Hardly a month goes by without some new public revelation that confirms the endemic hypocrisy in sections of the political class. People expect their leaders to be honourable, transparent and honest in how they conduct their public duties and their private financial affairs.
The just-published Pandora Papers, which involves hundreds of journalists including Times of Malta’s, have exposed a deadly pattern of hypocrisy in the behaviour of hundreds of political leaders in western democracies and totalitarian states.
Unfortunately, a former Maltese politician has joined the ranks of other local formerly honourable gentlemen who held secret accounts or companies in tax havens. Owning a company in a tax haven is not a criminal offence. But the underlying motivation for holding such a company may have criminal elements.
Former finance minister John Dalli was the owner of a secret company, Westmead, in the British Virgin Islands, one of the more notorious tax havens. Dalli never declared this asset in his asset filings when he was a local MP or a commissioner of the European Union.
He claims that he did not do so because the company was “inactive”. He also argues that he decided to own this secret company in a tax haven as an inevitable move when his relations with former prime minister Lawrence Gonzi soured and he was “forced to work abroad”.
Professional practitioners helped Dalli’s search for a suitable tax haven in the financial services industry. Alcogal, a law firm headquartered at the Humboldt tower in Panama, provided trustee services for the BVI company whose ultimate beneficiary owner was Dalli.
Finco Trust Services is a local financial services company. A spokesperson for Finco said that “it had provided introductory services to Alcogal to set up the company”. Finco added that it was never involved in any way in the management or administration or provision of any professional services to Westmead. Finco invoked professional secrecy and refrained from giving further details.
The Pandora Papers records reveal that the due diligence documents passed on by Finco to Alcogal in 2006 flagged “serious allegations of corruption” against Dalli. Despite the corruption allegations, Finco and Alcogal still provided services to Dalli.
Dalli had an important role in recent local political history. He had a reputation for being tough on those who abused the tax system, as was his duty, especially as a finance minister. Why he failed to understand that his holding a secret company in a BVI would undermine his credibility as a defender of fiscal rectitude will probably never be explained by him.
Professional service providers rightly argue that most financial services practitioners are upright people who do not deserve to be tainted with allegations of collusion with rogue politicians and others who try to hide their wealth from the tax authorities. Unfortunately, a few professionals use doublespeak, censoring the illicit or illegal actions of tax abusers while also colluding with them on tax evasion or avoidance.
While the hundreds of politicians mentioned in the Pandora Papers are now engaging in a damage limitation exercise, these most recent revelations continue to undermine people’s confidence in some of the politicians who lead them.
The sort of investigative work done by the media houses involved in the Pandora Papers is, on the one hand, an essential element of western democracy.
On the other hand, until the sleaze and the doublespeak that seem to be endemic in sections of the political community are eradicated, people will continue to disconnect from the political process.
This is not good for democracy.