On December 4, 2018, U.S. law enforcement announced the unsealing an indictment in the U.S. District Court for the Southern District of New York, charging four individuals with wire fraud, tax fraud, money laundering, and other crimes for their alleged roles in a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (“Mossack Fonseca”), a Panamanian-based international law firm, and related entities.
The 11-count indictment charges Ramses Owens, 50, a Panamanian citizen; Dirk Brauer, 54, a German citizen; Richard Gaffey, a U.S. citizen, of Medfield, Massachusetts; and Harald Joachim Von Der Goltz, 81, a German citizen. Owens, Gaffey and Von Der Goltz are charged with one count of conspiracy to commit tax evasion, one count of wire fraud, and one count of money laundering conspiracy. Owens and Brauer are charged with one count of conspiracy to defraud the U.S. and one count of conspiracy to commit wire fraud. Gaffey and Von Der Goltz are also charged with four counts of willful failure to file an FBAR. In addition, Von Der Goltz is charged with two counts of making false statements.
On November 15, 2018, French authorities arrested Brauer, who worked as an investment manager for Mossfon Asset Management, S.A., an asset management company closely affiliated with Mossack Fonseca, in Paris, France. On December 3, 2018, British authorities arrested Von Der Goltz, a former U.S. resident and taxpayer in London, England. On December 4, U.S. authorities arrested Gaffey, a U.S.-based accountant in Boston, Massachusetts. Owens, a Panamanian attorney who worked for Mossack Fonseca, remains at large.
The indictment alleges that, from at least in or about 2000 through in or about 2017, Owens and Brauer conspired with others to help U.S. taxpayer clients of Mossack Fonseca hide assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful and dishonest means. Owens and Brauer allegedly worked to establish and manage opaque offshore trusts and undeclared bank accounts on behalf of U.S. taxpayers who were clients of Mossack Fonseca. Owens and Brauer allegedly marketed, created, and serviced sham foundations and shell companies formed under the laws of countries, such as Panama, Hong Kong, and the British Virgin Islands, to conceal from the IRS and others the ownership by U.S. taxpayers of accounts established at overseas banks, as well as the income generated in those accounts. Typically the sham foundations “owned” the shell companies that nominally held the undeclared assets on behalf of the U.S. taxpayer clients of Mossack Fonseca.
In exchange for additional fees, Owens and Brauer allegedly helped clients who had bought the sham foundations and related shell companies by preparing corporate meeting minutes, resolutions, mail forwarding, and signature services. Owens and Brauder are also alleged to have intentionally established the bank accounts in jurisdictions with strict bank secrecy laws, thereby impeding the ability of the U.S. to obtain bank records for the accounts. Additionally, Owens and Brauer allegedly instructed U.S. taxpayer clients of Mossack Fonseca about how to repatriate funds to the U.S. from their offshore bank accounts in a manner designed to keep the undeclared bank accounts concealed. Among other things, Owens and Brauer instructed clients to use debit cards and fictitious sales to repatriate their funds covertly.
Von Der Goltz was allegedly one of Mossack Fonseca’s U.S. taxpayer clients. Von Der Goltz was a U.S. resident and was subject to U.S. tax laws, requiring him to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts. As a U.S. taxpayer, Von Der Goltz was required to file a Report of Foreign Bank and Financial Accounts (FBAR). Von Der Goltz allegedly evaded his tax reporting obligations by establishing a series of shell companies and bank accounts, and hiding his beneficial ownership of the shell companies and bank accounts from the IRS. These shell companies and bank accounts allegedly made investments worth tens of millions of dollars. Owens and Gaffey, a partner at a U.S.-based accounting firm, helped Van Der Goltz in this scheme. Van Der Goltz, Gaffey, and Owens allegedly falsely claimed that Von Der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and, unlike Von Der Goltz, was not a U.S. taxpayer.
The indictment alleges Gaffey, besides helping Von Der Goltz evade U.S. income taxes and reporting requirements, also worked closely with Owens to help another U.S. taxpayer client (Client-1) of Mossack Fonseca defraud the IRS. Client-1 allegedly maintained a series of offshore bank accounts, which Mossack Fonseca helped Client-1 conceal from the IRS for years. The indictment also alleges that, on the advice of Owens and Gaffey, Client-1 covertly repatriated approximately $3 million of Client-1’s offshore money to the U.S. by falsely stating on Client-1’s federal tax return that the money represented proceeds from the sale of a company. After Client-1 repatriated approximately $3 million in this way, approximately $1 million still remained in Client-1’s offshore account, the existence of which remained hidden from the IRS.
The indictment illustrates the trend by U.S. and law enforcement around the world to investigate and prosecute law firms, asset managers, accountants, and other enablers for their key roles in the global financial system. Assistant Attorney General Benczkowski said “the charges…demonstrate our commitment to prosecute professionals who facilitate financial crime across international borders and the tax cheats who utilize their services.” IRS-Criminal Investigations Chief Don Fort said the indictments send a message that “more investigations are on the way.”
With respect to prosecuting tax enablers, on July 2, 2018 the heads of tax crime and senior tax officials of the U.S., U.K., Canada, the Netherlands, and Australia announced an alliance on tax enforcement cooperation. At their first meeting they agreed to develop tactical plans and identify opportunities to pursue enablers of international tax crime. This new indictment shows a tangible result.
The indictment also is the latest of many indictments brought by tax authorities and prosecutors arising out of the publication on April 3, 2016 by the International Consortium of Investigative Journalists (ICIJ) of the Panama Papers investigation. As of December 1, 2016, governments in more than 70 countries have started over 150 investigations, inquiries, audits and probes into the affairs of thousands of people and corporations linked to Panama Papers.