Secrecy for Sale: Inside the Global Offshore Money Maze

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Secrecy FOR Sale

Inside the Global Offshore Money Maze

The International Consortium THE CENTER FOR of Investigative Journalists PUBLIC INTEGRITY

SHOW CONTENTS Secrecy for Sale ©2013 Center for Public Integrity 2 Table of Contents 4 Introduction: Secret Files 71 Offshore Companies Provide Expose Offshore’s Global Link Between Corporate Impact Mogul and Azerbaijan’s President 17 Caribbean Go-Between Provided Shelter for Far-Away 77 François Hollande’s Frauds, Documents Show Campaign Treasurer’s Investments in the Cayman 31 Lawyers and Accountants Islands Help Rich Manage Their Money 81 ‘Crony’ of African Strongman Among Thai Names in Secret 40 Faux Corporate Directors Offshore Files Stand in for Fraudsters, Despots and Spies 88 Mega-Rich Use Tax Havens to Buy and Sell Masterpieces 47 Ferdinand Marcos’ Daughter Tied to Offshore Trust in 95 Elites Undermine Putin Rail Caribbean Against Tax Havens

55 Taxmen Have Little Clue of 99 Ponzi Scheme Used Offshore Offshore Companies Owned Hideaways to Shuffle by Greeks Investors’ Money

64 Disclosure of Secret Offshore 106 Deutsche Bank Helped Documents May Force Top Customers Maintain Mongolian Lawmaker to Resign Hundreds of Offshore Entities 66 Canadian Senator’s Husband Shifted Money Into Offshore 108 French Banks Traded in Tax Havens Secrecy

Go online for more about the ICIJ’s investigation into offshore secrecy including videos and related stories at: www.icij.org/offshore

3Cover CONTENTS FIRST ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 3 Table of Contents 113 The Swiss Lawyers Who Help 171 Jailed Property Man Hid Europe’s Richest Families Assets Offshore During Park Their Wealth Offshore Divorce

120 Swiss Bank Pushed Offshore 174 Secret Files Reveal Middleman to Skip Anti- Rothschild’s Offshore Domain Money Laundering Checks for Wealthy Clients 177 Family of Televangelist Chris Oyakhilome Incorporated 124 Dutch Banking Giants Helped Secretive Company in Tax Clients Go Offshore Haven

126 After Multi-Million 183 India Says It Will Investigate Inheritance, Playboy Sachs Offshore Leaks Revelations Goes Offshore 187 Bank Owned by Paraguay’s 135 Offshore Documents Solve Leading Presidential Mystery of Pre-Civil War Candidate Linked to Tax Haven Helicopter Deal in Congo 192 Crocodile Dundee Actor Paul 144 Offshore Tax Havens Became Hogan Chases His Missing Traps for Investors Offshore Millions

154 Son of Leading Pakistani 196 Who Uses the Offshore World Politician Tied to Secret Caribbean Company 214 Methodologies: How ICIJ’s Project Team Analyzed the 159 Top Malaysian Politicians Use Offshore Files Offshore Secrecy 220 Follow-Up: Release of 166 Billionaires Among Offshore Records Draws Thousands of Indonesians Worldwide Response Found in Secret Offshore Documents 229 About the ICIJ

Cover Graphic: Tim Meko/Shutterstock

Graphic: Tim Meko/Shutterstock Introduction Secret Files Expose Offshore’s Global Impact By Gerard Ryle, Marina Walker Guevara, Michael Hudson, Nicky Hager, Duncan Campbell and Stefan Candea Published Online: April 3, 2013

Dozens of journalists sifted ceach of 2.5 million files has cracked open the se- through millions of leaked A crets of more than 120,000 records and thousands offshore companies and trusts, exposing hidden dealings of politi- of names to produce cians, con men and the mega-rich ICIJ’s investigation into the world over. The secret records obtained by offshore secrecy. the International Consortium of Investigative Journalists lay bare

the names behind covert companies and private trusts in the Brit- Key Findings ish Virgin Islands, the Cook Islands ● Government officials and their and other offshore hideaways. families and associates in Azerbai- They include American doctors jan, Russia, Canada, Pakistan, the and dentists and middle-class Greek Philippines, Thailand, Mongolia and villagers as well as families and as- other countries have embraced the sociates of long-time despots, Wall use of covert companies and bank Street swindlers, Eastern European accounts. and Indonesian billionaires, Russian corporate executives, international ● The mega-rich use complex offshore arms dealers and a sham-director- structures to own mansions, yachts, fronted company that the European art masterpieces and other assets, Union has labeled as a cog in Iran’s gaining tax advantages and anonym- nuclear-development program. ity not available to average people. The leaked files provide facts ● Many of the world’s top’s banks and figures — cash transfers, incor- — including UBS, Clariden and poration dates, links between com- Deutsche Bank — have aggressively panies and individuals — that illus- worked to provide their customers trate how offshore financial secrecy with secrecy-cloaked companies in has spread aggressively around the the British Virgin Islands and other globe, allowing the wealthy and the offshore hideaways. well-connected to dodge taxes and fueling corruption and economic ● A well-paid industry of accountants, woes in rich and poor nations alike. middlemen and other opera- The records detail the offshore tives has helped offshore patrons holdings of people and companies shroud their identities and business in more than 170 countries and ter- interests, providing shelter in many ritories. cases to money laundering or other The hoard of documents repre- misconduct. sents the biggest stockpile of inside ● Ponzi schemers and other large-scale information about the offshore sys- fraudsters routinely use offshore tem ever obtained by a media orga- havens to pull off their shell games nization. The total size of the files, and move their ill-gotten gains. measured in gigabytes, is more

than 160 times larger than the leak porate — can roil economies and pit of U.S. State Department docu- nations against each other. Europe’s ments by Wikileaks in 2010. continuing financial crisis has been To analyze the documents, ICIJ fueled by a Greek fiscal disaster ex- collaborated with reporters from The acerbated by offshore tax cheating Guardian and the BBC in the U.K., and by a banking meltdown in the Le Monde in France, Süddeutsche tiny tax haven of Cyprus, where lo- Zeitung and Norddeutscher Rund- cal banks’ assets have been inflated funk in Germany, The Washington by waves of cash from Russia. Post, the Canadian Broadcasting Anti-corruption campaigners ar- Corporation (CBC) and 31 other me- gue that offshore secrecy undermines dia partners around the world. law and order and forces average Eighty-six journalists from 46 citizens to pay higher taxes to make countries used high-tech data up for revenues that vanish offshore. crunching and shoe-leather report- Studies have estimated that cross-bor- ing to sift through emails, account der flows of global proceeds of finan- ledgers and other files covering cial crimes total between $1 trillion nearly 30 years. and $1.6 trillion a year. “I’ve never seen anything like this. ICIJ’s 15-month investigation This secret world has finally been re- found that, alongside perfectly le- vealed,” said Arthur Cockfield, a law gal transactions, the secrecy and professor and tax expert at Queen’s lax oversight offered by the offshore University in Canada, who reviewed world allows fraud, tax dodging and some of the documents during an political corruption to thrive. interview with the CBC. He said the documents remind him of the scene Offshore patrons identified in in the movie classic The Wizard of the documents include: Oz in which “they pull back the cur- • Individuals and companies linked tain and you see the wizard operat- to Russia’s Magnitsky Affair, a tax ing this secret machine.” fraud scandal that has strained U.S.-Russia relations and led to a Mobsters and Oligarchs ban on Americans adopting Rus- sian orphans. The vast flow of offshore money — legal and illegal, personal and cor- • A Venezuelan deal maker accused

of using offshore entities to bank- eager to find out whether any as- roll a U.S.-based Ponzi scheme sets in the trust are part of the esti- and funneling millions of dollars mated $5 billion her father amassed in bribes to a Venezuelan govern- through corruption. ment official. Manotoc, a provincial governor in the Philippines, declined to answer a • A corporate mogul who won bil- series of questions about the trust. lions of dollars in contracts amid Azerbaijani President Ilham Ali- yev’s massive construction boom Politically connected wealth even as he served as a director of The files obtained by ICIJ shine a secrecy-shrouded offshore com- light on the day-to-day tactics that panies owned by the president’s offshore services firms and their cli- daughters. ents use to keep offshore companies, • Indonesian billionaires with ties trusts and their owners under cover. to the late dictator Suharto, who Tony Merchant, one of Canada’s enriched a circle of elites during top class-action lawyers, took extra his decades in power. steps to maintain the privacy of a Cook Islands trust that he’d stocked The documents also provide pos- with more than $1 million in 1998, sible new clues to crimes and money the documents show. trails that have gone cold. In a filing to Canadian tax au- After learning ICIJ had identi- thorities, Merchant checked “no” fied the eldest daughter of the late when asked if he had foreign as- dictator Ferdi- sets of more than $100,000 in 1999, nand Marcos, court records show. Maria Imelda Between 2002 and 2009, he often Marcos Mano- paid his fees to maintain the trust toc, as a ben- by sending thousands of dollars in eficiary of a cash and traveler’s checks stuffed British Virgin into envelopes rather than using Islands (BVI) easier-to-trace bank checks or wire trust, Philip- transfers, according to documents Maria Imelda pine officials from the offshore services firm that Marcos Manotoc said they were oversaw the trust for him.

One file note warned the firm’s In a neighboring land, the depu- staffers that Merchant would “have ty speaker of Mongolia’s Parliament a st[r]oke” if they tried to commu- said he was considering resigning nicate with him by fax. from office after ICIJ questioned It is unclear whether his wife, him about records showing he has Pana Merchant, a Canadian senator, an offshore company and a secret declared her Swiss bank account. personal inter- “I shouldn’t have opened that ac- est in the trust count,” Bayartsogt Sangajav, who has on annual fi- also served as his country’s finance nancial disclo- minister, said. “I probably should sure forms. consider resigning from my position.” Under legis- Bayartsogt said his Swiss account lative rules, she at one point contained more than had to disclose $1 million, but most of the money every year to belonged to what he described as Tony Merchant the Senate’s “business friends” he had joined in ethics commis- investing in international stocks. sioner that she He acknowledged that he hasn’t was a beneficiary of the trust, but the officially declared his BVI company information was confidential. or the Swiss account in Mongolia, The Merchants declined requests but he said he didn’t avoid taxes for comment. because the investments didn’t pro- Other high profile names iden- duce income. tified in the offshore data include “I should have included the com- the wife of Russia’s deputy prime pany in my declarations,” he said. minister, Igor Shuvalov, and two top executives with Gazprom, the Wealthy Clients Russian government-owned corporate behemoth that is the world’s The documents also show how the largest extractor of natural gas. mega-rich use complex offshore Shuvalov’s wife and the Gazprom structures to own mansions, art officials had stakes in BVI compa- and other assets, gaining tax advan- nies, documents show. All three de- tages and anonymity not available clined comment. to average people.

Spanish names include a bar- politicians, played a key role in oness and famed art patron, Car- the campaign that persuaded Clin- men Thyssen-Bornemisza, who is ton to pardon her ex-spouse, Marc identified in the documents using Rich, an oil trader who had been a company in the Cook Islands to wanted in the U.S. on tax evasion buy artwork and racketeering charges. through auc- Records obtained by ICIJ show tion houses she had $144 million in April 2006 such as So- in a trust in the Cook Islands, a theby’s and chain of coral atolls and volcanic Christie’s, outcroppings nearly 7,000 miles including from her home at the time in Man- Van Gogh’s hattan. Water Mill at The trust’s holdings included Gennep. a yacht called the Lady Joy, where Baroness Carmen Her attor- Rich often en- Thyssen-Bornemisza ney acknowl- tertained ce- edged that lebrities and she gains tax raised money benefits by holding ownership of for charity. her art offshore, but stressed that Rich, who she uses tax havens primarily be- gave up her cause they give her “maximum flex- U.S. citizen- ibility” when she moves art from ship in 2011 country to country. and now main- Among nearly 4,000 American Denise Rich tains citizen- names is Denise Rich, a Grammy- ship in Aus- nominated songwriter whose ex- tria, did not husband was at the center of an reply to questions about her off- American pardon scandal that shore trust. erupted as President Bill Clinton Another prominent American in left office. the files who gave up his citizenship A Congressional investigation is a member of the Mellon dynasty, found that Rich, who raised mil- which started landmark companies lions of dollars for Democratic such as Gulf Oil and Mellon Bank.

James R. Mellon — an author of Of the use of nominees, Mel- books about Abraham Lincoln and lon said that “that’s the way these his family’s founding patriarch, firms are set up,” and added that Thomas Mellon — used four com- it’s useful for people like him who panies in the BVI and Lichtenstein travel a lot to have somebody else to trade securities and transfer tens in charge of his businesses. “I just of millions of heard of a presidential candidate dollars among who had a lot of money in the Cay- offshore bank man Islands,” Mellon, now a British accounts he national, said, alluding to former controlled. U.S. presidential candidate Mitt Like many Romney. offshore play- “Not everyone who owns offers, Mellon shores is a crook.” appears to have taken Offshore growth James R. Mellon steps to distance him- The anonymity of the offshore self from his world makes it difficult to track the offshore interests, the documents flow of money. A study by James S. show. He often used third parties’ Henry, former chief economist at names as directors and sharehold- McKinsey & Company, estimates ers of his companies rather than that wealthy individuals have $21 his own, a legal tool that owners of trillion to $32 trillion in private fi- offshore entities often use to pre- nancial wealth tucked away in off- serve anonymity. shore havens — roughly equivalent Reached in Italy where lives part to the size of the U.S. and Japanese of the year, Mellon told ICIJ that, economies combined. in fact, he used to own “a whole Even as the world economy has bunch” of offshore companies but stumbled, the offshore world has has disposed of all of them. He continued to grow, said Henry, who said he set up the firms for “tax is a board member of the Tax Jus- advantage” and liability reasons, as tice Network, an international re- advised by his lawyer. “But I have search and advocacy group that is never broken the tax law.” critical of offshore havens. His re-

search shows, for example, that as- Singapore-based Portcullis Trust- sets managed by the world’s 50 larg- Net and BVI-based Commonwealth est “private banks” — which often Trust Limited (CTL), which have use offshore havens to serve their helped tens of thousands of people “high net worth” customers — grew set up offshore companies and trusts from $5.4 trillion in 2005 to more and hard-to-trace bank accounts. than $12 trillion in 2010. Regulators in the BVI found that Henry and other critics argue CTL repeatedly violated the islands’ that offshore secrecy has a corro- anti-money-laundering laws between sive effect on governments and le- 2003 and 2008 by failing to verify gal systems, allowing crooked offi- and record its clients’ identities and cials to loot national treasuries and backgrounds. “This particular firm providing cover to human smug- had systemic money laundering is- glers, mobsters, animal poachers sues within their organization,” an and other exploiters. official with the BVI’s Financial Ser- Offshore’s defenders counter that vices Commission said last year. most offshore patrons are engaged The documents show, for ex- in legitimate transactions. Offshore ample, that CTL set up 31 compa- centers, they say, allow companies nies in 2006 and 2007 for an indi- and individuals to diversify their vidual later identified in U.K. court investments, forge commercial alli- claims as a front man for Mukhtar ances across national borders and Ablyazov, a Kazakh banking tycoon do business in entrepreneur-friend- who has been accused of stealing ly zones that eschew the heavy rules $5 billion from one of the former and red tape of the onshore world. Russian republic’s largest banks. “Everything is much more geared Ablyazov denies wrongdoing. toward business,” David Marchant, Thomas Ward, a Canadian who publisher of OffshoreAlert, an on- co-founded CTL in 1994 and con- line news journal, said. “If you’re tinues to work as a consultant to dishonest you can take advantage the firm, said CTL’s client-vetting of that in a bad way. But if you’re procedures have been consistent honest you can take advantage of with industry standards in the that in a good way.” BVI, but that no amount of screen- Much of ICIJ’s reporting focused ing can ensure that firms such as on the work of two offshore firms, CTL won’t be “duped by dishonest

clients” or sign on “someone who A Thai government official with appears, to all historical examina- links to an infamous African dicta- tion, to be honest” but “later turns tor used Singapore-based TrustNet to something dishonest.” to set up a secret company for her- “It is wrong, though perhaps self in the BVI, the records show. convenient, to demonize CTL as by The Thai far the major problem area,” Ward official, Na- said in a written response to ques- linee “Joy” tions. “Rather I believe that CTL’s Taveesin, is problems were, by and large, direct- c u r r e n t l y ly proportional to its market share.” Thailand’s ICIJ’s review of TrustNet docu- internation- ments identified 30 American cli- al trade rep- ents accused in lawsuits or criminal resentative. cases of fraud, money laundering She served or other serious financial miscon- Nalinee Taveesin as a cabinet duct. They include ex-Wall Street minister for titans Paul Bilzerian, a corporate Prime Min- raider who was convicted of tax ister Yingluck Shinawatra before fraud and securities violations in stepping down last year. 1989, and Raj Rajaratnam, a bil- Taveesin acquired her BVI com- lionaire hedge fund manager who pany in August 2008. That was was sent to prison in 2011 in one of seven months after she’d been ap- the biggest insider trading scandals pointed an advisor to Thailand’s in U.S. history. commerce minister — and three TrustNet declined to answer a months before the U.S. Depart- series of questions for this article. ment of Treasury blacklisted her as a “crony” of Zimbabwean dictator Blacklisted Robert Mugabe. The Treasury Department froze The records obtained by ICIJ ex- her U.S. assets, accusing her of “se- pose how offshore operatives help cretly supporting the kleptocratic their customers weave elaborate fi- practices of one of Africa’s most nancial structures that span coun- corrupt regimes” through gem traf- tries, continents and hemispheres. ficking and other deals made on

behalf of Mugabe’s wife, Grace, and Rautenbach denies U.S. authori- other powerful Zimbabweans. ties’ allegations, contending that Taveesin has said her relation- they made “significant factual and ship with the Mugabes is “strictly legal errors” in their blacklisting social” and that the U.S. blacklist- decision, his attorney, Ian Small ing is a case of guilt by association. Smith, said. Smith said Rauten- Through her secretary, Taveesin bach’s BVI company was set up as flatly denied that she owns the BVI “special purpose vehicle for invest- company. ICIJ verified her owner- ment in Moscow” and that it com- ship using TrustNet records that plied with all disclosure regula- listed her and her brother as share- tions. The company is no longer holders of the company and includ- active. ed the main address in Bangkok for her onshore business ventures. ‘One Stop Shop’ Records obtained by ICIJ also reveal a secret company belonging to Offshore’s customers are served by Muller Conrad “Billy” Rautenbach, a well-paid industry of middlemen, a Zimbabwean businessman who accountants, lawyers and banks was blacklisted by the U.S. for his that provide cover, set up financial ties to the Mugabe regime at the structures and shuffle assets on same time as Taveesin. The Trea- their clients’ behalf. sury Department said Rautenbach Documents obtained by ICIJ has helped organize huge mining show how two top Swiss banks, UBS projects in Zimbabwe that “benefit and Clariden, worked with Trust- a small number of corrupt senior Net to provide their customers with officials.” secrecy-shielded companies in the When CTL set Rautenbach up BVI and other offshore centers. with a BVI company in 2006 he Clariden, owned by Credit Su- was a fugitive, fleeing fraud allega- isse, sought such high levels of con- tions in South Africa. The charges fidentiality for some clients, the lodged personally against him were records show, that a TrustNet of- dismissed, but a South African ficial described the bank’s request company he controlled pleaded as “the Holy Grail” of offshore en- guilty to criminal charges and paid tities — a company so anonymous a fine of roughly $4 million. that police and regulators would be

Thousands of offshore entities are headquartered on this building’s third floor, which houses TrustNet’s Cook Islands office. Photo: Alex Shprintsen

“met with a blank wall” if they tried A spokesperson for UBS said the to discover the owners’ identities. bank applies “the highest interna- Clariden declined to answer tional standards” to fight money questions about its relationship laundering, and that TrustNet “is with TrustNet. one of over 800 service providers “Because of Swiss banking secrecy globally which UBS clients choose laws, we are not allowed to provide to work with to provide for their any information about existing or wealth and succession planning supposed account holders,” the bank needs. These service providers are said. “As a general rule, Credit Suisse also used by clients of other banks.” and its related companies respect all TrustNet describes itself as a the laws and regulations in the coun- “one-stop shop” — its staff includes tries in which they are involved.” lawyers, accountants and other ex-

perts who can shape secrecy pack- served as a director for a BVI com- ages to fit the needs and net worths pany, Tamalaris Consolidated Lim- of its clients. These packages can ited, which the European Union be simple and cheap, such as a com- has labeled as a front company for pany chartered in the BVI. Or they the Islamic Republic of Iran Ship- can be sophisticated structures ping Line. The E.U., the U.N. and that weave together multiple layers the U.S. have accused IRISL of of trusts, companies, foundations, aiding Iran’s nuclear-development insurance products and so-called program. “nominee” directors and shareholders. ‘Zone of Impunity’ When they create companies for their clients, offshore services International groups have been firms often appoint faux directors working for decades to limit tax and shareholders — proxies who cheating and corruption in the off- serve as stand-ins when the real shore world. owners of companies don’t want In the 1990s, the Organization their identities known. Thanks to for Economic Cooperation and the proliferation of proxy direc- Development began pushing off- tors and shareholders, investigators shore centers to reduce secrecy and tracking money laundering and get tougher on money laundering, other crimes often hit dead ends but the effort ebbed in the 2000s. when they try to uncover who is re- Another push against tax havens ally behind offshore companies. began when U.S. authorities took An analysis by ICIJ, the BBC and on UBS, forcing the Swiss bank to The Guardian identified a cluster pay $780 million in 2009 to settle of 28 “sham directors” who served allegations that it had helped as the on-paper representatives of Americans dodge taxes. U.S. and more than 21,000 companies be- German authorities have pressured tween them, with individual direc- banks and governments to share tors representing as many 4,000 information about offshore clients companies each. and accounts and UK Prime Min- Among the front men identi- ister David Cameron has vowed to fied in the documents obtained by use his leadership of the G8, a fo- ICIJ is a U.K.-based operative who rum of the world’s richest nations,

to help crack down on tax evasion and money laundering. Promises like those have been met with skepticism, given the role played by key G8 members — the U.S., the U.K. and Russia — as sources and destinations of dirty money. Despite the new efforts, offshore remains a “zone of impunity” Online Video: What are offshore tax for anyone determined to commit havens, who uses them, and how do financial crimes, said Jack Blum, they work? Find out in our explainer. a former U.S. Senate investigator who is now a lawyer specializing in money laundering and tax fraud Contributors to this story: cases. Mar Cabra, Kimberley Porteous, “Periodically, the stench gets so Frédéric Zalac, Alex Shprintsen, bad somebody has to get out there Prangtip Daorueng, Roel Landingin, and clap the lid on the garbage can François Pilet, Emilia Díaz-Struck, and sit on it for a while,” Blum said. Roman Shleynov, Harry Karanikas, “There’s been some progress, but Sebastian Mondial and Emily there’s a bloody long way to go.” n Menkes

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3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 17 Caribbean Go-Between Provided Shelter for Far-Away Frauds, Documents Show By Michael Hudson, Stefan Candea and Marina Walker Guevara Published Online: April 4, 2013

British Virgin Islands firm had prompted him to claim that gangsters and government insiders kept doing business with had stolen $230 million from Rus- shady characters even sia’s treasury. Magnitsky and other private at- as regulators prodded torneys investigating the affair on it to obey anti-money- behalf of a major hedge fund followed a path from Russia to bank laundering laws. accounts in Switzerland and luxury properties in Dubai — ending up hen ta gled trail of at a small firm based in the British the Magnitsky Affair, a case Virgin Islands that specializes in Tthat’s strained U.S.-Russian setting up offshore companies for relations and blocked American clients who want to remain in the adoptions of Russian orphans, shadows. snakes through an offshore haven This is the story of behind-the- in the Caribbean. scenes players in the Magnitsky af- The death of Moscow tax attor- fair — and the tale of how an off- ney Sergei Magnitsky sparked in- shore go-between provided shelter ternational outrage. It also fueled to fraudsters, money launderers a push to unravel secret deals that and other shady characters from

The British Virgin Islands office of Commonwealth Trust Limited. Photo: Alex Shprintsen/CBC News

Russia, Eastern Europe and the to a secrecy-cloaked company in the United States. Caribbean. The offshore company had been * * * established by Commonwealth Trust In early 2008, lawyers working for Limited, a firm in the British Virgin a London-based hedge fund scram- Islands that sets up overseas compa- bled to prove that their client had nies and trusts for clients around been the victim of a corporate heist. the world. A gang of mobsters, the lawyers Lawyers for the hedge fund’s believed, had quietly transferred owner, Hermitage Capital Manage- ownership of three Russian busi- ment Limited, contacted CTL and nesses belonging to the hedge fund demanded answers.

Who, they wanted to know, was and Russia, spawning human-rights behind the mystery company? legislation in the U.S that in turn But there was a problem: CTL led the Kremlin to retaliate by ban- had no idea. ning Americans from adopting As far as CTL knew, the owners Russian orphans. were two unlikely characters from Until now, the role played by a small Russian city near the Black CTL in the Magnitsky Affair has Sea — a vocational instructor and gone untold. a 70-year-old pensioner, according Secret documents obtained by to later court filings. Hermitage’s the ICIJ show that CTL set up at lawyers claimed that the two were least 23 of the offshore companies fronts for underworld figures who that Hermitage claims were used wanted to keep their stake in the by the alleged fraudsters to move company hidden. money and cover paper trails. It’s a common scenario in the Internal CTL documents ob- offshore world, which is served by a tained by ICIJ cover the firm’s re- sprawling industry of accountants, lationships not only with figures lawyers, middleman and fixers who linked to the Magnitsky case but are paid to guard their clients’ se- also with thousands of other cli- crets. Often, anti-corruption ad- ents. The secret files show the firm vocates say, they do this by clos- served as a middleman for an ex- ing their eyes to the identities and tensive list of shady operators — backgrounds of their customers. setting up offshore companies for Only later, Hermitage’s lawyers securities swindlers, Ponzi schem- claimed, did the true purpose of ers and individuals linked to po- the alleged corporate hijackings litical corruption, arms trafficking become clear. The companies had and organized crime. been used, they claimed, as part of There’s no evidence CTL en- a complicated scheme that made gaged in fraud or other crimes. off with $230 million in bogus tax Records obtained by ICIJ indicate, refunds from Russia’s treasury. however, that CTL often failed to The alleged heist would eventu- check who its real clients were and ally have other — wider — implica- what they were up to — a process tions. that anti-money-laundering ex- It caused a rift between the U.S. perts say is vital to preventing fraud

and other illicit activities in the off- The British Virgin Islands — shore world. known in shorthand as the BVI — The documents show authorities are home to roughly 28,000 souls in the British Virgin Islands failed and 500,000 active offshore compa- for years to take aggressive action nies. That represents about 40 per- against CTL, even after they con- cent of the offshore companies that cluded the firm was violating the is- exist around the globe, according lands’ anti-money-laundering laws. to a 2011 World Bank report. CTL co-founder Thomas Ward Secrecy is a selling point for out- blames many of the firm’s problems landers who want to charter a com- on “the law of large numbers” — any- pany on the islands, which govern time you form thousands of compa- themselves as a British overseas ter- nies for thousands of people, he said, ritory. a few of them may be up to no good. BVI authorities demand little or In a written response to ques- no information about who’s behind tions from ICIJ, Ward said CTL offshore companies licensed within chose its clients carefully and that the territory. They rely instead on it had no more problems than oth- CTL and other local “registered er offshore services firms of similar agent” firms to vouch for these size. companies. “I regard myself as an ethical Tax Justice Network, an anti- person. I don’t think I intentionally corruption advocacy group, ranked did anything wrong,” Ward, who the BVI 11th highest among the has worked as a consultant for the most secretive jurisdictions on its firm since selling it to new owners global Financial Secrecy Index. in 2009, said in a telephone inter- The BVI became a player in the view. “I certainly didn’t aid and abet offshore world in 1984, when local anybody doing anything illegal.” authorities passed the Internation- al Business Companies Act. The Treasure Island number of companies birthed in the territory grew quickly, swelling CTL’s home base is a chain of coral in a decade from fewer than 1,000 a and volcanic islands reputed to have year to 36,000 a year. been the inspiration for Robert By 1994, Euromoney magazine Louis Stevenson’s Treasure Island. was hailing the BVI as “the world’s

pre-eminent offshore corporate do- split time between the Caribbean micile” and the territorial govern- and Canada, was able to buy a home ment had hired a New York public in 1999 amid millionaires and bil- relations firm to market the islands lionaires in Toronto’s most exclusive as an offshore haven. neighborhood — a 20,000-square- For the founders of Common- foot Georgian mansion that Ward wealth Trust Limited, it was a good and his wife rented out as a filming year to get in on the action. Ward, location for the Lindsay Lohan hit an MBA and entrepreneur from movie Mean Girls. Canada, laid the groundwork and brought in Scott Wilson, a Texan Master clients who’d been working as a radio engineer in the Caribbean, as com- The secret documents show CTL at- puter guru and minority partner. tracted much of its business with the CTL set up offices in the BVI’s help of “master clients” — lawyers, capital and largest settlement, accountants and other middlemen Road Town, on the island of Torto- in Russia, Cyprus, and elsewhere la. As a registered agent, it helped who brought in the customers who start companies and trusts for cli- wanted to set up companies. CTL’s ents and served as the official pub- standard procedure was to let these lic face for many of the companies professionals be responsible for it helped charter, receiving sum- what’s known in the financial world monses and other legal documents. as “due diligence,” checking clients’ The firm expanded quickly, es- identities and backgrounds. tablishing subsidiaries in the Ba- In a 1999 fact sheet for master hamas, Belize and other places. It clients, the firm said “we will rely showed special interest in Russia on your firm to do all necessary and Eastern Europe as markets for due diligence in order to adequate- customers, with Ward writing one ly ‘know your client’ before provid- would-be client from the region, ing that client with a BVI company. “To the best of my knowledge, we It will not be necessary for you to are the only BVI registered agent provide any of this information with a Russian speaker on staff.” directly to Commonwealth Trust. CTL did well enough in its wide- (Obviously this will be preferable ranging ventures that Ward, who for your clients.)”

This system operated with few starting a working relationship, but headaches until January 2002, ended up being “among the people when U.S. authorities accused one fooled” by the firm. He said due of CTL’s master clients of fraud. diligence can’t always protect regis- Securities regulators charged tered agents such as CTL from “be- that Merrill Scott & Associates Inc., ing duped by dishonest clients” or a tax planning and investment firm signing on “someone who appears, based in Utah, was operating “as a to all historical examination, to be giant Ponzi scheme, using newly in- honest” but “later turns to some- vested money to pay returns to ear- thing dishonest.” lier investors.” More questions about how CTL Merrill Scott had used CTL’s screened its clients and business branch office in Mauritius, a tax partners came in March 2003, when haven off the east coast of Africa, the main regulator of the BVI’s off- to set up companies for American shore industry, the local Financial investors. Services Commission, conducted “Well, we actually likely knew an inspection of the firm’s files. this client better than most, I would The commission determined CTL say!” Ward wrote in an internal had breached the BVI’s anti-money email. “We went to visit their prem- laundering laws by failing to verify ises (which were elaborate) and met and record the identity of its cli- many of their staff.” ents, court records show. Ward distanced his company It ordered CTL to update its from Merrill Scott’s conduct, how- due diligence on its customers, but ever, and minimized the gravity of took no other action, putting the the frauds. “If anyone is guilty” at case on hold for nearly three years. Merrill, he said, “it is only one or The company provided regular up- two top people.” dates on its progress in complying A judge eventually ordered three with the order, even as it continued Merrill Scott executives to pay a taking on new clients from Russia, total of nearly $17 million to settle Eastern Europe and other places fraud claims against them. known for being sources of shad- In his written response to ques- owy money. tions from ICIJ, Ward said CTL In late 2005, CTL’s general man- fully vetted Merrill Scott before ager, Sandy Holburn, wrote the

firm’s founders, Ward and Wilson, “ongoing dialogue” over another raising a warning about the num- 12 months, while the commission ber of clients the firm was attract- wrote its report and figured out ing from former Soviet bloc coun- what to do about CTL. tries: “There’s obviously a lot going The regulators’ actions came on that we don’t really know or un- during a time that influential orga- derstand concerning the users of nizations such as the International the companies we form for these Monetary Fund were putting pres- clients.” sure on tax havens to improve over- Ward replied that there wasn’t sight of their offshore industries. much that CTL could do about that. CTL co-founder Scott Wilson “You are correct of course that said he and others at the firm be- the larger we grow the more cli- lieved their procedures were in line ents we have and the more clients with BVI law and with what other we have the more likely one of the firms on the islands were doing. clients is to cause some difficulty,” But he said the regulators “may Ward said, “but there is little we have chosen to make an example can do about that unless we wish to out of CTL” as part of a larger push stop growing.” to rein in the industry. Ward said last month that he doesn’t recall Holburn’s warning or Most Wanted his own reply. When BVI regulators returned Problems with the regulators didn’t for another inspection in early do much to slow the firm’s growth. 2006, they concluded that CTL had One internal company document done little to improve its client- shows the number of offshore com- screening procedures. The regu- panies it formed in the BVI more lators also believed, a judge later than tripled in seven years, going wrote, that the company had pro- from 2,100 new companies estab- vided “false and misleading” infor- lished during 2000 to 6,600 estab- mation in its progress reports. lished during 2007. This didn’t prompt immedi- The clients who signed on with ate action. The Financial Services CTL during this period included Commission and company had Dmytro Firtash, a billionaire busi- what the judge later described as an nessman from Ukraine with a sus-

pect back story. Media reports go- cused of stealing $5 billion from ing back to at least 2003 had raised one of the former Russian repub- questions about his links to Semion lic’s largest banks. Mogilevich, a reputed Russian mob Twenty-five of the 31 companies boss who’d been indicted in the appear on the list of entities that U.S. in a $150 million investment BTA Bank alleges Ablyazov used to scam, a case that would land Mo- cover his tracks as he looted BTA gilevich on the F.B.I.’s “Ten Most between 2005 and 2009. Wanted” list. Lawyers for Ablyazov — who U.S. State Department cables maintains that the allegations are have reported that Firtash acknowl- the work of political enemies in edged to a top American diplomat Kazakhstan — did not reply to re- “that he needed, and received, per- quests for comment. mission from Mogilevich when he When BVI regulators returned established various businesses, but to CTL for a follow-up inspection he denied any close relationship to in July 2007, CTL officials acknowl- him.” edged they’d done no due dili- Firtash set up an offshore compa- gence since early 2006 on files in- ny through CTL, Group DF Limit- volving individual clients and that ed, in 2006, months after he’d pub- they’d completed due diligence on licly acknowledged that he owned a fewer than half their master clients, big stake in RosUkrEnergo, a part- according to later testimony by a nership with Gazprom, the Russian commission official. natural gas giant. Group DF Lim- It was not until February 2008 — ited became the holding company nearly five years after the commis- for Firtash’s vast interests in ener- sion first found CTL in violation gy, chemicals and real estate. of anti-money-laundering rules Firtash could not be reached for — that the regulators took action comment. that threatened to put the company Internal records show CTL also out of business. They banned CTL set up 31 companies in 2006 and from taking on new clients until it 2007 for an individual later named complied with the regulations. in U.K. court claims as a front man CTL officials were stunned. With- for Mukhtar Ablyazov, a Kazakh out the ability to sign new clients, banking tycoon who has been ac- Ward wrote in one document, the

firm would be left with “no future.” led by a Moscow-based lawyer, Ser- “The company will be destroyed,” gei Magnitsky. Ward said. In June and October 2008, he gave to testimony to Russian au- Magnitsky Affair thorities naming government officials and underworld figures that, In April 2008, more trouble arrived he claimed, were behind the tax in the form of a letter from lawyers fraud. in London. A whistleblower leaked bank re- Hermitage Capital Management, cords to Hermitage showing what which ran a hedge fund focused on appeared to be an impressive gain Russia, claimed thieves had “misap- in wealth for a Russian tax official propriated” ownership of three Hermitage subsidiaries and had used them to successfully apply for $230 million in bogus tax refunds from the Russian government. Hermitage claimed the alleged thieves had tried to cover their tracks by trumping up criminal charges against Hermitage executives and by reas- Sergei Magnitsky died in prison after accusing signing control of the Russian tax officials of corruption. Photo: AP three companies to an entity called Boily Sys- tems — a BVI company CTL set up — Olga Stepanova — who had ap- in 2007 at the request of one of its proved $155 million of the $230 top master clients in Russia, G.S.L. million in refunds. Law & Consulting. Her husband, Vladlen Stepanov, Hermitage’s investigation was used an offshore company set up

for him by CTL, Aikate Properties, 23 of these companies had been set to open bank accounts in Switzer- up through CTL. land, according to a petition Her- Magnitsky, Hermitage’s lawyer mitage later submitted to Swiss in Russia, wasn’t around for many authorities. Millions of dollars in of these discoveries. In November deposits later turned up in Aikate 2008, Russian authorities arrested Properties’ accounts in Credit Su- Magnitsky and accused him of com- isse and evidence indicated that mitting tax fraud — part of an ef- the husband and wife were laun- fort, Hermitage officials claimed, dering cash via real estate deals in to silence him and cover up the al- Dubai and Montenegro, the peti- leged criminal scheme. tion claims. CTL co-founder Ward said his In all, Hermitage claims, the tax firm “had no role in the ‘Magnitsky official and her husband acquired affair’ ” other than performing $38 million in cash and assets, even routine duties as a registered agent. though their combined salaries “Any other Registered Agent were less than $50,000 a year. could equally well have been in the CTL smoothed the way for the same role as CTL and would have couple by signing a letter in June contributed no more or no less to 2008 —addressed “To whom it may the ‘affair,’ ” he wrote. concern” — that affirmed that Ai- kate Properties “isn’t involved in Ponzi any money laundering activities.” Stepanov has said their wealth As the Magnitsky Affair heated up, came from legitimate business- other scandals involving CTL’s cli- es and the couple have not been ents were coming to light. charged with a crime in Russia A Texas A&M University finance or elsewhere. They could not be professor used two companies set reached for comment by ICIJ. up through CTL to carry out a Hermitage officials eventually Ponzi scheme that caused inves- compiled a list of nearly 40 compa- tors tens of millions in losses. A nies that they claim were used by a Ponzi scheme run by a Connecti- criminal gang and their accomplic- cut hedge fund manager used four es in government. Internal records companies established by CTL as obtained by ICIJ show that at least part of a scam that, securities regu-

lators alleged, bilked investors out one for herself, one for her family of hundreds of millions. and one for her church. Her house CTL also set up a BVI compa- and her church needed work, she ny implicated in a smaller Ponzi said, and she’d hoped the huge re- scheme that used the Internet to turns promised by the investment target U.S. investors of modest plan would help. means, Wisconsin securities regu- Now that she realized all the lators claimed. The company, Del- money was gone, she said, she was ten Holdings, Inc., was the domain too ashamed to tell her pastor she’d owner of minvestment.com, which gotten the congregation ensnared posed as an online investment site in a scam. that could take initial outlays as “What I don’t understand,” she small as $15 from investors, accord- wrote, “is how could people do ing to the regulators. things like that.” Who was behind Delten is murky. She was praying, she said, that CTL’s records show Delten’s only CTL would find some way to help director was an individual based her. in Moscow and its only shareholder In internal emails, CTL of- was a proxy based in the Seychelles, ficials agreed that BVI’s secrecy a tax haven in the Indian Ocean. laws meant they could release little Eleven months after setting up about Delten. Delten, CTL filed a “suspicious activity report” informing BVI au- Survival plan thorities that the company might be running a “pyramid scheme.” It CTL’s staff grew worried in 2008 also resigned as Delten’s registered and 2009 because, along with be- agent. ing blocked by regulators from tak- Authorities didn’t accuse CTL ing on new business, the firm was of wrongdoing in the case. But losing existing clients. The clients that didn’t prevent worried inves- were moving their companies to tors from contacting the firm and other registered agents or other ju- pleading for help. risdictions. A woman in Brooklyn, N.Y., wrote Many were frustrated with the to say she’d made three $1,000 in- “more onerous regulatory environ- vestments with minvestment.com — ment” and were refusing to provide

the identifying data that BVI regu- While Ward was visiting G.S.L. lators were pushing CTL to gather, and other Russian business part- internal documents said. ners, Sergei Magnitsky was locked If CTL wanted to ensure its sur- in a prison built in the time of the vival, it needed a plan. czars. He grew weak from untreat- Rescue came from a Dutch com- ed illnesses. pany, Equity Trust. He died Nov. 16, 2009. CTL and Equity Trust made a A Russian investigative commis- proposal to BVI regulators: If Eq- sion concluded there had been a uity Trust bought CTL, would the “criminal failure” by prison author- regulators consider withdrawing ities to provide him medical aid. the order banning CTL from tak- His death drew condemnation ing on new clients? inside and outside Russia. In De- The plan worked. cember 2012, U.S. President Barack In June 2009, the BVI’s Financial Obama signed the Sergei Mag- Services Commission approved Eq- nitsky Rule of Law Accountability uity Trust’s takeover of CTL and lift- Act. It bans Russian human-rights ed the ban on signing new clients. abusers from entering the United Ward stayed on with the firm, of- States or using U.S. banks. In retal- ficially listed as a consultant while iation, Russian President Vladimir serving as the firm’s director of Putin signed a law barring Ameri- marketing and sales. cans from adopting Russian babies. In September 2009, he headed to Russian leaders have given little Moscow to meet with old clients and credence to claims of government recruit new ones. One of the master corruption and human-rights abus- clients he called on was G.S.L. Law es in the Magnitsky Affair. Prime & Consulting — the Moscow-based Minister Dmitry Medvedev told firm that had worked with CTL to CNN in January that Magnitsky was set up Boily Systems. no corruption fighter, but merely a Despite the fallout from the “common corporate accountant or Magnitsky case, Ward noted in his lawyer who served his boss” in com- trip report that the two firms still mitting tax fraud. maintained an “excellent rapport” Authorities in Moscow are now and G.S.L. continued to be CTL’s conducting a trial on the criminal largest client in Russia. charges against Magnitsky, in what

is likely the first time in Russian vices Commission, spoke in defense history that a defendant had been of his agency. tried posthumously. The defen- “I’m happy to say that Common- dant’s cage in the courtroom has wealth [CTL] is no longer an … stood empty throughout the pro- operational entity in the Virgin Is- ceedings. lands,” Penn said. “This particular firm had systemic money launder- ‘No longer authorized’ ing issues within their organization,” he said, but there was “pun- Last year at an offshore industry ishment” as a result. CTL was “no conference in Miami, Magnitsky’s longer authorized” to do business former law partner, Jamison Fire- in the BVI. stone, singled out CTL as an ex- “Glad to hear that you caught ample of the compliance failures that one,” Firestone said as the that allowed the Magnitsky Affair meeting hall welled with applause to unfold. for BVI regulators’ crackdown. On a large video screen, Fires- “Very glad.” tone displayed CTL’s June 2008 let- There was a problem, though, ter that affirmed Vladlen Stepanov with the narrative of a bad actor and Aikate Properties weren’t in- put out of business. volved in money laundering. CTL still operates — under the The evidence, Firestone said, in- change of ownership — in a new set dicated that the Stepanov and his of offices in the BVI’s capital, Road wife, the Russian tax official, had Town. indeed been involved in money It is still an approved agent for laundering. new clients in BVI. Ward said he “Somewhere out there in the continues to work on a part-time BVI there’s a regulatory body, and basis, helping CTL manage client I wish they’d have a little chat with relationships. these people for writing stuff like The Financial Services Commis- this,” he said. sion declined to answer questions During the question period after about CTL’s status or its investigation Firestone was done, Brodrick Penn, of the firm. In a written statement, then the director of the securities agency officials said they maintain division of the BVI’s Financial Ser- “world-class regulatory and registra-

tion regimes and we demand high Amid this clean up, Equity Trust standards of integrity and sound said, roughly half of CTL’s client financial management of ourselves base has left the firm. n and from all of our licensees.” Equity Trust, which is now owned Michael Hudson is a senior editor by Amsterdam-headquartered TMF with the International Consortium Group, said in its own written state- of Investigative Journalists. Stefan ment that it has worked with the com- Candea is a freelance journalist mission since 2009 to reshape CTL’s and co-founder of the Romanian operations. The company said it has Center for Investigative Journal- replaced CTL’s senior management ism. Marina Walker Guevara is the and “continues to make significant deputy director of ICIJ. progress in making CTL’s portfolio fully compliant” with the BVI’s anti- Contributors to this story: money laundering rules. Frédéric Zalac and Alex Shprintsen

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Trusted service provider litical and economic transparency across the planet. blends into the invisible The Tax Justice Network, an offshore world. international advocacy group opposed to tax havens, estimates that about one third of all world wealth heo st ry of Portcullis is held offshore, and about half of TrustNet and its birthplace all world trade flows through there. T— the Cook Islands — is in TrustNet, now headquartered in many ways the story of the offshore Singapore and with branch offices system itself. in 16 other locations, describes it- It’s a largely invisible world, a self as a “one-stop shop,” employ- curious blend of the parochial and ing lawyers and accountants who the global that’s made up of the mi- help “high net worth” clients man- nor personalities and politics inside age their money and business ac- each offshore jurisdiction — many tivities. with populations no larger than a In this they are not alone: there small town. are dozens of other so-called off- But by establishing special zones, shore service providers. these tiny provinces have changed They rarely draw attention to the face of international finance themselves. Unlike many of their and business and impacted law clients — like banks and accoun- enforcement, tax policies and po- tants — there are no high-profile

industry associations that represent The firm helps ensure names, their interests. They advertise al- finances, business interests and po- most entirely on the Internet. litical links remain hidden. It does Few are as big as TrustNet, whose this using a variety of methods, website claims it is the largest inde- such as creating maze-like layers pendent operator in Asia. of companies and financial trusts The size of their operations is in multiple countries and in many confirmed in hundreds of thou- cases helping clients open over- sands of documents obtained by seas bank accounts in the names of the ICIJ, which show the internal day-to-day workings of TrustNet. They reveal clients spread across about 140 countries and territories, among them many prominent business and political figures. They include about 4,000 names from the U.S. and Canada, and about 1,300 from the European Union. A bulk of them however — roughly “One-stop shop”: the Portcullis TrustNet Cook Islands 45,000 of about 77,000 branch is on the third floor. Photo: Frederic Zalac — come from China, Taiwan, Singapore and other East and Southeast Asian na- anonymous companies rather than tions, a sign of the growing impor- in their own names. tance of that region as a source of Sometimes parked inside pur- shadowy money. pose-built corporate vehicles are The main product that TrustNet luxury yachts or masterpieces by sells can be summarized in one famous artists. word — secrecy. Some of the entities TrustNet

helps create are made-to-measure. havens, they have the British Union Others are prefabricated “shell” Jack in the corner of their flag. companies, often with slightly ab- While the Swiss pioneered secret surd names such as Golden Hon- bank accounts and tax shelters al- est Enterprises Limited, Jolly Good most a century ago, remnants of Fortune Investment Limited and the British empire took a leading Sunny Islands Overseas Limited. role in the spread of the system offshore, beginning with Bermuda, Offshore empire the Bahamas and the Channel Is- lands in the 1930s, followed by the The Cook Islands were a sleepy Cayman Islands in the 1960s, the place more than three decades British Virgin Islands in the 1980s ago when a group of promoters and many others along the way. broached the idea of turning the Offshore centers all sell secrecy islands into an offshore financial as their primary item, but over time center. Parliament met in a struc- the types of secrecy products they ture built years earlier as temporary began to peddle and the markets barracks for construction workers they targeted varied, depending on building the international airport their histories, geography and laws. across the street. The population The British Virgin Islands, for numbered less than 20,000 and was example, where TrustNet’s busiest dropping, with many Cook Island- office is located, are mass market- ers living in New Zealand. ers of offshore companies that can Given the micro-nation’s eco- be bought cheaply, used for single nomic struggles, its political lead- purposes like opening bank ac- ers were willing to hear a sales counts in the name of the company pitch about the economic benefits rather than an individual. “Corpo- of aligning the islands within the rations in a box,” one U.S.-based offshore financial system. offshore promoter calls them. The Cooks fit the profile for The Cook Islands generally tar- an island-based offshore satellite. get a higher-end market — smaller They’re 3½ hours by plane from a numbers of wealthy people who regional economic center — New want to set up long-term “asset Zealand. And, like the Caymans protection trusts” that will protect and many other modern-day tax their fortunes from lawsuits, credi-

tors and, if necessary, government which even now only has a popula- authorities. tion of about 13,000 and measures about 20 miles in circumference. Growth Industry Scandal of the decade The Cook Islands’ Parliament approved laws covering offshore TrustNet grew quickly, opening banking, companies, trusts and in- a Hong Kong office in 1991, the surance in 1981. same year Mitchell told the Cook One of those who helped oversee Islands News that the company the introduction of the legislation dealt mainly with clients brought in was Mike Mitchell, a New Zealand by lawyers and accounting firms in lawyer who served as the Cook Is- Hong Kong. He said, “Sometimes lands’ solicitor general in the early we don’t know the identity of the 1980s. clients,” but added that “anything Five years later, in keeping with that looks remotely dubious or of an apparent pattern of tax-haven the laundering variety we just won’t officials moving freely between gov- handle.” ernment and industry, Mitchell de- Anti-money laundering experts cided to go into the offshore busi- say that sort of logic doesn’t make ness himself. sense — it’s impossible to know He left his post as solicitor gen- whether someone’s involved in eral in 1986 and established an money laundering or other crimes, offshore services firm in 1987. The they say, without knowing their firm, initially called Pacific Trustee identity. “You’ve got to know who Company Limited and then Inter- your customer is,” said Charles In- national Trust Corporation Limit- triago, a former U.S. prosecutor ed, was named TrustNet in the ear- and president of the Miami-based ly 1990s and, eventually, Portcullis Association of Certified Financial TrustNet. Crime Specialists. “If you don’t Mitchell was the main sharehold- know who the guy is, there’s no way er and company chair when the to know why he’s bringing his mon- enterprise opened its doors with a ey offshore.” staff of two and offices on Raroton- Mitchell could say that in 1991, ga, the largest of the Cook Islands, though, without anyone taking

much notice. Things would soon returned, creating a massive tax change. The Cook Islands were write-off in New Zealand. about to become the epicenter of As a British judge summed it scandal. up later, “thus European Pacific In 1994, Winston Peters walked was better off by $1.95 m[illion], into New Zealand’s Parliament car- the Cook Islands was better off rying a cardboard wine box con- by $50,000 and the New Zealand taining a trove of secret corporate Government was worse off by $2 tax documents. Peters, a member m[illion].” of Parliament, said the box held Many other contentious transac- evidence of “wholesale cheating” tions were alleged in the Winebox on taxes.” Affair but in the inquiries and The Winebox Affair, as it was court cases that followed, few wit- called, became New Zealand’s scan- nesses were willing to come for- dal of the decade. ward. The Cook Islands’ solicitor The documents came from a general, John McFadzien, publicly company called European Pacific warned people subpoenaed by New Banking Corporation, part of the Zealand authorities that they could European Pacific Group, which be prosecuted under Cook Islands counted among its senior execu- offshore secrecy law if they gave evi- tives Trevor Clarke, one of the key dence. players who helped the Cook Is- Nevertheless, tens of millions of lands to become a tax haven. dollars in unpaid taxes were even- One of the allegations at the cen- tually retrieved, New Zealand’s tax ter of the scandal involved Euro- laws were tightened and, for many pean Pacific persuading the Cook years after, the Cook Islands were Islands authorities to accept NZ$2 synonymous in Australasia with million in taxes — money that was dodgy offshore deals. later returned, minus a NZ$50,000 A less known part of the story is fee. what happened to others involved A European Pacific subsidiary in the Winebox Affair. One of them then presented the Cook Islands was George Couttie. He had been a tax certificate to the New Zealand senior European Pacific tax expert tax authorities without disclosing handling the secret transactions that the money had mostly been and had gone to work for TrustNet

in Hong Kong before the affair The revolving door between in- broke. dustry and officials was also seen Lawyers for European Pacific at the islands’ new Financial Su- later accused him in court of leak- pervisory Commission. Trevor ing the documents that had led Clarke, the founding patriarch of to the scandal. Couttie has always the Cooks’ offshore industry in remained silent about his alleged the 1980s and a key figure in the role. Winebox Affair, was appointed Soon after this accusation was chairman of the regulatory com- made, according to the ICIJ docu- mission from 2003 until 2010. ments, senior TrustNet staff record- During that time, the ICIJ doc- ed a terse company resolution that uments show, he maintained a “accepted” his resignation “effec- complex set of personal offshore tive from the date hereof.” companies and trusts that were ad- In contrast, John McFadzien, ministered by TrustNet. These enti- the solicitor general who had in- ties were home to millions of dol- voked offshore secrecy that helped lars of assets, the documents reveal, shield the activities of European and TrustNet staffers were given Pacific, resigned from government special instructions. and found a new job — as a senior One document reads: “We are to TrustNet lawyer. McFadzien has contact Trevor by phone only un- since died. less otherwise authorized. … Mini- Geoff Barry, a European Pacific mum documents to be kept in the manager in the Cook Islands dur- Cooks. All docs are to be held at ing the years of the Wine-box deals, our HK [Hong Kong] office.” returned to New Zealand for a few Clarke responded that he was years. Then he, too, took a job at not “a user of any Cook Islands enti- TrustNet. ties” and the ones he had elsewhere Within three years he had be- were set up well before his role as come the TrustNet’s chief execu- FSC chair. TrustNet records show tive officer. Today, more than ten his companies and trusts were in years later, he is a group director Samoa and the British Virgin Is- in TrustNet’s Hong Kong office. lands. He did not respond to a request for He said he had disclosed them to comment. a number of authorities and there

were lots of reasons for people to Some were disguised even with- want to have assets outside the coun- in TrustNet’s own internal records try where they live. The secrecy in- — referred to simply as “Client A,” structions did not come from him. “Client B,” “Client C.” Among the wealthy Indonesians Variety of clients was Suharto’s cousin Sudwikatmono, who’d accumulated a fortune in rub- TrustNet’s low-profile services were ber, wheat and other business dealings. being used by many of the world’s In the months after Suharto’s major banks, such as UBS, Deutsche fall, Sudwikatmono retained a law- Bank and Credit Suisse subsidiary yer thousands of miles away in Cali- Clariden, and by the world’s biggest fornia by the name of Machiavelli auditing firms, such as Pricewater- W. Chao. The lawyer in turn sent houseCoopers, Deloitte and KPMG. Sudwikatmono and his money thou- Bank accounts were being opened sands of miles from both California for clients in many parts of the world, and Indonesia, to the Cook Islands. from branches of HSBC in Singapore TrustNet helped the family set to the Cook Islands branch office of up the secret Wilshire International the Australian bank, ANZ. Trust and two offshore companies, The individual client list includ- Truease Ltd. and Rodeo Internation- ed a wide variety of politically and al. The trust’s beneficiaries, accord- financially powerful figures. ing to documents, included Sudwikat- In 1996 and 1997 TrustNet mono’s wife, his son Agus and what helped establish two British Virgin appear to be his three daughters. Islands companies for Aye Zaw Win, Sudwikatmono has since died, the son-in-law of General Ne Win, a but his son emerged as one of In- military strongman who ruled Bur- donesia’s richest people, according ma for three decades. He could not to Forbes. He did not respond to a be reached for comment. request for comment. After the fall of the Indonesian TrustNet also set up the secretive dictator Suharto in 1998, a number Sintra Trust in the British Virgin of his family and other rich Indone- Islands for Maria Imelda Marcos sians began appearing as TrustNet Manotoc and her three sons. Imee, clients, the documents obtained by as she is known, is the oldest child ICIJ show. of the former Philippines dictator

Ferdinand Marcos who plundered and prohibited Americans from do- his country’s finances and resources ing business with her. and enriched his family and busi- The agency accused her of “se- ness associates. She declined to cretly supporting the kleptocratic comment. practices of one of Africa’s most Clients who signed up during the corrupt regimes” through “finan- late 1990s included international cial, real-estate and gem-related mercenaries working in war-torn Si- transactions” made on behalf of erra Leone. TrustNet helped set up the dictator’s wife, Grace Mugabe, a company called Hinterland Min- and Gideon Gono, governor of the ing Brokers Limited, listing its direc- Zimbabwe Reserve Bank, and other tors as four ex-special forces officers suspect Zimbabwean elites. from Britain, Fiji and New Zealand Responding to questions through who’d been hired to protect mining her secretary at the Thailand Trade sites in central Sierra Leone from Representative’s Office, Taveesin opposition groups. said she had no knowledge of the Hinterland was one of many existence of Hall Kingston Interna- hundreds of gold and mining com- tional Limited. panies working in developing coun- Taveesin continued to deny her in- tries that filtered their operations volvement when later confronted with through offshore entities estab- information from documents that lished through TrustNet. showed the address used for the direc- In July 2008, TrustNet set up tors and shareholders in Hall Kings- a British Virgin Islands company ton International Limited matched called Hall Kingston International the registered address of a number of for a Thai businesswoman and for- Taveesin’s companies in Bangkok. mer cabinet minister named Nalinee Rich American clients were at- Taveesin. tracted by the asset protection af- It is unclear what Taveesin used the forded under Cook Islands legis- new company for, but in November lation. Records obtained by ICIJ, 2008 the U.S. Department of Trea- for example, show that the firm sury designated her as a “Mugabe established more than 700 trusts regime crony,” a reference to Zimba- for American clients since the law bwe dictator Robert Mugabe. It froze came into being, including large assets she held in the United States numbers of doctors, dentists, finan-

ciers and real-estate developers. police who later served as a senior The ICIJ review also identified at Singapore diplomat. least 30 American clients accused in Having their headquarters in government actions or private law- Singapore may have favored Trust- suits of fraud, money laundering or Net when, in 2009, events elsewhere other serious financial misconduct. shifted the focus of offshore secrecy They include ex-Wall Street ti- away from its traditional home in tans such as corporate raider Paul Switzerland. Bilzerian, who was convicted of se- In 2009 the U.S. Department of curities and tax fraud in 1989, and Justice successfully brought a criminal billionaire hedge fund manager Raj case against Switzerland’s largest bank Rajaratnam, who was imprisoned UBS for assisting offshore tax evasion. in 2011 in one of the biggest insider This was followed by actions trading scandals in U.S. history. against a dozen other Swiss banks, TrustNet declined to answer a se- such as Credit Suisse. Wegelin, ries of questions for the story. Switzerland’s oldest bank, folded early this year after admitting it Asia rising had sheltered U.S. tax evaders. Singapore — on the other side of In 2004, a Singaporean lawyer named the world and with vault-like banking David Chong bought TrustNet and secrecy — offered a solution to those merged it with his existing offshore determined to resist the U.S. action. services company, called Portcullis. London-based international law- Chong was an experienced off- yer Jamison Firestone summed it up: shore operator who had helped “You’re not going to get any banking draft the offshore legislation for information out of Singapore,” he the Malaysian island offshore cen- said. It is “a respectable-sounding tre of Labuan, a jurisdiction that black hole.” features in the company’s work. TrustNet, with its range of secre- Chong named the consolidated cy products, was perfectly placed to company Portcullis TrustNet and benefit from the offshore world’s appointed a new chairman to the ever evolving geography. n Singapore branch of the company: His Excellency Tee Tua-Ba, a for- Contributor to this story: mer Singapore commissioner of Prangtip Daorueng

What links the Rwandan genocide, a CIA secret prison, and Saddam Hussein? All used anonymous fronts offshore. Faux Corporate Directors Stand in for Fraudsters, Despots and Spies By Gerard Ryle and Stefan Candea Published Online: April 7, 2013

Worldwide network of n November 14, 2006, a man going by the name Paul Wil- ‘nominee directors’ helps Oliam Hampel was arrested at hide real people, and a Canadian airport on charges of being a Russian spy. organizations, behind Hampel’s carefully constructed offshore companies. identity portrayed him as a successful businessman, yet for a decade his company did no business.

Only months before his capture, financial services firm tells clients, the same apparatus used to create “It doesn’t matter who the front man his alias was also employed by a very for your corporation is, as long as it’s different spy agency — the U.S. Cen- not you.” The firm promises that the tral Intelligence Agency —to build nominee directors it supplies will be a secret prison in Lithuania, where “completely ignorant to the happen- U.S. agents interrogated suspected ings of your corporation.” al-Qaeda terrorists. The service the nominee directors Earlier again, it was used by the provide is, in itself, not illegal. They regime of former Iraqi dictator Sad- generally say they are helping own- dam Hussein to cheat the Oil for ers of companies preserve legitimate Food program. privacy. All three deceptions employed a But the scale and the organization common subterfuge: far-flung cor- of their networks became vivid as the porate entities used as anonymous ICIJ scoured millions of secret files fronts, with “executives” who lacked from the offshore world. knowledge of what the firms were The documents are client records up to. and internal emails largely associat- The activities of these so-called ed with two firms — Commonwealth nominee directors are a little no- Trust and Portcullis TrustNet — that ticed part of the world of secretive form offshore entities for a range of offshore finance that’s grown so vast other middlemen and have offices in that it touches more than 170 of the many offshore havens. globe’s 206 countries, but it’s one The documents lay bare complex that’s often drenched in intrigue. interrelationships the two financial For a fee as low as $90, men and service providers — and there are women who often appear to have many more like them, found largely little or no formal business qualifica- on tropical islands — have with the tions lend their names as directors nominee directors and hundreds of to enterprises they later can claim tax agents, banks and law firms scat- to know nothing about - even after tered around the world. those enterprises are linked to ev- It’s a secrecy system on a gigan- erything from stock fraud to money tic scale that obscures ownership of laundering. billions of often-untraceable dollars As one Panama-based offshore that flow through those entities ev-

ery year, adding to a global flood that laxed view of the duties of nominee exceeds $1 trillion and has grown so directors, particularly if the director large that it can distort and even de- is in another jurisdiction,” Sharman stabilize the global economy. explains. “Onshore authorities are What emerges is that drug cartels, very unlikely to go through all the ef- arms dealers and rogue nations take fort of an extradition to get some for- advantage of the same system as the eign nominee director.” Law enforce- covert arms of the Russian and U.S. ment work across borders, he says, “is governments. a major pain.” Few nominee directors person- Uncovering the secrets ify this better than Stan Gorin and Erik Vanagels. From a base in Lat- Most offshore companies and nomi- via, a tiny nation in the Baltics, their nee directors are up to “pretty bor- names have been attached to hun- ing things,” says Jason Sharman, a dreds of corporations around the scholar at Australia’s Griffith Univer- world, some of which can be linked sity who studies offshore secrecy, but to “grand corruptions.” “you’re certainly going to be using a Gorin and Vanagels have proved nominee director if you’re doing any- so good at acting as straw men that thing bad.” questions have arisen about whether A 2011 World Bank and United or not they even exist. Nations study co-authored by Shar- A Ukrainian journalist working man found that nominee directors for television station TVi sought to regularly emerge in what it calls track down the pair in 2011, and dis- “grand corruption” scandals around covered the real live Gorin was an the globe. insurance broker in the Latvian capi- The study says the complexity tal, Riga, who denied all knowledge of the relationships in the offshore of his alleged work around the globe. world often produces a maze that Gorin also denied knowledge for this can sometimes discourage investiga- story. tors, regulators, lawyers and others In a follow-up report, the same who are trying to track corruption, journalist failed to find Vanagels, money laundering and other mis- who was described by a woman who conduct. said she knew him as a half-blind va- “Offshore jurisdictions take a re- grant, living on the city’s streets.

The ICIJ could not locate him International concern at the either. time focused both on the plight of What is undeniable, according the crew and on the cargo: 33 So- to the documents obtained by ICIJ, viet-made T-72 tanks, plus grenade public records searches and the find- launchers and small arms ammuni- ings of other journalists, is the litany tion, destined for the rebel govern- of intrigue that can be tied to the ment of South Sudan, then under a two identities. United Nations arms embargo. The ICIJ documents show the An anonymous Panamanian com- names Gorin and Vanagels were used pany, Waterlux AG, officially owned to set up a series of offshore entities the ship. But behind Waterlux AG linked to Mukhtar Ablyazov, the for- were two other Panamanian compa- mer head of Kazakhstan bank BTA. nies, Systemo AG and Cascado AG — Some of the entities were incorpo- both of which were fronted by Gorin rated through Commonwealth Trust and Vanagels. by Ablyazov’s business associate Paul A very different but equally eye- Kythreotis and Ablyazov’s brother-in- popping event dates to July 9, 2003, law, Syrym Shalabeyev. when a Panamanian entity linked Ablyazov stands accused in his to Gorin, Star Group Finance and home country of embezzling up to Holdings, was used to register an $5 billion from BTA in what British entity in Washington, D.C., called media describe as one of the biggest Elite LLC. frauds in history. He fled Britain last The CIA later used Elite LLC to year, where he had been living, short- buy a former horse-riding academy ly before being sentenced there to 22 outside Vilnius, Lithuania, in March months in jail for failing to disclose 2004. The U.S. agency flew in pre- full details about his wealth, leaving fabricated elements to build a secret behind a string of luxury homes fi- prison there. It opened in Septem- nanced allegedly using fake loans, ber 2004 and was later the subject of backdated documents and offshore a European Parliament inquiry after accounts. ABC News reported that it was used Then there was the case of the MV to covertly and harshly interrogate Faina, a merchant vessel captured by suspected al-Qaeda terrorists. pirates en route from Ukraine to Ke- ABC quoted a human rights re- nya in September 2008. searcher who claimed that prisoners

suffered “various forms of torture, directors responsible for the conduct including sleep deprivation, forced of the companies they front. standing, painful stress positions.” In addition, documents setting up offshore companies often include No persuasive reasons clauses that shield nominees from financial liability if the companies get A report released in January by the sued. nongovernmental European Net- “It is perfectly legal in many coun- work on Debt and Development, tries to avoid having your name ap- “Secret Structures, Hidden Crimes,” pear as the director or owner of a finds that opaque legal structures company by employing the services are one of the key ways to hide the of a nominee, whose name appears real ownership of entities that can instead,” the Global Witness report sometimes facilitate tax evasion, cor- states. ruption and related crimes. “Nominees are, in essence, rent- “Using nominees is a key way of ing out their name, and in doing so, hiding the real owners,” says the providing the anonymity that cor- report’s author, Alex Marriage. In- rupt officials, tax evaders and other vestigators, he says, have “found criminals require to move dirty mon- no persuasive reasons for nominee ey around the world.” shareholders.” Gorin and Vanagels are far from “There may be very special cir- lone players in this regulatory wilder- cumstance where a nominee di- ness. rector is needed,” he adds, citing the example of two international The group of 28 corporations needing neutral territory to conduct business, “but small The ICIJ, working with The Guard- changes in the law would make this ian newspaper in England and the unnecessary.” BBC’s Panorama program, identified A June 2012 report from the U.K.- a group of 28 other nominee direc- based advocacy group Global Witness tors who have represented more than points out that one of the problems 21,000 companies between them, is that legal authorities in the United with individual nominees represent- States, United Kingdom and many ing as many as 4,000 companies. other countries don’t hold nominee For example, Jesse Grant Hester

— a nominee director based on the government, many nominee direc- English Channel island of Sark and tors from Sark relocated to other later the Indian Ocean tax haven of jurisdictions like Cyprus, the United Mauritius — was the director for an Arab Emirates, Mauritius and Ire- Irish entity Candonly Limited, which land and, as the secret documents an official inquiry later found was obtained by ICIJ show, they simply used by the regime of Iraqi dictator resumed operations. Saddam Hussein to cheat the United Nations’ Oil for Food Program. Russian spy Hester, who did not respond to a request for comment, has been listed The ICIJ documents identify three as a director for at least 1,500 other other former Sark islanders who companies in the British Virgin Is- formed parts of the mysterious back- lands, Britain, Ireland and New Zea- story of Hampel, the alleged spy for land, according to the ICIJ analysis. Russia arrested in Canada. Until the practice was stamped According to the National Post, out in the late 1990s, it was com- Hampel had established a corporate mon for Sark residents like Hester presence in Ireland from July 1997, to lend their names as directors to two years after he received his first businesses around the world wanting Canadian passport using a fraudu- anonymity. lent Ontario birth certificate. At the height of what became Corporate documents described known as the “Sark Lark” the BBC the Irish entity, Emerging Markets reported, the 600 inhabitants of the Research & Consulting Ltd., as a island held 15,000 directorships be- tourism venture — and Hampel tween them, some of which later led as a travel consultant. But the Na- to controversy. tional Post reported that the com- One extreme example was a resi- pany’s annual accounts showed it dent John Donnelly who lent his didn’t do any business and that it name as director to an Isle of Man appeared to be merely a cover for company, Mil-Tec Corporation Ltd., his spying activities. which shipped rifles, rockets, mortar Though he denied the allegation bombs and ammunition to Rwanda made in court that he was a member that were used in the 1994 genocide. of the Sluzhba Vneshney Razvedki, After a crackdown by the British the successor to the infamous KGB,

Hampel was eventually deported to why so many professional firms do Russia after admitting to being in use our services.” Canada illegally. In an example of how much the Appearing as nominee directors players in the offshore world overlap, in Hampel’s Irish entity at various the data obtained by ICIJ reveals that times were Sean Lee Hogan, Simon one of Gray’s other clients was Roger Ashley Couldridge and Michael An- Alberto Santamaria del Cid. drew Gray, who each show up over In October 2010, Santamaria was and over in the documents obtained named in press reports as the Pana- by ICIJ. Each declined emailed re- manian contact for an Internet in- quests for comment. vestment scam, Imperia Invest IBC, Among Hogan’s many other direc- which defrauded 14,000 investors torships — including nearly 100 in worldwide of about $7 million. They the British Virgin Islands, 743 U.K. included about 6,000 deaf people companies and dozens in the U.S., from the U.S. states of Utah, Maine, Panama, Austria, Ireland and New Wisconsin and Texas. Zealand — are companies linked to The U.S. Securities and Exchange a Norwegian professor, the Russian Commission, the Monetary Author- gas and oil giant Gazprom and a mu- ity of Singapore, the Swedish Finan- sic publishing company, Plaza Mayor, cial Supervisory Authority and the whose website claims that they repre- Swiss Financial Market Supervisory sent the work of Julio Iglesias, Ricky Authority all issued alerts regarding Martin and Placido Domingo. Imperia. Couldridge, who recently put up There is no suggestion that Gray his Sark home for sale for nearly £5 was in any way involved in Imperia, million, is publicly listed as a direc- and the data obtained by ICIJ and tor of more than 1,000 companies in searches of public company registers Ireland. indicate that Santamaria was a nomi- Gray runs the Alterego Group, a nee director himself. Santamaria Cyprus company that boasts in one could not be contacted for comment. email obtained by ICIJ: “We at Al- His fellow officials in one Panama- terego Management are the visible nian entity? Gorin and Vanagels. n other self. … The desire to obtain complete privacy, often bordering Contributors to this story: on total anonymity, is a major reason Arta Giga and Hamish Boland-Rudder

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 47 Ferdinand Marcos’ Daughter Tied to Offshore Trust in Caribbean By Roel Landingin and Karol Ilagan Published Online: April 3, 2013

Records show late the beneficiaries of the Sintra Trust, which was formed in June 2002 in dictator’s oldest child, the British Virgin Islands, financial now a Philippine provincial records uncovered by the ICIJ show. Other beneficiaries were Imee Mar- governor, didn’t disclose cos’ adult sons with estranged hus- British Virgin Islands band Tomas Manotoc: Ferdinand Richard Michael Marcos Manotoc, trust in asset declarations Matthew Joseph Marcos Manotoc, required for public officials. and Fernando Martin Marcos Ma- notoc. It’s unclear whether the trust re- ewly uncovered documents mains active. The records obtained link Maria Imelda Marcos by ICIJ show the trust was still ac- NManotoc, the eldest child tive at least as recently as 2010. of the late Philippine dictator Fer- The documents show that Imee dinand Marcos and now a senior Marcos was also a financial advi- political figure in her own right, to sor for the Sintra Trust as well as two secretive offshore trusts and an for a company in which the Sintra offshore company. Trust was a shareholder, ComCen- The hardworking and popu- tre Corporation, which was formed lar provincial governor — widely in January 2002 in the BVI and is known as Imee Marcos — was one of still in operation. The records also

Governor Imee Marcos, her brother Senator Ferdinand “Bongbong” Marcos, Jr., mother Imelda Marcos, and sister Irene Marcos-Araneta.

show she was a “master client” for quartered in Singapore. Another the M Trust, formed July 1997 in record related to ComCentre refers Labuan, Malaysia, and closed July to an account at HSBC. 2009. Philippines law requires gov- The Philippines’ Presidential ernment officials to disclose their Commission on Good Government assets no matter where they’re held, is eager to find out if the entities and Imee Marcos’s disclosure state- connected to Imee Marcos might ments do not list the three offshore contain some of the estimated $5 entities. It is not known what as- billion that her father allegedly sets they hold, but one Sintra Trust amassed through corruption. He document refers to a bank account too held offshore accounts, which with United Overseas Bank Lim- the Philippine government has ited, a financial institution head- sought to freeze.

Ferdinand Marcos fled the Phil- statements of assets, liabilities and ippines with his family and their net worth. This statement must in- close associates when a revolution clude business interests and finan- toppled his 21-year rule in Febru- cial connections, including those ary 1986. He had been accused of located in other countries. large-scale human rights violations In addition, the Philippine Con- as well as widespread corruption. stitution requires that “members of After Marcos died in exile in the Senate and the House of Rep- 1989 at age 72, his wife, the flam- resentatives shall, upon assumption boyant Imelda Marcos, returned of office, make a full disclosure of to the Philippines with their three their financial and business inter- grown children to rebuild political ests.” careers and to contest the govern- The Sintra Trust and the two ment’s seizure of their assets and other offshore companies linked to properties. Imee Marcos were not listed in the Though many cases are still in asset disclosure statements that she the courts almost 25 years on, the filed as lawmaker and provincial government has scored a few major governor and which were examined victories, including a Philippine Su- by the Philippine Center for Inves- preme Court ruling that mandated tigative Journalism (PCIJ). forfeiture of $356 million from the A Civil Service Commission ex- Marcos couple’s secret Swiss depos- pert who helped draft the latest its, after declaring the funds to be guidelines on asset disclosures said “ill-gotten.” the law requires public officials to disclose all their assets and proper- Undeclared entities ties whether in the Philippines or elsewhere. “If it’s yours, you should Imee Marcos’s role in the offshore declare it,” said Ariel Ronquillo of entities uncovered by the ICIJ data the commission’s legal affairs office. raises questions as to why a pub- PCIJ sent an email and a fax to lic official has a need for offshore Imee Marcos asking her to com- trusts and corporations in tax ha- ment on the ICIJ findings, but she vens. did not respond to the detailed Philippine law requires public questions. The day after PCIJ sent officials to list all assets in annual the questions to the governor a per-

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 50 The discovery of any assets linked to Imee Marcos may help in the enforcement of a $4.2 million judgment made by a U.S. court against her in 1991 for the 1977 death of a Filipino student activist who publicly questioned her about her government appointments, says former Sen. Rene Saguisag.

son who claimed to be a long-time responsible for moving the funds friend of Imee Marcos called the around could be committing money journalists to inquire about the sto- laundering.” ry. PCIJ requested that she ask Imee Former and current government Marcos to respond to the questions officials shown some of the docu- or agree to be interviewed. The ments gathered by ICIJ said they person has not gotten back to PCIJ were reminiscent of the methods Fer- since then. dinand and Imelda Marcos used in Officers of the Presidential Com- the 1970s when they created secret mission on Good Government offshore accounts and foundations. (PCGG), tasked to recover the bil- “Fruit never falls far from the lions believed to have been stashed tree. Like parents, like daughter,” away by the Marcoses, are now keen said former Sen. Rene Saguisag, to find out if funds being managed a human rights lawyer during the by the Sintra Trust and the two oth- Marcos dictatorship and a spokes- er offshore entities came from the man for President Corazon Aquino, former dictator’s allegedly ill-gotten who succeeded Marcos in 1986. wealth. “We are duty bound to inves- Saguisag said that the discovery tigate, and then pursue or discount of any assets linked to Imee Marcos the matter depending on informed may help in the enforcement of a findings,” said Maita Chan-Gonza- $4.2 million judgment made by a ga, a commissioner of the PCGG. U.S. court against her in 1991 for “If funds came from the pre-1986 the 1977 death of a Filipino student Marcos secret deposits that were the activist who publicly questioned subject of freeze orders, then those her about her government appoint-

ments and who was kidnapped and tion; estate of Ferdinand E. Marcos,” tortured by state security forces one reported. In 2010 and 2011, she under her control. In 1993, the listed about $2,300 worth of stocks mother of the victim initiated court among her assets. proceedings in the Philippines to The PCIJ investigation also found enforce the U.S. judgment, but the more than 500 other Philippine resi- Supreme Court rejected the claim dents who have links with offshore in 2006, saying Imee Marcos had trusts, corporations and other enti- not been properly notified. ties. Only about half the names have Imee Marcos’s offshore assets are public profiles, of varying promi- unknown, but the disclosure state- nence. Most are business people, ments she’s filed show wealth that’s professionals or people who work significant by Philippines standards for foreign companies in the Philip- but less so in the context of the in- pines. But some are owned by public ternational elite. PCIJ examined 12 officials. of the 15 such statements that she filed from 1998 to 2007 when she A popular governor was a member of Congress and then in 2010 and 2011 when she was pro- The Marcoses have staged a remark- vincial governor. able comeback in Philippine poli- The statements showed that her tics. In 2010, Ferdinand Marcos Jr., assets, consisting mostly of inher- known as Bongbong, won a Senate ited jewelry, paintings and artifacts, seat. He is now being touted as a pos- as well as vehicles, rose in value from sible presidential candidate in 2016. about $170,000 in December 1998 to Imee’s and Ferdinand Jr.’s mother about $640,000 in December 2011. is now a member of Congress, where Almost half of the overall increase she is seeking a second three-year came from the higher value of jew- term. elry, and the value of her paintings Princeton-educated Imee Mar- and artifacts more than doubled. cos ran and won a seat in the House Most Marcos statements that PCIJ of Representatives representing her examined were less than specific in father’s political bailiwick in Ilocos listing her business connections and Norte from 1998 to 2007. In 2010, financial interests. “Share of various she made a successful run as gov- corporations currently under litiga- ernor of Ilocos Norte province, de-

feating the incumbent, who is her Marcos had powers to direct the first cousin. investment of trust assets held by One of Marcos’s biggest achieve- banks and other financial institu- ments as provincial governor is de- tions. veloping Ilocos Norte as a major The so-called “settlor,” “trust tourism draw for both local and protector,” and “master client” list- foreign tourists. ed in the documents is Mark Chua, She says she has set new stan- a Singapore-based businessman dards for transparency in local said to be Imee’s new boyfriend. government, calling it “open gover- The settlor refers to the person who nance.” The provincial government creates the trust by transferring a celebrates the province’s founda- certain asset that he or she owns to tion day by opening up the capitol the trustee, who then assumes legal to the people, literally. “Students ownership of the assets on behalf of see how government works and the beneficiaries. how departments process papers,” Chua has not replied to PCIJ’s she boasted to the Philippine Daily questions on his role in Sintra Inquirer early this year. “We even Trust. opened a provincial safe to show In June 2005, Imee was named tax collections, how they process investment adviser of the Sintra the money and bring them to the Trust, according to a document un- bank.” covered by ICIJ. As investment ad- In a sign of her popularity in viser, she can direct any financial the province, she is running unop- institution in the purchase, sale, posed for a second term as provin- liquidation and investment of the cial governor in a May election. trust assets. Chua also became an investment advisor for the trust in Offshore accounts details 2006. Although the Sintra Trust is lo- The Sintra Trust was created in cated in the British Virgin Islands, June 2002 with the help of a Singa- another PCGG official — the com- pore-based offshore services firm mission tasked with recovering the called Portcullis TrustNet. Marcoses’ assets — said he does The documents indicate that in not find it surprising that its servic- her role of financial advisor, Imee ing company, Portcullis TrustNet,

is based in Singapore, which has one of the toughest financial secrecy regulations in the world. It ranked No. 6 in the 2011 Financial Se- crecy Index of the Tax Justice Network, a Lon- don-based group that campaigns against tax havens. “We’ve had a hard time getting cooperation from Singapore in our requests for international mutual assistance on criminal matters,” said children. Now, it is Imee and her the PCGG official, who asked not children. Both the BVI trust and to be identified because of the con- Liechtenstein foundations were set fidential nature of his work for the up with the help of foreign lawyers agency. and other professionals whose job is ensuring the real owners and Parallels with Marcos’ beneficiaries are well hidden. foundations Some of the documents that the Marcoses left behind at the Malaca- Despite being formed in 2002, thir- ñang presidential palace as they teen years after the death of Ferdi- were rushing to board U.S. military nand Marcos, Sintra Trust has par- helicopters to take them to safety allels with the Marcos foundations on February 25, 1986, show that the set up in the early 1970s in Liech- former president instructed one of tenstein. Then as now, the offshore his foreign agents, Marcus Geel of entities were established in well- Zurich in Switzerland, to set up the known tax havens that guaranteed Xandy Foundation in Vaduz, Liech- secrecy. Before, the beneficiaries tenstein in March 1970. Marcos and were the Marcos couple and their Imelda were named first beneficia-

ries, the surviving spouse the sec- by the Swiss authorities in 1986 and ond beneficiary, and the three Mar- eventually forfeited in favor of the cos children were named as equal government by the Philippine Su- third beneficiaries. preme Court in 2003. A few months later, Marcos in- Investigating the remnants of structed his foreign agents to trans- the famed Marcos billions has be- fer funds from four secret Swiss come more difficult and costly in bank accounts that Marcos and recent years because the money Imelda opened in 1968, just two trail has gone cold. Many of the off- years after he became president, to shore financial centers where the the Xandy Foundation. The couple funds are deposited are reluctant hid their identities, using the false to help for fear it will undermine names “William Saunders” and their attractiveness to investors, ac- “Jane Ryan” when they opened the cording to PCGG officials. Swiss bank accounts. Among the As a result, public and govern- documents the Marcoses left be- ment interest in the Philippines in hind at the presidential residence recovering the alleged ill-gotten were “declaration/specimen signa- wealth of the Marcoses and their tures” forms the couple signed with associates seem to be waning. Last their real names as well as pseud- year, the head of the PCGG spoke onyms. of the possibility of the agency fold- In August 1970, Imelda also in- ing up and having its functions par- structed Geel to set up the Trinidad celed out to the Department of Jus- Foundation in Vaduz, Liechten- tice and other government agencies. stein, with C.W. Fessler, E. Schell- An outcry from Marcos-era victims er of Swiss Credit Bank, and Otto of human right violations forced the Tondury as directors. Imelda was government to keep the commission named first beneficiary while her going, at least for now. n three children were named second beneficiaries. Roel Landingin and Karol Ilagan The secret Swiss deposits, which are reporters with the Philippine include funds held in the name of Center for Investigative Journalism. the Xandy and Trinidad foundations and other secret entities, were Contributor to this story: part of the Marcos monies frozen Mar Cabra

The Christina O, which was bought and refurbished using two of the offshore companies in ICIJ’s data. Photo: Getty Images Taxmen Have Little Clue of Offshore Companies Owned by Greeks By Harry Karanikas and Marina Walker Guevara Published Online: April 3, 2013

Officials say they will check reek citizens who own or direct offshore companies ICIJ’s data for any evidence G in the British Virgin Islands of misconduct by owners of and other tax havens rarely declare them to Greek tax officials, an Inter- offshore companies. national Consortium of Investigative

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 56 Just four out of 107 offshore companies investigated by ICIJ are registered with tax authorities as the law usually requires, particularly when the firms hold assets or conduct business in Greece.

Journalists’ review of more than 100 to offshore companies that appear companies shows. to operate under the radar of tax Just four out of 107 offshore authorities at a time when endemic companies investigated by ICIJ are tax evasion is fueling a financial registered with tax authorities as crisis that has devastated Greece’s the law usually requires, particu- economy and threatened the future larly when the firms hold assets or of the euro. conduct business in Greece. Offi- Two of the offshore companies in cials apparently have no record of the ICIJ data were used to buy and the other 103 firms — or whether refurbish one of the world’s most sto- the owners declared any assets held ried yachts — the Christina O, where by these entities or paid taxes on the Onassis family once entertained them. John F. Kennedy, Marilyn Monroe After learning about ICIJ’s find- and Winston Churchill, among other ings, the Greek Finance Ministry celebrities and statesmen. said it would examine the data and Others are linked to a defense determine whether there’s any evi- contractor working for the govern- dence of improper or illegal conduct ment and to top Greek executives by owners of offshore companies. who made a fortune on bonds sales. The companies’ owners are a Greeks are taxed on their world- surprising cross-section of Greek wide income, so in theory they society, from the richest districts in should pay taxes on income gener- Athens to remote northern villages. ated by offshore companies. But ex- They include retail executives, ship- perts say tax regulation is complex ping magnates and middle-class in Greece and there are many legal families. What these people have in loopholes citizens can use to avoid common is that they are connected declaring their assets.

In this context, it’s not surpris- Pacific and the English Channel. ing that tax revenue from Greek Until that point, he said, the ex- offshore companies fell 90 percent istence of Greek-owned offshore in the past two years to €345,000 entities was known only to a hand- ($440,000) in 2012 from €3.4 mil- ful of law firms that had helped lion ($4.5 million) in 2010, accord- their clients set up the companies. ing to figures from the Ministry of “Today they are widespread,” he Finance. added, reaching all sectors of society. The Greek documents ICIJ ana- Sources within the Ministry of lyzed are part of a trove of 2.5 mil- Finance gave ICIJ a list of more lion secret offshore files obtained than 23,000 companies incorpo- by the global reporters’ network. rated in other countries, including The documents, the largest cache tax havens, and that have been reg- of offshore data ever gathered and istered with Greek tax authorities analyzed by a media organization, over the years. reveal the inner workings of off- ICIJ reporters cross-checked the shore jurisdictions and the activities information with the list of 107 of real owners behind anonymous offshore companies identified in offshore companies. the ICIJ data and found that only “Offshore companies are used by four entities in the BVI had been Greek homeowners to evade taxes, cleared with Greek tax authorities. businesses to hide their profits and The secretary general of state by politicians for unlawful enrich- revenues at the Greek Finance Min- ment,” George Kanellopoulos, the istry, Charis Theocharis, said that Greek government’s former top ICIJ’s findings were “of great con- financial crimes investigator, told cern,“ and that the government will ICIJ. Others say that there are legit- examine the information to see “if imate uses of offshore companies, evidence regarding illegal activities such as joint ventures by investors or irregularities arises.” from different countries. At a recent conference on “Trans- Kanellopoulos said that in 1998 parency and Offshores” held at the his team at the Finance Ministry dis- Greek Parliament, the deputy minis- covered the shocking scale of Greek ter of finance, George Mavraganis, offshore interests — 2,400 compa- said the government is planning to nies registered in tax havens in the close some of the loopholes that al-

low Greek offshore owners to avoid Greek finance minister, George paying taxes. It will also audit and Papaconstantinou, was accused tax companies that are incorporat- of deleting the names of his rela- ed in tax havens but are conducting tives when he first got the Lagarde business in Greece. list. Papaconstantinou has denied Tax evasion is so rampant in wrongdoing. Greece that it’s at the core of an eco- Many of the Greek-owned com- nomic crisis that continues to crip- panies in the ICIJ data are incorpo- ple the country’s economy despite rated in the British Virgin Islands the infusion of billions of dollars in (BVI), a chain of coral and volca- bailouts from wealthier European nic islands in the Caribbean. The neighbors. As austerity measures islands host about 500,000 active and riots have garnered unwelcome companies, about 40 percent of all international attention, Greece has the world’s offshore firms. become known as a worst-case ex- Kanellopoulos, the former fi- ample of the toll of the 2008 eco- nancial crimes chief, said that back nomic meltdown and the dangers of in 1999, his team asked the Orga- fiscal irresponsibility. nization for Economic Cooperation According to a recent report by and Development to demand that the European Union and the Inter- its members stop hosting offshore national Monetary Fund, Greeks companies for Greek citizens. owe about $70 billion in unpaid tax- The request, he said, was rejected. es to the state, about a quarter of the “If rich countries can withstand country’s gross domestic product. tax evasion from offshore compa- Last year, a Greek journalist nies, Greece cannot,” he said. “The caused a political storm when he international community stands si- published the names of about 2,000 lent, covering the actions of these Greeks with bank accounts in Ge- companies.” neva — the “Lagarde list,” named for IMF head Christine Lagarde, Christina O who handed out lists of tax dodgers to authorities of several European With its canopied decks and marble countries when she was France’s fi- bathtubs, the 325-foot Christina O nance minister. yacht symbolizes an era in Greece. To add to the drama, a former It was here where, in 1957, John F.

Maria Callas and Winston Churchill on the Christina O in 1959.

Kennedy and Winston Churchill Two years later, he set up shop met for the first time — and where, in one of the world’s most secretive in 1968, owner Aristotle Onassis offshore jurisdictions, the Cook and Jackie Kennedy held their wed- Islands in the South Pacific. On ding reception. April 7, 2000, Papanicolaou and One visitor to the yacht was John Irish lawyer Ivor Fitzpatrick creat- Paul Papanicolaou, a well-known ed a Cook Islands company called ship owner and friend of Onassis. Christina GP Limited. Both men In 1998, two decades after Onassis’ were named directors of Christina daughter Christina had donated GP in the company documents but the yacht to the Greek government, they used a nominee firm, Stock- Papanicolaou set out to buy and re- corp, as shareholder. furbish the boat. Nominees are persons or firms

that, for a fee, lend their name so stake in the Christina O, according the real company owners — in this to the executor of his estate, Mari- case Papanicolaou and Fitzpatrick ella Tzoni. Papanicolaou died in — don’t have to disclose theirs. 2010. This is a legal artifice of the off- None of the Cook Islands enti- shore economy. ties created by Papanicolaou and The offshore structure used to Fitzpatrick to acquire and remod- own the Christina O didn’t stop el the yacht appear in the list of there. Five days later, Papanicolaou Greek-owned offshore companies and Fitzpatrick created a Cook Is- maintained by the Ministry of Fi- lands limited partnership called nance. Tzoni said that her client The Christina Limited Partnership. never received any income from the They made Christina GP one of the ship; therefore, she said, he didn’t partners. need to report taxes. Another partner, added in Au- According to Tzoni, ship owners gust 2000, was millionaire Irish in Greece use offshore entities rou- developer Robert “Pino” Harris. tinely because they facilitate busi- According to court records, Harris ness with foreign partners. invested nearly €145,000 ($130,000) “It’s legal, nothing peculiar,” she in the boat and gave €14.3 million said. ($13 million) as a loan in exchange As for the Christina O, she still for a 4 percent share in the part- boasts her famous mosaic swim- nership. The partnership ended ming pool that converts into a up paying nearly €66 million ($60 dance floor and the barstools Ar- million) for the ship. istotle Onassis had upholstered The partners’ goal was to refur- in fine leather made from minke bish the yacht and restore its past whale foreskins. Charter prices glory, so they could charter it prof- start at $60,000 a day for a small itably. But drama over management group. of the Christina O ensued, and they In the meantime, Harris made ended up in the London Court of news in Ireland in 2008 for winning International Arbitration. a court judgment of €9 million in Fitzpatrick retained a leading income tax refunds, a decision role in the partnerships that owned that upheld his deduction for his the ship. Papanicolaou sold his expenses in buying and remodel-

ing of the Christina O through the began in 2003, a BVI entity called Cook Islands limited partnership. Bounty Investments Ltd. owned 33 Fitzpatrick and Harris did not percent of ISI Hellas S.A. Some of respond to ICIJ’s requests for com- the shareholders of the offshore ment. company were managers of ISI: Da- vid Adams, Johan Boskemper, Ger- Offshore defense hard Mazenier, Heinz Winter and David Tham. The reach of the Greek offshore The offshore structure had yet economy extends also to the public another layer. Bounty Investments sector, particularly to military con- was a shareholder in another BVI tractors. company called Interoperability Last year a former minister of Systems International Ltd, almost defense, Akis Tsochatzopoulos, was the same name as ISI Hellas SA, arrested and jailed, charged with re- according to the corporate records ceiving millions in bribes through reviewed by ICIJ. One of the direc- offshore companies connected to tors of this company was Nikolas his associates. Tsochantzopoulos Papatsas, ISI Hellas SA’s current has denied wrongdoing. His trial is president. set to start later this month. There was a third and even more The ICIJ data reveals that a con- secretive company, Belchamps Man- tractor for the Greek air force is agement Limited, which for several closely connected to secretive enti- years used bearer shares — meaning ties registered in the BVI. Interop- that the owners of the shares were erability Systems International Hel- not officially registered anywhere. las S.A. is one of the companies In 2005, Commonwealth Trust that since 2003 has participated Limited, an offshore services firm in a $242 million contract for the that BVI authorities sanctioned for production of electronic warfare its lax anti-money-laundering con- equipment for Greek F-16 fighter trols, took over management of the jets. The company has also pro- three companies. vided electronic hardware and soft- Under CTL’s management, own- ware for the U.S. Navy and govern- ership of the three companies be- ments around the world. came even more opaque. In January At the time the F-16 contract 2005 Sarah Petre-Mears, a Brit who

acts as nominee director for 1,200 companies in the Ca- ribbean, U.K., New Zealand and Ireland, became director and shareholder of Bounty Systems, Interoperability Sys- tems International and Bel- champs Management. Of the three BVI entities, only Bounty Investments Ltd appears in the list of offshore companies kept by the Minis- try of Finance and reviewed by ICIJ. A lawyer for ISI Hellas SA, Nicholas Karambelas, said Bounty Investments currently owns 40 percent of the Greek defense contractor and “has fully satisfied each obligation it has to the Greek tax authorities.” Karambel- Apostolos Vakakis. las said the other two BVI entities are “dormant.” He said the offshore firm Interoperabil- tual relationship between defense ity Systems International Ltd. has ministries and offshore companies, no tax liabilities because it never in any form, should be condemned, raised any capital. even if only for transparency rea- Economist Evangelos V. Vasilakos, sons, in a sector replete with cor- a former general director for arma- ruption allegations,” Vasilakos said. ments at the Greek Defense Minis- try believes that defense contractors The $43 million bond deal should not be part of the largely un- accountable offshore economy. Another way Greeks use offshore “Any direct or indirect contrac- companies is to buy and sell bonds

— thus keeping the arrangements mained anonymous and are part of cloaked in secrecy and avoiding the mystery surrounding the trans- taxes on the profits, according to action. Panayiotis Douvis, author of the Vakakis did not answer detailed book Offshore Activities and for- questions sent to him by ICIJ, but mer director of investigations at he said in an email: “I have de- the Greek Financial Crimes Unit. clared officially all without excep- On February 21, 2007, a Cyprus tion my transactions that should be law firm created an offshore com- announced in public, as provided pany in the BVI called Karpathia by relevant Greek legislation.” Ltd. It used the same registered Vakakis also said that capital agent as the Greek military contrac- gains from buying and selling tor, Commonwealth Trust Limited. bonds at the time of Karpathia’s It named two companies as nomi- transaction was “absolutely tax-free nee directors of Karpathia. anyway” in Greece. He didn’t re- Documents obtained by ICIJ spond to a follow-up question from reveal that the single shareholder ICIJ about whether Karpathia’s cap- behind the mysterious entity was ital gains had at any point become Apostolos Vakakis, chairman of the taxable dividends upon distribu- retail conglomerate Jumbo SA, one tion to him, the sole shareholder of of Greece’s largest companies. the offshore company. In July 2007, Karpathia pur- “One does not use a legal entity chased 3.5 million convertible in order to hide the identity of the bonds issued by Jumbo SA for beneficial owner by using shadow €36.7 million ($49.7 million), ac- names but to be able to complete cording to records from Greece’s a transaction in a straightforward security and exchange commis- manner,” said Vakakis. n sion. Within the next six months, while Jumbo’s stock remained sta- Harry Karanikas is a reporter for ble, Karpathia made a windfall: It the newspaper Ta Nea. Marina sold 2.85 million bonds for €65.1 Walker Guevara is the deputy million ($92.6 million) — a $43 director of ICIJ. million profit, financial records show. Contributor to this story: The buyers of the bonds re- Mar Cabra

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 64 Disclosure of Secret Offshore Documents May Force Top Mongolian Lawmaker to Resign By Gerard Ryle and Nicky Hager Published Online: April 3, 2013

ne of Mongolia’s most senior politicians says he is Oconsidering resigning from office after being confronted with evidence that he has an offshore company and a secret Swiss bank account. “I shouldn’t have opened that account,” Bayartsogt Sangajav, Mongo- lia’s deputy speaker of Parliament, Bayartsogt Sangajav told the ICIJ. “I don’t worry about my reputation. I worry about my family,” he said 2008, a position he held until a cabi- after ICIJ asked him about records net reshuffle in August 2012. revealing his offshore holdings. “I During those years he attended probably should consider resigning international meetings and served as from my position.” governor of the Asian Development Bayartsogt, who says his Swiss ac- Bank and the European Bank of Re- count at one point contained more construction, pushing the case for than $1 million, became his coun- his poor nation to receive foreign de- try’s finance minister in September velopment assistance and investment.

He was also at the forefront of en- He acknowledged that he hasn’t couraging foreign mining and other declared the offshore company or companies to move into Mongolia, the Swiss account on disclosure state- one of the world’s most sparsely pop- ments required for Mongolian pub- ulated countries. lic officials. But he said he didn’t use A cache of 2.5 million secret off- the offshore entities to avoid taxes shore files obtained by ICIJ includes because the venture didn’t produce documentation that Bayartsogt ac- any income. quired a British Virgins Islands com- “I should have included the company, Legend Plus Capital Limited, pany in my declarations,” he said. in May 2008. The company was then “We didn’t even think of the tax is- used to open a Swiss bank account in sues. I am going to close it [the bank the name of the Legend Plus Capital account] now.” Limited, with an official address in Bayartsogt was at the forefront of the BVI. encouraging foreign mining com- Bayartsogt told ICIJ that not all of panies to move into Mongolia. For the money in the Swiss account was instance, he championed changes his. He said the account was opened to tax laws and other concessions in to trade in international stocks. 2011 that had been demanded by the He said his investment into the ac- multinational mining company Rio count was $200,000 — profit derived Tinto, based in Britain and Australia. from a family wheat business. Anoth- The changes reduced the benefits er $800,000 or so belonged, he said, for Mongolia and increased the re- to three “business friends” he didn’t turns for Rio Tinto of a planned multi- name. All but about $2,000 had since billion dollar copper and gold mine been withdrawn, he said. at Oyu Tolgoi in the Gobi Desert. “My friends told me: If you have There is no suggestion his public extra profit, why not open an ac- stance had anything to do with his count? Our first intention was to private offshore activity, but his Swiss have more than $1 million,” he said. bank account and offshore company “It was risky business but we remained secret throughout his years wanted to try. Foreign banks came as minister. n to Mongolia and invited us to invest abroad. I shouldn’t have opened that Contributors to this story: Emily account.” Menkes and Marina Walker Guevara

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 66 Canadian Senator’s Husband Shifted Money Into Offshore Tax Havens By Frédéric Zalac, Alex Shprintsen, Zach Dubinsky and Harvey Cashore Published Online: April 3, 2013

Lawyer Tony Merchant, account in the Caribbean, according to the files. His wife, Canadian Canada’s “class action Senator Pana Merchant, and their king,” sought secrecy for three sons were named in the documents as beneficiaries of the funds. Cook Islands trust. The transactions are detailed in a leak of offshore financial infor- pri om nent Canadian mation obtained by the ICIJ. The lawyer, husband to a Lib- data covered more than 120,000 A eral senator, moved CA$1.7 offshore companies and private million (US$1.1 million) to secre- trusts in the Cook Islands and oth- tive financial havens while he was er offshore havens. The Merchants locked in battle with the Canada are among the more than 400 Ca- Revenue Agency over his taxes, ac- nadians whose names are included cording to documents in a massive in the secret records. leak of offshore financial data. Tony Merchant didn’t reply to Tony Merchant of Saskatchewan, several requests from CBC News to dubbed Canada’s class-action king discuss the matter. because of the large settlements he The files show he set up a legal has won for his clients, transferred entity known as a trust in 1998 in the money to a tax haven in the the Cook Islands, a self-governing South Pacific and then onward to an New Zealand territory in the South

Tony and Pana Merchant

Pacific that’s a popular place to “Keep correspondence to a min- move money because of its strict imum,” reads a note placed on his financial-secrecy laws. He put at Cook Islands account that warned least CA$1.7 million (US$1.1 mil- only to communicate with Mer- lion) into the trust, records show. chant by airmail. “Do not fax to cli- Merchant then had the trust open ent. He will have a st[r]oke.” an account in Bermuda at a broker- Another note discusses Mer- age called Lines Overseas Manage- chant’s reaction when told his ment and used it to buy mutual funds, holdings in Luxembourg would including some in Luxembourg. require him to either cough up his All along, the documents show, identity to officials there, or have the high-profile lawyer sought to all transactions on the mutual keep the investments secret. funds frozen.

“Received a letter from Mr. Mer- field, an expert on international chant requesting that we do not tax at Queen’s University in Ontar- disclose now or in the future any in- io, who reviewed the documents at formation to the authorities in Lux- CBC’s request. embourg, or anywhere,” the note on “There may be an innocent ex- the account reads. “And the [mutual planation for all this. But boy, in funds] will just remain on a freeze my mind that does raise some seri- for the foreseeable future.” ous red flags.” “If you want to move money Mailed thousands in cash around the world without onshore regulators or officials understand- Even the modest annual fees for ing that you’re behind the wire his offshore accounts would have transfer, you set up a bank, you set been impossible to trace back to up an account at Lines Overseas Merchant: He often paid those ex- Management — they use very strict penses by sending cash in the mail standards of confidentiality,” said from Canada to the South Pacific, lawyer Martin Kenney, a specialist prompting a caution from the ac- in tracing international assets who count administrators. runs a firm in another offshore ha- “We strongly advise, however, ven, the British Virgin Islands. that all future payments be made “This would be an excellent way either by cheque or by telegraphic to do it without Revenue Canada, transfer, as we cannot vouch for the or anyone in Canada, being able security of cash sent through the to discern who is this unidentified post,” a lawyer wrote to him in 2002. beneficiary,” added Kenney, who Merchant didn’t heed the warn- was shown the files but wasn’t given ing, though. Documents show he Merchant’s identity. mailed cash and traveler’s checks in ensuing years to pay the roughly Tax battles $2,000 in annual charges. “The less innocent explanation Merchant is one of Canada’s most is that this particular individual prominent class-action lawyers. did not want to have any record His crowning achievement is the maintained at all of this payment,” $1.9-billion settlement for survivors said professor and lawyer Art Cock- of aboriginal residential schools,

from which his Regina-based na- None of the court records from tional firm, Merchant Law Group, those cases mention Merchant’s was slated to earn $25 million. He offshore investments. Those have has also gone after cellphone com- only come to light in the leaked panies for their system-access fees, documents, which show that he drugmakers behind the withdrawn created an entity called the Mer- arthritis pill Vioxx, various auto- chant (2000) US Trust in 1998 and makers, the Canadian Standards then put the $1.7 million into it. Association, and universities over Normally when someone sets up late-payment charges. a trust, they give away control of Merchant’s legal maneuvers have the assets it holds. In Merchant’s sometimes landed him in hot water. case, the leaked records show that He’s been disciplined by the Law at the time, he was a beneficiary Society of Saskatchewan five times of his offshore trust, as well as its (the most recent case is under ap- “protector” — a role giving him peal), and in 2008 a B.C. court or- significant power, according to ex- dered him to pay a former client perts in trust law. (He ceased being $273,000 for excessive billing. a beneficiary in 2002.) Some of the 68-year-old’s big- The files also show the people gest legal battles have been with handling the trust’s investments the Canada Revenue Agency, over were told Merchant “is to retain an his income taxes. active involvement on this account” Since the late 1970s, the litigator and to “please revert directly to has repeatedly locked horns with Mr. Merchant” for any “problems the CRA, taking a dozen cases to or queries.” In addition, Merchant tax court and a handful as high as had trading authorization for the the Federal Court of Appeal. Some funds in Bermuda, according to of the disagreements centered on the records. tens of thousands of dollars Mer- “Canadian tax authorities could chant booked as business expenses, say, ‘In fact, it’s being controlled such as costs for his Jaguar or Regi- from Canada by Mr. Merchant, and na social functions he attended. In not by the offshore trustee,’ ” Cock- one case, he failed to report $75,592 field commented. in income, which a judge ruled was “Then it would be a domestic “grossly negligent, if not deliberate.” Canadian trust. You’d have to have

full disclosure on all of the income, the nature of the trust. The beneficiaries would also have to disclose everything.” Tax-court filings obtained by CBC News show that on his income tax return for 1999, the year after he established the trust, Merchant didn’t tick off the box declaring Online Video: What are offshore tax ownership of more than $100,000 havens, who uses them, and how do in “foreign property.” they work? Find out in our explainer. Under Senate rules, Pana Mer- chant was required to declare she was a beneficiary of the Merchant for years against such investment (2000) US Trust to the Senate’s eth- vehicles, calling many of them “a ics commissioner, but confidential- tax holiday.” ly. There is no public access to the “More and more upper-income information. Canadians are hiding their money CBC News attempted several overseas, not contributing to the times to also contact Pana Merchant. Canadian economy and not pay- Like her husband, she did not reply. ing their fair share, and that simply means the rest of us have to pay Senate colleague more,” he said in an interview. “It’s grossly unfair.” n In a 2006 interview with the CBC, Tony Merchant said: “Money has al- Zalac is a national reporter with ways motivated me. But it’s not re- Société Radio-Canada/Canadian ally that it motivates me to spend Broadcasting Corporation. Cashore it, in particular. But I guess it mo- is senior producer and Shprintsen tivates me to have it. And I’m sure is a producer at CBC News, Special my children will spend it well.” Investigations Unit. Dubinsky is a While Merchant’s wife was senior writer for CBCNews.ca. named as a beneficiary of an offshore account, Liberal Senator Per- Contributor to this story: cy Downe has been campaigning Nicole Reinert and Curt Petrovich

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 71 Offshore Companies Provide Link Between Corporate Mogul and Azerbaijan’s President By Stefan Candea Published Online: April 3, 2013

Members of Azerbaijan’s daughters, according to secret documents obtained by the ICIJ. first family have had been The daughters were 19 and 23 shareholders in at least four years old at the time. The documents obtained by ICIJ offshore companies, newly also show that the president and his revealed records show. wife, Mehriban, a member of Par- liament, acquired their own BVI company in 2003, Rosamund Inter- corporate mogul whose national Ltd. business empire has won Why the presidential family es- A building contracts worth tablished these companies is un- billions of dollars amid Azerbaijani clear. What is clear is that the President Ilham Aliyev’s massive family took steps that obscured its construction spree is tied to the involvement in the companies, us- president’s family through secre- ing various agents to register the tive offshore companies. companies and direct them, at least The businessman, Hassan Gozal, on paper. is the director of three British Virgin The presidential family and Go- Islands (BVI) companies set up in zal did not respond to ICIJ’s repeat- 2008 in the name of the president’s ed requests for comment.

Azerbaijani President Ilham Aliyev and his wife Mehriban.

The timeline of Ilham Aliyev’s October of that year. The records ownership of the offshore company show that the BVI company was in raises questions about whether he good standing until May 2004. violated constitutional provisions In addition to the constitutional against members of Parliament provisions relating to members of operating or owning businesses, Parliament, Azerbaijani law also according to Annagi Hajibeyli, forbids state officials involved in president of Azerbaijani Lawyers overseeing business from being in- Association, a group that is often volved in business themselves, in- critical of the government. cluding being shareholders in com- Ilham Aliyev was still serving in panies, according to Hajibeyli and Parliament when he was director Alimammad Nuriyev, a lawyer and and shareholder of the offshore director of the Azerbaijan’s Consti- company in early 2003. Aliyev be- tution Research Center. came president of Azerbaijan in “Ilham Aliyev violated this law if

he was involved in business activi- towers, are more than 6,000 square ties during the period when he was feet each and have asking prices a member of Parliament … or presi- close to $6 million. dent,” Hajibeyli asserted. ICIJ send questionnaires to Il- Flame Towers ham Aliyev and his wife Mehriban via email and post mail. The presi- Hassan Gozal, the corporate mo- dent’s press office offered no re- gul listed as a director of Leyla and sponse to the questions raised by Arzu Aliyeva’s companies, is a busy ICIJ. Letters sent to the president’s man. daughters, Leyla and Arzu Aliyeva, He and his brother, Abdolbari, also went unanswered. both originally from Iran, conduct Arzu and Leyla Aliyeva acquired a wide range of businesses, mostly their BVI companies in December out of Dubai’s Jebel Ali Free Trade 2008, two months after their father Zone. Hassan Gozal is the CEO of was re-elected for a second term as many as a dozen companies op- as president, the secret documents erating under the umbrella of a me- show. ga-company called Intersun Hold- Arbor Investments was regis- ing, where Abdolbari is president tered under Arzu’s name. Leyla is and Hassan vice president. listed as the owner of LaBelleza Documents show the Gozal Holdings Limited and Harvard brothers’ business interests have Management Limited. For all three won major contracts from Azer- companies, the same offshore mid- baijan’s state-owned oil company, dleman was used — Malaysia-based where Aliyev served as an executive Naziq & Partners — and all are before becoming president. registered by Portcullis TrustNet, a The brothers have also benefited Singapore-based offshore services in indirect ways from the country’s provider. oil wealth — thanks to an oil mon- In registering the companies, ey-financed building boom that’s the young women listed addresses transformed the cityscape of Azer- in Dubai: two apartments in a lux- baijan’s capital, Baku, into a forest ury resort called Marina Le Reve. of high rises. Other apartments in the building, In all, their companies have one of the area’s most exclusive won construction contracts in and

around Baku totaling some $4.5 villas built for the presidential ad- billion: ministration and the Heydar Aliyev • Their holding company, Azer- Center, named for the president’s sun, is building an ambitious re- father, who was his predecessor as sort development, the $2 billion the country’s chief executive. Dream Island, which will cover Hassan Gozal did not respond to 300 hectares near Baku. repeated attempts by ICIJ to seek comment from him via email and • Another company they control, telephone. Dia Holdings, has won $2.5 billion in construction contracts in Azerbaijan, much of it financed Family properties by public money. Questions have been raised for Dia’s projects include the Fair- years about the first family’s finan- mont Flame Towers in Baku, three cial dealings. curving glass-walled buildings In 2010, The Washington Post found whose shape in part pays homage to $75 million worth of real estate in the vast natural gas deposits in the Dubai whose owners had names region. Dia is also behind luxury and ages appearing to match those of President Aliyev’s three children. Nine mansions were purchased in 2009 for about $44 million, far more than President Aliyev’s $228,000 annual pay, the Post noted, and “roughly 10,000 years’ worth of salary for the average citizen of Azerbaijan,” According to Dubai property records, the Baku’s dramatic Flame Towers: part of Azerbaijan’s purchaser of the man- oil-financed building boom. sions, Heydar Aliyev,

was 11 years old at the time. Arzu and Leyla’s younger brother, Hey- dar, has a matching birthdate. Documents obtained by ICIJ show the parents acquired their own offshore company, Rosamund International Ltd., in early 2003, using a reseller of offshore entities in Singapore, DBS Trustee Limit- ed. The couple were The $1 million house in Karlovy Vary owned by Arzu named as directors Aliyeva. Photo: OCCRP and shareholders, listing a personal address in the Jebel Ali Free Zone in services, airline maintenance, Dubai. ticketing and duty-free shops, Ilham Aliyev ascended to the according to a 2010 report by Ra- presidency in Azerbaijan shortly af- dio Free Europe/Radio Liberty. ter the company was created. The • Azerfon, one of the biggest cell company became dormant in 2004. phone operators in Azerbaijan, In addition to the offshore com- was co-owned by offshore companies purchased in 2003 and panies in Panama that listed the 2008, the Aliyev family has been Aliyeva daughters as president connected to several other ventures and treasurer, according to a and investments: 2011 story by Radio Free Eu- rope/Radio Liberty. • Arzu Aliyeva was co-owner of Silk Way Bank, a unit of SW • Arzu Aliyeva owned a house Holdings, a firm that controls worth $1 million in the Czech in-flight meals, airport taxi luxury resort Karlovy Vary, ac-

cording to a 2012 article from resign amidst corruption charges. the Organized Crime and Cor- After the Soviet Union collapsed ruption Reporting Project. in the early 1990s, Aliyev regained power in the wake of a military Father and son coup, taking over presidential powers and then formally winning the On paper, Azerbaijan is making presidency in a national election in strides towards accountability. The October 1993. He remained presi- country has signed several interna- dent for a decade. tional agreements relating to trans- Just before his death in 2003, parency and corruption. his son Ilham inherited the coun- Corruption prosecutions, how- try’s leadership from him, winning ever, have largely been confined to the presidency in an election that low-level officials, according to Glob- many outside observers claimed al Integrity, a Washington-based re- was rigged in the son’s favor. search and advocacy group. Another In June 2012, in the wake of media anti-corruption group, Transparen- reports about the presidential fam- cy International, ranked Azerbaijan ily’s business interests, Azerbaijan’s 139th out the 176 countries on its parliament voted to put a veil of se- 2012 Corruption Perception Index. crecy over information about compa- Reporters Without Borders puts nies based in Azerbaijan, restricting Azerbaijan 162nd out of 179 coun- public access to details about corpo- tries on its 2011-2012 Press Freedom rate registration and ownership. Index. The parliament also voted to The Aliyev family has held power give the president and first lady in Azerbaijan for decades, long be- lifetime immunity from criminal fore the country was a country. prosecution. n President Ilham’s father, Heydar Aliyev, was member of the NKVD, Another Azerbaijani reporter who the Soviet secret service, in the wishes to remain anonymous for 1940s, and in the 1960s became the safety reasons contributed to this head of the Azerbaijani KGB. In story. 1969, he became the leader of Soviet Azerbaijan, a position he held for al- Contributor to this story: most 20 years, until he was forced to Khadija Ismayilova

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 77 François Hollande’s Campaign Treasurer’s Investments in the Cayman Islands By Anne Michel and Raphaëlle Bacqué Published Online: April 5, 2013

Jean-Jacques Augier The name of 59-year-old Jean- Jacques Augier, a businessman says that his actions were and an unobtrusive figure on the fully legal and attributes French publishing scene who was François Hollande’s treasurer his participation in during the 2012 presidential cam- these schemes to his paign, features in documents obtained by the ICIJ and seen by Le “adventurous nature”. Monde. These show that he has shares in two offshore firms in the rench president François Cayman Islands through his finan- Hollande faces more embar- cial holding company Eurane. Frassment after it emerged Investigations by Le Monde us- that a close friend and treasurer for ing files unearthed by the ICIJ his presidential election campaign have established that Mr Augier invested in offshore businesses in and several other shareholders set the Cayman Islands. up a company called International The revelation comes at the Bookstores Limited in 2005 in the worse possible time, as France is Caribbean tax haven, which is a reeling from the Budget Minister British Overseas Territory. Cahuzac scandal. Mr Augier confirmed these facts

Jean-Jacques Augier

with a hint of embarrassment, but An alumnus of the elite Poly- has stated that he does not have technique and ENA management “either a personal bank account school, and a brilliant former in- in the Cayman Islands or any per- spector of finances, Mr Augier is sonal direct investment in that ter- indebted to his business mentor, ritory”. André Rousselet, a close friend of “I invested in this firm through François Mitterand, for paving his Eurane’s Chinese subsidiary, Capi- way to success by hiring him to run tal Concorde Limited, a holding the struggling G7 taxi company in company that manages all my busi- 1987. He left it 13 years later hav- ness in China,” added this friend of ing turned the company round and the French President. “The invest- made his fortune, with a golden ment in International Bookstores handshake of 11 million euros. appears in company records. Noth- In 2004, heeding a desire to see ing is illegal.” the wider world, Mr Augier headed

for China, where he put some of his Was the senior Chinese official’s fortune into founding a new chain plan to avoid paying capital gains of Western-style bookshops. This tax on the sale? Whatever his in- led to his setting up International tentions, the French businessman Bookstores in 2005 with two busi- and Mr Rougeaux bought about ness partners: Jacques Rougeaux, 30% of the capital of International a French engineer based in China Bookstores, and Mr Augier became like himself, and a Chinese busi- its managing director, while the nessman. French engineer took care of set- Three years later, in 2008-09, Mr ting up the company in the Cay- Augier, who was still living and do- man Islands. ing business in China, joined sev- Soon after, in 2006, it came to a eral international shareholders and clash with Xi Shu. Mr Augier says tour operators, some of them Eu- he felt cheated, having realized ropean, to set up a second offshore that the bookshops were in debt. structure in the Cayman Islands. He resigned but was unable to sell Mr Augier was willing to explain his shares. Mr Augier states that he his actions regarding these two op- has no idea what the company does erations. The French publisher, who now. owns Books magazine and, since Asked about a second offshore January 2013, Têtu, France’s leading firm set up in 2008-09 with tour gay magazine, says that he was asked operators of various nationalities to set up International Bookstores by to manage investments whose ac- one of his then partners, Xi Shu, a tivities he refuses to disclose, all prominent figure in China who owns Mr Augier will say is that it was a chain of bookshops. based in the Cayman Islands at the Xi Shu was interested in Mr Augi- request of his business partners. er’s European business experience The fund has reportedly now been and was keen to enter into partner- moved to Hong Kong. ship by selling Augier a stake in his “You think I’m reckless?” he re- bookstore business. He insisted, plied to Le Monde’s probing about however, on establishing a holding the timing of this arrangement at company in the Cayman Islands in the height of the global financial a move that was very popular with crisis just as the G20 was declaring Chinese entrepreneurs at the time. war on tax havens. “Put it down to

my adventurous nature. Maybe I lacked prudence.” Maybe, yes. There are two burn- ing questions about the French publisher’s offshore investments. The first is obviously about the legality of these operations and whether Mr Augier — a Frenchman who set up Eurane, a company whose assets Online Video: What are offshore tax are quite separate from his person- havens, who uses them, and how do al fortune, to host his international they work? Find out in our explainer. business activities — knew that he was breaking French law. The law is very clear. According auditor, a member of one of the to Article 209-B of the French Gen- “grands corps de l’État” and a rep- eral Tax Code, any French compa- resentative of Republican values ny owning, either directly or indi- really be getting involved in ar- rectly, a legal entity that has no real rangements of this kind and prop- business activities but does harbor ping up the financial secrecy of “liabilities” (dividends, loans, etc.) offshore territories? in a country with a preferential tax Speaking anonymously, a senior regime is subject to French tax in civil servant offered this observa- proportion to its offshore invest- tion: “We live in a world in which ments. This does not appear to ap- exchange controls have been abol- ply to Mr Augier’s case. He further ished but where countries do not states that all his operations are le- have equal taxation rights. There gal and have been declared. is a jungle of rules, and a lot of But how can this be verified loopholes for business. Many peo- for companies that publish no ac- ple confuse the law with morals. counts? And hasn’t Mr Augier got Taxation is a matter of law. Tack- himself into a sticky situation with ling financial secrecy is something a company he cannot pull out of? else entirely — a different dimen- The second question is naturally sion where everyone is a judge.” n one of ethics. Even if these operations are legal, should a treasury Translation: Simon Pare

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 81 ‘Crony’ of African Strongman Among Thai Names in Secret Offshore Files By Prangtip Daorueng, Prasong Lertrattanavisuth, Sanoh Sukcharoen and Montree Juimoungsri Published Online: April 3, 2013

Nearly 600 Thais have owned offshore companies in the British Virgin Islands and other havens.

oliticians and billionaire business magnates are Pamong the prominent Thais listed in secret documents as owners of offshore holdings in tropical tax havens. The list includes the former wife of ousted Prime Minister Thaksin Shinawatra, a sitting senator, a former high-ranking defense ministry Nalinee Taveesin: former Thai official, Forbes-listed tycoons, and a minister whose U.S. assets are frozen former government minister whose because of her alleged links to Robert assets in the United States are fro- Mugabe. Photo: AP

zen because of her alleged links Among those who appear as cli- to Zimbabwean dictator Robert ents in the data is Nalinee Taveesin, Mugabe. a former government minister who Documents obtained by the ICIJ is currently Thailand’s internation- and examined by Bangkok-based al trade representative. news portal Isra show nearly 600 In 2008, she was designated as Thais owning offshore companies one of four “Mugabe regime cro- in overseas havens such as the Brit- nies” by the U.S. Department of the ish Virgin Islands (BVI) and the Treasury’s Office of Foreign Assets Cook Islands. Control (OFAC). Some of the entities owned by The OFAC’s 2008 statement was politicians have been previously strongly worded, particularly in ref- self-declared under tough local anti- erence to Taveesin. “Ironically,” it graft laws, but at least one may have said, “Nalinee Taveesin has partici- escaped scrutiny from authorities. pated in a number of initiatives on Thai anti-corruption laws re- corruption and growth challenges quire all elected politicians and in Africa and Southeast Asia while those holding political posts to secretly supporting the kleptocrat- reveal their wealth. Officials and ic practices of one of Africa’s most their spouses are prohibited from corrupt regimes.” holding more than 5 percent of The OFAC statement became a shares in privately or publicly listed point of controversy in Thailand companies, and politicians must when Taveesin was appointed min- list their work positions, such as ister for the prime minister’s of- directorships of companies, going fice in January 2012. She strongly back five years from the time they denied the allegations, saying that take office. her relationship with the Mugabes The ICIJ unearthed details of is “strictly social” and that she is a the offshore holdings through an victim of guilt by association. analysis of about 2.5 million files Taveesin is currently under scru- largely associated with two offshore tiny by the Thai National Anti-Cor- services providers, Singapore-based ruption Commission (NACC) over Portcullis TrustNet and British Vir- an unrelated matter. The commis- gin Islands-based Commonwealth sion is investigating whether she Trust Limited. concealed her wealth through an

intricate series of stock transac- When asked if it was possible that tions before she took political of- Taveesin’s brother, Anuraj Mishra, fice in 2008. was a shareholder of Hall Kingston Analysis of the secret documents International Limited, Supavadee obtained by ICIJ appears to show repeated, “She [Taveesin] had no Taveesin and her brother Anuraj knowledge about the company and Mishra in 2008 bought a company none of her family members were called Hall Kingston International involved in the company.” Limited that had recently been in- Taveesin continued to deny her corporated in the British Virgin Is- involvement when later confronted lands. They appear in the documents with information from the ICIJ doc- as directors and shareholders. uments that shows the address used The offshore company was ac- for the directors and sharehold- quired shortly after Taveesin’s first ers in Hall Kingston International appointment to a political position, Limited matched the registered as secretary to the commerce min- address of a number of Taveesin’s ister in 2008. The company does companies in Bangkok. not appear in her 2012 public state- “She insisted on her earlier re- ment of assets. Though the compa- sponse,” said secretary Supavadee. ny still exists, according to records “She never heard about the com- in the BVI, it is unclear whether it pany. She has never been its share- had to be publicly declared. holder. She doesn’t know anything Responding to questions whatsoever.” through her secretary at the Thai- According to her asset declara- land Trade Representative’s Office, tion to the NACC after she took Taveesin said she had no knowl- office as a minister in 2012, Tavee- edge of the existence of Hall Kings- sin reported she owned a 4 percent ton International Limited. “She interest in 32 different businesses, [Taveesin] strongly affirmed that ranging from spas, import-export, she had neither known nor heard ticketing, computers and telecom- about this so-called Hall Kingston. munication. The information about her being Many shared the same address [a company] shareholder is incor- as listed for Hall Kingston Interna- rect,” said the secretary, who identi- tional Limited. fied herself as Ms. Supavadee. Taveesin’s brother, Anuraj

Mishra, is shown at a different Bangkok address in douments obtained by ICIJ — one that matches the residence of Taveesin’s mother, as reported in Taveesin’s official 2012 assets report. The documents show that, in 2008, Mishra separately set up another BVI company called Sino King Group Hold- ings Limited with Ernesto Guerra Pires, a general in the Angolan Armed Forces. Each held a 50 percent share. Mishra could not be contacted for comment, despite repeated attempts to reach him. An official portrait of Nalinee Taveesin. Others who appear in the ICIJ documents include Pot- jaman Na Pombejra, the former wife Shinawatra’s family assets were of Thailand’s ousted Prime Minister seized after he was found guilty by Thaksin Shinawatra, and her step- the Supreme Court of corruption brother Bhanapot Damapong. and abuse of power to benefit his Potjaman and Damapong, along family’s telecommunication com- with former premier Shinawatra, pany, Shin Corporation, while he were charged with corruption after was prime minister. Later the same a military coup in 2006 that ousted year, the Supreme Court also de- Shinawatra from power. termined that he used offshore Potjaman and Shinawatra ob- entities to conceal his ownership tained a high-profile divorce at the of shares in Shin Corporation — Thai consular office in Hong Kong ownership that ought to have been in 2008. revealed under Thai law. In 2010, about $1.4 billion of The ICIJ documents reveal that

while the former Prime Minister’s Potjaman and Damapong to three then-wife Potjaman was fighting years’ imprisonment in 2008 over the her separate court battles against tax evasion charges. However, they the corruption charges she pur- were immediately released on bail. chased an offshore company called In 2011, an appeals court acquit- Premium Select Inc. ted Potjaman and reduced Dama- It was incorporated in the British pong’s sentence to two years, with Virgin Islands in 2007, and soon af- the jail term suspended. ter she was listed as the sole owner. The ICIJ data shows Damapong The company was set up with the was the owner of two other BVI help of a Singapore subsidiary of companies. He purchased Bounti Swiss banking giant UBS. Two BVI holding companies were appointed as on- paper stand-ins for Potja- man — Execorp Limited as the “nominee” director and Sharecorp Limited as “nominee” shareholder. It is unclear what Pre- mium Select Inc. was used for, if anything. It did not last long. Potjaman did not pay the company’s license extension in mid-2008. Thaksin and Potjaman Shinawatra That was the same year she and her stepbrother Damapong were found guilty in a Harvest Corporation in BVI in separate tax evasion court case, 2004, using the same companies also involving Shin Corporation. — Execorp Limited and Sharecorp Potjaman’s lawyer, Somporn Limited —as nominee shareholder Pongsuwan, did not return several and director. phone calls seeking information on It is unclear from the data what the offshore entity. Bounti Harvest was used for. It went A criminal court sentenced both defunct in 2009.

In 2006, Damapong bought ny Vnet Capital International Co., Tropic Offshore Holdings Inc., Ltd in 1998. and was registered as its owner un- Kengrian was appointed a mem- til 2007. Both of these companies ber of the National Legislative were also registered through UBS Council after the military coup in AG Singapore. 2006. He resigned as a naval offi- Damapong could not be contact- cer in 2007 but was later appointed ed for comment. chairperson of a transportation Both Potjaman and Damapong committee under the National Leg- are now free of their legal difficul- islative Council with a mandate to ties. They live in Thailand while investigate corruption cases within Shinawatra remains in exile, invest- the Ministry of Transportation that ing in various businesses through a had allegedly occurred under the host of companies registered over- previous government led by Shi- seas. nawatra. One of his past investments was Kengrian said he had bought the 2007 purchase of the British a small stake in the company as a Premier League soccer club Man- personal investment. “I have nev- chester City for $163 million, which er gotten involved with company he sold for a reported $36 million management,” he said. “As far as profit to Abu Dhabi United Group I understand, the company has one year later. changed status. It has merged with Among the hundreds of other another company a while ago. I do Thai names that appear in the ICIJ not really have the details though.” data is Sen. Prasert Prakoonsuk- There is no suggestion Kengrian sapan, who properly declared his avoided his disclosure responsibili- ownership of Singapore-based Met- ties. alsing Private Limited in his asset Also found in the ICIJ data are reports soon after he won a senate members of the Chirathivat family. seat in 2008. In 2012, Forbes magazine listed the Another is Adm. Banawit Ken- retailing family as the second rich- grian, the former deputy perma- est in Thailand, worth about $6.9 nent secretary of defense, who is billion. listed as one of many shareholders The documents show Sudhitham in the British Virgin Islands compa- Chirathivat as a shareholder and

director of the BVI company Dai- Fund Limited, based in Grand Cay- ly Legend Investment Limited in man. The company was registered 2008. It is unclear what it was used in 1998 through the service of infor. The entity, set up through Gold- ternational law firm Baker & McK- man Sachs (Asia) LLC, based in enzie in Hong Kong. Hong Kong, went defunct in 2009. Supavee Vongkusolkit, a family Another family member, Sakchai member, said that Pan-Asia Sugar Chirathivat, and his wife, Suran- Fund was no longer active. “It does grat, controlled a company called not have anything to do with [Mitr Vintage Gold Investment Limited, Phol Sugar]. It is a personal com- incorporated in the BVI in 2008. It pany,” she said. was also set up through Goldman The ICIJ documents also contain Sachs (Asia) LLC. the name of the singer and guitar- Sudhitham Chirathivat was over- ist Yuenyong Opakul, who leads one seas when ICIJ/Isra called for his of Thailand’s most famous string response. According to his secre- bands, Carabao. In 2008, Baker & tary, he is scheduled to return to McKenzie Ltd. (Thailand), helped Thailand but had yet to confirm Opakul register as the owner of the date. Sakchai and Surangrat Superp Offshore Investment Ltd, Chirathivat’s could not be contact- based in the Republic of Mauritius. ed despite calls to different branch- The other owners of the compa- es of the family’s retailing firm, ny were listed as the businessmen, Central Group. Sathien Setthasit and Nutchamai The Vongkusolkit family is an- Thanomboon. other whose name appears in the Opakul, Setthasit and Thanom- documents. In 2012, Forbes listed boon are shareholders of the Thai- the family as the 12th richest in land-based energy drink company Thailand, worth about $1 billion. Carabao Tawandang. Isara Vongkusolkit, chairman of Setthasit did not return a phone Thailand’s biggest sugar company, call. Opakul and Thanomboon Mitr Phol Sugar Corp. Ltd — along could not be contacted for com- with four family members, all of ment. n whom are on the company’s board — appear as the beneficial owners Contributor to this story: of a company called Pan-Asia Sugar Kimberley Porteous

Watermill at Gennep by Vincent Van Gogh, held at the Carmen Thyssen-Bornemisza Collection at the Museum Thyssen-Bornemisza Mega-Rich Use Tax Havens to Buy and Sell Masterpieces By Mar Cabra and Michael Hudson Published Online: April 3, 2013

Famed Spanish art patron oru ists who come to Spain’s capital often make a uses island haven in Tpilgrimage to the museums South Pacific to manage in Madrid’s so-called Art Triangle. After the Prado and the Reina her collection. Sofia, the next stop usually is the Thyssen-Bornemisza. The Span-

ish state owns the majority of the but allowed her attorney, Jaime Ro- paintings inside this museum, but tondo, to discuss her art and her it also holds much of the private offshore companies. collection of Carmen Thyssen-Bor- Rotondo acknowledged that nemisza, one of the world’s biggest Thyssen-Bornemisza gains tax ben- art collectors. efits by holding ownership of her What visitors don’t know as they art offshore, but he stressed that look at these Monets, Matisses and she uses tax havens primarily be- other masterpieces is that many of cause they give her “maximum flex- them are legally owned by secrecy- ibility” when she moves paintings guarded companies in tax havens: from country to country. Liechtenstein, the Cayman Islands, “It’s convenient,” he said. “You the British Virgin Islands and the have more freedom to move the as- Cook Islands. sets, not just buying or selling, but Van Gogh’s 1884 painting, Water also circulation.” Mill at Gennep, is one of the works Offshore ownership helps pre- Thyssen-Bornemisza purchased with vent works of art from getting tied the help of an offshore operative up by laws in various countries that based in the Cook Islands, a South can make it “a nightmare” to trans- Pacific haven more than 10,000 miles fer them across national borders, from Madrid. he said. Documents obtained by the ICIJ Thyssen-Bornemisza isn’t alone show how Thyssen-Bornemisza built in using offshore havens to manage up part of her collection buying art her vast art collection. Many of the from international auction houses multi-millionaires and billionaires such as Sotheby’s and Christie’s who count themselves among the through a Cook Islands company. world’s biggest art collectors use The offshore service provider now tax havens to buy and sell art, ex- called Portcullis TrustNet helped perts told ICIJ. with the arrangements under a se- Using offshore entities to buy cretive structure that connected and sell art “is quite common people in as many as six different among the very, very wealthy,” said countries. Hector Feliciano, a Puerto Rican Thyssen-Bornemisza, 69, didn’t journalist who investigated the reply to ICIJ’s questions directly, commercial side of the art world for

his book about Nazi-plundered art, wrongdoing, asserting that they The Lost Museum. were following the recommenda- Feliciano said many art dealers tions of their financial advisers. and big collectors use companies in Charles Wyly, 77, died in a traffic the Cayman Islands, Luxembourg, accident in August 2011. Monaco and other “loosely regu- Thyssen-Bornemisza’s attorney lated” jurisdictions to trade and said she paid sales taxes for her own art in much the same way they paintings in the countries where use offshore entities to make invest- she bought them, but she doesn’t ments, reduce their taxes and pro- pay annual wealth taxes on them tect their fortunes. in Spain or Switzerland, where she “Art to them is one more thing to holds a passport. be bought and sold,” he said. Rotondo said a loophole in The global art market now tops Spanish law allows her to live in $55.1 billion. The mixing of art Spain most of the year, but not de- and offshore is another example of clare her wealth or pay taxes. She how the super-rich use tax havens declares her assets in Switzerland, to organize their lives and their be- he said, but she doesn’t have to pay longings — buying and selling art, taxes there on her art because as- yachts, homes and jewelry through sets held in trusts are exempt from offshore companies and trusts. taxation under Swiss law. In the United States, a 2006 Sen- Had the paintings been owned ate investigation found that bil- directly under her name, instead of lionaire brothers Sam and Charles through offshore entities, she may Wyly and their families had spent have been required to pay millions “at least $30 million in untaxed off- of dollars a year in taxes, ICIJ’s re- shore dollars” on artwork, jewelry search indicates. and furnishings over a 13-year period. A $937,500 portrait of Benja- A public secret min Franklin and other items were legally owned by two offshore cor- Carmen “Tita” Cervera became a porations, but the report said evi- celebrity in Spain in 1961 when she dence showed that the family held won the Miss Spain contest. She and used these assets in the U.S. was the third runner-up in the Miss The Wyly brothers denied any Universe pageant. A few years later,

she married Hollywood actor Lex Trustees Limited sold 775 paintings Barker, known for playing Tarzan. — about half of the collection — to After Barker died of a heart attack the Spanish state for $350 million. in 1973, she appeared in a few films Spanish law considers Bermuda as as an actress and raised a son, Borja. a tax haven. Her life changed dramatically in That same year Carmen “be- 1985 when she married business- came fully aware of her role as a man and art collector Baron Hans collector,” according to the muse- Heinrich von Thyssen-Bornemisza. um’s website. She began building Born in the Netherlands to a up her own art collection using the German baron and a Hungarian same secretive structures used by baroness, Hans Heinrich inherit- her husband. ed a global fortune with dozens of In March 1994 Nautilus Trust- companies that ranged from glass ees Limited was incorporated in production to shipping. He lived the Cook Islands with the help of in several European countries and TrustNet, the offshore services pro- had four wives — and four children vider, internal records show. The — before he met Carmen. company’s 2,000 shares were put He himself used offshore to man- in a “bearer certificate.” Whoever age his money and his art collec- held that piece of paper, held their tion, partly as a way of preserving ownership. It was immediately sent control and confidentiality amid to prominent law firm Lenz & Stae- battles among his children and ear- helin in Zürich to be kept safely. A lier wives over his wealth, accord- month later TrustNet incorporated ing to Rotondo. The legal owner Sargasso Trustees Limited, using of the Thyssen-Bornemisza’s fam- similar procedures. ily collection was Favorita Trustees Emails obtained by ICIJ show Limited, a Bermuda company likely that Carmen Thyssen-Bornemisza named after Villa Favorita, the fam- was the two offshore companies’ ily’s home in Lake Lugano, Switzer- owner. Her lawyer in Spain, Ro- land, where the collection resided tondo, declined to comment on for many years. whether she was the owner, but In August 1993, just 10 months confirmed her connection to the after the baron opened a museum companies. under his name in Madrid, Favorita Rotondo said the Swiss lawyers

used corporate structures that obscured shareholders’ identities because she needed to “protect” the art work from the aging baron’s sons at a time when it was unclear how his wealth would be divided after his death. The family tradi- tion of fighting over his fortune would continue until he died in 2002. Nautilus Trustees Lim- ited appears to be the vehicle Carmen Thyssen-Bor- nemisza used to purchase Water Mill at Gennep, a work on which Van Gogh, painting entirely outdoors in November 1884, tried out “pure touches of co- lour for the first time, Carmen Thyssen-Bornemisza. bringing him closer to Im- pressionism and heralding his mature style,” according to the “Please find enclosed various Thyssen-Bornemisza museum. correspondence received from So- It was sold at a Sotheby’s auction theby’s. In particular we have rein London for £500,000 ($760,000) ceived correspondence as to the on June 24, 1996. Three weeks later purchase of ‘Watermill Gennep’ TrustNet received correspondence [sic] by Vincent Gogh [sic],” the about the sale at its offices in Raroton- July 18, 1996, letter said. ga, the Cook Islands’ capital. Trust- The Van Gogh did not end up in Net faxed a note to alert the Swiss Rarotonga nor Zürich. It landed in firm Lenz & Staehelin — its contact Madrid at the Thyssen-Bornemisza for Nautilus Trustees Limited. in late 1996 — the same year Car-

men’s private collection was first ed in a new museum with her name shown in public. in Málaga, in the south of the coun- Between July 1995 and Novem- try, which opened in March 2011. ber 2002 TrustNet received at least The Carmen Thyssen-Bor- 31 invoices and statements from So- nemisza collection remains in theby’s and Christie’s for Nautilus Spain temporarily, though, giv- Limited, then called Nautilus Trust- en up “for free” thanks to a loan ees Limited. The correspondence agreement signed in 1999 with shows charges for £202,912.50 then-Minister of Culture (and now (about $300,000) from Christie’s Prime Minister) Mariano Rajoy. It in London in relation to “an ex- was due to expire in 2011, but it has port licence” and $302,605.06 for been renewed yearly since then — Sotheby’s client account number although the number of paintings 3012374. has decreased 35 percent because TrustNet records also include of the move to Málaga. In return, six invoices from Momart, an in- the public foundation that owns ternational art transport company. the Thyssen-Bornemisza museum Other correspondence came from in Madrid receives around €4 mil- the Metropolitan Museum of Art lion annually in subsidies. Public in New York, Kunsthaus Lempertz funds also paid for an expansion in Cologne, Germany, and auction between 2002 and 2004. houses Bonhams and Phillips. The yearly agreement is pub- Today Carmen Thyssen-Bor- lished in the Boletín Official del nemisza’s public collection includes Estado (Official State Gazette). It around 700 works of art, records states that the contract is signed be- show. According to a recent official tween the foundation, presided by estimate, it’s worth more than half the Minister of Culture, and “Omi- a billion dollars. cron Collections Limited, Nauti- It not only includes Water Mill lus Trustees Limited, Coraldale at Gennep but also paintings from Navigation Incorporated, Imiberia renowned artists such as Canaletto, Anstalt and the Baroness Carmen Munch, Picasso and Goya. Apart Thyssen-Bornemisza.” The four from Madrid’s museum, some are companies mentioned are all incor- shown in Barcelona, and about a porated in tax havens. third of the pieces are now exhibit- Although Swiss magazine Bilan

ranked her as the seventh-richest Andorra, a landlocked microstate woman in Switzerland, with an esti- tucked between Spain and France, mated family fortune between $1.6 which has had a long history as a billion and $2.1 billion in 2011, tax haven. Some months later, the Carmen has complained that most company was renamed as Nautilus of her wealth is tied up in art. In Limited. Sargasso Trustees Limited May 2012 she announced she had was closed by then. to sell one of her masterpieces — Borja Thyssen-Bornemisza de- The Lock, by Constable — because clined, though his lawyer, ICIJ’s re- she needed cash. quest to comment. “I may be a millionaire in art, Having endured a family quarrel but not in liquidity,” she said. over her husband’s fortune, which The Lock’s auction at Christie’s in ended with a secret agreement in London closed at £22.4 million ($34 2002, Carmen now is in the midst million), making it one of the most of a new family battle. Both mother expensive British paintings ever and son are engaged in a legal fight sold. Thyssen-Bornemisza’s attorney disputing who owns what, and re- confirmed she sold it through Omi- portedly the two hardly talk since cron Collections Limited, her com- Borja married in 2007. In an Octo- pany in the Cayman Islands. ber 2011 interview Carmen denied they had any companies in com- A (new) family battle mon. Among the several issues in A change in Cook Islands law in question, there are two paintings. 2003 required Thyssen-Bornemisza Borja said that a Goya and a Gia- to send her “bearer certificate” to quinto, with an estimated value of TrustNet. But her lawyers couldn’t $9 million, were his. Carmen said find it — not in Zürich, Bermuda that they were from the baron and or Madrid, correspondence shows. he never gave them to her son. Emails from the end of 2004 indi- They are both owned by Cayman cate that she was no longer the sole Islands-based Omicron Collections shareholder of Nautilus Trustees Limited. Limited. Her then-24-year-old son Borja lost that case because he Borja had 45 percent of the compa- could not prove that the paintings ny. Both were using an address in were his. n

Russian President Vladimir Putin used his first state-of-the-nation address in December 2012 to denounce offshore tax havens. Photo: AP Elites Undermine Putin Rail Against Tax Havens By Roman Shleynov Published Online: April 4, 2013

Owners of corporations he deputy prime minister’s wife, as well as top registered in British Tmanagers of major Russian Virgin Islands include military contractors and of giant government-controlled companies, top managers of state- are among an array of Russian fig- controlled giants. ures with secretive offshore investments revealed in documents obtained by the ICIJ.

The disclosure puts President linked with the defense sphere be- Vladimir Putin’s persistent call for come the secret shareholders of curbing offshore investments in a offshore companies, it may bring new and ironic light: he is well ac- harm to state security. … The ques- quainted with at least one of the tion is: What is more important to offshore investors the documents them, the interests of the state or identify. their private offshore interests?” Even before the 2012 election ICIJ’s investigation found that returned him to the presidency, owners of corporations registered Putin was calling for curbs. In Feb- in the British Virgin Islands includ- ruary, he introduced a draft law to ed top managers of state-controlled bar senior Russian officials from giants including Gazprom, one of holding bank accounts or stocks the world’s largest extractors of outside Russia, which has now natural gas. Others in the docu- passed the first stage of adoption ments include relatives of ranking in the Russian Parliament. And in Russian officials and prominent his state-of-the-nation address, Pu- private business people. tin said Russia’s economy is hurt because so much of it operates None of the Russians named in through offshore tax havens. the documents responded to re- Upon releasing a recent study quests for comment about the pur- of the Russian economy, Global Fi- poses of the companies. Among nancial Integrity, a Washington re- the offshore investors were these search and advocacy organization, well-connected luminaries: said illicit offshore flows of money • Olga Shuvalova, wife of Igor are so great that they raise “serious Shuvalov, who has served as first questions about the economic and deputy prime minister since political stability of the nation.” 2008. In 2007, the documents Ruslan Milchenko, a former show, she became a sharehold- Moscow police officer who heads er in Severin Enterprises Inc., the Federal Information Center for which was registered in the Brit- Analysis and Security, a nongov- ish Virgin Islands and owned at ernmental organization, added in least two other offshore compa- an interview: “When top managers nies that owned still others. The of state-controlled corporations dealings of one of the compa-

nies, called Sevenkey Ltd., were industry and energy. The docu- laid out in a 2011 investigative ments show him as a sharehold- article in Barron’s, which tied er in a BVI corporation called the company to her husband, Dreemlover Ltd. He could not who has denied wrongdoing. be reached for comment. But new documents identify cor- • Vladimir Margelov, a member porations beyond those Barron’s of the board of administration discovered. for the Russia-Belarus joint ven- • Valery Golubev, deputy chair of ture Defense Systems, a state- the management committee of controlled group of developers Gazprom. The documents show and manufacturers of air de- that he held half of the shares of fense systems. The documents Sander International Inc., which show him as a shareholder and was registered in the British Vir- director of Winkind Technology gin Islands in 2008 and was dis- Development Ltd. in 2005 and solved later the same year. His Innovation Tech Group Ltd. in personal ties to Putin go back to 2008. the 1990s, when they worked together. The ICIJ documents, the largest collection of secret offshore • Boris Paikin, the general di- corporate documents ever made rector of a Gazprom construc- public, identify many Russian busi- tion subsidiary called Gazprom nessmen as owners of companies Sotsinvest that builds such proj- incorporated in the British Virgin ects as a $200 million stadium in Islands. St. Petersburg and an Olympic Much that happens offshore is ski resort. He also held Sander illicit — money laundering, tax International shares. evasion and bribery. But wealthy • Andrey Reus, a former direc- Russians have other reasons to do tor general of Oboronprom, a their business offshore. part of the Russian Technolo- After the Soviet Union col- gies State Corporation whose lapsed, the weak Russian state in products include helicopters, jet the 1990s offered little structure engines and power plants. He is for business or for protection of also a former deputy minister of money, and much of the money

made by the “oligarchs” — the faster than Russian financial insti- early Russian business figures who tutions do. made billions by privatizing state- Raymond Baker, director of owned businesses — was shipped Global Financial Integrity, agrees offshore for protection. with Putin that offshore dealings Alexander Zakharov of Paragon hurt Russia. “Hundreds of billions Advice Group, a private firm that of dollars have been lost that could offers tax advice to Russian busi- have been used to invest in Russian nesses and high net worth individ- health care, education, and infra- uals, said that for legal matters the structure,” Baker said in announc- wealthy much prefer the courts of ing GFI’s recent report. “At the Great Britain, which oversees many same time, more than a half trillion of the tax haven islands, to those of dollars has illegally flowed into the Russia. Further, he said, offshore Russian underground economy, fu- jurisdictions conclude deals much eling crime and corruption.” n

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3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 99 Ponzi Scheme Used Offshore Hideaways to Shuffle Investors’ Money By Marina Walker Guevara and Emilia Díaz-Struck Published Online: April 4, 2013

Bribes for Venezuelan share of profits from a transaction — into three HSBC bank accounts officials were funneled in Switzerland, via an HSBC account through tax havens, court in New York. “Dude, I am your biggest produc- filings claim. er hahahahaha,” Beracha wrote in Spanish before he sent the message rano cisc Illarramendi of- off to Illarramendi. ten called on Moris Beracha A pair of lawsuits in U.S. federal Fwhen he needed an infusion court claim the two men were at the of cash. center of a half-billion-dollar Ponzi The Venezuelan-born Illarra- scheme that shuffled investor mon- mendi was a manager of a Connect- ey among a maze of offshore com- icut-based investment advisory firm. panies, hedge funds and bank ac- Beracha was a Venezuelan financier counts stretching from the Cayman close to the Hugo Chavez govern- Islands to Switzerland and Panama, ment who, a lawsuit against him smoothing the way by funneling claims, could produce multi-million- bribes to officials in Venezuela. dollar advances of cash with relative The scheme collapsed in 2011, ease — for the right price. causing losses of hundreds of mil- On Nov. 2, 2007, Beracha emailed lions to investors, including a mem- Illarramendi instructions to deposit ber of one of Latin America’s rich- more than $10 million — Beracha’s est families. According to court

documents, the Ponzi scheme also “Black” — of pocketing more than ate up part of the pension fund of $30 million in bribes in exchange Venezuela’s government-owned oil for approving complex “bond-swap” company, Petroleos de Venezuela, transactions between PDVSA’s pen- or PDVSA, a piggy bank for Chavez’ sion fund and Illarramendi‘s hedge socialist revolution. funds. Some of the companies used in Carney claims it was Beracha, the scheme are included in a cache with his network of contacts among of 2.5 million secret offshore files the rich and powerful in Venezu- obtained by the ICIJ. ela, who helped Illarramendi keep Illarramendi pleaded guilty to the fraud going. He alleges in the criminal charges in 2011. John J. Carney, a receiver appointed by a U.S. judge to clean up the Ponzi mess, is pursuing a lawsuit that accuses Beracha of providing “the money or access to money that kept Illar- ramendi and his The Ponzi scheme ate up part of the pension fund of scheme afloat.” Venezuela’s government-owned oil company, Petroleos Beracha has de Venezuela. not been charged criminally in the U.S. He asserts that he was not part lawsuit that Beracha injected fresh of the scheme but one of Illarra- money into the scheme in return mendi’s victims. for “exorbitant fees and kickbacks.” The receiver has also accused a Illarramendi and Beracha, Carney Venezuelan government official — claims, made more than $170 mil- Juan S. Montes, a senior investment lion in fraudulent transfers via a manager at PDVSA, nicknamed web of offshore companies.

Beracha, who owns a broker- schemes usually include offshore el- age business and a mobile phone ements — bank accounts and com- company that operates throughout panies in overseas hideaways that Latin America, strenuously denies allow financial criminals to obscure wrongdoing and says he is entitled the origins and destinations of the to the return of $140 million. “I huge sums of cash needed to keep never knew that Illarramendi was their schemes going. defrauding anybody until it became “Very rarely do you have one that public,” Beracha wrote to ICIJ in does not” include offshore com- Spanish. panies or accounts, says Michael I. In 2008, Beracha was an advi- Goldberg of Fort Lauderdale, Fla., sor to Rafael Isea, then Venezuela’s an attorney who often testifies as minister of finance. Isea served for an expert on Ponzi schemes. “If you years as one of Hugo Chavez’s clos- don’t, it’s usually a very parochial, est deputies. Podunk type of Ponzi. But the more The receiver’s lawsuit says that Ber- sophisticated ones almost always do.” acha controlled four British Virgin Is- Allen Stanford’s $7 billion fraud, lands companies used in the scheme: for example, was run through a bank Bradleyville Ltd, Northwestern In- he controlled in Antigua. Bernard ternational Ltd, Brave Spirit Ltd and Madoff used a series of offshore Rowberrow Trading Corp. All four “feeder funds” to fuel the growth of were incorporated through Com- his $65 billion house of cards. monwealth Trust Limited (CTL), a In the Illarramendi Ponzi case, British Virgin Islands-based offshore three hedge funds alleged to be at services firm that the islands’ finan- the core of the fraud were based in cial regulators sanctioned for violat- the Cayman Islands. ing anti-money-laundering rules. In addition, Carney alleges that the BVI companies controlled by Be- Offshore fraud racha received millions in payment for “no work, service or value.” The secrecy provided by offshore In a written court declaration, middlemen creates the perfect envi- Beracha claims he had disposed of ronment for fraud — and, especial- any majority stake in the four BVI ly, Ponzi schemes. companies well before Illarramen- Fraud experts say big Ponzi di’s crimes came to light.

But Carney says that Beracha used A lawyer for Montes, Elliot Green- the companies to channel money field, did not return emails and calls from the fees and interest — annual from ICIJ seeking comment on the loan rates of 80 percent were not un- allegations against his client. common — that he charged Illarra- In 2008, another one of Beracha’s mendi in return for funneling cash BVI entities, Brave Spirit, received into his money-losing hedge funds. more than $3.6 million from one of Bribes to pay the PDVSA pension Illarramendi’s funds “in exchange manager were also routed through for absolutely nothing,” the receiver Beracha’s offshore companies, ac- alleges. Internal records from CTL, cording to Car- Brave Spirit’s registered agent, in- ney’s court fil- dicate that Moris Beracha and four ings. other persons who share the name On March 22, Beracha were shareholders of Brave 2007, nearly $12 Spirit at the time. Moris Beracha million in money owned a fifty-percent stake and was for bribes was the sole director of the company, ac- transferred to cording to the records. one of the BVI “I don’t own or participate in any entities, North- company with that name,” Beracha Moris Beracha western Ltd, as wrote to ICIJ. well as two other Beracha once told Illarramendi companies con- in an email that they were “a team.” trolled by Beracha, according to the But in the heat of shuffling large receiver’s complaint. In one email amounts of money around the exchange later that year, Beracha world, things sometimes got tense and Illarramendi discussed a pay- between the men. Like when money ment of more than $7 million for transfers got delayed. “black.” Then Beracha wrote: “I will “Dude, you have me up sh-t’s give you the instructions for the new creek too much responsibility for account I am opening for him at me. Really send them like you are hsbc,” according to an affidavit filed telling me but pull the trigger. It’s by the receiver in court. mucho real papa,” Beracha wrote in Beracha said Carney’s bribery al- Spanish in a Dec. 4, 2007, email to legations are “false.” Illarramendi.

“We already know that doing this takes time and that we don’t like to send out multiple transfers on the same day,” answered Illarramendi. “We can’t drive ourselves crazy because the roads get cut off my friend.”

Shell game In 2010 the U.S. Securities and Ex- change Commission began probing Illarramendi’s business practices. SEC investigators found intricate financial transactions and virtually zero bookkeeping. They traced the Ponzi to a $5 million loss that Illar- ramendi suffered in 2005. From that point on the hole continued to grow as Illarramendi, a former Credit Suisse banker, “played a shell game” with investors’ funds Hedge fund manager Francisco to try to pay debts and conceal the Illarramendi leaves court in 2011 losses, according to court filings. where he plead guilty to five federal Court documents show that an charges. Photo: Handout early investor in the Illarramendi’s offshore hedge funds was Venezu- elan millionaire Oswaldo Cisneros, Documents filed in court by who owns one of the largest tele- Oswaldo Cisneros’ lawyers and as- communications companies in the sociates show that the Venezuelan country. His cousin, Gustavo Cisner- businessman invested around $117 os, together with other family mem- million in the Illarramendi offshore bers, has built a fortune that Forbes funds. estimates at $4.2 billion, including In 2004, a company linked to interests in television stations, a Oswaldo Cisneros was co-manager brewery and a baseball team. of one of the offshore hedge funds

later used in the scheme, Highview cept court papers for companies it Point Offshore Fund, created by Il- no longer represents. larramendi and two business part- Jonathan New, a New York at- ners in the Cayman Islands. An af- torney and former federal prosecu- fidavit filed by the receiver indicates tor who is working on behalf of the that Cisneros did this for “tax rea- receiver, says there are often many sons” and that Illarramendi and the layers of intermediaries between a others had exclusive authority to ex- company and its real owners. “You ecute trades. end up,” he says, “with almost like a A lawyer for Cisneros, Laurence Russian doll situation trying to fig- Curran, said his client cannot com- ure out where ultimately this ends ment because court proceedings are up.” ongoing. ICIJ contacted the Panamanian In March 2011, Illarramendi middleman who helped Beracha pleaded guilty to four counts of incorporate his companies through wire fraud, securities fraud, invest- CTL in the BVI. Dani Kuzniecky, a ment adviser fraud and conspiracy well-connected lawyer and former to obstruct justice. Two months later comptroller general of Panama, de- the SEC announced that it had re- clined to comment, citing confiden- covered $230 million of investors’ tiality and legal issues. money from a bank account in The Meanwhile, Beracha’s lawyers Netherlands. are fighting his case in U.S. courts, Investors quickly lined up to pushing to have the case moved to claim their money from the receiver, Venezuela, where an investigation who is still searching for money that by Venezuela’s Congress found all vanished in the scheme. government officials accused in the It’s often a game of cat and Illarramendi case innocent. mouse. When the receiver’s lawyers Beracha now lives in the Domini- tried to serve notice of the lawsuit can Republic. He says he has been to Beracha’s companies in the BVI, blackmailed in Venezuela. they found that the firms apparent- “I am a victim of Illarramendi’s ly didn’t exist anymore or had been fraud,” he wrote in an email to an transferred to other offshore juris- ICIJ reporter. In written responses dictions. CTL, the BVI registered sent later through a PR firm he said, agent, told the receiver it can’t ac- instead, that he was a victim of a

prosecution against Illarramendi in and self-propagating disinformation. which “I have been implicated with- My son never pled guilty to running out any legal basis.” a Ponzi scheme — the term isn’t even mentioned in his guilty plea nor in Extorted the transcript of the hearing. His attorneys have demonstrated that After the Illarramendi case was un- there was no such thing, and yet that covered, the Chavez government said is what every headline has been call- it would cover any losses suffered by ing it for the past two years.” the 25,000 PDVSA pensioners. The In a court filing, Francisco Illara- president of the association of pen- mendi said that he had been extorted sioners, César Delgado, told ICIJ that on multiple occasions and forced to the retirees have continued receiving pay out millions to Venezuelan gov- their pensions normally. But a group ernment officials, which resulted in of pensioners sent a letter to the U.S. losses for the hedge funds he adminis- Attorney’s Office of the District of tered. “My life and the lives of my fam- Connecticut in October 2012 say- ily were threatened with bodily harm ing that they had suffered financial if certain payments were not made to harm from Illarramendi’s scheme Venezuelan officials or their alleged and had not been able “to obtain re- intermediaries,” Illarramendi wrote. dress” from PDVSA. Illarramendi has been in a prison Rafael Ramírez, Venezuela’s min- in Rhode Island since late January ister of oil and mining, did not re- awaiting sentencing. spond to requests for comment. As for Cisneros, the Venezuelan Illarramendi did not respond to millionaire, he is fighting in court calls and emails from ICIJ seeking to get his money back. His name is comment. His father, Ramon Illarra- deeply buried in court filings. Like mendi, said in an email that his son most other characters in this story, is bound to silence as part of a con- Cisneros sits behind secretive off- fidentiality agreement reached with shore companies, including a Pana- the SEC during his plea negotiations. manian firm that is claiming $20 However, he added, “both the million from the receiver. n U.S. Attorney’s Office and the SEC have blatantly ignored such an agree- Contributors to this story: ment, creating a cloud of repetitive Francisca Skoknic and Michael Hudson

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 106 Deutsche Bank Helped Customers Maintain Hundreds of Offshore Entities By Christoph Heinzle, Lena Guertler, Mareike Fuchs, Bastian Brinkmann and Christoph Giesen Published Online: April 4, 2013

Largest German bank’s shore entities for its customers in the British Virgin Islands and other Singapore unit helped tax havens, according to secret re- birth companies and cords obtained by the news organizations. trusts in tax havens Most of the companies carry fan- tasy names like “Thrilling Returns ermany’s largest finan- Incorporated,” “Amazing Oppor- cial institution, Deutsche tunity Limited” or “Market Dollar GBank, helped its custom- Group Limited.” Public sources ers maintain more than 300 secre- don’t show any business activities tive offshore companies and trusts for most of these companies. through its Singapore branch, an Deutsche Bank registered the investigation by German newspaper entities with the help of Portcullis Sueddeutsche Zeitung, German pub- TrustNet, an offshore services pro- lic broadcaster NDR and the ICIJ vider headquartered in Singapore. has found. Many companies list Deutsche More than 100 customer consul- Bank subsidiary Regula Limited as tants at Deutsche Bank Singapore their directors. helped create or manage 309 off- A Deutsche Bank spokesman in

Frankfurt declined to answer a de- these home countries’ laws.” tailed list of questions from NDR Deutsche Bank’s private bank- and Sueddeutsche Zeitung, but gave ing operations ranked No. 6 among general comments. the world’s largest private banks, “Deutsche Bank is not offering increasing their assets under man- any tax advice or any service offer- agement from $180 billion in 2005 ing registration of companies in to $367 billion in 2010, according tax havens,” the spokesman wrote. to the study, which Henry did for The spokesman said Deutsche the Tax Justice Network, an inter- Bank takes “extensive precautions national group that’s critical of the to obstruct the misuse of the bank’s offshore system. products and services for money Overall, assets under manage- laundering,” but did not offer fur- ment by the globe’s 50 largest “pri- ther details. vate banks” grew from more than A brochure available on the In- $5 trillion to more than $12 trillion ternet from Deutsche Bank’s Pri- over the same period. vate Wealth Management unit ad- Frank Wehrheim, the former vertises “the creation, management head of the tax investigation unit and administration” of “trusts, in German financial hub Frank- companies, foundations” in several furt, charged that big banks such countries. as Deutsche Bank are responsible Private banking units of the for “aiding and abetting tax fraud, world’s largest banks often use off- money laundering and similar shore havens to serve their “high crimes.” Because of complex struc- net worth” clients and solicit depos- tures in tax havens, tax investiga- its from customers across national tors can “very rarely look into these borders. acts,” Wehrheim said. n A study last year by James S. Henry, former chief economist at Heinzle is an editor with the global consulting firm McKinsey & investigative unit of the radio Company, charges that giant pri- news channel NDR Info. Guertler vate banking units seek to “entice and Fuchs are reporters with the the elites of rich and poor countries investigative team of NDR TV. alike to shelter their wealth tax-free Brinkmann and Giesen write for offshore, usually in contravention of Sueddeutsche Zeitung.

A BNP Paribas conference room in their Paris office. French Banks Traded in Secrecy By Anne Michel Published Online: April 6, 2013

he “Offshore Leaks” Samoa and Singapore for clients in files published around the search of secrecy and lower tax rates. Tworld on April 4 show that, These are the findings unearthed from the late 1990s until the end of by the ICIJ, which has been re- the 2000s, two major French banks, searching the story for over a year. BNP Paribas and Crédit Agricole, According to these secret docu- oversaw the creation of a large num- ments, BNP Paribas channels op- ber of totally opaque offshore com- erations through its Singapore and panies in the British Virgin Islands, Hong Kong subsidiaries, whereas

Crédit Agricole relies on its Gene- For example, on the 17th of va-based Swiss subsidiary. April, 2012, Baudouin Prot, chair- Both banks have set up compa- man of the BNP Paribas banking nies through their Asian subsid- group, made a bullish declaration iaries with the help of Portcullis to the Senate investigative commit- TrustNet, a service provider that tee into tax evasion: “We make no specializes in offshore business and compromises in this area: we insist turnkey companies (the famous on being absolutely exemplary.” “quick” companies that can be in- On the 30th of January 2013, at corporated within 48 hours) for rich a parliamentary hearing during the clients claiming to be domiciled in review of the bill on splitting up and Asia and concealed by nominees. regulating the banking industry, the Setting up such firms is not in it- chief executives of the major French self illegal by law in English-speak- banks stated to a man that their off- ing countries, as long as such ser- shore activities were either marginal vices are not offered to clients in a or else related to funding the real country where this type of company economy (for example, financing is banned (which includes France, ships or planes in states with oblig- where the beneficiaries of a coming contract law arrangements). pany must be identified by law and The ICIJ’s files made it possible trusts are banned). to trace 56 international business However, such activities require companies — an entity comparable extreme vigilance. Experts in the to a trust — that BNP Paribas had fight against international tax eva- set up through its subsidiaries in Jer- sion and fraud all agree that any sey and Asia (Singapore, Hong Kong bank engaging in this kind of ac- and Taiwan), in the British Virgin Is- tivity exposes itself to a serious risk land, Samoa, and the Seychelles. of aiding and abetting tax fraud or Crédit Agricole also appears to even money laundering. have been very active, at least until The active involvement of the the end of the 2000s, and according two French banks in setting up to the ICIJ’s files set up 36 compa- these offshore firms contributes nies through Crédit Agricole Suisse to international financial secrecy SA and its Asian branches (Hong and contravenes the principles they Kong and Singapore). have repeatedly asserted in public. When contacted by Le Monde,

BNP Paribas’ CEO, Jean-Laurent gin Islands by BNP Paribas Private Bonnafé, refused to comment pub- Banking in Singapore, are domi- licly. Yet after examining its activi- ciled in Greece, i.e. in a European ties in Asia, the bank confirmed country that has been receiving that these firms did exist, but insist- financial aid from the European ed that half of them were no longer Union since 2010 and whose fi- operational today. nances are blighted by tax evasion. BNP Paribas claims that these They are George Macrymichalos companies were set up for Asian cli- and Dimitrios Charitatos. ents or clients domiciled in Asia in Sources in Athens have con- strict accordance with the law, that firmed that the latter is the son of the bank “knows the identity” of Catherine Drakopoulos-Charitatos these individuals and has “verified and grandson of the Greek shipping the funds’ origins, uses and pur- magnate George Drakopoulos, who poses”. The bank says that none of owned Empros Lines until his death these clients is European. in 2008. Mr Macrymichalos and Mr According to BNP Paribas, their Charitatos are the current company clients are not attempting to avoid directors of Empros Lines. inheritance tax, which is low in Asia, For its part, Crédit Agricole re- but simply trying to put their money fused to comment on confidential in a safe place in territories where information, hiding behind “bank there is business confidentiality so secrecy and other applicable con- that they can pass it on to their heirs fidentiality rules, non-compliance in secret when the time comes. with which is a punishable offence”. “Most inheritance in Asia and A senior official from the coop- the Commonwealth countries is erative bank did however empha- channelled through trusts in off- size that the bank had conducted shore territories,” says BNP Paribas a major cleanup of its activities in in justification. “It’s an accepted uncooperative tax havens (in their form of private banking.” relations with internal revenue However, the ICIJ’s information services or other countries’ judi- undermines BNP Paribas’ claims. cial authorities) in 2009 and 2010 It shows that the real shareholders following the G20 summit in Lon- of the company Muju International don in April 2009. In the wake of Limited, set up in the British Vir- the 2008 financial crisis, the major

economic powers had declared war the same nominees as its French on “palm-fringed jurisdictions”, as competitor, including companies they are known, and urged their such as Execorp Limited, Sharecorp banks to pull out of international Limited or Acticorp Limited, as financial black holes. well as fictitious directors and fake The ICIJ’s files lay bare a host shareholders that Portcullis Trust- of incredibly complex offshore ar- Net rents by the year. rangements. They are clearly de- This raises similar issues. What signed with concealment in mind was the purpose of setting up these - particularly from regulators. “vehicles”? What checks were car- This raises the question of their ried out? Can the bank vouch for beneficiaries’ intentions. They con- the identity and probity of its cli- tain multiple layers of bogus direc- ents? Can it guarantee that these tors and shareholders based at P.O. structures have not been used to box addresses in tax havens dotted shield money from taxation in the around the globe. country of origin? Is it not exposing Triple 888 Fortune Limited, itself to money laundering? which is registered in the British Experts say that French banks Virgin Islands, is a prime example. were among the first to react to The company’s directors include pressure from governments and bankers from BNP Paribas Jersey civil society in 2009 by withdrawing and other companies domiciled in from tax havens such as Panama the Virgin Islands and the Cayman that were seen as overly opaque and Islands. One of its shareholders is unwilling to cooperate with other UBS Nominees, a Swiss bank sub- countries’ tax and legal authorities. sidiary that specializes in supplying But this process of withdrawal has nominees. It is a freak of law that ground to a halt since. The banks’ would prove impenetrable to any activities lack transparency, and tax authority minded to take a clos- nameless trusts and unaudited offer look at its cash flows and legality shore firms are prospering. and to track down its true financial Although the banking industry beneficiaries. has made enormous efforts to im- The architecture of the compa- plement procedures to counter the nies set up by Crédit Agricole is just laundering of the proceeds of crime, as opaque. Coincidentally, it uses its actions to combat tax evasion and

fraud are considered insufficient. by-country basis worldwide, includ- A bank executive who wishes ing their turnover, the profits they to remain anonymous challenges make and the taxes they pay,” says these accusations. “The black list of this experienced observer of bank- tax havens drawn up by the OECD ing practices, alluding to the bank- [Organisation for Economic Co- ing law that is currently being ex- operation and Development] no amined by the French parliament. longer exists. Every one of them In his 2009 preface to a book by has signed a tax treaty. Why should Philippe Quême published in 2011 we refuse to work in territories that (Monnaie bien public ou “banque- are not on file?” he wonders, then casino”?, L’Harmattan), the former continues: “We apply rules when head of the Treasury wrote: “Banks they exist. If politicians have the are expected to behave in a socially courage to penalize countries they responsible manner and to keep a consider opaque, we’ll adapt. It’s close eye on the impact of their ac- not up to the banks to do the po- tivities (…) Governments and profes- licing. We’re not the police or the sionals are jointly responsible for en- army, let alone prosecutors.” suring that the globalization of trade For Daniel Lebèque, former does not go hand in hand with an head of the French Treasury and exponential increase in fraud and fi- president of the anti-corruption nancial crime including money laun- NGO Transparency International, dering, corruption and tax havens.” “one of the major challenges is to The NGO CCFD-Terre Solidaire set up a national register of trusts concurs with his analysis. “We know and other kinds of opaque offshore how shrewdly banks around the firms and foundations so that we world adapt to what they are or are know the names of the trustees, not allowed to do,” notes Mathilde managers and real financial benefi- Dupré. “Tax havens exist and they ciaries of these entities all around are harmful to states, especially de- the world. Transparency is one of veloping countries. They need to the pillars of the free market. It collect the taxes that are currently is non-negotiable. I am delighted slipping through their fingers.” n that France and subsequently Eu- rope decided to force the banks to This story was also published in Le report their activities on a country- Monde.

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 113 The Swiss Lawyers Who Help Europe’s Richest Families Park Their Wealth Offshore By Titus Plattner, Catherine Boss and François Pilet Published Online: April 9, 2013

Thyssen, Sachs and the internal revenue service would then reopen the case of one of his Rothschild are among clients, and yet that is precisely what Switzerland’s largest law the spokesperson for the tax authorities in Berne, Yvonne von Kauffun- firm clients. gen, announced on Thursday. This announcement was triggered by the itt le did Zurich-based publication of a preview based on lawyer Peter Hafter imagine our investigations into two decades Lhow things would turn out of correspondence between Portcul- when he ordered a $2,700 offshore lis TrustNet and Peter Hafter. kit to create a front company in Matin Dimanche and Sonntags the Cook Islands on September 13, Zeitung have reviewed hundreds of 1993. Twenty years on from that day, pages of confidential documents the fax he sent, the ensuing emails that are part of a cache of 2.5 mil- and all his business correspondence lion files obtained by the ICIJ — with Portcullis TrustNet in Raroton- probably the largest set of confiden- ga, the largest island in the archipel- tial financial data ever disclosed to ago, have been copied and passed the media. on to journalists around the world. The files offer a first ever glimpse Nor did the lawyer imagine that of how Swiss lawyers and trusts from

Geneva to St. Gallen helped clients wealthiest individuals — for example the world over establish offshore the banker Elie de Rothschild and firms and trusts to protect their as- industrialist Hans Heinrich Thys- sets from the taxman or over-zeal- sen — by setting up business entities ous heirs. “People don’t set up this in tax havens such as Panama, the kind of structure out of altruism, British Virgin Islands, Luxembourg but to gain a profit,” says Christian and Liechtenstein. This is known as Wanner, one of Switzerland’s lead- “asset protection” in commercial le- ing authorities on tax collection. galese, but some experts say it’s tax The offshore files show the role not only of Swiss banks but also of Swiss lawyers in helping foreign clients set up secretive offshore entities. “Someone who has set up dozens of offshore firms for foreign clients obviously risks becoming a target for foreign tax inspectors,” Zurich-based firm helped clients establish predicts Beat von Rechen- offshore firms and trusts to protect their berg, the president of the assets from the taxman or over-zealous heirs. Swiss Bar Association. Of his 9,000 members he estimates that only two to three hun- avoidance and evasion. dred are likely to be involved. “But, Peter Hafter, who is now 83, is not a bit like banking, our profession is just anyone. Prior to his recent and going through a paradigm shift,” gradual retirement, he was one of Beat von Rechenberg says. the mainstays of Lenz & Staehelin, Let’s go back to our lawyer and the largest law firm in Switzerland, his fax. He is just one of the many which has offices in Geneva, Laus- Swiss middlemen who feature in the anne and Zurich. It employs more offshore files. The documents show than 150 attorneys. how Peter Hafter helped arrange the On September 15, 1993 Peter financial affairs of some of Europe’s Hafter called for the first time —

but by no means the last — on the three sons. Yet, Gunter Sachs him- services on Portcullis TrustNet. self was a beneficiary of at least two From Zurich, over 10,500 miles of the funds and thus had access to away, he opened a limited liabil- the money. ity company called Triton Limited on the island of Rarotonga, some- Trusts run from Geneva where in the middle of the South Pacific between New Zealand and A “special arrangement” was found Hawaii. His client? The famous to keep the name of the settlor Gunter Sachs, a German-born pho- (Gunter Sachs) secret according to tographer and heir to the Opel dy- a memo dated April 4, 1999. He was nasty (Opel cars), Brigitte Bardot’s therefore swathed in secrecy, anon- ex-husband and a Swiss citizen ymous amid the anonymity of the since 1976. Yet Gunter Sachs does Cook Islands. He retained control not feature in any of Triton’s offi- of the funds, though, which were cial documentation. Its directors managed until his death by a Gene- are Peter Hafter and two of Sachs’ va-based company called Galaxar trusted associates. On paper it is SA. Another trust, Triton Trust, they who own the company’s 2,000 was set up as late as April 2007. bearer shares. Things began to heat up in 2008 Peter Hafter also set up a second when Gunter Sachs moved his do- front company called Tantris Lim- micile back to Switzerland after a ited along with four trusts — Park- brief interlude in London. Lenz & land Oak, Moon Crystal, Espan Staehelin prepared a dossier for Water and Sequoia — all of them the Swiss tax authorities in which incorporated in the Cook Islands Sachs declared a fortune of around between May 18, 1994 and July 22, $500 million. However, the most 1996. These firms were created to recent tax returns reviewed by Mat- host a substantial share of Gunter in Dimanche and Sonntags Zeitung Sachs’s fortune. Peter Hafter is a make no mention of any of the five trustee of all four, meaning that he trusts, or the two front companies, is not acting for himself, but for the or the firm in Panama. beneficiaries — who are none oth- Nor is there anything about sever than Rolf, Christian Gunnar and eral other companies belonging to Claus Alexander “Halifax”, Sachs’s Gunter Sachs, despite official docu-

ments proving that they contained millions of dollars’ worth of assets. This is notably the case of K-Buchs and K-Erlen, both registered in Lux- embourg and both ab- sent from his tax return. According to some of his former friends, the photographer was at least as good a businessman as he was a ladies’ man, and former Galax- ar employees hint that he had “much more” than the $500 million he declared to the tax Gunter Sachs, alongside his Andy Warhol portrait. authorities in Berne. Photo: AP Despite his flourishing business, Sachs paid no income tax in Switzerland, just $3 lion. A self-portrait of Andy Warhol million in wealth tax. from 1986 sold for $8.5 million, a A further eyebrow-raiser is the flower painting went for $5.8 mil- photographer’s inheritance invento- lion, and a portrait of Brigitte Bar- ry, which was drawn up by his Swiss dot, also by Warhol, was auctioned attorneys and is dated July 2012. This for $4.8 million. There is no trace of document estimates the value of the the income from these sales in the works of art belonging to Sachs at tax documents we have seen. only $51 million. Yet six weeks earlier, on May 22 and 23, 2012, Sotheby’s Masterpieces of London sold 260 pieces from the photographer’s private collection — Peter Hafter also established 18 only a part of the whole — for far trusts in the Cook Islands for Baron more than that, fetching $65.5 mil- Elie de Rothschild, the founder and

former president of the Rothschild dogs and liking for cigarettes, Car- Bank in Zurich, who died in 2007. men quickly became an art expert. The famous lawyer declined to com- In the 1990s she persuaded her hus- ment on this case. He also declined band to sell a large part of his vast to explain his role in setting up collection of over 1,000 works of art companies for art patron Carmen to the Spanish state for $350 million. Thyssen-Bornemisza, wife of the The baron then set up five trusts German steel manufacturer Baron in Bermuda to host the remaining Hans Heinrich Thyssen. masterpieces and bequeath them Peter Hafter even reinvented him- to his wife and children, each trust self as an art buyer for them. Fond named after a major painter. The of Old Masters, horses and women, Carvaggio Trust was in Carmen’s Baron “Heini” became a Swiss citi- name, according to her lawyer. zen in 1950 and lived in Lugano. His private collection was already world- A safe in Zurich famous when he married his fifth wife Carmen, Miss Spain in 1961 At the same time, a firm called and ex-wife of the American actor Nautilus Trustees Limited was set Lex Barker (Tarzan, 1949-53). up in the Cook Islands to enable Alongside her passion for small Carmen to secretly purchase other paintings. She was the firm’s beneficiary, but remained in the background. The directors included Peter Hafter of Lenz & Stae- helin and the Zu- rich-based lawyer Patrick Oesch. Nau- tilus’s bearer shares were sent to Lenz & Staehelin for storage in a safe in Zu- Vincent Van Gogh’s Water Mill at Gennep rich.

In a memo dated July 18, 1996, by the Supreme Court of Bermuda Puai Wichmann of Portcullis Trust- on March 12, 2013, which Le Matin Net sent on the correspondence he Dimanche has obtained, values the had received from Nautilus Trust- assets of a trust associated with Car- ees Limited in Rarotonga in the men, the Gauguin Trust, at about $1 Cook Islands to Lenz & Staehelin billion. in Zurich as agreed. The letter con- The Swiss and Spanish tax ex- cerned the purchase of a painting perts we have interviewed identify for $751,550 three weeks earlier. a clear motive for this sleight of “Please find enclosed various items hand involving the Cook Islands of correspondence from Sotheby’s, and Bermuda. If Carmen Thyssen in particular one relating to the owned the works in her private col- purchase of Water Mill at Gennep lection directly, they would have by Vincent Gogh [sic].” been subject to Spain’s 2.5% wealth However, Vincent van Gogh’s oil tax. To put it plainly, her lawyers’ painting did not end up in Raro- smart advice has saved her between tonga or Zurich. Instead, it made 10 and 20 million dollars per year, its way to the Thyssen-Bornemisza and according to the Spanish at- Museum in Madrid in late 1996. torney Jaime Rotondo, she pays From July 1995 to November 2002 no wealth tax on her paintings in the Thyssens carried out about Ticino, where she is once more of- twenty operations of this kind ficially domiciled. The trusts there- through their Nautilus hub, with fore enable her to save at least $2 a detour via the Buque Anstalt in million per year, more than cover- Liechtenstein. ing the few dozen thousand dollars she spends each year to keep these A billion in Bermuda firms running. Last year she sold John Constable’s Despite having sold 775 works of art painting The Lock for $36 million via to the Spanish state ten years ear- a company called Omicron Collec- lier, in 2002 Carmen found herself tions Limited, registered in the Cay- at the head of one the world’s larg- man Islands. It was very painful to est private collections containing sell the work, she told the BBC, but 655 works officially valued at €541 she had “no liquidity.” However, there million ($706 million). A judgment seems to be a problem with this sale

too. In order to escape Swiss wealth glio Services in Great Britain. These tax, the Caravaggio Trust is clearly ir- assets are worth about $7.5 million revocable, and Carmen therefore has and are hidden away in a Zurich no access to its contents — except bank safe. This was all run from a when she needs liquidity. The Ticino company in Rarotonga and handed tax authorities declined to comment down to Goffredo’s son Guido after on the matter. As for Peter Hafter, he the elder Lombardo’s death in 2005. has not been Mrs. Thyssens’ lawyer Professor Max Baumann declined for nearly ten years now. to answer our questions.

University professor Heads or tails At least five other lawyers at Lenz & As for Peter Hafter, he championed Staehelin have helped clients set up a slightly different position three firms in offshore jurisdictions. “This years ago. In an article about the type of arrangement has long been future of Switzerland as a finan- a national sport,” confirmed a Ge- cial centre published on February nevan banking law professor, who 28, 2010, he explained that many wishes to remain anonymous de- Zurich-based wealth management spite having nothing to do with this firms were acting through struc- business. However, some academics tures set up with the help of trustees seem to have turned this “sport” in Liechtenstein and other offshore into something of an academic dis- centres. “Not all these trusts with cipline. Max Baumann, a lawyer and bank accounts in Switzerland are professor at the University of Zurich used to avoid tax — but probably until 2011, was legal advisor of the most of them are,” Peter Hafter said After Trust, registered in the Cook at the time. n Islands on October 31, 2002, for the famous Italian producer Goffredo Translation by Simon Pare. This Lombardo. Among other films, story was also published in Matin Lombardo produced The Leopard Dimanche and Sonntags Zeitung. starring Burt Lancaster and Alain Delon. Contributors to this story: Mar All After Trust’s bearer shares Cabra, Bastian Obermayer, Frederik were placed in a company called Ita- Obermaier and Oliver Zihlmann

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 120 Swiss Bank Pushed Offshore Middleman to Skip Anti-Money Laundering Checks for Wealthy Clients By Marina Walker Guevara and François Pilet Published Online: April 14, 2013

Clariden, part of Credit it wasn’t unusual for a bank in one country to ask a service provider in Suisse, sought highly a far-off place to oversee a company secretive structures for based in yet another jurisdiction. But the request came with a some clients. wrinkle: Clariden didn’t want to disclose to TrustNet the identities n December 2006, an of- of its clients. ficial at Switzerland’s Clariden Law requires middlemen like IBank, part of Credit Suisse, TrustNet to verify the names and contacted the Singapore office of backgrounds of their clients — a the offshore services firm Portcul- process called “due diligence” — as lis TrustNet to discuss a sensitive a way to deter criminals and terror- question. ists from hiding illicit cash in secret The banker wanted TrustNet’s offshore entities, a practice known help administering an offshore as money laundering. If shady fig- company based in the British Vir- ures slip through the system de- gin Islands and owned by a group spite the checks, law enforcement of wealthy private-equity investors, can use the records to help track according to internal TrustNet down the real owners. emails obtained by the ICIJ. What Clariden officials were ask- In the sprawling offshore world, ing TrustNet, instead, was to blind-

ly oversee an offshore company for ulations in the countries in which anonymous wealthy individuals and they are involved.” record the bank as the “principal” in those entities, relying on the Law or business bank’s assurances that its clients weren’t involved in illicit activities. Clariden’s aggressive effort to shield The documents trace an intrigue its clients’ confidentiality was busi- inside TrustNet over whether or ness as usual among Swiss financial how to deal with the Clariden re- institutions in the mid-2000s. In quest and the law at the same time. 2008, the United States launched One of TrustNet’s in-house law- an assault on Swiss banks that had yers, Michael Darwyne, described helped thousands of American citi- such a secretive arrangement as zens dodge taxes. Currently, about a “the Holy Grail” — an offshore dozen Swiss banks are under investi- company so anonymous that “law enforcement officials and the regulators will be met with a blank wall” if they ever tried to discover the identities of the owners. Under this arrangement, he said, “we will have to say we know nothing about who owns the company.” Credit Suisse’s Clariden Bank pushed for the Clariden officials de- “Holy Grail” of banking secrecy. clined to comment. A spokesman for the bank’s parent, Credit Suisse, said that gation by the U.S., including Credit due to Swiss banking secrecy laws Suisse, Clariden’s parent. Wegelin, “we are not allowed to provide any Switzerland’s oldest bank, folded information about existing or sup- early this year after admitting it had posed accountholders” and that sheltered U.S. tax evaders. Credit Suisse and its affiliated com- Clariden’s December 2006 re- panies “respect all the laws and reg- quest triggered a heated debate

within TrustNet that shed light on erwise we don’t do the business.” the role big financial institutions Ronnie Summers, senior coun- play in the offshore economy as well sel and compliance officer in as on the gatekeeping responsibili- TrustNet’s Cook Islands office, dis- ties of intermediaries that set up se- agreed. cret companies. “I understand what Clariden Some TrustNet employees be- would like, but their request does lieved Clariden could be trusted not absolve us from our legal re- to make sure its clients were not quirements to know who the real involved in dirty money. Others principal is,” she wrote. “Some- argued that following “know-your- times we need to say ‘no.’ ” customer” rules is a basic anti- As these discussions were going money laundering procedure that on, another request from Clariden shouldn’t be brushed aside by busi- was sitting on TrustNet’s desks. ness considerations. In this case, Clariden officials in To complicate things more, the Hong Kong and Singapore were BVI’s anti-money laundering law had exploring an offshore venture for a a loophole that allowed for more wealthy American couple living in than one reading of the legislation Tokyo. The husband was a consul- on due diligence responsibilities. tant for Airbus, the French aircraft The BVI law explicitly allowed off- manufacturing giant, who dealt shore servicers to rely on reputable with Taiwanese clients on a regu- financial organizations to vouch for lar basis, one Clariden official ex- their clients under certain condi- plained in an email. tions. But BVI regulators had in fact The proposed offshore structure started to crack down on service pro- included a foundation and a trust. viders who abused this loophole to The money involved: $20 million. skirt their know-your-client duties. The wrinkle: The couple didn’t “I think we have to rely on the want their offshore holdings to have fact that Clariden is a reputable fi- any connections to the U.S., a pos- nancial institution and will be reg- sible indication that they weren’t ulated by AML [Anti-Money-Laun- planning to declare it to the IRS. dering] provisions in Switzerland,” This time the response from in- wrote Felicia Wee, an employee in house counsel came quickly: “No,” TrustNet’s Singapore office. “Oth- read the one-word email response by

TrustNet lawyer Darwyne. Summers signed the proposed letter, but a few said that “there’s no way around” months later, in August of 2007, Trust- U.S. tax reporting obligations. Net employees were still debating the Meanwhile, the request from Cla- effect of the Clariden “precedent.” riden about administering an off- Several were discussing, via email, a shore company for anonymous pri- complaint from a banker with UBS, vate-equity investors was still in works. the Swiss banking conglomerate, who After hearing the pros and cons only reluctantly pledged in writing to from his employees, TrustNet’s verify his clients’ identities in accor- owner, David Chong, made the call: dance with the BVI law. He gave a green light to the deal Felicia Wee, in the Singapore proposed by Clariden, provided office, believed that, as long as it the bank signed a letter vouching complied with the law, TrustNet’s that the clients weren’t involved in requirements should be flexible. money laundering. “Sometimes the banks have a big- The letter would require Clariden wig client that they will protect,” she to inform TrustNet if its clients were wrote. Again, she said, a solution criminals or terrorists and to make would be for the bank to sign a let- their identities available to TrustNet ter saying the clients weren’t money upon request. In other words, Trust- launderers. Net would still not know who the McDonnell had not realized that clients were at the onset but could some of his colleagues were taking potentially find out if, for example, this approach. “I was of the under- the company became the focus of a standing that it was merely for Clari- law enforcement investigation. dan [sic] (but obviously this is a “Are you surprised?” TrustNet precedent so can [be] and has been BVI compliance officer, Adam Mc- extended to other institutions),” he Donnell, who opposed the idea, replied. asked in an email to lawyer Ronnie Wee said that so far TrustNet had Summers. made use of the “Clariden prece- “Not really,” Summers answered. dent” in only two cases. “It simply [is] TrustNet officials declined to not possible, in the interest [of] tak- comment for this article. ing on work from some institutions, It is not clear from the documents to take the stance that it is either this available to ICIJ whether Clariden or that or we don’t do business.” n

Dutch bank ING helped set up offshore companies. Photo: AP Dutch Banking Giants Helped Clients Go Offshore By Joop Bouma and Martijn Roessingh Published Online: April 10, 2013

ING and ABN Amro set up ish Virgin Islands, the Cook Islands and the Malaysian island of Labuan, dozens of companies in an investigation by Dutch newspaper island tax havens. Trouw and the ICIJ has found. Trouw found the information in leaked documents and emails from hec Dut h banks ING and two companies — Singapore-based ABN Amro registered dozens Portcullis TrustNet and British Vir- Tof companies for their clients gin Islands-based Commonwealth in offshore refuges with lovely beach- Trust Limited — that specialize in es and low tax rates such as the Brit- helping customers set up and man-

age companies in offshore centers The database lists ING-subsid- known as havens for individuals who iaries and ING-staff as nominee di- want to reduce their taxes. rectors and nominee shareholders. ING and ABN Amro said they Several companies that are regis- have never been party to tax evasion. tered through TrustNet name ING “The companies were set up for (Jersey) Nominees Limited as share- international clients and always in holder and list ING employees as di- compliance with local and interna- rectors. tional laws,” ABN Amro said in a In one example, ING (Jersey) statement. Secretaries Limited and ING (Jer- The companies set up by the two sey) Nominees Limited are listed as Dutch banks have names like Thriv- shareholders of a company called ing Capital, Capital Plus Worldwide, Ocean & Mountain Limited. There Wise Bonus Group and Billion Giant is no ING company document show- Development. Records show that so- ing that Ocean & Mountain Limited called ‘nominee’ companies helped was part of the bank. obscure the identities of many of the ING said that because the bank people involved in the companies divisions that managed such compa- that ING and ABN set up through nies have since been sold, it was un- offshore services firms. These nomi- able to explain the reason for the use nee companies act as stand-in direc- of such structures. n tors or shareholders while the actual owners stay in the background. This story was also published in Trouw.

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3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 126 After Multi-Million Inheritance, Playboy Sachs Goes Offshore By Bastian Obermayer, Frederik Obermaier and Titus Plattner Published Online: April 5, 2013

He’s known as Brigitte Bardot’s husband, photo grapher, director, art collector. Now another aspect has come to light: a man who set up an intricate offshore scheme to manage his vast fortune, a scheme that remained inscrutable to the fiscal authorities until the end.

he hand that governs everything must remain Tinvisible. It certainly must Sachs and Brigitte Bardot in 1966. not sign anything. That is why Photo: AP

Hanswerner Schwenk, a private sec- corporations and trusts, and then retary in his 50s, sets off for the Pa- manage them with absolute discre- cific island of Rarotonga. tion. The Cook Islands, an archi- Meanwhile, the man behind the pelago of which Rarotonga is a part, scenes can relax: in London, Paris are a typical offshore tax haven: or St. Tropez, on one of his many Founding a company or trust there estates. His name must not appear means paying almost no taxes at all in any official document, for such and, above all, total anonymity. An is the nature of an anonymous en- ideal place to minimize one’s tax terprise. Otherwise one would not burden, be it legally or illegally. need to bother with all the hassle, The man in whose employ after all: the South Seas, the lawyers Hanswerner Schwenk made that and all that secretiveness. trip to the South Sea, almost twenty It is a strenuous trip for Schwenk, years ago, in November 1993, is very who lives in Munich. Rarotonga famous and very rich. His name is is situated about halfway between Gunter Sachs. Schwenk had been New Zealand and Hawaii, and it working for him for more than twen- takes him more than 40 hours to get ty years at the time, and was one of there from Germany. At least his lo- his closest confidants. cal partner, the International Trust Next Monday [April 8,2013], the Corporation Ltd., has arranged for ARD will air a lavishly produced a hotel and a rental car. Hanswerner portrait of Gunter Sachs. It will show Schwenk’s mission: confirm with his the many aspects of his personality signature that the share issue of the everyone had known so far: playboy recently founded company Triton and millionaire’s heir, Brigitte Bar- Ltd. proceeded in a lawful way. dot’s husband and lover of Empress Officially, the sole owner of Tri- Soraya, photographer, director, art ton Ltd. is a company called Trust- collector, philanthropist and good corp Ltd., who, on paper, also owns friend. a large number of other companies. Now, however, another aspect has In fact, however, that is just a smoke- come to light — that of a man who screen, put up to avoid mentioning set up an intricate offshore scheme the real owner’s name. For this is to manage his vast fortune, a scheme Trust Corporation Ltd.’s business that remained inscrutable to tax au- model: They set up anonymous shell thorities until the end.

During the last few weeks, a team to Zurich soon after. Its price: 2,700 of journalists from Süddeutsche Zei- dollars. tung, the Swiss Sonntags Zeitung Staehelin also managed Sachs’s and the NDR examined the offshore offshore companies over the next two leak data provided by the Interna- decades. Dozens of faxes, letters and tional Consortium of Investigative emails going back and forth between Journalists and discovered dozens the lawyers and International Trust of documents to reconstruct Gunt- Corporation Ltd. (later called Port- er Sachs’s offshore scheme. These cullis TrustNet) attest to this fact. documents include deeds and con- The South Seas Scheme looked tracts, photocopied ID cards and ac- as follows: Two shell corporations, counts of charges, a vast amount of Triton Ltd. and another company internal emails and faxes, but also called Tantris Ltd., acted as trustees letters by Gunter Sachs, bearing his for five trusts set up between 1994 own signature. and 2007 — the Moon Crystal Trust, The documents provide detailed the Espan Water Trust, the Sequoia evidence of how Sachs, with the help Trust, the Triton Trust and the Park- of some advisors, constructed an land Oak Trust. anonymous network of companies These five trusts were the opaque on the Cook Islands. And that is not containers in which Sachs stored all: SZ journalists discovered Gunter parts of his fortune. According to Sachs also had shares in companies the Parkland Oak Trust’s charter based in other tax havens, apparent- from May 18, 1994, the trust’s ben- ly with values and debts in the high eficiaries were Sachs’s three sons millions. Rolf, Christian Gunnar and Claus Even before private secretary Alexander. The same goes for three Hanswerner Schwenk set off for of the other trusts. his trip to the South Seas in 1993, But Gunter Sachs himself demon- most formalities had already been strably had access to the funds of two dealt with. On September 15, 1993, of those trusts as well, and was there- a lawyer of the major Zurich law fore liable to declare them. “Assets firm Lenz & Staehelin had already in such trusts are attributed to the registered “Triton Ltd.” by fax. The trust’s founder. Therefore, Swiss law “Company Kit”, a sort of starter set demands they be declared, just like for shell corporations, was on its way all kinds of international income,

property or investment,” says An- such cases; “receipts, certificates or dreas Kolb, a tax attorney who spe- written confirmations by third per- cializes on wealthy private clients. sons” must be submitted, so that the However, neither Gunter Sachs’s trust’s existence can be verified. last tax returns nor the official in- Without such documentation, ventory of his estate (the Süddeutsche there is no way to verify the con- Zeitung had access to these docu- tents of a trust, either. ments) said anything about the five trusts registered in Rarotonga. The Secrecy inventory of his estate was drawn up by two executors and signed on In managing his companies in the July 6, 2012. One of them is precise- South Seas, Gunter Sachs put ex- ly the Lenz & Staehelin lawyer who treme stress on secrecy. For years his founded the first South Sea compa- name did not appear in Portcullis’ ny by fax in 1993 and then went on customer files — a highly unusual to become the director and trustee exception. The electronic files of of Sachs’s companies. Additionally, three of his trusts show the following the law firm took care of the annual note by an employee, dating from payments of around 2,000 dollars April 1999: “No information on the per trust to Portcullis Trustnet for founder, apparently top secret. No all those years. info on bank data. No declaration When asked about this, the two ex- of intention by the founder.” ecutors of the deceased — the Lenz Contrary to usual practice, Gunt- & Staehelin lawyer and another one er Sachs doubly protected himself from Munich — said they had han- within a totally confidential envi- dled the trusts “transparently” and ronment. He was secretly secret and that, while they did not declare the anonymously anonymous. trusts themselves, they did declare Documents stating the amount in- the funds contained in them. vested in the trusts do exist. Howev- The tax authorities of the Can- er, Lenz & Staehelin did not comply ton of Bern, Sachs’s last place of with the SZ’s request to access them. residence, take a different view on Thus, it remains unclear, whether or the legal situation. One speaker as- which of the trusts’ funds have in- serts it is not enough to “merely de- deed been officially declared. clare the funds held by the trust” in Numerous inquiries to the de-

ceased’s heirs, to his lawyers and Together with his cousin, the business partners, remained largely race driver Frederick von Opel, unanswered. The only reply was a Sachs seems to have founded com- letter by the two executors, who are panies in Panama, another tax ha- in contact with the heirs but do not ven. They are each registered as officially speak on their behalf. The presidents and legal representatives letter states: “All assets belonging of a company there. Sachs’s compa- to the testator Gunter Sachs at the ny is called “Dirki Finance S.A.;” his time of his death are listed in the cousin’s bears the name “Muraccio inventory of his estate and in the in- Investment S.A.” There has to be a heritance tax return filed with the connection between the two com- appropriate revenue authorities.” panies: both were founded on the All of these assets, the executors same day, on September 16, 1977, assert, had “already been disclosed and both employ the same two Swiss during Herr Sachs’s lifetime for the trustees as directors. When ques- purposes of his income and prop- tioned, the two men claimed not erty tax return.” to remember any details; von Opel The inventory of Sachs’s estate could not be reached by the SZ. also reveals the magnitude of the Much like the others, the Pana- issue: Sachs’s fortune at the time ma company neither appeared in of his death is listed at 470 million Sachs’s last tax returns, nor in the Swiss francs. In a case of rare luck, inventory of his estate. According to the deceased playboy had been the official register in Panama, how- born not into one, but two family ever, it still operates today. The ex- dynasties: His father, the industri- ecutors offered no comment on this alist Willy Sachs, owned the engine company. works “Fichtel und Sachs” — selling But the list of offshore compa- off most of his shares must have lat- nies goes on: SZ research shows that er made Sachs more than 200 mil- Gunter Sachs held shares of four lion Deutschmarks. And his mother, companies founded between 2003 Elinor von Opel, granddaughter of and 2008 in the tax havens of the Opel founder Adam Opel, was the British Virgin Islands, Jersey and heiress to a similarly vast fortune. Luxembourg. In 2008 he put all his Old money, wherever Sachs was eggs into the same basket: the dis- looking. creet Grand Duchy of Luxembourg.

Now it is getting complicated, below their market value. but it is worth to take a closer look: The executors deny they failed to According to official documents, adequately declare the companies’ those companies temporarily had value to the authorities. capital assets of about 9 milllion At least one thing is clear in this Swiss francs ($9.6 million) at their whole jumble of companies, invest- disposal. They also had bank debts ments, debts and tax havens: Gunter of about 77 million Swiss francs ($81 Sachs went to extreme lengths to be million) and owned a lot of real es- able to manage part of his millions tate in Switzerland. That real estate in secret. Up to now, there are elev- probably served as security for the en offshore companies whose exis- bank debts, and must therefore be tence is unknown to the tax authori- accordingly valuable. ties. Even Switzerland’s rather soft Only two of the four companies taxation system seems to have been are mentioned in Sachs’s tax returns enough to entice Sachs to come up and the inventory of his estate, and with strategies of tax evasion. they seem to be listed well below their actual value: the superordinate Sexy Sachs holding company Sunrise Water at zero, K-Berg at 60,000 Swiss francs Looking at the intricate network of ($64,000). The other two compa- Sachs’s offshore companies, one un- nies, K-Buchs and K-Erlen, are still derstands it cannot have been easy unknown to the tax authorities. to keep track of everything. How- Even experts are confused by this. ever, according to sources close to Sub-participations need not neces- him, Sachs had a fully equipped of- sarily be declared, but “if they are fice in each of his many apartments not, the holding company itself abso- and houses (13, at the time of his lutely has to be correctly appraised,” death). The notorious bon vivant says Andrea Opel, a tax law professor “Sexy Sachs”, as the yellow press at the University of Lucerne. dubbed him in the sixties, is said to The SZ has access to documents have often been working there in indicating that this has not been the early morning. the case. According to those docu- As the ICIJ offshore documents ments, two of the companies own show, Sachs did in fact participate real estate whose book value is well in the management of his tax ha-

ven companies. There are various want to comment on this and merely letters, personally written by him, referred to the executors’ statement. in which he announces the appoint- Saturday, May 6, 2011. Gunter ment or dismissal of a trustee with Sachs has returned from the USA the legally correct clause “in exer- to his Chalet, an old farmhouse, in cise of the right conferred me as the Swiss town of Gstaad. After sup- the trust’s founder.” Signed: Gunter per, he sits down at his desk, writes a Sachs. suicide note mentioning “the incur- But Sachs also enlisted profes- able illness a.,” and shoots himself. sional help. There were Lenz & Stae- With him in the chalet were his helin’s lawyers, of course, but also a butler and his best friend, Samir company he had founded in Geneva Sibaei. Sibaei had been Sachs’s con- under the mysterious name of “Ga- stant companion for 50 years: as a laxar S.A.”. Galaxar is his “family college friend, as best man at Sachs’s office”, a company solely concerned first wedding and, for a while, as with the management and increase his secretary. In his autobiography of his fortune. According to a for- Sachs writes about their friendship: mer employee, almost 30 people “We were co-architects of our lives.” all over the world were busy with Sibaei, originally from Beirut, Sachs’s real estate in Europe and could also have been a co-architect the USA, his art collection, his cars of Sachs’s financial schemes. At the and his yachts. very least, he was involved in various To the day of Sachs’s death, Ga- places: as a director and trustee of laxar was managed by the German the South Sea enterprises, and as economist and political scientist member of the family office’s ad- Wolfgang Reinicke, a former World ministrative board. As of Wednes- Bank advisor. Galaxar was fully in- day afternoon, he has given no reply volved in Sachs’s offshore activities. to the Süddeutsche Zeitung’s ques- Reinicke directed two of the compa- tions. nies on the Cook Islands, and acted That was the Sachs Scheme, se- either as manager or member of the cretly functioning for many years, administrative board in the four and profitable for a large number of Luxembourg companies as well. people: Sachs himself, his sons (as When asked by the Süddeutsche beneficiaries of some of the trusts), Zeitung, Wolfgang Reinicke did not Samir Sibaei, and all the various

Gunter Sach’s Offshore Network

GunterGunter OnlineSeineSeine interactive graphic:SeineSeine DasDas SachsSachswww.icij.org/offshore/interactive-gunter-sachs-networkKinderKinder Vertrauten TarnnetzTarnnetz

contractors, of course, the lawyers, istrative offence in Switzerland, and directors, administrative board whether it has been committed in- members, trustees and managers tentionally or unintentionally has no of the offshore companies. And the bearing on the case. For it is entirely providers of the shell corporations. possible that Sachs and his executors Only the government was left out. merely lost track of their vast and But Gunter Sachs is dead, and complicated offshore scheme. the only remaining question is what The crucial document here is the consequences all this will entail here inventory of Sachs’s estate. Swiss fis- and now. Tax fraud is only an admin- cal law expert Andreas Kolb says the

signing lawyers will face legal con- authorities’ investigations “culmi- sequences “if they can be proven to nated in envy.” In his autobiography, have participated in or incited to he describes a meeting with “three tax fraud”. important gentlemen of the world of And the heirs themselves will have finance.” Without thinking, he told to make steep back payments if the them: “If our names were Müller, Swiss revenue authorities determine Maier and Huber [three rather com- that Sachs, a Swiss citizen since 1976 mon German names], we wouldn’t and registered in Gstaad since 2008, be here.” The three gentlemen, he did in fact evade taxes. There may adds, were called Müller, Meyer and even be fines involved, says Kolb, “if Huber. they failed to declare assets against This is probably a mere anecdote, their better judgment.” and there may not be much truth Once before Gunter Sachs was at to it. Indeed, the last of those three the heart of a tax scandal. When he men still alive, finance undersecre- and his brother became Swiss citi- tary Albert Meyer, says he neither re- zens and moved to Switzerland in the members this event nor the three of seventies, and then tried to sell their them ever having been in the same shares in Fichtel & Sachs for about room with Sachs at all. 330 million Deutschmarks soon after, It would seem that Gunter Sachs tax authorities swiftly took action. In sometimes had his very own truth, the morning of January 22, 1976, ten and maybe he just liked to exag- tax officials searched Sachs’s farm- gerate a bit here and there. Only house in the Rechenau region, while where the revenue authorities were five others went through his Munich concerned, however, the gifted en- office. Apartments in Sylt and Ham- tertainer seems to have been rather burg where also searched, with the tight-lipped. Too tight-lipped, it officials looking for some kind of seems, by the standards of the law. n proof that Sachs’s main place of residence was in Germany after all. To Translation: Jan Schönherr. no avail. This story was first published in Thus, the Sachs tax case turned Süddeutsche Zeitung into the “Sachs affair,” a Spiegel cover story. Gunter Sachs felt he was Contributor to this story: being persecuted. In his mind, the Miranda Patrucic

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 135 Offshore Documents Solve Mystery of Pre-Civil War Helicopter Deal in Congo By Stefaans Brümmer and Craig McKune Published Online: April 5, 2013

Secret records from British of indiscriminate bombardment from helicopters. Virgin Islands firm show Five days earlier, as his forces a South African and two readied for the offensive, then-Pres- ident Pascal Lissouba personally Americans reaped $2.5 approved the purchase of four ex- million from aborted sale South African Air Force helicopters offered by a Johannesburg company of surplus military choppers headed by a German expat. to Congolese leader. They were French-designed Puma SA 330L transporters, suit- able for military and civilian use. n June 5, 1997, all hell Within weeks, as the war raged broke loose in Brazzaville. on, tens of millions of petrodollars OPresidential forces moved started sloshing from a Paris ac- on the compound of a former presi- count controlled by Lissouba’s oil- dent whose militia hit back, ignit- rich regime to pay for the Pumas ing a civil war that would lay to and other items that could be use- waste much of the Congolese capi- ful in war. Other hardware ordered tal and claim the lives of thousands from companies linked to the Ger- of civilians, many of them victims man expat included two East-bloc

Bombardment by government forces killed thousands in Brazzaville during the Republic of Congo civil war in 1997. Photo: AP

MI-17 multi-role helicopters, four Now, a unique peek into these fixed-wing cargo and transport air- money flows — and the use of off- craft, and 290 trucks. shore secrecy jurisdictions afford- The fact and destination of ing anonymity in such transactions those payments would likely have — has been provided by offshore remained hidden were it not for company records uncovered by the Lissouba fleeing and his predeces- ICIJ. sor, current President Denis Sas- The ICIJ has obtained 2.5 mil- sou-Nguesso, publishing a trove of lion documents from two firms documents that were discovered which provide services to offshore when he took the presidential pal- clients in the British Virgin Islands ace that October. (BVI) and similar jurisdictions. It is

believed to be the largest breach of voice, approved by Lissouba’s signa- offshore secrecy yet, and has given ture, detailing an offer to the Con- rise to the publication, starting this golese government of four Pumas week, of investigative articles across at an asking price of $19.9 million. the globe. The invoice was issued by Johan- nesburg-based company CED Mar- Profiting from war keting, headed by German expat Rudolph Wollenhaupt, but stated Selected records reveal how mil- that the offer was “on behalf of” lions from Lissouba’s order of the Exotek and another company. Pumas overflowed into the BVI The documents did not reveal, accounts of three Johannesburg- however, who was behind Exotek. based businessmen — although the That 15-year-old mystery has now two who are still alive now claim been solved by internal CTL docu- they didn’t know the ultimate ments that are among the offshore source of the money. These heli- records obtained by ICIJ. copters were ultimately not deliv- The records show that Myhill ered to the Republic of Congo. headed Exotek, through which he, The three were Johannesburg Parker and Segers had exclusive dealmaker Esmond Myhill and U.S. rights to the helicopters that were to nationals Richard Parker and the be sold to Lissouba. They reveal how, late Roy Segers. They were doing on August 28 that year, the three business through Exotek Manage- partners were paid $2.5 million into ment Services Ltd, a company reg- a CTL trust account at Chase Man- istered for them in the BVI by Com- hattan Bank, split with $900,000 go- monwealth Trust Limited (CTL), a ing to Myhill and $800,000 each to firm that specializes in setting up Parker and Segers. offshore entities for clients who Beginning that same day, hun- want to keep their financial affairs dreds of thousands of dollars be- confidential. gan to flow onwards to destinations The name Exotek had previous- in the United States, the UK, Swit- ly emerged in the document trove zerland, BVI and other places that published by Sassou-Nguesso, after remain a mystery. he captured the palace. Among the CTL immediately funneled documents was a June 1, 1997, in- $423,500 from Segers’ share, de-

scribed as: “Eleven transfers as re- accounts — in at least one instance quested per fax of this date.” And while he was travelling in London. $311,000 flowed similarly from The records show that CTL pro- Parker’s share days later. vided services that went beyond sim- Parker and Segers also used some ply registering companies in the BVI. of the money to pay start-up and It administered the three partners’ service fees on two new offshore funds in the secrecy jurisdiction too. companies based in the BVI, while Emails between Myhill and CTL a large part of Myhill’s portion was co-founder Scott Wilson also sug- moved from the BVI to Switzerland gest Wilson got involved directly in — from one secrecy jurisdiction to his clients’ business dealings. Years another. later, Myhill wrote to Wilson recall- The records show $300,000 went ing “when we first made contact to the Swiss account of investment during the Puma days.” management firm Rathbones in A record obtained independent- 1998 and more than $40,000 to Swiss ly by the M&G Centre for Investi- law firm Umbricht Rechtsanwälte gative Journalism (MGCIJ) shows and one of its attorneys over the Wilson writing on Exotek letter- next two years. Myhill paid another head, on behalf of the company, to $120,000, the records indicate, to confirm an aspect of the helicopter Hofmann Schneider Capital, an in- transaction. vestment firm with Swiss, Austrian Wilson did not answer questions and Panamanian registrations. about the Puma deal, saying they Meanwhile, the trio also related to a “responsibility that I splurged on high living. Less than left over a dozen years ago” and he a week after taking transfer of the no longer had access to the files. Puma money, Segers spent nearly But, he said, “As a matter of policy, $47,000 at Louisiana car dealer Orr CTL would never knowingly have Acura BMW Infiniti. Parker and been involved with arms sales. In Segers transferred more than half the scenario described, for CTL a million dollars to South African to have been involved in any ca- real estate agent Pam Golding, and pacity, including simply acting as Myhill received several large trans- registered agent, any such aircraft fers of between $5,000 and $15,000 would have had to have been com- in London and South African bank pletely unarmed.”

Thomas Ward, who co-founded and financier who was working in CTL with Wilson in 1994, initially Kuwait when he learned of the lu- claimed that “CTL never, to the best crative South African proposition of my knowledge and belief, ever from Esmond Myhill, who worked had client funds pass through its in the 1980s and 1990s for security hands, other than relatively small equipment suppliers, including in payments for its professional regis- Kuwait. tered agent and office services.” Parker explained: “He said to Later, when pressed on the Puma me, ‘Well, don’t you have a business deal, he conceded recalling a “sin- partner who’s really into aviation?’ gle case” where “CTL did act as sort I flew directly from Kuwait to South of an ‘Escrow Agent’ for the sale Africa and had some meetings with of a BVI company to a third party, Esmond, and then I contacted Roy holding the buyer’s funds tempo- Segers who was in Texas.” rarily for the seller.” Like Wilson, A pilot and self-described “risk- he said his recollection imperfect taker, traveler, adventurer, ex- due to the passage of time. marine [who] seeks the unusual,” The CTL records obtained by Segers flew to South Africa a month ICIJ show that the arrangement in later. “And we all got together and the Puma deal was in fact not tem- then started meeting with the peo- porary. CTL held the funds and ple from Armscor,” Parker said. made disbursements on behalf of Myhill over the course of six years Big deal and Parker and Segers two years. Their goal was to buy and sell 28 Relocating to South Africa Puma helicopters from Armscor, which among other duties disposes Parker told MGCIJ he and Segers of surplus South African defense had relocated to South Africa in materiel. the mid-2000s hoping to make mil- “It wasn’t just the surplus aircraft lions buying and selling surplus — it was the spares. That’s what military aircraft and spare parts made it very attractive,” Parker said. from the government. Surplus state military aircraft Parker describes himself as a for- may gain enormous value once mer air conditioner parts salesman they are refurbished using cheaply

purchased spares. In later writ- Within days, he said, they were ten correspondence, an official of called by a contact of Wollenhaupt’s Denel Aviation, an Armscor sister who said: “I understand that you company, valued the basic Puma guys are in a difficult position but airframes at $150,000 each. if you come to this meeting [at Wol- “When you take the refurbish- lenhaupt’s home] some things can ment costs and the approximate be cleared up.” value of those helicopters, the prof- Myhill said: “All I can assume it our company stood to make was is that [Wollenhaupt] got to know $20 million,” Parker explained. from Denel that we had the rights. Negotiating with Armscor “was He then engaged in discussions very slow going for the first sever- with us. We did not have a buyer at al months, but it looked like there all at that stage. We had tried our were some possibilities and we just damnedest to dispose of them for kept after it,” Parker said. normal profit, but were unable to Myhill said, “Once we had the do so.” right to buy the helicopters, the In Parker’s view, he and his part- whole deal really depended on us ners were forced to sell Exotek — selling them at a price where we and the contract giving the right to could have them refurbished to buy the Pumas from Armscor with whatever the requirements of the it — for $2.5 million, to Namibian- customer would be.” registered Support Systems Corpo- Both Parker and Myhill said Ex- ration, a company 51 percent owned otek was trying to sell the fleet to by another Wollenhaupt entity. Greece or Turkey after having it Wollenhaupt gave MGCIJ a simi- overhauled by Denel Aviation. lar account, although he denied forcing anyone to sell. He said Lis- “Forced” to sell souba wanted “VIP” helicopters from him but when he went knock- But, Parker said: “At the eleventh ing at Armscor and Denel’s door hour the helicopter guys at Denel to supply Pumas, officials told him said we can’t stand behind this proj- to deal with Exotek, which had the ect any longer. And we were sitting right to acquire all 28 available. there with our bankers and we were Wollenhaupt insisted that the flabbergasted.” president did not want them for the

war effort. He pointed to Lissouba go nor that they were to profit $2.5 having indicated, next to his signa- million from a civil war. ture on the June 1 invoice for the “We had no idea where [Wollen- four Pumas, that he was interested haupt] was going to sell them. [And] in another 16. The refurbishment the National Conventional Arms schedule, Wollenhaupt said, was Control Committee [the state body two every three months. “Lissou- that vets arms exports] would have ba was aware of this timeline and to approve the end user,” Parker therefore could not have expected said. that these helicopters would arrive According to Myhill: “I have nev- in Congo soon.” er engaged with the Congo in any Wollenhaupt’s version appears to discussions on the sale of Pumas. be undermined by the timeline on The reason [Exotek] was sold was the invoice itself, which promised that it had the buying right on the faster delivery — two by mid-August Pumas from Armscor.” and another two by mid-September While they could not recall when — meaning Lissouba would have they agreed to sell Exotek, nor when received the original order, had all they subsequently learned of the gone according to plan, during the agreement to sell the Pumas to the course of the hostilities. Congo, he and his partners received Be that as it may, the three part- their payout almost three months ners sold Exotek to Support Systems after the June 1 invoice to Lissouba. Corporation, the Wollenhaupt- The Congo regime paid $7.7 mil- linked company, which planned to lion directly to Armscor to fulfill sell at least four of the Pumas to Exotek’s purchase contract for all 28 Lissouba’s Congo. There, had the helicopters. An Armscor spokesper- delivery taken place, the helicop- son confirmed the money was wired ters might well have been used in directly from Congo on July 11. an escalating civil war. A letter dated July 14 from CTL’s Wilson, the administrator still act- “No idea” ing for Exotek, acknowledged receipt of a minor amount in connec- Parker and Myhill were adamant tion with the sale of the company they and Segers did not know the to Wollenhaupt-linked Support Sys- helicopters were destined for Con- tems Corporation.

Less than six weeks later, on Au- were unsuccessful. … In my and my gust 28, the three Exotek partners lawyer’s opinion, Armscor has not got their full $2.5 million paid in made delivery of the helicopters as the BVI. per the contract.” Myhill disputed that they re- Armscor’s spokesperson said it ceived as much as $2.5 million, but had delivered the choppers to De- he refused to give an amount. How- nel Aviation on Exotek’s instruc- ever, CTL’s own accounts summary tion, thus completing Armscor’s reflects the deposit, and Parker role in the deal. “Any further en- confirmed the amount. quiries on this matter can be directed to Denel.” No delivery Denel Aviation in turn referred all queries to Armscor. But the four Pumas were never de- In 2002, the Congolese govern- livered. ment sued Armscor in a South Af- Two months after Lissouba fled rican court for the repayment of the presidential palace that Octo- the $7.7 million. But Armscor told ber, Jean-Pierre Ossey, the chargé MGCIJ that following discussions d’affaires heading Congo’s embassy Congo withdrew its case. in South Africa, wrote to Wollen- haupt on Sassou-Nguesso’s instruc- “Naïve and greedy” tion to emphasize that all “contracts and proofs of payment” still Wollenhaupt said his company CED stood. It was the new regime’s “wish Marketing’s “actions may have been to conclude the outstanding busi- naïve or even greedy but it never ness and conduct further business delivered any arms” and that “all with you and your group.” contracts were later scrutinized by Ossey sent Wollenhaupt further the relevant authorities in Congo, demands in May and November France and Great Britain and no 1998. contracts or payments were found Wollenhaupt told MGCIJ that to be related to arms or war equip- the helicopters had been taken ment.” from Armscor to Denel, but that Wollenhaupt maintained that “attempts by lawyers and involved many of Lissouba’s orders for heli- parties to receive the helicopters copters, planes and trucks predat-

ed the civil war, and that deliveries and an end-user certificate from were “stopped for the entire period Lissouba’s regime, and promised of the civil war.” that the helicopters would be deliv- And he pointed MGCIJ to a let- ered to the Congo by an Ilyushin-76 ter, also contained in the trove cargo plane on June 29 or 30. later released by Sassou-Nguesso, Also in Sassou-Nguesso’s trove is in which he told Lissouba that his an end-user certificate issued 11 days CED Marketing could not fulfill a earlier by Lissouba’s ministers. It was request to supply arms. frank, confirming Congo’s “inten- But a closer reading of the letter tion to acquire two combat helicop- shows that while it said that CED, ters for the defense of its territory.” as a South African company, could On June 29, an Ilyushin-76 de- not help, it assured Lissouba that livered two combat helicopters to “an Eastern European supplier pos- Lissouba’s forces, according to a sessing government authorization press release issued two days later will take care of it.” by Sassou-Nguesso’s wartime press The thrust of Wollenhaupt’s let- office in Paris. n ter — dated June 27, 1997, three weeks after the civil war started The M&G Centre for Investigative — dealt with Lissouba’s order of Journalism, a nonprofit founded to what Wollenhaupt called two MI-17 develop investigative journalism in “transport” helicopters. The letter the public interest, produced this confirmed receipt of $1m payment story. All views are theirs.

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 144 Offshore Tax Havens Became Traps for Investors By Scott Higham, Michael Hudson and Marina Walker Guevara Published Online: April 7, 2013

Internal records of common: money that ended up in offshore accounts and trusts set up offshore trusts and in tax havens around the world. companies in the South The existence of the trusts surfaced during a joint examination Pacific and the Caribbean of the offshore world by The Wash- reveal sanctuaries for ington Post and the ICIJ. The ICIJ obtained 2.5 million records of secrecy-seekers. more than 120,000 companies and trusts created by two offshore com- N ew York hedge fund panies, Commonwealth Trust Ltd. manager allegedly swindles (CTL) in the British Virgin Islands A $12 million from a promi- and Portcullis TrustNet, which op- nent Baltimore family. An Indiana erates mostly in Asia and the Cook couple is accused of bilking hun- Islands, a South Pacific nation. The dreds of customers by charging for records were obtained by Gerard free trials of cosmetic products. A Ryle, ICIJ’s director, as a result of financial manager in Texas promis- an investigation he conducted in es 23-percent returns but absconds Australia. with $33.5 million of his investors’ Many people use the offshore money in a classic Ponzi scheme. world for legitimate purposes, for All three cases have one thing in legal tax shelters or to smooth the

Used offshore havens: Allen Stanford and Raj Rajaratnam. Photos: AP

way for international trade. Off- ernments worldwide. Recently, as- shore havens vaulted into public pects of the offshore world came consciousness last year with sto- under assault after whistleblowers ries about Republican presidential alerted the IRS to thousands of nominee Mitt Romney’s accounts unreported U.S. accounts in Swiss in the Cayman Islands. Recent cov- banks, resulting in an amnesty of- erage of the Cyprus banking crisis fer to violators who paid billions in has thrust the issue back into the fines to the U.S. government. spotlight. The records reviewed by The U.S. citizens are permitted to Post and ICIJ expose how havens in move money offshore as long as they the South Pacific and Caribbean in report their account information to some cases have become sanctuar- the Internal Revenue Service. But ies for individuals seeking to con- there have long been concerns that ceal their activities from investiga- much of the money is not reported tors and investors. and bleeds tax revenue from gov- Among the 4,000 U.S. individu-

als listed in the records, at least 30 that does not make use of the off- are American citizens accused in shore world. lawsuits or criminal cases of fraud, “If you don’t, it’s usually a very money laundering or other serious parochial, Podunk type of Ponzi,” financial misconduct. he said. “But the more sophisticat- They include billionaire hedge ed ones almost always do.” fund manager Raj Rajaratnam, who The offshore world makes it was convicted in 2011 in one of the hard for prosecutors pursuing com- biggest insider trading scandals in plex financial crimes to follow the U.S. history, and Paul A. Bilzerian, money, because many offshore ju- one of the most famed corporate risdictions refuse to recognize U.S. raiders of the 1980s, who was con- subpoenas and account informa- victed of securities fraud. tion is hidden under layers of cor- An attorney for TrustNet, which porate shells. helped create the companies and “People were trying to hide their trusts for the clients, declined to money from the IRS, or they were comment, referring questions to se- trying to hide their money from law nior TrustNet officials who did not enforcement, or they were trying to respond to requests to discuss their hide their money from regulators,” firm. said Paul E. Pelletier, the principal Fraud experts say offshore bank deputy chief of the Justice Depart- accounts and companies are vital to ment’s fraud section who prosecut- the operation of complex financial ed Stanford before entering private crimes. Allen Stanford, who ran practice in 2011. “As a prosecutor, a $7 billion Ponzi scheme, used a it was very difficult pursuing these bank he controlled in Antigua. Ber- people.” nard Madoff, who ran the largest The records reviewed by The Post Ponzi scheme in U.S. history, used and ICIJ include tax filings, inter- a series of offshore “feeder funds” nal memoranda and e-mails kept by to fuel the growth of his multibil- CTL and TrustNet. lion-dollar house of cards. The CTL records contain infor- Michael I. Goldberg, a Fort mation on at least 23 companies Lauderdale, Fla., attorney who of- linked to an alleged $230 million ten testifies as an expert on Ponzi tax fraud in Russia, a case that was schemes, said it is rare to see one being investigated by a Moscow-

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 147 CTL’s general manager, Sandy Holburn, warned about the firm’s Russian clients: “There’s obviously a lot going on that we don’t really know or understand concerning the users of the companies we form for these clients.”

based lawyer named Sergei Mag- blamed many of the firm’s prob- nitsky, who died in prison under lems on “the law of large numbers.” suspicious circumstances. One of Anytime you form thousands of the companies was used to set up companies for thousands of people, Swiss bank accounts into which the he said, it’s likely that a few of them husband of a Russian tax official are going to be up to no good. deposited millions in cash, accord- “I regard myself as an ethical ing to legal filings in Switzerland. person. I don’t think I intentionally The Magnitsky Affair has cre- did anything wrong,” said Ward, ated tensions between the United an entrepreneur from Canada who States and Russia. Russia last year has worked as a consultant for CTL blocked hundreds of foreign adop- since selling it to new owners in tions after Congress passed the Ser- 2009. “I certainly didn’t aid and gei Magnitsky Act, barring Russian abet anybody doing anything ille- officials believed to be involved in gal.” the lawyer’s death from entering In late 2005, CTL’s general man- the United States or using its bank- ager, Sandy Holburn, warned about ing system. the firm’s Russian clients: “There’s There’s no evidence that CTL obviously a lot going on that we participated in fraud or other don’t really know or understand crimes. Internal records suggest, concerning the users of the compa- however, that the firm often did nies we form for these clients.” little to screen its clients to make Ward agreed that such clients sure they weren’t involved in illicit might “cause some difficulty,” but activities. told Holburn there was “little we CTL co-founder Thomas Ward can do about that unless we wish to

stop growing,” according to an e- At the time, the Cordishes were mail exchange at the time. already in the process of creat- Ward said he does not recall Hol- ing four trusts in the Cook Islands burn’s warning and added that the through TrustNet and the fam- firm’s client-screening procedures ily eventually placed $116 million were consistent with standard prac- worth of assets in them, a transfer tices in the offshore industry. He they disclosed to the IRS. They said the firm often relied for its invested some of the money with vetting on intermediaries in other Callahan, but instead of protect- countries who usually employed ing their investment, he allegedly lawyers and accountants and did a swindled the Cordishes out of near- good job of collecting information ly $12 million, according to previ- about would-be clients. ously confidential documents and a But he said such measures can’t civil lawsuit brought by the Securi- always protect firms from “being ties and Exchange Commission. duped by dishonest clients” or sign- The SEC sued Callahan this ing on “someone who appears, to past May, alleging that he divert- all historical examination, to be ed investor money to help pay for honest” but “later turns to some- his home in a fashionable Long thing dishonest.” Island enclave and to underwrite his brother’s oceanfront real estate Cordishes lose $12 million project in Montauk, N.Y. Callahan’s attorney declined to In the spring of 2006, New York comment, citing the SEC case and financial planner Brian Callahan a criminal investigation into his cli- and a TrustNet attorney toured the ent by federal prosecutors. United States with a sales pitch that The Cordishes also declined to urged wealthy Americans to invest comment. their money through trusts set up Callahan raised $90 million in the Cook Islands. Among the cli- from at least 45 investors who re- ents that Callahan and the attorney ported losing nearly $68 million, approached was a family that runs according to a recent filing by Ste- a large commercial real estate and ven Weinberg, a court-appointed casino development company in receiver in the case. Baltimore, the Cordish Cos. The U.S. Attorney’s Office for

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 149 Today, there are between 50 and 60 offshore financial centers around the world holding untold billions of dollars…. Groups that monitor tax issues estimate that between $8 trillion and $32 trillion in private global wealth is parked offshore.

the Eastern District of New York billions of dollars at a time of his- has opened a criminal investiga- toric U.S. deficits and forced bud- tion and initiated forfeiture pro- get cuts. Groups that monitor tax ceedings of Callahan’s Long Island issues estimate that between $8 home and the Montauk real estate trillion and $32 trillion in private project. global wealth is parked offshore. For the better part of a century, For most investors in the United the U.S. government has been try- States, the first step to open an off- ing to rein in the offshore world. shore account is to contact one of In 1937, Treasury Secretary Henry the hundreds of law firms special- Morgenthau Jr. wrote to President izing in “asset protection.” These Franklin D. Roosevelt to warn that firms then call on a sprawling in- millions of tax dollars were being dustry of offshore-based middle- kept in offshore accounts and lim- men, such as CTL and TrustNet. ited partnerships, including one $3 They set up companies and arrange million account in the Bahamas. trusts and hard-to-trace bank ac- “The companies are frequently counts. organized through foreign law- Sen. Carl M. Levin (D-Mich.) yers, with dummy incorporators has been holding hearings and and dummy directors, so that the conducting investigations into the names of the real parties in inter- offshore world for nearly three de- est do not appear,” Morgenthau cades. In 2010, Congress passed the wrote. Foreign Account Tax Compliance Today, there are between 50 Act requiring that U.S. taxpayers and 60 offshore financial centers report foreign assets to the govern- around the world holding untold ment and foreign institutions alert

the IRS when Americans open ac- of tax competition.” The center ar- counts. gues that unfettered access to off- In February, Levin introduced shore havens leads to lower taxes legislation that would permit the and more prosperity. Treasury Department to penalize According to records reviewed offshore financial institutions that by The Post and ICIJ, the organiza- “significantly” impede U.S. tax tion’s fundraising pleas have been enforcement and put an end to ac- circulated to offshore entities that counting practices that enable cor- make millions by providing ano- porations to evade billions in taxes. nymity for wealthy clients, many of “We can’t afford to lose tens of them U.S. citizens. billions of dollars a year to tax- In May 2007, one director of a avoidance schemes,” Levin said. Hong Kong company that creates “And many of these schemes in- offshore trusts sent a CF&P solici- volve the shift of U.S. corporate tax tation to contacts in the Cook Is- revenues earned here in the U.S. to lands, pointing out that CF&P was offshore tax havens.” trying to raise $250,000 for a lobby- The efforts by Levin and other ing campaign to “stop the bleeding, lawmakers have been opposed by build allies and go on the offen- powerful lobbying interests, in- sive” against efforts in Washington cluding the banking and account- to regulate the industry. ing industries and a little-known “I personally think the efforts nonprofit group called the Center of CF&P should be supported by for Freedom and Prosperity. CF&P the Cook Islands given the impact was founded by Daniel J. Mitchell, a [that] passage of current bills being former Senate Finance Committee considered in the USA Congress staffer who works as a tax expert would have on the jurisdiction and for the Cato Institute, and Andrew industry,” the director said. Quinlan, who was a senior econom- Attached to the e-mail was the ic analyst for the Republican Na- proposal from CF&P to “work with tional Committee before helping Congress and the White House” start the center. and explain the “legitimate role In filings with the IRS, the cen- that low-tax countries play in pro- ter says it has “met with more than tecting financial privacy.” 175 Capitol Hill offices on benefits Quinlan, the president of CF&P,

declined to disclose his donors or Phillips in Evansville, Ind. The say how much of the $200,000 his Indiana attorney general’s office organization raises each year comes stepped in, accusing the couple of from the offshore world. civil fraud and demanding refunds “I don’t think it matters what in excess of $1 million. percentage of the money comes The attorney general’s office al- from which donor,” Quinlan said. leged that companies controlled “There are huge offices on K Street by the couple had promised “free that lobby on behalf of interests trial” offers for their products, in- that are outside the United States. cluding vitamin supplements and We’re just trying to be as effective “fat buster” beauty creams, but as we can be.” customers ended up paying for the Mitchell, the co-founder of products without receiving their CF&P, added that nations shouldn’t free trials. be telling other countries how to When requests for refunds be- conduct their affairs and noted gan to mount, the couple filed for that the United States is one of the bankruptcy protection in October worst offenders in the world when it 2003. A month later, they opened comes to corporate secrecy. a company on the Caribbean island “The United States is one of the of Nevis, records show. biggest tax havens in the world,” The next month, Fifth Third Mitchell said. “In general, the Bank, which had sustained heavy United States is impervious to fish- losses, filed a lawsuit in the case ing expeditions here, and then the against the Phillipses. Two weeks United States turns around and later, the Phillipses opened a trust says, ‘Allow us to do fishing expedi- in the Cook Islands. tions in your country.’ ” The couple transferred millions in assets into the offshore accounts, Bankrupt couple’s $3 million according to court documents and the internal records. Within In 2003, hundreds of U.S. consum- three years, one offshore company ers complained that they had been formed by the couple held $3 mil- bilked by an online health and lion, assets that were beyond of the beauty supply company operating reach of the U.S. judge overseeing out of the home of Wayne and Anita the bankruptcy case.

“They were moving funds off- their promise to refund $130,000 to shore and there was nothing we customers and pay a $20,000 fine. could do,” said Andrew C. Ozete, a “I really can’t say anything about lawyer hired by Fifth Third Bank, this,” Wayne Phillips told The Post which claimed it lost more than recently. $1 million in the case. “The judge “It was stunning to see how the was not happy. Judges don’t want to laws are written in these places to hear that people have moved mil- create these havens,” said Justin G. lions of dollars offshore so they Hazlett, the deputy attorney gener- don’t have to pay settlements.” al in Indiana who investigated the The bankruptcy judge appoint- case. “It presents a significant up- ed attorney R. Stephen LaPlante as hill battle to pierce through these the trustee to recover as much mon- accounts.” ey as he could for the creditors. “I thought to myself, how are Secrecy cuts both ways we going to get this money back?” LaPlante said. “We didn’t know In 2005, Dennis Kittler, the presi- anything other than that these ac- dent of a Houston-based oil compa- counts existed. For someone like ny, thought he had found a sound me, I can’t do my job when people investment opportunity after hear- are able to create these kinds of ing a sales pitch by a businessman trusts.” named Robert Watson. When LaPlante learned that the Watson, who told clients he was Phillipses were planning to move to a former military intelligence of- Costa Rica, he asked the judge to ficer and a professor of finance at order them to surrender their pass- Texas A&M University, said he had ports. developed an algorithm for trading The couple eventually settled the in foreign currencies. He promised lawsuit without admitting wrongdo- returns as high as 23 percent. ing and repaid some of the money “He came out of A&M with an to the bank, but Ozete said his cli- accounting degree. He was in Spe- ent was not able to recover much. cial Operations in the Army; he The Indiana attorney general’s of- had gone on all these covert opera- fice also settled with the couple, tions around the world; he knew all dropping its lawsuit in return for these generals,” Kittler recalled in

a recent interview. “He went to my husband-and-wife team in the Ca- daughter’s graduation. He always ribbean who had served as direc- seemed to remember everyone’s tors of other companies with thou- birthday. I thought he was one of sands of wealthy clients seeking to the greatest guys in the world.” shield their assets. The first sign of trouble came Watson used his investors’ mon- in 2008, when Kittler received a ey to pay for a high-flying lifestyle, monthly report that was identical to including a $500,000 annual salary the one he had received the month and a $33,000 diamond ring. before. Kittler called Watson, who In February 2012, a federal judge apologized for what he called an sentenced him to 20 years in prison oversight. and ordered him to pay restitution “He said he was sorry and he and a $10 million fine. said, ‘I guess I owe you another Kittler lost nearly $2 million, $50,000.’ ” among 132 investors who lost an es- The following summer, Kittler timated $33.5 million. received a call from his attorney. “Once your investment ends up “He said, ‘You know that guy in a place that bills itself as a se- you’ve been investing with? He’s crecy haven, your money is offshore been arrested.’ ” and you have no legal standing to Kittler soon learned that Watson go get it,” said David L. Peavler, was a fraud. When investors with- an associate regional SEC director drew money, Watson simply trans- in Texas who worked on the case. ferred funds from other investors “You’re basically putting your faith to cover the withdrawals, using two in another country’s process and British Virgin Islands companies there’s a high degree of risk. You set up by the offshore firm CTL, have to ask yourself, why in the court records and internal docu- world would you send your money ments show. there?” n “He should have won an Acad- emy Award,” Kittler said. This article was also published in The According to previously confi- Washington Post. dential documents reviewed by The Post and ICIJ, the nominal direc- Contributor to this story: tors of Watson’s companies were a Magda Jean-Louis

Chaudhry family residence in Lahore, Pakistan, which was listed as the address for Moonis Elahi in the offshore files. Son of Leading Pakistani Politician Tied to Secret Caribbean Company By Aamir Latif and Marina Walker Guevara Published Online: April 8, 2013

Moonis Elahi, a Punjab he scandal-buffeted heir to one of Pakistan’s most pow- legislator, was shareholder Terful political dynasties, the of a British Virgin Islands Chaudhry family, owned a secret company in the British Virgin Is- firm set up with the help of lands he created with the help of Swiss bank UBS. Swiss bank UBS, according to documents obtained by the ICIJ.

Moonis Elahi, son of Chaudhry ing the prosecution against Elahi. Pervaiz Elahi, who has just stepped During the probe, Pakistan’s Fed- down as deputy prime minister, was eral Investigations Agency uncov- the sole shareholder in an offshore ered a bank account that Elahi kept company called Olive Grove Assets in the British Virgin Islands. But the Ltd, created in 2006 in the British existence of the offshore company Virgin Islands according to corpo- discovered by ICIJ never surfaced rate records reviewed by ICIJ. In during the agency’s investigation. 2008 Moonis Elahi won a seat in the In an email to ICIJ, Elahi said he Punjab Provincial Assembly. does not own or control the BVI com- Elahi was swept up in scandal in pany found by ICIJ. He did not an- 2011 when government prosecutors swer whether he had owned the firm accused him of in the past. obtaining illegal ICIJ verified Elahi’s connection to payments in an the firm through the address listed alleged land scam for the politician in the corporate re- involving the gov- cords, which is that of the Chaudhry ernment-owned family residence, a columned white National Insur- mansion in the eastern city of La- ance Company hore. According to the data, the com- Limited (NICL). pany was active at least until 2010. A Pakistani The records show the Singapore court acquitted Moonis Elahi branch of Swiss bank UBS acted as him after what intermediary between Elahi and the critics say was in- Singapore-headquartered offshore tense interference from Pakistan’s services provider, Portcullis Trust- government, which twice transferred Net, which set up the BVI company. the case’s head investigator and later The files suggest that UBS was suspended him. The president of closely involved in the affairs of Transparency International Paki- Elahi’s company. “With immedi- stan, Syed Adil Gilani, said Elahi’s ate effect, all correspondences of acquittal was “completely bogus and the above entity to be sent to Nico- fraudulent.” las Nussbaumer as per UBS email Even Pakistan’s Supreme Court dated 15 April 2008,” reads a note accused the government of hinder- included among Olive Grove Assets

documents reviewed by ICIJ. Nuss- contain information about another baumer was the UBS contact for Pakistani politician, Sen. Muham- Elahi’s company. mad Talha Mahmood, who created The arrangement wasn’t unusual. a company in 2008 in Mauritius, a The ICIJ files show that in the past 20 tax haven island off the southeast years UBS and TrustNet worked to- coast of Africa, with the help of gether to help the bank’s clients set Deutsche Bank. up more than 2,960 companies in 12 Mahmood told ICIJ that he had offshore jurisdictions from the Baha- created the company hoping to use mas to Hong Kong. it for his automotive battery export In 2008, UBS was the first casu- business but that it became so com- alty of the U.S.’s historic crackdown plicated to get the necessary permits on Swiss banking secrecy. The bank from the Pakistani government that agreed to pay $780 million to settle he soon abandoned the idea and U.S. civil and criminal charges, ad- closed the company. He said he used mitting it had helped Americans Mauritius because it was the easiest hide their money from the IRS. U.S. place to incorporate a company, but Senator Carl Levin of Michigan said that the short-lived firm did not hold investigators found that UBS had “a single penny.” woven a cloak of secrecy by using Global Financial Integrity, a offshore companies, anonymous Washington-based research group wire transfers and code names for that tracks dirty money worldwide, clients. estimates that $2.5 billion was illegal- A UBS spokesperson declined to ly siphoned out of Pakistan between comment about particular clients cit- 2001 and 2010. ing confidentiality issues but said the Shahid Hasan Siddiqui, a Kara- bank has strong guidelines for the chi-based economist and former verification of its clients’ sources of World Bank consultant, said West- wealth. ern governments and international Elahi is one of about 40 Pakistan- organizations have put pressure is included in a cache of 2.5 million on banks to question the source of offshore records obtained by ICIJ, the money kept by their Pakistani the largest collection of offshore clients in offshore accounts. But data ever gathered and analyzed by in their chase for profits, he said, a media organization. The files also banks often circumvent their own

anti-money-laundering regulations. name of laborers who used to work at “They cannot afford to lose such a sugar mill owned by Elahi’s family. huge amounts.” The investigative report that Qureshi presented in court alleged that a Political interference manager for Moonis Elahi admitted opening the bank accounts and later The Chaudhrys, Moonis Elahi’s transferring the money to another powerful family from the northern account controlled by Elahi. Punjab province, have wielded major With the help of British law en- influence in Pakistani politics since forcement, Qureshi also discovered a the 1960s. They own large tracts of bank account that Elahi controlled at agricultural land. EFG Private Bank Ltd. in the British In 2010, Transparency Interna- Virgin Islands with a balance of more tional presented evidence in court than £1.1 million ($1.8 million). that officials at Pakistan’s National Elahi surrendered to police in Insurance Company had used tax- March 2011. That’s when pressure payers’ money to buy land at artifi- started to build. cially inflated prices. One of the sell- Twice during the investigation, ers who allegedly benefited from the higher ups in the government trans- corrupt deals was a former defense ferred Qureshi off his job and off minister, Habibullah Warraich. the case. Pakistan’s Supreme Court The lead investigator in the NICL intervened and ordered his rein- case, Zafar Qureshi, said he was sur- statement. He resumed charge of the prised when the money trail in the investigation only to find that three case led to the scion of the Chaudhry members of his investigative team clan. Moonis Elahi, who attended had been transferred away. Wharton Business School in the In May 2011, the opposition Paki- United States, is considered the fu- stan Muslim League (Q), led by the ture of the right-wing party Pakistan Chaudhrys, formed an alliance with Muslim League (Q). the ruling Pakistan People’s Party, Qureshi said he uncovered evi- and Chaudhry Pervaiz Elahi, Elahi’s dence that one of the main suspects father, joined the government. Many in the land scam had deposited 220 in the opposition and the Pakistani million rupees ($2.3 million) in local media saw the deal as a political bank accounts that were held in the move designed to give the ruling

party needed seats in the national as- the investigation,” Qureshi told ICIJ sembly and save Moonis Elahi from in a recent interview. He said he the corruption charges. received death threats during the “Although it sounds flattering probe. Police still stand guard out- that this was all done for me, it’s ab- side his home in a newly developed solutely not true,” said Moonis Elahi neighborhood in Lahore. in his email to ICIJ. “We joined the Pakistan’s interior minister, government because there was a lot Rehman Malik, has strenuously de- of pressure from parliamentarians nied that the government interfered within our party. We took the step in Elahi’s prosecution. The cases to stop them from leaving and join- against the others accused in the al- ing other parties.” leged land scam are still in progress. In July 2011, the Supreme Court In an email to ICIJ, Elahi said accused the Pakistani government of he was innocent and that the FIA’s “political interference.” The justices “purpose was to arrest me and not ordered an inquiry into the matter, investigate.” He said during the trial saying that the corruption probe had the judge and the prosecutors took been “badly hampered” to the point long leaves. “I don’t blame the Su- that “no progress has been made and preme Court, but some influential looted money, which has been taken people were definitely trying to de- outside the country, is not likely to lay my case.” come back.” The inquiry corrobo- Experts say that money siphoned rated the justices’ earlier findings of out of Pakistan and stashed in off- political meddling in the case. shore accounts has a direct impact Qureshi retired from the FIA in on average Pakistanis who can’t use September 2011. offshore accounting to get ahead. During Elahi’s trial, the investiga- “Just imagine, our people are tor who replaced Qureshi said the reeling from poverty and unemploy- government had found no evidence ment, and our politicians and busi- against him. The judge who exoner- nessmen have billions of dollars rot- ated Elahi in October 2011 said in ting in offshore accounts,” Siddiqui, his ruling that the prosecution had the economist, said. “This money “half-heartedly” pursued the case. could have changed the country’s “The entire government stood economic dimensions if it had been alongside the accused throughout utilized here.” n

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 159 Top Malaysian Politicians Use Offshore Secrecy By Aidila Razak, Kuek Ser Kuang Keng, Wong Teck Chi and Steven Gan Published Online: April 8, 2013

Key members of the bah Chief Minister Musa Aman. The files, which were obtained Malaysian government, their by the ICIJ and examined by Ma- families, and well-heeled laysiakini, show more than 1,500 Malaysians owning offshore com- associates are among those panies in Singapore — dubbed as owning secretive offshore the new Switzerland — as well as the British Virgin Islands (BVI), an companies in Singapore and international tax haven. the British Virgin Islands, The ICIJ list comprises a curious mix of Forbes-listed tycoons, par- according to a cache of liamentarians, retired politicians, leaked documents. civil servants and their spouses, members of royal families, famous and infamous businesspeople, un- hey include former derworld kingpins and even former prime minister Mahathir beauty queens. TMohamad’s son Mirzan, While some of the offshore com- Federal Territories and Urban panies carry out legitimate transac- Well-Being Minister Raja Nong tions, others are likely to be part Chik Zainal Abidin and Michael of the 871.4 billion ringgit (about Chia, the alleged ‘bagman’ for Sa- $285 billion) estimated by Wash-

Then-Malaysian Prime Minister Mahathir Mohamad (right) with his son Mirzan Mahathir at the 1997 ASEAN summit. Photo: AP

ington-based financial watchdog “The hoard of documents rep- Global Financial Integrity (GFI) to resents the biggest stockpile of have been lost through illicit out- inside information about the off- flows over a 10-year period. shore system ever obtained by a In 2010 alone, GFI reported that media organisation. The total size close to 200 billion ringgit (about of the files, measured in gigabytes, $65 billion) of dirty money was si- is more than 160 times larger than phoned out of Malaysia, putting the the leak of US State Department country second only to Asian eco- documents by Wikileaks in 2010,” nomic powerhouse China in global says ICIJ. capital flight. Despite the extensive data, this The leaked ICIJ files provide se- is not the complete list of all off- cret records of offshore holdings shore companies around the world. of people and companies in more Indeed, it is only the tip of the ice- than 170 countries and territories. berg.

Nevertheless, it allows members shore entity with his father, Raja of the public, for the very first time, Zainal Abidin Raja Tachik, a num- to sneak a peak into the secretive ber of his sisters and brothers as well world of anonymous wealth. as other family members. Most of them are also shareholders and di- The well-being minister rectors of Kumpulan RZA Sdn Bhd. Prior to his senatorship, Raja According to the leaked documents, Nong Chik was a corporate figure Raja Nong Chik, who is Lembah Pan- who founded and managed an en- tai Umno chief, is a shareholder and gineering firm for 20 years. director of RZA International Cor- Contacted by Malaysiakini, the poration, a British Virgin Islands en- minister confirmed that RZA In- tity incorporated on August 21, 2007, ternational was set up by his father, through Singapore. who will turn 96 this year, “for the The company is a mirror of Malay- purpose of holding legitimate off- sian entity Kumpulan RZA Sdn Bhd, shore investments for the family.” a 1979-founded company dealing in However, the minister did not real estate and equities investment. elaborate on the offshore invest- Raja Nong Chik set up the off- ments made by his family through the company. He added that RZA International was de-registered in 2009. “The company was not used to obscure activities of Kumpulan RZA Sdn Bhd, and neither was it used to circumvent taxes or hide transactions overseas,” Raja Nong Chik said in an email to Malaysiakini.

The former PM’s son Mirzan Mahathir, the eldest son of Mahathir, is also among those the ICIJ list as director and shareholder Raja Nong Chik of three offshore companies.

porated on Dec 16, 2003, originally named Mainline Ltd and with an authorized share capital of 37,000 ringgit (about $12,000). Mirzan became a director and main shareholder six days later and the company was renamed Cres- cent Energy on May 16, 2008. Another Labuan offshore company, Utara Capital Ltd, in which Mirzan is named as sole shareholder and director, was incorporated on Aug 19, 1997, with an authorized share capital of US$15,000. The third company, Al Sadd Mirzan Mahathir Investments Pte Ltd. was also a Labuan offshore company. It was established on May 14, 2009, with Mirzan’s major commercial ve- an authorized share capital of hicle in Malaysia is Crescent Capi- US$12,000. Mirzan is listed as the tal Sdn Bhd, an investment hold- sole shareholder and director of Al ing and independent strategic and Sadd Investments. financial advisory firm. He is the Malaysiakini has approached company’s chairperson and chief Mirzan’s office for his comments on executive officer. these offshore companies, but his A Forbes-listed entrepreneur, Mir- aide said he was unable to respond zan holds a non-executive director on the matter as he was out of town. position in Philippines-based San Miguel group, which has raised eye- The Sabah ‘bagman’ brows in Muslim-majority Malaysia, as beer brewery is a core businesses Another prominent personality on of San Miguel. the list is Chia Tien Foh, who is better One of Mirzan’s offshore enti- known as Michael Chia — the shad- ties is called Crescent Energy Ltd, owy business tycoon allegedly linked a Labuan offshore company incor- to Sabah Chief Minister Musa Aman.

Chia, too, has three offshore companies in which he is listed as either director or shareholder. One of them was CTF International Ltd, with ‘CTF’ seen as the initials of Chia’s full name. It was incorporated on April 18, 2006, in the British Virgin Is- lands. CTF International gained notoriety when Musa Aman (left) and Chia Tien Foh (right) it was named by whistleblower website Sar- awak Report of being a conduit StarWater Corporation — while in channelling millions of ringgit Siaw Lin owned Splendor Success to a Hong Kong account allegedly Worldwide Ltd. linked to Musa. Malaysiakini contacted Chia However, Musa has denied any through the address stated in his business ties with Chia. company registration documents CTF was de-registered in 2008. for comments, but there has been The other two offshore companies no response. owned by Chia are Ravenswood Development Ltd and Ark Capital Iron-clad secrecy Technologies Ltd. In addition, Chia’s wife Yap Loo According to a former officer with of Mien and another woman, who is the Inland Revenue Board (IRB), Ma- alleged to be his mistress, Yap Siaw laysians parked their money offshore Lin, also appear on the list as key to enjoy significantly lower or no tax- shareholders in three separate Brit- es. When the income is illegal, they ish Virgin Islands entities. are protected by a wall of secrecy. Loo Mien owned two companies Such ploys, said the officer who — Perfect Minds Incorporated and was a tax investigator, may not al-

ways succeed as Malaysia has a dou- could be used to evade taxes. ble taxation agreement with close “For example, a payment can to 80 countries that provides for the be made for a seemingly legiti- exchange of information on investi- mate service, like consultancy for gations involving the prevention or the procurement of submarines, detection of tax evasion or fraud. but it is paid to a company set up This includes Singapore, where overseas, where the recipient pays a some of the offshore companies are lower tax. based. “Singapore and Hong Kong, with The island republic has been la- corporate tax rates of about 17 per- belled by Sarawak corporate lawyer cent compared with Malaysia’s 25 Alvin Chong as the “new Switzer- percent, are popular parking lots,” land” in a recent video clandestine- he said, speaking on condition he ly filmed by London-based NGO not be named. Global Witness. The retired officer, who worked Tax evasion with the IRB for more than 20 years, added that while the setting One of the methods of tax eva- up of offshore companies was in sion was explained by Chong in itself not illegal such companies the Global Witness video — how to avoid paying capital gains tax on Sarawak’s dodgy land deals. According to the former tax officer, offshore companies often include many layers of ownership through nominees to camou- flage and “water down the link” to the original owner. As such, he said, the act of setting up off- Alvin Chong (right) shore companies in tax

havens often raised red flags. Malaysia-Singapore DTA (double “Someone can say that their com- taxation agreement),” he said. pany is set up in the British Virgin But most tax havens are not signa- Islands, for example, but the money tories to DTA agreements and they they use to set up the BVI company, operate outside international laws. or more importantly, the opera- Moreover, it is also up to the Ma- tions channelled through these tax laysian authorities to decide wheth- havens could raise suspicion as beer to pursue the case and seek the ing not genuine and invite an IRB necessary information from their probe,” he said. counterparts abroad. n “If the MACC (Malaysian Anti- Corruption Commission), IRB or This article was also published in the police want information from Malaysiakini. their Singapore counterparts, for example, the Singaporeans are Contributor to this story: obliged to give, at least under the Kimberley Porteous

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3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 166 Billionaires Among Thousands of Indonesians Found in Secret Offshore Documents By Nicky Hager Published Online: April 9, 2013

Owners of corporations Six were closely tied to the late dictator Suharto, who helped a spe- registered in tax havens cial circle of Indonesians grow rich include some linked during his 31-year rule by granting economic fiefdoms to family and to regime of the late friends. dictator, Suharto. The billionaires are among nearly 2,500 Indonesians found in the files of Singapore-headquartered ine of Indonesia’s 11 rich- offshore services provider Portcullis est families have found shel- TrustNet, which ICIJ has been ana- Nter in tropical tax havens, lyzing and began reporting on last holding ownership of more than week. 190 offshore trusts and companies, Although there is no evidence secret records obtained by the ICIJ in the files of illegality by any of show. the nine families, they are part of a The nine families, worth an es- wider Indonesian economy riddled timated $36 billion among them, with secret offshore companies and are at the top of a wealthy class that resources draining away to offshore dominates Indonesia’s politics and bank accounts. economy. Danang Wirdaus of Indonesian

Names in the offshore records include billionaires linked to former Indonesian dictator Suharto (left) and the son of former president B. J. Habibie (right). Photo: AP

Corruption Watch said that after In- tax authority says that taxpayers and donesia’s 1998 financial crisis many companies resident in Indonesia are Indonesian tycoons moved to Sin- subject to taxation on their world- gapore and Hong Kong. “Offshore wide income. This includes in tax companies were essential because havens. It says there are special tax they are not Indonesian companies forms to declare transactions occur- any more,” he said. ring in tax havens. However he said that for other In December 2012 the Washing- very rich Indonesians as well, “when- ton-based research organization ever their companies become bigger Global Financial Integrity estimated and bigger, they can use offshore that Indonesia had lost over $10 bil- companies to reduce their tax and lion in “illicit financial outflows,” increase profits.” including tax evasion, each year be- On its website, the Indonesian tween 2001 and 2010. This placed it

9th out of 150 developing countries name not to be used in issuing infor the quantity of money disappear- voices: “Please do not mention Gary ing into offshore tax havens. These Phair’s name,” the TrustNet staff outflows of “dirty money” deprive wrote. “We are to refer to him in an nations of investments in healthcare, invoice as either ‘the company repre- education and infrastructure, GFI sentative’ or ‘your representative.’ ” said in a statement. The tiny Cook Islands in the However there are also legitimate South Pacific have been a preferred uses for offshore companies. Service destination for many Riady family providers like TrustNet allow compa- offshore entities, from 1989 until at nies and individuals to do business, least 2009, the files indicate. diversify their investments and forge The Riadys and Lippo were at the alliances across political borders. center of a foreign political cash scan- They also help individuals who live dal during American President Bill in multiple countries to manage Clinton’s 1996 reelection campaign, their affairs. with the company admitting dozens The files analyzed by ICIJ show of violations of U.S. campaign law how wealthy Indonesians have em- and the family’s scion, James Riady, braced the anonymity offered by the pleading guilty to fraud and paying offshore world. The Riady family, for an $8.6 million fine. instance, owners of the conglomer- A spokeswoman for Stephen Ri- ate Lippo Group, had at least 11 off- ady, James’ brother, declined to dis- shore companies and trusts, records cuss the family’s offshore entities. obtained by ICIJ show. But TrustNet She said there was “nothing illegal or cautiously refers to the Lippo com- improper in protecting the privacy panies in internal correspondence of one’s own information” and no as “Client A”. Company records ex- adverse implication should be drawn plain that “the client does not want from the group doing so. to be seen dealing offshore.” Their Some Riady (“Lippo”) group agent Gary Phair instructed the companies were publicly listed com- TrustNet staff to “delete any refer- panies, so information regarding ence to ‘C/- [care of] Lippo Group’” them was publicly available. “Other from all contact addresses in Client companies in the group are privately A records. owned, so information concerning Phair also asked that his own these companies is private and will

only be disclosed to the appropriate clear rainforest during the Suharto regulatory authorities, as and when years. required by law.” Between them they have over 140 Phair also declined comment, cit- offshore companies, mostly in the ing “strict obligations of confidenti- British Virgin Islands. ality to my clients and former clients More recently Widjaja, Tanoto regarding their business affairs.” and Pangestu have invested heav- One of Indonesia’s big tobacco ily in palm oil families also used the Cook Islands. plantations. A On May 18, 2005, Philip Morris In- series of reports ternational completed the purchase earlier this year of 97 percent of the shares of the from the Pulit- Sampoerna tobacco company. It paid zer Center on the Sampoerna family, Indonesia’s Crisis Report- 10th richest, $2 billion for their mi- ing described nority stake. Two weeks later, on May palm oil as one 31, TrustNet established an offshore of the most trust called Strong Castle Trust in controversial the Cook Islands. commodities Sulistiani Sampoerna is listed in Eka Tjipta Widjaja on earth. Palm the TrustNet files as “trust settlor”, oil plantations possibly indicating it was her money have replaced the trust was to hold. She did not “swathes of rainforest the size of respond to a request for comment. small countries”. Two other Indonesian tobacco bil- The documents obtained by ICIJ lionaires, Susilo Wonowidjojo and show that as Suharto’s rule came to Peter Sondakh, also have multiple an end in 1997-98, the number of offshore companies. new TrustNet companies and trusts Four more of Indonesia’s very set up for Indonesians spiked. richest are known for their role in TrustNet’s employee Stephen clearing vast areas of tropical rain- Breed arranged a trip to Jakarta in forest. Eka Tjipta Widjaja, the Salim late 1997 to speak with at least one family, Sukanto Tanoto and Prajogo important client about the services Pangestu built their fortunes after TrustNet provided. He made an ap- they obtained licenses to log and pointment to meet with Marimutu

Sinivasan, chairman of Texmaco, thousands of dollars each — made an Indonesian textile and industrial from Pico Trading’s bank account. conglomerate. More than $30,000 went to someone Sinivasan was a favorite of Suhar- called “Yanti Rukmana,” the same to, and state banks and government name as Suharto’s oldest daughter. agencies extended some $2.2 billion But, as the secretive record-keeping in loans to Texmaco, much of it in intended, there is no way of know- the dictator’s final months in power. ing from the documents if it was ac- TrustNet incorporated a Cook Is- tually her. lands offshore company on April 4, Suharto was finally forced from 1997, named the Pipeline Trust Com- power on May 21, 1998, and was re- pany Limited and transferred its placed by his deputy B.J. Habibie, shares to Sinivasan’s name on Aug. who promised to increase transpar- 13, 1997. ency compared to the Suharto years. The Pipeline Trust Company Yet even Habibie’s own sons used used the TrustNet subsidiaries Di- offshore companies, records re- rectcorp and Secorp as its director viewed by ICIJ show. His younger and secretary. Sinivasan was the son Thareq Kemal Habibie was part sole shareholder. TrustNet later sent of the rush of Indonesians setting Sinivasan a power-of-attorney docu- up offshores in 1998. He formed two ment on Dec. 11, 1997 that entitled British Virgin Islands companies in him to open bank accounts and the last weeks before Suharto had transfer money in and out of the ac- to resign. A decade later another counts in the name of the company. son, Ilham, personally organized at Sinivasan could not be reached least seven TrustNet companies to for comment. provide an offshore base for enter- Other members of prominent prises inside Indonesia, including Indonesia families set up offshore exploration and mining. He did not companies using TrustNet at this respond to a request for comment. time. In September 1998 TrustNet Most of Indonesia’s 240 million set up a secretive offshore company people have barely heard of the off- called Pico Trading Limited. No shore world. But for wealthy and pow- real directors or owners were re- erful Indonesians, it is still a routine corded. Invoice records show doz- part of managing their business and ens of payments — usually tens of finances. n

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 171 Jailed Property Man Hid Assets Offshore During Divorce By Duncan Campbell and Craig Shaw Published Online: April 8, 2013

Ex-wife is suing Scot Young occupy a $21 million Oxfordshire mansion and to throw his money for share of $610 million about in spectacular fashion. He fortune that he claims he once bought his then wife, Michelle, a Range-Rover filled to the roof lost within three months. with couture dresses. For her 40th birthday, he gave her a $1.5 million ailed British property necklace. developer Scot Young, an asso- He is held in Pentonville prison Jciate of Russian oligarch Boris for contempt of court, following bit- Berezovsky, constructed a secret net- ter seven-year divorce proceedings work of offshore companies to hold in which he failed to explain where his assets during a multimillion- his fortune had gone. He could be pound divorce battle, according to eligible for parole in two weeks. He the ICIJ’s research. has not responded to requests for His story graphically demon- comment. strates the way hideaways such as Michelle Young is suing for a the British Virgin Islands (BVI) can share of the $610 million fortune be used by a man bent on cheating that Young reportedly owned in the law. 2005, but which he claims disap- Young, 51, described as a fixer for peared and became debts of $43 the super-rich, rose suddenly from million within three months. He working-class origins in Dundee to owes nearly $1.5 million in mainte-

nance and almost $2 million in unpaid tax. Despite declaring bankruptcy in 2010, Young continued to live lavishly. He told the high court that top businessmen were supporting him with gifts and loans. Mrs Young alleges that associates such as the exiled Berezovsky, who was found hanged at his Ascot mansion Scot Young, left, is accused by his ex-wife, last month, helped her ex- Michelle, right, of hiding his $610m fortune husband conceal his assets. offshore during their bitter seven-year She said: “I find it disgrace- divorce battle. ful the amount of money that has been allowed to be hidden offshore, and that it is legal to an offshore Cyprus company, Para- put assets out of reach in cases like sol Participations Ltd, which con- mine.” trolled the planned property specu- Young was finally jailed in Janu- lation. Their secret deal involved ary 2013 for failing to verify his al- 12 obscure companies and trusts in leged financial losses. Mr Justice Cyprus, Russia, the BVI and Lich- Moor told him he had committed a tenstein. “flagrant and deliberate contempt” Young subsequently claimed that over a very long period of time. Back “Project Moscow” fell apart and that in 2005, as his marriage deteriorat- he got no shares. ed, Young had joined forces with Mrs Young testified in court that Russian businessman Ruslan Fomi- in March 2006 she suddenly received chev, formerly Berezovsky’s business a phone call from Stephen Jones, a partner, to invest in a deal to rede- London lawyer and owner of off- velop a $100 million former paint- shore specialists Jirehouse Capital. factory site in Moscow into shops Jones told her that her husband had and offices. lost all his money, had attempted Fomichev sold him a half share in suicide and was seeking help at the

Priory clinic. Mrs Young could, how- of imprisonment if he did not do ever, find no record of his admit- his “utmost” to give true answers to tance. Jones does not dispute making questions about his finances. the call, but says that the contents are Two days later, the documents re- “subject to legal professional privi- cord that agents appointed by Young lege held by our clients”. sought to merge the six BVI compa- On 28 March 2006, according to nies he had set up, containing half documents the Guardian has seen, shares in the Moscow property . Young signed a power of attorney The instruction to consolidate giving the lawyer control of “inter- Young’s share of “Project Moscow” ests held by me in Parasol Participa- was carried out on 17 August, 2009 tions”. The authority indicates that . This created a single new company Young’s interests are to be trans- with a different name, Solar Breeze ferred to Solar Breeze Ltd and five (Consolidated) Limited. The sole other BVI companies. share in the new company was is- A week later, according to docu- sued to Stephen Jones’s company, ments seen by ICIJ, the lawyer also Jirehouse Fiduciaries Nominees. took control of these BVI compa- In the most recent move in the nies, at a meeting held in Monaco. offshore battle, on 4 July 2012, The next morning, the companies Jirehouse Fiduciaries Nominees of and shares were shifted even fur- Nevis took full ownership of Para- ther offshore, to the tiny Caribbean sol Participations of Cyprus. This island of Nevis. Jones then estab- means that Jones’s clients, who have lished a new Nevis-based trust, the included Young, now own all of “SY Refinance Foundation”, to “re- Parasol Participations and any stake structure” Young’s financial affairs. in the potentially valuable Moscow Young’s estranged wife finally development. obtained a “global freezing order” Jones denies fronting for the from the high court in June 2007, jailed tycoon. He says: “We only ever forbidding Young from moving or acted on behalf of various creditors selling the assets under dispute. (and upon the express instructions In May 2009, Young was sum- of those creditors) of Mr and Mrs moned by a judge and ordered to Young and have never acted for Mr explain how he was managing to or Mrs Young or represented any of live. Mr Justice Charles warned him their respective interests.” n

The Cook Islands: where Baron Rothschild established at least 20 trusts and 10 holding companies to contain his assets. Photo: Alex Shprintsen Secret Files Reveal Rothschild’s Offshore Domain By Anne Michel and Emily Menkes Published Online: April 12, 2013

Late guardian of French aron Elie de Rothschild, the guardian of the French branch of banking dynasty Bbranch of the famed Roths- had a web of at least child banking dynasty, built an offshore empire in the palm-fringed 20 secrecy-cloaked trusts Cook Islands between 1996 and in the South Pacific. 2003. Rothschild, a businessman and

arts patron who died in 2007 at the ued after the Baron’s death in 2007. age of 90, constructed a complex The companies have a common network of offshore trusts and front shareholder called Mandalor Lim- companies, according to secret ited, an equally opaque company documents obtained by the ICIJ based in the Caribbean country of and reviewed by Le Monde. Saint Vincent and the Grenadines. The complex nature of the fi- According to a document, when nancial arrangements in the Pa- Portcullis TrustNet set up Agate, cific islands and their near-total secrecy made it difficult to identify his hand in the offshore entities. The internal documents reveal at least 20 trusts and 10 holding companies were set up for Rothschild in the Cook Islands, an independent territory in the South Pacific with close ties to New Zealand. The trusts have typically opaque names, Anon Trust, followed by the Benon Trust (apparently set up by Rothschild’s daughter Nelly) and Denon Trust, being notable examples. All of them are linked in a multi- layered, complicated web. Each of An undated photo of Baron Elie de the companies is listed as trustee Rothschild. of one or more of the trusts. None of the documents that ICIJ or Le Monde examined lists the benefi- Begate, Cegate, Degate, Egate and ciary of any of the trusts, although Fegate Trusts, the appointed lawyer all but Benon list Rothschild as the was not willing to disclose Roths- settlor, the individual whose assets child’s identity. are put into a trust. Although PTN normally re- These documents also reveal quired the grantor to provide their that several of these trusts contin- full personal details and a deed of

indemnity, in this instance PTN ar- that their paths had separated in ranged for the lawyer to sign “for the 1980s when Elie de Rothschild and on behalf of the grantor.” moved to London. The lawyer informed PTN “the Another source close to the fam- grantor is the head of a wealthy and ily said Elie de Rothschild devel- respected European family” whom oped business activities in Great he had known for several years. Britain and the United States in PTN conceded, stating, “In this which no other member of the respect, we must rely entirely on French branch invested. n your assurances.” Despite repeated attempts, Le Anne Michel is a reporter cover- Monde was unable to speak to ing the banking industry for Le Rothschild’s heirs. Only Baron Eric Monde. de Rothschild, Elie’s nephew and a prominent Paris banker, agreed to Contributor to this story: answer questions, making it clear Kimberley Porteous

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3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 177 Family of Televangelist Chris Oyakhilome Incorporated Secretive Company in Tax Haven By Musikilu Mojeed Published Online: April 10, 2013

Shares of an offshore company were held in trust for the daughters of Nigerian mega-church pastor, associate says.

ecret documents link family and associates of one Sof Africa’s most popular pastors, Nigerian televangelist the Rev. Chris Oyakhilome, to an offshore company in the British Virgin Is- lands. A business associate of the pastor says some directors in the company held shares on behalf of the pastor’s daughters, Sharon and One of Africa’s most popular pastors: Charlyn, who are now teenagers. Chris Oyakhilome.

The company in question is His church has a series of busi- Gmobile Nigeria Limited, an off- ness interests, the website says, that shore firm incorporated in 2007 in include vibrant TV and Internet a Caribbean tax haven, the British ministries and a publishing outfit Virgin Islands, according to a cache that churns out the popular “Rhap- of documents reviewed by Premium sody of Realities” booklet, which is Times and the ICIJ. The sharehold- like a second Bible to members of ers listed in the documents include his church. Oyakhilome’s wife, Anita; another He is as controversial as he is pastor in his organization, Thomas entrepreneurial. Critics believe he Amenkhienan; a business associate, is excessively flamboyant, dressing Aigobomian Inegbedion; and an- most of the time in expensive suits, other British Virgin Islands’ com- top-of-the-range shirts and ties and pany, GTMT International Group exotic shoes. Limited. Some of his critics have alleged Oyakhilome is founder and pres- that he has staged miracles, bring- ident of one of Africa’s largest Pen- ing forth impotent men, infer- tecostal churches, Believers Love- tile women and people with AIDS world Inc. (aka Christ Embassy), who testified they’d been instantly which claims “hundreds of church- healed. In the wake of controver- es … affecting millions of people” sy over faith-healing practices by in all the continents of the world, Oyakhilome and other pastors, the with a strong presence in the Unit- Nigerian government banned un- ed Kingdom, South Africa, United verified miracles from television in States, Canada and Nigeria. 2004. He has also set up satellite His wife, Anita, is also a pastor in broadcast channels in the United the church. She heads the interna- Kingdom (LoveWorld TV), South tional division of the ministry and Africa (LoveWorld SAT) and Ni- is regularly credited with growing geria (LoveWorld Plus). He hosts a the church’s presence around the TV show, Atmosphere for Miracles, world. which airs on television networks in Until now, there has never been Africa, North America, Australia, any suggestion that she was in- Asia and Europe, according to his volved in financial dealings. church’s website. Documents reviewed by ICIJ and

Premium Times show that Anita to help it register Gmobile Nige- Oyakhihome held 17, 750 of Gmo- ria Limited in the British Virgin bile’s 50,000 shares, with Amenkh- Islands (BVI), a Caribbean chain ienan owning 1,500 and Inegbedi- largely controlled by the United on 750. The fourth shareholder, Kingdom. On June 26, 2007, CML GTMT International, also a British in turn approached BVI-based Virgin Islands’ company, owned Commonwealth Trust Limited by South African investors, held (CTL) to complete the task of set- 30,000 shares. ting an offshore company. The documents show that some After some preliminaries — in- of these individuals held shares in cluding name checks and consul- trust for two minors. The records tation with lawyers — CML’s Su- don’t identify the minors, but In- sha George wrote to CTL’s Shonia egbedion confirmed that the mi- Mathew on July 3 giving her the nors referred to in the documents go-ahead to incorporate Gmobile. were the Oyakhilomes’ daughters, In that same two-paragraph mes- quickly adding that there was noth- sage, George informed CTL “two ing wrong with that. shareholders of this company are “Their parents bought the shares minors.” She also asked whether ad- for them because they have rights to ditional documents or procedures own shares,” Mr. Inegbedion said. were needed for the minors to be “A day-old child has a right to own owners of the company. shares in companies.” He declined Mathew replied the same day, to say which of Gmobile directors saying that shares of the company held shares in trust for the girls. could only be held in trust for the The Oyakhilomes did not re- minors. spond to emails sent to their per- “Please note if the beneficial sonal and church websites. owners are minors, then the shares would need to be held in Trust for Setting Up Gmobile them until they are of age to act in that capacity,” she wrote, adding In 2007 Anita Oyakhilome and her that “it may be wise to contact an partners retained the services of a attorney regarding the formalities Dubai-based company, Covenant of the company.” Management Consultancy (CML), Seven days after Gmobile’s in-

corporation, company records They were Willem Johannes Ja- show, shares were issued to Anita cobus Van Der Merwe, Karen Ann Oyakhilome, Amenkhienan, Ineg- Smith and Daniel John William bedion and GTMT Limited, a BVI Mills. Reporting by Premium Times company. determined that Van Der Merwe, Another curious aspect of the Smith and Mills were based in company, which became dormant South Africa but we could not as- on May 1, 2009, was the makeup of certain how they came to be associ- its board of directors. Its first direc- ated with the Oyakhilome clan. tor was not a human being but an- Inegbedion said the idea of in- other offshore company, Covenant corporating Gmobile in a tax ha- Managers Limited, an offshore ven was suggested by the South Af- firm also set up by Dubai-based ricans, who he said argued that BVI Covenant Consultancy Limited in was an ideal neutral ground for the July 2005 to offer nominee services business partnership the Oyakhi- to corporations and individuals in- lomes were forging with GTMT to corporating companies in the BVI. carry out the business of distribut- In the offshore world, nominee ing data compression software in directors or shareholders serve as Nigeria. stand-ins that allow the real people “We were looking for a neutral behind companies to keep their ground where both parties could identities hidden. feel safe,” Inegbedion said in a tele- As first director, Covenant Man- phone interview. “So we had to go agers approved the opening of a to British Virgin Islands. But it was bank account in the United Arab our partners who handled the reg- Emirates or any other place in the istration.” world. It is not known in which The only South African partner bank the account was eventually Premium Times was able to track opened nor whether it was used to down, Karen Ann Smith, declined move funds. to comment on the formation and After Covenant Managers of- businesses of Gmobile. ficially resigned, GTMT directors “You are on the wrong trip, guy, were brought on board together as I’m not interested in talking with Anita Oyakhilome, Inegbedi- about that business,” Mrs. Smith on and Amenkhienan as directors. said on telephone. When she was

pressed for details, she said, “You Remmy Nweke, a well-regarded are wasting my time, as I have no Lagos-based communications re- interest in speaking to you.” porter, was among those who covered Gmobile’s press conference at Fleeting Appearance the time. “Well, they came and met the media and said they were roll- Gmobile does not appear to have ing out an irresistible product,” Mr. carried out any business in Nigeria, Nweke said via telephone. “But that South Africa or the BVI. was the last we heard of them. They Inegbedion and another individ- simply disappeared.” ual who identified himself as Dan- Inegbedion said Gmobile was ny Mills made a fleeting appear- unable to roll out the product be- ance before journalists in Lagos in cause the company’s partners in October 2007, almost four months South Africa failed to deliver after after Gmobile was registered in the his team, led by Anita Oyakhilome, BVI, to say the firm was unveiling paid $1.8 million for a distribution a GMobile product which allows us- license. ers to maximize data storage and To all appearances, Gmobile was make an array of communications simply a failed business venture. and services possible. But other companies incorporated Danny Mills was introduced as in tax havens such as the BVI have the international sales director of become known for involvement Gmobile, while Inegbedion was in- with illegal activities, including troduced as chief operating officer money laundering and tax evasion. of an unknown firm, LW GNet Ni- Taking advantage of the loose geria. laws in several jurisdictions, off- Apparently, nothing has been shore companies are easy to form in heard of that product since that tax havens and owners can remain event. Today, Inegbedion introduc- anonymous while using nominee es himself on his Facebook page as directors as fronts and deploying managing director of Paradigm Biz the corporations to hide ill-gotten Solution Limited, a company the assets, launder funds, dodge litiga- Nigerian Corporate Affairs Com- tion or evade taxes. mission also says does not exist in Diepreye Alamieyeseigha, for its database. example, was convicted of stealing

public funds while he was governor of the oil-rich Nigerian state of Bayelsa. The state recovered more than 17 million British pounds from him, including assets he held through Solomon and Peters Limit- ed (a company registered in the BVI) and Santolina Investment Corp. (a company incorporated in the Seychelles). Last month, he received a presidential pardon. The BVI offices of offshore services company Nigeria’s anti-corrup- CTL. Photo: Alex Shprintsen tion agency, the Econom- ic and Financial Crimes Commission, has also accused an- Thomas Ward, a co-founder of other ex-governor, Abubakar Audu, CTL who has worked as a consul- of using two offshore companies in tant to the firm since it was sold to Bermuda (another tax haven) to the new owners in 2009, said the hide ill-gotten assets. Audu denies company worked hard to make sure the allegations. it didn’t take on shady clients. “We believe we chose our clients Dealing with a carefully and we believe they hon- questionable firm oured their agreements with us,” he said. But at times CTL’s staff was The BVI Financial Services Com- “either deceived or previously hon- mission found CTL, the offshore est customers changed.” n services firm that helped the Oyakhilomes to incorporate Gmo- Musikilu Mojeed, managing editor bile, to be in repeated violation of at Premium Times in Abuja, Nigeria, the BVI’s anti-money laundering is currently a Knight Journalism law between 2003 and 2008. Fellow at Stanford University.

“India’s Richard Branson”: Vijay Mallya, elected politician, billionaire, and linked to an offshore company. Photo: AP India Says It Will Investigate Offshore Leaks Revelations By Ritu Sarin Published Online: April 12, 2013

Politicians, business wo members of India’s Parliament, the world’s larg- leaders among prominent Test producer of cut roses and figures linked to tax other major business owners are among hundreds from the subcon- haven activity. tinent linked to offshore companies revealed in files obtained by the ICIJ.

After The Indian Express pub- richest family. He is vice-chair of lished the revelations of dealings Essar Group, a multinational con- in countries commonly used as tax glomerate that has interests in havens, Finance Minister P. Chid- steel, oil and gas, and power gen- ambaram announced an investiga- eration, among other things. tion. “We have taken note of the The documents obtained by names,” he said at a press confer- ICIJ show he has three firms in the ence, “and inquiries have been put British Virgin Islands (BVI). His in motion.” daughter, Smiti, is a shareholder in The disclosure also shines new two of them. One of Ruia’s flagship light on characters caught up in companies, Essar Power, has fur- two local scandals that have been ther BVI entities that are named in likened to Watergate and Enron. the ICIJ documents. The list of offshore owners in- A company spokesman said cludes Ravikant Ruia, who in De- that of the eight companies regis- cember 2011 was accused of crimi- tered in Ruia’s name as well as in nal conspiracy by India’s principal the name of Essar Power, five have anti-corruption enforcement agen- since been liquidated. Three con- cy, the Central Bureau of Investiga- tinue to be operational. tion. “These companies were started The accusation relates to a scam as SPV’s to make investments and that involved politicians and gov- are in the knowledge of the au- ernment officials illegally under- thorities concerned,” the spokes- charging telephone companies by man added. billions of dollars for cell phone Another owner of BVI compa- frequencies. nies is Teja Raju Byrraju. He is the Time magazine listed the scam eldest son of Ramalinga Raju, the at number two on its 2011 “Top former chairman of Satyam Com- 10 Abuses of Power” list, just be- puters, who was jailed in a fraud hind the Watergate scandal that case that has been called India’s brought down U.S. president Rich- Enron. ard Nixon. Satyam Computers is one of In- Ruia, whose firm is disputing the dia’s largest technology outsourc- charges made against him and oth- ing companies and investigators ers, is a member of India’s fourth looking into the fraud found a

maze of about 300 Indian compa- The documents obtained by ICIJ nies related to Ramalinga Raju that show Mallya linked to a company were used to siphon off as much as called Venture New Holding Lim- $1 billion. ited that was registered in the BVI Ramalinga Raju spent 32 months in 2006. in jail for falsifying the accounts of A spokesman for Mallya stated: Satyam Computers before he was “Dr. Mallya is a non-resident In- granted bail in November 2011. dian with business activities in dif- The case against him is proceeding ferent parts of the world. It is com- and authorities have frozen some mon practice to use BVI registered of his assets. companies in connection with such The documents obtained by ICIJ activities which are not confined appear to show that the son, Teja to India alone. All disclosures in Raju, registered two BVI compa- regard to Dr. Mallya’s wealth have nies in 2007, Global Network Over- been duly made to Parliament.’” seas and Stapley Universal Limit- Another member of Parliament ed. Their purpose is unclear. Raju that appears to be listed in the ICIJ however disputed the accuracy of documents is Vivekanand Gaddam, the documents, saying it “looks like a member of the ruling Congress a case of mistaken identity.” Party. Gaddam is also vice-chair- Another prominent Indian on man of Visaka Industries, which the ICIJ list is Vijay Mallya, an elect- produces about one quarter of In- ed member of the upper house of dia’s asbestos needs. India’s parliament. A flamboyant Gaddam and his wife Saroja are billionaire and liquor baron, he is listed as directors and sharehold- known for his lavish lifestyle and ers of a BVI company called Bel- is sometimes referred to as India’s rose Universal Limited, which was Richard Branson. incorporated in September 2008. Mallya is currently struggling But Gaddam said the documents to save his debt-ridden Kingfisher were wrong and he was not associ- Airlines. The airline recently lost ated with the company. “I do not its license to fly and Indian tax remember being involved with authorities have served Mallya no- such a company and have no con- tices for failing to deposit taxes de- nection with it,” he said. ducted from his employees’ pay. Another on the list is textile

and fertilizer tycoon Abhey Ku- ny registered in 2004 called Bapaji mar Oswal. Incorporated. Neither responded The documents appear to show to questions sent to them in Bel- that Oswal registered 11 compa- gium. nies in Samoa and the BVI, be- By co-incidence, one of their ginning in 2006, and that he con- relatives, Praboth Mehta, another trolled them through a trust called prominent business figure in In- Rising Wealth Trust, registered in dia, was named in 2011 as one of 18 the Cook Islands. Oswal also dis- Indians who had bank accounts in puted the accuracy of the docu- the European tax haven of Liech- ments. tenstein. Those on the list later “I have not registered any off- faced prosecution in India for tax shore firms. You must be in the evasion. knowledge of business entities of Another name on the Liechten- my son, Shael Oswal, who is a Sin- stein list was the late K M Mammen gapore resident and a NRI [non- Mappillai, the founder of India’s resident Indian]. My companies or leading tire manufacturer, MRF myself have no relation whatsoever Tyres. with his business or business enti- Members of Mappillai’s family ties.” and some top managers of MRF The world’s largest producer of Tyres turn up in the ICIJ docu- cut roses, Sai Ramakrishna Karutu- ments. The documents show a BVI ri, also appears in the documents. company called Moon Mist Enter- He and his wife Anitha appear to prise Limited. have registered six BVI companies Mappillai’s two sons, MRF chair- in 2007. Reached in Ethiopia he man Kandathil Mammen and its said he did not recall setting up managing director Arun Mam- any offshore companies and he did men, along with Kandathil’s son not respond to follow-up calls. Rahul Mammen Mappillai, a MRF Also on the ICIJ list are two director, are shown as directors of prominent Mumbai-based jewelers, the BVI firm. The family did not Rashmi Kirtilal Mehta and his son respond to calls for comment. n Bhavin Mehta. Father and son are shown as Contributor to this story: joint shareholders in a BVI compa- Kimberley Porteous

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 187 Bank Owned by Paraguay’s Leading Presidential Candidate Linked to Tax Haven By Marina Walker Guevara and Mabel Rehnfeldt Published Online: April 15, 2013

Five directors of Banco Amambay created a secret bank in the Cook Islands with no building and no staff.

Top officials of a Paraguayan bank owned by Horacio Manuel Cartes, the country’s leading candidate in this month’s presidential election, operated a secret financial institution in a tax haven in the South Pacific, files obtained by the ICIJ reveal. Cartes’ father, Ramón Telmo Cartes Lind, and four other executives of Paraguay’s Banco Amambay S.A. created Amambay Trust Bank Ltd. in Paraguayan presidential candidate 1995 in the Cook Islands, a tiny chain Horacio Manuel Cartes. Photo: ABC of atolls and volcanic outcroppings Color.

more than 6,000 miles away from the Cooks but held a banking license South American nation. that allowed it to perform financial Horacio Cartes is a successful Par- transactions like a normal bank. In aguayan cigarette maker who is run- its license application, it stated that ning for president in the country’s it intended “to provide banking ser- April 21 elections. Both Horacio vices to investors that need financing Cartes and Banco Amambay have alternatives not available from local recently been the subject of a money banks in Paraguay.” That document laundering investigation by the U.S. Drug Enforce- ment Administration and the Bureau of Alcohol, Tobacco, Firearms and Ex- plosives, according to diplomatic cables released by Wikileaks in 2010. It was not the only time that Banco Amambay and its officials made headlines The Paraguayan bank owned by Horacio Manuel for alleged money launder- Cartes, the country’s leading candidate in ing, but the accusations April’s presidential election. Photo: ABC Color have never resulted in con- victions. Just last month the head of Paraguay’s anti-money laun- is part of a cache of 2.5 million off- dering agency said that the bank was shore files obtained by ICIJ. being investigated alongside other fi- The shareholders of the offshore nancial institutions for illegal money bank were Ramón Cartes and Guio- transfers abroad. The following day mar De Gásperi, at the time presi- the official recanted his words and dent and vice president of Banco said he had misspoken. Amambay Amambay. denied any involvement in criminal Ramón Cartes died in 2011. Today activities. his son, Horacio Cartes, is the head The Cook Islands bank, Amam- of the family business conglomer- bay Trust Bank Ltd., appears to have ate, which besides Banco Amambay had no building and no staff in the includes a cigarette factory and sev-

eral agricultural ventures. Cartes is bay Trust Bank Ltd. in the Cook Is- also the president of a popular soc- lands. “I have no knowledge of what cer club (he is on leave now while he happened in the 1990s,” he said. campaigns for president). Since Ramón Cartes and De Gás- The Cook Islands bank, which was peri were listed as the only share- operational until 2000, is not listed holders in Amambay Trust Bank Ltd. among the more than 20 companies in the Cook Islands, it would appear that the Cartes Group says on its web- that it was a separate venture, rather site that it has established since 1961. than a formal subsidiary of Banco The president of Banco Amam- Amambay. bay, Hugo Portillo, did not respond to detailed questions sent by ICIJ to Operation Heart of Stone him, nor did De Gasperi and other current directors of Banco Amambay A classified 2010 U.S. diplomatic ca- who had been involved in the Cook ble published by Wikileaks said that Islands bank. both Cartes and Banco Amambay One former director of the off- were at the center of a U.S. money shore entity who no longer works at laundering investigation called Op- Banco Amambay, Mariano Roque eration Heart of Stone. Alonso, told ICIJ he does not remem- According to the cable, Horacio ber the offshore bank or having any Cartes was the “head” of a money connections to it. “We never even laundering and drug-trafficking or- considered an operation like that,” ganization that operated in the tri- he said. border area of South America, where Jorge Raúl Corvalán Mendoza, Paraguay, Argentina and Brazil president of Paraguay´s Central meet. “Agents have infiltrated Cartes’ Bank, which oversees financial insti- money laundering enterprise, an or- tutions, said the country’s legislation ganization believed to launder large since the mid-1990s requires banks quantities of United States currency to get permission from bank regula- generated through illegal means, tors before opening subsidiaries, in- including through the sale of narcot- cluding in offshore destinations. ics, from the TBA [tri-border area] to Corvalán, who became head of the United States,” read the cable. the Central Bank in 2008, said he did In interviews with local media in not know of the existence of Amam- 2011, Cartes denied wrongdoing and

said he would be happy to see the earlier, Banco Amambay S.A. Right results of the alleged U.S investiga- that around the time the Cook Islands tion. DEA and ATF officials declined entity was created, Paraguay was em- to comment about the status of the barking on a massive financial crisis, probe. fueled by widespread corruption, The cable also said the alleged which resulted in a run on deposits criminal enterprise smuggled ciga- and the closure of several banks. rettes. Cartes’ tobacco company was The Paraguayans named their se- featured in a 2009 ICIJ investigation cretive Cook Islands company Ama- that revealed that tiny Paraguay has mbay Trust Bank Ltd. and applied become one of the world’s leading for a banking license to the Cook suppliers of contraband cigarettes. Islands Monetary Board. While his firm, Tabesa, serves a legit- In simultaneous letters to the imate market in Paraguay, customs Cook Islands Treasury Department officials in Brazil and Argentina as- and the solicitor general, the Trust- serted that the factory supplies large Net staff said that the Coudert Broth- quantities of cigarettes that end up ers lawyers “have indicated to us that being smuggled to their countries. they have no reservations about the Horacio Cartes did not respond to clients we are dealing with.” ICIJ’s requests for comment. Still, local regulations required that Interpol certify that the officials The secret bank of the bank-to-be were not criminals. The background checks for In January 1995, a lawyer with the shareholders Ramón Telmo Cartes U.S. law firm Coudert Brothers ap- and Guiomar De Gásperi and for proached the offshore firm Portcul- directors Mariano Roque Alonso, lis TrustNet to create a company in Eduardo Campos Marín and Carlos the Cook Islands for a group of Para- Eduardo Moscarda took a while but guayan clients. came back clean. In those years, the Cook Islands TrustNet approved resolutions stat- had started to build a reputation as ing that the company would not hold a competitive offshore jurisdiction, regular annual meetings and that with strong secrecy laws. the bank would not have an auditor, The clients were directors of a Para- records show. The address of the new guayan bank founded just three years bank was the office of TrustNet on

the main island of the Cook Islands, Force on Money Laundering con- Rarotonga. With the banking license demned Cook Islands’ laws for “ex- approved and Cartes and De Gasperi cessive secrecy provisions” that al- each holding 1 million shares, the lowed owners of offshore companies bank was ready to operate. and accounts to hide in the shadows. In 1998 a U.S. Department of State It noted the islands’ government had official, Jonathan Winer, wrote an ar- “no relevant information on approxi- ticle about the threats of tax havens to mately 1,200 international compa- the global economy. He said the State nies that it had registered” and that Department had reviewed a group of the offshore banks located in the offshore entities based in the Cook Is- Cooks weren’t required to document lands and found unsavory clients be- the identity of their customers. hind them. “The review revealed con- The Cook Islands remained on nections between this village-sized the OECD’s blacklist until 2005. ‘nation-state’, organized crime, Rus- In the meantime, Paraguay also sia, and some of the most notorious decided to clean up its connections financial players in the Asia Pacific re- to tax havens and it banned banks gion.” Among the Cook Islands bank- operating in the country from doing ers, Winer highlighted a notorious business with financial institutions Italian family, Brazilian politicians that only existed in paper in far- investigated for money laundering as flung offshore jurisdictions. well as “six Paraguayans, several Rus- In 2004, Brazilian prosecutors sian speakers operating out of Cyprus charged four directors of Banco and a number of Indonesian banks.” Amambay who had also been direc- Amambay Trust Bank Ltd. was tors of the Cook Islands bank — de-registered as a Cook Islands com- Cartes, De Gasperi, Marín and Mos- pany on May 23, 2000. carda — accusing them and others The following month, the Orga- of helping Brazilians evade taxes in nization for Economic Cooperation 1996. They were all acquitted in 2008 and Development moved the Cook for lack of evidence. n Islands onto its money laundering blacklist, a dishonor roll for places Marina Walker Guevara is ICIJ’s the OECD considers havens or con- deputy director. Mabel Rehnfeldt duits for dirty money. is an ICIJ member in Paraguay and OECD’s Financial Action Task editor of ABC Digital.

Actor Paul Hogan: accuses his tax adviser of absconding with $34 million he helped hide in offshore tax havens. Crocodile Dundee Actor Paul Hogan Chases His Missing Offshore Millions By Kate McClymont and François Pilet Published Online: April 14, 2013

Paul Hogan wants his r ocodile Dundee star Paul Hogan may have settled millions back from Chis tax case with Australian Switzerland, but his authorities but he is accusing his once-trusted tax adviser of abscond- Geneva intermediaries ing with $34 million he helped Ho- refuse to give him the loot. gan hide in offshore tax havens. There is already an international warrant out for Philip Egglishaw, the man known as the “bowler hat

Englishman”, who is the alleged mastermind behind Australia’s biggest tax evasion scheme. But now the international fugitive has the Australian actor on his tail, with Hogan’s advisers taking legal action in the US alleging Egg- lishaw, who set up elaborate corporate structures in tax havens to help Online Video: What are offshore tax his clients evade tax, has stolen the havens, who uses them, and how do entertainer’s money. they work? Find out in our explainer. Court documents obtained by Le Matin Dimanche as part of their joint investigation with the Interna- are now directly aiding and abetting tional Consortium of Investigative his criminal actions,” Moore said Journalists state that Hogan’s $34 in his email. “The Carthage Trust’s million “has been lying for almost 20 beneficiary [Hogan] is not going to years in account number 379865 at stand idly by in the face of this theft, the Corner Bank in Lausanne” run and he is going to take every step by the Geneva firm Strachans. But possible in every country possible to Hogan cannot get his hands on it. hold Egglishaw, Strachans, you, and Egglishaw is alleged to have “ab- your firm liable and brought to ac- sconded with or spent all” of Hogan’s count.” millions, according to documents Throughout last year, Hogan and filed in the Californian District court his US advisers became increasing- by Hogan’s representative, Schuyler ly anxious after Egglishaw refused “Sky” Moore, one of Los Angeles’ top to provide any bank statements or entertainment lawyers. accounts relating to the millions in In October last year, Moore the Carthage Trust. emailed Egglishaw’s lawyer in Ge- An added problem for Hogan is neva, Paul Gully-Hart. “The actions the other signatory to the Carthage of Egglishaw have now crossed the account is in jail in Australia. boundary of legality, and he is now Philip de Figueiredo, Egglishaw’s engaging in criminal fraud, theft, partner at Strachans, is serving 2½ and breach of fiduciary duty, and you years in prison. Last month in the

Queensland Supreme Court, de their inquiries into Hogan in 2005, Figueiredo pleaded guilty to three Egglishaw set up a new trust for Ho- counts of conspiring to defraud gan called the Carthage Trust. the Australian government of more This trust replaced the Quatre than $4 million in tax. His guilty Saison Trust which was alleged plea related to helping clients avoid to have been a vehicle set up by paying tax. A string of Strachans’ Strachans to enable Hogan to clients such as prominent entrepre- stream revenue from his Crocodile neur Glenn Wheatley, Brisbane en- Dundee franchise into offshore ac- trepreneurs Adam Hargraves and counts and thereby avoid paying Daniel Stoten, have already served tax. Hogan disputes this. time for tax evasion. The initial beneficiary of the De Figueiredo had money laun- Carthage Trust was listed as the dering charges against him dropped “British Red Cross” but later docu- and he has agreed to assist authori- ments stated ‘’the sole intended ties with ongoing investigations. An beneficiary of the Carthage Trust arrest warrant has been issued for is Hogan, and this structure was ad- Egglishaw over the same matters. It opted to maintain his privacy’’. is believed he is in Switzerland. Egglishaw used another entity, Operation Wickenby, a joint in- Grasselle, a British Virgin Islands vestigation by the Australian Crime company, to run the Carthage Commission and the Australian Tax Trust. Up to $US37 million was held Office, has taken years and cost mil- by Carthage Trust in the Corner lions of dollars investigating Egg- Bank in Lausanne. lishaw’s and de Figueiredo’s Austra- Late last year, Moore, who is listed lian clients, including Hogan and as the trustee of Hogan’s Carthage his comedy sidekick John “Strop” Trust, launched action against Egg- Cornell. lishaw and Strachans in the US. After years of legal battles, Ho- In the Californian court filings, gan and Cornell settled with the Moore stated he believed Egglishaw Tax Office on confidential terms. had absconded with Hogan’s mil- Its fight with their financial adviser lions, or if he had not, he intended Anthony Stewart continues. to. California District judge Otis D. After the Crime Commission Wright summed up Moore’s case and Tax Office began stepping up when he said it was “a sordid tale

of wayward fiduciaries and inter- Hogan’s Australian lawyer An- national fraudsters supposedly ab- drew Robinson tried to distance Ho- sconding with millions of dollars in gan from the US court proceedings, funds from a Swiss bank account”. saying he was ‘’not a party and gave But there were two major prob- no evidence by way of affidavit or lems with Moore’s case, Judge otherwise’’ in the recent case. “Paul Wright said. California was not the has never denied the existence and correct jurisdiction to bring the operation of overseas structures set action since one defendant, Gras- up in accordance with competent selle, was a company in the British advice received,” Robinson said. Virgin Islands and the other was a Hogan’s US lawyer Craig Emanu- British-born Swiss resident. el told Fairfax Media: “For a variety “Given the dearth of connections of ethical reasons, I am not avail- … to California, the ‘long arm of able to comment on your inquiries.” the law’ is simply too short to reach The Wickenby tax inquiry was them,’ ” the judge said, dismissing kicked off by the 2004 seizure of a the case in February. computer belonging to Egglishaw, According to Le Matin Diman- who was in Australia to see some of che, Brian Merryman, Egglishaw his clients. and Strachans’ US lawyer, has said Le Matin Dimanche came across Judge Wright’s decision had not the Hogan court case as part of an been appealed and Moore had not inquiry by the ICIJ into the use of tax lodged any further complaints. havens. n

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 196 Who Uses the Offshore World By Marina Walker Guevara, Nicky Hager, Mar Cabra, Gerard Ryle and Emily Menkes Published Onlne: April 16, 2013

ecr t records obtained by up their inquiries into the actor. the ICIJ reveal tens of thou- Carthage Trust replaced the Qua- Ssands of people in more than tre Saison Trust which was alleged 170 countries and territories linked to have been a vehicle set up by to offshore companies and trusts. Geneva firm Strachans to enable Here are some examples from Hogan to stream revenue from his around the world: Crocodile Dundee franchise into offshore accounts and avoid paying Australia tax. Hogan disputes this. Comment: Hogan’s US lawyer Paul Hogan Craig Emanuel told Fairfax Media: Actor ‘’For a variety of ethical reasons, Details: The Crocodile Dundee I am not available to comment on star is accusing Philip Egglishaw, your inquiries.’’ his once-trusted tax adviser, of disappearing with $34 million he Azerbaijan helped Hogan hide in offshore tax havens. Egglishaw is alleged to have Ilham Aliyev, Mehriban Aliyeva, ‘’absconded with or spent all’’ of Arzu Aliyeva and Leyla Aliyeva Hogan’s millions. Ruling family Offshore business: Carthage Trust Details: Ilham Aliyev is the presi- was set up for Hogan in 2005 by dent of Azerbaijan and Mehriban Egglishaw after the Crime Commis- Aliyeva is his wife. Arzu and Leyla sion and Tax office began stepping are the couple’s daughters. The Ali-

yev family, beginning with Ilham’s settlor, protector and a beneficiary father, Heydar Aliyev, has held pow- of the trust. er in Azerbaijan almost without in- Comment: Agarwal declined to terruption since the late 1960s. comment. Offshore business: Ilham Aliyev and Mehriban Aliyeva were direc- Brazil tors of Rosamund International Ltd (2003) in the British Virgin Is- Clarice, Leo and Fabio Steinbruch lands. Arzu Aliyeva was a director Businessmen and shareholder of BVI company Details: Members of one of Brazil’s Arbor Investments (2008). Leyla richest families, which owns large Aliyeva was director and share- steel and textile companies and a holder of LaBelleza Holdings Ltd. bank. (2008) and Harvard Management Ltd. (2008) both in the BVI. Offshore business: Shareholders and directors of Peak Management Comment: Ilham Aliyev, Mehriban Inc. (2007) in the British Virgin Is- Aliyeva, Arzu Aliyeva and Leyla Ali- lands. yeva did not respond to ICIJ’s requests for comment. Comment: Leo Steinbruch told ICIJ that “Peak Management exists, is active, it’s been declared on Belgium its owners’ tax forms and has been duly disclosed to the Brazilian Cen- Santosh Kumar Agarwal (Kedia) tral Bank as a Brazilian investment Businessman abroad.” Details: Santosh Kumar Agarwal was on the board of directors for Canada the Antwerp World Diamond Cen- tre. He has withdrawn from the E.F. Anthony “Tony” Merchant board, pending the results of a pos- Trial lawyer sible investigation. Details: A former politician, he is Offshore business: In 2008, Agar- married to Canadian senator Pana wal created the Platinum Estate Merchant. He has been involved in Trust in Singapore, acting as the a number of high-volume class ac-

tion suits, including a $1.9 billion They were acquitted in both cases settlement with the Canadian gov- but prosecutors have started inves- ernment on behalf of native groups tigating new leads related to the over abuse of students in residential land acquisitions. schools. Merchant has had repeat- Offshore business: Shareholders ed battles with the Canadian rev- of Asia America Investment Corpo- enue agency over his tax payments. ration (2008) in the British Virgin He has also been disciplined by the Islands. Law Society for “conduct unbecom- ing of a member.” Comment: A lawyer for Tomás and Jerónimo Uribe Moreno, Jaime Offshore business: Beneficiary Lombana, said the company was (1998-2002), settlor and protec- created with the purpose of selling tor of the Merchant (2000) US Inc Colombian handcrafts abroad but Trust (incorporated 1998) in the the business never took off. The Cook Islands. His wife, Canadian company was incorporated in the senator Pana Merchant, is a benefi- BVI because one of the partners in ciary of the trust. the venture lived there, said Lom- Comment: Anthony and Pana Mer- bana. The firm, he said, “didn’t chant declined to comment. produce any income.”

Colombia Djibouti Tomás Uribe Moreno and Jerónimo Alberto Uribe Moreno Abdourahman “Charles” Boreh Businessmen Businessman and politician Details: Sons of former Colombian Details: One of Djibouti’s most president, Alvaro Uribe. During wealthy and powerful businessmen their father’s eight years in office, and a 2011 presidential election they were accused of influence- candidate. He is exiled in Dubai. peddling in two high-profile scan- Offshore business: Beneficial own- dals, including in a case in which er of Net Support Holdings Ltd they acquired land in an area (2007) in the British Virgin Islands whose value skyrocketed after au- and Value Additions Ltd (2007) in thorities granted it tax-free status. Samoa

Comment: Boreh said he uses his Offshore business: Shareholder offshore companies to steer his (since 2008) of NLC International many investments worldwide and Corporation (incorporated 2005) to protect his assets from potential in the British Virgin Islands. political instability. Comment: The director of Itella Lo- gistics in Russia, Vesa Vertanen, said Fiji in an interview with Finnish State Television that Itella would dissolve Fred Marafono the company in the BVI by the end of Mercenary 2013 and transfer it to Cyprus. When Details: Ex-British SAS, he was asked why Itella had not dissolved its involved in security work and dia- company in the BVI, Mr Vertanen mond mining during the Sierra Le- said that it was very complicated to one civil war. dissolve offshore companies and it takes time, a statement that was coun- Offshore business: Director of Hin- tered by the Finnish tax authority. terland Mining Brokers Limited (1997-2000) in the Cook Islands. Comment: Marafono passed away on France March 27; earlier attempts to reach him for comment were unsuccessful. Jean-Jacques Augier Publisher Finland Details: Campaign treasurer of Fran- çois Hollande for the 2012 presiden- Itella Oyj tial elections. They studied together State-owned national postal company at the prestigious National School of Details: In a 2008 move to expand Management (ENA). He’s also chief its operations in Russia, the corpo- executive officer of investment hold- ration acquired the leading Rus- ing company Eurane SA, mainly fo- sian logistics warehousing service cused on the publishing field. provider for around €200 million Offshore business: Shareholder — ($310 million). Its parent company through Eurane SA — and direc- was registered in the British Virgin tor of International Bookstores Ltd Islands and still exists there. (2005) in the Cayman Islands.

Comment: Jean-Jacques Augier Comment: Despite repeated at- said he used the company to do a tempts, Le Monde was unable to large investment in China in 2005. speak to Rothschild’s heirs. One of his partners in the offshore firm was Xi Shu, a businessman and a member of the Chinese People’s Georgia Political Consultative Conference, a political advisory body in China Bidzina Ivanishvili dominated by the Communist Party Prime MinisterBidzina Ivanishvili but with representatives from other Details: Georgia’s richest man, parties and organizations. with a net worth estimated by Forbes magazine at more than $5 billion. Was elected prime minister Baron Elie de Rothschild in October 2012, straight from the Businessman from the Rothschild business world. banking dynasty Offshore business: Director of Details: The guardian of French Bosherston Overseas Corp. in the branch of banking dynasty built a British Virgin Islands (2006). The web of at least 20 secrecy-cloaked company is still in existence, ac- trusts in the South Pacific between cording to BVI records. 1996 and 2003, some of which con- Comment: “For the reporting pe- tinued operating after his death in riod of 2011-2012 Prime Minister 1997. Ivanishvili had no interest in the Offshore business: Internal docu- company you have mentioned in ments reveal at least 20 trusts and your inquiry and therefore there 10 holding companies were set up was no obligation to report it in his for Rothschild in the Cook Islands, declaration. The Prime Minister with typically opaque names in- takes these reporting requirements cluding, fittingly, Anon Trust. The seriously and everything is done ac- companies have a common share- cording to the law,” a spokesman holder called Mandalor Limited, said. an equally opaque company based in the Caribbean country of Saint Vincent and the Grenadines.

Germany “if they can be proven to have participated in or incited to tax fraud”. Gunter Sachs Millionaire author, photographer, industrialist and ex-husband of Greece Brigitte Bardot Apostolos Vakakis Details: The famous Gunter Sachs Businessman is revealed to have had a vast and Details: CEO of the retail conglom- inscrutable wealth-hiding web, in- erate Jumbo SA, one of Greece’s volving nominee directors, shell largest companies. companies, and law firm trustees, to create multiple layers of secrecy Offshore business: Shareholder of in an already secret world. Karpathia Ltd. (2007) in the Brit- ish Virgin Islands. Company trans- Offshore business: Sachs com- ferred to another offshore service missioned a private secretary to provider in 2009. oversee his business dealings, who travelled to the Cook Islands to cre- Comment: “I have declared of- ate two shell corporations, Triton ficially all without exception my Ltd. and another company called transactions that should be an- Tantris Ltd. The companies acted nounced in public, as provided by as trustees for five trusts set up be- relevant Greek legislation. … One tween 1994 and 2007 – the Moon does not use a legal entity in order Crystal Trust, the Espan Water to hide the identity of the benefi- Trust, the Sequoia Trust, the Triton cial owner by using shadow names Trust and the Parkland Oak Trust. but to be able to complete a trans- Sachs’s vast offshore web has been action in a straightforward man- visualized here. ner,” said Vakakis. Comment: Before he died, Sachs asserted he was being persecuted India and the investigations stemmed Ravikant Ruia from envy. Swiss fiscal law expert Andreas Kolb says the signing law- Businessman yers will face legal consequences Details: In December 2011, he was over the inventory of Sachs’s estate, accused of criminal conspiracy by

India’s principal anti-corruption Indonesia enforcement agency, the Central Eka Tjipta Widjaja Bureau of Investigation. The accusation relates to a broader investi- Businessman gation of politicians, government Details: Head of Indonesia’s sec- officials and telecom executives in ond richest family (2012), owns India for alleged irregularities in rainforest-clearing Asia Pulp and the award of cell phone frequencies Paper and world’s second largest to telephone companies. Ruia’s palm oil plantations. firm is disputing the charges made Offshore business: Beneficial own- against him and others. er, through his Sinar Mas conglom- Offshore business: Shareholder in erate, of various pulp and palm oil one firm in the British Virgin Is- British Virgin Islands and Labuan lands, Orion Worldwide Universal offshore companies. Corporation (2008). His daughter, Comment: Widjaja did not respond Smiti, is a shareholder in two oth- to a request for comment. ers. One of Ruia’s flagship companies, Essar Power, has further BVI entities that are named in the ICIJ Italy documents. Fabio Ghioni Comment: A company spokesman said that of the eight companies Hacker registered in Ruia’s name as well Details: Former head of informa- as in the name of his flagship busi- tion security at Telecom Italia, ar- ness Essar Power, five have since rested in 2007 for leading a unit been liquidated. Three continue to that illegally obtained data of 4,000 be operational. “These companies people, including politicians and were started as SPVs [Special Pur- journalists. In 2012 the Supreme pose Vehicles] to make investments Court of Cassation confirmed his and are in the knowledge of the 2010 plea bargain and his sentence authorities concerned,” the spokes- of 3 years and 4 months in prison. man added. Offshore business: Owner of Con- stant Surge Investments Ltd (2006) in the British Virgin Islands.

Comment: Fabio Ghioni denied be- to an investment arm of Marubeni, ing the owner of Constant Surge which was founded in Labuan Is- Invesments Ltd. “The BVI? I don’t land in Malaysia, also a tax haven, know where they are located!” he through TPIC. said on the phone. ICIJ verified Comment: While refusing to dis- Ghioni’s connection to the BVI close their investment profits, To- firm through the address he used hoku Electric confirmed that an upon incorporation of the com- agent had been contracted to op- pany which is that of his personal erate on financial matters, saying residence in Milan. The corporate “We concluded the contract in com- files also include annotations de- pliance with the law, and it was al- scribing Ghioni’s occupation at the ready in place before we made the time. investment (in Australia). And we have little knowledge of the back- Japan ground of it.” Marubeni Corp declined to comment. Marubeni Corp and Tohoku Electric Power Co. Jordan Trading and utility companies Suha, Omar and Aysha Shoman Details: Marubeni Corp., a leading trading house, and utility Tohoku Widow and children of one of Electric Power Co., used offshore Jordan’s richest families subsidiaries to invest in an overseas Details: The family’s father, Khalid energy firm, allowing returns on Shoman, was — until his death in the investment to be shielded from 2001 — vice-chairman of the Arab domestic taxes. Bank Group, one of the main banks Offshore business: Tohoku Elec- in the Arab world, founded by his tric established a subsidiary, To- father. Omar sold their share of the hoku Power Investment Co. (TPIC), bank for about $375 million in 2003. in the Netherlands in 2002 to invest Offshore business: Omar and Ay- 3 billion yen ($32.6 million) in an sha are shareholders — jointly or independent power producer in on their own — of 12 companies in Millmerran in Queensland, Aus- the British Virgin Islands, includ- tralia. The utility funneled the sum ing OS Investments Inc. (2002),

OAKS Inc. (2003), Fisch Invest- denied the fraud allegations in the ments Inc. (2005) and OS Tech Inc. past. (2006). Their mother is connected with two of the firms as a share- Kuwait holder and one as a director. Most entities were transferred to another Sheik Sabah Jaber Al-Ali Al-Sabah offshore service provider between and two relatives 2007 and 2009. Members of Kuwait’s ruling family Comment: Omar Shoman didn’t re- Details: Sheik Sabah Jaber Al-Ali ply to requests to comment through Al-Sabah has headed the Kuwaiti his assistant and email. The ICIJ Public Ports Authority. He and his could not locate Aysha Shoman and brother are sons of Kuwait’s former could not reach Suha Shoman on deputy prime minister the phone despite several attempts. Offshore business: He or his relatives are shareholders in two Brit- Kazakhstan ish Virgin Islands companies CIC Realty, Inc and Capital Investment Mukhtar Ablyazov Company Group, Ltd for seven Businessman years until 2002 Details: Ablyazov stands accused of Comment: Sheik Sabah Jaber Al- embezzling up to $5 billion from Ali Al-Sabah did not respond to a a state-owned Kazakhstan bank in request for comment what British media describe as the biggest fraud in history. Malaysia Offshore business: An individual later named in U.K. court docu- Mirzan Bin Mahathir ments as a front man for Mukhtar Businessman Ablyazov set up 31 companies in Details: Son of Dr. Mahathir Moha- 2006 and 2007 in the British Virgin mad, the longest-serving prime min- Islands. ister of Malaysia (1981-2003), who Comment: Ablyazov’s attorneys in modernized the country under an London did not respond to a re- autocratic rule. Mahathir Mohamad quest for comment. Ablyazov has was accused of abusing his extensive

political powers to enrich his family Abidin Raja Tachik, a number of his and key business associates. Mirzan sisters and brothers as well as other is a prominent entrepreneur, with family members. Most of them are directorships in various companies also shareholders and directors of in Malaysia and internationally. Kumpulan RZA Sdn Bhd. Offshore business: Shareholder Comment: Contacted by Malaysia- and director of Utara Capital Lim- kini, the minister confirmed that ited (1997), Crescent Energy Limit- RZA International was set up by his ed (2003), and Al Sadd Investments father, who will turn 96 this year, Pte. Ltd. (2009) in Labuan. “for the purpose of holding legiti- Comment: An aide for Mirzan told mate offshore investments for the Malaysiakini and ICIJ that Mirzan family.” However, the minister did could not answer questions because not elaborate on the offshore invest- he was out of town. ments made by his family through the company. He added that RZA International was de-registered in Raja Nong Chik Zainal Abidin 2009. “The company was not used to Federal Territories and Urban obscure activities of Kumpulan RZA Well-Being Minister Sdn Bhd, and neither was it used to Background: Prior to his senator- circumvent taxes or hide transac- ship, Raja Nong Chik was a corporate tions overseas,” Raja Nong Chik said figure who founded and managed an in an email to Malaysiakini. engineering firm for 20 years. Offshore business: Raja Nong Chik Chia Tien Foh (Michael Chia) is shareholder and director of RZA Business tycoon International Corporation, a British Virgin Islands entity incorporated Background: Chia is a prominent on Aug 21, 2007, through Singa- Malaysian businessman and the al- pore. The company is a mirror of leged ‘“bagman’” for Musa Aman, Malaysian entity Kumpulan RZA the chief minister and financl min- Sdn Bhd, a 1979-founded company ister of the state of Sabah. dealing in real estate and equities Offshore business: Chia has three investment. He set up the offshore offshore companies in which he is entity with his father, Raja Zainal listed as either as director or share-

holder. One of them was CTF Inter- Offshore business: Shareholder of national Ltd, with ‘“CTF’” seen as Vercors Private Limited (2005) in the initials of Chia’s full name. It was Singapore. incorporated on April 18, 20067, in Comment: Garza Medina did not the British Virgin Islands. CTF In- respond to a request for comment. ternational gained notoriety when it A spokesman for Alfa, of which was named by whistleblower website Garza Medina was CEO until 2010, Sarawak Report of being a conduit in declined to answer questions say- channelling millions of ringgit to a ing this is a “private matter of Mr. Hong Kong account allegedly linked Garza not related to Alfa.” to Musa, who has denied links to Chia. CTF was de-registered in 2008. The other two offshore companies Mongolia owned by Chia are Ravenswood De- Bayartsogt Sangajav velopment Ltd and Ark Capital Tech- nologies Ltd. In addition, Chia’s wife Politician Yap Loo Mien and another woman, Details: Became his country’s fi- who is alleged to be his mistress, Yap nance minister in September 2008, Siaw Lin, also appear on the list as a position he held until a cabinet key shareholders in three separate reshuffle in August 2012. During British Virgin Islands entities. those years he attended interna- Comment: Malaysiakini contacted tional meetings and served as a Chia through the address stated governor of the Asian Development in his company registration docu- Bank, pushing the case for his poor ments for comments, but there has nation to receive foreign develop- been no response. ment assistance and investment. He was at the forefront of encouraging foreign mining and other com- Mexico panies to move into Mongolia. He Dionisio Garza Medina currently serves as deputy speaker of the Mongolian Parliament. Businessman Offshore business: Bayartsogt San- Details: His family co-owns Alfa, a gajav controlled Legend Plus Capi- conglomerate with interests in oil, tal Limited, an offshore company food and telecommunications. administered from Hong Kong but

incorporated in the British Virgin gin Islands. The companies were Islands (2008). The documents transferred to another offshore show the company was used to open service provider, but the records do a secret Swiss bank account, con- not provide a date. trolled by Bayartsogt, just months Comment: Aye Zaw Win could not before he was appointed his coun- be reached for comment despite try’s minister of finance. multiple attempts. Comment: Bayartsogt said the company and the bank account were set up as a syndicate by him and three Pakistan unnamed business friends to trade Moonis Elahi in stocks. Both the bank account and the company remain in his Legislator name, and he did not declare them Details: Son of Chaudry Pervez Ela- to Parliament, something he now hi, who until last month was Paki- describes as a “mistake.” He said stan’s deputy prime minister. The he was considering resigning from Chaudry family has had a powerful Parliament over the issue. role in the country’s politics for the past five decades. In 2010, Moonis Myanmar/Burma Elahi was accused of receiving illicit payments as part of an alleged Aye Zaw Win land scam. He was later acquitted Son-in-law of Burma’s former amidst what Pakistan’s Supreme dictator Ne Win Court said was intense government Details: General Ne Win was a mili- interference in the investigation. tary strongman who ruled Burma Offshore business: Shareholder during three decades, 1962-1988. and director of Olive Groves Assets His family became wealthy through Ltd. (2006) in the British Virgin Is- business activities including forest- lands. ry and fisheries. Comment: Moonis Elahi denied that Ofshore business: Shareholder of he owns or controls Olive Grove As- Compass Point Finance Limited sets Ltd. He did not answer whether (1996) and Sky-Link Communica- he had owned the firm in the past. tions Ltd. (1997) in the British Vir- ICIJ verified Elahi’s connection to

the firm through the address listed Offshore business: Shareholder in for the politician in the corporate re- Severin Enterprises Inc., which was cords, which is that of the Chaudry registered in the British Virgin Is- family residence in Lahore. lands and owned at least two other offshore companies, which in turn Philippines owned more companies. The dealings of one of the companies, Seven- Maria Imelda Marcos Manotoc key Ltd., were laid out in a 2011 in- Politician vestigative article in Barron’s, which tied the company to her husband, Details: Daughter of former Phil- who has denied wrongdoing. ippines dictator Ferdinand Mar- cos and at present governor of the Comment: Olga Shuvalova did not re- province of Ilocos Norte. spond to ICIJ’s requests for comment. Offshore business: Beneficiary and investment advisor to Sintra Trust Valery Golubev and Boris Paikin (2002) in the British Virgin Islands. Gazprom executives She was also a financial advisor for a company in which the Sintra Trust Detail: Golubev is the deputy chair was a shareholder, ComCentre Cor- of the management committee poration (2002), and a “master cli- of Gazprom, with personal ties to ent” for the M Trust in Labuan, Ma- Putin dating back to the 1990s. laysia (2007-2009). Paikin is the general director of a Gazprom construction subsidiary Comment: Manotoc did not recalled Gazprom Sotsinvest that spond to a request for comment. builds projects such as a $200 million stadium in St. Petersburg and Russia an Olympic ski resort. Olga Shuvalova Offshore business: Golubev held half of the shares of Sander Inter- Wife of Russian Deputy Prime national Inc., which was registered Minister in the British Virgin Islands in Detail: Wife of Igor Shuvalov, who 2008 and was dissolved later the has served as first deputy prime same year. Paikin also held Sander minister since 2008. International shares.

Comment: Golubev and Paikin did Internal records show Vaid was not respond to ICIJ’s requests for shareholder of Costa Azzoura Lim- comment. ited and shareholder and director of Hillbeck Limited. He is also re- Saudi Arabia lated to five more BVI companies — in one case as shareholder and Hassan Mohammed and Fady in the other four cases as director. Mohammed Jameel The Abdul Latif Jameel Group ad- Businessmen dress in Jeddah is mentioned in Details: Sons of one of the richest most of the company records ob- men in Saudi Arabia and executives tained by ICIJ. in Abdul Latif Jameel Group, one of the world’s largest Toyota deal- Slovenia ers, with operations in the Middle East, UK, Central Asia and China. Zoltan Varga Offshore business: Directors (2002- Executive Managing Director and 2003) of Costa Azzoura Limited (in- Head of Asian Investing for Och- corporated in 2002) and directors Ziff Capital Management Group (2004-2009) of Hillbeck Limited LLC (incorporated in 2004) in the Brit- Details: Based in Hong Kong, Var- ish Virgin Islands. Hassan was also ga is a partner at Och-Ziff, one of shareholder of Hillbeck Limited the largest investment funds in the (since 2004). world. Comment: The Director of Busi- Offshore business: Internal docu- ness Development at the Abdul ments reveal Varga purchased Latif Jameel Group, Farooq Vaid, three offshore companies, Bofita said the Jameel brothers were not Limited, Trend Express Holdings related to the offshore companies Limited and Garden Town Trading as directors or shareholders. He Limited, in November 2007. He acknowledged knowing about the also has a yacht called Pershing 50, entities but didn’t want to confirm registered in Gibraltar, another tax any further details. “These are pri- haven. vately held companies and nobody Comment: Varga declined to com- has the right to know,” he told ICIJ. ment.

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale ©2013 Center for Public Integrity 210 South Africa/Zimbabwe Spain Muller Conrad “Billy” Rautenbach Carmen Thyssen-Bornemisza Businessman Art collector and philanthropist Details: Zimbabwean millionaire Details: Former Miss Spain and with close links to the Mugabe widow of a German-Hungarian bar- regime. The United States black- on, she’s one of the world’s top art listed him saying he has helped collectors. Her hundreds of works organized huge mining projects of art ranging from Van Gogh to in Zimbabwe that “benefit a small Goya are exhibited in museums in number of corrupt senior officials.” Madrid, Barcelona and Málaga. Rautenbach fled South Africa in Offshore business: Beneficial 1999 after being accused of fraud. owner of Sargasso Trustees Lim- The charges lodged personally ited (1996-2004) and shareholder against him were dismissed, but of Nautilus Limited (incorporated a South African company he con- 1994) in the Cook Islands. trolled pleaded guilty to criminal charges and paid a fine of roughly Comment: Carmen Thyssen-Bor- $4 million. nemisza’s lawyer acknowledged that she gains tax benefits by holding Offshore business: Shareholder of ownership of her art offshore, but Artemis Group, LTD. (2006) in the stressed that she uses tax havens British Virgin Islands. primarily because they give her Comment: Rautenbach denies U.S. “maximum flexibility” when she authorities’ allegations, contend- moves art from country to country. ing that they made “significant factual and legal errors” in their blacklisting decision, his attorney, Tanzania Ian Small Smith, said. Smith said Mehbub Yusufali Manji Rautenbach’s BVI company was set up as “special purpose vehicle for Businessman investment in Moscow” and that it Details: The Manji family is one of complied with all disclosure regu- the richest in Tanzania. It started lations. The company is no longer Quality Group Limited, the coun- active. try’s major conglomerate with in-

terests ranging from automotive to fice in January 2012. She strongly food processing. denied the allegations, saying that Offshore business: Director and her relationship with Zimbabwean shareholder of Intertrade Commer- dictator Robert Mugabe and his cial Services Inc. (2007-2009) in wife is “strictly social” and that she the British Virgin Islands. is a victim of guilt by association. Comment: Yusuf Manji, chairman Offshore business: Taveesin and and CEO of the company, did not her brother Anuraj Mishra in 2008 reply to ICIJ’s emailed request for bought a company called Hall comment. The contact address in Kingston International Limited the records is that of the company that had recently been incorpo- in Dar-Es-Salaam. rated in the British Virgin Islands. They appear in the documents as Thailand directors and shareholders. The offshore company was acquired Nalinee Taveesin shortly after Taveesin’s first ap- International trade representa- pointment to a political position, as tive, former government minister secretary to the commerce minister in 2008. The company does not ap- Details: In 2008, Taveesin was des- pear in her 2012 public statement ignated as one of four “Mugabe of assets. Though the company still regime cronies” by the U.S. De- exists, according to records in the partment of the Treasury’s Office BVI, it is unclear whether it had to of Foreign Assets Control (OFAC). be publicly declared. The OFAC statement read, “Na- linee Taveesin has participated in a Comment: Taveesin’s secretary Ms. number of initiatives on corruption Supavadee responded that “She and growth challenges in Africa [Taveesin] strongly affirmed that and Southeast Asia while secretly she had neither known nor heard supporting the kleptocratic prac- about this so-called Hall Kingston. tices of one of Africa’s most corrupt The information about her being [a regimes.” This statement became company] shareholder is incorrect,” a point of controversy in Thailand When asked if it was possible that when Taveesin was appointed min- Taveesin’s brother, Anuraj Mishra, ister for the prime minister’s of- was a shareholder of Hall Kingston

International Limited, Supavadee ny management,” he said. “As far repeated, “She [Taveesin] had no as I understand, the company has knowledge about the company and changed status. It has merged with none of her family members were another company a while ago. I do involved in the company.” not really have the details though.”

Adm. Banawit Kengrian Potjaman Na Pombejra Former Deputy Permanent Former Thai first lady Secretary of Defense Details: Former wife of Thailand’s Background: Kengrian was ap- ousted Prime Minister Thaksin Shi- pointed a member of the National nawatra. Potjaman and Shinawatra Legislative Council after the mili- obtained a high-profile divorce at tary coup in 2006. He resigned as the Thai consular office in Hong a naval officer in 2007 but was later Kong in 2008. Two years later, about appointed chairperson of a trans- $1.4 billion of Shinawatra’s fam- portation committee under the ily assets were seized after he was National Legislative Council with found guilty by the Supreme Court a mandate to investigate corrup- of corruption and abuse of power tion cases within the Ministry of to benefit his family’s telecommu- Transportation that had allegedly nication company, Shin Corpora- occurred under the previous gov- tion, while he was prime minister. ernment led by Shinawatra. Offshore business: Potjaman Na Offshore business: Kengrian is Pombejra acquired an offshore listed as one of many shareholders company called Premium Select in the British Virgin Islands compa- Inc. (2007) in the British Virgin Is- ny Vnet Capital International Co., lands, and soon after she was listed Ltd in 1998.There is no suggestion as the sole beneficial owner. The Kengrian avoided his disclosure re- company was set up through the sponsibilities. service of UBS AG Singapore. Comment: Kengrian said he had Comment: Potjaman’s lawyer, Som- bought a small stake in the compa- porn Pongsuwan, did not return ny as a personal investment. “I have several phone calls seeking infor- never gotten involved with compa- mation on the offshore entity.

Ukraine Sledge and Celine Dion. In 2012, Rich resigned her U.S. citizenship. Dmytro Firtash Offshore business: Settlor and ben- Businessman eficiary of The Dry Trust (1992) and Details: Co-owns RosUkrEnergo, director of DTD Limited (2007), a partnership with Gazprom, the both in the Cook Islands. Russian natural gas giant. U.S. law Comment: Denise Rich did not re- enforcement officials and diplo- spond to a request for comment. mats have linked him to arms and drug trafficking and to reputed Russian mob boss Semion Mogile- Venezuela vich. José Eliecer Pinto Gutiérrez Offshore business: Shareholder Army General and director (since 2007) in Group DF Limited (incorporated in 2006) Details: Top commander in the Am- in the British Virgin Islands, which azonas state, overseeing security in became a holding company for the Venezuela-Colombia border. Firtash’s interests in energy, chemi- Offshore business: Shareholder, cals and real estate. director and secretary of Roma- Comment: Firtash could not be na International Holdings, Ltd. reached for comment. (2003-2006) in the British Virgin Islands. United States Comment: Pinto Gutiérrez could Denise Rich not be reached for comment. ICIJ verified his connection to the off- Songwriter shore company through his identity Details: The ex-wife of the United card, a copy of which was included States’ most famous tax fugitive, in the offshore files. n Marc Rich, who was controversially pardoned by former President Bill Clinton on Clinton’s last day in office. She is a Grammy-nominated songwriter, having written chart- topping songs for the likes of Sister

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale | Methodologies ©2013 Center for Public Integrity 214 Methodologies How ICIJ’s Project Team Analyzed the Offshore Files By Duncan Campbell Published Online: April 3, 2013

he International Consor- The drive contained four large tium of Investigative Jour- databases plus half a million text, Tnalists’ exploration of the se- PDF, spreadsheet, image and web cretive world of offshore companies files. Analysis by ICIJ’s data experts and trusts began after a computer showed that the data originated in hard drive packed with corporate 10 offshore jurisdictions, including data and personal information and the British Virgin Islands, the Cook e-mails arrived in the mail. Islands and Singapore. It included Gerard Ryle, ICIJ’s director, ob- details of more than 122,000 off- tained the data trove as a result of his shore companies or trusts, nearly three-year investigation of Australia’s 12,000 intermediaries (agents or Firepower scandal, a case involving “introducers”), and about 130,000 offshore havens and corporate fraud. records on the people and agents The offshore information totaled who run, own, benefit from or hide more than 260 gigabytes of use- behind offshore companies. ful data. ICIJ’s analysis of the hard When ICIJ further analyzed the drive showed that it held about 2.5 data using sophisticated matching million files, including more than 2 software, it found that about 40 million e-mails that help chart the percent of files and emails were du- offshore industry over a long period plicates. of explosive growth. It is one of the The people identified in ICIJ’s biggest collections of leaked data analysis of the data are sharehold- ever gathered and analyzed by a ers, directors, secretaries and nomi- team of investigative journalists. nees of companies and trustees,

“settlors” or “protectors” of offshore largest source of capital investment trusts, as well as power-of-attorney flowing into China is the tiny off- holders who direct the actions of shore tax haven of the British Vir- third parties. Many of the struc- gin Islands. Similarly, a large source tures are designed to conceal the of investment flowing into Russia true ownership and control of assets is from Cyprus, a country that also placed offshore. Their identified ad- features heavily in the data — and dresses are spread across over more whose financial stability was recent- than 170 countries and territories. ly undermined by a crisis precipi- A large number of positions are tated by Cypriot-based banks being held by so called “nominee direc- bloated by Russian money. tors,” whose names appear again ICIJ’s team of 86 investigative and again, sometimes in hundreds journalists from 46 countries repre- of companies. Nominee directors sents one of the biggest cross-border are people who, for a fee, lend their investigative partnerships in journal- names as office holders of compa- ism history. Unique digital systems nies they know little about. It is a supported private document and in- legal device widely utilized in the formation sharing, as well as collab- offshore world — akin to having orative research. These included a your motor vehicle registered in the message center hosted in Europe and name of a stranger. a U.S.-based secure online search sys- The records indicated that com- tem. Team members also used a se- pany directors and shareholders cure, private online bulletin board were often nominee companies, law system to share stories and tips. firms or other types of “corporate The project team’s attempts to persons,” some of which were man- use encrypted e-mail systems such aged and owned by still other nomi- as PGP (“Pretty Good Privacy”) were nees and companies. abandoned because of complexity ICIJ’s data analysis showed that and unreliability that slowed down the people setting up offshore enti- information sharing. Studies have ties lived most often in China, Hong shown that police and government Kong and Taiwan. Another impor- agents — and even terrorists — also tant group of clients comes from struggle to use secure e-mail systems Russia and former Soviet republics. effectively. Other complex crypto- This helps explain why the second- graphic systems popular with com-

puter hackers were not considered tigative journalists ask: “Who knew for the same reasons. While many what, when?” team members had sophisticated In their modern form, high-end computer knowledge and could use FTR and analysis systems have been such tools well, many more did not. sold for more than a decade, in large quantities, to intelligence agencies, Tackling the data law firms and commercial corporations. Journalism is just catching up. Analyzing the high volume of in- Many of the tools are too expensive formation was the team’s first and for most journalism organizations central challenge. With this much and may be too sophisticated for most data, relevant information, and to use. Perhaps the best-known intel- good stories, cannot be found just ligence analysis system, i2 Analysts “going and looking.” What’s needed Notebook, has been used by very few is to use “free text retrieval” (FTR) journalists or news organizations. software systems. The major software tools used for Modern FTR systems can work the Offshore Project were NUIX of with huge volumes of unsorted data, Sydney, Australia, and dtSearch of many times larger than even in this Bethesda, Md. NUIX Pty Ltd pro- landmark investigative project. They vided ICIJ with a limited number pre-index every number, word and of licenses to use its fully featured name, making it possible for com- high-end e-discovery software, free plex queries to be completed in mil- of charge. The listed cost for the liseconds. The searches are akin to NUIX software was higher than a using advanced features on Google non-profit organization like the ICIJ or other internet search engines but could afford, if the software had not are more sophisticated — and, criti- been donated. cally, are private and secure. Computer programmers in Ger- The use of FTR, as well as rele- many, the UK and Costa Rica de- vant features such as timelines that signed sophisticated data mining tools can extract and display, have and cleaning software for ICIJ to been critical to the success of the support data research. Before it was project. It sounds complicated, but used, though, manual analysis had still boils down to asking one of the established much country-by-coun- most important questions that inves- try identification of clients and thus

Networking in the offshore world: ICIJ used advanced tools like Nuix to see how offshore providers linked up.

provided an initial look at the scope files out faster for research by dozens and range of clients. This painstak- of new journalists who were joining ing work was done in New Zealand the expanding Offshore Project. and it proved crucial in early deci- Interdata allowed team members sions on what countries ICIJ needed to access and download copies of any reporters to work in. of the offshore documents that were ICIJ’s online search and retrieval relevant to their countries and inter- system — named Interdata - was de- ests. Journalists using the Interdata veloped and deployed by a British system have to date made over 28,000 programmer in less than two weeks in online searches and downloaded December 2012 to support an urgent more than 53,000 documents. need to get relevant documents and Before loading Interdata or using

NUIX or similar analysis tools, the different companies. Another special team’s data experts had to deal with program identifies the country as- a major problem affecting tens of sociated with each person and com- thousands of the leaked documents. pany, even when geographic data has Computers could not automatically not been entered fully or correctly. read them because they were photo- Unlike the U.S. cables and war logs graphs or other images that do not released by Wikileaks, the offshore contain text. data was not structured or clean. As The solution was large scale re- delivered, it consisted of a large and scanning of unreadable files by op- mainly unsorted collation of com- tical character recognition (OCR) pany and trust documents and in- software that identifies and writes structions, e-mails, large and small in the names and numbers on top databases and spreadsheets, personal of the images. This brought to the identity documents, accounting infor- surface dozens of important new mation and agents’ and companies’ documents, including passports, internal papers and reports. contracts and letters explaining how As might be expected in any of- companies were controlled. fice computer network, many docu- ICIJ’s offshore 260-gigabyte data ments and e-mails had been shared collection is more than 160 times and copied many times over. Some larger in size as measured in giga- of the programs ICIJ used could au- bytes than the U.S. State Depart- tomatically sift out duplicates, but ment cables leaked to and published others could not. by Wikileaks in 2010. The formats Large databases detailing offshore of the data that ICIJ’s team worked companies and the people who had with were more complex and diffuse set up and operated them were found than the collected U.S. State Depart- in the data. Over three months, ICIJ ment cables passed to Wikileaks, recovered and rebuilt the databases and needed more levels of analysis. in an effort to run them in their One specially built program has original format. When the database been prepared to check and match reconstruction was done, there were names and addresses, and has spot- surprises. The databases had been ted thousands of cases where the built to record and check who really same person’s data has been entered lay behind each company and trust, numerous times in different ways for as required by international regula-

tions on money laundering and “due pected or convicted fraudsters and diligence.” ICIJ’s journalists hoped the like, hoping that bank accounts the data as to who was behind a com- and scam plots would just pop out. It pany was a click away. was a frustrating road to follow. The In fact, database entries for “ben- data was not like that. eficial owners” were often empty. But persistently following leads Often too, the offshore services pro- through incomplete data and docu- viders had passed the legal respon- ments yielded some great rewards: sibility for holding the information not just occasional and unexpected to intermediaries in other countries top names, but also many more nu- who had brought the client to the anced and complex schemes for service provider. The lesson was hiding wealth. Some of the schemes that the empty fields were not an ac- spotted, although well known in the cident; it was the design. offshore trade, have not been described publicly before. Patience was rewarded when this data opened new A frustrating n but rewarding road windows on the offshore world. In the rebuilt databases, researchers Duncan Campbell (U.K.), a found- were excited by occasional electron- ing member of ICIJ, is the ICIJ ic flashes. Sometimes, on accessing Data Journalism Manager for the a company record, an alert screen Offshore Project and a contrib- popped up over the registered data, uting journalist. Programmers giving a name and contact details Sebastian Mondial (Germany), for the person or persons who really Matthew Fowler (UK), Rigoberto owned the company and its assets. Carvajal and Matthew Caruana A further feature in one database Galizia (Costa Rica) provided masked a deeper layer of secrecy, custom software design, program- identifying thousands of people as ming and data support. The initial hidden stand-ins. manual analysis of the client ICIJ’s fundamental lesson from names was done by ICIJ member the Offshore Project data has been Nicky Hager and Barbara Mare patience and perseverance. Many (New Zealand). ICIJ member Gi- members started by feeding in lists annina Segnini oversaw the work of names of politicians, tycoons, sus- in Costa Rica.

3PREVIOUS ARTICLE SHOW CONTENTS NEXT ARTICLE4 Secrecy for Sale | Follow-Up ©2013 Center for Public Integrity 220 Follow-Up Release of Offshore Records Draws Worldwide Response By Emily Menkes, Kimberley Porteous and Michael Hudson Published Online: April 20, 2013

CIJ’s investigative series on areas for immediate action in im- offshore secrecy — which draws proving the fight against tax fraud, Ifrom a cache of 2.5 million se- evasion and avoidance. Member cret records — has ignited reac- States were asked to agree on these tions around the globe. actions at the Since the initial release of stories ECOFIN in May. by the ICIJ and its media partners The letter cred- across the world, public officials its the offshore have issued statements, govern- leaks investiga- ments have launched investigations, tion with “sharp- and politicians and journalists have ening the focus” been debating the implications of on tax fraud, and says it will ask the records and the reporting. ICIJ to supply names and details of Among the latest reactions and European citizens from its data. responses: • Finance ministers and central • The European Commissioner on bankers at the G20 meeting in Taxation Algirdas Šemeta and Washington said in a communi- Irish Finance Minister Michael qué that automatic exchange of Noonan sent a letter to all EU Fi- tax-relevant bank information nance Ministers, setting out 7 key should be adopted as the global

standard to overcome interna- • French president Francois Hol- tional tax evasion. Skeptical Eu- lande has published the personal ropean leaders reportedly “be- financial details of government came more enthusiastic” after ministers on the official govern- the public outcry over ICIJ’s off- ment website, following the Jerome shore leaks revelations. Cahuzac and Jean-Jacques Augier offshore assets scandals. The list • Bayartsogt Sangajav, deputy of assets includes details of bank speaker of the Mongolian Par- accounts, life insurance, property liament, has reportedly resigned and other expensive items such as from his post following ICIJ’s cars, art works and antiques. Vari- revelations about his undeclared ous properties in Paris and the offshore company and bank ac- south of France have already been count. In a parliamentary ses- itemized by ministers, as well as sion he was asked to explain his designer lounge chair (Industrial actions. Several MPs called for Renewal Minister Arnaud Mon- further disciplinary action, in- tebourg) and a David Beckham cluding expelling him from Par- t-shirt (Culture Minister Aurelie liament entirely. Filippetti).

• Santosh Kumar Agarwal (Kedia), • European Council president a member of the board of direc- Herman Van Rompuy announced tors for the Antwerp World Dia- that tax evasion will be discussed mond Centre, has resigned from at the next European Council in the organization after his off- May, saying “we must seize the in- shore dealings were revealed. “In creased political momentum to the interest of the integrity of the address this crucial problem.” Antwerp World Diamond Centre as [an] organization and the in- • BVI government officials have dustry as a whole, Kedia has taken announced they are opening a the initiative to withdraw from the new business headquarters in AWDC’s board of directors, await- Hong Kong, with Orlando Smith, ing the outcome of a potential BVI Premier and Finance Min- investigation,” said a statement re- ister, confirmed to officiate the leased by the company.” opening. Executive director of

BVI International Finance Cen- following a public outcry in Ger- tre, Elise Donovan, said the data many over the “offshore leaks.” obtained by the ICIJ was “a small Sources “close to Cameron” fraction” of the total number of claim he was actually the first to BVI firms. She later added, “We raise the issue, spelling out how want to reassure clients in Hong his government was cracking Kong and the region that this is down on tax avoidance in places an isolated incident. We remain such as Jersey and Guernsey. committed to clients’ privacy and confidentiality.” • Russian Deputy Prime Minister Igor Shuvalov is moving his off- • The Swiss and U.S. governments shore assets back to Russia after are investigating a possible solu- ICIJ’s revelations that Shuvalov’s tion to the dispute over wealthy wife Olga Shuvalova was either a Americans using Swiss banks to shareholder or owner of several hide their money. These talks secretive offshore entities. The come at time when Switzer- Shuvalovs had a declared income land’s banking sector is under of $12.7 million in 2011, most of increased pressure to surren- which was earned by Olga. der personal information about suspected tax evaders. Swiss • Spanish political party Unión Finance Minister Eveline Wid- Progreso y Democracia submit- mer-Schlumpf said all countries ted written questions to the should be treated equally in the Spanish Congress today in the drive for bank transparency. wake of French president Fran- “We consider it very important çois Hollande’s announcement that rules must apply to all and that French banks had to declare are engaging ourselves for a level their tax haven subsidiaries. The playing field in multilateral fo- questions read: Is the govern- rums,” Widmer-Schlumpf said. ment going to present in the Eu- ropean institutions any initiative • German Chancellor Angela to eradicate the tax havens with- Merkel urged UK’s PM David in the Member States? and Is the Cameron to crack down on tax government going to force banks havens during talks in Berlin, to disclose the subsidiaries they

have in tax havens and what are • Algirdas Semeta, European Union their activities? Tax Commissioner stated in a recent interview that it is time to • French president François Hol- move “quicker and harder” against lande called for “eradication” of tax evasion. He said the “growing the world’s tax havens and told willingness to act” increases the French banks they must declare likelihood of a more coordinated all of their subsidiaries. He also EU stance against tax havens. announced the creation of a special prosecutor to pursue cases • Europe’s five biggest economic of corruption and tax fraud. powers — Britain, France, Ger- French government ministers many, Italy and Spain — an- have been ordered to declare nounced they would begin regu- their assets publicly within days. larly exchanging banking and tax information as a way of iden- • Luxembourg’s Prime Minister tifying tax dodgers and other fi- Jean-Claude Juncker announced nancial wrongdoers. his country plans to lift bank secrecy rules for European Union citizens • Meanwhile, the British Virgin Is- who have savings based in the coun- lands (BVI) authorities are not try, ending decades of bank secrecy fans of the ICIJ investigation. The in Luxembourg. “We are following BVI premier and Finance Minis- a global movement,” Juncker told ter Orlando Smith told the South parliament in a state-of-the-nation China Morning Post that “BVI address. The new transparency re- authorities are actively investigat- gime would begin in January 2015. ing how this private information Austria is now the only EU country has been illicitly obtained and not sharing data about bank de- used to attack the BVI financial positors. In a recent interview, Aus- services industry, which operates trian Vice Chancellor and Finance compliantly within international Minister Spindelegger Fekter said: guidelines and the law.” “How much money someone has in the bank is a matter between the • Athens’ district attorney Panay- bank and the customer and is no ota Fakou has started a prelimi- one else’s business.” nary probe to find out if Greeks

who own offshore companies un- court to force it to share the off- earthed by the ICIJ investigation shore leaks records. have evaded taxes or laundered money. According to the Greek • Quebec Premier Pauline Marois newspaper Ta Nea, prosecutors has declared that neither she, nor will send information requests to any other elected officials in her British Virgin Islands’ financial government have dealings in the authorities asking them to turn offshore world. Marois also sup- over records of 107 entities con- ported the handover of internal nected to Greek citizens. documents to Canadian authorities, stating the Quebec govern- • An investigation by Finnish State ment would not hesitate to use Televisionand ICIJ exposing the “all legal means” to ensure this. offshore connections of state- owned postal company Itella has • French budget minister Bernard been received with surprise by Cazeneuve joins the clamor from the Finnish Finance Minister, governments around the globe Jutta Urpilainen. The minister in urging ICIJ and its media said that “state owned compa- partners to release the offshore nies should be an example for tax haven files to them, to “aid other companies. That is why it is justice and help them do their especially unacceptable that Itel- job.” Le Monde’s response: “It la owns a company in a tax ha- is up to the justice system to es- ven.” Urpilainen said the Finnish tablish responsibilities at a time government should adopt clear when the law might have been rules on the use of offshore ju- broken ... It is up to the press to risdictions by state-owned cor- enlighten the reader...” porations and called tax havens “one of the biggest threats to the • Austrian Chancellor Werner Finnish welfare state.” Faymann says he is ready to make concessions on banking secrecy, • Canada’s national revenue min- to bring the nation in step with ister Gail Shea says the govern- Switzerland and Luxembourg. ment may pursue the Canadian “Austria should participate in Broadcasting Corporation in talks on banking secrecy,” Aus-

trian Chancellor Werner Fay- • The Philippine Presidential mann declared to Die Presse. Commission on Good Govern- ment probe into the disclosure • The European Commissioner that Maria Imelda Marcos Ma- for Taxation, Algirdas Šemeta, notoc, the eldest daughter of the called for an automatic ex- late dictator Ferdinand Marcos, change of information between was a beneficiary of a secret off- countries and a “tough common shore trust in the British Virgin stance.” “Recent developments, Islands, will release its report fuelled by the outcome of the within two weeks. “We are duty Offshore Leaks, confirms the ur- bound to investigate and, de- gency for more and better action pending upon informed prelimi- against tax evasion .... Now it is nary findings, decide whether time to put words into action.” to pursue the matter,” said An- He said he was “very pleased” to dres Bautista, the chairman of see many of the Member States the Presidential Commission on reviewing where they stand on Good Government, tasked with the issues and “intensifying their recovering the Marcos family’s political will to act.” alleged ill-gotten wealth.

• The Swiss government has dis- • The president of the Association tinguised itself from other world of German Banks denied that governments by publicly stating his group’s members had helped it does not want access to the off- customers engage in tax evasion. shore leaks records. Finance min- “First in line are the individuals ister Eveline Widmer-Schlumpf and the organizations that invest said Switzerland has worked hard their money in tax oases,” An- in recent years to curb fraud and dreas Schmitz said.” tax evasion and that much of the activity pointed to in the leaked • The Berne internal revenue ser- documents can be perfectly legal. vice authorities announced they She says the Swiss government will re-open the Gunter Sachs does not want access to the data case after ICIJ’s revelations about as “it was acquired illegally and the former Mr. Brigitte Bardot’s Bern wants no part of that”. intricate offshore scheme.

• In Canada, a Liberal senator and net worth” on required dis- urged his caucus colleague, Sena- closures forms for public offi- tor Pana Merchant, to answer cials, he said in a statement. questions in the wake of CBC News and ICIJ reports that she • Germany’s Economics Minister has been listed as beneficiary of Philipp Rösler urged the media an offshore trust created by her to pass the data on to the govern- husband, a well-known class-ac- ment, stressing that tax evasion tion attorney. “We’re all innocent was a “criminal act.” until proven guilty in this country, but I want to hear her expla- • Luxembourg’s Finance Minister nation,” Senator Percy Downe Luc Frieden says he is open to told CBC News in an interview. greater transparency of its banks in order to cooperate further • In the Philippines, two lawmak- with foreign tax authorities. ers dismissed a report by an ICIJ media partner, the Philippine • The Indian Finance Minister P. Center for Investigative Journal- Chidambaram said an inquiry ism (PCIJ), that they had off- had been initiated by the author- shore holdings. Senator Manuel ities against individuals whose Villar said his offshore entity was names figured in the global me- a “1-dollar shell company” that dia report. “Yes. We have taken he wasn’t required to report, be- note of the names and inqui- cause he hadn’t made any real ries have been put in motion in investment in it. Villar said that respect of the names that have he hadn’t conducted business been exposed,” he told a press with the British Virgin Islands conference. company “because I decided to concentrate in the Philippines.” • The Mongolian Deputy Speaker, Congressman Joseph Victor ‘JV’ Bayartsogt Sangajav, admitted G. Ejercito suggested the story to an “ethics failure” over his about him was politically motivat- undeclared million-dollar Swiss ed. “To the best of my knowledge, bank account. He told a press I have truthfully and accurately conference: “It is true that there declared all my assets, liabilities, is 1,658 Euros or 2.9 million

MNT in a Swiss bank account. I enue loss to the Greek govern- opened the account to trade in ment is in the order of 40% or international stocks with three more of the debt of our country,” other acquaintances in 2008. My Sourlas said. “The offshore com- failure of responsibility is that I panies cast a shadow at this time did not include the company in of great crisis, when some get my declaration of income. I have rich and many get poor.” admitted my ethic failure and I am ready to take responsibility.” • In France, President Francois Hollande denied knowledge of • Philippine government officials the offshore accounts held by his said they will investigate evi- 2012 campaign manager, Jean- dence that Maria Imelda Marcos Jacques Augier, asserting that Manotoc, a provincial governor it’s up to the tax administration and daughter of the late dictator to monitor Augier’s private ac- Ferdinand Marcos, was the ben- tivities. Reports about Augier’s eficiary of a secret BVI offshore offshore dealings by Le Monde, trust. the BBC and other ICIJ partners came in the wake of news about • George Mavraganis, the Deputy tax fraud charges against Hol- Finance Minister of Greece an- lande’s ex-budget Minister, Je- nounced that the Greek govern- rome Cahuzac. ment is moving to address offshore-driven tax dodging. Greek • The office of Azerbaijani Presi- members of parliament asked Ma- dent Ilham Aliyev asserted there vraganis what he planned to do was nothing unusual about the about the 103 offshore companies information in the leak – which that ICIJ found hadn’t been regis- showed that his two daughters tered with Greece’s tax authorities. were shareholders of three offshore companies. The statement • George Sourlas from Greece’s said the President’s daughters Ministry of Justice said the rev- “are grown up and have the right enue loss caused by offshore was to do business.” A spokesperson huge. “By the actions of offshore for Azersun – a holding compa- companies in Greece, the rev- ny controlled by Hasan Gozal, a

corporate mogul who was listed business pay tax when we let the as the director of the daughters’ BVI use British law and British companies – said the report was protection to suck in billions in biased and based on inaccurate dirty money?” Oakeshott asked. information. “I regret that authority of Press Council doesn’t • German Finance Minister Wolf- go beyond Azerbaijan and there gang Schäuble stated on public is no such institution worldwide radio that he was “pleased” with to fight racketeer journalists,” the ICIJ reports. He went on to the spokesman said. say, “I think that such things as have been made known will • Ex-Colombian President Álvaro increase the pressure interna- Uribe Vélez publicly defended tionally, and we will be able to his sons’ involvement in offshore increase the cooperation with business. Uribe stated that his those who have been more reti- sons Tomás and Jerónimo are cent”, a sentiment reflected in entrepreneurs and “have partici- Germany’s previous lobbying to pated in business dealings since stamp out tax avoidance. they were children” and “they are not tax evaders.” • Canadian Federal Revenue Minister Gail Shea called the • In the UK, David Cameron is fac- released of offshore banking ing renewed pressure to take ac- information as “good news” for tion over Britain’s entanglements Canadians and bad news for tax within the offshore world. Lord evaders. Ms. Shea urged ICIJ or Oakeshott, a senior Liberal Dem- anyone else with information on ocrat said that the secrecy ha- tax cheats to come forward. ven of the British Virgin Islands “stains the face of Britain.” Oake- • Pascal Saint-Amans, director of shott and others are questioning the Organization of Economic whether Cameron will raise the Cooperation and Development, issue in June of at the G8 summit said: “Secrecy is no longer ac- of wealth nations. “How can Da- ceptable. We need to get rid of vid Cameron keep a straight face it. If the rules make it possible, calling for the G8 to make big then we’ll change the rules.” n

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