Ten months after international media reported the leak of 11 million documents related to 200,000 offshore companies set up by Panamanian law firm Mossack Fonseca, two partners of the firm have been arrested and charged with money laundering.
The arrests of Ramon Fonseca and Juergen Mossack are linked to corruption and bribery allegations involving Brazilian construction firm Odebrecht.
In a statement on the arrests, Panama Attorney General Kenia Porcell said certain information “allegedly identifies the Panamanian firm as a criminal organization that is dedicated to hiding assets or money from suspicious origins.”
More specifically, it has been alleged that the Panamanian law firm helped launder bribe payments.
The attorney general filed charges against four people: the principal partners of the law firm, Mossack Fonseca attorney Edison Teano and Sara Montenegro, the firm’s legal director.
In the bribery case, dubbed Lava Jato – or car wash – by the Brazilian media, Odebrecht has admitted to paying $788 million in bribes to obtain contracts in 12 countries.
In December, the construction company agreed to pay the U.S. Justice Department a record $3.5 billion fine and pleaded guilty to charges under the U.S. Foreign Corrupt Practices Act.
Brazilian investigators allege that a network of offshore companies was used to funnel the bribe payments by Latin America’s largest construction firm. Several of these companies, including Panama-registered Balmer Holding Assets SA, were set up by Mossack Fonseca.
While the identity of Balmer Holding’s owners is concealed using anonymous bearer shares, investigators determined that Odebrecht and related companies transferred $7 million to the company.
The Panama Papers revealed that a Mossack Fonseca representative agreed to destroy correspondence related to the company at the request of an agent acting for Balmer’s hidden owner.
An attorney for Ramon Fonseca described the evidence against his client as “weak,” adding, “it does not seem too difficult to show the lack of foundation to these allegations.”
Following the arrest, police searched Fonseca and Mossack’s homes as well as the law firm’s headquarters. Both men are considered a flight risk and were refused bail.
In a statement, Mossack Fonseca said the raid was an “arbitrary and biased action.”
“All the actions that the prosecution has taken against the firm today are an attempt to divert the attention from those who really merit a deep and proactive investigation from the authorities on crimes that have already been confessed,” Mossack Fonseca said. “In the more than ten months since the beginning of this investigation, caused by a suspiciously unreported crime committed against our firm, they have not presented a single piece evidence that shows us guilty.”
Fonseca told reporters last week that Panamanian President Juan Carlos Varela had confided in him that he had accepted “donations” from Odebrecht.
Fonseca used to be a senior adviser to the president but was sacked after the Panama Papers revelations.
Colombian President Juan Manuel Santos also allegedly received $1 million in potentially illicit political campaign contributions from Odebrecht. Both presidents denied the accusations.
In response to the Lava Jato investigations in Brazil, Mossack Fonseca in August 2016 issued a “clarification” in which the law firm characterized Mossack Fonseca do Brasil as a Brazilian company and a completely independent franchisee with management and partners separate from the group.
Last week’s arrests appear to be part of a coordinated action by law enforcement agencies across Latin America, as Peru issued an international arrest warrant for former President Alejandro Toledo. Toledo is charged with accepting $20 million in bribes from Odebrecht.
Three days before the arrest, Mossack Fonseca closed its Luxembourg office, following the shuttering of its subsidiaries in Jersey, Isle of Man and Gibraltar.