Andrew Wiederhorn, one of the most high-profile executives in state history, is one of at least two prominent Oregonians whose name appears in the Panama Papers.
The International Consortium of Investigative Journalists on Monday identified offshore companies tied to at least 36 Americans accused of fraud, insider trading or other serious financial misconduct in the documents, a blockbuster trove of leaked records from the Panamanian law firm Mossack Fonseca, which specializes in forming anonymous offshore companies.
The Oregonians in the documents: Fog Cutter Capital and Fatburger CEO Wiederhorn and Leonard Gotshalk, a former National Football League player who has lived in Ashland.
Offshore companies are legal. But authorities say they provide anonymity that can sometimes enable financial and other crimes ranging from money laundering and fraud to tax evasion, akin to the problems identified by the Portland Business Journal in previous reports on abusive Oregon shell companies.
Wiederhorn’s expertise in real estate finance helped him build a $100 million fortune by age 31, according to a 1997 profile in The Oregonian. He now lives in Southern California, where he manages the Fatburger restaurant chain, Fog Cutter’s primary holding.
In an email, he defended the Mossack Fonseca-formed offshore company with which he was associated, saying it was used for overseas real estate deals.
Gotshalk did not return messages.
Mossack Fonseca has denied any wrongdoing, but did not respond to Monday's ICIJ report.
In previous statements, the law firm said for 40 years it “has operated beyond reproach in our home country and in other jurisdictions where we have operations. Our firm has never been accused or charged in connection with criminal wrongdoing.”
An offshore company before an explosive lawsuit
Mossack Fonseca formed Myrtle Properties Ltd. in the British Virgin Islands in May 1998, according to documents in the Panama Papers provided by ICIJ to the Business Journal. The company changed its name to WREP (Wilshire Real Estate Partnership) Island Ltd. in June 1998.
Wiederhorn was named a director on Oct. 1, 1999.
In an email, he said WREP Island Ltd. was formed to hold United Kingdom real estate in which Fog Cutter invested. He said Fog Cutter, which was public at the time, disclosed the offshore entity in its financial statements.
“We owned a portfolio back then of commercial and residential buildings,” he said. “I believe (Fog Cutter) and (a partner) invested via British Channel Island companies ... so not to be subject to U.K. landlord tax in addition to U.S. tax.”
Documents in the Panama Papers provided by ICIJ to the Business Journal include a list of U.K. properties, seemingly confirming WREP Island was used to buy real estate.
Historically, Fog Cutter’s interests have been vast. It’s invested in everything from real estate to a Parisian modeling agency. In recent years, it’s sold most of those interests, including an apartment building in Spain and a manufacturing subsidiary. It now focuses on operating the Fatburger restaurant chain, its primary holding.
Wiederhorn said the offshore company is no longer active, the properties were sold more than 10 years ago and the funds were “repatriated to Fog Cutter in the U.S. in the ordinary course of business.”
“There should be ample information in our public filings around that time.”
The timing of the offshore activity coincides with a turbulent period in Wiederhorn’s career. In 1998, global markets wobbled, pinching financial services firms, especially those that worked with high-risk asset classes, such as Wilshire Financial Services Group Inc., Wiederhorn’s then-company.
On March 3, 1999, Wilshire Financial Services Group Inc. filed a prepackaged bankruptcy.
A year later, Capital Consultants — a Portland-based investment firm that managed around $1 billion in assets, mostly union fund money — collapsed after making millions in loans to Wiederhorn’s Wilshire Credit Corp, which later defaulted on them.
The SEC later claimed Capital Consultants operated as “a Ponzi-like scheme” that grew to become “one of the largest frauds perpetrated by an investment adviser,” according to an SEC lawyer.”
Wiederhorn’s role in the case led to criminal charges, and in 2004 — despite admitting no wrongdoing — he pleaded guilty to one count of paying an illegal gratuity and one count of filing a false income tax return. He received an 18-month prison sentence.
Wiederhorn was also named in an explosive civil lawsuit filed by unions that claimed he and others siphoned off millions of dollars.
The civil lawsuit settled out of court. Some remain frustrated with how it turned out.
“As I recall it, we were never satisfied that we had anything close to full transparency of Andrew Wiederhorn’s assets,” said Steve English, lead counsel on the civil lawsuit. “We always suspected there was more money hidden away somewhere.”
He estimated “multiple millions” of dollars were unaccounted for.
English is a partner at the Portland law firm Perkins Coie LLP. At the time, he worked for Bullivant Houser Bailey PC.
He currently represents a party in an unrelated lawsuit against Wiederhorn.
Wiederhorn dismissed English’s claim and said the offshore company “had nothing to do with (Capital Consultants) whatsoever.”
He also said the offshore activity was a one-time deal.
“I do not nor have I ever owned any offshore entities nor do I have any assets offshore.”
Mossack Fonseca looks past red flags
At the time Wiederhorn was appointed to the board of WREP Island Ltd., he had yet to be charged or plead guilty to any financial crimes.
That wasn’t the case for Gotshalk, making his story an important piece of the Panama Papers puzzle. It shows Mossack Fonseca has sometimes overlooked troubled histories despite insisting it has a “strong compliance record” and works to make sure “that the companies we incorporate are not being used for tax evasion, money-laundering, terrorist finance or other illicit purposes.”
By the time he contacted Mossack Fonseca about an offshore company in early 2010, Gotshalk, who played for the Atlanta Falcons from 1972-1976, had a history of legal problems that included civil and criminal charges related to fraud and racketeering.
On Feb. 19, 2010, Mossack Fonseca informed Gotshalk its compliance department found “negative information” about him and “would not be able to proceed,” according to emails in the Panama Papers provided by ICIJ to the Business Journal.
Gotshalk responded the same day and said he had “held offshore accounts in the past in Europe and Bahamas and Belize.”
“I would like to know what they found,” he said, in the email.
Gotshalk eventually convinced Mossack Fonseca to do business with him.
The law firm received a $3,055 wire transfer from Gotshalk on May 24, 2010, for Irishmyst Consultants Ltd., a company based in the British Virgin Islands.
Three days earlier, on May 21, 2010, federal prosecutors unsealed an indictment against Gotshalk and three others for manipulating the stocks of two public companies.
Gotshalk had come to the attention of authorities before.
In 1994, the Securities and Exchange Commission sued Gotshalk and five others, accusing them of giving investors “false and misleading information” about a company in the oil and gas business.
Gotshalk’s also been party to roughly 50 civil lawsuits in Oregon, mostly small claims and foreclosures.
In 2004, he was indicted on racketeering charges in Jackson County over unpaid loans. Gotshalk pleaded guilty to first-degree theft and got a 20-day sentence.
Brent Jensen, the Ashland, Ore., detective who worked the case, said he interviewed roughly a dozen of Gotshalk’s alleged victims. He estimated they lost between $250,000 and $500,000.
“This was a pattern for Mr. Gotshalk,” Jensen said. “He had numerous judgments in Oregon and California.”
Jensen retired in 2006 and now works as a labor representative for Teamsters Local 223.
Victims thought the 20-day sentence was a slap on the wrist, he said.
“It left a lot of disgruntled victims,” Jensen said. “Disappointed is putting it mildly. It was more borderline livid.”
The International Consortium of Investigative Journalists contributed to this report.
