Mosack Fonseca in US billionaire face off
MOSSACK FONSECA (MF) which since the Panama Papers revelations has denied that it has done anything illegal in the setting up of thousands of offshore accounts is now facing off against New York billionaire Paul Singer, who is suing the Panamanian law firm for obstruction of justice.
The hedge fund that successfully fought for more than a decade against Argentina is now targeting: Mossack Fonseca reports the AFP news agency
In federal court in Nevada, NML Capital Ltd., a unit of hedge-fund giant Elliott Management Corp. managed by Singer is after MF reports the Wall Street Journal
Mr. Singer zeroed in on Mossack Fonseca in 2013, as he searched the globe for Argentine assets his fund could seize as compensation for bonds on which Argentina had defaulted. Mr. Singer’s NML alleged the law firm set up shell companies in Nevada that were used to siphon stolen money from Argentina and then obstructed its efforts to uncover those links.
Earlier this year, NML reached a settlement with Argentina that would pay the fund $2.4 billion, but that doesn’t mean it is giving up on the Panamanian firm.
“Mossack Fonseca actively engaged in the concealment and destruction of evidence,” NML wrote in a filing with the U.S. District Court in Nevada in late May. “They should be held accountable for their conduct.”
Mossack Fonseca said the companies in Nevada aren’t linked to Argentine corruption scandals and that it can’t be held liable for the behavior of companies after it helps set them up. The law firm said that it has made an extraordinary effort to comply with NML’s various requests and has never been accused of wrongdoing by any court.
“Mossack Fonseca has and will continue to defend itself in the face of these baseless allegations,” a spokeswoman said.
The suit adds another chapter to Mr. Singer’s combative history and another source of pressure on the Panamanian law firm, which is engulfed in the Panama Papers scandal. The open case threatens further exposure and possibly damaging revelations for the firm, and could put it on the hook for NML’s legal fees, which the fund said are substantial.
Mossack Fonseca has been reeling from a massive leak of documents related to its business setting up some 240,000 corporate entities in tax havens around the world. Among those corporate entities were more than 1,000 opened in Nevada. The disclosures helped show how the U.S., too, can be a destination for offshore money.
“The fact remains that the U.S. is still one of the easiest places in the world to set up anonymous shell companies,” said Stefanie Ostfeld, head of the U.S. office of Global Witness, an investigation and advocacy organization. “It’s absolutely an impediment to investigators who are trying to follow the path of money for all kinds of crimes.”
Mossack Fonseca has called the data leak illegal and has denied any wrongdoing in setting up the offshore companies. It also says it shouldn’t have to turn over extensive information in the Nevada proceedings because it lacks a U.S. presence and because it was contractually required to keep information about the companies confidential.
The companies were represented in the U.S. by M.F. Corporate Services Nevada. In a sworn statement in 2015, Jürgen Mossack, one of Mossack Fonseca’s founders, said his firm had no parent-subsidiary relationship with M.F. Nevada and that it didn’t control its internal affairs.
That’s a point the hedge fund disputes. NML filed its obstruction allegations after reviewing internal Mossack Fonseca emails published in April by the International Consortium of Investigative Journalists. The emails, which were also reviewed by The Wall Street Journal, appear to show that Mossack Fonseca officials discussed wiping information from computers in the offices of M.F. Nevada to prevent the court from finding out about the law firm’s ties to M.F. Nevada.
“I think that in this situation it could be obvious that we are hiding something,” Mossack Fonseca’s IT manager wrote in one email to senior lawyers at the firm. “A systems auditor with basic auditing skills could detect this.”
The emails were sent days after lawyers for NML deposed Patricia Amunategui, who led M.F. Nevada for over a decade. Ms. Amunategui told the court in 2014 that Mossack Fonseca was the firm’s sole client and provided back-office services, including information technology support. She said she didn’t know who owned the firm, or whether the “M.F.” in M.F. Nevada referred to Mossack Fonseca.
Mossack Fonseca said the emails in question don’t show any wrongdoing.
“Nothing in the communications demonstrate any misconduct on the part of Mossack Fonseca,” a spokeswoman said.
Last year, U.S. Magistrate Judge Cam Ferenbach, who was overseeing the suit, agreed with NML that the Nevada firm was an “alter ego,” or an instrument for Mossack Fonseca.
Nevada slapped a $10,000 civil penalty on M.F. Nevada in May, the maximum allowed under state law, for failing to maintain updated contact information for its clients. Shortly afterward, M.F. Nevada resigned as the representative for the shell companies in the state. The company’s lawyer said in court last month that the firm has shut down operations and that it could be dissolved.
Now, Mossack Fonseca is fighting it out with NML.
People familiar with the case say that the parties could reach a settlement, potentially giving Mr. Singer yet another legal victory. The hedge-fund manager not only beat Argentina in court, but got the country to pay his legal fees in doing so.
