Panama Papers law firm was oblivious as companies registered to its BVI office swindled UK investors out of millions

At the tail end of hurricane season in 2005, staff at the British Virgin Islands branch of offshore law firm Mossack Fonseca were surprised to be contacted by a retired brewer from Lancashire. He had questions about one of the many companies that declared their registered address to be Mossack Fonseca’s small offices in Road Town, Tortola, up two flights of shabby stairs above a photography shop and the BVI tourist board. The amateur investor was persistent: phoning, faxing and emailing.

He had bought £22,000 worth of shares in two US companies during a telephone call with a British salesman, John Reynolds, who was working for a Madrid-based brokerage called Price Stone, and was being pressured to invest much more.

Fraudsters used tax haven firms to trick amateur UK investors Read more

The investor, James Burrows*, had become concerned after his payment had been sent to Globe Trade Services – a company registered to Mossack Fonseca’s offices in the BVI (and unrelated to a freight-forwarding firm in San Diego of the same name) – and he had not received his share certificates.

Having been unable to reach Price Stone, Burrows wanted an explanation from those involved with Globe.

In one email, he told Mossack Fonseca how a quick internet search had thrown up alarming allegations. “I am concerned to find out if this business is genuine,” he wrote. “There are alerts on the internet about pricestone and the[y] can be found on Google.com.”

When the law firm wrote back two weeks later, the response was not helpful. “We have not received authorisation to release any information regarding this company,” the email said. “We will contact you should the client respond to our request for authorisation.”

But if Burrows’s intervention did not get him anywhere, it did cause a headache for Mossack Fonseca. Up to that point, gazing out of their third-floor window at the yacht masts in Road Town marina, staff in the BVI office had known nothing about the real activities of Globe. However, after this complaint, they were obliged to make inquiries. But of whom? What did they know about Globe?

Globe Trade Services had been set up by Mossack Fonseca’s BVI office in February 2005 on the instructions of an intermediary in Hong Kong. Within three months, shares were owned by the company’s sole director, who was not a person but another company, giving a post office box address in Belize. Yet another firm, with a PO box address in Samoa, was appointed company secretary.

With few other options, staff made inquiries to the Hong Kong intermediary who had first requested Globe be incorporated.

A forwarded response came back from Globe: “Mr [Burrows] had no dealings with Globe Trade Services and has never sent any funds to Globe.”

Later the same day, Globe clarified: “Please be advised that Globe have contacted [the investor] today and the client is happy again. We have explained to [him] that his share certificates are imminent and he was understanding.”

Burrows, who is in his 70s, was even persuaded to buy more shares after his certificates finally arrived – borrowing against his house and spending £180,000 in total. His payments all went to Globe but no returns were generated and the shares were effectively worthless.

Meanwhile, though it welcomed Globe’s explanation concerning Burrows, Mossack Fonseca asked the Hong Kong intermediary to provide a description of the company’s main business activity.

Facebook Twitter Pinterest A view toward Road Town, Tortola. Photograph: National Geographic Creative / A/Alamy Stock Photo

Eventually, the intermediary sent a short letter from a local BVI law firm, certifying that the company was upstanding.

“[Globe] is in the business of receiving investor funds as an administrator centre with a brokerage firm,” it said. “The business being conducted by the company does not and will not violate in any respect any law or regulation of any governmental or official authority.”

Mossack Fonseca was also sent a copy of what purported to be a payment-processing agreement between Globe and a Swiss-based business run by Anthony May, a British lawyer and client of the law firm’s Geneva office.

None of the paperwork addressed the serious allegations referred to by Burrows. However, inquiries appear to have ended there. It is not known whether staff carried out internet searches he had suggested.

They appear to have thought about it. An annotated copy of the complaint letter has the words Google, pricestone and genuine circled. The word alert is underlined. Had a web search been carried out, the firm would have found warning lights flashing.

Six months earlier, the UK’s financial regulator had warned that Price Stone was a potential front for confidence tricksters targeting UK investors. Eighteen months earlier, May had been named by Spanish regulators as being linked to another unlicensed, possibly fraudulent, brokerage.

Amateur investor postings in online chat rooms were also starting to warn of Price Stone and a company called Landmark Trade Services, registered to the Hong Kong office block where the Globe intermediary worked. Landmark, too, had been identified by regulators as a suspected front for fraudsters.

Behind the warning signs was an industrial-scale fraud factory. In just 13 months, Globe became one of the most successful arteries ever created for spiriting fraudulent proceeds out of the UK.

Facebook Twitter Pinterest Jeffrey Revell-Reade has been compared to Wolf of Wall Street Jordan Belfort. Photograph: Central News

Unbeknown to Mossack Fonseca, the mastermind pulling the strings was the Australian con artist Jeffrey Revell-Reade, who lived in a £5m house in Wimbledon, south London. His victims were UK amateur investors.

Revell-Reade had been well known to police and regulators for years – though he had always remained just beyond their grasp.

He specialised in boiler room frauds, pop-up stockbrokers that sell worthless shares through cold-calling, fast talking and false claims, often without an operating licence. “Boiler room” refers to a discreet office that can be temporarily equipped with lots of telephone lines.

British investors were swindled through Globe, transferring £27.2m into the company’s Hong Kong bank account. All warning signs, however, had gone unseen or unheeded by Mossack Fonseca.

Documents from the Panama Papers suggest just how few checks the firm made on those behind Globe before forming the company, and how, despite continuing to serve as its registered agent, it failed to alert the authorities when a complaint was received.

In large part this was because, under BVI law, an intermediary requesting the formation of a company is presumed to have made the proper checks. The Panama Papers were obtained by the German newspaper Süddeutsche Zeitung and shared through the International Consortium of Investigative Journalists (ICIJ) with the Guardian, the BBC and other media.

After the inconvenience caused by Burrows’s complaint, a mail-forwarding arrangement was set up so that all future post addressed to Globe would be forwarded from Tortola to Hong Kong unopened.

For each redirected letter, and there were many, Mossack Fonseca charged a $45 handling fee. All were from the UK, many of them addressed in spindly Copperplate-style handwriting suggesting an elderly correspondent.

Facebook Twitter Pinterest Mossack Fonseca’s Panama City office. Photograph: Carlos Jasso/Reuters

The money-laundering flow through Globe came to an abrupt end in August 2006 after another investor’s complaint reached a bank in Hong Kong, which shut down the company’s account.

Even then, the fraud continued. Transfers were switched to another front company, Global Clearing Services, which also used the MF offices in Road Town as its registered address. Again, Mossack Fonseca staff appear to have been oblivious as hundreds more UK investors lost a further £10.3m.

In all, Revell-Reade and his confidence tricksters duped more than 1,000 British investors, many of them elderly, out of more than £70m. There is nothing in the Panama Papers to suggest Mossack Fonseca were involved with or aware of any of the other companies used in the fraud.

The gang’s man in Hong Kong, Jerome Hertzberg, was the first to be caught. He admitted his part in the swindle, and was jailed for two and a half years. The Serious Fraud Office caught up with May, too, who was sentenced to seven years and four months.

Burrows saw Reynolds – whose real name is Jon Emery – for the final time when appearing as a prosecution witness at Southwark crown court in 2013. Emery was sentenced to five years in jail.

Revell-Reade was extradited to the UK from Australia and was also found guilty. He is serving nine and a half years behind bars. Last month, a judge heard evidence of his wealth – much of it assets held through a maze of offshore companies – and ordered him to repay £11m or face further jail time.

Facebook Twitter Pinterest Anthony May. Photograph: Central News

Mossack Fonseca told the Guardian: “The files … make clear that we were persistent in lodging the appropriate questions related to the nature of the business being conducted by this company, and that we were successful in securing that information both from independent outside counsel, and the newly incorporated company itself.

“Your suggestion that we should not have incorporated this company based on complaints that appeared on what you describe as internet ‘bulletin boards’ betrays a fundamental misunderstanding of our business, and of how our institution and many others conduct required due diligence.”

In previous statements to the Guardian, Mossack Fonseca said: “We regret any misuse of companies that we incorporate or the services we provide and take steps wherever possible to uncover and stop such use. If we detect suspicious activity or misconduct, we are quick to report it to the authorities.”

Jeffrey Revell-Reade: the Wolf of Wimbledon

For Jeffrey Revell-Reade his Madrid boiler room scam, targeting thousands of UK amateur investors, was the most successful venture of his career.

He lived a high life, full of private jet flights, fast cars, luxury properties, expensive watches, art and fine wines. At the same time he oversaw a bewildering labyrinth of pop-up companies in secrecy jurisdictions around the world.

Revell-Reade, 51, would take control of large volumes of worthless shares in small or dormant US companies. Meanwhile, his sales teams would target known amateur investors in the UK, cold-calling them and pressuring them to buy the worthless stock.

He has been compared to New York fraudster Jordan Belfort, whose story was told in the Hollywood film the Wolf of Wall Street, starring Leonardo DiCaprio.

Facebook Twitter Pinterest Leonardo DiCaprio in the Wolf of Wall Street. Photograph: Mary Cybulski/AP

Prosecutors believe Revell-Reade ultimately received more than £40m from the swindle, the UK’s largest ever fraud of its kind.

The cash reached him through a web of offshore companies and bank accounts. Much of it went on jets, fast cars, a Harley Davidson and school fees. He bought artwork worth £73,000, wine worth £50,000 and Rolex and Cartier watches valued at £13,000.

Revell-Reade also bought a £5m home in Wimbledon as well as luxury properties in Marbella and Melbourne.

But in 2014, the Serious Fraud Office caught up with him. He was jailed after being convicted as the master swindler.

Sentencing Revell-Reade, the judge, Michael Gledhill, told him: “Many investors lost every penny they had … the consequences of those losses have been dreadful and in some cases catastrophic.”

For the SFO, the fight is not over. The court has ordered Revell-Reade to repay £11m or stay longer in prison. Whether he will cooperate remains to be seen.