An indictment unsealed yesterday in a US federal court charges four defendants connected to Mossack Fonseca, the now-defunct law firm at the heart of the Pamana Papers débâcle.

Three of the four are under arrest. Dirk Brauer, a German citizen who worked as an investment manager for Mossfon Asset Management, an asset management company closely affiliated with the law firm, was arrested in Paris on 15 November. Harald Joachim von der Goltz, a former US resident and taxpayer, was arrested in London on 3 December. Richard Gaffey, a US-based accountant, was arrested in Medfield in Massachusetts yesterday. Ramses Owens, a Panamanian attorney who worked for Mossack Fonseca, remains at large. Mossack Fonseca specialised in creating foundations and trusts, incorporating offshore companies in return for fees and setting up overseas bank accounts for clients, including US clients.

Record sealing is the practice of removing court records from public view that would otherwise be accessible to the public. It usually requires a court order to unseal records once they are sealed.

Between 2000 and about 2017, the indictment alleges, Owens and Brauer conspired with each other to help US taxpayer clients of Mossack Fonseca conceal assets and investments from the US Internal Revenue Service fraudulently. They helped set up sham foundations and shell companies (companies with no physical presence) with nominee officers and directors which the firm formed under the laws of the British Virgin Islands, Hong Kong, Panama and other countries, while also helping to create undeclared accounts.

According to the indictment, the sham foundations typically owned the shell companies that nominally held the undeclared assets. They held bank accounts - sometimes one, sometimes more - in countries outside the US. The assets were typically realty and money in bank accounts. Sometimes, the prosecutors say, Owens and Brauer provided US clients with minutes of corporate meetings, resolutions, mail forwarding and signature services. They are also accused of going to New York to reassure American clients that their assets were going to be shielded from the prying eyes of the IRS and in some cases of inducing American clients to go out to the Bahamas, Costa Rica, Panama and Switzerland to see their banking services set up and to receive investment advice about undeclared accounts.

US prosecutors are always accusing offshore jurisdictions of being 'secrecy jurisdictions,' and this indictment follows the usual pattern. Owens and Brauer, it says, purposefully established the bank accounts in locations with strict bank secrecy laws which impeded the IRS in its efforts to obtain bank records. Panama is certainly an inhospitable place from which to obtain records, but the BVI has a far better record of international co-operation, as long as the Americans fill in the right forms.

The gatekeepers

By 2008, Gaffey was on the scene. An American client of Owens' and Brauer's with assets outside the US met him in Boston with a view to repatriating his untaxed offshore investments back to the US and Gaffey, allegedly, said that he could accomplish that goal by putting the money into artwork or real estate, or by 'selling' a real or made-up company. The client eventually followed Gaffey's alleged advice and repatriated $3 million by stating falsely on his tax return that the money was the result of the sale of a company, even though it was not. His money was wired to the US from a bank in Switzerland to which Mossack Fonseca had transferred it from Hong Kong. The client's tax return did not mention his offshore bank account, as US law demanded.

Another client was Harald Joachim von der Goltz, a German who grew up in Guatemala and who lived in the United States after 1984. As a US resident he was subject to US tax laws which (uniquely in the world, save for the tax laws of Eritrea) required him to report and pay income tax on his worldwide income. Owens allegedly helped him evade this duty, with both of them setting up a series of shell companies and bank accounts and hiding von der Goltz's beneficial ownership of them from the IRS. Von der Goltz, Gaffey and Owens allegedly claimed falsely that von der Goltz's elderly Guatemalan mother - now 102 - was their sole beneficial owner. Being Guatemalan, she is not a US taxpayer.

The Revack entities

Beginning in the 1980s, von der Goltz allegedly used the services of Mossack Fonseca to create various foreign shell companies to hold his unreported assets in the US and elsewhere. These entities were initially 'owned' by an overlying trust and, later, by an overlying foundaction, which Mossack Fonseca created.

The Revack Trust, domiciled in the BVI, was first formed in or around 1988. The trust agreement, written with the law firm's help, stated that upon the death of von der Goltz's father - which occurred in 1990 or thereabouts - the assets in the trust were for the use and benefit of von der Goltz, who was the primary beneficiary. His wife and three children were identified in the trust agreement as secondary beneficiaries, making no mention of von der Goltz's mother, from whom the father was estranged.

Later, in or around 2007, von der Goltz used Owens and Mossack Fonseca to resettle the trust into the Revack Holdings Foundation, domiciled in Panama. The Revack Holdings Foundation Regulations also did not mention von der Goltz's mother, although they did make the amusing pronouncement that "any family member engaging in reprehensibe conduct or marrying an unacceptable trouble-making or gold-digging spouse can be either partially or totally eliminated from receiving any benefits."

The foundation, through various Revack entities, made investments in private equity, real estate and a watch company founded by von der Goltz that were worth $35 million in value in 2012. Gaffey kept the balance sheets of the Revack entities in files at his US accountancy firm.

Starting in 2000 or thereabouts, von der Goltz kept bank accounts in the names of various Revack entities - including, eventually, the foundation. They were located both inside and outside the US. He allegedly used the assets in the bank accounts for his personal benefit without properly reporting them to the IRS or paying the appropriate income taxes on the income that they generated.

Owens and Gaffey allegedly helped him do this, serving as the authorised signatories on the accounts. In 2010-13 or thereabouts (dates in the indictment are vague) they helped him open accounts in the name of a Revack entity called EMJO Investments Ltd at banks in the US. Von der Goltz was the sole beneficial owner, but they did not identify him as such, according to the indictment, which describes EMJO as a foreign shell entity.

In the early 2000s, the indictment goes on to argue, Owens helped von der Goltz open bank accounts in the names of various Revack entities at an unnamed bank in Panama. This time the opening documents identified von der Goltz as the beneficial owner of the assets in the accounts, with Owens serving as a director of the entities that (in name only) held them and directed transfers to and from them. The accounts held millions of dollars in assets, but von der Goltz allegedly never reported their existence, or the interest that they generated, to the IRS, nor did he send off FBARs (Form 114, entitled "Report of Foreign Bank and Financial Accounts," separate from tax returns) off to the US Treasury's Financial Crimes Enforcement Network (FinCEN) in respect of the accounts.

The document goes on to accuse Gaffey of repeatedly directing the payment of von der Goltz's various personal expenses, including hunting trips, grouse shoots, hangar rentals, mortgage payments and purported personal loans. Bank records, it says, show that in 2010-16 von der Goltz received more than $1.4 million into his personal bank accounts from accounts nominally held by EMJO alone.

The bane of Swiss banking secrecy

The US Swiss Bank Programme, the American crusade against tax evasion at Swiss banks which ended in January 2016 with the US Department of Justice's last non-prosecution agreement with HSZH Verwaltungs, seems to have done for von der Goltz. The indictment alleges that he and his helpers set up many accounts at a Swiss bank in the names of Revack entities, falsely naming his mother as a beneficial owner for the first time in 2013.

In a letter dated 4 March 2014, the Swiss bank informed von der Goltz that, in pursuit of its obligations to the Americans in accordance with the programme, it had reviewed its account relationships and identified von der Goltz's accounts as 'US-related' because he was their real beneficial owner and was resident in the US. It urged him to get in touch with the IRS and report his accounts to that body himself. In any other country the bank would have been guilty of the crime of 'tipping off,' telling the suspect of a crime that he could be under investigation; until the last two years, however, this was not a crime in Switzerland as every holder of every Swiss bank account was entitled to know whether he was under investigation.

Von der Goltz's decline and fall

Around April 2014 von der Goltz reportedly hired a US law firm to help him co-operate with the DoJ's Offshore Voluntary Disclosure Programme or OVDP. According to the indictment, however, he did not follow through with this in the end and instead sent the IRS many false FBARs for the years 2009 to 2013, prepared by Gaffey and the US law firm. These, apparently, fooled nobody because they contradicted the Swiss bank's records. In 2016 von der Goltz had appeared in the Panama Papers and, in proverbial terms, this seems to have been the final nail in his coffin. A humiliating interview with the DoJ followed, at which he allegedly compounded his misrepresentations.

All the above details are allegations to be found in the first count of the indictment. Count 2 concerns conspiracy to commit wire fraud in contravention of USC Title 18 s1343 and is directed against Owens and Brauer. Count 3 consists of conspiracy to commit tax evasion in contravetion of USC Title 26 s7201 and is directed against Owens, Gaffey and von der Goltz. Count four covers actual wire fraud in contravention of USC Title 18 s1343 and concerns Owens, Gaffey and von der Goltz. Count five covers conspiracy to launder money in contravention of USC Title 18 s1956(a)(2)(A) and concerns the same three men. Counts 6-9 concern failures to send off the right FBARs and concern Gaffey and von der Goltz. Counts 10 and 11 are to do with false statements and concern von der Goltz alone.

Law firms, asset managers and accountants play a vital part in allowing tax evaders, money launderers and other ne'er-do-wells to access the world's financial system. These charges - the first American charges levelled at anyone whose tax affairs have received negative coverage in the Panama Papers - are a demonstration of the US Government's desire to prosecute 'gatekeepers' who allegedly facilitate tax evasion for the benefit of their clients.

Caseload overflow

Last week 170 German policemen raided the Frankfurt offices of Deutsche Bank in connection with the Panama Papers, hoping to find evidence that the bank helped clients to set up offshore companies for shady purposes. The bank wrote on Twitter: "It is true that the police is [sic] currently conducting an investigation at a number of our offices in Germany. The investigation has to do with the Panama Papers case. More details will be communicated as soon as these become known. We are co-operating fully with the authorities. As far as we are concerned, we have already provided the authorities with all the relevant information regarding Panama Papers. Of course, we will co-operate closely with the public prosecutor's office in Frankfurt, as it is in our interest as well to clarify the facts."

Two unnamed Deutsche Bank people, aged 50 and 46, are thought to be under investigation along with others, according to Bloomberg which believes that one of the two works in the private wealth unit. The Süddeutsche Zeitung and the London Financial Times say that the unit at the core of the case is Regula Ltd, domiciled in the British Virgin Islands. The present raid reportedly has nothing to do with Deutsche Bank's involvement in the Danske Bank débâcle.