Panama Papers firm linked to over 1,000 U.S. companies

WASHINGTON -- The law firm at the hub of a global financial scandal has links to more than 1,000 U.S. companies, formed mostly in Nevada and Wyoming since 2001, but appears to have largely escaped the scrutiny of U.S. financial regulators — at least in public.

The leak this week of more than 11 million records from the Panamanian firm, Mossack Fonseca, has led to a global uproar that prompted Iceland’s prime minister to step aside Tuesday. An international consortium of journalists has reported the documents tie the firm, which specializes in shell companies that can be used to conceal assets, to Russian oligarchs, former heads of state and world soccer’s scandal-plagued governing body.

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Yet despite those apparent dealings and its operations in the United States, the firm has appeared in only a scattering of court cases and regulatory filings. Most involve government attempts to track money the authorities believed had been concealed behind overseas shell companies the firm helped establish.

The Justice Department is “reviewing the reports” published by international journalists, the head of its Criminal Division, Leslie Caldwell, said Tuesday, but declined to elaborate.

The firestorm around Mossack Fonseca has been tied mostly to its work for foreign customers. But state incorporation records show the firm helped set up nearly 1,100 business entities in the United States since 2001.

The majority of U.S.-based companies linked to Mossack Fonseca were formed in Nevada by M.F. Corporate Services (Nevada) Limited, a one-employee company based out of a low-slung tile-roofed office building 20 miles from the Las Vegas strip. MF Nevada has served as the registered agent for 1,026 business entities since 2001, according to USA TODAY's review of Nevada business documents.

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Publicly available information about many of the Nevada corporations is limited to the fact that MF Nevada is the registered agent and a listing of the officers. Many of the officers are businesses themselves — meaning no individuals are listed in corporate records — and typically have addresses in Anguilla, the Seychelles, Panama or another foreign country.

Nearly all of those companies were incorporated in Nevada and Wyoming, two states with permissive corporate secrecy laws.

“If your goal is secrecy and not having prying eyes find out even the most basic things about what you’re doing and what your company is and who owns it, Wyoming and Nevada are incredibly attractive places from that secrecy perspective,” said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy.

“These companies are using mechanisms that are precisely designed to avoid prosecution, to avoid discovery,” he said. “Shell corporations are very effective for conduits for avoiding the law, for whatever purpose.”

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Among the Nevada-based corporations now falling under global scrutiny are 123 named in the Argentine government's investigation into corruption allegations involving the current and former presidents of Argentina as well as two business partners.

Another Nevada-based business entity, Cross Trading LLC, has been linked to a corruption scandal involving FIFA, soccer’s international governing body.

Wyoming records show a Mossack Fonseca-linked business registration operation was formed in the state in 2001, where it also has served as registered agent.

Patricia Amunategui, who holds positions with the Nevada and Wyoming registered agent operations, referred to the Wyoming operation as “another product” in a 2014 deposition, which was part of a civil suit by a Nevada-based company seeking to force MF Nevada to produce documents.

“If someone asks (for) a company in Nevada,” she said, “l say why not offer them one in Wyoming.”

A third business registration entity linked to Mossack Fonseca is located in Florida, and has served as registered agent for several dozen companies.

While many states' laws allow corporations to operate under a veil of secrecy, forming shell companies has become a cottage industry in Wyoming, Delaware and Nevada, said Heather Lowe, legal counsel and director of government affairs for Global Financial Integrity, a research group based in Washington.

“There is no information that they’re asking for that tells them who owns, controls, (or) works for…the company,” she said. “It’s like a big black box they’ve created.”

While Mossack Fonseca-linked business entities have operated on U.S. soil for more than a decade, there are few records of any federal enforcement actions against them. The firm surfaced most recently in a securities fraud case in Manhattan.

In 2012, a federal judge in New York ordered former hedge fund manager Chetan Kapur to pay the Securities and Exchange Commission $4.9 million as the result of a civil suit accusing Kapur and his fund of having “engaged in a pattern of deceptive conduct designed to bolster their track record, size, and credentials.” Among other things, the SEC said, Kapur’s ThinkStrategies Capital Management, failed to rigorously screen investments, leading it to sink money into “several hedge funds that were later revealed to be Ponzi schemes or other serious frauds.”

The judge ordered Kapur to pay the judgment by January 2013. Two years later, Kapur had not paid. The SEC returned to court demanding that he disclose all of his accounts, including “any entity associated with Mossack Fonseca Group.” The securities agency filed copies of emails between Kapur and a Mossack Fonseca affiliate, Mossfon Trust, in which he discussed buying a “vintage shelf corporation.” Mossfon offered Kapur companies for as little as $5,750.

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In July, U.S. District Judge Paul A. Engelmayer jailed Kapur for contempt until he pays the judgment. Engelmayer said the SEC “has developed compelling evidence that Kapur possesses and has access to significant assets” and ordered that he be “incarcerated until he purges the contempt.” Kapur is locked up in a federal detention center in Brooklyn.

According to court records, Kapur testified that he did not purchase the companies for himself, but did so on behalf of ThinkStrategy clients so “they could avoid Know Your Customer requirements,” governing information financial firms must collect about their customers. Kapur’s lawyer did not respond to emails or phone messages on Tuesday. The SEC declined to comment on the case.

Mossack Fonseca also made a brief appearance in the government’s case against former Ukrainian prime minister Pavel Lazarenko, who was sentenced to prison in 2006 for money laundering and fraud. According to court records, a firm tracking Lazarenko’s assets through a firm in the British Virgin Islands, “controlled" by a local agent from Mossack Fonseca.

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The fact that so few cases involving Mossack Fonseca have been made public doesn't mean the firm has escaped government attention, said Jeffrey Neiman, a former federal tax prosecutor who now advises Americans with financial holdings abroad. “The IRS records will stay in the IRS vault. So the overwhelming majority will stay hidden from view,” he said.

Since the U.S. government began cracking down on Americans’ overseas holdings in 2009, more than 54,000 people have disclosed financial information to the IRS, the Justice Department said last month. They have paid more than $8 billion in taxes, penalties and interest on overseas earnings. But they also have provided the government with detailed accountings of how they sheltered their money, including naming middlemen.

“That’s provided a treasure trove of information,” said Martin Press, a Ft. Lauderdale tax attorney.

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Press said the government’s crackdown on overseas holdings, which began by targeting Swiss accounts, has since broadened to other parts of the globe. “People out there should be aware that there’s a much greater chance of being caught,” he said.

Caroline D. Ciraolo Delivers, acting head of the Justice Department’s Tax Division, said last month that authorities are “identifying and investigating accountholders and individuals, both domestic and foreign, who helped U.S. taxpayers conceal foreign accounts and evade their tax obligations.”

“Our investigations of both individuals and entities are well beyond Switzerland at this point,” she said, “and no jurisdiction is off limits.”

Contributing: Kevin Johnson