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The only American charged in connection with the first Panama Papers prosecution in the United States vowed to fight the charges Friday, even as his alleged co-conspirator was arrested in Panama.
Accountant Richard Gaffey was named in an indictment late Tuesday, charged with wire fraud, conspiracy to launder money and evade taxes, and failure to declare foreign holdings. He’s a partner in the Massachusetts tax firm Elder, Gaffey & Paine, and is the first American known to face criminal charges from the massive leak of files from the Panamanian law firm Mossack Fonseca.
“Elder, Gaffey & Paine believes the charges put forth in the indictment unsealed in the Southern District of New York, and the subsequent charging of partner Dick Gaffey, are without merit,” the firm said in a statement to McClatchy and the Miami Herald. “The firm has cooperated completely with federal officials, and Mr. Gaffey will be mounting a defense against the government’s allegations.”
Gaffey’s alleged co-conspirator, Ramses Owens, was arrested in Panama Thursday night. The arrest of the Panamanian lawyer came in connection with an ongoing prosecution there of the now-defunct Mossack Fonseca, a global provider of offshore shell companies, which are legal but can be easily used for nefarious purposes such as tax evasion and money laundering.
A top former IRS investigations chief thinks the action against Gaffey and Owens signals the likelihood of more prosecutions to come. “This is the first step of the U.S. going public. It’s not going to be the last,” said Victor Song, former chief of the IRS criminal investigations division. He now trains companies on how to avoid ending up like those prosecuted in New York.
It is likely Owens cannot be extradited to the United States, given that the U.S. does not have an extradition treaty with Panama despite having a free-trade pact with the Central American nation. However, the United States this past June extradited former Panamanian President Ricardo Martinelli from Miami to Panama to face a corruption trial.
Owens remained in jail Friday afternoon, according to sources, who spoke on condition of anonymity on a non-public matter.
Charging documents in the U.S. case suggested Owens, a former longtime lawyer at Mossack Fonseca, had been on the run. McClatchy and the Miami Herald have learned that he was arrested Thursday night as he tried to enter his home in the posh, gated Costa Serena section of Panama City, where real estate often goes for $1 million and up.
Owens was arrested because he had been freed on bail in an ongoing case alleging he helped Brazilians launder money but had not paid it. He’d already been under house arrest in Panama and remains under investigation for an ongoing money laundering investigation in Brazil known as Lava Jato (Operation Car Wash).
Gaffey, 74, appears in 94 files, a relatively small number given the voluminous leaked documents in the Panama Papers. But the first reference to him dates to an Aug. 18, 2000, email from Ramses Owens to Mossack colleagues about how to handle to the files of the family of Harold von der Goltz and lists Gaffey as his adviser.
Von der Goltz, 81, was charged along with Gaffey in the U.S. case. He is a German citizen who lived in Guatemala before moving in 1984 to Boston, where he opened a successful investment business. The 11-count indictment alleges that Gaffey and Owens worked to help von der Goltz skirt U.S. taxes and launder money.
As recently as 2010, the files show Owens reaching out to Gaffey about an American client in Europe needing help with profits earned abroad.
Gaffey’s bio on his firm’s website said he lectures at universities and “at seminars for the Massachusetts Society of Certified Public Accountants.” Amy Pitter, president of that group, confirmed he is a member but said even executives with four decades there had never heard of him. They had no record of his ever lecturing for them.
A fourth man charged in New York, German national Dirk Brauer, 54, allegedly worked with Owens to defraud the IRS. Internal Mossack Fonseca documents show him communicating directly with Gaffey to execute stock sales on behalf of von der Goltz.
A spokesman for the U.S. attorney for the Southern District of New York declined to take questions about the case.
Working with the International Consortium of Investigative Journalists, the umbrella for the original Panama Papers investigation involving more than 100 media companies working together, McClatchy and Miami Herald went back to the files to match emails, passports, invoices and sales contracts with the indictment.
From that, the consortium concluded the likely identities of four unnamed clients mentioned in the documents who were not indicted. A fifth client allegedly lied to investigators and was indicted.
Unnamed Client 1 is described by the Justice Department as a U.S. citizen who resides in Manhattan and who lived in London around 2001. That’s a description that matches Panama Papers records of a woman named Marianna Olszewski.
Mossack Fonseca advised Olszewski to use the services of a 90-year old British man who, on a bank account and other documents, would pretend to be the real owner of a company, according to a report published by ICIJ media partner the BBC at the time of the Panama Papers.
Olszewski did not respond to multiple requests for comment.
The indictment states that she employed MF to help bring offshore money back to the United States. She met Gaffey in a train station in Boston. There, prosecutors allege, Gaffey told the client she could bring her money back by putting it into artwork or real estate or by selling a “real or made-up company.” The client ultimately brought $3 million of offshore cash back by falsely stating she had sold a company, on the advice of Gaffey and Owens.
Client 2 was indicted, Harald Joachim von der Goltz, whom prosecutors allege evaded taxes on multimillion-dollar assets from as early as 2000. He was arrested in London Dec. 3.
He was “without a doubt the biggest” U.S. client, according to an email sent by Owens in the Panama Papers. Even after von der Goltz contacted the Department of Justice in May 2016 after his name appeared in the Panama Papers, the DOJ said, he continued to make “false statements” to investigators, according to the indictment.
The unnamed Client 3 is believed to be the late William Ponsoldt, a breeder of Arabian horses and real estate mogul. Ponsoldt died in September 2017, matching the DOJ’s description.
The DOJ describes Client 3 and his offshore activities in detail, including a condominium bought in Grand Bay Towers, Panama City, which matches information in emails and property records from the Panama Papers.
The law firm managed about $8 million in offshore assets for Ponsoldt, who did not declare his wealth to the IRS from 2004 to 2016, the DOJ alleged. In early 2017 and after reporting on the Panama Papers by ICIJ’s media partner The New York Times, Ponsoldt started cooperating with law enforcement.
The DOJ stated that the client matching Ponsoldt’s description cooperated with the government, participating in “consensually monitored phone calls” with defendant Dirk Brauer of Mossack Fonseca and introducing him to an undercover agent. He also shared emails with prosecutors that documented MF’s role in alleged tax evasion.
On one recorded call, the client told Brauer: “If I and my wife should pass I want to make sure everything can go to my children tax free.”
“Yes, yes,” Brauer replied, according to the indictment. “It can be, it can be [a] very simple, simple distribution.”
In July 2017, Ponsoldt worked with an undercover U.S. government agent who posed as a U.S. financial adviser. The three met in the Bahamas. The undercover agent discussed evading U.S. taxes and laundering money for clients “involved in a pump-and-dump securities fraud scheme.”
In later conversations, Brauer said the clients could send their money overseas and he could set up a “fake investment for them,” the indictment states. Brauer told the agent he preferred to speak via Skype or WhatsApp because the were “more discrete” than the telephone.
Ponsoldt’s son Christopher is thought to be Client 4.
He is described by the prosecution as the son of Client 3 and a Miami resident who used the internal codename “son” when communicating with Mossack Fonseca.
Over 100 emails and documents refer to Christopher Ponsoldt and the codename “son” in the Panama Papers files. “Client-4 was first introduced to Mossack Fonseca in or about January 2005, when Client-4 traveled to Panama with Client-4’s parents — Client-3 and Client-3’s wife — for vacation,” the indictment states. That description matches an email sent by Christopher Ponsoldt’s father, William, in June 2006 following a previous visit.
“My wife, son Chris and I spent two days in your offices in Panama,” William Ponsoldt wrote.
Between 2006 and 2008, the DOJ alleges, the client matching Christopher Ponsoldt’s description transferred $1.6 million of his money to Mossack Fonseca, sometimes in amounts below $10,000 “to avoid leaving [a] track.” Under U.S. law, banks must obtain more detailed documents for transactions greater than $10,000.
Ponsoldt could not be reached.
Client 5 was described by the Justice Department as a “U.S. citizen who currently lives in London, the United Kingdom” and who earned an income from writing books and scripts. That matches the profile of Jurgen Wolff, whose website lists his achievements as an author, playwright and television script writer for shows and films that featured stars Rob Lowe and Kelsey Grammer.
“Shortly after this initial meeting…[in or about 2008], Client-5 traveled to Mossack Fonseca’s headquarters in Panama,” the DOJ indictment stated. This matches with emails from Wolff in the Panama Papers. “We [my partner and I] will arrive via Copa flight CM303 from Los Angeles arriving 10:30AM on Tuesday, September 16,” Wolff wrote in an email dated Sept. 9, 2008.
According to the DOJ, Mossack Fonseca employees knew the client matching Wolff’s description was a U.S. citizen and assured him they would keep his money “outside of the U.S. tax system.” Mossack Fonseca’s Brauer told the client to keep his “hands off the structure in place, otherwise it would not work, meaning that [the client] would have to pay U.S. taxes,” the DOJ alleged. The client declared his offshore accounts to the IRS in 2014, according to the DOJ.
A man who answered Wolff’s phone number as listed in the Panama Papers but who identified himself as a “family member,” said only that Wolff did not have any comment.
Wolff also did not respond to an email and a Tweet reaching out to him for comment.
This story includes reporting from the International Consortium of Investigative Journalists.
Kevin G. Hall: 202-383-6038, firstname.lastname@example.org