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Offshoring Tax Ethics: The Panama Papers, Seeking Refuge from Tax, and Tax Lawyer Referrals

Offshoring Tax Ethics: The Panama Papers, Seeking Refuge from Tax, and Tax Lawyer Referrals

Heather M. Field*

The full text of this article can be found in PDF form here.

“[T]he legal profession has failed. . . . [L]awyers have become so deeply corrupt that it is imperative for major changes in the profession to take place . . . . [T]he term ‘legal ethics,’ . . . has become an oxymoron. Mossack Fonseca did not work in a vacuum—despite repeated fines and documented regulatory violations, it found allies and clients at major law firms in virtually every nation.”


The leak of more than eleven million files in the recent “Panama Papers” scandal revealed the offshore financial, legal, and tax planning facilitated by Panamanian law firm, Mossack Fonseca (“MF”), for more than 214,000 offshore entities with beneficial owners from around the world. Although MF’s American client list does not appear to include the sort of high-profile political figures who have emerged from reporting on the Panama Papers in other countries around the world[,] . . . the services offered by Mossack Fonseca . . . were in high demand by the rich and famous in the United States.

Despite the investigative research and scholarly analyses of the Panama Papers, many questions remain, including: How did U.S. clients get to the Panamanian law firm of Mossack Fonseca? What were the ethical responsibilities of the individuals (particularly lawyers) who connected these U.S. clients with MF, especially in cases where the U.S. clients sought offshore assistance in order to avoid or evade U.S. taxes? And what, if anything, should individuals in similar situations do differently in the future?

This Essay starts to answer these questions, and in doing so, fills a gap in the literature. Existing literature on lawyer referrals is relatively limited and generally focuses on referral fees, lawyer referral services, and malpractice actions for negligent referral. And while there is literature about professional responsibility in cross-border matters, discussions of referrals to foreign counsel are relatively brief and tend to focus on malpractice risk for negligent referral or on aiding and abetting the unlicensed practice of law. This Essay considers a specific, and previously unaddressed, type of cross-border referral—one for clients seeking help with offshore tax avoidance or evasion. This situation raises different ethical concerns and implicates tax-specific penalty provisions and standards of conduct.

This Essay argues that, although the rules governing ethical tax practice generally do not prevent a U.S. lawyer from referring a client to a firm like MF for potentially aggressive tax planning, a lawyer who does so without very careful reflection “passes the buck” for ethical tax practice onto the next lawyer. Rather than expatriating responsibility for the tax practice ethics of representing the client, each lawyer should internalize more of that responsibility and should not blithely provide referrals.

This Essay proceeds by describing what the Panama Papers reveal about client referrals to MF, after which the Essay briefly explains how the general ethical rules, tax-specific standards of practice, tax penalty provisions, and other constraints apply to a U.S. lawyer making a referral to a firm like MF. The Essay then argues that lawyers should adhere to higher standards when considering such referrals.


The Panama Papers reveal that MF’s U.S. client referrals came from many different sources. Some clients found MF through referrals from family and friends. Some clients may have found MF through its U.S. affiliates in Nevada and Wyoming. And some U.S. clients were referred to MF through tax protestor organizations, such as the Sovereign Society, which is a “selfdescribed advocacy group for liberty and low taxes” and “an unapologetic promoter of tax avoidance.”

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*Professor of Law & Eucalyptus Foundation Chair, University of California Hastings College of the Law. I appreciate the opportunity to present this project at Saint Louis University School of Law’s Sanford E. Sarasohn Conference on Critical Issues in Comparative and International Taxation II: Taxation and Migration and in the UC Hastings Tax Concentration Seminar. I thank the conference/seminar participants for their comments and feedback.