The release this weekend by the International Consortium of Investigative Journalists of the “Panama Papers,” an extraordinary collection 11 million secret files linking the Panamanian law firm Mossack Fonseca to global money laundering schemes involving political and business leaders, has a U.S. housing market connection.
According to a Miami Herald analysis of the Panama Papers, Mossack Fonseca assisted 19 foreign nationals in creating offshore shell companies that were used to buy luxury real estate in Miami. Half of those foreign nationals are linked to white collar crimes in their counties, with charges involving bribery, corruption, embezzlement and tax evasion.
The Miami real estate market was especially popular among wealthy Brazilians that sought to funnel their money out of their country’s dismal economy. Among those cited in the Herald’s report are Brazilian politician Paulo Octávio Alves Pereira, who was indicted on bribery charges in his country and who paid $2.95 million for a condo at the St. Regis in Bal Harbour in 2011, and Marcelo Carvalho Cordeiro, who was fired as president of Rio de Janeiro’s pension fund amid charges of improper assignment of a multimillion-dollar contract through improper back channels and who paid $2.7 million for a home on Key Biscayne last year.
Miami is already being investigated by the federal government for its high number of mysterious shell companies that acquired high-ticket real estate. One major red flag involving this market is its unusually high rate of cash-only sales: more than half of all 2015 home sales in the Miami-Dade metro area and 90 percent of new construction sales were transacted in cash.
“The guys who want to clean up dirty money are always going to try to penetrate the system at its weakest spot,” said Joe Kilmer, a former Drug Enforcement Administration special agent. “You’ve got so much real estate being bought and sold in South Florida. It’s easy to hide in plain sight.”
