Australia’s Financial Review has just published more details of NZ’s starring role as tax haven in the Panama Papers. Here are some highlights.
The Panama Papers: Behind Mossack Fonseca’s secret New Zealand deals
On July 1 last year, opportunity came knocking for Panamanian law firm Mossack Fonseca: they had a new client—and a big one—ready to push $100 million into the tax-free obscurity of some New Zealand foreign trusts. That figure was just for starters, the client’s Miami lawyer promised, “only a small part of the client’s portfolio”.
The client, Juan Armando Hinojosa Cantu, was one of Mexico’s construction tycoons. But there was a problem. In fact there was a problem with a string of Mossack Fonseca’s clients who were coming to New Zealand, as prime minister John Key’s government has discovered, thanks to a global investigation led by the International Consortium of Investigative Journalists based on 11.5 million Mossack Fonseca documents obtained by Süddeutsche Zeitung.
The roiling controversy in New Zealand triggered by the Panama Papers has focused on just one Mossack Fonseca client—an Argentinian family behind a sensitive New Zealand land purchase.
New documents obtained by The Australian Financial Reviewchallenge parts of the government’s account of the sale [emphasis added], as well as revealing other deals with a cast of controversial players ranging from senior members of the government of Malta to Panama lawyer with an outstanding arrest warrant in Brazil on money laundering charges.
In January 2009 when law firm Cone Marshall was seeking accreditation with Mossack Fonseca, Ken Whitney, of Ross & Whitney, provided a professional reference. Unusually for a professional reference in the Panama Papers files, Whitney, whose clients include Prime Minister John Key, did not address it To Whom It May Concern. He was able to cite the street address of Mossack Fonseca’s Compliance Department.
CASHING IN ON NZ’S REPUTATION
In 2013 Mossack Fonseca had been on a marketing drive, cutting its prices to build up its New Zealand office. “Chase the money,” head office in Panama urged its New Zealand staff.
WAVE OF SOUTH AMERICAN MONEY
Other clients came to Mossack Fonseca New Zealand in a steady stream. … The list runs on and on. Setting up a New Zealand trust ensured secrecy and tax advantages but it was not necessarily illegal. There are many legitimate reasons to use such services.
It came to resemble a Homeric quest, an endless odyssey to find a safe haven. All nine banks turned Schembri and Mizzi’s companies down because they were PEPs. In New Zealand the due diligence process took months but in the end they had no such problem [emphasis added].
By the end of November, as the demand for New Zealand trusts went into overdrive, with prime minster Key in Malta for the Commonwealth Heads of Government, unaware of the struggles to open a bank account for Schembri and Mizzi’s Panama and New Zealand holdings, and Hinojosa Cantu began steps to set up even more New Zealand trusts, there was one more problem looming.
Ruben Goldberg Javkin, the former head of the Republic National Bank of Mexico, was reorganizing his offshore holdings, which he controlled through his NZ Midtown Trust. Through November and December he was arranging for five people to be authorized to open a bank account for his new British Virgin Islands company, Schofield Company Global Limited—and the board approval was to be backdated, his intermediary requested.
One of the five was a Panamanian lawyer, Edison Teano Ernesto Rivera. An unfortunate choice. In January Rivera was targeted in Operation Triple X, a huge Brazil investigation linked to the Petrobras bribery scandal. On January 29, Brazil’s Justice Department issued an arrest warrant for Rivera on money laundering charges. Mossack Fonseca has denied any part in money laundering and there is no suggestion that Goldberg was involved. But it’s another scandal that tarnishes New Zealand’s reputation [emphasis added].
And the conclusion…
Despite Mossack Fonseca’s size elsewhere in the world, it remains a minor player in New Zealand, its files merely an indication of what may be taking place on a much larger scale with bigger operators [emphasis added]. … The question, given the damage such controversies may inflict on New Zealand’s name and its reputation for probity and transparency, is whether the exchange is worth the cost.
The material has been covered on Stuff, with this summary:
• A Mexican construction tycoon dubbed the ‘Duke of Influence’ joined a rush of foreign money into tax-free New Zealand trusts.
• Juan Armando Hinojosa Cantu, who built his fortune from billions of dollars in Mexican government contracts, was investigated for lavish housing deals with Mexican political figures.
• On July 1 last year, Cantu’s Miami lawyer said his client had “circa $US100 million” to put into three New Zealand trusts.
• Maltese investors who had been turned away from nine banks in the Caribbean, Miami and Panama eventually found a home for their money in New Zealand trusts.
• Demand for New Zealand trusts went into overdrive late last year with Mossack Fonseca staff in Panama urging New Zealand staff to “chase the money”.