The shadowy dealings of global finance

After a mysterious whistleblower gave more than 11 million financial and legal records on the clients of a Panama-based law firm to two investigative reporters, the murky underworld of offshore tax havens, financial service providers, and other outfits catering to the ultra-rich burst into public view with the international publication of what became known as the Panama Papers.

Reporter Frederik Obermaier, a current Nieman Fellow, led the effort to break the story two years ago this week with his colleague Bastian Obermayer. It was a project so massive that it ultimately included 400 journalists from outlets around the world. Obermaier shared the 2017 Pulitzer Prize for Explanatory Reporting for his work. He spoke with the Gazette about that experience, and about how voters ought to demand that more be done to foil transnational criminal networks.

Q&A

Frederik Obermaier

GAZETTE: The Panama Papers gave many people their first look at the opaque and often intricate networks lurking behind the veil of offshore finance. But that reporting focused on Mossack Fonseca, a single law firm. How many more Mossack Fonsecas are out there?

obermaier: Nobody knows. There are dozens of law firms that offer a similar service, but you do not know how many customers they have because, in this sector of the financial market, nobody hands out statistics because, of course, what they sell is secrecy. It’s part of the secrecy to not reveal how many customers they have because that might attract law enforcement, intelligence services spying on them. When we started, we tried to figure out how big Mossack Fonseca is, and it was nearly impossible.

After the Panama Papers, [we had] the Paradise Papers. One part of the Paradise Papers was a leak of a law firm that was considered the white knight of the offshore financial industry. But when we then saw what they do, we saw they behaved a little better than Mossack Fonseca but still had shady customers. So I think that’s a general problem of this whole industry because what they sell is secrecy, and who looks for secrecy? Of course, it’s some people who want to hide money from their wives because they have secret girlfriends, it’s some people trying to hide it from business partners, but then there are the criminals. And they use it.

GAZETTe: Why do you think you and your colleague were chosen to receive the original cache of documents that formed the basis of the Panama Papers investigation?

obermaier: We have no clue. We have some hints, put it that way. John Doe, the whistleblower at the beginning of the Panama Papers, published something like a manifesto. One explanation, and this is only guessing, is that if you have information that is of public relevance and you are turned down by [other] media outlets, you might think, “This law firm is owned by a Panamanian and by a German.” In Panama, there’s nearly no media outlet that has no tie with the offshore industry, so maybe you’re a little bit reluctant to approach them. If you then look to the German media market, there are maybe three or four players known for investigative journalism. The most famous one is our competitor, Der Spiegel. They do more intelligence service, national security/terrorism investigations. And our media outlet [Süddeutsche Zeitung] is more famous for corruption and tax haven stories.

GAZETTe: How did you get the information?

obermaier: That’s something we don’t [discuss].

GAZETTe: How worried were you that this information was legitimate and that you’d be able to verify enough to use it?

obermaier: We were, of course, super skeptical dealing with an anonymous source. We did hundreds of cross-checks with public registries, court documents, information that was in the Panama Papers where we then could ask people who were mentioned in there: “Is this accurate?” All the crossmatches we have done have turned out to be accurate. But still, that was only a portion of the data. It was 2.6 terabytes, so we were super cautious. Every detail that came out of the Panama Papers was something that we put out to the people who we wrote about beforehand, giving them the chance to comment, or even claim that it’s wrong or that it’s falsified. There were some people trying to claim that it was falsified at the beginning, but when we then told them “Let’s sit down, here’s what we have,” they were, like, OK. Even [Russian leader] Vladimir Putin, who’s no fan of our investigation, even he said in a public TV debate that while he does not agree with the whole reporting and interpretation, that he’s of the opinion that the information is authentic.

GAZETTe: Journalists are killed regularly for exposing criminal networks. Were you worried about your safety?

obermaier: There was concern at the beginning where my colleague [Obermayer], who was the first point of contact for John Doe, when we sat together and were like, OK, we now have found several heads of state, several people with connections to the Mexican drug cartels, the Ukrainian organized crime gangs, relatives of Bashar al-Assad, good friends of Vladimir Putin. We were, like, we have to basically think about security, and we have to make a risk assessment. What does it mean for our lives, for our families’ lives, for our colleagues’ lives? And we stepped up security like hell. For example, we did not leave any stuff in our offices that was not encrypted. We told all the colleagues who we involved that they cannot speak with anyone, not even their partners, about it. I came back from half a year’s parental leave when [it] started, and colleagues and family were [asking], “What are you doing; you don’t publish anymore?” In the beginning, I was, like, “I can’t tell you,” but that only led to more questions, so then I [said], “We are doing a project archiving documents.”

It was exhausting; it was frightening, I had complete nightmares in the weeks before publication because all the people we were writing about appeared in my dreams, and there were these moments when I drove home at night. Our workplace is in the suburbs of Munich, so it’s a long way to the city center. I was on my bicycle, and there was a car behind me on a road. There was no traffic, only the two of us, and he was not overtaking me. I was like, “Is this one of them?” But in the end, it wasn’t.

We did security plans. On the days of publication, my family was not in town. We had police patrolling the building, we had more security staff there. But in the end, I think still in Germany we live in a luxury cell for journalists. I feared more for our partners all around the world, in Russia, Africa, Latin America, and Turkey. Our Turkish partner received a death threat from a businessman very close to Mr. [President Recep Tayyip] Erdogan. Our Russian partners had to leave the country for a while. Our Latin American partners, there was online voting after the publication on “What shall we do with them? Shall we dump them in the bay, or shall we put them in prison?”

That’s what really frightened me because I think, after sharing the data, we shared the risk. We could feel a little bit safer, but we shared the risk with journalists in a very dangerous environment. And I really feared for something to happen, and it happened afterward. Our colleague in Malta, Daphne Caruana Galicia — she was not part of the original team, but she reported a lot about the consequences of the Panama Papers — and she was killed in a car bomb. And in Slovakia, a journalist [Ján Kuciak] who also reported on the aftermath of the Panama Papers was shot, together with his fiancée. In both cases, we do not know if it was related to the Panama Papers, but you start thinking more about the consequences of what you are doing.

“It was exhausting, it was frightening, I had complete nightmares in the weeks before publication … ”

Frederik Obermaier

GAZETTe: Why do so many people use firms like Mossack Fonseca?

obermaier: People still think criminals act with only cash. That might still be valid for at least some parts of their business, for example forced prostitution, drug trafficking, weapons trade. There are such huge amounts of money. We don’t speak of millions, we speak of billions they have to move. You need a way of moving it, you need bank accounts, and if you already have a bad reputation, it’s hard to find a bank. So you set up an offshore company, and then this offshore company is provided with nominee directors, fake shareholders, and you can open a bank account quite easily and use the complete banking system. That’s the frustrating part.

Due to many financial service providers, including banks, sometimes turning a blind eye to these activities, it’s super easy, even if you’re a known criminal, you can get hold of a credit card of a famous Western bank. Because if you set up a company structure that involves a Panamanian firm, maybe the shareholders are of a company in the British Virgin Islands, it’s hard to figure out who is the real owner. But then if this company approaches one of these banks asking to open an account, of course these banks do some kind of due diligence, but there are tricks to get around that.

And then this company, let’s say it’s called Sunshine Unlimited, is writing power of attorney to the criminal guy who can then use the credit card and do business for this company. So it’s those institutions that help. It’s also big consulting firms. They’re involved in many of these cases. I think that’s a field where there’s academic research desperately needed and more journalistic investigations needed.

GAZETTe: Does anyone — law enforcement, journalists, the public — have a handle on how to get ahead of many criminal networks that are out there?

obermaier: We are missing huge parts of the picture still because, first of all, those individuals and organizations don’t only use one jurisdiction. If you create a cascade of companies from different jurisdictions, it’s super difficult for even law enforcement to get the whole picture and to follow the chain of ownership. A German authority asking the British Virgin Islands for such documentation, if you get it at all, it takes you a month. If you then see the shareholder of this company is another company in the Cook Islands and then another one in Panama, then you have to go on and on. So that [lack of] transparency helps criminal organizations. It would be naïve to think they only use one financial services provider. And of course they learn. We even saw it in the Panama Papers data. There were references to other journalistic investigations, [one] called Offshore Leaks that was published in 2013. And we saw this law firm speaking about this investigation, saying “Could this happen to us? Should we change something?” And I guess this same process took place after the Panama Papers, that other law firms and financial service providers discussed how they should react, if they should change their M.O.

As soon as we have uncovered something, the shady side reacts, and we have to wait for the next leak. Nobody in this field can feel safe anymore because there are so many whistleblowers, not only turning data over to journalists but also to authorities. Wherever you are hiding your money, you have to feel that, while we are speaking, someone is plugging in a hard drive and copying data that reveals their secrets. That’s the good thing.

But still, there are certain limitations for you as a journalist. There would be enough scandals and stuff going on to publish a newspaper on it every day. But people get bored. Let’s fact the facts. If you tell the audience the same story but with different actors one day after another, you reach the point where people are, like: “I’m not interested anymore.” That’s the huge challenge, in my opinion, to still find a new way of telling the stories.

In the Paradise Papers, we by far put more effort into storytelling than in the Panama Papers because we realized it might feel like the same stuff for our audience. So we had to find new ways of telling the stories. And I think that’s the challenge for the future as well — that people understand what it means for them, to understand that something’s going on. Resources worth billions being funneled out of a country — this might be the reason for hunger in some country. How does it affect me, how does it affect the country, how does it affect the world? [Corruption is] not a victimless crime.

GAZETTe: What can be done outside of law enforcement to keep these kinds of criminal networks at bay?

obermaier: Real estate, company registers, and court documents should be, to a certain extent, public. I guess the frustrating reality on both sides of the Atlantic is there are structures that enable criminal activities. There is not enough political demand for change. You have, in the U.S., Delaware. It would be super naïve if you think criminals don’t use these structures. In the European Union, we have Cyprus and Malta. We have tax havens.

And we also have “passports for sale” programs where people doing a certain investment can acquire a European Union passport that enables them to travel within the European Union, which makes traveling to the U.S. easier, which makes, in the case of Malta, it easier to travel to all Commonwealth states, and that’s a very high risk that this could be abused by criminals. There’s this tendency to always point the fingers away from yourself. It’s the U.S. pointing its fingers at a country like Panama, the E.U. pointing its fingers at the U.S., Panama, British Virgin Islands, whatever, but not acknowledging the problem is within your own borders as well. So I think it would be important in society for voters to get more interested in topics like this because they affect our daily lives.

This interview was edited for clarity and length.