MIAMI _ Mossack Fonseca's secrets had just been spilled to the world _ and clients of the Panamanian law firm's Miami office were furious.
"You guys had employees arrested in my country because your firm accepts deals with corrupt companies and corrupt politicians in Brazil," Luis Paulo Mesquita, a Sao Paulo financier with an offshore company set up by MF, wrote in an April 2016 email to the firm's employees. "And now, this stupid scandal called Panama Papers!"
The Panama Papers _ a partnership between 100 media organizations around the world that analyzed 11.5 million secret Mossack Fonseca documents _ exposed the dodgy world of offshore companies, where kleptocrats, drug lords and tax cheats hide their riches scot-free. The 2016 leak also put an unwelcome spotlight on wealthy clients of the firm like Mesquita who had done nothing wrong but sought privacy for their financial affairs.
"I do not want to do business with Mossack anymore," wrote Mesquita, who didn't respond to a recent request for comment. "The guys you consider as clients do not have the same ethics standards I have."
Now, a new leak of documents from the since-shuttered law firm shows what happened as MF employees struggled to contain the fallout from the scandal _ and distance the firm from clients accused of criminal behavior.
The new leak of documents spans the period from early 2016 _ just before journalists published the Panama Papers in April _ through the end of 2017, a few months prior to the firm collapsing. MF had many unhappy customers to placate.
Because of the Panama Papers, "all the names of our customers have been known by the authorities of their countries.," Meir Elmaleh, a Geneva-based fund manager, told MF employees in an email last year. "Thanks to Mossack, customers have to pay income taxes."
As with the first set of records, which covered the late 1970s to 2015, the new documents were obtained from a confidential source by the German newspaper Suddeutsche Zeitung and shared with the International Consortium of Investigative Journalists, a Washington, D.C.-based group of journalists that partners with the Miami Herald and its parent company, McClatchy.
The new documents reveal that Mossack Fonseca couldn't identify tens of thousands of owners of companies it had registered in opaque, low-tax jurisdictions. Two months after the firm became aware of the records breach, it still couldn't identify owners of more than 70 percent of 28,500 active companies in the British Virgin Islands, the firm's busiest offshore hub, and 75 percent of 10,500 active shell companies in Panama, the records show.
The firm's ignorance about who benefited from the shell companies it helped set up represented a significant risk. So-called know-your-client rules obligate financial institutions to know who they're doing business with _ and what they've done in the past. Offshore companies have many legal purposes, but they are easy to misuse because of their secrecy. It can often be impossible to tell who really owns such companies.
Back in 2016, the Herald _ armed with leaked corporate registries that showed for the first time the true owners of thousands of secret shell companies _ approached MF with questions about some of its clients' alleged ties to wrongdoing. Those ties were hiding in plain sight in public records and news reports.
At that time, the law firm said its due diligence practices were of the highest standard.
But the newly leaked internal documents show that almost immediately after reporters contacted MF, the firm told those clients it would resign as the registered agent for their offshore companies.
In many cases, MF employees even filed "suspicious activity reports" with regulators, saying the clients posed a risk of money laundering or criminal behavior.
It should have been obvious: Reporters often found damaging information through simple Google searches and reviews of court records. But the firm seems not to have taken the information seriously until reporters came knocking.
Whether the firm didn't perform due diligence on its clients _ or knew about the information and didn't care _ isn't always clear.
Either way, MF was "turning a blind eye," said Shruti Shah, president and CEO of the Coalition for Integrity, a Washington, D.C.-based anti-corruption advocacy group.
Days after the Panama Papers were published, MF began frantically reaching out to clients for documents and information it should have already had, the new documents show. That led to tension with the lawyers who brought clients to MF and represented them in the back and forth.
"This has been ridiculous," wrote Eliezer Panell, a Doral lawyer who grew exasperated at Mossack Fonseca's multiple requests _ sometimes only one day apart _ that he obtain and share documents from two offshore company owners to prove their identity.
"WE CAN'T GO BACK a day after asking for papers to ask for something else. WE LOOK LIKE F--KING AMATEURS," he wrote, spelling out the expletive. "A Mickey Mouse operation."
Shah said she believes MF's helter-skelter practices reflect the practices of the broader multibillion-dollar offshore industry.
"I don't think Mossack is an outlier," she said. "This is pretty much how the offshore industry operates."
In 2017, ICIJ and news partners published the Paradise Papers, a similar leak that showed how Appleby, one of the world's most important offshore firms, used financial havens to help its clients avoid taxes, a legal practice but one that raise questions of fairness and whether such loopholes perpetuate income inequality.
MF said it would shut down in 2018 following the arrest of its founders, Jurgen Mossack and Ramon Fonseca, in Panama a year earlier on money-laundering charges.
"They have their fight, and as a lawyer I plan to demonstrate their innocence," Guillermina McDonald, a lawyer representing the men, said in a recent interview. "I want to have the opportunity to demonstrate that they have not committed any crime."
Brazilian prosecutors also brought criminal charges against five Mossack Fonseca employees in Brazil, including Maria Mercedes Riano, the general manager who was accused of ordering subordinates to destroy evidence.
