Front pages of all the world media carry the same story today: the scandal sparked by investigating journalists (380 journalists from 78 countries) who figured out how famous and rich people all over the world use offshore companies to hide their money. The world had a similar experience in 2010, when WikiLeaks released data from a similar leak which included more than 250,000 US diplomats’ cables. Then, we learned about numerous informal descriptions of world leaders and politicians’ connections. Now, the amount of data is far larger, as the leak involves 11 million documents, filed with the database of the world’s fourth largest offshore law firm, Panamanian company Mossack Fonseca, between 1977 and 2015.
They deal with the firm’s efforts to help clients, including 72 current or former heads of state, to launder money and avoid sanctions and taxes. The documents contain information about secret offshore companies, including ones linked to family members and associates of Hosni Mubarak in Egypt, Muammar Gaddafi in Libya, and Bashar al-Assad in Syria. The data mention family members of President of the PRC Xi Jinping, President of Azerbaijan Ilham Aliyev, King of Morocco Mohammed VI, and King of Saudi Arabia Salman al-Saud, the late father of current British Prime Minister David Cameron, and children of Prime Minister of Pakistan Nawaz Sharif. Also, there is evidence that Prime Minister of Iceland Sigmundur Gunnlaugsson had undeclared interests in this country’s banks.
The report published by the International Consortium of Investigative Journalists (ICIJ) mentions the Russian leadership as well. In particular, the documents provide data on a money laundering scheme which was worth billions of dollars and involved a Russian bank and close associates of Russian President Vladimir Putin. “Thanks to the leaked documents from Mossack Fonseca, we discovered that offshore companies linked to the cellist [Putin’s close friend Sergey Roldugin. – Ed.] deal in billions rather than mere millions of dollars; they likely received money from companies close to the Rotenberg family, Suleyman Kerimov, Alexei Mordashov,” the investigation reads.
The leak has been as high-profile in Ukraine as elsewhere, because it involves, among others, the head of our state, President Petro Poroshenko. In her investigation The President’s Double Life, produced for the Investigation.Info show broadcast by Hromadske TV, Anna Babinets revealed that President Poroshenko created three offshore companies, in particular, the British Virgin Islands-based Prime Asset Partners Limited, in summer of 2014, at the height of the Russian aggression against Ukraine, intending to use them for selling Roshen’s assets without paying taxes to Ukraine’s budget. Out of 20 Ukrainians who appeared in the investigation, stories of a few people have already been released, including President Poroshenko as well as the National Bank of Ukraine’s chief manager Valeria Hontarieva, mayor of Odesa Hennadii Trukhanov, former prime minister Pavlo Lazarenko, and businessman Mohammad Zahoor.
The National Anti-Corruption Bureau of Ukraine (NABU) has stated that it lacks powers to investigate Poroshenko’s offshore dealings. “The serving president of Ukraine is outside the NABU’s jurisdiction. There is a separate impeachment procedure that is prescribed in the Constitution. We have no right to conduct investigations against the serving president of Ukraine,” the NABU’s press secretary Svitlana Olifira stated.
Less-than-honest behavior is the mildest criticism that can be leveled against Poroshenko, because it is in fact a huge blow to not only the president’s reputation, but that of Ukraine as a whole. It is especially damaging since it came on the heels of another fresh scandal with the publication of the article “Ukraine’s Unyielding Corruption” by The New York Times. In it, American journalists criticized the internal policy of the Ukrainian president in the strongest terms, accusing him of abetting corruption. In response, Poroshenko said: “Ukraine is a victim of hybrid warfare now, which is waged in many ways, including through the dissemination of information that discredits the Ukrainian state.”
“This is not an element of hybrid warfare, but rather a signal from Washington for President Poroshenko, showing that our American partners are concerned about the level of corruption present in the Ukrainian government,” political analyst Mykhailo Basarab commented for The Day. “The purpose of this article was not to discredit the Ukrainian president, much less our state, but to send a clear signal to Poroshenko, who was visiting the US at the time. Poroshenko’s comment was probably the worst response possible to The New York Times’ article.”
Reputation damage is also well-illustrated by headlines of leading Western publications, where Putin, Poroshenko, and al-Assad are mentioned together and linked to the scandalous story. It hardly improves the position of Ukraine’s post-Euromaidan president and that of the country itself too.
COMMENTARY
Daryna KALENIUK, director of Anti-Corruption Action Centre:
“It was something to be expected, and most of the information had already been published. Ukrainian registry, which is open to the public, still lists Petro Poroshenko as the beneficial owner of Roshen Corporation – that is, a person who controls it. Journalists have actually published the entire ownership structure, including the bits in Panama – as in our registry one could only see the parts of the company in Cyprus and British Virgin Islands, others are secret.
“But from the media point of view, the most interesting part is that Poroshenko had changed the ownership structure in August 2014 – during the Ilovaisk disaster. President of Ukraine, who should have devoted his time fully to the interests of national security, found time and resources to take care for the security of his business. This is an issue of politics, not legality, since Poroshenko had promised to sell his business and he should have done it.
“And in regard to legal point of view, until recently there was no requirement to declare an offshore company, of which one is the beneficial owner. The most interesting thing is that the president and his administration, acting through their loyal MPs, attempted to prevent the adoption of the law on electronic declaration. But it was still adopted in preparation for visa-free regime implementation with the EU. And this law contains the requirement to declare income of businesses of which you are the beneficial owner. Had Poroshenko not declared these offshore companies under the new system, it would have been possible to speak of a direct violation of the law – in providing knowingly false information in the declaration. But the president cannot be held criminally responsible – he can only be ousted by an impeachment.
“It is difficult to assess whether the crime had been committed, but looking through the published documents, one can ‘smell’ corruption and tax evasion. But if the question is whether it was legal or not – there had likely been no breach of the law. I’m sure Petro Poroshenko had lawyers who set up a flawless structure in terms of letter of the law – the tax police have nothing to pick on. But speaking politically: should the president of a country think about paying less tax from his business, or should he think about creating favorable investment conditions in Ukraine? Obviously, the president is in the conflict of interest, because the law prohibits business activity in public office. However, holding shares in privately property owned companies and corporations are not recognized as business activity. Many civil servants enjoy this oversight, and the president is not an exception.
“For Ukraine this scandal can bring huge reputation loss. President’s credibility in the international arena is plummeting. Not because of these materials, which had only confirmed the long-known facts; not only because Poroshenko owns a company through offshore – the reason is that the president had failed to dismiss a corrupt Prosecutor General for six months. Even the fact that Poroshenko had promised to sell the business and did not sell it is not a breach of the law, but it is another reason to stop trusting this person. In addition, despite the declared course on getting rid of the oligarchs, he in fact gave the other oligarchs a green light: the rules did not change, and the old system of personal relations continues to operate successfully in the country.”
Susan STEWART, German Institute for International and Security Affairs, Berlin:
“Of course all the details will need to be examined, but the Panama Papers leak appears to indicate that there could (and probably should) be serious consequences for President Poroshenko. So on the one hand, this is a new development which should be taken seriously by the Ukrainian elite as well as the population. On the other hand, fewer and fewer people maintain any illusions about the goals and methods of the Ukrainian president. For quite a while, his behavior has made it clear that his reform rhetoric has clear limits. His failure to divest himself of his business interests (despite explicit promises to do so) and his protracted reluctance to get rid of Prosecutor General Viktor Shokin are only two examples of this problematic behavior. In particular his choice of and insistence on retaining Shokin as long as he did have prevented serious reform efforts in the areas of the fight against corruption and the prosecutor’s office from taking place so far. So in this sense, the apparent revelations of the Panama Papers are not that surprising. When Poroshenko was elected president, there was a lingering question in many people’s minds about how reform-oriented and intent on fighting corruption he could be, coming as he does from a Ukrainian elite which made its money and developed its networks prior to the Maidan, in what was (and to a significant extent unfortunately remains) a deep swamp of corruption, with the key actors especially interested in avoiding transparency. And it seems that this initial skepticism was largely justified. The Panama Papers are only a further indication of this.”
