Bermuda must stand ground on Paradise Papers
In the wake of the Paradise Papers, I am sure there is no shortage of people on your island who have opinions on how your government and legal community should move forward in light of the recent revelations that placed you in the spotlight of the world's media.
As that discussion unfolds, perhaps you can learn from someone who has “been there, done that” to help you collectively navigate the troubled waters that are raging around you.
My wife and I were involved in the Panama Papers investigation, which put us in an awkward position because, since she was a lawyer with significant experience in the offshore industry, she appeared in the Panama Papers dozens of times.
Additionally, we had close ties to the firm. While living in the British Virgin Islands, I played softball for the Mossack Fonseca team, and my wife graduated from high school in Panama with the firm's compliance officer.
But we ignored the personal toll the project took on us because we felt that there was a greater good. The problems outlined in the Panama Papers — and to be sure there was no shortage of morally bankrupt and borderline illegal activities contained in the files — were the same ones that I entered journalism to combat. The adage “comfort the afflicted and afflict the comfortable” was never more clear to me as I went through the files. Every day I see the effects in Central America of the scourges of corruption and tax evasion, and the Panama Papers provided conclusive evidence of how these problems were made worse by Mossack Fonseca.
After the project went public, I was optimistic that it would result in real change. And that actually happened. Almost immediately, Panama agreed to adhere to the Organisation for Economic Co-operation and Development's common reporting standards, considered to be one of the keys to fighting problems in the global financial industry.
It also created a commission led by world-famous economist Joseph Stiglitz to examine its financial services sector. A criminal investigation was opened into the matter, which resulted in charges being filed against the firm's founders, Jürgen Mossack and Ramón Fonseca.
The attorney-general also began fully co-operating with the Odebrecht investigation — which had not been done previously — leading to the largest corruption investigation in history, exposing wrongdoing in a dozen countries.
I saw real changes being made by the Panamanian Government. And what did it get for its efforts?
Stiglitz resigned from the commission in a public manner, claiming that the Panamanian Government was not committed to transparency. This move garnered worldwide attention, but the real reason was clearly that, once the government agreed to the OECD standards, there was nothing more it could do from a regulatory standpoint. Rather than admitting this, Stiglitz quit — the equivalent of knocking over a chessboard once he had been checkmated.
Any decent reporter should have realised this, yet the world's media, including many of our partners in the Panama Papers project, refused to put any effort into reporting that side of the story, choosing instead to take Stiglitz at his word, something they tell you not to do on the first day of journalism school.
Meanwhile, as Panama was tightening its regulatory regime, the United States, after the election of Donald Trump, was seeking to relax its restrictions on Wall Street, a move that was sure to make the problems outlined in the Panama Papers even worse. And now, the United States is seeking to pass tax reforms that will further exacerbate those problems. And the US is hardly unaware of its position.
It has refused to sign the OECD's common reporting standards, knowing that doing so would hurt its own financial services industry. Panama put the founders of Mossack Fonseca in jail. After the global financial crisis, the US Government not only failed to pursue any criminal action against those responsible, it set them up through bailouts to become even richer.
And so, what is my advice to Bermuda in the wake of the Paradise Papers? If I listen to my heart, I would tell you to actively engage in a global discussion about meaningful reforms to an industry that has had disastrous impacts on the world's most vulnerable citizens.
I would encourage you to seek to have an industry that contributes to the prosperity of every citizen of the world, and not just the richest 0.01 per cent. I would encourage you to develop an industry that you would be proud to have your children work in because it makes the world a better place.
But if I listen to my brain, my advice would be to not change a single thing. Because Panama made changes, and it has not had any impact at all. Until changes are made at places that really matter — Washington, Wall Street and London — any changes made in Bermuda will not matter at all.
• J. Scott Bronstein is a journalist from the United States who is now based in Panama where he was part of the Panama Papers global investigation, which won a Pulitzer Award in April. Previously he worked in the British Virgin Islands for the BVI Beacon. He has co-written a book, Sociedades Peligrosas, with his wife, Rita Vasquez, about their experience working together on the Panama Papers project that was published by the Mexican division of Penguin Random House in May