The firm's Nevada company and the NML Capital discovery case

analysisOn 16 March 2015 Magistrate Judge Cam Ferenbach of the U.S. District Court for the District of Nevada ruled on subpoenas in NML Capital, Ltd.'s post-judgment proceedings against the Republic of Argentina (lead case 2:14-cv-492, member case 2:14-cv-1573). NML, seeking to enforce judgments totalling $1.7 billion, suspected that Lázaro Báez and Cristóbal López had laundered embezzled Argentine state funds through Nevada companies, and had subpoenaed M.F. Corporate Services (Nevada), the registered agent of the Nevada companies it linked to Báez; those suspicions were NML's, and the court ruled only on discovery. The order describes M.F. Corporate Services as a Nevada corporation with one employee, one client, the Panamanian law firm Mossack Fonseca & Co., and one owner, Tornbell Associates, Inc., a Panamanian company whose agent is the firm and whose directors are all its employees. ¹

analysisIn a reply brief dated 4 December 2014, which appears in the court record as Document 102-6 filed on 16 March 2015, NML argued that the Nevada company was the firm's alter ego, so that serving it was effective service on the firm, and asked for an evidentiary hearing if the court found that evidence inconclusive. NML stated that Imogene Wilson is or was the company's president and instructed its sole employee under the contract between the firm and the company, worked from the same address as the firm's Panama offices and served or had served as director and assistant secretary of Aldyne Ltd.; that Leticia Montoya, an employee of the firm in Panama, was an officer of Aldyne; and that Tornbell, the company's sole shareholder, had the firm as registered agent and five individual directors, Montoya among them, all employees of the firm. According to the brief, M.F. Corporate Services had argued that NML cited the wrong legal standard for alter-ego status and that the funds allegedly embezzled by Báez were irrelevant to NML's judgment enforcement. The court's order found that Montoya answered NML's subpoenas for each of the Báez entities as an officer of Aldyne, custodian of records for most of the entities and an attorney with or employee of the firm; she asserted that none of them held responsive documents, including their own operating agreements, and that Aldyne and another Seychelles company were not 'actually owned by anybody'. The order notes that Aldyne's Seychelles address is shared by the firm, and recalls that on 11 August 2014 the court had held that Montoya could be compelled to appear for a deposition in Las Vegas after she submitted 123 affidavits for the entities. ^{2 1}

analysisThe court held that M.F. Corporate Services acted as the agent of Mossack Fonseca & Co. and was also its alter ego for jurisdictional purposes, citing their joint ownership through Tornbell. It concluded that it could exercise general jurisdiction over the firm, which was 'essentially at home' in Nevada through its domination of the company, and that doing so was reasonable because there was 'reasonable suspicion to believe that Mossack Fonseca & Co.'s activities further fraud and money laundering'. It granted the company's motion to quash in part and denied it in part, and partly granted NML's motion to compel production. These findings decided jurisdiction over a non-party in post-judgment discovery; they are not findings of liability, and the retained records do not show what the firm produced afterwards or whether the order was challenged. ¹

analysisA Chilean investigative news outlet reported in April 2016, from the September 2014 deposition of the Nevada company's only employee and from the leaked records, that she described herself as its sole administrator and employee, named Imogene Wilson as its president and acknowledged that the company had no clients other than the Panamanian law firm; she had also acted as secretary of Aldyne Ltd., a Seychelles company whose registered agent is the firm. A Chilean investigative news outlet described Wilson as a Panamanian executive of the firm and a director of more than 420 offshore companies created by it. From the firm's internal emails, a Chilean investigative news outlet also reported that a few days after the deposition an IT specialist of the firm travelled to the Las Vegas office, arranged a telephone that would not show the firm's corporate directory or keep call logs, and cleaned the employee's computer, with the extracted files kept at the firm's headquarters in Panama; no response from the firm to this account is retained. ¹

analysisAccording to the journalists' book, a bank-account opening form in the leak shows that all the shares of M.F. Corporate Services (Nevada) were held by Tornbell Associates, which in turn belonged 45 percent to Jürgen Mossack, 45 percent to Ramón Fonseca and 10 percent to Christoph Zollinger, a minority partner in the firm. Asked by the journalists, Zollinger denied being a shareholder of Tornbell, and the book notes that Mossack had declared under oath that the firm did not control the internal affairs or day-to-day operations of the Nevada company and that the two were not in a parent-subsidiary relationship. No registry record of Tornbell's shareholders is retained: a commercial registry-data service lists Tornbell Associates Inc. as a Panamanian sociedad anónima at Mercantile Folio 396154 (S), formed about 25 years ago, and a company-registry aggregator shows it as suspended, with Mossack Fonseca & Co as agent and 15 officers whose names are hidden. ^{2 3 4}

analysisThe same journalists, who examined the firm's files on the 123 companies NML attributed to Báez, wrote that they found no decisive evidence linking the companies to Néstor Kirchner and Cristina Fernández de Kirchner, and concluded that a large part of them were tied to the Argentine case only because the same internal nominee companies of the firm also managed the few that could probably be attributed to people close to the Kirchners. The firm had told them in February 2015 that the companies had 'nothing to do with NML's case against Argentina'. Their conclusion does not address the court's findings on jurisdiction. ²

analysisThe Nevada Secretary of State announced on 23 May 2016 that M. F. Corporate Services (Nevada) Limited had paid a $10,000 civil penalty, the maximum, for failing to maintain the records required by NRS 77.400; investigators who examined its records on 7 and 8 April 2016 found contact-person information for the represented companies consistently missing. The company had been the commercial registered agent of 1,024 Nevada limited-liability companies, 193 of them active, and on 23 May 2016 it filed to resign as agent for all 1,025 entities it represented. According to a press account by an investigative nonprofit, the firm's Wyoming operations were also run from the Nevada office; after its local Wyoming partner cut ties, M.F. Corporate Services Wyoming had 60 days to find a new registered agent or face dissolution, and an expert called the abrupt resignation from 1,024 companies 'absolutely unusual'. ^{1 2}