What does the Panama Papers leak have to do with divorce?
What is the Panama Papers leak?
With more than 2.6 terabytes of data comprising more than 11.5 million documents, the release of Panama-based law firm Mossack Fonseca’s records this week represents one of the largest data leaks in history. The Panama Papers, as they are dubbed, were initially obtained by German newspaper Süddeutsche Zeitung and subsequently the subject of a yearlong investigation, led by the International Consortium of Investigative Journalists (ICIJ) and involving more than 100 publications from nearly 80 countries.
The millions of documents include financial records, passports and correspondence stretching back 40 years, and detail 214,000 offshore entities across more than 200 countries. Offshore accounts aren’t illegal but are often used as tax havens for money laundering and corruption. Many of these entities were reportedly found to be shell companies established in order to help several of the law firm’s clients, through more than 500 top banks worldwide, allegedly hide income and transactions worth billions of dollars.
The leak names twelve current and former heads of state—including Ukrainian President Petro Poroshenko, former Prime Minister of Iraq Ayad Allawi, former Prime Minister of Georgia Bidzina Ivanishvili and Saudi Arabian monarch King Salmannamed.
The family members and associates of several other world leaders—British Prime Minister David Cameron, Pakistani Prime Minister Nawaz Sharif, South African President Jacob Zuma, Syrian President Bashar Assad and Chinese President Xi Jinping, to name a few— have also been implicated. Iceland’s Prime Minister Sigmundur David Gunnlaugsson may face a snap election, and walked out of a recent interview when asked about his alleged dealings detailed in the Panama Papers.
One of the specialties of Mossack Fonseca is helping clients incorporate companies in certain countries, usually those with open financial regulations and not very open-eyed financial oversight.
But sometimes they can also be used to hide assets to avoid paying exes.
The Panama Papers suggest that, sometimes, well before divorce papers are even written, gallant billionaire husbands (it’s usually husbands, although at least one wife has been named) begin to place their assets in complicated trust funds. These funds are held by off-shore shell companies as a way of creating a unnavigable maze for any spouses, attorneys or forensic accountants who wish to find out how much money a person is really worth.
One of the unmasked billionaires was Monte Carlo-based, Russian-born Dmitri Rybolovlev, who made a fortune in fertilizer that amounted to an estimated $8.5 billion. His divorce from his wife of 20 years, Elena, was not just front-page news in Switzerland, where she lives, but around the world, because of the money involved, the intense wrangling over how the assets would be divided and his remarkable similarity to a Bond villain.
Emails sent to Mossack Fonseca revealed that Rybolovlev was using one of the holding companies that the firm set up for him in the British Virgin Islands to quietly move assets—millions of dollars worth of art and Louis XVI-style furniture—out of Switzerland and into Singapore and London. Because Rybolovlev owned all the shares in that company, his wife was unable to get access to them once they were overseas.
Rybolovleva was initially awarded $4.5 billion, the largest divorce settlement in the world at the time, which was later reduced to $600 million before she accepted an undisclosed settlement.
Another Mossack Fonseca internal email spoke of a client, “a Dutch man married to a Dutch lady,” who was living in the Netherlands but wanted to protect part of his assets against “the unpleasant results of a divorce (on the horizon!)” The email goes on to ask about the possibility of using a “vintage foundation” to keep the wife from having access to said assets as a creditor.
One judge in a case in which Mossack Fonseca was involved took a billionaire husband to task for his arguments in a divorce proceeding, which the judge called “an elaborate charade” that was “founded on concealment and misrepresentation,” the point of which was to satisfy the desire “to vanquish [his ex-wife] financially.”
The world of the very rich may seem to foreign to us, but the basic principles of a divorce remain the same: don’t think hiding assets will save you from having to make a property settlement with your ex-spouse.
We offer a free, 10-minute phone consultation with one of our friendly, experienced family lawyers. Contact us today!