The Professional Classes That Enable The Global Kleptocracy
Way back in 2011, when Robert Mueller was still running the FBI, he made a remarkably prescient speech that detailed the very situation he is investigating today. Mueller’s revelation over eight years ago was that what we recognized as “organized crime”, such as the Sopranos, had morphed into much more dangerous and powerful transnational crime syndicates.
As Mueller stated, “Some believe that organized crime is a thing of the past. Unfortunately, this is not the case…But the playing field has changed. We have seen a shift from regional families with a clear structure, to flat, fluid networks with global reach. These international enterprises are more anonymous and more sophisticated. Rather than running discrete operations, on their own turf, they are running multi-national, multi-billion dollar schemes from start to finish…They may be former members of nation-state governments, security services, or the military. These individuals know who and what to target, and how best to do it. They are capitalists and entrepreneurs. But they are also master criminals who move easily between the licit and illicit worlds. And in some cases, these organizations are as forward-leaning as Fortune 500 companies…These groups may infiltrate our businesses. They may provide logistical support to hostile foreign powers. They may try to manipulate those at the highest levels of government. Indeed, these so-called ‘iron triangles’ of organized criminals, corrupt government officials, and business leaders pose a significant national security threat”.
The more we learn about the Trump Organization, the Trump Foundation, the Trump campaign, the Trump inaugural, and the Trump presidency, the more it resembles one large transnational criminal enterprise that Mueller was describing in 2011. As Sarah Kendzior aptly describes the Trump presidency, “This is a transnational crime syndicate masquerading as a government”. The tentacles of that extended criminal enterprise span the globe. It reaches from the South American drug trade to the Iranian Revolutionary Guard to Indonesia and China. The Trump Organization seems to exist only as a vehicle for money laundering and Trump’s obsession with playing golf. The Trump campaign managed to scheme with corrupt autocratic regimes in Russia, Turkey, Saudi Arabia, United Arab Emirates, and Qatar.
These crime syndicates do not exist in a vacuum and, like the regular mafia, need “businesses” that have the appearance of a legitimate enterprise, businesses like the Trump Organization. In order to do that, the global kleptocratic class needs the support of the professional class, especially lawyers, accountants, and bankers.
The Panama Papers are simply documents stolen from Mossack Fonseca, a Panamanian law firm that also provided corporate services. What those documents showed is a company that provided plenty of legal services but also willingly abetted fraud, money laundering, avoidance of sanctions, tax evasion, and tax avoidance using shell companies and other corporate structures to hide the true identity of their asset owners. Their clients were truly global, ranging from royals to senior political and business leaders to penny-ante insurance fraudsters. Mossack Fonseca worked with all the major banks including the two most notorious for money laundering, UBS and HSBC, and many other respectable law firms. The firm was essentially a nexus for the global kleptocratic class.
Mossack Fonseca was willing to go to extraordinary lengths to help its clients. It offered to back date documents for their clients’ benefit, making the incredible statement that back dating is a “well-founded and accepted practice…common in our industry and its aim is not to cover up or hide unlawful acts”. The firm took extraordinary actions to protect its clients from legal and investigative scrutiny including preparing bogus audits. More often than not, the company appeared not to care who its clients were and where their money actually came from.
Now, one might think that this is just a rogue Panamanian law firm. Wrong. Mossad Fonseca was just providing services that were also common among reputable banks. In 2007, Bradley Birkenfeld exposed how UBS illegally abetted tax evasion and tax avoidance worldwide. HSBC willingly laundered money for the worst criminal organizations in the world, including “drug mobs…organizations linked to Al Qaeda and Hezbollah,…Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash”. In Europe, Deutsche Bank and Danske Bank have laundered money for Russians and others for years.
One might think, yes, those are overseas international banks but nothing like that goes on in the US. Wrong again. America’s refusal to join the Common Reporting Standards adopted by virtually the rest of the world, combined with the loophole that exempts real estate transactions and hedge funds from anti-money laundering scrutiny and states’ tax policies, has made the United States the premiere venue for tax evasion and money laundering in the world. And there is a whole industry designed to service “clients” who wish to take advantage of that.
Wyoming has one business entity for every 4.5 individual citizens and, according to the Tax Justice Network, that state, along with Nevada and Delaware, has become the money-laundering equivalent of a narco state “where decisions about relevant legislation are taken between lawmakers and financial services interests behind closed doors, ring-fenced from complex democratic processes”. HSBC blatantly flouted US anti-money laundering rules for over a decade.
Global Witness sent a prospective “client” to thirteen top US law firms asking for help in laundering his ill-gotten money. Although none of them specifically took him on as a client, virtually all of them advised him on how to move that money. Skadden, Arps, one of the top white show law firms in the country, has paid a $4.6 million fine for failing to register as a lobbyist in its work for Putin’s Ukrainian henchman and kleptocrat, Viktor Yanukovych, who was Paul Manafort’s client as well. In addition, one of Skadden’s lawyers has pled guilty to lying to investigators about that work and another, now former, partner at the firm is expected to be indicted for that work as well.
The consulting giant PwC paid a $25 million fine for downplaying the Bank of Tokyo-Mitsubishi’s money-laundering for sanctioned Iranian companies through its New York branches. As noted above, hedge funds and private equity funds are exempt normal anti-money laundering laws and no one really knows how much money might be laundered through them. It is presumed that they are largely the recipients of money that has already been cleaned. Even so, it raises questions such as why Wilbur Ross would become an investor in and director of the Bank of Cyprus, which was a notorious money laundering venue for Russians.
The structures that the US has in place to enable money laundering and tax evasion on such a scale is easily used for other nefarious purposes and do not require a whole lot of sophistication. Michael Cohen was not much of a lawyer but even he, with the help of accountant Allen Weisselburg, managed to set up an LLC that hid the President’s payments to Stormy Daniels that violated campaign finance laws. As Franklin Foer notes in his fabulous Atlantic piece, “procuring a library card requires more identification in many states than does creating an anonymous shell company”. That tolerance for criminality then seeps down into other business. Most big banks knew those mortgage originations leading up to the 2008 crisis were fraudulent but the fees kept on rolling in.
I could go on and on with hundreds more examples, but you get the idea. The riches that the global kleptocracy can offer the professional classes are too much to pass up. As one Senate investigator laid it out, “If you have clients who are interested in ‘specialty services’ — that’s the euphemism for the bad stuff — you can charge ’em whatever you want. The margin on laundered money for years has been roughly 20 percent”. And, as one lawyer at one of those 13 NYC firms put it, “They don’t send lawyers to jail, because we run the country … We’re still members of a privileged class in this country.” They are not the only privileged class. The bankers who nearly brought the world’s financial system to its knees not only never paid a price but continued to abet and enable their kleptocratic clients and engage in rampant illegality. The consultants and accountants that sign off on the fraud fared similarly. The exceptions only highlight the rule that the professional class of lawyers, bankers, and accountants are literally above the law.
Originally published at thesoundings.com on February 19, 2019.