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Leaks reveal secrets of the rich who hide cash offshore

Exclusive: Offshore financial industry leak exposes identities of 1,000s of holders of anonymous wealth from around the world

By David Leigh   - The Guardian, Wednesday 3 April 2013 23.59 BST   

The British Virgin Islands, the world's leading offshore haven used by an array of government officials and rich families to hide their wealth. Photograph: Duncan Mcnicol/Getty Images

Millions of internal records have leaked from Britain's offshore financial industry, exposing for the first time the identities of thousands of holders of anonymous wealth from around the world, from presidents to plutocrats, the daughter of a notorious dictator and a British millionaire accused of concealing assets from his ex-wife.

The leak of 2m emails and other documents, mainly from the offshore haven of the British Virgin Islands (BVI), has the potential to cause a seismic shock worldwide to the booming offshore trade, with a former chief economist at McKinsey estimating that wealthy individuals may have as much as $32tn (£21tn) stashed in overseas havens.

In France, Jean-Jacques Augier, President François Hollande's campaign co-treasurer and close friend, has been forced to publicly identify his Chinese business partner. It emerges as Hollande is mired in financial scandal because his former budget minister concealed a Swiss bank account for 20 years and repeatedly lied about it.

In Mongolia, the country's former finance minister and deputy speaker of its parliament says he may have to resign from politics as a result of this investigation.

But the two can now be named for the first time because of their use of companies in offshore havens, particularly in the British Virgin Islands, where owners' identities normally remain secret.

The names have been unearthed in a novel project by the Washington-based International Consortium of Investigative Journalists [ICIJ], in collaboration with the Guardian and other international media, who are jointly publishing their research results this week.

The naming project may be extremely damaging for confidence among the world's wealthiest people, no longer certain that the size of their fortunes remains hidden from governments and from their neighbours.

BVI's clients include Scot Young, a millionaire associate of deceased oligarch Boris Berezovsky. Dundee-born Young is in jail for contempt of court for concealing assets from his ex-wife.

Young's lawyer, to whom he signed over power of attorney, appears to control interests in a BVI company that owns a potentially lucrative Moscow development with a value estimated at $100m.

Another is jailed fraudster Achilleas Kallakis. He used fake BVI companies to obtain a record-breaking £750m in property loans from reckless British and Irish banks.

As well as Britons hiding wealth offshore, an extraordinary array of government officials and rich families across the world are identified, from Canada, the US, India, Pakistan, Indonesia, Iran, China, Thailand and former communist states.

The data seen by the Guardian shows that their secret companies are based mainly in the British Virgin Islands.

Sample offshore owners named in the leaked files include:

• Jean-Jacques Augier, François Hollande's 2012 election campaign co-treasurer, launched a Caymans-based distributor in China with a 25% partner in a BVI company. Augier says his partner was Xi Shu, a Chinese businessman.

• Mongolia's former finance minister. Bayartsogt Sangajav set up "Legend Plus Capital Ltd" with a Swiss bank account, while he served as finance minister of the impoverished state from 2008 to 2012. He says it was "a mistake" not to declare it, and says "I probably should consider resigning from my position".

• The president of Azerbaijan and his family. A local construction magnate, Hassan Gozal, controls entities set up in the names of President Ilham Aliyev's two daughters.

• The wife of Russia's deputy prime minister. Olga Shuvalova's husband, businessman and politician Igor Shuvalov, has denied allegations of wrongdoing about her offshore interests.

•A senator's husband in Canada. Lawyer Tony Merchant deposited more than US$800,000 into an offshore trust.

He paid fees in cash and ordered written communication to be "kept to a minimum".

• A dictator's child in the Philippines: Maria Imelda Marcos Manotoc, a provincial governor, is the eldest daughter of former President Ferdinand Marcos, notorious for corruption.

• Spain's wealthiest art collector, Baroness Carmen Thyssen-Bornemisza, a former beauty queen and widow of a Thyssen steel billionaire, who uses offshore entities to buy pictures.

• US: Offshore clients include Denise Rich, ex-wife of notorious oil trader Marc Rich, who was controversially pardoned by President Clinton on tax evasion charges. She put $144m into the Dry Trust, set up in the Cook Islands.

It is estimated that more than $20tn acquired by wealthy individuals could lie in offshore accounts. The UK-controlled BVI has been the most successful among the mushrooming secrecy havens that cater for them.

The Caribbean micro-state has incorporated more than a million such offshore entities since it began marketing itself worldwide in the 1980s. Owners' true identities are never revealed.

Even the island's official financial regulators normally have no idea who is behind them.

The British Foreign Office depends on the BVI's company licensing revenue to subsidise this residual outpost of empire, while lawyers and accountants in the City of London benefit from a lucrative trade as intermediaries.

They claim the tax-free offshore companies provide legitimate privacy. Neil Smith, the financial secretary of the autonomous local administration in the BVI's capital Tortola, told the Guardian it was very inaccurate to claim the island "harbours the ethically challenged".

He said: "Our legislation provides a more hostile environment for illegality than most jurisdictions".

Smith added that in "rare instances …where the BVI was implicated in illegal activity by association or otherwise, we responded swiftly and decisively".

The Guardian and ICIJ's Offshore Secrets series last year exposed how UK property empires have been built up by, among others, Russian oligarchs, fraudsters and tax avoiders, using BVI companies behind a screen of sham directors.

Such so-called "nominees", Britons giving far-flung addresses on Nevis in the Caribbean, Dubai or the Seychelles, are simply renting out their names for the real owners to hide behind.

The whistleblowing group WikiLeaks caused a storm of controversy in 2010 when it was able to download almost two gigabytes of leaked US military and diplomatic files.

The new BVI data, by contrast, contains more than 200 gigabytes, covering more than a decade of financial information about the global transactions of BVI private incorporation agencies. It also includes data on their offshoots in Singapore, Hong Kong and the Cook Islands in the Pacific.



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'Offshore Leaks' shows how some of the wealthy hide riches

Information leaked to media outlets worldwide has shed new light on how some of the world’s richest people avoid paying their fair share of taxes. It has been described as the "biggest blow" so far to tax havens.

 The Munich-based newspaper Süddeutsche Zeitung and German regional public broadcaster Norddeutscher Rundfunk are among the media outlets that have spent months examining the data in a project that has been dubbed "Offshore Leaks." Among the other media outlets in 46 countries that took part in the project are the BBC, Washington Post, the Guardian and Le Monde.

According to a report published in Thursday's edition of the Süddeutsche, it is to be just the first in a series of reports about how some wealthy people use tax havens to hide their riches from the tax authorities.

The 260 gigabytes of data made available to the journalists is said to include around 2.5 million documents. Among the 130,000 alleged tax cheats from 170 countries listed in the documents are the names of publicly known figures such as oligarchs and weapons traders. The information reportedly comes from two companies that specialize in setting up offshore accounts and was handed over to the International Consortium of Investigative Journalists in Washington D.C. by an anonymous source last year.

In its story, the Süddeutsche, says it has independently verified the data, which a number of reporters spent months evaluating. It cites an unnamed insider who described the leak as "the biggest blow so far to the black hole of the world economy."

 It isn't clear how much money is hidden in the world's tax havens, but a 2012 report by the British non-governmental agency Tax Justice Network estimated the figure at between $21 and $32 billion (16 billion - 25 billion euros).

The most prominent name mentioned so far is the late German-born industrialist Gunther Sachs. According to the Süddeutsche report, Sachs, who committed suicide in 2011, had millions hidden in offshore firms in the Cook Islands, Panama, the British Virgin Islands and Luxembourg. The tax authorities in Switzerland, where Sachs lived, had no knowledge of Sachs' offshore holdings and these were not declared by his estate following his death. The Sachs estate has denied any wrongdoing, saying everything was done by the book.

The leak comes at a time when many governments, particularly in the 17 countries that make up the crisis-hit eurozone, are battling to reduce the amount of debt they hold. Over the past couple of years they have been stepping up cooperation together and tightening up their own regulations in an effort to combat tax evasion.

pfd/hc (dpa, AFP)


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The massive leak of offshore-wealth secrets: 4 takeaways

A journalism nonprofit is slipped a huge cache of documents detailing the tax-avoiding schemes of the super-rich, and the group is naming names

Sometimes a news story is almost too complicated to wrap your head around; other times it's just too big. Late Wednesday, the International Consortium of Investigative Journalists unveiled a massive trove of data and analysis on how the world's super-rich hide their wealth through secret companies and trusts located in the British Virgin Islands and other offshore tax havens. They name names, and put those names to numbers.

But here are some other numbers that explain the challenge of tackling the massive leak of confidential financial data: Somebody gave the consortium a flash drive with about 260 gigabytes of data — 160 times larger than the 2010 WikiLeaks diplomatic cable dump. The drive included 2.5 million files containing 30 years' worth of records of 120,000 offshore companies and trusts and their connection to individuals and firms in more than 170 countries and territories. It took 86 journalists from 46 countries and 38 media partners to sift through the records and try to make sense of what the ICIJ calls "the biggest stockpile of inside information about the offshore system ever obtained by a media organization."

ICIJ had dedicated a whole section of its website to the story — "Secrecy for Sale: Inside the Global Offshore Money Maze" — replete with articles focused on specific countries and individuals, as well as maps, video, and interactive features. Newspapers and other media partners are rolling out their analyses over the rest of the week. To get started, here are four key takeaways from this rare look inside the financial secrets of the world's financial elite:

1. Collectively, the money involved is enormous

First of all, not all offshore financial holdings are illegal. But "studies have estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $1.6 trillion a year," the ICIJ says. And in a 15-month investigation, the Washington organization has found that, "alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging, and political corruption to thrive."

How much money are we talking about? The ICIJ points to a June 2012 study by former McKinsey & Co. chief economist James S. Henry that estimated the total private financial wealth stashed in offshore havens at between $21 trillion and $32 trillion — an amount, the ICIJ notes, "roughly equivalent to the size of the U.S. and Japanese economies combined."

2. The leak has landed some prominent people in hot water
The leaked documents feature a lot of names — the ICIJ says the ranks of the offshoring elite "include American doctors and dentists and middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers, and a sham-director-fronted company that the European Union has labeled as a cog in Iran's nuclear-development program."

But the ICIJ researchers single out a couple of prominent politicians and their families, heirs and heiresses, and other boldface names. Among the nearly 4,000 U.S. individuals fingered in the files are James S. Mellon, an heir to the Mellon oil and banking fortune, and Denise Rich, a onetime Democratic fundraiser married to infamous Clinton-pardoned, tax-evading oil trader Marc Rich; in 2006, Mrs. Rich had $144 million stashed in trust in the tiny Cook Islands. (Both have given up their U.S. citizenships; Mellon is now a British national, Rich an Austrian.)

Politicians who are now facing uncomfortable scrutiny include Canadian Sen. Pana Merchant, whose husband Tony Merchant went to great lengths to hide the $1.7 million he put in a Cook Island trust; the deputy speaker of Mongolia's parliament, Bayartsogt Sangajav, who says he might resign amid the disclosure of his secret accounts; two top executives of Russian state-owned oil company Gazprom and the wife of Russia's deputy prime minister, Igor Shuvalov; Indonesian international trade representative Nalinee "Joy" Taveesin, listed as a crony of Zimbabwean strongman Robert Mugabe; and most prominently, Maria "Imee" Imelda Marcos Manotoc, a Filipino provincial governor and the eldest daughter of former dictator Ferdinand Marcos. Imee reportedly failed to list her position and stake in a secret trust in the British Virgin Islands.

Most of the wealthy people refused to comment to the ICIJ team, but James Mellon said he has liquidated all his offshore holdings, has "never broken the tax law," and then played the Mitt Romney card: "I just heard of a presidential candidate who had a lot of money in the Cayman Islands," he told the ICIJ. "Not everyone who owns offshores is a crook."

3. But a lot of people are earning money from shady tax-sheltering

The 2.5 million emails and other documents don't just lay out the fiscal machinations of the elites, but also the "well-paid industry of middlemen, accountants, lawyers, and banks that provide cover, set up financial structures, and shuffle assets on their clients' behalf," says the ICIJ. A lot of the middlemen work from London.

But the ICIJ, Britain's The Guardian, and the BBC also identified 28 "sham directors," or "nominee" company directors or shareholders — typically "Britons giving far-flung addresses on Nevis in the Caribbean, Dubai, or the Seychelles" who are essentially "renting out their names for the real owners to hide behind," says The Guardian's David Leigh. These 28 people represent, at least on paper, more than 21,000 companies, with some nominee directors representing 4,000 companies each. The ICIJ's James Ball profiles one such nominee, Sarah Petre-Mears — the "Queen of Nevis" — a British national who officially controls 1,200 companies around the world from the "goat-tramped Caribbean outcropping" she calls home now.

he BBC and ICIJ offer this primer on how the wealthy "dodge" taxes:

4. Governments can now crack down harder on tax evaders
Legal or not, these offshore banking schemes have real-life consequences for the countries that never see the tax revenue. The never-ending European financial crisis, for example, is bookended by tax-avoidance debacles: In Greece, rampant tax evasion is a big contributor to its financial woes, and the latest crisis, Cyprus, has a lot to do with both Greece's collapse and the Russian oligarchs who flooded the tiny island nation with offshore cash.

Now governments who want to crack down on tax evasion have a large pool of targets and tools to do so, if they so choose. That would be popular with the 99 percent–plus who don't have the means or opportunity to shelter their money in the Caymans or Nevis, says Canadian Sen. Percy Downe. If the wealthy hide their money, he tells the CBC, regular taxpayers "have to pay more."

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Agence France-Presse
April 4, 2013 16:45
Mysterious mail triggers global tax-haven probe

The cascade of WikiLeaks-style revelations shedding light on the often murky world of offshore tax havens began when Gerard Ryle received a mysterious letter in the post.

The experienced investigative journalist had been busy trying to unravel the details of a large financial fraud in his native Australia when the prospect of an even bigger scoop landed on his doormat.

The letter contained part of a hard drive with the details of 2.5 million digital files, a treasure trove that would ultimately yield information on 120,000 offshore companies and nearly 130,000 individuals.

Ryle, who moved to Washington to head the International Consortium of Investigative Journalists (ICIJ) soon after receiving the hard drive, admits he was not entirely sure what he was dealing with at first.

"My instinct told me it was big but you do not know," Ryle told AFP. Technical impediments also frustrated his early attempts to pore over the information he had received.

"The files were almost impossible to read, they kept crashing my computer," Ryle said. "I've seen a lot of names from all around the world; they were people that meant nothing to me.

"I just did what any reporter would do -- you just go on the Internet and you Google them."

In his capacity as head of the ICIJ, a non-governmental organization founded in 1997 to help co-ordinate the work of reporters seeking to uncover corruption, Ryle set about mobilizing a worldwide army of journalists to help mine the rich seam of information he had received.

"It's always been on my mind to get some help from reporters all around the world," Ryle said. "The ICIJ was the perfect vehicle."

The ICIJ coordinated a 15-month long probe that involved 86 investigative journalists in 46 countries to compile a series of reports it began releasing around the world this week, using a strategy similar to that used by WikiLeaks when it released hundreds of thousands of diplomatic cables in 2010.

So far, the revelations have made waves in several countries, causing embarrassment to French President Francois Hollande's former campaign treasurer Jean-Jacques Augier, as well as the family of the president of Azerbaijan.

Ryle cautioned, however, that many of the individuals brought to his attention by the hard drive may not have broken any laws.

"What you first realize is that you can't accuse people of doing something wrong because you don't have the full story, you don't know what they've declared in taxes," he noted.

"You kept asking yourself: where's the story here? Is it illegal? Your instinct tells you it's a story but you need to find it, you need to look for patterns, for trends."

Recruiting the services of foreign journalists to decipher the information was necessary because of the vast amounts of detail in the hard drive, estimated as being 160 times larger than the cache released by WikiLeaks, totaling some 260 gigabytes of data.

The ICIJ's efforts were also assisted by an Australian software company that provided free software to help make sense of the information in the files.

"I approached the firm and said 'Don't ask me why I need it but can you give it to me?'" Ryle recalled.

He also acknowledged that the sheer scale of the global investigation went against the instincts of many of those journalists involved.

"I wanted to encourage collaboration among journalists, something that we, investigative journalists, normally don't like to do. We like to work on our own and keep our secrets," Ryle said.

Other revelations are set to be released on April 15, while the ICIJ promises further reports later this year.

"We're pretty confident we have a lot more because it's so vast and it takes a long time to understand," Ryle said, adding that he was not concerned about whether the revelations ultimately lead to criminal prosecutions.

"It's not our duty -- our duty is to report and to let other worry about that," he said. "Our job is to inform the public about something they didn't know and what people or authorities do afterwards is up to them."

the link:
"Life shrinks or expands in proportion to one's courage" Anais Nin .. and yet we must arm ourselves with fear


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