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From the ICIJ, the same consortium of journalists and media outlets that brought you Luxleaks and the Panama Papers, now comes the Paradise Papers. Everyone from Lewis Hamilton and Bono to Apple and Nike seem to pay less than their fair share – and this time, it’s all above board. The European Union has announced it’s going to draw up a tax haven blacklist. But it’s anyone’s guess if member states can agree on a definition of a tax haven and how they can enforce it.
Produced by Daniel BARNEY, Alessandro XENOS, Christopher DAVIS.
The Paradise Papers is a set of 13.4 million confidential electronic documents relating to offshore investment that were leaked to the German newspaper Süddeutsche Zeitung. The newspaper shared them with the International Consortium of Investigative Journalists, and some of the details were made public on 5 November 2017. The documents originate from the offshore law firm Appleby, the corporate services providers Estera and Asiaciti Trust, and business registries in 19 tax jurisdictions. They contain the names of more than 120,000 people and companies. Among those whose financial affairs are mentioned are Queen Elizabeth II, the President of Colombia Juan Manuel Santos, and the U.S. Secretary of Commerce Wilbur Ross.
On 20 October 2017, an anonymous Reddit user hinted at the existence of the Paradise Papers. Later that month, the International Consortium of Investigative Journalists (ICIJ) approached the offshore law firm Appleby with allegations of wrongdoing. Appleby said that some of its data had been stolen in a cyberattack the previous year, and denied ICIJ’s allegations. After the documents were published, the company stated that there was “no evidence of wrongdoing”, that they “are a law firm which advises clients on legitimate and lawful ways to conduct their business”, and that they “do not tolerate illegal behaviour”. Although press reports referred to the documents as being “leaked” Appleby issued a series of public statements insisting that the firm “was not the subject of a leak but of a serious criminal act”, and that “This was an illegal computer hack. Our systems were accessed by an intruder who deployed the tactics of a professional hacker”.
The documents were acquired by the German newspaper Süddeutsche Zeitung, which had also obtained the Panama Papers in 2016. According to the BBC, the name “Paradise Papers” reflects “the idyllic profiles of many of the offshore jurisdictions whose workings are unveiled”—the so-called tax havens, or “tax paradises” involved. The BBC also notes that the name “dovetails nicely with the French term for a tax haven – paradis fiscal“. The data comprises some 13.4 million documents—totaling about 1.4 terabytes—from two offshore service providers, Appleby and Asiaciti Trust, and from the company registers of 19 tax havens.Süddeutsche Zeitung journalists contacted the ICIJ, which has been investigating the documents with 100 media partners. The consortium made the data available to the media partners using Neo4j, a graph database platform made for connected data, and Linkurious, graph visualization software, allowing journalists across the globe to undertake collaborative investigative work. The documents were released by the consortium on 5 November 2017.
Gavin St Pier, an elected Deputy of the tax haven Guernsey, stated that the “coverage was part of a well-orchestrated, ongoing campaign”. He also averred that despite having the information since 2016, the timing of the release was deliberately delayed to coincide with the meeting of EU Finance Ministers ahead of the proposed discussion of a tax haven blacklist.
According to the papers, Facebook, Apple, Uber, Nike, Walmart, Allianz, Siemens, McDonald’s, and Yahoo! are among the corporations that own offshore companies, as well as Allergan, the manufacturer of Botox. According to The Express Tribune, “Apple, Nike, and Facebook avoided billions of dollars in tax using offshore companies.” Apple issued a statement in response criticising the reports as inaccurate and misleading, stating that the company is the largest taxpayer in the world and that it “pays every dollar it owes in every country around the world”.
A Kremlin-owned firm, VTB Bank, put $191 million into DST Global, an investment firm part of Mail.ru Group and founded by Russian billionaire Yuri Milner, which used it to buy a large share of Twitter in 2011. A subsidiary of the Kremlin-controlled Gazprom funded an investment company that partnered with DST Global to buy shares in Facebook, reaping millions when the social media giant went public in 2012. Twitter similarly went public in 2013. The US government sanctioned VTB in 2014 because of the Russian military intervention in Crimea, but DST Global had sold its stake in Twitter by then. Four days after the Facebook IPO, a DST Global subsidiary sold more than 27 million shares of Facebook for roughly $1 billion.
In 2009, Glencore, an Anglo–Swiss multinational commodity trading and mining company, loaned $45 million to Israeli billionaire Dan Gertler in exchange for his help with officials of the Democratic Republic of Congo in negotiations over a joint venture with state-owned Gécamines at the Katanga copper mine, in which one of the board members was Glencore major shareholder Telis Mistakidis. Glencore, which had effectively taken over Katanga, agreed to vote for the joint venture. The loan document specifically provided that repayment would be owed if agreement was not reached within three months. Gertler and Glencore have denied wrongdoing. Appleby had worked for Glencore and its founder Marc Rich on major projects in the past, even after his indictement in 1983. Rich was indicted in the United States on federal charges of tax evasion and making controversial oil deals with Iran during the Iran hostage crisis. He received a controversial presidential pardonfrom U.S. President Bill Clinton on January 20, 2001, Clinton’s last day in office.
The Australian branch of Glencore has been demonstrated to have carried out some $25 billion in cross-currency interest rate swaps, complex financial instruments the Australian Taxation Office suspects of being used to avoid paying taxes in Australia.
Appleby managed 17 offshore companies for Odebrecht, a Brazilian conglomerate, and at least one of them was used as a vehicle for the payment of bribes in the Operation Car Wash. Some of these offshore companies are publicly known to operate for Odebrecht in Africa and be involved in bribes. Among those involved in the operation who also are named in the papers are Marcelo Odebrecht, Brazilian businessman and former Odebrech’s CEO, his father Emílio Odebrecht and his brother Maurício Odebrecht.
Liberian President Ellen Johnson Sirleaf is listed in the papers as a director of the Bermuda company Songhai Financial Holdings Ltd. a subsidiary of Databank’s finance, fund management and investment company Databank Brokerage Ltd., from April 2001 until September 2012. Ghanaian Minister for Finance and Economic Planning Ken Ofori-Atta, was a co-founder of Databank and a co-director, with Johnson Sirleaf, of Songhai Financial Holdings.
Foreign Minister Sam Kutesa is listed as beneficiary, along with his daughter, of a trust which holds the Seychelles-based Katonga Investments Ltd. Katonga gave as its source of income Enhas Uganda, another Kutesa-owned company criticized in a parliamentary committee as part of a privatization it said had been “manipulated and taken advantage of by a few politically powerful people who sacrifice the people’s interests”. Kutesa was also president of the United Nations General Assembly in 2014–2015.
India ranks 19th out of the 180 countries represented in the data in terms of the number of names. In all, there are 714 Indians in the tally, including the names of several political leaders. Among them are Jayant Sinha, member of the Lok Sabha and Minister of State for Civil Aviation, Ravindra Kishore Sinha, member of the Rajya Sabha, former Minister of Corporate Affairs Sachin Pilot, former Chief Minister of Rajasthan Ashok Gehlot, former Minister of Science and Technology Vayalar Ravi‘s son[who?], the Minister of State for Civil Aviation Jayant Sinha, the son of former Minister of Environment, Forest and Climate Change Veerappa Moily[who?] and Rajya Sabha MP Ravindra Kishore Sinha. Others named are Bollywood actor Amitabh Bachchan (as a shareholder in a Bermuda-based digital media company) and former Member of Parliament of the Rajya Sabha Vijay Mallya, son of businessman Vittal Mallya. The papers revealed that Mallya sold United Spirits to Diageo in 2013, which it later approached London-based law firm Linklaters to restructuring the group structure created by Mallya. With three other subsidiaries based in the UK, United Spirits was allegedly involved with diverting funds amounting to $1.5 billion. Bachchan and Mallyain also appeared in the Panama Papers.
Among the companies listed in the papers are Apollo Tyres, the Essel Group, D S Construction, Emaar MGF, GMR Group, Havells, Hinduja Group, the Hiranandani Group, Jindal Steel, the Sun Group and Videocon.
Two children of deceased former president Suharto, Tommy and Mamiek in addition to opposition party leader Prabowo Subianto (Suharto’s former son-in-law) are listed in the papers. Following the release, the Directorate General of Taxes released a statement that they will follow up the information provided on Indonesian taxpayers.
Former Japanese Prime Minister Yukio Hatoyama is listed in the papers. The Bermuda-incorporated company, Hoifu Energy Group, is listed on the Stock Exchange of Hong Kong and appointed Hatoyama honorary chairman in 2013 because of his “amicable relationship” with the oil industry, a sector in which Hoifu planned to expand. The principal shareholder of the company was Hui Chi Ming. Neil Bush, brother of George W. Bush, was a director (deputy chairman) of the company.
From Pakistan, former Prime Minister Shaukat Aziz is listed in the papers, having set up a trust called the Antarctic Trust owned by a Delaware corporation. Aziz, a former Citibank executive, told the ICIJ he had set the trust up for estate planningpurposes and that the funds had come from his employment at Citibank. An internal Appleby document raised concerns about warrants issued for him in connection with the killing of a local leader. Aziz dismissed both the murder charge and the allegations of financial impropriety.
Alfred Gusenbauer was head of the Social Democratic Party of Austria from 2000 to 2008 and Austria’s chancellor from January 2007 to December 2008. He is listed as a director for Novia Management, a Maltese company listed as a shareholder in Novia Funds Sicav Plc, also Malta-based, which includes among its other shareholders Tal Silberstein, who was arrested in 2017 with Beny Steinmetzon charges of money laundering, then released. Silberstein had served as Gusenbauer’s campaign advisor.
A great deal of intangible property surfaced in Ireland around the time of an internal Apple Inc. reorganization of three Irish subsidiaries. The 2015 gross domestic product showed a 26% increase, and close to $270 billion of intangible assets suddenly appeared in Ireland as the year began – more than the entire value of all residential property in Ireland. This is believed to indicate that Apple has taken advantage of a tax incentive known as a capital allowance, which gives Irish companies generous tax breaks for buying intangible property. Following a US Senate investigation which featured testimony by Tim Cook, Ireland announced that henceforth Irish companies would be required to declare tax residency someplace in the world. Several US multinationals, including Apple subsidiaries, had taken the position that they did not owe taxes anywhere in the world. Apple’s law firm, Baker McKenzie, researched island tax havens, asking Appleby officials in numerous jurisdictions to confirm “that an Irish company can conduct management activities … without being subject to taxation in your jurisdiction.” Two of the subsidiaries moved to Jersey. Apple is being sued for $14.5 billion in back taxes, following a finding by European regulators that Ireland illegally provided state aid when it approved Apple’s tax structure. Irish companies are required to pay taxes in Ireland, but if they convince authorities that they are “managed and controlled” from abroad, the companies may win an exemption. Apple now holds $252 billion offshore.
Mareva Grabowski, wife of Kyriakos Mitsotakis leader of the opposition and president of New Democracy, is listed on the Paradise Papers. She is the shareholder of 50% of an offshore company Eternia Capital Management in Cayman Islands, in the Caribbeans. This entry is verified from the law-firm Appleby and on the Cayman records on 30 March 2010.
Appleby documents detail how Nike boosted its after-tax profits by, among other maneuvers, transferring ownership of its Swoosh trademark to a Bermudan subsidiary, Nike International Ltd. This transfer allowed the subsidiary to charge royalties to its European headquarters in Hilversum, effectively converting taxable company profitsto an account payable in tax-free Bermuda. Although the subsidiary was effectively run by executives at Nike’s main offices in Beaverton, Oregon – to the point where a duplicate of the Bermudan company’s seal was needed – for tax purposes the subsidiary was treated as Bermuda. Its profits were not declared in Europe and came to light only because of a mostly unrelated case in US Tax Court, where papers filed by Nike briefly mention royalties in 2010, 2011 and 2012 totaling $3.86 billion. Under an arrangement with Dutch authorities, the tax break was to expire in 2014, so another reorganization transferred the intellectual property from the Bermudan company to a Dutch commanditaire vennootschap or limited partnership, Nike Innovate CV. Dutch law treats income earned by a CV as if it had been earned by the principals, who owe no tax in the Netherlands if they do not reside there. One in six dollars of foreign profit earned by US multinationals was earned, at least on paper, through a Dutch CV subsidiary. Companies involved include Tesla, NetApp and Uber.
In Spain, the first political authority that appears is the former mayor of Barcelona and current councilor, Xavier Trias, artist José María Cano and billionaire Daniel Maté. The businessman Juan Villalonga, who was CEO of Telefónica between 1996 and 2000, registered two companies in tax havens.
Quantum Global Group, an investment bank owned by Jean-Claude Bastos de Morais, managed the Angolan wealth fund invested in seven investment funds in Mauritius and received an annual fee of 2 percent to 2.5 percent of capital under management per year.
The papers show that the Duchy of Lancaster, a private estate of Queen Elizabeth II, held investments in two offshore financial centres, the Cayman Islands and Bermuda. Both are British Overseas Territories of which she is also the monarch, and for which she appoints governors. Britain handles foreign policy for both islands to a large extent, but Bermuda has been self-governing since 1620. The Duchy’s investments included First Quench Retailing off-licences and rent-to-own retailer BrightHouse. Labour Party Leader Jeremy Corbyn asked whether the Queen should apologize, saying anyone with money offshore for tax avoidance should “not just apologise for it, [but] recognise what it does to our society”. A spokesman for the Duchy said that all of their investments are audited and legitimate and that the Queen voluntarily pays taxes on income she receives from Duchy investments.
The papers also show that in June 2007, the Duchy of Cornwall, a possession of Prince Charles, invested $113,500 via in Sustainable Forestry Management. a Bermuda-based carbon credits trading company run by Hugh van Cutsem. Four weeks after the Duchy of Cornwall purchased shares in Sustainable Forestry Management, Prince Charles made a speech criticising the European Union Emission Trading Scheme and the Kyoto Protocol for excluding carbon credits from rainforests, and called for change.
James Meyer Sassoon, the 2007 president of the international Financial Action Task Force on Money Laundering,said that his $236 million trust revealed in the papers had been established years before by his grandmother with funds that had not been earned in the UK and therefore were not subject to tax there. He said he had first disclosed the trust when he joined the Treasury in 2002, where he was Commercial Secretary from 2010 to 2013.
An article published by the ICIJ detailing the use of ambiguous VAT policies on the Isle of Man highlights the $27 million Bombardier Challenger 605 private jet that Lewis Hamilton registered there, apparently in order to become eligible for a $5.2 million VAT refund.
Queen Noor of Jordan is listed in the papers as the beneficiary of two trusts registered in Jersey. One of the trusts, the Valentine 1997 Trust, was valued at more than $40 million in 2015, and its income is to be paid to the queen during her lifetime. The trust also owns property in southern England adjacent to Buckhurst Park, Sussex. The other trust, the Brown Discretionary Settlement, is the beneficial owner of a Jersey-incorporated investment holding company with assets worth c. $18.7 million in 2015.
Jonathan Kolber, former CEO of Koor Industries and the beneficiary of the Kolber Trust and son of Canadian senator Leo Kolber, who set the fund in 1991, is named.
Dan Gertler, Israeli billionaire businessman in natural resources and the founder and President of the DGI (Dan Gertler International) Group of Companies appears in 120 documents regarding his relationship with Glencore.
Prince Khaled bin Sultan bin Abdulaziz Al Saud, a former deputy minister of defense for the Kingdom of Saudi Arabia, is given as the owner of at least eight companies in Bermuda between 1989 and 2014, some of them apparently formed for purposes of owning yachts and airplanes.
Three former Canadian Prime Ministers are named in the Paradise Papers: Jean Chrétien, Paul Martin, and Brian Mulroney.According to the papers, Stephen Bronfman, Canadian Prime Minister Justin Trudeau‘s adviser and close friend, a Liberal Party fundraiser credited with putting Trudeau into office, moved millions of dollars offshore for former Liberal Party Senator Leo Kolber.The offshore maneuvers may have avoided taxes in Canada, the United States and Israel, according to experts who reviewed some of the 3,000-plus files detailing the trust’s activities.
Former president José María Figueres sat on the board of energy company Energia Global International, along with his brother and Timothy Phillips. The company was bought in 2001 by Enel SpA, an Italian power company, for $73 million, plus $37 million in debt cancellation. Figueres resigned from the board that year, at the annual EF meeting in Davos. He was also CEO of World Economic Forum from 2000 to 2004, and resigned as a result of allegations he called “unfounded” about $900,000 in consulting fees from a French telecommunications firm.
According to the files, trade union leader and politician Joaquín Gamboa Pascoe had investments worth $15.5 million; other mentioned politicians are Pedro Aspe Armella, Alejandro Gertz Manero, and officials from PEMEX. High-profile Mexicans in the files include billionaire Carlos Slim, priest Marcial Maciel known as “the greatest fundraiser of the modern Roman Catholic church”, and Ricardo Salinas Pliego. In an interview with Proceso, Gertz Manero, formerly National Security Secretary, denied all knowledge of the company, of which he was vice-president, and which was started by his brother, who had made himself president.
According to the papers, United States Secretary of Commerce Wilbur Ross holds stakes in businesses which deal with Russian oligarchs Leonid Mikhelson and Gennady Timchenko who are subject to U.S. sanctions, as well as Russian president Vladimir Putin‘s son-in-law, Kirill Shamalov. Other members of the Trump Administration that appear in the documents include United States Secretary of State Rex Tillerson and Director of the National Economic Council Gary D. Cohn. Overall, more than a dozen Trump cabinet members, major donors and advisers appear in the documents. These include major donors Robert Mercer and Sheldon Adelson.
The documents also revealed that Russian state organizations with ties to Putin pursued between 2009 and 2011 large investments in Facebook and Twitter via an intermediary—Russian-American entrepreneur Yuri Milner, who befriended Facebook founder Mark Zuckerberg and was a business associate of Jared Kushner, President Donald Trump‘s son-in-law.
American singer Madonna, Microsoft co-founder Paul Allen, American billionaire George Soros, founder of Open Society Foundations, and former NATO supreme commander in Europe General Wesley Clark are also named in the papers.
Commenting on the Paradise Papers leak, United States Senator and 2016 presidential candidate Bernie Sanders warned of “rapid movement toward international oligarchy”, saying, “The Paradise Papers shows how these billionaires and multinational corporations get richer by hiding their wealth and profits and avoid paying their fair share of taxes.” The Democratic leader in the US Senate, Chuck Schumer, and the ranking Democratic member of the Senate finance committee, Ron Wyden, issued a joint statement accusing Republicans of “pushing a reform of the tax code that fails to close egregious loopholes revealed by the leaks.”