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Panama Papers scandal reaches Slovakia

So-far investigations of documents leaked from the Panamanian law firm Mossack Fonseca have uncovered dozens of names and companies in Slovakia with ties to the law firm.

(Source: AP/SITA)

THERE are links between the Panamanian law firm Mossack Fonseca and some Slovak businesses, and though few specific names have emerged as yet, they look to be connected to some of the biggest political scandals of recent years. The revelations are leading to renewed calls for new legislation targeting shell companies.

Details from the Panama Papers about links to Slovakia have not been published yet, but so far investigations of over 11.5 million documents leaked from the law firm Mossack Fonseca have uncovered dozens of names and companies in Slovakia with ties to the law firm. While Mossack Fonseca claims that it broke no laws and all of its operations were legal, the Panama Papers scandal raises questions about tax avoidance as a moral issue. The European Union has also already responded with a plan to prepare legislation requiring large multinationals operating in Europe to disclose profits earned and taxes paid in each of the EU’s 28 member states, as well as offshore locations.

Cases in Slovakia

Slovak investigative journalists have uncovered several Slovak links to the law firm Mossack Fonseca, which specialises in setting up offshore companies. The name of Jana Lütken, the legal representative of a company involved in the emission-quotas scandal of the first government of Robert Fico – Interblue Group – is mentioned as a white horse in the Panama papers, according to the Czech Centre for Investigative Journalism. That 2008 scandal cost the Slovak state an estimated €75 million and nobody has been prosecuted.

Another name is Zuzana Herichová, originally from Bratislava but now living in Prague. Herichová or her colleagues have been connected to a questionable tender for the operation of the highway toll system from 2009 as well as the Interblue case, the Sme daily wrote.

Read also: Read also:Panama Papers have Slovak ties

Prime Minister Robert Fico’s name has also emerged in connection with the Panama Papers. In 2003, he launched the Elwing Slovakia company and the plan was to build apartment buildings in Bratislava’s borough of Rača. In the past he told the weekly Plus 7 Dní that he sold the company and has nothing to do with it. His wife Svetlana was the head of its supervisory board through 2007. One year after she left, Stanislav Jankovič, who acts together with Herichová in bodies of several Czech companies, took over a seat on the Elwing’s supervisory board. Thus Fico’s former company has links to white horses cooperating with Mossack Fonseca but they entered the company only after Fico had left, Sme wrote.

The Sme daily firstly, as it did not have access to the leaked documents, investigated data publicly available on the internet, offices or courts including the analytical website Finstat.sk.

Mossack Fonseca, based on data of Finstat.sk, provides its seat in Panama to nine companies that own shares in 79 Slovak companies. This number does not need to be complete as in case of joint-stock companies owners do not need to be published on the internet, Sme wrote.

One of the Slovak firms with the address in the seat of Mossack Fonseca is Transam Solutions, which owns limited companies Medipark Košice, and Blackstorm Group. Both of them have tried to do business in the public sphere and obtain public finances. Medipark Košice is behind a failed parking project in the eastern Slovak town of Michalovce and now seeks €7 million as compensation for damages and lost profit from the town. Blackstorm Group also tried to do business with parking, this time in Bratislava’s Rača district.

Sme also uncovered that lawyers of Mossack Fonseca administer real estate in Slovakia, for example an industrial hall in Piešťany. The hall is owned by Seychelles-based company Tuscaro Invest launched and administered by lawyers of Mossack Fonseca, but the real owners are not known.

The Panama Papers scandal has also drawn interest from the Slovak National Criminal Agency (NAKA) and the Financial Administration.

“We started checking on the situation,” Patrícia Macíková, spokeswoman of the Financial Administration told Sme.

Tax havens and Slovakia

Milan Seliak, business development consultant at Bisnode Slovensko, told The Slovak Spectator that there is a need to distinguish between what is legal and what is illegal. When a company is looking for a place with better conditions for doing business it is legitimate and legal but it is necessary to put aside cases in which tax havens serve for hiding income from illegal or criminal activities.

Panama does not belong among the most popular tax haven destinations for Slovak companies. Based on data of Bisnode Slovensko company, it is the Netherlands, the United States, in which some states like Florida or Delaware offer such conditions that can be perceived as tax havens, and Cyprus. Between 2005 and 2015, as many as 3,121 companies or 66 percent moved their tax domicile from Slovakia to these three countries. For Panama they register only 174 companies.

“Panama’s popularity [as a tax haven among Slovak businessmen] is quite low,” Seliak told The Slovak Spectator. “After the scandal with Panama Papers its reputation would be even worse. Basically large and international companies looking for an optimal environment in terms of tax optimisation rather choose other destinations that are not perceived in such a controversial light.”

Slovak media join

It is possible to expect more revelations as investigative journalists from several media in Slovakia have created a nine-member team that will cooperate with the Czech Centre for Investigative Journalism on the papers. The team consists of journalists working for dailies Sme, Hospodárske Noviny, and Denník N, the weekly Trend, the news website Actuality.sk, the public broadcaster RTVS and private TV Markíza. Their first meeting took place on April 13, the Medialne.sk website informed.

The task of the investigative journalists will be to uncover causes of a possible tax avoidance or money laundering. It is assumed that the database contains several ‘Slovak’ names but also information about activities of people, who do not have a permanent residence in Slovakia, but do business here or did so in the past.

New anti-shell law

The cabinet that resulted from the March 5 election promises a more effective law against shell companies that will pertain to all public resources and prevent possibility to provide undue advantages to bearers of public power. The cabinet approved the programme or cabinet manifesto on April 13.

Earlier in April Radoslav Procházka, the head of Sieť, one of four coalition parties, has conditioned further operation of the coalition cabinet with exclusion of shell companies from public procurement.

“If the cabinet includes any commitment in its cabinet manifesto, it will vote for meeting this commitment,” Procházka said during a radio discussion programme of the public RTVS on April 9. “Otherwise, it will deprive the cabinet of the right to exist.”

 The law to the adopted should be based on the bill drafted by Miroslav Beblavý, former member of Sieť but now an independent MP, and Lucia Žitňanská (Most-Híd), the Justice Minister in the coalition cabinet.

Beblavý noted that the anti-shell law is included into the cabinet manifesto in a 75-percent form as originally pushed through by Sieť.

“The key question of enforceability is approached only generally and simultaneously there is nothing said about excluding shell companies from fields related to bankruptcy and restructuring proceedings or bank regulation as Sieť had proposed in its [pre-election] programme based on cases of Váhostav and J&T,” said Beblavý as cited by the SITA newswire.

Slovakia already has an anti-shell law, but some see it is not effective enough. Based on the amended law on public procurement parliament adopted last September there was launched a register of final beneficiaries, i.e. real owners of companies participating in public procurement. The then opposition criticised the bill as imperfect and required that the register pertains also to companies linked to spending of public finances not only public procurement.

Topic: Finances and Advisory


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