Panama Papers scandal draws rebuttals, refusals
LONDON -- Iceland's prime minister was the first major figure seemingly brought down by the leak of millions of records on offshore accounts, but officials from other countries were also forced Wednesday to defend themselves against allegations of hiding wealth, including British Prime Minister David Cameron and Ukraine's leader.
Icelandic leader Sigmundur David Gunnlaugsson stepped aside Tuesday amid outrage over revelations he had used a shell company to shelter large sums while Iceland's economy was in crisis.
Officials in several other countries also were facing questions about possibly dubious offshore tax-avoidance schemes, following the publication of the names of rich and powerful people linked to the leaks, dubbed the Panama Papers.
The British Prime Minister's office said Wednesday that David Cameron and his family do not benefit now from offshore funds or trusts and they would not do so in the future. The statement Wednesday came after the leader of the opposition called for an independent investigation into everyone holding money in tax havens.
Ian Cameron, the prime minister's father who died in 2010, used other offshore investments to help shield his money from U.K. tax. There is no suggestion the arrangement was illegal.
Labour Party leader Jeremy Corbyn said Tuesday he wanted tax authorities to investigate "all people that have invested in these shell companies or put money into tax havens."
Cameron's office said on Tuesday that "the prime minister, his wife and their children do not benefit from any offshore funds," but they amended that statement Wednesday to rule out any financial benefits from such funds in the future.
"I own no shares, no offshore trusts, no offshore funds, nothing like that. And so that, I think, is a very clear description," Cameron said on Tuesday. Downing Street said Cameron's wife, Samantha "owns a small number of shares connected to her father's land, which she declares on her tax return."
Ukraine's President Petro Poroshenko who, the leaks show, set up an offshore holding company to move his candy business offshore, possibly depriving Ukraine of millions of dollars in tax revenue, also fought back on Wednesday.
Poroshenko insisted he had done nothing wrong and hadn't managed his assets since being elected. Still, some adversaries were calling for his removal from office.
Poroshenko said at a news conference in Tokyo on Wednesday that it was necessary to set up the offshore holding company for his candy business to put his assets into a blind trust when he became president in 2014.
Poroshenko insisted that his case is different than Iceland's or Russia's, and that the company was not set up to minimize taxes.
China and Russia, meanwhile, suppressed news of the leaks and rejected any allegations of impropriety by government officials named in the release of more than 11 million financial documents from a Panamanian law firm.
The reports are from a global group of news organizations working with the Washington-based International Consortium of Investigative Journalists. They have been processing records from the Mossack Fonseca law firm that were first leaked to Germany's Sueddeutsche Zeitung newspaper.
One of the firm's co-founders, Ramon Fonseca, said it has filed a complaint with Panamanian prosecutors, alleging that the data was stolen by a hacking attack from somewhere in Europe, but he declined to give any details.
The announcement that Gunnlaugsson was stepping down as leader of Iceland's coalition government came from his deputy, Sigurdur Ingi Johannsson, who is also the country's agriculture minister. It followed the refusal by Iceland's president to dissolve parliament and call an election, and after thousands of Icelanders protested outside the parliament building in Reykjavik.
No replacement has been named, and President Olafur Ragnar Grimsson did not immediately confirm that he had accepted the resignation. Late Tuesday, a government statement said Gunnlaugsson had suggested Johannsson take over as prime minister for "an unspecified amount of time," while Gunnlauggson would stay on as leader of his center-right Progressive Party.
Gunnlaugson has denied any wrongdoing and said he and his wife have paid all their taxes. He also said his financial holdings didn't affect his negotiations with Iceland's creditors during the country's acute financial crisis.
The leaked documents allege that Gunnlaugsson and his wife set up a company called Wintris in the British Virgin Islands with the help of the Panamanian law firm. Gunnlaugsson is accused of a conflict of interest for failing to disclose his involvement in the company, which held interests in failed Icelandic banks that his government was responsible for overseeing.
Iceland, a volcanic North Atlantic island nation with a population of 330,000, was rocked by a prolonged financial crisis when its main commercial banks collapsed within a week of one another in 2008.
Since then Icelanders have weathered a deep recession and been subjected to tough capital controls - another reason the prime minister's offshore holdings rankle many.
China, on the other hand, dismissed as "groundless" reports that the Panamanian law firm had arranged offshore companies for relatives of at least eight present or past members of the Communist Party's Politburo Standing Committee, the apex of power in China.
Among those named in the leaked documents was the brother-in-law of President Xi Jinping. State media have ignored the reports and searches of websites and social media for the words "Panama documents" were blocked.
China's Foreign Ministry spokesman Hong Lei said he would not discuss the reports further and declined to say whether the individuals named would be investigated.
Shell companies aren't in themselves illegal. People or companies might use them to reduce their tax bill legally, by benefiting from low tax rates in countries like Panama, the Cayman Islands and Bermuda. But the practice is frowned upon, particularly when used by politicians, who then face criticism for not contributing to their own countries' economies.
Because offshore accounts and companies also hide the names of the ultimate owners of investments, they can be used to illegally evade taxes or launder money.
Mossack Fonseca says it obeys all laws relating to company registrations and does not advise people how to evade taxes.
Members of the Group of 20 - which includes China - have agreed on paper to tighten laws relating to shell companies and make sure authorities can find out who the real owners are. Actual legislation at the national level has lagged behind the promises, however.
The appearance of offshore accounts in political scandals is far from new. Shell companies played a role in the corruption scandal involving the Petrobras oil company in Brazil. The U.S. Justice Department said in an indictment last year that offshore accounts were used to mask the transfer of bribes to officials at FIFA, the global soccer federation.
Sueddeutsche Zeitung, working with Germany's NDR and WDR public television stations, reported Monday that 14 German banks had used Mossack Fonseca's services to set up 1,200 letterbox companies for clients.
The report said use of offshore company registrations had spiked after the European Union introduced regulations in 2005 requiring countries to exchange tax information on individual people, but not for companies. Many of the accounts, however, have since been closed.
The EU has since tightened its rules on offshore companies under its Fourth Anti-Money Laundering Directive, which is being phased in as national governments pass local laws to comply by June 26, 2017. The new rules tighten requirements for companies to keep accurate information on their real owners and to make that available to authorities.