Over the years, William Ponsoldt had earned tens of millions of US dollars building a string of successful companies. He had renovated apartment buildings in the New York City area. Bred Arabian horses. Run a yacht club in the Bahamas, a rock quarry in Michigan, an auto parts company in Canada, even a multibillion-dollar hedge fund.
Now, as he neared retirement, Ponsoldt, of Jensen Beach, Florida, had a special request for Mossack Fonseca, a Panama-based law firm well-placed in the world of offshore finance: How could he confidentially shift his money into overseas bank accounts and use them to buy real estate and move funds to his children?
“He is the manager of one of the richest hedge funds in the world,” a lawyer at Mossack Fonseca wrote when the firm was introduced to Ponsoldt in 2004.
Illustration: Mountain People
“[Our] Primary objective is to maintain the utmost confidentiality and ideally to open bank accounts without disclosing his name as a private person,” the firm explained: “He needs asset protection schemes, which we are trying to sell him.”
Thus began a relationship that would last at least through last year as Mossack Fonseca managed eight shell companies and a foundation on the family’s behalf, moving at least US$134 million through seven banks in six countries — little of which could be traced directly to Ponsoldt or his children.
The transactions, and others like them for a stable of wealthy clients from the US, are outlined in extraordinary detail in the trove of internal Mossack Fonseca documents known as the Panama Papers. The materials were obtained by the German newspaper Suddeutsche Zeitung and the International Consortium of Investigative Journalists, and have now been shared with the New York Times.
In recent weeks, the papers’ revelations about Mossack Fonseca’s international clientele have shaken the financial world.
The Times’ examination of the files found that Mossack Fonseca also had at least 2,400 US-based clients over the past decade, and set up at least 2,800 companies on their behalf in the British Virgin Islands, Panama, the Seychelles and other jurisdictions that specialize in helping hide wealth.
Many of these transactions were legal; there are legitimate reasons to create offshore accounts, particularly when setting up a business overseas or buying real estate in a foreign country.
However, the documents — confidential e-mails, copies of passports, ledgers of bank transactions and even the various code names used to refer to clients — show that the firm did much more than simply create offshore shell companies and accounts. For many of its US clients, Mossack Fonseca offered a how-to guide of sorts on skirting or evading US tax and financial disclosure laws.
US federal law allows US citizens to transfer money overseas, but these foreign holdings must be declared to the US Department of the Treasury, and any taxes on capital gains, interest or dividends must be paid — just as if the money had been invested domestically.
US federal officials estimate that the US government loses between US$40 billion and US$70 billion per year in unpaid taxes on offshore holdings.
Experts in federal tax law, money laundering and offshore accounts — asked by the Times to examine certain documents or at least to identify legal issues raised by the money management techniques that Mossack Fonseca advocated — said the law firm at times had come up with creative, but apparently legal, strategies to save clients money.
A common tactic: selling real estate as a shift of corporate assets, instead of as a piece of property subject to transfer taxes.
While the experts were reluctant to declare that the law firm or its clients had broken any laws given that no charges have been filed, they said they were surprised at how explicitly Mossack Fonseca had offered advice that appeared carefully crafted to help its clients evade US tax laws.
The firm’s US client list does not appear to include the sort of high-profile political figures who have emerged from reporting on the Panama Papers in many other countries.
However, the services offered by Mossack Fonseca, with 500 employees in more than 30 offices worldwide, were in high demand by the rich and famous in the US.
In 2001, Sanford Weill, the then-chief of Citigroup, set up an offshore account called April Fool for his yacht.
Alfonso Soriano, a former Major League Baseball All-Star player with the New York Yankees and other teams, had a Panamanian corporation created for him.
John Akridge III, a leading real-estate developer in Washington, flew to Panama to meet with Mossack Fonseca lawyers, who created in 2011 the Cyclops Family Foundation in Panama, along with a related bank account.
A spokesman for Weill said the accounts were used for legitimate purposes and “appropriate disclosures were filed.”
Akridge and Soriano did not respond to repeated requests for comment.
For its best customers, like the Ponsoldts, who declined repeated requests to discuss their work with Mossack Fonseca, the firm’s ministrations went far beyond legal services and banking. It acted as a concierge for “all details regarding your properties and worldwide business affairs,” for example helping the family confidentially purchase (and dispose of) luxury condominiums at resort destinations and even arranging repairs for a car stored at a vacation home and hiring a contractor to fix broken poolside tiles, the documents show.
“You deserve the best Mr Ponsoldt, and we will try to help you the most we can,” the firm said in an e-mail.
The firm’s US clients often expressed disbelief at how much they could lighten their tax burden by using the techniques advocated by Mossack Fonseca.
“At hearing that he can make nearly US$8 million per year just on tax savings,” a client from Pennsylvania “was now wide awaken,” a Mossack Fonseca staff member wrote.
“I could even detect sweats coming down from his forehead and his cheeks were beginning to blush with crimson excitement. Noticing his interest, I went in for the kill,” the staff member wrote.
A BLACK HOLE
In 2006, using a secret e-mail account set up by Mossack Fonseca so his correspondence would not be traced by authorities, a businessman from Washington state asked a question common among the firm’s potential US clients: “How does a US citizen legally get funds to Panama without the knowledge of the US government, and how can those funds be profitably invested without the US government knowing about them?”
The reply came from Ramses Owens, then a partner who helped run the firm’s trust division, offering clients “effective solutions to enhance your privacy, protect your wealth.”
Owens laid out a basic menu of services: a package deal setting up an offshore company in what he promised would be a relatively cheap and quick transaction.
“We have right now a special offer by which we create a private foundation/company combination for a flat fee of US$4,500. It includes charter documents, regulations, nominee officers and directors, bank account and management of funds, provision of authorized signatories, neutral telephone and fax numbers and mail forwarding services for both the private foundation and its underlying company,” Owens said.
With this legal structure in place, Owens went on to explain, any money placed in these accounts would essentially go into a black hole.
“If we create a private foundation and the underlying company for you, the funds become completely private [US cannot know] as soon as the funds are deposited under a bank account or investment account in the name of the underlying company or the private foundation,” he wrote.
The benefits of such an arrangement were numerous, he added, detailing how the client could effectively evade US tax laws while protecting himself — and the firm.
“You can take the money in cash, you can do a bad investment; you can purchase something and not receive anything [an expensive piano, expensive software],” Owens wrote.
“You can receive an invoice from Panama or any other location and that would justify some of the outgoing moneys. You can also declare everything to the tax administration. Any decision you make, please be aware that you will have to sign a ‘disclaimer’ to us. We can only ‘suggest,’ but the final decision to take the money out of the country is fully yours and under the professional opinion of someone in USA,” he said.
Few US clients, the records show, demanded and received as much attention as Ponsoldt and two of his children, Tracey and Christopher, each of whom was assigned a secret e-mail account and a code name — “father,” “daughter” and “son.”
Mossack Fonseca’s “VIP service” consisted of everything from securing lunch reservations at a popular French bistro in Panama City to pressing the government to make an exception and grant Ponsoldt and his wife Panamanian passports.
Over the years, tens of millions of US dollars flowed into a series of shell companies — Escutcheon Investment, with its money at the Banca Privada in the Pyrenees principality of Andorra; Probity Investments, with deposits at Andbanc Grup Agricol Reig, also in Andorra; Royal Pacific Investments, with deposits at Balboa Securities in Panama; and Valdano Investments Group, with deposits at Berenberg Bank in Switzerland, among others, the bank records and other documents show.
The most important part of this elaborate structure was an entity called the Edenstone Foundation.
Panama has long specialized in creating unusual foundations like Edenstone that are neither subject to Panamanian taxes nor required to support charitable causes.
However, they do allow the investors who “contribute” their financing to shield themselves from legal claims in the US.
In secret meetings documented in the Panama Papers, Mossack Fonseca named the Ponsoldt family as the beneficiary, through the foundation, of the money placed in bank accounts around the world.
Among the early requests: confidentially transfer US$800,000 from “father” to “son,” meaning moving the money to yet another offshore account — called LBFH of Panama — which Mossack Fonseca had set up on Christopher Ponsoldt’s behalf with bank accounts in Andorra and Panama.
Tracey Ponsoldt Powers, William Ponsoldt’s daughter, approached the firm in October 2008 with an urgent request for help in secretly moving some of her family’s money to Panama and then into gold coins. She feared political developments at home.
“I feel VERY unsettled with this election and how the media is censoring information and spinning the American public to vote [US President Barack] Obama,” she wrote to Owens at Mossack Fonseca. “It is so obvious to me, that they are setting us up with a socialist — but most people can’t see it happening before their eyes. It’s like propaganda that is brainwashing Americans to forget the principles of hard work, ingenuity, risk and boundless success.”
Owens suggested shifting the money into a “charity” account, controlled by the firm on the family’s behalf, in increments of less than US$100,000, so it would not be detected.
Powers did not respond to a series of calls and e-mails, and then declined to answer questions when reached on a mobile phone.
“I have no idea what you are talking about,” she said before hanging up.
IN A MOTHER’S NAME
Across the US, Mossack Fonseca picked up clients who had similarly urgent and delicate demands.
For more than 30 years as the founder of Boston Capital Ventures, Harald Joachim Von der Goltz has built a reputation as a savvy investor in emerging companies.
However, what few know is that over about that same span of time, and with the help of Mossack Fonseca, Von der Goltz has also come to command a vast offshore empire: Interconnected corporations, foundations and bank accounts with about US$70 million in assets, according to internal e-mails.
A lawyer for Von der Goltz said the beneficial owner of all of the trusts and accounts is Von der Goltz’s 100-year-old mother, who resides in Guatemala.
One document also suggests that the tens of millions of US dollars in the accounts originally came from businesses operated by Von der Goltz’s father.
However, numerous other documents prepared by Mossack Fonseca and signed by Von der Goltz list him as the founder, manager and “first beneficiary” of the foundation that controls most of the family’s wealth.
Von der Goltz also put assets from companies he helped operate into the accounts, documents show.
Most important, Mossack Fonseca registered Von der Goltz as a resident of Guatemala, which tax experts said could help him protect the family money from certain US tax obligations.
In a 2008 e-mail, Von der Goltz’s Boston-based accountant asked executives at Mossack Fonseca to wire money from Von der Goltz’s mother, Erika.
“Erika would like to make a gift to Tica of US$100,000 for his birthday. She hadn’t given him anything,” the e-mail said, providing an account for Von der Goltz at Espirito Santo Bank in Miami.
“Ohh, yes, I know ERIKA wants it to be done quickly, we will proceed,” Owens responded before confirming that the money should be moved as requested.
Legal experts consulted by the Times said it was difficult to determine definitively if the arrangements related to Von der Goltz violated US laws.
However, they said such moves were commonly used by investors seeking to hide their assets and evade federal taxes.
“There is reason to question if she was really directing that shift of money,” Blum said, referring to Von der Goltz’s mother.
“There has never been any illegal activity associated with these companies,” the statement said.
For another client, Mossack Fonseca offered a special service for a premium price.
Marianna Olszewski, the New York City-based author of Live It, Love It, Earn It: A Woman’s Guide to Financial Freedom, wanted to shift US$1 million held by HSBC in Guernsey to a new overseas account. The catch? She did not want her name to appear anywhere near the transaction.
Owens, the Mossack Fonseca lawyer, again offered a solution.
Mossack Fonseca would locate what he called a “natural person nominee” in a “tax-convenient” jurisdiction to stand in for Olszewski as the owner of the account.
“The natural person trustee is a service which is very sensitive,” Owens wrote. “We need to hire the natural person nominee, pay him, make him sign lots of documents to cover us, make him sign resignations, make him get some proofs evidencing that he has the economic capacity to place such amount of moneys, letters of reference, proof of domicile, etc., etc.”
The process, he suggested, would cost her at least US$17,500.
Olszewski approved the maneuver — only to see the firm, at one point, accidentally disclose her name to the banks involved.
“Ramses, please call me ASAP. This is important,” she wrote to Owens. “HSBC said someone said Marianna Olszewski is the principal/beneficary. Who has done this? I need you to call me immediately and tell them HSBC that was a mistake. This is not good and I asked you NOT to do this. This is why we have this structure.”
Owens sought to calm her down, saying that Mossack Fonseca could tell the bank that the natural person nominee actually controlled the account.
“This can be solved,” he wrote.
The use of a stand-in to hide the true ownership of an account is one of the remaining illegal ploys favored by Americans as international banks, under pressure from the US, demand proof of account ownership, said Jeffrey Neiman, a former US federal prosecutor from Miami who specialized in criminal tax offenses, adding that he could not comment directly on this case.
A FIRM’S INNER DOUBTS
Many of the client files — like those for Weill, the banker; Soriano, the ballplayer; and Akridge, the developer — contain little information on the purpose of the offshore accounts or how they were used after they were set up, making it impossible, based on the records available, to assess whether they were used legitimately.
However, the experts who reviewed some of the documents related to the Ponsoldts, Von der Goltz and Olszewski said the firm itself seemed to realize it was taking risks.
The files contain instances, beginning before the Panama Papers came to light, of Mossack Fonseca lawyers second-guessing their actions. In recent weeks, the firm has shut down many of its operations in Nevada, as well as British locations in Jersey and the Isle of Man, and is closing the asset-management division that served many of its US clients.
In 2013, Mossack Fonseca advised Olszewski to seek outside counsel and consider reporting herself to the US Internal Revenue Service (IRS), warning of possible “severe” repercussions if she did not.
The warning came in the wake of a US Department of Justice investigation of the role that certain Swiss banks had played in helping US citizens evade federal taxes.
Records show that Mossack Fonseca had been paid at least US$102,000 over nine years to help Olszewski handle various transactions.
Olszewski took the firm’s advice and belatedly disclosed her accounts to the IRS, the documents show.
By 2014, she asked Mossack Fonseca to shut down her accounts and offshore entities, which collectively held at least US$1.7 million.
Mossack Fonseca sent a series of similar and increasingly dire warnings to the Ponsoldts in 2013 and 2014, telling them that they had to provide a Swiss bank with documentation that they had paid all required US taxes — or face possible investigation.
“Neither your ex-trustees nor us would like to be involved into any measure the US Department of Justice might try to enforce,” the firm wrote. “In this regard, again we strongly urge you to take the necessary steps to avoid any negative consequences for you as well as us.”
The records examined by the Times give no indication whether the Ponsoldts complied and family members would not say when asked.
“I don’t know what you are talking about,” Christopher Ponsoldt said in a second brief conversation before he again hung up.
Additional reporting by Mike McIntire
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