The Panama Papers Investigation, Scandals Revealed and Why It Matters

While most listeners have at least heard of the Panama Papers and the Panama Papers investigation, there are still a lot of questions that people have regarding what the papers actually covered. Featured in today’s episode of the Creating Wealth podcast is Jake Bernstein, author of Secrecy World: Inside the Panama Papers Investigation of Illicit Money Networks and the Global Elite. Together, he and Jason Hartman discussed what the Panama Papers are, why it’s important for listeners to know about them, and what impact we should all expect to feel from them.

Bernstein covered valuable information about why tax revenues are so low, how the government has been paying spies for years, and how the Rothschild family name appears within the Panama Papers investigation.

As well as the topic of tax evasion strategies for the elite, Hartman added some insight to the Puerto Rican real estate market, including the expenses of living on the island compared with the tax breaks.

Puerto Rico Real Estate is NOT Cheap

Jason Hartman begins the episode from the inside of a car in Puerto Rico, heading to the airport to fly to Fort Lauderdale, Florida. He notes that he would like to share some observations he made during his visit before he begins the discussion with guest Jake Bernstein on the Panama Papers and the Panama Papers investigation.

He states that he has been in Puerto Rico for the past few days in Palmas Del Mar, where a lot of people from the fifty US states have moved for tax benefits. He mentions discussing this topic thoroughly on his Jetsetter podcast, that listeners can tune into at

Hartman explains that there is a great opportunity for Americans to legally lower their tax liability by moving to Puerto Rico. A former guest on the show, Peter Schiff, has done so. He has a 14,000 sqft house in Dorado that cost him $6 million.

Puerto Rico suffered a giant hurricane recently and is still in recovery mode. One whole island is without power and about 10% of the entire Puerto Rican population is still without power. There are a lot of potholes in the roads, Hartman says. He notes that the real estate available on the island for people who have a few bucks is not cheap at all. He will cover Puerto Rico real estate more in future episodes, but the housing is quite expensive.

He explains that he looked at some condo flats in the Ritz Carlton resort, and the prices are much higher than some of the linear markets he recommends in the United States. The condo flats are 3200 sq ft at $4.8 million with HOA fees at $5,000 per month. They’re on the beach, which is nice, but the price is beatable in the States.

Upcoming Events

Before introducing Jake Bernstein to the podcast, Hartman reminds listeners that the Philadelphia Creating Wealth event will take place on May 19th. There will be two local market specialists at the event who will talk about properties and management techniques. This will be the only Creating Wealth event this year, and the following weekend, Memorial Day weekend, will be the Venture Alliance trip in New York City. It’s a great time to take advantage of both events. For more information, visit or

What Are the Panama Papers and the Panama Papers Investigation?

Hartman introduces Jake Bernstein, author of Secrecy World: Inside the Panama Papers Investigation of Illicit Money Networks and the Global Elite to the episode. Bernstein tunes in out of New York but notes that the digital age has allowed him to collaborate with people all over the world.

Hartman explains that most of us have heard about the Panama Papers investigation, where a lot of elite people were exposed for keeping offshore entities and accounts, and he askes Bernstein to illustrate the point of the papers themselves.

Bernstein states that a Panamanian law firm and corporate service provider Mossack Fonseca was founded in the mid-1980s, but the founders were creating anonymous firms like this for years before Mossack Fonseca. When the Panama Papers were released, there were over 11.5 million documents included from more than fifty countries. Elite people like the Prime Minister of Iceland, the President of Pakistan, and the Minister of Industry in Spain were named therein. Wealthy people all over the world were involved, some of which only executed legal activities, but there were plenty of elite people involved in money laundering and tax evasion.

In the papers, one lawyer candidly admitted that 95% of their business involved helping people avoid paying taxes. Some of these methods were legal, some were clearly illegal, but most fell into a grey area where it wasn’t easy to determine legality.

Hartman refers to a chapter in Bernstein’s book entitled “Nazis and Radical Priests” and asks if the Nazi party and/or Catholic Church were involved.

Bernstein clarifies that the chapter was about the founding of the firm by Jurgen Mossack and Ramon Fonseca. He explains that Mossack’s father was a Nazi officer in the SS, which adds a lot to the image of the kind of person Jurgen is. Fonseca was at one point going to become a priest, but together they decided that they wanted to create the McDonalds of the offshore world. This was started in the mid-1980s, when the internet and digital capacities were growing. The world was beginning to see wealth growing in developing areas. A lot of business people didn’t want to pay taxes, so the firm grew and put the British Virgin Islands on the map.

A lot of other offshore firms followed this one, but Mossack Fonseca became one of the top five offshore companies in the world.

Why the Panama Papers Investigation Matters

panama papers investigationWhen asked why this matters to listeners, Bernstein explains that it matters for several reasons. Most people think about the Panama Papers investigation as something that happened in a foreign place. The reality is, it still impacts all of our lives. If you live in a place like Miami or New York City, property prices are skyrocketing and a lot of the reason behind it is that foreign investors with anonymous shell companies were coming in and buying investment properties.

We don’t know where their money is coming from, Bernstein explains. FinCEN, the Financial Crimes Enforcement Network says that 30% of all cash transactions of this sort are on their suspicious activity reports. It’s coming from criminal activities like money laundering and corrupt officials from other countries. The real impact is that ordinary middle-class citizens who want to buy an apartment in New York or Miami can’t afford to do so anymore.

Hartman adds that people are paying more because these foreign investors are getting an unfair advantage. The playing field is not even. These people have a lot of money to throw around, so they’re buying properties all over the world, primarily in the US. They’re able to pay more so they crowd out the marketplace, he says.

Bernstein points out that another issue is that the government doesn’t have enough money for infrastructure like healthcare, police, and things that US citizens need. The money isn’t there and part of the problem is tax avoidance from the elite and companies that are storing their money offshore. The US loses $70 billion per year in tax revenue from shifting corporate money.

Hartman states that both Google and Apple are considered leftwing businesses, but they’re both very guilty of these tactics. He mentions a documentary on Netflix that points out a scheme called the Double-Irish Twist. He also wonders aloud if under the new GOP tax bill, money might come back to US shores, as doing so is not as punitive as it was before.

Bernstein is Not Optimistic About Tax Reform

Bernstein explains that he does not believe that this will be a big game changer. He states that from the company’s perspective, if money is being stored in an offshore account, they’re only paying about 8% for it. There isn’t a lot of incentive to bring the money back to the US so that they can pay 21% in taxes. There are reasons businesses might want to do this, like to pay off debts, but the savings is much greater when keeping money offshore.

Hartman adds that it’s a question of reducing the delta. The tax plan is not perfect by any means, but it’s easier to deal with the money in the US.

Bernstein references a piece in his book where he mentions multi-national corporations and certain cap strata of global wealth. He points out that many wealthy individuals don’t view things from the nation’s state anymore. They have houses all over the world, fly around in private jets, and have these anonymous offshore companies. They might make their money in the US, but they don’t feel attached to the country.

He also mentions something happening in Europe, which he predicts will happen in the US as well. When austerity takes a deeper bite, as the citizens who pay their taxes and play by the rules see the ramifications of people who don’t do so, they’re going to start changing the rules and demand more buy-ins by companies in the places where they make their money.

“It’s always the carrot or the stick,” Hartman says. It’s important to incentivize with a little bit of both. He also asks about any shocking revelations that came about from the Panama Papers.

Scandals Unearthed by the Panama Papers Investigation

Bernstein states that one revelation surrounded Vladimir Putin. For years, there has been speculation that he’s a multi-billionaire, and perhaps one of the richest people in the world. Though his official salary is less than what the US president makes, there has been speculation for a long time that he has his hand in several Russian businesses.

The Panama Papers investigation noted a network of companies surrounding Putin, being run by wealthy oligarchs that are close to him. One person was mentioned who nobody ever even considered to be a businessman, a cellist by the name of Sergei Roldugin. He is one of Putin’s oldest friends and the godfather of his oldest daughter. Through the papers, he was seen as the owner of several companies set up by Russian banks that the US Treasury said was closely tied to Putin.

When asked if the law firm is still in business, Bernstein explained that it has been all but destroyed. It had over 600 employees at its height, and now it is down to 80. The reality is, more than 240,000 companies were released into the world. There are plenty of governments demanding information about these companies even now. Most of their activity is now dedicated to vetting and doing the due diligence they were supposed to do before. Now that there is attention on them, they aren’t really doing any new business.

He states that the founders of the law firm have complained bitterly about the way that their company’s demise has benefitted the US. Most people don’t think of the US as a tax haven, Bernstein says, but it is. Delaware gets more than $1 billion a year in business registry. They’re pumping out anonymous shell companies, often used by foreigners for illegal activities.

The US has also complained that the Russian Mafia is using Delaware companies. Wyoming and Nevada are also big players in the scheme.

CIA and IRS Involvement

Hartman asks about how, in Bernstein’s book, he mentions that the CIA is involved with secret accounts as well, and that the IRS has been largely ineffective at investigating them.

Bernstein states that the CIA and KGB were quick to adopt the secret world. In the CIA archives, there are secret memos from early CIA history, in the 1950s, that explains a practical problem they were faced with.

The CIA had a good deal of covert agents and didn’t know how to pay them. They couldn’t have people walking around with suitcases full of cash. They needed bank accounts and being the bureau, the CIA was, they conducted meetings and had memos detailing how they were going to create fictitious people and companies that would open accounts at certain banks. The CIA was actively covering for the money laundering in the 1980s.

When the US Ambassador started digging around, he found out about how safe shells were being used by the Gambino family. During his search, he received a message from the director of the CIA warning him to leave the accounts alone and stay away from the issue.

Bernstein adds that the IRS has been decimated in recent years. In their defense, their job has become much more difficult. They do not have a lot of participation from investigated parties, and they don’t like to go after lawyers. There is a sense of bureau-wide malaise about going after offshore accounts.

However, it has been done. Bernstein cites a chapter in his book where he detailed the way that an IRS agent named Joe West successfully went after an offshore account. He performed a successful audit and caught wind of some tax evasion. He managed to track billions of dollars that were offshore, and his investigation was so successful that his boss wanted him to perform a research project to expand on investigating.

West went all over the world researching and talking to people with various experience in the field. He came up with a whole menu for the IRS to go after tax evaders, Bernstein says.

The IRS agreed to only one of his proposals involving offshore credit cards, and in the end, the research process was so difficult for West that he retired early due to being burnt out.

Hartman states that this is why the elite get away with everything. In the recession, there were the “too big to fail” companies that became corporate socialists. These companies were bailed out while smaller companies were left to die. The bigger companies are dishonest and they’re still around, because the IRS doesn’t like to lose. If they went up against big companies, they’d have a fight on their hands. They can attack Joe Six-pack and take advantage of his company because they have more resources and sophistication.

He adds that he has heard stories of people who have four children to support and barely make money, but they get audited. Billionaires never seem to.

Are the Rothschilds in the Panama Papers?

Hartman asks if the Rothschild family is mentioned in the Panama Papers, or if they’re too high up on the level that they’re unreachable.

Bernstein confirms that the Rothschild bank is in the papers and that the family also has some activity in Nevada. There are a lot of old European families mentioned in the papers. If you’re a big player, you’re going to be found in the leaks. The Rothschilds are in the papers.

In closing, Bernstein offers listeners his website to explore at He also states that his book is available at all major outlets, and notes that the International Consortium of Investigative Journalists has a lot of resources available to learn more about both the Panama Papers and the Paradise Papers. It is the largest public database of offshore holding.