Panama Papers, Dark Money, and Nonprofits

(The Panama Headquarters of Mossack Fonseca, the law firm at the center of the Panama Papers leak)

In a provocative op-ed appearing originally in The Clyde Fitch Report (and reprinted in The Nonprofit Quarterly), Jason Tseng – a nonprofit professional with years of experience with arts and LGBTQ organizations – draws an intriguing connection between the Panama Papers and the role of dark money in philanthropy.

From a profile on the International Consortium of Investigative Journalists (the group that broke the Panama Papers story) to a breakdown of the scandalous details relating to the head of FIFA (who only recently took over the reins from the highly corrupt Sepp Blatter), Key Elements Group has featured a number of stories showing how the Panama Papers tie directly into the world of Philanthropy.

In Tseng’s op-ed, the writer explores a similiar theme to one we explored in a piece on the ulterior motives of politicians who both influence tax policy and hold financial assets in offshore tax havens. Titled “The Panama Papers, Philanthro-Capitalism, and the Arts,” Tseng’s article discusses the role of dark money in obscuring the transferral of ideology from wealthy funders to the institutions they fund.

Using the DeVos family as an example, Tseng details the billionaire family’s relationship with the controversial DeVos Institute, a think tank operated by family associate Michael Kaiser which has released controversial reports decried by critics as racist. The particular priorities of the DeVos Institute – which implore organizations serving minorities to gear their operations toward the concerns of wealthy white donors – have immense reach. Bloomberg Philanthropies, for example, requires all of its 200+ grantees to undergo DeVos Institute training.

Tseng makes the argument that the DeVos family, which made its wealth through a poorly regulated market that enabled them to effectively run a legal ponzi scheme, actively influences the ideological drive and framework of its vassel organizations. While certainly conjecture, it is hard not to see a parallel between the ethos exhibited by the family’s namesake institution and its conservative politics (the DeVos’ have long been considered key king-makers in the Republican party).

His stronger point is that the lack of transparency is what makes the philanthropic funding of the financial elite most noxious. He describes the incompatibility of dark money with the social and cultural vision of arts professionals:

…[I]f, as artists and administrators, we are committed to a world free of oppression, where creativity is unbound by the circumstances of your birth, then we must be prepared to enter a world in which we are not made subservient to our very oppressors by virtue of their unexamined finances. Thanks to the Panama Papers, those very finances are about to enter the light.

The “unexamined” characteristic of philanthropic funding is what ultimately empowers hidden agendas. The billions of dollars poured into worthy causes by businesses that exact some sort of negative toll on society can make a degree of positive difference (the DeVos family has spent millions on the arts), but this impact is severely curtailed if the financing is submerged in secrecy. In this case, the funding can transmit the influence of a particular special interest in the guise of promoting the Social Good.

Nonprofits do well to acknowledge the sources of their funding. Doing so creates trust and enables stakeholders and constituents to keep nonprofits on the right path for pursuing their missions to the fullest. Without the public’s trust, administrators face an uphill battle in making meaningful positive change in their areas of focus, thus shortchanging the demographics they serve and leaving urgent problems unaddressed to the detriment of future generations.

The Panama Papers have laid bare the sheer immensity of dark money across the globe. As nonprofit professionals continue to pursue their respective missions promoting the Social Good, they should take a keen interest in this ongoing debate, as it will continue to have a direct impact on the nonprofit world.

FIFA Boss Incriminated by Panama Papers

(Current FIFA President Gianni Infantino)

FIFA has had a tumultuous year, with a host of scandals rocking the international nonprofit in charge of world soccer. Ousted FIFA President Sepp Blatter oversaw an organization rife with bribery, responsible for allegedly selling hosting rights for the World Cup to Qatar, which has worked as many as 1,200 migrant workers to death in brutal, slave-like conditions.

While many hoped for a bright future following Blatter’s welcome departure, the recently released Panama Papers have brought renewed scrutiny of FIFA.

The nonprofit’s offices were raided by Swiss authorities, acting on details gleaned from the leaked Mossack Fonseca documents. Gianni Infantino – current head of FIFA and former general secretary for the organization – appears to have signed a TV rights deal with two businessmen who have since been accused of bribery by US authorities.

Furthermore, Juan Pedro Damiani – a member of FIFA’s ethics committee – appears to have  provided assistance setting up offshore tax havens to Eugenio Figueredo, the former FIFA vice-president who was arrested in Switzerland last year at the request of US authorities. In the wake of the revelations, Damiani resigned.

Leadership changes can certainly change a nonprofit’s direction – but institutional cultures can be hard to break. This seems to be the case with FIFA, which sits upon the nexus of the world’s more popular – and profitable – sport. To keep FIFA true to it’s mission, continued governmental oversight of the kind shown by Swiss and US authorities is paramount.

As the investigations continue, we will have more coverage on FIFA and the revelations from the Panama Papers.

The Panama Papers & David Cameron: How Tax Havens Hurt Nonprofits

(British Prime Minister David Cameron)

Tax policies – and the politicians that compose, debate, and codify them – affect nonprofits. From the IRA-to-charity rollover to deductions to incentivize philanthropy, tax polices in the United States have a direct impact on people’s giving behavior. When politicians make it simple for the wealthy to stash funds away in tax havens across the globe, they are indirectly cheating charitable organizations of invaluable revenue streams.

Across the Atlantic in Britain, this reality is no less true, and details emerging from the Panama Papers with regard to Prime Minister David Cameron’s family wealth and actions on behalf of offshore trusts have created an air of mistrust and the possibility of a conflict of interest.

Cameron’s late father – Ian Cameron – was a client of Mossack Fonseca, the Panama-based offshore tax firm at the heart of the ongoing tax haven revelations. The elder Cameron set up an investment fund called Blairmore Holdings, Inc. through Mossack Fonseca. A prospectus released by the fund bluntly stated that it “should be managed and conducted so that it does not become resident in the United Kingdom for United Kingdom taxation purposes.” It did so by utilizing an intricate system of untraceable certificates, called “bearer shares,” along with situating its officers in the Bahamas.

The behavior of David Cameron’s father is a reflection of how closely connected the world’s political and financial elite are to the tax avoidance schemes detailed in the Panama Papers. While there is not currently evidence that the prime minister was directly connected to the fund, the details shed some unsettling light on his efforts to shield trusts from an EU crackdown on tax shelters in 2013.

At the time, the EU was debating whether or not to publicly reveal a registry of actual asset holders at the helm of offshore shell companies. In a letter to Herman Van Rompuy – then president of the European council – Cameron stated that it

is clearly important we recognise the important differences between companies and trusts … This means that the solution for addressing the potential misuse of companies – such as central public registries – may well not be appropriate generally.

While it is yet uncertain if Cameron was acting on behalf of certain parties, a Downing Street spokesperson refused to answer questions from the press as to whether or not Cameron still held assets in his father’s former offshore interests.

The prime minister’s family history and actions are part of a larger trend. A culture of tax avoidance runs throughout elite circles in the Western world. In Britain, Michael Geoghegan – the former head of HSBC – attempted to shirk an £8 million tax on his luxurious townhouse, creating an elaborate offshore arrangement through which he could rent the house to himself using a shell company registered abroad. Geoghegan is among the highest profile leaders of the Brexit movement, which seeks to extricate Britain from the EU – the multinational body that is actively trying to clamp down on offshore tax havens.

This culture generates a rift between the ultra wealthy and the rest of society, depriving countries of important financial resources not only through the deprivation of tax dollars to fund government programs, but also by circumventing the system of incentivized charitable giving. Coupled with the fact that the tax havens exist in the same shadows that permit the actions of sanction-breaking firms selling energy to war crime-perpetuating governments – along with other forms of criminal behavior – and the continued existence of tax loopholes across the world is a menace to charitable organizations and their causes.

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.

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