A Panamanian judge on Friday acquitted all 28 defendants in a money laundering case linked to the Panama Papers scandal, including former employees of the law firm Mossack Fonseca, the source of the leaked documents that caused a global uproar in 2016.
The ruling comes eight years after the media alliance was announced. Explosive research 11.5 million documents leaked from a Panama-based company that exposed the offshore banking industry, prompted an international tax investigation, and toppled a head of state.
Among the original 29 defendants were Jurgen Mossack, 76, a co-founder of the shuttered company, and Ramon Fonseca, who died in May at age 71 while awaiting sentencing. Judge Baroiza Marquinez said in her 339-page decision that the case against Fonseca had been dismissed due to his death.
Prosecutors had alleged that Mossack Fonseca set up shell companies to hide money made through illegal activities, failed to exercise due diligence and neglected to exercise necessary care in vetting clients.
Panama’s judiciary said in a statement on Friday night that the judge found that electronic evidence submitted by the prosecution did not comply with evidence-keeping procedures and had authentication problems. The judge also said he did not find enough evidence to hold the defendants liable.
The ruling marks a major development for Panama, which has seen its reputation tarnished by the leaks and has overhauled its laws in recent years to strengthen its fight against money laundering.
“Over the last few years, I have been protesting the innocence of my representatives,” said Guillermina MacDonald, an attorney whose firm represented many of the defendants. “We have conclusively proven that there was no money laundering and that the people I represented did not commit any crimes.”
A representative for the prosecution service said they were analyzing the ruling for a possible appeal.
Juan Carlos Arauz, a Panama City corporate litigation lawyer, said the sentence reflected prosecutors’ failure to prove that the company’s founders knew its shell companies were being used for illegal activities.
“What the judge is saying is, ‘No, it hasn’t been proven that the company knew there was any conduct with that goal in mind,'” he said.
The Panama Papers trial, which began on April 8 and lasted for 10 days, was live-streamed and all defendants pleaded not guilty. The defense argued that the prosecution had failed to prove that the company controlled funds derived from illegal activities or that banks had not warned them about suspicious transactions.
Depositing funds in offshore bank accounts is not inherently illegal, but prosecutors alleged the company operated shell companies to move off-book funds linked to illegal payments out of Siemens, a German electronics maker.
Prosecutors tried to back up their case by pointing to past allegations of wrongdoing by Siemens and its employees. In 2008, Siemens agreed to pay $1.6 billion to U.S. and European authorities to settle allegations that it used bribes and kickbacks to win public-works contracts.
Millions of dollars were funneled through shell companies. Court records referenced Journalism Research He explained that Mossack Fonseca had adopted a high level of confidentiality to protect its clients, including using abbreviations to refer to Siemens employees.
Prosecutors also accused the company of engaging in illegal activities linked to Argentina, alleging that it controlled companies used to buy real estate linked to an individual convicted in Argentina in 2023 for a massive fraud scheme.
Judge Marquinez consolidated the Panama Papers case with another money laundering trial also involving Mossack Fonseca, and ruled on both. The other case was related to the Car Wash (also known as Lava Hato) bribery scandal involving Brazil’s state-run oil company Petrobras.
In the Lava Jato trial last summer, prosecutors alleged that Mossack Fonseca was used to set up offshore companies to move corrupt funds. On Friday, Judge Marquinez acquitted 31 defendants in the Lava Jato case (some of whom overlapped with the Panama Papers trial).
Panama, a trading hub that rarely shares banking information with foreign countries and has loose rules about the responsibility of law firms to identify the ultimate beneficial owners of funds (rules have since been tightened), has historically been a hub for the creation of shell companies, said Gabriel Zucman, an economist at the University of California, Berkeley.
The Panama Papers investigation began when an anonymous whistleblower sent a message to the German newspaper Sueddeutsche Zeitung asking if it was interested in the data. The paper reported the massive leak International Consortium of Investigative Journalists In Washington, we assembled a team of hundreds of reporters from more than 100 news organizations around the world.
The leaked files included about 215,000 offshore companies and more than 14,000 banks, law firms and intermediaries that did business with Mossack Fonseca. The reporting partnership’s stories began to be published in April 2016. One of the repercussions was the resignation of the prime ministers of Iceland and Pakistan.
Mossack and Fonseca were arrested in Panama in 2017 on money laundering charges related to the Lava Hato scandal. They were released on bail a few months later. Their company, which once had more than 600 employees, closed in 2018, claiming it had broken no laws.
In an interview shortly after the Panama Papers revelations came to light, Fonseca said his company was like a car factory in that it carefully vets its customers but “is not responsible for what happens to the car” after the sale.
Over $1.36 billion The 2016 investigation resulted in the government collecting fines and additional taxes, and the subsequent journalism efforts investigating the massive data leaks known as the Paradise and Pandora Papers also exposed the workings of offshore tax havens.
Carlos Barsalo, a lawyer and money laundering expert, said that in response to the leak, Panama enacted a series of laws aimed at preventing money laundering by strengthening the obligation for companies to know the ultimate beneficial owners of shell companies they set up for their clients and creating a registry of those beneficial owners.
“Companies cannot just sell shell companies and have the mentality that it’s not my problem who does what,” said Olga de Obaldia, executive director of Panama’s Free Citizens Development Fund. Transparency International.
It is not known how many people worldwide have been convicted as a result of the Panama Papers. However, Frederick Obermeyer, a journalist who investigated the leaks, said: Süddeutsche Zeitung, The reference to the Panama Papers TV series and pop songs This shows how this survey has generated a huge response among the public.
“The government has learned about the price we all pay for tax evasion and corruption,” he said. “And it’s not just something abstract. It’s about not having enough money for hospitals and universities.”