Lessons from the US for Panama inquiry

The former chief counsel of the US Senate’s Permanent Subcommittee on Investigations, Elise Bean, outlined several important lessons from her experience in a workshop provided for the European Parliament’s Panama Papers inquiry committee (PANA) on 19 October 2016. She was accompanied to the workshop by the current staff director for the US House of Representatives Subcommittee on Government Operations within the Committee on Oversight and Government reform, Kathrin Bailey.

Bean was appointed as chief counsel of the Permanent Subcommittee in 2003 by its chairperson, former Democratic Senator Carl Levin, and worked on several investigations in this role, including on tax avoidance by Microsoft and Apple, the 2008 global financial crisis, and money-laundering by HSBC.

The workshop was organised by the PANA secretariat following a proposal to invite Bean to Brussels by GUE/NGL MEPs on the Panama Papers inquiry, and has prompted MEPs from across the political spectrum to propose changes in the committee’s work in order to make it more effective.

Parliament needs stronger powers of inquiry

The most significant difference between the US Senate’s Permanent Subcommittee on Investigations and a committee of inquiry established by the European Parliament (EP) is the fact that the EP does not have the power of subpoena to compel witnesses to appear or documents to be produced.

Bean outlined the development of the US Senate subcommittee’s powers, and said issuing a subpoena was generally used only as a last resort.

She said the limited inquiry powers of the EP was not a problem that could be solved within the 12-month mandate of the Panama Papers inquiry, but added that MEPs should aim to establish a permanent committee of inquiry with the power of subpoena as a five-year project.

“You can still use the powers you have more effectively,” she said. “There are other ways besides a subpoena to make sure witnesses show up and engage with you. Already there has been a step forward when it comes to the European Parliament’s inquiries – in the TAXE committee several witnesses refused to come to hearings, but in your more recent inquiries people have been more responsive.”

Bean said there were several ways to pressure witnesses to appear before the PANA committee, including being directly asked by MEPs, using the media in order to expose non-cooperation to the public, and using other parliamentary procedural methods – for example, revoking the parliamentary visiting rights of non-cooperative individuals and corporations.

A second key difference between US and EU investigations that Bean and Bailey outlined was on the nature of the hearings. The PANA committee hearings are currently time-constricted, with very limited opportunities for MEPs to question witnesses and no opportunity for follow-up questions. Speaking time for MEPs in hearings is determined by the d’Hondt method of representation, which means that political groups outside of the two largest groups – the European People’s Party (EPP) and Progressive Alliance of Socialists and Democrats (S&D) – only have one minute to put a question to the witness.

Bean outlined the importance of having the opportunity to ask follow-up questions of the witness in order to draw out vital information unconstrained by time limits.

“During the investigation into Apple, for example, we questioned a single witness for seven hours – by the end of the hearing there were only four people in the room,” Bean said. “But that’s how we got the information we needed.”

The other time restriction is on the mandate of the inquiry. At present, the mandate of a committee of inquiry in the EP is restricted in the Rules of Procedure (rule 198 §4), which states that an inquiry must submit its report within 12 months and may, by a vote of the full parliament, twice decide to extend this period by three months.

Bean and Bailey said the inquiry should not be restricted to a 12-month period, but that the MEPs in the inquiry committee should be able to decide themselves when the inquiry was completed.

‘Use case studies to probe systemic problems

The value of focusing on a small number of case studies was one of the most significant lessons from the US system highlighted by Bean and Bailey.

“There is a difference between a prosecution and a legislature, and as a legislature you are likely to be tempted to focus on policy solutions,” Bean told MEPs. “But the starting point needs to be establishing the specific facts – 80% of the hearing should focus on the problem, and 20% on the solution.

“The purpose of the inquiry should be to reveal new information that is not already in the public domain.

“We have stuck to four key principles in our investigations – focus on the facts, use case studies instead of generalities, work with those you may disagree with, and take the necessary time to complete your work.

“For example, when our subcommittee was investigating the financial crisis in the US, we knew we couldn’t examine every institution and everything that had taken place. So we focused on the role of four key institutions, including Goldman Sachs and Deutsche Bank. And in all of our hearings during our investigation into money-laundering, we called witnesses from HSBC and built up a case history on that particular bank.”

The PANA committee should use the facts available in the ICIJ database in order to select case studies, Bean said.

“An investigation is not like using the scientific method where you start with a hypothesis that you attempt to prove. You need to ask factual, open-ended questions. For example, in the first hearing you held with the ICIJ [International Consortium of Investigative Journalists], they highlighted that there were 732 Belgian companies named in the Panama Papers. So how did the European lawyers interact with their clients and with Mossack Fonseca, who did the customer due diligence, who was supposed to? The facts can then illustrate the deeper, systemic problems.

“With the ICIJ database you have a really excellent opportunity to base your investigation on the facts. You could select the top three law firms in Europe doing the most business with Mossack Fonseca to base case studies on, for instance.

“When calling witnesses, you should focus on the ‘bad guys’ rather than experts – and make sure the witnesses are the key decision-makers who can’t evade responsibility.”

Seek the Panama Papers data

Bailey said: “The great thing about the Panama Papers inquiry is that you have the database. You should request the data from the ICIJ and if they don’t hand it over, then go directly to the source. John Doe has said he will cooperate with law enforcement, so it’s not out of the question that you could gain access to some of it too.

“There are a lot of levels to what you can do with the ICIJ. You could say, here are the top 10 banks that appear the most in the Panama Papers – four are from Luxembourg, three from the Channel Islands, two are Swiss and one is from Monaco. So request the ICIJ provide the original documents relating to these 10 banks, even conditionally – with personal information redacted, for instance. If that doesn’t work, you could go directly to the company named in the database and request the documents from them.”

Implementing the lessons

MEPs from various political groups are eager to put some of the lessons from the US into practice in order to improve the effectiveness of PANA, as well as working together to strengthen the EP’s powers of inquiry in the longer term.

Following the workshop, GUE/NGL MEPs have proposed to the PANA committee that as an immediate priority, it should adopt two case studies to focus on, including one focusing on Deutsche Bank. Deutsche Bank appears in the Mossack Fonseca data more than 15,000 times and was described in the Panama Papers book by Obermayer and Obermaier as being the bank with the “largest and most scandalous” role.

At the PANA coordinators’ meeting on 8 November 2016, coordinators from the different political groups agreed to consider focusing on a limited number of case studies on specific intermediaries; improve the preparation and coordination of questions at hearings; and attempt to improve conditions for access to documents for MEPs and staff.

It was also decided that the PANA committee would make recommendations for improvements in the EP’s powers of inquiry in the committee’s final report; that PANA coordinators could meet with the rapporteur of the EP’s constitutional affairs committee (AFCO) regarding the proposal for a regulation on the EP’s Right of Inquiry and possible changes to the Parliament’s Rules of Procedure; and that the committee would commission a study on the EP’s powers of inquiry.