The story behind the massive leak of documents revealing the extent to which the world's wealthy go to avoid and evade tax and New Zealand's part in the investigations

News has been coming out of Washington DC recently of a massive leak of tax haven information. I have spent the past 15 months working on this project, helping to dig through the leaked material to find what should be publicised. It is probably the most secret financial information to reach the public and I hope it will be interesting to share some of the story.

It is a very good time to be shining a light on tax havens. These legal black holes are dotted around the world, partly helping people avoid tax (the traditional picture) but also helping all sorts of people and companies keep their business and crimes secret.

I have researched stories, not all published yet, about criminals, corruption and big companies ripping off poor countries, all protected by the secrecy tax havens provide.  Tax matters as well. Another story looks at a huge corporation dodging hundreds of millions of dollars of tax in a country where local people suffer without basic services.

I knew relatively little about all this when I started on the tax haven project. But now I believe it is one of the fundamental problems confronting the world. If wealthy people don't pay their share of tax, and if the powerful and criminal have a way of avoiding laws and regulations, it undermines the basis of modern countries. Luckily it is a problem that can be solved. The answer, sooner or later, is for governments to work together and close down tax havens completely.

I got into all this 18 months ago when I was helping organise an investigative journalism conference in Kiev. Midway through the conference a man from a Washington journalist organisation, the International Consortium of Investigative Journalists, asked if we could have an early breakfast meeting the next day. He explained cautiously that he had received a huge leak of financial information and was looking for help to use it properly.

We ended up talking for much of the morning. When I was home in New Zealand again, a copy of a hard drive arrived by courier and I began diving down into the secret world of tax havens.

If this sounds quite like Wikileaks, it is, the main difference being that it was organised by a journalist organisation. Wikileaks combined an old idea, that leaking is a crucial public defence against overly secretive public and private institutions, with the new potential of digital technology that allows leaking on a large or even astronomical scale. This is the story of the tax haven leaks as well. There were more than a million documents on the hard drive I received at the start of last year.

The challenge was to find a way to extract the important stories and data in a way that could be accessible and useful to people around the world. It takes careful reading to understand 100 documents and it takes a very organised person to make sense of 1000 documents. A million documents can feel utterly impossible.

The first part of my work was digging deep into the data and figuring out what was there. I worked on about half of it and a colleague in Eastern Europe focused on the other half. Unlike the neatly organised and clearly written State Department cables that Wikileaks gave to the world, we got a huge, unsorted mass of e-mails, spreadsheets, invoices, legal documents and much more.

The first part of the job was a survey of how the data was structured, where the most useful material was and how best to try to use it. The answer was that there was good information there, but it took a lot of time to follow up each lead.

It became obvious that there was no way to do the job without bringing in many more people to help. The solution to this was largely worked out here in New Zealand. The world-wide project team was not large, so I found a group of people in New Zealand who would help with the work. This included finding a method of sorting the tens of thousands of tax haven client names into lists of names for each country. One of the people who helped spent over 80 hours sorting the data manually to help produce the lists.

Instead of having tens of thousands of companies and clients all muddled together, we ended up with lists of the Japanese tax haven users and Belgian tax haven users and so on. This was an important breakthrough. It meant that we could then reach out  to investigative journalists in dozens of countries and ask for their help looking at the people identified for their country.

This was an enjoyable part of the job. I had many early morning or late night skypes or phone calls with good people in different parts of the world, inviting them into the project and then working with them as they researched their own country. I covered Africa, the Middle East, quite a lot of Asia and some of Europe, while two other people managed other regions.

The project could never have worked without the efforts of dozens of people. Just here in New Zealand:

  • some journalist friends helped to research areas of the world where we couldn't find local help
  • one friend spent many hours identifying offshore companies working in poor countries
  • a journalism intern working with me for six months worked her way successfully through a series of Asian countries
  • and another local journalism student helped with British data.

I even had a family member happily digging away on seven or eight of the African countries.

After a year of work, with so many people helping, most of the stories hidden in the leaked data are still there, waiting for more investigation. But it's a good start.

The basic reason for researching and showing this information to the world is that people cannot solve problems that they don't know about. The world-wide problem of tax havens is getting more and more attention yet still most of what happens inside the tax havens remains completely secret. Leaks throw open a window into this world.

Leaking has a direct and practical result as well. There will be a lot of very nervous people around the world right now wondering if their names and their secret Swiss bank accounts will be appearing in the news.

If tax havens stop being reliably secret, less people will use them.

Leaking has another practical effect as well. Prominent and effective leaking encourages more leaking. As I wrote in the Sunday Star-Times, there are a surprising number of New Zealanders working in the offshore world. The more thoughtful ones will know how many dodgy things go on. I hope and expect there will be more leaks out of tax havens in the coming years.

The ultimate answer for closing down the offshore world is concerted multi-government action. But in the meantime whistle-blowers and publicity are an important part of reducing the damage tax havens cause.


Comments (5)

by Ian MacKay on April 09, 2013
Ian MacKay

A vast idea for the uninitiated. Wow!

And would Winston Peters' effort with the Wiebox enquiry be a forerunner of just how tough it is to to challenge the very very rich?

by George Hendry on April 11, 2013
George Hendry

Having followed several pundit threads for a few months and noticed no new ones by Nicky Hager I was pleased to find this one just after getting my new Pundit membership approved. I'm grateful to those who have worked so hard and taken risks because they have decided it matters enough.

Keeping a democracy democratic requires ongoing hard work and discussion - I look forward to being able to take part in a column of this calibre.

by Suzie B on August 06, 2013
Suzie B

You might be interested at looking more into these guys Nicky... I note you have already written about them... the elusive Exclusive Brethren, who are not allowed to vote but who get their hands into dirty politics... their so called humble leader also has a few million dollar home and his group are worth a few cool billion, all of it due to their pretending to be a charity when they are not even truly a church... if you want any more information, please contact me back, and here is a petition from those of us who have had enough of the rich and powerful getting away with breaking the law:

by Ian Dalziel on April 13, 2016
Ian Dalziel

I'm hoping the 'leaker' of these documents is protected - I see that the leaker of the 'Luxembourg papers' was prosecuted.


more info here:

This would have been a good dry run for the ICJJ to attack the Panama leaks

Odd to think that Key's shoulder tapped independent inquirer into 'what we can get away with, before our reputation suffers' was a head at transnational PwC during the period (2002 - 2010) the Luxembourg leaks looks at...

The best advice money can buy, I guess?

by Tony Wallace on April 17, 2016
Tony Wallace

Analysing millions of documents is a challenge, but any challenge is improved by the right tools.  I know when I am trying to find some bit of computer code that I know I wrote some time ago.  You talk of making lists of documents, which of course is another term for indexing. grep is a great tool for extracting simple pattern matches (and regular expressions) from lots of documents.

In his book Programming Erlang, chapter 27, Joe Armstrong discusses using term frequency * inverse document frequency (which I believe is call cosine similarity) to effectively index and search large corpuses of documents.

I would be interested to know what tools you used to manage this project.



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