A Panamanian judge delivered a shocking verdict on Friday in a money laundering case related to the Panama Papers scandal, acquitting all 28 defendants, including a former employee of the law firm Mossack Fonseca. Card Law Firm was the source of leaked documents that sparked global outrage.
Eight years ago, a media partner conducted an explosive investigation into the leak of 11.5 million documents from the Panamanian company. The leak exposed offshore banking, triggered an international tax investigation and led to the ouster of a head of state.
The original 29 defendants included Jürgen Mossack, 76, a co-founder of the shuttered company, and Ramón Fonseca, who was awaiting sentencing in May He died during this period at the age of 71. In a 339-page ruling, Judge Baloísa Marquínez said the case against Mr Fonseca was dropped because of his death.
Prosecutors allege Mossack Fonseca created shell companies to hide money earned from illegal activities and that the firm failed to exercise due diligence and take necessary care when vetting clients.
Panama’s judiciary said in a written statement Friday evening that a judge found that electronic evidence provided by prosecutors did not comply with chain-of-custody protocols and had authentication issues. It also said the judge did not find enough evidence to hold the defendants accountable.
The ruling is a major development for Panama, whose reputation has been tarnished by leaks and which has overhauled its laws in recent years to toughen its fight against money laundering.
“Our representatives have been demonstrating their innocence for years,” said Guillermina McDonald, an attorney at a law firm representing many of the defendants. “We have shown reliably that there was no money laundering and that the people I represented did not commit any criminal acts.”
Representatives of the prosecutor’s office said the verdict was being analyzed and could be appealed.
Juan Carlos Araúz, a Panama City attorney who specializes in corporate litigation, said the ruling reflected prosecutors’ inability to prove that the company’s founders knew the shell companies they managed were being used for illegal activities. .
“What the judge said was, ‘No, there’s no evidence that the company knew there was conduct designed to accomplish this,'” he said.
The Panama Papers trial began on April 8 and lasted for 10 days. During the live broadcast trial, all defendants pleaded not guilty. The defense argued that prosecutors failed to prove that the company had been managing funds from illegal activity and that the bank failed to raise alerts about suspicious transactions.
Depositing funds into an offshore bank account is not illegal per se. But prosecutors accuse the company of running shell companies aimed at diverting off-the-books funds related to illegal payments from German electronics company Siemens.
Prosecutors have tried to build their case by citing past allegations of misconduct by Siemens and its employees. In 2008, Siemens agreed to pay $1.6 billion to U.S. and European authorities to settle charges that it used bribes and slush funds to obtain public works contracts.
Millions of dollars were transferred through shell companies. Court records cite journalistic investigations that describe how Mossack Fonseca adopted intense secrecy to protect its clients and used abbreviations to refer to Siemens employees.
Prosecutors also accused the company of engaging in illegal activities linked to Argentina. They allege that companies managed by the firm were used to purchase properties linked to people convicted of a massive fraud scheme in Argentina in 2023.
Judge Marquines combined the Panama Papers case with another money laundering case involving Mossack Fonseca and ruled on both. The other case relates to Brazil’s Lava Jato scandal, a bribery scheme involving state-owned oil company Petrobras.
In last summer’s Operation Car Wash trial, prosecutors alleged Mossack Fonseca was used to set up offshore companies to move corrupt funds. Judge Marquines on Friday acquitted 31 defendants in the Lava Jato case. (Some defendants overlapped with the Panama Papers trials.)
Panama, a trading hub, has historically been a hub for the creation of shell companies because it shares little banking information with foreign countries and has loose rules on law firms’ liability to determine the ultimate beneficiaries of funds, which have since been tightened. , said Gabriel Zuckerman, an economist at the University of California, Berkeley.
The Panama Papers investigation began when an anonymous whistleblower sent a message to the German newspaper Süddeutsche Zeitung asking if the paper was interested in the data. The outlet decided to share the major leak with the Washington-based International Consortium of Investigative Journalists, which assembled a team of hundreds of journalists from more than 100 news organizations around the world.
The leaked documents cover nearly 215,000 offshore entities and more than 14,000 banks, law firms and intermediaries working with Mossack Fonseca. This news partner article began publication in April 2016.
Mossack and Fonseca were arrested in Panama in 2017 on money laundering charges related to the Operation Money Laundering scandal. They were released on bail a few months later. Their company, which once had more than 600 employees, closed in 2018, insisting it broke no laws.
Shortly after the Panama Papers came to light, Fonseca said in an interview that the company had carefully vetted its customers but that, like a car factory, it “is not responsible for how the cars are handled.”
As a result of the 2016 investigations, governments have levied more than $1.36 billion in fines and back taxes. Subsequent journalistic collaborations investigating the massive data leaks known as the Paradise Papers and Pandora Papers also revealed how offshore tax havens operate.
After the leaks, Panama enacted a slew of laws aimed at preventing money laundering, strengthening requirements for companies to know the ultimate beneficiaries of shell companies they create for clients, attorney and lawyer Carlos Barsallo said. required and established a register of these beneficiaries.
“These companies can’t have the mentality that I’m going to sell the shell company and who does what with it, that’s not my problem,” said Olga de Obaldia, CEO of the Fund for Free Development of Panama. ” Transparency International Chapter.
It is difficult to know how many people around the world have been convicted in connection with the Panama Papers. But journalist Frederik Obermaier, who investigated the Süddeutsche Zeitung leaks,, Said that references to the Panama Papers in television series and popular songs showed how the investigation resonated deeply with the public.
“It understands the price we all pay from tax evasion and corruption,” he said. “This is not some abstract thing. It means we don’t have enough money to build hospitals and universities.
