Tag Archives | panama papers

Trump Ocean Club Buyers

The flurry of emails began in the spring of 2008. On one side was Marie Williams, representing the Trump Ocean Club International Sales Group. On the other was Mossack Fonseca, the law firm known as Mossfon, whose leaked data became the Panama Papers.

Construction on the 70-story tower in downtown Panama City was not yet complete at the time. Announced in April 2006, Trump Ocean Club International Hotel and Tower Panama would not launch until 2011, when the Trump family came down for a triumphant ribbon cutting alongside President Ricardo Martinelli and developer Roger Khafif.

Ivanka Trump was also there. When Trump first committed to the deal, he told Khafif he was sending Ivanka to Panama. The project would be her baby.

In 2007, Trump Ocean achieved a significant milestone. It pre-sold enough condos to convince Wall Street to back $220 million in construction financing. A significant portion of those early sales went to Russian buyers hiding behind anonymous shell companies. Few were seeking a home in which to live. Some were simply parking cash they had spirited out of Russia. Others, it now appears, were Russian mafia laundering money. They joined money launderers from South American drug cartels who were also buying property at Trump Ocean Club.

In September 2008, Donald Trump, Jr. said at a real estate conference that “Russians make up a pretty disproportionate cross-section of a lot of our assets… We see a lot of money pouring in from Russia.”

Fast forward to last week. The Associated Press broke the news that condo owners in the Trump Ocean Club want to remove President Donald Trump’s name from the development. They also hope to fire his company’s management of the Ocean Club’s hotel.

Occupancy in the hotel has shriveled, according to reports. Condos aren’t selling either. Last August, 202 still-unsold condos were part of a sales package that included the Ocean Club’s restaurants and conference center. Khafif’s firm, Newland International Properties, filed for bankruptcy in 2013. Martinelli is living in Miami, fighting extradition back to Panama, where he faces criminal charges. The development shaped like a sail, or perhaps, as Ivanka Trump said, “a giant D,” is fast becoming an international symbol for money laundering.

How did it all go so wrong? The emails from the Panama Papers help tell the story.

Trump Ocean contacted Mossfon for translation services in June 2008. Khafif wanted the firm to translate the condo sales agreement from Spanish into Russian. It cost $15 a page. The total came to $600. The payment was late.

Trump’s own company was not directly involved in selling the units but it helped with the marketing. Trump reaped millions of dollars from the naming rights and management contract. Estimates are he took in well over $75 million from the development.

During those initial years, hot money was pouring into Panama. Some joked that those who complained about the traffic and parking from the new buildings filling the skyline had nothing to worry about – nobody actually lived in the apartments. The benign view was that these empty properties were awaiting Americans or Canadian snowbirds who would someday quit working and claim their retirement homes. Others suspected the bulk were being used for money laundering or as investments for wealthy elites from places like China and Russia. These buyers were unreliable. They would soon flip their properties, particularly at the first sign of trouble.

Trump and Khafif were not interested in asking too many questions about who purchased the Ocean Club units. They didn’t care that their building was built on a shaky foundation of flighty capital and money laundering. For Trump, it has always been about the quick score, consequences be damned. As long as he could maintain plausible deniability, the origins of the cash handed to him didn’t matter.

In one of her emails sent to Mossfon in 2008, Williams, the Trump sales executive, had another question:

Additionally, we are working with an Iranian broker who has individuals residing in Iran or who are residents in the UK with Iranian passports desiring to purchase in Panama.  Does your firm have experience with Iranians?  Would the visa requirements be any different from someone from Russia or Europe?  You were so helpful with the information your forwarded before pertaining to Russians. I would like to create this same experience for this broker who has connections with the wealthy Iranian nationals.

On the campaign trail and as president, Trump savagely attacked Iran in speeches. He described the country as a “fanatical regime” that “raided the wealth of one of the world’s oldest and most vibrant nations, and spread death, destruction, and chaos all around the globe.”

Yet in private business, Trump grabbed that wealth with both hands.


Blacklisted Tax Havens

During the early 2000s, tax havens and the lawyers, accountants and bankers who serviced them fought a pitched battle with the Organisation for Economic Co-operation and Development (OECD). Revenue was vanishing into tax havens. The use of secret bank accounts and anonymous shell companies by Russian mobsters, drug cartels and kleptocratic politicians had become impossible to ignore. The secrecy world was lawless territory and international organizations like the OECD tried to impose some standards.

The stick the OECD wielded was the threat of a blacklist. If tax havens did not adopt reforms – information exchanges, better vetting of customers, more transparency, raising tax rates – the OECD threatened to restrict their access to the global financial system. This was a real threat. The OECD is truly an international organization. Its members include the United States and the other richest nations of the world.

However, the tax havens fought back. They had powerful ideological allies in Washington, including congressional Republicans and the Bush administration. Their efforts succeeded. More about this battle can be found in my book, Secrecy World. By March 2003, powerful offshore intermediaries like Panamanian law firm Mossack Fonseca declared victory.

“We are very pleased by the fact that the coordinated efforts of the offshore jurisdictions to repel harmful initiatives that once threatened the financial privacy of our customers have received proper recognition,” the firm told its clients in the company newsletter that year. “As a result we have before us a very positive outlook for the year 2003.”

The good times continue to this day. When the OECD first began its campaign it identified forty-seven tax havens worldwide. By June 2016, the OECD had a single country on its tax haven list, Trinidad & Tobago. Nobody on the planet – except the OECD – believed that Trinidad was a the sole tax haven, or even a significant one.

In April 2016, the Panama Papers were published worldwide to considerable attention. Gnashing of teeth and rending of garments ensued. Three months later, European Finance ministers launched a process to create a new blacklist. They worked through something called the Council’s Code of Conduct Group on Business taxation. The process was opaque and apparently marked by intense lobbying.

Yesterday, the EU process released the results to much fanfare. Seventeen jurisdictions were blacklisted: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.

Another 47 jurisdictions were added to a grey list including Switzerland, Turkey and Hong Kong.

Given the fact that they were severely knocked about by a major hurricane in September, a number of the Caribbean tax havens such as the Bahamas, British Virgin Islands and the Turks and Caicos were given more time.

How the blacklist is to be implemented and what it really means, beyond bad press for those named, is a bit fuzzy. There are no economic sanctions attached to the list. It’s up to individual EU member states to take action.

Nonetheless, tax havens on the list protested fiercely. Panamanian President Juan Carlos Varela blasted his country’s inclusion as “unfair.” Panama, he asserted, is “not in any way a tax haven.”

The reactions from those who have campaigned for tax fairness and tax haven transparency ranged from scathing to dismissive.

Sven Giegold, a German Green EU parliament member who has spearheaded efforts against the tax havens had this to say:

From the very beginning EU Member States were entirely excluded from the screening process although the Netherlands, Ireland, Malta, Luxembourg, the UK and Cyprus do not comply with the EU’s own criteria. In the shadow of the opaque Code of Conduct Group, Member States successfully lobbied to get their own dependencies and overseas territories off the hook. If countries with a tax rate of zero do not appear on the blacklist, it is not worth the paper it is written on. Even worse, as long as the Council cannot agree on common and automatic sanctions against listed tax havens, the blacklist will be toothless.

British professor and accountant Richard Murphy, who has focused on this issue for decades, was skeptical but encouraged by one provision. The Council appears to have wheedled a commitment from the tax havens of Bermuda, Cayman Islands, Guernsey, Isle of Man and Jersey to address concerns about the use of their countries to attract profit that is earned elsewhere. These are major players in offshore corporate tax avoidance. We shall see if these commitments amount to anything meaningful.

On his blog Murphy stated:

The fact that the EU has ignored its own abusive states undermines much of the credibility that this list might have. That makes this a disappointment for all those who have campaigned for tax haven reform, even if the writing is on the wall for at least five British tax havens.

The new blacklist underscores the power of the press, and its limitations. The Panama Papers helped force this issue onto the agenda of European politicians who would be happier ignoring it. However, the major powers continue to exhibit a lack of will when it comes to reforming a system that bleeds countries of much-needed revenue and feeds global criminality.