Panama Papers: Brazilian targeted by authorities

 The Prosecutor-General's Office (PGR) established Monday (Apr. 4) an international cooperation procedure with Panama's Public Ministry to access official documents of Panama Papers case. Panamaniam authorities will decide whether they will send the information. In other cases, like Operation Car Wash investigations, these authorities have offered resistance to cooperate with Brazil's prosecutor's investigation.

Internal Revenue Service (IRS) reported to be awaiting Justice to validate data to examine documents mentioning Brazilians in the case. They may impose a fine of up to 150% of the omitted amount if they find cases of offshores not declared to income taxes.

Documents released last Saturday (Apr. 2) by an International Consortium of Investigative Journalists (ICIJ) shows that Mossack Fonseca law firm, based in Panama, established offshore companies to customers all around the world. The leak disclosed documents from the past four decades and involved authorities from several countries.

According to the IRS, it is not illegal to create offshore companies, which is also a way of making investment abroad, provided that the information is declared. However, if detected an attempt to evade taxes or conceal the identity of the property's real owner, the taxpayer can be fined.

The IRS also pointed out that part of the information disclosed was made available to the task force that participated in the 22th phase of Operation Car Wash, launched in late January. The phase investigates offshore companies created for money laundering from a corruption scheme at Petrobras. In Brazil, Mossack Fonseca is probed for creating Murray Holdings offshore company, which took over the ownership of an apartment in Solaris complex in Guaruja (São Paulo state), to hide the identity of the real owners.

Panama Papers

The investigation pursued by ICIJ on offshore companies led to the dubbed Panama Papers. Supported by the German Suddeutsche Zeitung, ICIJ had access to 11.5 million documents linked to the Panamanian law firm, Mossack Fonseca. These leaked documents were thoroughly examined by more than 370 journalists from 76 countries. In Brazil, part of the ICIJ journalists are from UOL portal, O Estado de S. Paulo newspaper and Rede TV! television network.

Documents showed that Mossack Fonseca, managing offices in other countries, is one of the world's major creators of shell companies. Documents analyzed indicated the creation of 214,000 offshore companies linked to people in more than 200 countries and territories. Spreadsheets, emails, invoices, and corporate records indicate that frauds were being committed for the past 40 years.

Journalist Fernando Rodrigues, from UOL portal, revealed in his blog that employees of Mossack Fonseca said, in personal email exchange, that the company's policy is "not to serve people who hold or held political office." But ICIJ journalists found that some of the offshore companies were used by politicians and their relatives to buy goods and real estate abroad. Others were used to make bank accounts transactions in countries like Switzerland.

A shell company can be used to obscure origins of money made from illegal activity—bribery or even drug trafficking—and tax evasion. It is also possible to create a private foundation, which acts as a company's shareholder and conceals the identity of the offshore owner. Directors of this foundation sign for it, hiding the identity of the name of the money owner in documents related to the foundation and offshore companies.

In Brazil, UOL checked the names of people considered "PEPs". Data crossing included the names of 513 federal deputies, 81 senators and their substitutes, 1,061 state lawmakers elected in 2014, and 424 councilors of the 10 largest cities.

President Dilma Rousseff's name and all her living predecessors, in addition to close relatives, were checked. Current and former Supreme Court justices and all high courts judges were also checked, as well as candidates for governor and president in 2014.

Listed Brazilians

According to Fernando Rodrigues' blog, Panama Papers investigation also showed that Mossack Fonseca sold offshore companies to Brazilian politicians from several parties and to their relatives.

Among the politicians directly or indirectly named by the investigation are current Lower House Speaker Eduardo Cunha, and mill owner and former federal deputy João Lyra, in addition to the former president of the Brazilian Social Democracy Party (PSDB), Sérgio Guerra, who died in 2014, former Minister Edison Lobão, and economist and former Minister Delfim Netto.

Concerning Cunha, Panama Papers mention Portuguese business mogul Idalécio de Oliveira, who, according to the Prosecutor-General's Office, was accused of paying bribes to Brazil's lower house speaker for facilitating contracts with Petrobras. Oliveira owns Lusitania Group conglomerate, with offshore companies created by Mossack Fonseca. In 2011, the business mogul sold African oil exploration areas to Petrobras, which incurred in losses to the Brazilian state-led company.

Cunha was approached by the consortium journalists for interviews, but he did not answer. According to his advisers, he "strongly" denies the allegations and "challenges anyone to prove his link to any offshore company."

The investigation also listed then-Supreme Court Chief Justice Joaquim Barbosa, who would have evaded taxes when purchased an apartment in Miami in 2012, as the journalists Nicholas Nehamas, from Miami Herald newspaper, and André Shalders, from UOL portal, have found out.

In the purchase, Barbosa used an offshore company, set up by Mossack, called Assas JB1 Corp. The expediency is legal and common among foreigners. The tax, called documentary stamp tax, would have to be paid at the moment of purchase, but records at Miami Public Registry are zeroed—indicating pending payment. According to Miami Herald, the tax that Barbosa would have to pay amounts to 60 cents for every $100 paid for the property. "Sales prices are not listed on deeds, but they can be calculated from the tax." Without this information, there is no way to know the apartment's cost. However, the former justice says that all taxes on the property have been paid and that the transaction value is recorded on Multiple Listing Service, a private property database for real-estate agents. When purchased the apartment, Barbosa was responsible for the Criminal Action 470, known as “Mensalão” case.

Fernando Rodrigues' blog approached Sérgio Guerra's family through the press office of PSDB's national office. The party declared that they will not comment on the case and noted that the politician died about two years ago.

Economist Delfim Neto said via email that the companies listed were founded in 2008, but they have not engaged in any activity. According to him, the goal was to provide consulting services to foreign companies, but the project was not carried out.

Companies

According to Fernando Rodrigues' blog, Mossack attended at least six major companies mentioned in Operation Car Wash, setting up 16 offshore companies linked to Odebrecht construction company and to the following groups: Mendes Júnior, Schahin, Queiroz Galvão, Feffer (Suzano group controller) and Walter Faria, from Grupo Petrópolis, and Max and Rodrigo Bornholdt. Among them, only Odebrecht declined to comment on the new offshore companies revealed by Panama Papers.

Feffer group said in a statement that "from 1993 to 2011, members of Feffer family had stakes in Infonet Incorporated for overseas investments until 2011, when the investment was discontinued.

Through an adviser, Galvão family, controlling Queiroz Galvão construction company, said they would not comment on the case of Fipar Assets offshore. In a statement regarding the works in Quíbor Valley in Venezuela, the press office reported that "Queiroz Galvão stated that they did not make any illegal payment for irrigation works in Venezuela, in Quíbor Valley." The contractor has not commented on the document's legitimacy.

Mendes Júnior family members, owners of a contractor carrying their name, sent a note explaining that Lanite Development Ltd, an offshore company set up in 1997 as part of Mendes Júnior plan to resume internationalization, was not operating and "still not operates to date."

Translated by Amarílis Anchieta