Nonprofit Helps Explain Panama Papers

(Skyline of Panama City, home to the headquarters of Mossack Fonseca)

The single biggest leak in history has taken the news media by storm, as journalists from across the globe sort through 11.5 million documents pertaining to the inner-workings of the secretive Mossack Fonseca – a Panama-based offshore law firm that has assisted scores of the global elite skirt taxes.

Süddeutsche Zeitung – a German newspaper – received the enormous batch of documents from an unnamed whistleblower, and has shared them with the International Consortium of Investigative Journalists, a nonprofit that specializes in global stories relevant to the cause of public integrity.

The organization has set up a fascinating portal dedicated exclusively to the documents, collectively known as the Panama Papers. News outlets, writers and journalists will probably not uncover the extent of the revelations for a while longer, as the 11.5 million document cache poses a massive task for researchers.

Leading the news over the past several days, however, have been a variety of stories detailing elite abuse of tax havens to shield wealth, as well as firms circumventing international sanctions to do business with parties accused of war crimes.

The Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson faced calls for a vote of no confidence from opposition parties – as well as a 10,000 strong protest outside of the Icelandic parliament – following the revelation that Mossack Fonseca helped the prime minister’s wife set up an offshore company that held massive claims on Iceland’s collapsed banks following the financial crisis.  While Gunnlaugsson sold his share in the company before ascending to the seat prime minister and there is no direct evidence of corruption, the arrangement represents a flagrant conflict of interest for a nation still reeling from the financial collapse.

David Cameron – the prime minister of Britain – has also come under scrutiny as evidence has emerged that his father has used Mossack Fonseca’s services to keep family wealth overseas.

In an even more nefarious case, Mossack Fonesca provided legal service for Pangates International Corporation Limited – a sanctioned company that sells aviation fuel to the Syrian military, which has committed countless war crimes against the Syrian people including indiscriminate shelling of civilian areas. Additionally, the firm worked on behalf of Rami Makhlouf, cousin to the Syrian president and widely known figure of corruption within the Syrian regime.

Also of note are findings that confirm long-held suspicions that Putin uses personal proxies to store vast sums of wealth abroad. Russia – deemed a “mafia state” by some analysts – appears more than ever to host a generally corrupt elite that maintains billions of dollars in wealth abroad via tax havens and shell companies, some of which are tied to Mossack Fonseca.

The International Consortium of Investigative Journalists has done an outstanding job pursuing its mission “to bring journalists from different countries together in teams – eliminating rivalry and promoting collaboration” in an effort “to be the world’s best cross-border investigative team.” The organization’s writers have compiled an astonishing array of corruption tales that throw into sharp relief the disjunction between the mega-wealthy global elite and the rest of the world’s population.

Tax avoidance hurts nonprofits, both in the decrease of public funds available for grant making as well as scarcity of philanthropic donations from wealthy individuals more interested in stashing wealth abroad than making charitable gifts to take advantage of tax incentives for philanthropic behavior. Throw in the damning evidence that offshore tax havens and shell companies help perpetuate global injustices that nonprofits work day-and-night fighting against, and there is a natural opposition between the social good and the shadowy dealings of Mossack Fonseca.

As more information emerges from the Panama papers, Key Elements Group will provide ongoing coverage of stories relevant to the nonprofit world.

Indictment: Rep. Chaka Fattah Exploited Charities

Chaka Fattah – the longtime congressional representative for Pennsylvania’s 2nd district – was indicted this week on racketeering charges, potentially paving the way for a long prison sentence if found guilty.

Rep. Fattah purportedly used funding from his network of charitable nonprofits to pay off loans from his failed 2007 mayoral bid in Philadelphia. Other charges include using federal grants designated for his charities to line the pockets of Fattah family and political allies, as well as to pay off student loan debts for his son, Chaka Fattah, Jr.

Following the indictment, Rep. Fattah dismissed the charges as politically charged. The evidence against him – however – seems extensive, and paints a tragic portrait of how nonprofit organizations can fit into a nexus of greed, manipulation, and political power.

The FBI probe into the representative’s nefarious dealings have brought a number of potential infractions to light: Rep. Fattah engaged in a scheme to attract millions of dollars in federal grant monies to a scam charity, allegedly by using his privileged position on the House Appropriations Committee; he misused grant monies by doling out hundreds of thousands of dollars in consulting fees to closely-aligned friends and family; a former staffer and head of a Fattah-aligned scholarship charity directed $600,000 in federal money to pay off campaign debt following a failed mayoral bid; additionally, close political allies apparently funneled more than $22,000 of campaign funding to Drexel University and Sallie Mae in order to pay off Chaka, Jr.’s student debt.

The younger Fattah faces his own host of legal issues, as a trial is set to begin this fall over alleged bank fraud and scam consulting enterprises.

Whatever the result of the indictment and resultant trial, these allegations are an unfortunate blow to the Philadelphia nonprofit sector. Corruption and philanthropy for poor bed fellows, and any consequent distrust of the region’s predominately upstanding nonprofit professionals is a sad outcome of one political clique’s abuse of power.

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