On the afternoon of May 27th, 2014, the Mossack Fonseca office in Panama City received an email from a potential new client in Ireland called Paudie, whom they'd never heard from before.
“Hey guys. I have a number of questions about a company structure. Maybe you can better inform me and send me a quote for such services?”
Paudie, who didn’t give his surname, told the law firm that he was an EU resident in a country with “CFC rules”.
(Controlled foreign corporation rules are designed to limit artificial deferral of tax through the use of offshore low-taxed entities.)
“I was wondering if how private/secure and reliable the following would be?” Paudie asked.
He was thinking of opening up a dual structure. “A Hong Kong IBC along with a Seychelles PIF. Neither country has signed a TIEA with my country.”
An IBC is an internationally trading company while a PIF is a Private Interest Foundation. Both are tax planning structures. A TIEA is a tax information exchange agreement.
“The PIF, Paudie explained, “would have a nominee founder and councillor. The IBC in Hong Kong would have a nominee director. I planned to bank in Switzerland who (sic) does not share information with my country.
“Can you guys maybe tell me if this structure works or if there are any privacy issues? Also, can you let me know how much it would cost to set this up? Thanks. Paudie.”
The following afternoon Shalimar May, client relations analyst in the Panama office, replied to Paudie by email and told him it would be a pleasure to discuss the proposed structure. She asked Paudie for a few personal details and how he had come to hear about Mossack Fonseca.
Paudie's email reply was almost instant, and brief. He gave his name, an address in Co Cavan, and said he'd come across Mossack on Google. A person with the name given could not be located and there was no response to requests for comment sent by The Irish Times to the email address used by Paudie.
Mossack lawyer Rogelio Fernandez told Paudie that he believed the structure being proposed was “feasible” and sent on details and fees. Paudie replied suggesting that perhaps Fernandez could suggest an “ideal” structure.
“I am an Irish tax resident, opening an online business. All my income will be from overseas companies. Ideally I would like to act as a consultant from an offshore company and get paid a salary accordingly while the remained [SIC]of the company profits remain in the company bank account.”
Correspondence
When it was proposed by email that they speak by phone, Paudie replied: “Hey, just to be clear, what time zone are you in? Can we do [A]Skype call?” The email correspondence appears to fizzle out soon afterwards, though Mossack tried once or twice to revive the contact.
A Seychelles PIF costs $1,550 to incorporate. The cost of the Hong Kong entity was not given to Paudie, the files indicate.
The email correspondence is just one example from the Panama Papers of the way the legal services offered by the Mossack group, one of the largest providers of offshore services in the world, are being accessed not just by the rich and super-rich, but also by the relatively ordinary Irish people. The use of such services is perfectly legal.
The files show that the Anchor Bar, on Main Street, Graignamenagh, Co Kilkenny, was owned by way of a British Virgin Islands company called Kymar Holdings Ltd, for which Mossack acted. Seán Manning, also of Graiguenamanagh, was the owner of Kymar and one of its directors.
Manning, a former financial adviser with the Bank of Ireland, was sacked in 2011 after it emerged he owned a pub – the Anchor Bar – which had gone into receivership. Attempts to contact Manning were unsuccessful.
Court papers served
The leaked files include court papers served on Kymar Holdings in 2011 when ACC Bank initiated proceedings in relation to a €623,000 loan given in 2003 to Manning, a business partner of his, Daniel Grace, also of Graiguenamanagh, and Kymar. The loan was given to all three on a joint and several basis. By 2011 the amount owed was €910,512.
The files show that the shares in Kymar were transferred to Manning in 2006 from two nominee companies, following a meeting in Sark in the Channel Islands of the board’s two directors, who also lived in Sark.
A court in Thomastown, Co Kilkenny, was told in 2006 that the Anchor Bar business was being put into receivership. No-one answered the phone at the bar yesterday.
The two wealthy Irish business figures, Dermot Desmond and JP McManus, also appear in the files. Both are active in international investments and are not tax resident in this jurisdiction, and it is not surprising that they might show up in the files of a major law firm that provides global services.
The files include a June 2005 letter from HSBC Private Bank in Switzerland to Mossack’s office in Panama in relation to a Panamanian company called Ard International Inc.
A meeting of the company’s directors in Panama, consisting of three office employees of MF, voted that month to issue a bearer share certificate for 100 $1 shares in Ard International.
Bearer shares, as their name suggests, are company shares that belong to whoever has them. They are being done away with in most jurisdictions because of concerns over transparency.
On the same day the directors issued the bearer share certificate, they voted to grant a general power of attorney over the company to Desmond, including the right to deal in assets and open and close bank accounts.
The files include a note from Desmond of five months’ later, in November 2005, written on notepaper giving his office address in Dublin, asking the Ard International directors to grant power of attorney to two Swiss lawyers.
“This being done, I resign as attorney of the above mentioned company and ask you to kindly destroy the document of my appointment and the one of my resignation.”
It is not known what business, if any, was ever conducted by Ard International. A spokeswoman for Mr Desmond said he did not want to comment.
Swiss-based McManus, according to the files, is the main beneficiary of an entity called the Jasper Blue Family Settlement. Documents in the files record transactions involving tens of millions of euro between BVI company Izaca Corp, and Jasper Blue Ltd, of the Bahamas, which are in turn linked to the settlement. The files show that Izaca was at one stage owned by way of bearer shares, but ownership was later transferred to Jasper Blue Ltd in 2009. Izaca is described in the files as being based in Switzerland and being mainly involved in the holding of bonds.
Power of attorney
McManus is also mentioned in the files in relation to another company, Penton Consultants Inc, of Panama, which used nominee directors provided by MF. In August 2007 the directors gave McManus power of attorney in relation to the company. A bearer bond certificate for 100 $100 shares in Penton was issued in July 2007. It is not known what purpose the company was used for, if any. The leaked files include a letter dated January 2011 from HSBC that includes an indemnity for a lost or destroyed Penton share certificate. It says the bearer certificate issued in July 2007 has been lost or destroyed and asks that it be cancelled, and undertakes to deliver the share certificate to MF if it is ever recovered.
McManus is mentioned in relation to major art purchases. In May 2013 a Panmanian company called Blueline Group SA wrote to the art dealers Sotheby’s, in London, to confirm that the beneficial owner of Blueline was McManus, with an address in Switzerland.
A year later two similar letters were sent to art dealers Connery Pissaro Seydoux, of Geneva, in relation to payments of $12.15 million and $600,000. The Geneva firm was established in 2012 when two top dealers from Sotheby’s and Christies left to set up their own firm, which is considered to be a “superprivate superdealer” in the art world.
The letters were sent for know-your-client compliance reasons, and HSBC bank in Switzerland was involved in handling the matter for Blueline. The leaked files indicate a bearer certificate for 100 $100 shares in Blueline was issued in 2005. They also show that late last year the company was being moved from Mossack to a new registered agent in Panama.
A spokeswoman for McManus did not respond to a request for a comment.
Also in the files is the former chairman of the Derry GAA, Seamus McCloy. His Belfast-based Carn Properties group was placed in receivership in 2011. The property company was mainly involved in Northern Ireland but had business in the Republic also. It was placed in receivership by Bank of Ireland, at the direction of the National Asset Management Agency. In the period prior to its collapse the value of its assets collapsed to £2.5 million from £19 million.
The leaked files show that Carn held shares in a British Virgin Islands company called Crinum Ltd which were at a different stage in 2004 held by McCloy. A lesser number of shares were held by his fellow Carn Properties director, Seamus Mullan. Records in the leaked files show that at a meeting of the directors of Crinum Ltd in Belfast on April 2nd, 2009, McCloy and Mullan voted that, pursuant to Section 199 (2) of the BVI Business Companies Act 2004, Crinum should be dissolved and a plan of liquidation be approved. The two men also declared that in their opinion, the company was solvent. A liquidator in Gibraltar was appointed. It is not known what business, if any, was conducted by Crinum.
No knowledge
When asked about the BVI company, McCloy said he had no knowledge whatsoever of the company. He said he had a pretty good memory and did not think he could have been involved with an offshore company and have forgotten it. “I never heard of it.” Mullan could not be contacted.
The files also show that the former Fine Gael mayor of the South Tipperary county council, Jimmy O'Brien, was a shareholder in a Panamanian company called Melton Properties Inc, along with Richard Manogue, of Rosehill Mews, Kilkenny, and Colm Duggan, of Mullinahone, Thurles, Co Tipperary.
The files show email correspondence between Mossack in Panama and Mr O’Brien, with the latter using his @southtippcoco.ie email address. Some of the correspondence involves difficulties in 2010 concerning the rental income on apartments in San Francisco, Panama, which were owned by Melton.
The files indicate that Melton bought the property in 2007. O'Brien told The Irish Times that he and his partners bought the 12 apartments using an Irish contact in Panama they had been told of, who had recommended using Mossack. He said everything was registered here and declared and as there was no surplus from the rent, there was no tax involved. "It worked out fine and we sold them last year," he said. Capital appreciation on the Panamanian apartments helped cover losses incurred on property in Ireland, the former councillor said.
Service providers
There is no legal difficulty whatsoever with owning property in Panama by way of a Panamanian company and no such suggestion is intended.
The files show that a lot of companies linked to Ireland were set up by service providers with operations here, who might be working for Irish clients or foreign clients. The Pegasus Trust, for example, on Botanic Avenue, Dublin, is understood to work mainly for foreign clients. The files also show that some companies were established by Mossack for Irish beneficial owners following direct contact by the individuals, or by way of banks or professional firms based outside Ireland.
In the Mossack files, the “client” is the person or firm who contracts it to provide a service, whether it be for an ultimate beneficial owner, or directly for the client itself.
Among the clients with addresses here that used the services of Mossack is a company incorporated in the Bahamas called Denville Consultants SA. The leaked files show it was the client for twelve companies in the British Virgin Islands, and three in Panama, for which Mossack provided services. The address used by Mossack when contacting Denville, was a post office box in Castlegregory, Co Kerry.
