Operation Haven, the original Panama Papers
How a 1970s sting could’ve blown the lid off the tax evasion scandal
Among the more shocking realizations to come from the Panama Papers, the massive document leak that details the shadowy network of offshore shell corporations and tax havens used by the super wealthy, is that the practice of hiding vast sums of wealth is not only systemic, but quasi-legal.
However, rampant offshoring isn’t so much something the US failed to stop but rather something the government actively worked to promote.
Operation Haven, a 1970s Internal Revenue Service investigation into offshoring in the Bahamas that was thwarted by the Central Intelligence Agency, is an example of the American intelligence community’s complicity in sustaining the opaque conditions of international money laundering and offshore tax evasion.
To back up a bit, the CIA has a long history of black ops, shell corporations and funneling money. A list of them reads almost like a parallel history of American foreign policy.
There was Air America; the ostensibly private airline secretly run by the CIA that funneled arms to Laos, fueling the spread and intensity of the Vietnam War. The Glomar Explorer was a boat built in secret with the Hughes Company that would raise a sunken Soviet submarine. According to the New York Times, “CIA ties to international drug trafficking date to the Korean War,” with subsequent connections to opium, heroin and cocaine trafficking.
The CIA also funds companies. It even has its own venture capital firm, In-Q-Tel, which the Intercept recently confirmed invested in a skin-care startup as a “novel technique for gathering information about a person’s biochemistry.”
How are drug running, shell corporations and shady investments connected? They require secret conduits to move money through. The CIA relies on the same hidden financial networks as the shady politicians and voracious super rich evading the taxman.
In the ’70s, the IRS launched something called Operation Haven to gather evidence on Americans evading taxes by hiding money in offshore accounts in the Bahamas. In a move worthy of James Bond, the IRS lured an employee of Nassau-based Castle Bank & Trust into having dinner with an undercover agent in Key Biscayne, Florida. During the dinner, two other IRS agents photographed documents in a briefcase that the bank employee had left in the undercover agent’s apartment.
It was a treasure trove. Finally, the IRS had proof that American citizens, businessmen, entertainers and even organized crime figures were hiding money overseas. The Wall Street Journal said it would have been the “single biggest tax-evasion strike in IRS history.” The original Panama Papers.
The CIA put the kibosh on it. First, the IRS director and a federal judge told the agents that the search had been illegal, and the findings inadmissible as evidence. Then they were told the entire project would be put on hiatus.
Only years later did it surface, according to the Wall Street Journal, that “what caused the Justice Department to back off seems to have been the CIA’s argument that pursuit of the Castle Bank would endanger ‘national security.’ This was involved because that bank, besides its possible use as a haven for tax evaders, was the conduit for millions of dollars earmarked by the CIA for the funding of clandestine operations against Cuba and for other covert intelligence operations. … A major tax evasion investigation of the bank probably would have endangered these CIA operations.”
At the time the story was written in 1980, Castle Bank & Trust had moved its official address to Panama, although there was no known physical office.
