In 2009, the law firm Mossack Fonseca had an internal debate about one of its clients.
H.J. von der Goltz was from Guatemala where his father had built an impressive fortune, but he lived in the United States and had an American wife. This provided a problem for the law firm due to the fact that U.S. tax authorities had been very aggressive in pursuing persons with tax liabilities in that country.
"We know that he lives in Miami, and for five months a year lives in Boston. For his activities within the United States, he has US societies and trusts. For his external affairs, he uses Mossack," said Ramses Owens, his primary contact at the firm. "All of his schemes are very well structured. Don Harald Joachim has confidence in the schemes and feels fully covered and protected."
Owens then noted that the value of the client's international holdings were valued at $50 million, but they could climb as high as $60 million to $70 million. He identified Von der Goltz as the firm’s largest American client due to the complexity of the structures he needed to hide his family's offshore fortune. Owens then made his recommendation.
"My suggestion: Leave everything as is with von der Goltz," he said. "Let him stay and we will live with the potential risk."
Firm co-founder Ramon Fonseca issued a concise and crystal clear response.
"For my part, I am in agreement with your suggestion," he said.
The exchange was made public as part of a yearlong investigation into more than 11.5 million documents from the law firm that were leaked to the German newspaper Süddeutsche Zeitung. That newspaper shared them with the International Consortium of Investigative Journalists, which organized a collaboration of media from more than 60 countries.
Shortly before the leak was made public, both Fonseca and Owens told journalists working on the project that they would never knowingly assist a client in evading taxes.
“We deny a client if we know that the client will not be paying taxes. Transparency and information regarding the paying of taxes is very important. It’s not like the 80s and 90s when the information was very secretive. We must comply with new rules for transparency,” Owens said in an interview with a Süddeutsche Zeitung reporter in Panama in February.
Fonseca was also clear about his stance on tax evasion, especially in regard to American clients, in an interview with La Prensa in March.
“It's my understanding that we have a contract with the customer which tells us that he has complied with the laws of their country. Because we are not lawyers in the United States...and instead we are lawyers from Panama, we can not get into the structure of a company or the activities being undertaken by the company against the tax system, so yes we demand they guarantee us that they will act with good principles,” he said.
But internal documents from Mossack Fonseca illustrate that, in this case, the firm was well aware that von der Goltz was using offshore companies for behavior the firm considered to be possibly actionable by foreign authorities. The firm even discussed the client's U.S. tax returns in assessing what kind of risk he posed.
According to the Internal Revenue Service, federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.
In the wake of the investigation going public April 3, the U.S. government has announced that it will actively pursue cases of alleged tax evasion unearthed by the data leak.
"Once the IRS becomes aware of the identities of these people, I almost can guarantee you that they will do some kind of triaging of the data to see if there are U.S. people in there and based on the results of that, they may elect to go after people," former IRS official Daniel Reeves, who helped create its offshore compliance unit, told McClatchy.
In a document discussing the proposed creation of a foundation to control the bulk of von der Goltz’s family fortune, Owens expressed confidence that it would not expose his client to any tax liabilities. When asked if an intermediary should be appointed as a "protector" of the entity, Owens replied, "The foundation is so bullet proof that H.J. can feel absolutely comfortable being the consultant himself."
That comment was made to Richard Gaffey, a US-based accountant whom Mossack records show acted as the primary intermediary between von der Goltz and Mossack Fonseca and who was overseeing the creation of the foundation.
Part of the reason that the firm was confident its dealings with von der Goltz would go undetected by US authorities was his Guatemalan citizenship. In a document from 2007, Owens made it clear that a bank account being opened for von der Goltz in Andorra should make no reference to his U.S. ties.
"Of course, we should only use the passport from Guatemala," he wrote.
That account was created in the name of Emjo Investments Ltd., a British Virgins Island company which was created in 1986. It also had an account at the Panama brokerage house Financial Pacific. Asked about that account, Von der Goltz denied that Emjo had any connection to the Panama brokerage house, and tried to claim that La Prensa had confused the name of the company with another one from a different jurisdiction.
“Before you write something that is clearly not accurate, it would be helpful and advisable to establish who owned that company,” he wrote.
He also referred all further questions about Emjo to Owens. La Prensa submitted questions to Owens, but he declined to comment on the record.
According to Mossack Fonseca records, von der Goltz used his position as a director of an investment firm, Boston Capital Venture (BCV), to move money between foreign accounts and the United States. MF records show the firm created another BVI company, Offshore Ventures Investment Corporation (OVIC), specifically for the purpose of investing in a fund created by BCV. But the primary investor was von der Goltz himself.
In July 2002 BCV Chief Operating Officer Charles Bridge told MF "There are 14 investors (in OVIC), four of which are Mr. von der Goltz‘s companies.”
One of the companies identified by Bridge was Emjo.
Van der Goltz would also use Emjo to make an investment at another firm to which he had ties, Brooke Private Equity Advisors. According to Mossack documents, von der Goltz used Emjo to invest $500,000 in Brooke Private Equity Advisors Cayman Fund I-A and $1.5 million in Brooke Brooke Private Equity Advisors Cayman Fund II.
When La Prensa queried Brooke Private Equity about the investments made by Emjo in its funds, the response was provided by von der Goltz.
Von der Goltz would also use Emjo to invest in a company that developed eco-tourism projects in Central America and the Caribbean. That company, based in Hong Kong, was called Rain Forest Tram.
That company would eventually attract investment from some of the richest people on the planet, including French billionaire Philippe Foriel-Destezet, who owned 18 percent of the Swiss payroll company Adecco, Swiss pharmaceutical heiress Corinna von Schonau-Riedweg and Gabriele Quandt-Langenscheidt, whose family owned part of the German carmaker BMW and whose grandmother had been married to Joseph Goebbels.
Another investor was noted Harvard Business professor Michael Porter. Asked about his involvement, Porter declined to comment.
“I don't want to comment and cannot really contribute. I am a small investor in Rain Forest which I have always thought has a good mission, but have not been involved otherwise. I have also not seen or spent any time with Johann in several years so I am also out of date,” the professor wrote.
Several shareholders of Rain Forest Tram were also part of another company, Peninsula Investments Group, which invests in construction projects in Latin America, including several in Panama.
Mossack Fonseca records indicate that the main shareholders of that firm when it started in 2005 included Foriel-Destezet, who controlled 2 million shares through a company named Akila Finance and von Schonau-Riedweg, who owned 1.5 million shares in her own name. Emjo purchased 500,000 shares in 2006.
Over the next several years they would all increase their stake in the company, which according to MF records is incorporated in the Bahamas and which has been involved in the development of several projects in Panama.