Panama Papers law firm’s U.S. business shrinking amid investigations

McClatchy Washington Bureau reporter Kevin G. Hall, right, talks with registered agent Linda Grayson in the office suite of AAA Corporate Services in the Deming Building in downtown Cheyenne, Wyo., on March 8, 2016. Wyoming is the least populous and the second least densely populated of the 50 United States but a very popular location for the formation of offshore corporations, because with the help of a registered agent one can set up a LLC in Wyoming without one's name having to be in the State Register.
McClatchy Washington Bureau reporter Kevin G. Hall, right, talks with registered agent Linda Grayson in the office suite of AAA Corporate Services in the Deming Building in downtown Cheyenne, Wyo., on March 8, 2016. Wyoming is the least populous and the second least densely populated of the 50 United States but a very popular location for the formation of offshore corporations, because with the help of a registered agent one can set up a LLC in Wyoming without one's name having to be in the State Register. McClatchy

U.S. business for the law firm at the heart of the Panama Papers scandal is shrinking dramatically amid multiple investigations from federal and state regulators.

In Wyoming, the local business partner of Mossack Fonseca cut ties to the U.S. operations of the Panamanian law firm, McClatchy has learned. And this week the Nevada affiliate of Mossack Fonseca abruptly resigned as the registered agent for 1,024 companies it administered in the state.

Both developments came more than a month after a report by McClatchy and its partners that showed how Mossack Fonseca helped Brazilians, Russians and others hide assets from authorities in their home countries.

Nevada, Wyoming and Delaware are leaders in company formations but require little information on the true owners, requiring instead only a contact person.

The embattled Panamanian law firm is under investigation from the United States and Germany to the British Virgin Islands and the tiny Seychelles islands in the Indian Ocean. And each company it administered in Nevada now will have to find someone to serve as a new administrator.

“This scenario is absolutely unusual,” said Trevor Rowley, president of the Nevada Registered Agents Association. “I have never seen anything like this.”

A registered agent handles bill payments, renews incorporation and files annual required reports for companies. It’s not unusual for an agent to resign from a company if the true owners are found to be breaking the law or simply refuse to pay their bills. But resigning from more than 1,000 companies at once is an highly unusual event.

“ . . . I really don’t know what they would do,” said Rowley.

Gabriela Vivanco, a shareholder of a company that Mossack Fonseca set up in Nevada, Media Group Services LLC, said she had not heard from them as of Wednesday. The company’s intermediary was Ecuadorian law firm Estudio Jurídico Vivanco & Vivanco. “The company is inactive, and I haven’t heard anything from them,” she said.

The true owners of one of the Nevada companies, called a beneficial owner, could try to find another registered agent to handle their business, but that may be easier said than done.

Offshore corporations have one main purpose - to create anonymity. Recently leaked documents reveal that some of these shell companies, cloaked in secrecy, provide cover for dictators, politicians and tax evaders.

“Most major registered agents . . . would probably consider this (Panama Papers) database toxic. They probably don’t want to touch it,” said Rowley, himself a registered agent for more than two decades.

Mossack Fonseca’s Wyoming operations were operated out of its Nevada office, both led by Chilean-born Patricia Amunategui. Calls to her phone were not returned and there was no response from Mossack Fonseca’s headquarters in Panama to questions by email.

More than 350 journalists worldwide, working under the umbrella of the International Consortium of Investigative Journalists, examined 11.5 million leaked documents from Mossack Fonseca. The stories, published starting April 3, showed how politicians, businessmen and criminals hid money and assets behind the anonymity of shell companies.

The reporting led the prime minister of Iceland to step aside, forced the prime minister of England to testify before Parliament about undisclosed offshore holdings and showed how close of associates of Russian leader Vladimir Putin moved billions in offshore shells.

McClatchy’s report April 5 about foreigners using Wyoming and Nevada to hide questionable assets led Wyoming to immediately penalize Mossack Fonseca and investigate the firm. That same report documented how Nevada shell companies are tied to a corruption probe in Brazil.

When approaching a new registered agent, the owner or its representative would have to disclose that the prior registered agent had resigned, and that could be a warning sign.

“I think that these companies that have been resigned off of, most people would probably avoid,” Rowley said, adding that M.F. Corporate Services (Nevada) Limited, an affiliate of the Panamanian law firm, is a member of his trade association and its membership is now in question. “Those decisions haven’t been made yet.”

The act of severing the business relationship has already happened in Wyoming, where AAA Corporate Services on May 17 ended its ties to M.F. Corporate Services Wyoming LLC, a Mossack Fonseca affiliate. “We’re not their agent. . . . That’s the only thing I have to say about it,” Tracy, an employee of AAA Corporate Services, said in a phone interview. She declined to give her last name.

When a McClatchy reporter visited Mossack Fonseca’s Cheyenne, Wyoming, address in March, he found that the Panamanian firm used AAA Corporate Services as its registered agent to incorporate companies for which it was acting as a registered agent.

M.F. Corporate Services Wyoming has 60 days to find a new registered agent.

“Failure to appoint a new registered agent will result in the administrative dissolution of M.F. Corporate Services Wyoming LLC by the Wyoming Secretary of State’s Office,” Kathleen Wheeler, Wyoming’s deputy secretary of state, said in an email to McClatchy. “At this time, M.F. Corporate Services Wyoming LLC has not resigned from any of the 24 entities mentioned in the Panama Papers.”

McClatchy has analyzed public records for the 24 companies, many of whose true owners appear to be in Latin America. Fourteen of the 24, or 58 percent, had at one point been delinquent in tax payments to Wyoming, had been dissolved and later restored upon paying their bills or had been closed for nonpayment.

The Panama Papers leak involves more than 200,000 offshore companies in 21 tax havens, linked through a complex web. The large globs reflect clients, who as middlemen bring customers, the shareholders, to Mossack Fonseca.

Preet Bharara, the U.S. attorney for Manhattan, said in April that his office was opening an investigation involving the Panama Papers and asked news organizations to share access to the leaked data. His office and the U.S. Department of Justice declined to comment Wednesday. So did the office of Sen. Ron Wyden of Oregon, the top Democrat on the U.S. Senate Finance Committee. He has written to Wyoming and Nevada officials, demanding answers by June 3 to six detailed questions in the wake of the Panama Papers.

After two investigations in April, the office of Nevada Secretary of State Barbara Cegavske fined Mossack Fonseca affiliate M.F. Corporate Services (Nevada) Limited $10,000 on May 20, the maximum allowed under Nevada law. The company’s decision to step away from the 1,024 companies under its watch was announced Monday on the secretary of state’s website.

In an interview Tuesday night, Nevada Deputy Secretary of State Gail Anderson said M.F. Corporate Services (Nevada) Limited had failed to maintain names and addresses of contact people for all the shell companies it administered in the state.

“There was an initial visit to the office with a sampling of records, things identified, and under Nevada law, they had 10 days to make corrections,” said Anderson.

The initial visits by the state happened April 7 and 8, just days after the Panama Papers revelations were first published across the globe. “We became aware when that (Panama Papers leak) initially broke,” Anderson said, saying the agency did “under our law what we are allowed to do, which has limitations to it.”

Wyoming Secretary of State Ed Murray has proposed changes to address what he called deceptive advertising by commercial registered agents who are marketing “secrecy” and “anonymity” in Wyoming. He circulated his views Tuesday, adding that the state will move to prevent registered agents from listing themselves as a communications contact, a weakness highlighted in an earlier McClatchy report.

The Panama Papers stories prompted the Obama administration to propose closing a loophole that allowed some foreign companies to escape reporting to the U.S. government that they operated U.S. shell companies but earned no money nor held any assets here. The administration also proposed creating a central registry at the Treasury Department where information about the true owners of companies would be stored.

In its news release Monday, the Nevada Secretary of State’s Office said its investigators had randomly selected 94 records for 193 active entities, which all listed M.F. Corporate Services as registered agent.

On April 11, the state told the company it had found multiple violations of failing to keep proper records and that the company should examine its records and make adjustments.

Other examinations followed on April 26 and 27 of both active business entities and ones in default. Again, the records were found to beincomplete.

“I plan to organize a working committee to further review laws relating to business registration, registered agent requirements and the maintenance of related records,” Cegavske said in a statement.

The offshore industry has recently come under fire for enabling international criminals to do business. The consequences of this offshore practice creates victims in every corner of the globe.

Marisa Taylor, Tim Johnson and Vera Bergengruen contributed to this article, as did Nicholas Nehemas of the Miami Herald.

Kevin G. Hall: 202-383-6038, @KevinGHall