Judge’s order sent powerful message to Panama law firm
International scandal? As ever, Las Vegas plays its part.
But with all the names and nations linked to the offshore accounts debacle involving the Panama-based Mossack Fonseca & Co. law firm, and its local subsidiary M.F. Corporate Services, it’s easy to lose sight of the legal linchpin that has helped the light shine into this dark corner of commerce.
It starts with a hedge fund called NML Capital, Ltd., which had substantial investments in the Republic of Argentina when the nation’s economy foundered in the late 1990s. Wall Street investors financed government borrowing as it drifted in and out of recession. Argentina eventually defaulted on the loans as its economy worsened in depression and the world’s financial structure was shaken to its foundation.
Most lenders licked their wounds and settled their claims, but NML successfully argued before the federal court in the Southern District of New York that the $1.7 billion it’s owed should be repaid in total. Eleven collection actions were commenced. All it had to do was search the world, find the assets and execute its judgments.
It comes as little surprise to those who understand Nevada’s international reputation as a facilitator of secretive shell corporation documents that the hedge fund’s investigation led it not only to political insiders from Argentina, but also to Las Vegas. (Mossack Fonseca was so enamored of Nevada’s friendly laws of incorporation that it boasted of them to clients on its official website.)
But piercing the legal veil of secrecy associated with Nevada’s incorporation laws is no simple matter. It took a convincing argument — and a federal judge willing to listen and do his homework.
Attorneys for NML Capital found that person in U.S. Magistrate Judge Cam Ferenbach, whose 27-page order signed on March 16 shines a bright light not only on the legal issues, but on the essential need for transparency in the complex civil action.
“M.F. Corporate Services claims to be Mossack Fonseca & Co.’s Nevada-based independent contractor, used in connection with the law firm’s company-formation practice,” Ferenbach wrote, also noting of the law firm’s reputation in the press. “This practice provides clients with the opportunity to form corporate entities in various jurisdictions worldwide to reduce their client’s tax and regulatory exposure. Mossack Fonseca & Co. is known for incorporating shell companies and laundering money.”
Ferenbach plucked the feathers from Mossack Fonseca’s claim that M.F. Corporate Services was somehow an independent entity. The Las Vegas office was, in fact, a creation of the law firm and had been linked to the creation of 123 Nevada shell corporations possibly used to facilitate money laundering and fraud.
M.F. Corporate’s office manager Patricia Amunategui admitted under oath that she took orders from a Mossack Fonseca official, and also admitted that when the corporate documents were approved by the Nevada secretary of state’s office they were forwarded to Panama to, in essence, fill in the blanks.
Had NML Capital, Ltd. settled for less during the Republic of Argentina’s economic crisis, we probably wouldn’t be reading about the shadowy culture of shell corporations and Mossack Fonseca. Ferenbach’s order also makes that clear.
The judge wrote in part, “NML suspects that former Argentine President Néstor Kirchner and his wife, current President Cristina Fernández de Kirchner, awarded lucrative state-controlled projects to two political insiders, Lázaro Báez and Cristobal López, who embezzled billions of pesos in state funds and laundered the proceeds through Nevada.”
The hedge fund is in the process of proving it.
As intriguing as that statement is, I am left asking myself another question:
If this represents just one small group of clients, just how much other work did M.F. Corporate Services do for the Panamanian law firm at the center of this storm?
John L. Smith’s column appears Sunday, Tuesday, Wednesday, Friday and Saturday. Contact him at 702-383-0295 or jsmith@reviewjournal.com. On Twitter: @jlnevadasmith
