Ecuador’s President Guillermo Lasso is under investigation for tax fraud and Europe’s parliament rebuked financial secrecy in the United States, marking the latest high profile reactions to the International Consortium of Investigative Journalists’ Pandora Papers investigation.
Ecuador’s attorney general’s office confirmed the investigation, which it characterized as preliminary, after calls by an opposition leader for a probe into Lasso’s finances and tax contributions, according to Reuters.
A former banker who assumed office last May, Lasso launched a political party in 2012 and launched two unsuccessful campaigns for president. In 2017, Ecuador’s parliament enacted a law to prevent politicians and other public officials from owning offshore companies. The United States was not included on the country’s list of offshore jurisdictions.
The Pandora Papers documents show that in late 2017, months after the new law, Lasso authorized the transfer of companies held by two Panamanian private interest foundations to newly created trusts in South Dakota. The Panamanian foundations were designed to provide monthly payments to Lasso’s wife, children and brother in the event of Lasso’s death.
The South Dakota trusts, named Bretten Trust and Liberty US Trust, were managed by Trident Trust Company in Sioux Falls.
Trusts are legal arrangements that allow someone with money, real estate or other assets to place it under the technical control of an outside party, for the benefit, ultimately, of someone else — such as children. Their very nature can make trusts difficult to penetrate and for lawyers, tax inspectors and judges to determine who controls what.
Alemán, Cordero, Galindo & Lee, or Alcogal, the law firm that helped administer one of the foundations, the Barberini Foundation, listed Lasso in internal records as its founder, beneficial owner and protector, according to leaked records. In a draft document from the Pandora Papers, Lasso was also listed as the foundation’s “protector,” a role that usually applies to the person with control over the foundation.
In response to questions before the publication of the Pandora Papers investigation, Lasso told ICIJ that he does not have “any relation regarding property, control, benefit or interest of any type” with Bretten Trust and Liberty US Trust. “Accordingly, I have at all times complied with the Ecuadorian law that forbids candidates and public servants from holding offshore companies, exactly as I have declared in my filings.”
Andres Knobel, a senior researcher at the Tax Justice Network, said it is “crucial” that countries including the U.S. require trusts to register with authorities all persons involved so that it is easy to know who really controls or benefits from the assets. “Ideally this should be in public online registries.”
Also this week, Lasso declined to testify before an Ecuadorian parliamentary committee investigating the Pandora Papers revelations. Lasso said he would speak to lawmakers after hearing other testimony, France24 reported.
Earlier this week, members of the European Parliament in Brussels submitted a resolution that, for the first time, condemned the U.S. states of South Dakota, Alaska, Wyoming, Delaware and Nevada as hubs “for financial and corporate secrecy.”
The parliamentarians, drawn from multiple political parties, called on the European Union to consider adding the United States to its list of tax havens, joining countries like Panama, Fiji and Samoa. The Corporate Transparency Act, enacted by Congress in January, “falls short of ensuring full corporate transparency akin to the current standard in the EU and, in particular, does not cover trusts and similar arrangements exposed in the Pandora Papers,” the resolution says.
The resolution also urged the United States to join a global initiative supported by more than 100 other countries that allows for the easy sharing of tax information.
More fallout and impact from the Pandora Papers has also continued in countries around the world. Here are key new developments:
PRESIDENT’S SON QUESTIONED: Blazo Djukanovic, the son of Montenegro’s longtime leader Milo Djukanovic, was questioned by the special state’s prosecutor’s office about offshore arrangements revealed in the Pandora Papers, according to local media reports. The president is expected to comment on the case in a written statement.
Vanja Ćalović Marković, the editor of the news outlet Network for Affirmation of the Non-Governmental Sector (MANS) which partnered with ICIJ on the Pandora Papers, was also questioned by state prosecutors over her organization’s investigations related to the leak.
CYPRUS PRESIDENT: The Cyprus Bar Association is investigating two law firms featured in the Pandora Papers — DADLAW, which is one of the 14 law firms whose leaked files formed the basis of the investigation, and a law firm founded by Cyprus President Nicos Anastasiades that also listed wealthy Russians as clients, local news media reported. Anastasiades was also one of a number of European politicians ‘deplored’ in a resolution proposed by the European Parliament in response to the Pandora Papers.
COLOMBIAN OFFICIALS TESTIFY: Several Colombian government officials named in the Pandora Papers were summoned to testify to explain the findings by the opposition bench in Congress, according to local media. The officials, whose offshore activities were revealed by ICIJ partners El Espectador and CONNECTAS, include Vice President Martha Lucía Ramírez, tax chief Lisandro Junco and Minister of Transportation Angela Orozco.
GUEDES UNDER PRESSURE: Brazilian President Jair Bolsonaro is reportedly sticking with his beleaguered Economy Minister Paulo Guedes, amid rumors that Guedes plans to quit after a controversial spending plan triggered mass resignations in the Treasury.
Separately, Guedes is due to answer questions about offshore dealings revealed in the Pandora Papers to a congressional chamber in the next two weeks, local news media reports.
NIGERIAN AUTHORITIES RESPOND: Nigeria’s agency tasked with prosecuting corruption and the abuse of office by public officials contacted ICIJ’s media partner, Premium Times, for information from the Pandora Papers. The Code of Conduct Bureau requested information “to investigate and where possible prosecute those found guilty.” ICIJ and its media partners do not share information with governments. Separately, Premium Times also reported that Nigeria’s anti-corruption agency summoned Peter Obi, a former state governor, for questioning.
OECD RESPONDS: The Organisation for Economic Co-operation and Development’s Forum on Tax Administration is planning a collaborative approach to addressing aggressive tax avoidance and tax evasion. The international body said in a statement that its response to the investigation is modeled after those adopted to respond to previous ICIJ leaks, the Panama and Paradise Papers.
The White House responded to questions about Kenyan President Uhuru Kenyatta's offshore holdings, revealed in the #PandoraPapers, in light of U.S. President Joe Biden meeting with the African leader this week about defending democracy and strengthening financial transparency. pic.twitter.com/RIN8txjbGJ
— ICIJ (@ICIJorg) October 15, 2021
KENYATTA FACES QUESTIONS: Kenyan President Uhuru Kenyatta continues to face questions about his offshore holdings revealed in the Pandora Papers. The White House was also asked about it last week as U.S. President Joe Biden met with the African leader about defending democracy, strengthening financial transparency, and other topics.
“The President has taken note of President Kenyatta’s statement that the Pandora Papers release will enhance financial transparency and openness around the globe,” a senior Biden administration official said on a press call. “We can expect that the President will, again, reinforce the need to bring transparency and accountability to domestic and international financial systems … we may also have areas where there’s disagreement. And that’s what this meeting is an opportunity to convey our concerns.”
Kenyatta has stated he will be responding to the Pandora Papers findings comprehensively upon returning to Kenya from the visit.