US Accountant Pleads Guilty Ahead of Trial In Panama Papers Investigation

March 1, 2020 Updated: March 1, 2020
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A U.S. accountant from Massachusetts has pleaded guilty in federal court to charges related to the tax evasion scheme orchestrated by Panama law firm Mossack Fonseca revealed by the 2016 Panama Papers leak, The Department of Justice (DOJ) said on Feb, 28.

Richard Gaffey pleaded guilty to one count of conspiracy to commit tax evasion and to defraud the United States, one count of wire fraud, one count of money laundering conspiracy, four counts of willful failure to file Reports of Foreign Bank and Financial Accounts (Financial Crimes Enforcement Network Reports 114), and one count of aggravated identity theft.

According to the allegations, Gaffey conspired with others to defraud the United States by concealing his clients’ assets and investments, as well as the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means.

The accountant did this by hiding the beneficial ownership of his clients’ offshore shell companies and by setting up bank accounts for those shell companies, which held investments worth tens of millions of dollars, the documents state.

Gaffey, 75, was one of four men arrested in connection with the 2016 Panama Papers investigation in which millions of confidential documents from the Panamanian-based global law firm, Mossack Fonseca & Co., were published by German newspaper Sueddeutsche Zeitung in collaboration with the International Consortium of Investigative Journalists (ICIJ).

The trove of documents included nearly four decades of data from Mossack Fonseca, which had created hundreds of thousands of shell companies—corporate structures that can be used to hide ownership of assets—for clients including world leaders, fraudsters, drug traffickers, billionaires, celebrities, prominent sports stars, and more.

“This defendant worked with the Mossack Fonseca law firm and exploited his role as an accountant to create fraudulent shell companies and defraud the United States of millions of dollars over decades,” said Assistant Attorney General Brian A. Benczkowski of the DOJ’s Criminal Division. “Today’s guilty plea reflects the Department’s commitment to prosecute financial professionals and other gatekeepers to the U.S. financial system who abuse the public’s trust.”

Gaffey’s guilty plea is the second victory this month for U.S. prosecutors who launched an investigation into Mossack Fonseca clients following the ICIJ investigation. Another defendant in the case, Harald von der Goltz, a former U.S. resident and one of the accountant’s clients from 2000 to 2017, also pleaded guilty to similar charges on Feb. 18.

Gaffey, who initially pleaded not guilty in the District Court for the Southern District of New York on Dec. 17, is scheduled to be sentenced by Judge Richard M. Berman on June 29. Von der Goltz is scheduled to be sentenced by Berman on June 24.

The DOJ also charged two other defendants in the case—Ramses Owens, a Panamanian lawyer and partner of Mossack Fonseca, and Dirk Brauer, a German citizen and manager of an associated investment firm—as part of the investigation.

Brauer has been extradited to Germany to face criminal charges there while Owens faces criminal charges in Panama, according to the Wall Street Journal.

Prosecutors said they were both responsible for providing support to clients who had purchased the sham foundations and related shell companies by providing corporate meeting minutes, resolutions, mail forwarding, and signature services. They also purposefully established the bank accounts in locations with strict bank secrecy laws, which impeded the ability of the United States to obtain bank records for the accounts.