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Pandora Papers Reveals Lack of Journalistic Ethics in Major Media Outlets

Los Pandora Papers revelaron la carencia de ética periodística en grandes medios de comunicación

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The Pandora Papers have opened a fresh debate about journalistic ethics and responsibility. Media from around the world joined forces with the International Consortium of Investigative Journalists (ICIJ) to conduct a global investigation and present the revelations of the largest leak of financial records in history. In total, almost 12 million documents were leaked from 14 law firms dedicated to the creation of offshore structures in tax havens.

According to the Argentine portal Infobae, which was part of the network of 149 media that joined the investigation, the documents range from 1970 to 2020 and “show different operations such as the establishment of shell companies to movements of bank accounts in more than 30 jurisdictions and at least 10 tax-havens. The work reveals business and financial secrets of more than 30 state leaders, 330 politicians, and officials from more than 90 countries, dozens of billionaires who make up the rankings of Forbes magazine, businessmen. Also celebrities, singers, and world soccer stars.”

The number of celebrities exposed is staggering: Roberto Mancini, coach of the Italian national team, Pep Guardiola, Miguel Bosé, Julio Iglesias, Luis Miguel, Mario Vargas Llosa, Shakira; all appeared in the leaks as people who plan their wealth in tax havens. And this is where the controversy begins: is what these celebrities did illegal? The same media that carried it out explained it: it is not illegal or they do not know if there was any illicit act involved.

The newsworthiness of the Pandora Papers, in many cases, did not exist

Offshore structures are not illegal and if a millionaire plans his wealth in a tax haven legally, with all the papers in order, the journalistic value of that particular article loses all news interest.

The problem is that many traditional media that participated in the investigation, in the absence of legal conflict found, raised the moral and ethical problem within an investigative work. This is what El País of Spain wrote in one of its many articles on the Pandora Papers:

“A constellation of powerful characters in Latin America has made use over the years of tax havens. Despite inhabiting the most unequal region of the planet, this elite has used a web of trusts, shell companies and opaque business records in places like the British Virgin Islands or Panama to avoid public scrutiny of a substantial part of their assets. A whole network that now, with the publication of the Pandora Papers, is coming to light.”

This is a journalistic dilemma. One of the first lessons taught in journalism school is not to give opinions or make value judgments in investigative work. When it is exposed that some “powerful people” in “the most unequal region of the planet” took their money to tax havens, a moral and ethical debate is intrinsically being raised: is it right for a millionaire or businessman in Latin America to take his money to a tax haven, even if it is legal? That is where the value judgment and the opinion of each journalist will come in, but that position should not tarnish the objectivity of the investigative work and that is where several media failed.

For example, the BBC published an article with the following title: “Pandora Papers: what is ‘legal corruption’, the mechanism used by politicians and businessmen to hide millions of dollars a year in tax havens.”

The term “legal corruption” in the title is not a BBC phrase, but a quote from one of its sources, Mr. Dan Hough, head of the Department of Politics at the University of Sussex in England, and author of “Analyzing corruption.”

Mr. Hough told the British media that offshore structures “are completely legal. And that is precisely why they are so questionable”. For Hough, such companies are “today’s most obvious form of ‘legal corruption,” according to the BBC.

The English media also falls into a problem of ethics when it sets out to explain what an offshore structure is and uses, as an essential part of its title, the subjective position of a person who is unequivocally against tax havens. The media, in order to keep the balance, should have consulted, at the same time, a person from the other pole: people who defend or explain more precisely what an offshore structure is without ideological bias.

Just one side of the coin?

When a journalistic work shows, in a biased way, only one side of the information and opinions regarding an issue, it begins to restrict information to the audience. And that is a serious journalistic failure.

Rafael Álvarez Loscher, lawyer and International Corporate Advisor, explained to El American several of the key points to understand how an offshore structure works. Álvarez detailed in particular what tax avoidance is and why it is not the same as an evasion, why many rich people decide to put their wealth in a tax haven —the reason isn’t necessarily to avoid paying taxes— and also gave his impressions about the work of the media at the time of exposing the Pandora Papers.

“On the one hand, I think the investigative effort is positive, perhaps poorly focused; I mean, one particular issue is to expose corruption, crimes, and people who might be carrying out activities contrary to the law, and on the other hand, to expose a lot of data no matter who it is and why those people have investments, properties, businesses, outside their countries of residence,” said Alvarez.

“Having companies abroad, creating a patrimonial structure, is not an illegal act. Many times they are created to protect family wealth, to protect investments in case of expropriation, to create investment vehicles abroad, even to establish subsidiaries or mechanisms to raise funds for business, not necessarily for tax purposes,” he added.

With respect to evasion and avoidance, the lawyer is also very clear: “Evasion is, and in a very summarized way, when the obligation to pay the tax is born, the corresponding taxes are not paid through the concealment of income or information, but the tax obligation has been born.”

“On the other hand,” he continued, “tax avoidance is to use those small loopholes allowed by the legislation and reduce the tax impact. Certainly, between the two there is a fine line that defines them and that must be taken into account.”

Martin Litwak, an estate planning attorney, also answered several questions from El American regarding the Pandora Papers, tax evasion, and avoidance, and media coverage.

“The basic difference is that estate planning is, at all times and in all places, a lawful activity; evasion, on the other hand, is a crime,” Litwak said. “No one can force a person, if they have two legal options in front of them, to organize their business or estate in such a way as to pay more taxes or have a more complicated estate. Notice that the journalists’ own consortium, being able to organize itself as a corporation in the United States, did so as a non-profit in order to lawfully pay fewer taxes.”

Both Litwak and Alvarez agreed that not all the media did a poor journalistic job, but there were cases where, unnecessarily, they exposed private individuals who decided to move their money to a safer jurisdiction, with stronger institutions, with less bureaucratic-complex lines of succession and, also, lower taxes.

“In my opinion, the truth is that it is not right to expose personalities and celebrities who plan their wealth in a tax haven; especially when these people have already settled their issues with the tax authorities of the countries where they live or did nothing illegal,” Litwak explained.

“It seems to me that this is something they should change on the occasion of the next leak. That is, they should expose only politicians and businessmen with ties to power, since in both cases these are people with responsibility before the citizens. But I don’t see anything that justifies exposing a soccer player or a singer who, despite being famous, is still an ordinary citizen.”

This is where the main ethical problem of the media in this matter lies: morbidity. Presenting Julio Iglesias or a certain artist in the same way as potential criminals with corrupt links. El País, for example, decided to spread its notes with yellowish designs of the personalities that appeared in the leaks without differentiating them from some of the possible criminals that are on the list.

Not everyone knows how an offshore structure works and a tweet, together with a flashy design and a yellowish title is enough to damage the image of that person.

Besides, we must not lose sight of the fact that many medium and large businessmen (not necessarily millionaires) use offshore structures for mere survival.

In Latin America, institutions are corrupt, taxation is very low, legal security leaves much to be desired, the States are gigantic and inefficient and taxes, in many cases, are exaggerated. Argentina, for example, has been called a “tax hell”. It is because of such tax regimes that tax havens are born; not vice versa. If this context is not explained in the media during reporting, the information is not only incomplete, but decontextualized and inaccurate. And many media outlets, unfortunately, have ignored this reality.

Emmanuel Alejandro Rondón is a journalist at El American specializing in the areas of American politics and media analysis // Emmanuel Alejandro Rondón es periodista de El American especializado en las áreas de política americana y análisis de medios de comunicación.

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