The Paradise Papers Primer: Trump-Russia Links And Global-Scale Corruption
Leaked documents expose a secret world of hidden financial troves and a tangled web of international political players
In early 2016, a small German newspaper received an unprecedented leak of 11.5 million files from the world’s fourth largest offshore law firm. These documents, and the revelations they held would come to be known as the Panama Papers — a name now infamous for shedding light on the multitude of ways the rich and powerful exploit offshore tax havens for their own benefit.
This Sunday, an even more expansive leak of files was made public by the same organizations that brought us the Panama Papers. These 13.4 million files, once again obtained by German newspaper Süddeutsche Zeitung, and presented by the International Consortium of Investigative Journalists (ICIJ), expose exactly how deeply offshore financial dealings are tied with many of the world’s most powerful political players.
From Jared Kushner, to Trump’s commerce secretary Wilbur Ross, to Russian financial investments in Facebook and Twitter, the newly released Paradise Papers are filled to the brim with enough political corruption and shady dealings to keep the spy-movie genre going for centuries.
So what exactly do these 13.4 million documents reveal, and what does it mean for the American public? In this deep dive, we’ll explore what these files actually are, the key players involved, and the most important revelations.
Sit back, relax, and let’s deconstruct the Paradise Papers.
Essentially the Paradise Papers are comprised of files from two offshore service providers (companies that are incorporated under the laws of a different country than they would be assumed to reside, often used for tax breaks or looser regulations), and the registries of 19 companies that act as tax havens for businesses.
They contain nearly, “7 million loan agreements, financial statements, emails, trust deeds and other paperwork from nearly 50 years at Appleby, a leading offshore law firm with offices in Bermuda and beyond,” according to the organization that released the files.
As mentioned above, these documents were obtained by a German newspaper and disseminated by the ICIJ, an international organization that is comprised of more than 200 investigative journalists in 70 countries. In this specific investigation, they worked with over 380 journalists stationed all over the world. The ICIJ also partnered with many mainstream news organizations, such as The Guardian and The New York Times, in their release of the files.
Within the Paradise Papers lie many revelations, but generally speaking these files shed light on the following key findings:
The leaks expose how the worlds of powerful political players, influential corporations, and global entities converge when it comes to the offshore financial system.
So why are these tax havens so important to the lifestyles of the rich and the powerful? On the surface level, they can allow for looser tax regulations, therefore saving the companies and individuals that use them large amounts of money. They provide convoluted, yet legal ways for mega-corporations and heavy hitting players to shield their wealth, contributing to the rise of global income inequality.
An important, secondary benefit to the offshore financial system is the secrecy it provides. Often these entities are difficult, or impossible to trace back to the owners. And, while the system itself is not illegal, this secrecy often attracts shadowy clients — money-launderers, kleptocratic politicians, and drug cartels and traffickers.
So while the use of these havens is allowed by law, and these leaks do not necessarily point to unlawful wrongdoing by the parties mentioned, they speak to a level of unprecedented global corruption — as well as what we might call “criminal-adjacent” dealings.
Brooke Harrington, a certified wealth manager and Copenhagen Business, told the ICIJ that the actions revealed in these documents are examples of the way those in power live under a different set of rules.
“There is this small group of people who are not equally subject to the laws as the rest of us, and that’s on purpose. [These people enjoy] the benefits of society without being subject to any of its constraints.” — Brooke Harrington
At the center of this scandal is the prestigious offshore law firm called Appleby, founded in Bermuda in the late 1890s. Unlike other offshore arrangements, Appleby is considered a leader in the industry, priding itself on proving that these kind of law firms can operate outside of the shadows.
After the Paradise Papers came to light, the firm released a statement categorically denying any wrongdoing.
“Having researched the ICIJ’s allegations, we believe they are unfounded and based on a lack of understanding of the legitimate and lawful structures used in the offshore sector.”
The Key Players And Revelations
Alright, let’s get into the meat of why these papers are so important, specifically in regards to the unprecedented controversy of the Trump administration.
Since before he took office, Donald Trump has been plagued with scandal and controversy. And as Special Counsel Robert Mueller’s investigation into Russian collusion in the 2016 election heats up, with the first indictments being served, it’s clear that the President has a history of surrounding himself with people who have little respect for both the rule and spirit of the law.
(Just ask former Campaign Chairman Paul Manafort and Former National Security Advisor Michael Flynn).
On the eve of the Republicans’ attempt at a tax reform push, the Paradise Papers further underscore the President’s poor choice in his closest companions and highlight previously undocumented connections with Russian interests.
Despite his campaign promise to “drain the swamp”, more than a dozen associates of the President found themselves featured in the documents released on Sunday. And with Mueller making it clear that his investigation is focusing on financial crimes and misconduct, these revelations are sure to be of interest.
Here are some of the connections you should care about:
Trump nominated Wilbur Ross to the position of United States Secretary of Commerce shortly after winning the 2016 election. The two men have been close friends since the early 1990s when Ross helped bail out Trump’s disastrous Atlantic City casino. Ross even found himself standing at the President’s right hand in April, while he monitored the strikes on a Syrian air force base as a response to the Assad regime’s use of chemical weaponry.
The Paradise Papers are arguably the most damning for Ross. His private equity firm W.L. Ross and Co, LLC, was one of the Appleby’s largest and most visible clients, with the offshore firm focusing on over 50 W.L. Ross companies and partnerships.
After becoming commerce secretary, Ross divested most of his shares, but the leaked documents reveal that he maintained a stake in a shipping company called Navigator, through offshore dealings.
Navigator participates in a lucrative and well-documented partnership with Sibur, a Russian gas company that is partially owned by Kirill Shamalov, Vladimir Putin’s son-in-law. Since 2014, when it stepped up dealings with the Russian company, Navigator has received $68 million in revenue from the partnership.
Other important owners of Silbur include Russian oligarchs Leonid Mikhelson and Gennady Timchenko. Timchenko was put under sanctions by the U.S. in 2014 after Russia invaded Ukraine — at such time the U.S Treasury stated that Putin held investments in Timchenko’s oil-trading firm.
Trump’s personal pick for commerce secretary is participating in business dealings with members of Putin’s family and his close allies — some of whom are currently under U.S. sanctions.
Navigator also has ties to Venezuelan state-owned oil company PDVSA, which the U.S. Treasury accused of being closely connected to government corruption and attempting to undermine Venezuelan democracy. One of PDVSA’s top executives was placed under sanctions in July of this year.
It’s important to note at this point that the U.S. commerce secretary plays an integral role in the execution of said sanctions.
Earlier this year, on a required personal financial disclosure form, Ross failed to disclose any of these dealings. At such time, he also agreed to recuse himself from matters in which he would have a direct financial interest…
After these revelations came to light, member of the Senate Commerce Committee Sen. Richard Blumenthal (D-Conn.), produced a statement regarding Ross’ actions:
“In concealing his interest in these shipping companies — and his ongoing financial relationship with Russian oligarchs — Secretary Ross misled me, the Senate Commerce Committee, and the American people.”
Why do so many Trump associates have such trouble disclosing relationships with Russia? https://t.co/VUChe0vcFt
Early this week, Forbes published an article claiming that Ross had lied about his net worth to maintain a spot on the Forbes 400 List, which ranks and profiles the country’s richest billionaires. Ross claimed to have $2 billion worth of family trusts that he was not required to disclose in federal filings. After investigating, Forbes announced:
After one month of digging, Forbes is confident it has found the answer: That money never existed.
Ross also has a history of business dealings with Russia — most notably his 2014 takeover of the Bank of Cyprus — a common destination for Russian oligarchs’ hidden wealth. Associates in the takeover included:
The U.S. Secretary of State doesn’t make it out of these revelations unscathed. Prior to his nomination by Trump, Tillerson served as the CEO of ExxonMobil. Surely he can’t have any conflicts of interests…
According to Appleby’s files, Tillerson’s name shows up as the director of an offshore firm connected to a multi-billion dollar controversial, Middle Eastern oil and gas venture, the Marib Upstream Services Company. At the time of this company’s incorporation in Bermuda, Tillerson was president of ExxonMobil’s Yemen division.
In 2005, Yemen moved to nationalize their gas production and attempted to sever ties with ExxonMobil. A Texas-based connected firm sued Yemen for $1.6 billion but lost during arbitration.
Last year it was reported that ExxonMobil had at least 35 subsidiaries in tax havens, holding a total of approximately $51 billion offshore during Tillerson’s tenure as CEO.
For more on Tillerson’s convoluted past and ties to Russia, a primer:
Cohn serves as Trump’s chief economic adviser and the director of the National Economic Council. Former president and CEO of Goldman Sachs, Cohn is no stranger to the use of offshore dealings. Cohn has been considered one of the more influential voices in the Trump administration.
He was recruited by Goldman Sachs in 1990, and proceeded to work for the company until leaving for the White House. Considered a “globalist” by some Republican critics, Cohn often faced off with former White House Chief Strategist Steve Bannon, during Bannon’s seven months with the administration.
According to the leaks, between 2002 and 2006, Cohn served as either president or vice-president for 22 separate Bermuda entities for Goldman Sachs.
The Bermuda based companies headed by Cohn specialized in real-estate acquisition and were struck from their registry into 2012, a move that would signal their inactivity.
Currently, Cohn is the main force behind the Republican push for tax reform — an agenda item sure to be affected by these revelations. Having one of the main proponents of tax reform be a documented manipulator of global tax regulations is, at the very least, a textbook case of irony.
Although, it was already pretty clear that his understanding of the general populations’ financial issues was skewed at best:
Uh, Gary Cohn (who is worth several hundred million dollars) thinks it costs $1000 to buy a new car (or renovate your kitchen) https://t.co/6IwRDgGSCN
The Financial Backers
Politicians aren’t the only victims of the Paradise Papers. Billionaire donors such as the Koch Brothers and Robert Mercer were named in many of the documents released by the ICIJ.
Hundreds of documents revealed in this leak reference a Bermudan firm controlled by one of the Koch brother’s largest subsidies, a paper manufacturer called Georgia-Pacific. Activities enacted by the firm included “the granting and repaying of large loans between the Koch’s domestic and offshore subsidies,” according to the ICIJ.
This is not the first time the Koch Brothers have had their perplexing tax dealings revealed. In 2014, the ICIJ published leaks revealing that Koch Industries had been involved in setting up complex corporation entanglements designed to reduce tax costs.
During the 2016 elections, the Koch Brothers refused to back Trump — however, they seem to have recently changed their tune. In July, they launched a multi-million dollar campaign in support of the President’s tax reform. Once again, irony rears its head.
Appleby documents revealed connections with Mercer as well. In 2015, the Bermuda office received a copy of Mercer’s passport — which was standard policy for those registering as clients of the company. According to a 2008 invoice, the firm had previously provided him with “jurisdictional security advice” for his company.
Mercer, who just recently stepped down from his position as co-CEO of the hedge fund giant Renaissance Technologies, is well known for his support of former White House adviser Steve Bannon. After his resignation, this story was brought back into the headlines:
The IRS says Robert Mercer, the big Trump donor, owes $7,000,000,000 in back taxes. https://t.co/3cN4BURxWd
Are you tired of the irony yet?
Mercer is also one of the backers of the data-mining firm Cambridge Analytica, which was founded by his daughter Rebekah Mercer. Jared Kushner approached Cambridge Analytica during the campaign to help craft online efforts. Now, questions have been raised as to whether the data operation helped select social media targets for the Russian disinformation campaign that was waged during the election.
Additionally, it recently was reported that Cambridge Analytica was approached by a GOP megadonor requesting that the company organize the hacked Hillary Clinton emails that Wikileaks possessed. Rebekah Mercer reportedly forwarded the email suggestion to several people, including the company’s CEO, which prompted him to reply that he had contacted Julian Assange two months prior, asking for the emails.
Speaking of Kushner…
The President’s son-in-law isn’t having a great year. From revelations that he lied on security clearance forms (and then did it again…and again) to his attendance at the fateful June 2016 Trump Tower meeting, which was revealed to have been an attempt to obtain damaging information from the Russian government on Hillary Clinton, Kushner seems to have dirtied his hands at every possible opportunity.
The Paradise Papers reveal yet another corrupt connection of Ivanka Trump’s husband. Leaked files divulged that two Russian state institutions made substantial investments in Facebook and Twitter, through a close associate of Kushner. In 2011, $191 million was invested in Twitter, while an offshore company funded a vehicle that held $1 billion in Facebook shares.
Yuri Milner, who owns a stake in one of the companies co-owned by Kushner and his brother, made the social media investments. In 2015, Milner gave $850,000 to the presidential adviser’s start-up called Cadre. In a shocking turn of events, Kushner failed to disclose his holdings in the company when he first joined the Trump White House.
The two organizations that funded the investments in Twitter and Facebook are the state-owned VTB Bank, and state oil and gas firm Gazprom. These companies are currently under U.S. sanctions.
According to reporting by The Guardian, VTB has received more Russian state subsidies than any other Russian bank. Andrey Kostin, VTB’s chairman, formerly worked in KGB foreign intelligence and has ties to Putin himself.
Milner himself previously advised the Russian government on technology. He did so through an intermediary commission chaired by Dmitry Medvedev, the former president, and current prime minister. He also has close personal ties to Facebook’s chief executive, Mark Zuckerberg. Zuckerberg attended his wedding in California in 2011.
These revelations all come on the heels of multiple investigations into Russian interference in the 2016 campaign season and election. Russia’s role in exploiting social media networks to create electoral discord is integral to these probes.
These revelations just barely scratch the surface of the 13.4 million documents leaked this weekend. Smaller political fish have been implicated in controversial dealings as well.
The recently confirmed vice chairman for supervision at the Federal Reserve, Randal Quarles was named in documents connecting him to a Bermudan bank currently under U.S. investigation for possible tax evasion. Private equity funds used by Democratic mega-donor George Soros have connections with Appleby. Uber, Apple, and Nike are all mentioned in files.
Other international players have been exposed by these leaks. From Queen Elizabeth II to Queen Noor of Jordan to Brazil’s finance minister, Henrique de Campos Meirelles, the web of financial corruption crosses borders and all spectrums of political ideology.
The movement of money through tax havens is a global industry, that ranges from morally corrupt by legal evasion of higher tax rates to the hiding of ill-gotten, laundered finances.
The massive amounts of money discussed in these documents are concentrated in the pockets of the mega-rich — the top 0.001%. The Paradise Papers highlight the increasingly growing chasm of global income inequality. They expose exactly how convoluted these corrupt systems are, and how little transparency there is regarding how, where, and to whom this money travels.
As we in the U.S. are becoming increasingly more aware of the inappropriate, conflicted conduct of our highest-ranking officials, the information revealed by these papers highlights the depth of the greed that fuels so many high-ranking political players.
With the Russia probe rapidly revealing a heavy emphasis on financial crimes and misconduct, the Paradise Papers are sure to be of interest to Special Counsel Mueller.
And as for tax reform? I’ll ask again — are you sick of the irony yet?