World

Wealthy ‘countries’ unto themselves; Sanders and Cruz win Wisconsin; all eyes on downed Syrian jet. By Hamish McDonald.

Rich and famous left to wear Panama hack

Democratic presidential candidate Bernie Sanders speaks at the University of Wyoming after winning the primary in Wisconsin this week.
Credit: Theo Stroomer / Getty Images North America / AFP

As my old friend S. Gurumurthy, a Chennai accountant turned investigative journalist, found when he went after a trail of shell companies through the world’s tax havens in the mid-1980s, in pursuit of the founder of what is now India’s biggest company, Panama was where it got really dangerous.

The local agents he hired to ask a Panama law firm about the companies they had incorporated were told “this is a most delicate matter and should not be pursued further”.

Now investigators don’t have to put themselves at risk of such implied nastiness. Thanks to a leak of data records belonging to Panama’s biggest lawyers in the nominee company game, Mossack Fonseca, they can ransack the evidence from the safety of their own offices. The trove of 11.5 million documents, handed to the German newspaper Süddeutsche Zeitung and farmed out around the world via Washington’s International Consortium of Investigative Journalists (ICIJ), could keep them busy for years.

Already in the first week, the revelations are causing political embarrassment. Iceland’s prime minister Sigmundur Davíð Gunnlaugsson offered his resignation on Tuesday. He’d sold his half of a shell company trying to recover millions from Iceland’s banks to his wife for a dollar, a day before having to meet asset disclosure rules. Britain’s David Cameron is not resigning, but having his late stockbroker father listed as a Mossack Fonseca client is not a good look.

In less democratic countries, the scandal can be shrugged off. Vladimir Putin said the revelation of $US2 billion funnelled through companies controlled by a musician friend was a plot against Russia. China’s Xi Jinping simply got his propaganda apparatus to block all mention of tax haven companies owned by his brother-in-law and connections of other politburo standing committee members. In places such as Pakistan, Saudi Arabia and the Gulf emirates, having a tax-haven company or two was made to look just like normal behaviour for rulers, as perhaps it is.

Tax officials around the world will have a field day, seeking information from wealthy businessmen, sports stars and administrators, and entertainers about the purpose of their companies in the British Virgin Islands or wherever. In Australia, the taxmen are studying about 800 names. Nearby tax havens such as Samoa are coming under more pressure to be transparent. But for such small nations, or the British island dependencies, fees for company registration are the major source of government revenue.

In India, The Indian Express has pulled out a long list of prominent names connected to companies in tax havens. Among them is Vinod Adani, elder brother of Gautam Adani, the tycoon trying to raise finance for his $20 billion Carmichael coalmine project in Queensland. Intriguingly, the Mossack Fonseca records show the elder brother sought to change his name on the company books to Vinod Shantilal Shah, dropping the family name.

The Panama leak came only days after Fairfax-Huffington Post reported a trove of leaked information about alleged bribery and corruption by Monaco-based Unaoil on behalf of international oil companies and contractors, with Australia’s Leighton and WorleyParsons on the client list. Both have denied any bribery.

Wealthy ‘countries’ unto themselves

The scandals, plus earlier profit-shifting activity through Luxembourg revealed by the ICIJ, will no doubt feed the anti-elite backlash among voters throughout the Western world, emboldening populists of both left and right.

“For some, reading about the Panama Papers will feel like being told by your parents that Santa isn’t real: merely the final confirmation of a suspicion that you have harboured for a very long time,” wrote Fredrik deBoer for Foreign Policy. “The game is rigged, and unless you are part of the global 1 per cent, it isn’t rigged to help you.”

“The very idea of countries dissolves into an impossibly complex digital network of shady dealings, undertaken by those with no particular loyalty to country and plenty to themselves,” deBoer adds. “Even referring to the country of origin of the super-rich seems quaint. The rich are their own nation now.”

In Australia, the scandals will make it even harder for Malcolm Turnbull’s government to persuade everyone that the Construction, Forestry, Mining and Energy Union is the source of all evil in the economy and that businesses need to be relieved of their monstrous tax burden.

Bernie and Ted’s excellent adventure

It certainly didn’t hurt Bernie Sanders in the Wisconsin Democratic primary on Tuesday night. He has consistently slammed Hillary Clinton as too friendly with Wall Street, indeed in the pocket of big investment banks through the lucrative speaking fees they paid her last year.

Sanders won 56.6 per cent of the vote, 13.5 points ahead of Clinton. Come April 19, however, she’ll be on home turf in New York, the state she once represented in the US senate and which yields a big slab of convention delegates. Though the 74-year-old “revolutionary” Sanders is the favourite of under-45 voters, opinion polls have Clinton comfortably ahead.

Republicans in Wisconsin, meanwhile, gave Donald Trump a slap in the face, preferring Ted Cruz by a 13.1-point margin over his 35.1 per cent vote, with John Kasich trailing at 14.1 per cent. New York is also Trump’s home base, and he is well ahead in opinion polls there, too. But the likelihood of Trump failing to get a majority of delegates, leading to a “brokered” convention in July, is growing. The establishment always wins in the end.

Eyes on downed jet 

Western defence circles are waiting anxiously to see who downed a Syrian air force jet earlier this week, and how. The aircraft crashed and burned near the city of Aleppo, centre of a multisided battle. If a ground-to-air missile was employed, this would be a first in the Syrian war. If the al-Qaeda affiliate Jabhat al-Nusra fired it, that would be even more alarming.

While their delegates straggle in to Geneva for peace talks due to resume on Monday, the Assad regime and its more moderate opponents continue to attack Daesh and al-Nusra where they can. The Free Syrian Army, supported by the United States, Saudi Arabia and the Gulf states, is trying to force Daesh out of the town of al-Rai, north of Aleppo, while Assad’s army is pushing out from recently recaptured Palmyra.

The US is meanwhile thinking of sending more special forces into Syria, in addition to the 50 troopers already there with Kurdish militia groups. While Russia’s intervention has strengthened Assad’s position, his own community of Alawites (Shiite Muslims) is starting to look to a future without him. A group of Alawite community and religious leaders has issued a “declaration of identity reform” to distance themselves from his regime.

Meanwhile, Washington is turning cool on Turkey’s president Recep Tayyip Erdoğan, who is wildly mixing up his country’s security threats − at one point recently accusing Kurdish militia groups, Daesh and Assad’s intelligence service of conspiring together against his government − and at the same time suppressing quite moderate Turkish opposition groups and media critics.

Barack Obama refused to give Erdoğan a White House meeting on his recent visit, and the atmosphere soured even more when Erdoğan went to the Brookings Institution to give a speech. His security detail punched protesters outside the think tank, and dragged some Turkish journalists out of the audience. Brookings president Strobe Talbott escorted the journalist back into the hall and threatened to cancel the event if the guards did not desist.

This article was first published in the print edition of The Saturday Paper on Apr 9, 2016 as "Rich and famous left to wear Panama hack". Subscribe here.

Hamish McDonald
is The Saturday Paper’s world editor.