Baker McKenzie is 'architect and pillar' of offshore system that hides wealth, Pandora Papers report says
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Baker McKenzie fought proposals to strengthen financial oversight and tax laws in its lobbying for large banks and technology companies, according to Pandora Papers reporting by the International Consortium of Investigative Journalists and its media papers.
The law firm has lobbied for dozens of corporations and defended them when challenged by authorities, according to an ICIJ story noted by Law.com. It has also advised dozens of large companies on tax or offshore maneuvers.
“Baker McKenzie is an architect and pillar of a shadow economy, often called ‘offshore,’ that benefits the wealthy at the expense of nations’ treasuries and ordinary citizens’ wallets,” the ICIJ report says.
“Baker McKenzie has helped multinationals and the wealthy avoid taxes and scrutiny through the use of shell companies, trusts and complex structures in tax havens. These vehicles, shrouded in secrecy, hold vast riches—homes, yachts, stock and money that is sometimes of murky origin.”
The story is part of a series of reports in which the ICIJ is highlighting revelations contained in 11.9 million documents leaked from 14 companies in the offshore financial services industry, according to a description by the New York Times.
Baker McKenzie documents are not among the leaked files, but the law firm is mentioned in more than 7,500 documents, according to the ICIJ.
The leaked documents are dubbed the Pandora Papers, after the Greek myth in which Pandora, the first human woman created, opened a jar containing the world’s evils.
“When billionaires, multinationals and the politically connected seek to hide wealth or avoid taxes, they often turn to Baker McKenzie,” the ICIJ story says. The law firm’s clients include “people and companies connected to political corruption, fraudulent business practices and authoritarian regimes.”
Among the clients of Baker McKenzie and its affiliates:
• Jho Low, who is now accused of masterminding a scheme to embezzle billions of dollars from the 1MDB investment fund.
• Ukrainian oligarch Ihor Kolomoisky, accused of using shell companies in a $5.5 billion money laundering scheme.
Baker McKenzie defended its work in a statement cited by Law.com.
“Like other law firms and relevant industry or subject matter experts, Baker McKenzie is regularly requested to assist governments and regulatory bodies with the analysis and development of potential new legislation in countries around the world by contributing our legal expertise and experience,” the firm said.
“We are also asked by clients to provide expert input on proposed laws and regulations, including through public submissions processes or occasionally by legislative testimony. All our work in this area is done in compliance with applicable laws and regulations, including lobbyist registrations where required.”
The firm also noted that taxation “is a core area of our global expertise. Our advice is always in strict accordance with all applicable laws and regulations. Transparency and accountability are integral elements of such advice and we strive to ensure that our clients adhere to both the law and best practice.”
Tax experts said many of the wealth-hiding mechanisms described in the Pandora Papers are entirely legal.
Ian Gary, executive director of the Financial Accountability and Corporate Transparency Coalition, saw the need for reform.
“The revelations of the Pandora Papers show that the Panama Papers were not a one-off example of a rogue law firm but just the tip of the financial secrecy iceberg and the massive corruption it hides,” Gary told Law360.
Another Law360 report cited calls for new rules to combat money laundering. The story noted a new measure, the Corporate Transparency Act, that will help combat financial secrecy. The law is part of the Anti-Money Laundering Act of 2020, which was part of the National defense Authorization Act for fiscal year 2021.
The Pandora Papers report “are yet another reason, as if we needed one, why the U.S. Treasury needs to move quickly to implement regulations under the Corporate Transparency Act,” said Ross Delston, a lawyer specializing in anti-money laundering issues, in an email to Law360.
But Peter Hardy, the founder of Ballard Spahr’s anti-money laundering team, told Law360 that he doubts that the Corporate Transparency Act or a new customer due diligence rule for financial institutions would stop money laundering by the ultrarich. Neither, he said, addresses trust vehicles that aren’t created through a public filing.
“It’s far from clear that FinCEN’s forthcoming CTA regulations will be able to even address this particularly thorny problem,” Hardy said.