Panama Papers: the mining linksPublished by MAC on 2016-04-11
Source: NK News, ABC News, Australian Mining, others (2016-04-11)
The following stories are an attempt to collect together the mining related information contained in the release of the so-called Panama Papers (leaked papers from the offices of Panamanian law firm Mossack Fonseca). The data trove - some 11.5 million financial and legal records - mention more than 214,000 offshore entities, providing conections to people in more than 200 countries and territories, including current and former world leaders (including mining executives and investors).
The stories include:
- Australian businessmen being linked to sanctioned North Korean mining firm
- Concerns within Mossack Fonseca over BHP Billiton's use of British Virgin Island accounts
- Chile's head of Transparency International having to resign after links to mining were revealed
- Information on Beny Steinmetz's company BSGR and its involvement in Guinea's Simandou scandal (see: Judge dismisses multi-billion dollar Rio lawsuit against Vale)
- Further details of Beny Steinmetz's deadlings, including diamonds in Sierra Leone and his use of a 'shelf company' to gain control of a Romanian oil refinery
- Australian/Romanian businessman Frank Timis' activities
- The links of the family of Azerbaijani President Ilham Aliyev to a private gold mining company
- Details of how the Zimbabwean platinum mining company, Zimplats, allegedly funneled managers' salaries through an offshore company
- The link of Rawbank and conflict gold in the Democratic Republic of Congo to Dubai and Europe
This is not the first time MAC has covered mining-related dodgy dealings in Panama. Back in 2009, we asked is Panama the next diamond heaven?
The list above is no doubt far from complete, and we intend to add to it over time.
If you see any other stories you think should be added please email as at info[at]minesandcommunities.org
Australian miners embroiled in Panama Papers scandal
7 April 2016
Australian miners that own assets in North Korea have become embroiled in the Panama Papers scandal, which have brought to light possible collusion in breaking UN sanctions.
David Henty Sutton and Louis Schurmann have been linked, via their business interests in North Korea, to North Korean firm National Resources and Development Corporation (NRDC) which is reportedly an alias for a business exporting North Korea’s weapons, according to the ABC.
The two are part of Pacific Century Rare Earth Minerals, which is a joint venture between NRDC and SRE Minerals, which are operating on the Jongju rare earths ‘mega-deposit’ in the country, as previously reported in Australian Mining.
North Korea has been increasing its focus on its mining sector in the last decade, with Dr. Ben Habib, a professor of international relations at La Trobe University telling Australian Mining “North Korea is coming up, and since 2009 we’ve seen a spike in the country’s income from natural resources, according to data from the Bank of Korea”.
“The resources sector has been the first legitimate sector of the economy to take off in the Songun (North Korea’s military first policy) era,” Habib said.
Mining presents a unique opportunity to stimulate North Korea’s economy.
Unlike many of the economic avenues the nation has travelled down – drugs, arms, statues, and outsourcing its own citizens as a cheap labour force – tourism and mining are legally providing a development path supposedly unaffected by the existing UN sanctions.
According to Pacific Century Rare Earth Minerals, “It is a common misconception that mining in countries which are the subject of UN sanctions is prohibited, [however] nothing could be further from the truth; the UN sanctions with regards to the DPRK are targeted to prohibit the development of specific military technology and weapons.”
Habib explained that the country is using mining as an open channel, outside of UN sanctions, as a course for growth.
However new information from the recently leaked Panama Papers is highlighting the link between Schurmann and Sutton and the NRDC, also known as the Korea Natural Resources Trading company, in illegal banking practices , suggesting the two are complicit in breaching UN sanctions relating to mining agreements.
The ABC reports that the shell companies the mining agreements were originally made with AAT and EHG (which later became Bunuru Corporation) on the Kumwha polymetallic deposits were used to by North Korea to leapfrog UN regulators and allow it to operate financially in the international banking system.
It is as yet unknown whether similar practices were used in the operation of the Jongju deposit.
Speaking previously to Schurmann, he outlined the apparent ease of operating in the country, stating, “The legal environment (i.e. agreements) is to the point and in English; their mining laws and associated acts and regulations are basic but efficient and practical.”
“My work and my involvement in any part of the world is apolitical… I do not get involved in any politics and will not even have an opinion.
Panama Papers: Australian pair linked to companies striking mining deals with North Korea
By the National Reporting Team's Lisa Main, Mark Willacy and Mario Christodoulou
6 April 2016
An ABC investigation has found two Australian businessmen are linked to companies striking mining deals with North Korea.
Sydney-based businessman David Henty Sutton and South African born, Brisbane-based geologist Louis Schurmann were directors of two companies which announced the mining sub-license agreements on the Australian Stock Exchange (ASX).
A former United Nations official told the ABC the deals announced were with North Korean entities under sanctions, and the revelations warrant an inquiry.
The United Nations has banned individuals and companies from dealing with a range of North Korean companies.
Mr Sutton's involvement was uncovered by the leak of over 11 million documents from law firm Mossack Fonseca known as the Panama Papers.
The documents show the Australian is connected to a network of international businessmen who use shell companies to hide their identities.
Mr Sutton was Chairman of AAT Corporation in December 2012, when it announced on the ASX a mining sub-license with a North Korean entity, National Resources and Development Investment Corporation (NRDIC) outlined in a 2013 prospectus.
At the time Louis Schurmann was a director of AAT.
A few months later in March 2013, another company EHG Corporation made a similar announcement with the Korea Resources and Development Investment Corporation.
Mr Schurmann and Mr Sutton later also became directors of EHG.
Ex-UN official 'absolutely stunned'
William Newcomb, a former member of the UN Security Council Panel of Experts for North Korea sanctions said he was "absolutely stunned" by the lack of attention given to the public announcements.
The NRDIC has been placed under international sanctions since mid-2012.
The company is considered an alias for Green Pine Corporation, which is known for its involvement in North Korea's ballistic missile program and for exporting roughly half of the rogue state's weapons to countries including Iran and Syria.
Mr Newcomb said even though the company names on the AAT and EHG announcements were slightly different he said they were clearly sanctioned entities.
"From what I know there is no distinction aside from the spelling, these are one and the same entities," the UN official said.
Mr Newcomb said the North Koreans slightly adjust the title of a sanctioned entity to enable it to bypass regulators and operate in the international banking system.
"It's a common tactic to either add or remove a name like that, I've seen it in various banking traffic on shipping invoices, it's just a way to confuse and deceive," said Mr Newcomb.
The ABC contacted David Sutton about the deal. He denied the agreement involved the weapons company, Green Pine Corporation.
"Although this had a similar sounding name it was confirmed at the time that this was a separate legal entity and was unrelated to Green Pine Corporation," Mr Sutton wrote in an email to the ABC.
Thomas Clarke, a specialist in corporate governance and Professor at the University of Technology in Sydney, said the directors and shareholders had a responsibility to intimately understand the activities of the company with which they were forming a relationship.
"Having looked at the documents that they submitted to the ASX, it's quite clear that they are forming a relationship with a sanctioned entity in North Korea. They must have been aware of that and the ASX should have been aware of it too," Mr Clarke said.
The ASX declined an interview request by the ABC but in a statement said "matters to do with the UN sanctions list are outside our jurisdiction".
Pair came to attention of corruption investigator
Mr Schurmann appears to be the public face of the deals but his name does not appear on any of the shell companies that sit behind AAT and EHG.
However, the Mossack Fonseca leak revealed Mr Sutton and his company Dayton Way Financial make several appearances in those related shell companies.
Two years ago Mr Schurmann and Mr Sutton came to the attention of US corruption investigator and visiting scholar at Johns Hopkins University's US-Korea institute JR Mailey.
In a series of conversations with Mr Mailey, Mr Schurmann spoke openly about his North Korean dealings.
Mr Schurmann told Mr Mailey about his multiple mining projects in North Korea, stressing he had never paid a bribe and his clients dealt directly with "the government" in Pyongyang.
Whilst UN experts have questioned the wisdom of making agreements with North Korean entities possibly in breach of UN sanctions, the ABC makes no suggestion that either Mr Schurmann or Mr Sutton are involved in any financial wrongdoing.
The geologist views North Korea as a final frontier, a vast untapped mineral wealth that will pay astronomical dividends for the companies who have "the guts to go in there".
"The people are trustworthy and respectful and the conditions there are pretty good," Mr Schurmann added in his phone call with Mr Mailey.
"Compared to Africa, it's a walk in the park."
Mr Schurmann said he was given a "clean bill of health" by the Foreign Affairs Department.
The ABC understands the potential sanctions-breaking deals have not been referred to the Australian Federal Police for investigation.
Mr Newcomb said it was "regrettable" Australia was not investigating the possible breach.
The Department of Foreign Affairs and Trade (DFAT) declined an interview request by the ABC but said in a statement it takes "credible allegations of non-compliance with sanctions very seriously".
Neither AAT or EHG ever started trading on the ASX.
AAT was fined for failing to lodge half-yearly reports and transferred its sub-license to an undisclosed third party.
In late 2014, EHG announced to the ASX it would no longer pursue its North Korean mining deposit.
But this was not the end for Mr Schurmann or Mr Sutton's North Korean ambitions.
Who is behind the deals?
SRE Minerals and its North Korean joint venture partner Pacific Century Rare Earth Minerals Limited are registered by Mossack Fonseca in the British Virgin Islands.
SRE Minerals' rare earth venture
In December 2013, Dr Schurmann claimed he had discovered the world's largest known rare earth deposit, in Jongju in North Korea's northern Pyongyan Province.
If true, the deposit would be worth trillions of dollars and rival China's market dominance in rare earth minerals.
Rare earth minerals are highly sort after materials used in communications and satellite technologies but they also have applications for ballistic missiles.
Mr Schurmann was employed as senior geologist with SRE Minerals. That company's joint venture partner was Pacific Century Rare Earth Minerals Limited which is "jointly held" by the Korea Natural Resources Trading Corporation, an entity not on the UN sanctions list.
But former sanctions advisor to the US State Department, Joseph DeThomas said North Korean front companies could go undetected for some time.
"North Korea creates new entities all the time, it just transfers assets from one place to another so the sanctioned entity takes on a new nameplate but has the same mission," Mr DeThomas said.
If the SRE Minerals venture went ahead today it would still violate UN sanctions.
In March, the UN Security Council handed down new sanctions for North Korea which include the sale of rare earth minerals.
"The sale of these minerals is now sanctionable, it's prohibited. So today, it's a prima facie sanctions violation if it were implemented," Mr DeThomas said.
The unprecedented leak of a massive trove of Mossack Fonseca documents enabled the ABC to identify the individuals who sat behind the anonymous shell companies.
Along with Australian David Henty Sutton three key foreign individuals have been identified; Kevin Ronald Leech, John Terrence Lister and Andrew Turner.
The trio were listed as ultimate beneficial owners of SRE Minerals, in February 2015.
Mr Leech came to prominence in 2009 as a major shareholder in the British investment bank, First London.
The bank collapsed in 2010 after it became embroiled in an elaborate scandal involving a North Korean mining deal that also bankrupted an English County football club.
British citizen Andrew Turner, 45, was also on the board of First London at the time of its collapse.
In his conversation with US corruption investigator, Mr Mailey, Mr Schurmann confirmed he worked with Kevin Leech.
"Kevin Leech is the main guy," Mr Schurmann said.
In an email to the ABC, Mr Sutton also confirmed Kevin Leech represented the two mining agreements with AAT and EHG Corporation. Those agreements were also structured through shell companies registered by Mossack Fonseca in the British Virgin Islands.
"Mr Leech was representing TG Mining Limited and EG Mining Limited, the companies that AAT and EHG had entered license negotiations with," Mr Sutton said in an email to the ABC.
That information is consistent with the leaked files.
Another British citizen Linden Boyne, 72, also appears buried in the documents as a director connected to EG Mining in 2013. Mr Boyne came to the attention of the US fraud authorities when he was found liable for a scam, unrelated to EG Mining, that netted $US12 million.
Andrew Turner and the Gibraltar-based John Lister were not found to have committed any crimes but were mentioned in the suit as connected to at least ten of the entities involved in the scam.
The leaked Mossack Fonseca documents show John Lister to be the owner of David Sutton's Sydney firm, Dayton Way Financial. Mr Sutton denies this.
Experts skeptical of North Korea’s rare earth mineral claims
Geologist working on the DPRK's rare earth elements has not provided any data on the reserve estimates.
26 March 2015
Recently launched tourism website DPRK Today has reiterated claims that North Korea has huge quantities of rare earth minerals (REEs), however South Korean experts are highly skeptical of the news.
In a piece entitled “The Endless Wealth Under the DPRK” published on March 23, a representative from the DPRK Resource Development Center said North Korea had very large reserves of a wide array of minerals, including REEs.
“Our nation is the treasure island of earth minerals. 80 % of our land is composed of useful minerals … The amount of rare minerals in DPRK is one of the top of the world,” the article reads.
The Resource Development Center employee goes on to sight a 2013 study carried out by an Australian geologist Louis W. Schürmann.
Schürmann made headlines when he announced the discovery of the world’s largest deposit of REEs in the DPRKs North Pyongan province, near Jongju.
However South Korean experts are not sold on the legitimacy of the reserve estimates.
“The numbers are not backed up with any solid data, it is nothing but a list of what they have under the ground. [Schürmann] has absolutely no credibility. Whatever he says, I take it as hoax,” Choi Kyung-soo, a senior researcher at the North Korea Resource Institute told NK News.
“We do not have any data regarding this issue, and the article does not really give us the solid proof about amount of DPRK’s rare minerals nor how profitable it is,” a representative from the Information Systems for Resource of North Korea said.
Choi also told Voice of America (VOA) falling prices of raw materials and minerals were hurting the DPRK’s export revenues. To replace decreasing funds from trade, North Korea is looking to attract foreign investment with inflated resource estimates.
This is not the first time Schürmann’s REE estimates have been called into question. Last year an investment news website said that no drilling or analysis on samples from the Jenjgu area had been done, adding the current numbers “have no basis”.
The Australian geologist is the Director of Operations at Pacific Century Rare Earths Limited. The company is a joint venture between the DPRK’s Korea Natural Resources Trading Corporation and the British Virgin Islands based SRE Minerals.
China is the current world leader in exporting REEs, which are widely used within the technology and communications industries.
Additional reporting by JH Ahn
BHP-owned companies triggered 'high risk' alert at Panama law firm
Mossack Fonseca flagged concerns about two of mining giant’s companies in British Virgin Islands because ‘authorised capital is higher than the norm’
Paul Farrell and Nick Evershed in Sydney
4 April 2016
The Anglo-Australian mining giant BHP Billiton authorised two of its companies in the British Virgin Islands to receive large amounts of money, sparking a “high risk” warning at the Panamanian law firm Mossack Fonseca, new documents reveal.
The documents disclose details of BHP’s structure, and show the corporate giant is linked to at least 19 companies registered in the BVI with the assistance of Mossack Fonseca.
Mossack Fonseca acts as an agent for clients interested in setting up companies in countries such as the BVI, the Seychelles, Niue and others. Data on the company has been obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the Guardian and other media outlets.
Multinationals often use offshore entities in countries such as the BVI to minimise their tax bills. But a spokeswoman for BHP Billiton said it “does not engage in aggressive tax planning” and was committed to transparency.
The documents show that two of the BVI companies linked to BHP Billiton – BHP Billiton Finance South Africa Limited and BHP Billiton UK Holdings Limited – were assessed as “mandatory high risk” by Mossack Fonseca.
The warning formed part of what is known as an “enhanced due diligence” check undertaken by the firm, when it identifies clients who may be undertaking riskier business ventures.
The risk assessment document for BHP Billiton Finance South Africa Limited states the region where its business takes place is Australia. It said: “Authorised capital is higher than the norm. The company’s activity is not stated.”
The files recommend that Mossack Fonseca “request the source of funds and or source of wealth for this company”, information about its beneficial owners and the reason for the high capital. A beneficial owner is the person or entity who ultimately owns the companies.
Both risk assessments indicate Mossack Fonseca was unclear about who actually owned the entities.
A spokeswoman for BHP said in response to questions about the risk assessment: “As regards Mossack Fonseca’s internal assessment, based on a recent review of our historical filings and correspondence, it does not appear that we were aware of this assessment, nor the basis on which the assessment was conducted. Therefore, we are unable to comment on this.
“Mossack Fonseca was engaged by BHP Billiton in an administrative capacity only. Our understanding is that it was provided with information that was necessary to fulfil these activities.”
The spokeswoman said the two companies were subject to UK tax on their worldwide income, and the reason they had been set up in the BVI “was simplicity in relation to making distributions from a corporations law perspective and choice of functional currency from a reporting perspective”.
“BHP Billiton Holdings UK Limited is an investment company which holds significant assets of the BHP Billiton group. The capital of this company reflects the value of those assets.
“BHP Billiton Finance South Africa Limited was established to provide financing to the BHP Billiton Group in South African Rand. Since formation of the company, the shareholders funds (which includes paid-in capital) for this company have not exceeded US$300m, which is not material having regard to the size and funding requirements of the BHP Billiton Group. Post the May 2015 demerger, this company is no longer owned by the BHP Billiton Group.”
BHP has disclosed the existence of its BVI companies to the US Securities and Exchange Commission in a number of different filings.
BHP Billiton has faced heavy scrutiny in Australia over its offshore tax arrangements and has been accused of using a complex web of companies to minimise Australian tax it pays. It was criticised for its responses to questioning in an inquiry by the Australian Senate into tax avoidance. The Labor senator Sam Dastyari said during the April 2015 hearings: “BHP’s failure to give answers and basic information was far from satisfactory.”
Panama Papers explainer: where does Australia fit into the offshore tax scandal?
It’s not illegal for Australians to set up shell companies – but it can be an offence to fail to disclose assets to the tax office
Company executives were unable to answer a series of questions about their effective tax rate in Singapore, whether they had received an adverse assessment from the Australian Taxation Office and whether they had received a tax office position paper over their tax liabilities.
The Australian Senate inquiry’s report is to be released shortly and is expected to call for sweeping changes of Australia’s corporate taxation system.
BHP Billiton’s annual disclosure report states: “Our global company structure … means that all foreign subsidiaries within the Group are controlled foreign companies of either BHP Billiton Limited or BHP Billiton Plc.
“This means that, in addition to the local country tax rules, they also come within the scope of the international and anti-avoidance tax rules applying in Australia or the United Kingdom to prevent multinational companies from obtaining inappropriate tax advantages by operating through low rate jurisdictions.”
Panama Papers: Israeli billionaire appears on Romanian refinery’s road to destruction
4 April 2016
Israeli billionaire Benjamin Steinmetz apparently controlled the Romanian oil refinery Rafo Onesti from 2006 until October 2009, according to the Panama Papers, a set of confidential documents leaked from the Mossack Fonseca law firm in Panama City.
The law firm helped billionaire investors, politicians, sports stars, and organized crime leaders hide their money from the authorities and launder it by providing them with offshore companies.
Benjamin Steinmetz allegedly used such a shelf company registered in Cyprus, which was called Raglam Overseas, to take control of the Rafo Onesti refinery, in 2006, according to Rise Project, a Romanian investigation journalism team that has been collaborating in the huge international effort to decipher the Panama Papers.
Raglam Overseas was officially represented by Israeli-Ukrainian businessman Uri Bider, who was connected to a shady Russian oligarch named Michael Cherney. However, according to the documents leaked from Mossack Fonseca, the offshore firm had been founded in 2003 by BSG Resources, a firm that Steinmetz controlled, and Uri Bider had the power of attorney to represent the company, which was also involved in the takeover of a Ukrainian marine terminal.
BSG Resources also controls a large stake in Canadian company Gabriel Resources, the owner of the Rosia Montana gold project in Romania.
Raglam Overseas took over Rafo in 2006 from its previous owner, Romanian businessman Marian Iancu, who had bought the refinery in the early 2000s from another controversial local investor Corneliu Iacobov. Both Iacobov and Iancu are currently serving prison sentences for having decapitalized the company.
Corneliu Iacobov sentenced to 7 years in prison over Rafo Onesti fraud after previous exoneration
Court slaps heavy sentences on Romanian businessmen for fraud
Corneliu Iacobov also used a shelf company set up by the Mossack Fonseca lawyers to take over Rafo from the Romanian state, according to the same documents, quoted by Rise Project.
Steinmetz only controlled the refinery until 2009 when he sold it to Russian investor Iacov Goldovsky. The new owner mortgaged all of Rafo’s assets to Russian bank VTB for a USD 150 million loan, in 2011. In 2015, Rafo’s owner announced that the refinery would be dismantled and sold for scrap.
Rafo was built in 1964 and it could process 3.5 million tons of oil per year. It was the biggest company in Onesti a town in eastern Romania, close to Bacau, and used to support the town’s economy.
Rise Project announced that it would release more information about Benjamin Steinmetz’s other businesses in Romania, including those in real estate. The Israeli billionaire has been investigated in an illegal retrocession case involving Prince Paul of Romania and Remus Truica, former Prime Minister Adrian Nastase’s chief of staff. The Romanian prosecutors even asked for his arrest in absence, but the High Court ruled against their request.
Romanian businessman Frank Timis mentioned in offshore tax scandal
4 April 2016
Romanian businessman Frank Timis, who also has Austrialian citizenship, is mentioned in the Panama Papers scandal.
He used the lawyers from Mossack Fonseca to set up an offshore firm in Bahamas back in 1997. Timis is an investor in the mining sector, who was know in Romania due to his inolvement in the Rosia Montana project.
"The database of Mossack Fonseca shows, among other things, who was the unknown billionaire from the ownership structure of Rafo Onesti refinery and what were his links to the gold fields at Rosia Montana. Vasile Frank Timis, the initiator of the Rosia Montana affair, used the same lawyers from Panama City to start businesses in Romania in the mid-90s’. In the same document we find the offshore connection used to control another important mine in the Apuseni Mountains, but also firms active in the extraction of oil and gas,” according to journalists at Rise Project, who will publish in the upcoming days the names of Romanian involved in this offshore scandal.
Rise Project said that key-people involved in the privatization of aluminum maker Alro are also included in the Panama Papers.
The gold and silver mining project at Rosia Montana should have developed by Rosia Montana Gold Corporation. The firm is controlled by Canadian Gabriel Resources.
Frank Timis had a net worth of around USD 1 billion, according to the 2011 billionaires’ list by Forbes. The businessman is developing both energy and mining projects in various African countries.
Chile's head of Transparency International resigns after 'Panama Papers'
4 April 2016
The president of the Chilean branch of Transparency International resigned on Monday after documents from a Panamanian law firm showed he was linked to at least five offshore companies.
"Gonzalo Delaveau presented his resignation as the president of Transparency Chile, which has been accepted by the board of directors," the national body wrote on Twitter.
Delaveau was among tens of thousands of people named in a leak of four decades' worth of documents from Mossack Fonseca, a Panamanian law firm that specialized in setting up offshore businesses.
The "Panama Papers" were leaked to more than 100 news organizations around the world cooperating with the U.S.-based International Consortium of Investigative Journalists, or ICIJ, including Chilean watchdog CIPER.
While Delaveau is not accused of illegal activity, the leaks called into question his post at Transparency International, a German-based organization that seeks to monitor and root out corporate and political corruption worldwide.
According to CIPER, Delaveau, a lawyer, acts as a representative for Turnbrook Corporation, DK Corporation, Heatlhey International Inc, Turnbrook Mining Ltd and Vizcachitas Ltd, all of which are domiciled in the Bahamas.
Delaveau also serves as a director for Turnbrook Mining, which owns 51.6 percent of Los Andes Copper, a Canadian exploration and development company currently focused on a mine project north of Chile's capital, Santiago.
Delaveau could not be reached for comment.
In response to questions from CIPER, he said he was a director only at Turnbrook Mining and that his relations with the other companies were consistent with his role as a lawyer and legal clerk.
He added in an interview with a local radio station that he was "extremely surprised" by the "gray, dark area" of Mossack Fonseca.
Delaveau's resignation came hours after Chile's tax authority announced the beginning of an "intense follow-up" of the Chileans mentioned in the Panama Papers, who range from ex-soccer stars to newspaper magnates.
The disclosures also come as Chile deals with political and corporate corruption scandals that have left Chileans angry with the entire professional class and eroded the government's popularity.
(Reporting by Gram Slattery; Editing by Peter Cooney)
Panama, Congo, Zimbabwe, London, New York: the vultures come home to roost
Rights & Accountability in Development
18 April 2016
In the feeding frenzy over the documents leaked from the Panamanian law firm Mossack Fonseca, the names of notorious business men who profited from deals done in the Congolese war and its aftermath – Dan Gertler, John Bredenkamp, Billy Rautenbach – began to emerge. RAID has tracked these individuals and their companies for some considerable time.
In the US, the bones of some of the same deals are being picked over. In breaking news, Och-Ziff Capital Management Limited, the giant US hedge fund, is reportedly (see Wall Street Journal, Reuters) on the verge of pleading guilty to bribing government officials in Africa after a criminal investigation by the US Department of Justice. Rarely has such enforcement action been taken. Och-Ziff could also incur up to a $400 million fine by market regulators. RAID submitted detailed reports on Och-Ziff’s questionable deals across Africa to US authorities back in 2013 and 2014.
But Och-Ziff isn’t the only financial firm to come to the attention of US law enforcement. In February this year, the US Treasury’s Office of Foreign Assets Control (OFAC) issued an enforcement notice against Barclays: ‘Barclays Bank Plc (“Barclays”), a financial institution headquartered in London, United Kingdom, has agreed to remit $2,485,890 to settle its potential civil liability for 159 apparent violations of § 541.201 of the Zimbabwe Sanctions Regulations, 31 C.F.R. part 541 (ZSR).’ This notice immediately struck a chord: it parallels RAID's experience of how it has been left to the US authorities to pursue UK companies over sanctions violations when the UK government has done nothing. But while Barclays has been fined and Och-Ziff may be brought to book, many others have so far escaped sanction over events that they must have thought long buried.
In the DRC, at the start of the new millennium, the government of former rebel leader Laurent Kabila signed over mineral concessions worth hundreds of millions of dollars to allied governments and their middle men in return for soldiers and military hardware. In Zimbabwe, in April 2008, Robert Mugabe clung onto power after torturing and killing opponents in the aftermath of disputed presidential elections. A few weeks earlier, Och-Ziff’s London office bankrolled UK-listed Central African Mining and Exploration Company (CAMEC), chaired by former England cricketer turned wheeler-dealer, Phil Edmonds. In South Africa, in 2009, Billy Rautenbach reached a plea bargain on 326 counts of fraud and paid a substantial fine.
It is shameful and embarrassing for accountability in this country that we in the UK are reliant upon scraps from the US table to even begin to fathom how a UK company was allowed to do a deal with a murderous regime, to the ultimate advantage of a Mugabe crony needing to settle a fine for fraud, all seemingly with the approval of the UK government.
Aliyevs’ Secret Mining Empire
by Miranda Patrucic, Eleanor Rose, Lejla Camdzic and Khadija Ismayilova
4 April 2016
At the end of a hard month of work, Jumshud Asgerli, a 46-year-old geologist, war veteran and father of three, was crestfallen when he did not receive his expected salary from the Azerbaijani gold mine where he worked. Soon after, he was among 300 other employees that got an email informing them they were taking a mandatory two-month vacation.
“After two months they sent us another email to say we’d be on vacation for an unknown period and would receive two thirds of our salary,” said Asgerli.
But nearly two years later, the employees haven’t been paid a cent officially, but they are still officially full-time mine workers who, under Azerbaijani law, can’t take jobs elsewhere. Some have lost everything, they are stuck in a hellish limbo.
Their employer, Azerbaijan International Mineral Resources Operating Company Ltd. (AIMROC), came out of nowhere suddenly to become the second-largest gold producer in the country. Then it disappeared as quickly as it came, leaving employees in a desperate search to find out who actually was employing them.
Frustrated and desperate, they reached out to every government institution they could think of - from the Ministry of Ecology and Natural Resources and the Ministry of Labor and Social Protection of Population to the Parliament to the president himself. “They all pretend they don’t know anything,” said Asgerli.
But, cloaked behind an offshore organization, their employers were much closer than they imagined. They saw them almost daily wearing the latest fashions, carrying expensive handbags, and smiling from the pages of newspapers and magazines. Their employers were on TV attending openings and gala ceremonies and grand events talking about how great Azerbaijan was.
Their employers were Leyla and Arzu Aliyeva, the daughters of President Ilham Aliyev.
This information can be found in data from the Panama-based offshore services provider Mossack Fonseca, obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the OCCRP and more than 100 other media partners from 82 countries.
Nine years ago, the president awarded a consortium of six gold fields worth billions of dollars to one company in the United Kingdom (UK) and three in offshore jurisdictions: Globex International LLP, Londex Resources S.A., Willy & Meyris S.A. and Fargate Mining Corporation. But in reality, the fields went to his family.
A 2012 investigation by Radio Free Europe/Radio Liberty and the Organized Crime and Corruption Reporting Project (OCCRP) journalist Khadija Ismayilova showed the daughters were behind Globex International LLP which owned 11 percent of the consortium.
But the daughters’ stake appears to be significantly bigger than previously reported.
The leaked records reveal that the daughters control Londex Resources S.A., a Panama company with a 45-percent stake in the consortium, putting their total control at 56 percent. The company has been the main operating company under the agreement and has been responsible for negotiations with the government.
It has acted on behalf of the other three partners to secure funding and manage the mining development.
The Aliyevs did not respond to repeated requests for comment from OCCRP.
As for the other three partners, Londex Resources S.A. owns AIMROC. The third company, Fargate Mining Corporation, was incorporated the same day as Londex Resources S.A. and seems to be controlled by Aliyev’s close associate and business partner Nasib Hasanov, according to the leaked records. The government said the fourth company in the consortium, Willy & Meyris S.A., is registered in Panama, but OCCRP reporters couldn’t find a trace of it. That share, given past patterns of family owned businesses, may be owned by them or someone close to them as well.
Financial records obtained by OCCRP show that Londex Resources S.A. spent nearly US$ 230 million to set up and operate the mining business. A factory was built in the mining town of Chovdar in western Azerbaijan and the consortium produced as much as US$ 30 million in gold before it abruptly ceased operations.
How did a company with such possibilities disappear so quickly? Some say the company had trouble selling gold on the world market due to its secretive ownership structure, while others are saying the consortium is still looking to sell.
Workers blame Londex Resources S.A. for their suffering. “The main company was Londex Resources S.A. The main company is responsible for everything,” said Asgerli.
Whatever the reason, the fact the workers have gone without pay for nearly two years is, at the very least, an indictment of managerial indifference and incompetence.
The Aliyevs’ Gold Rush
In the 2000s, the hamlet of Chovdar was just another small mountain village in Azerbaijan – unassuming and rural, with a local population of wolves and foxes that occasionally picked off the villagers’ chickens.
Archaeological remains sketch a biography of the hamlet: Bronze Age burial mounds; an early Caucasian/Albanian church; later medieval Muslim sites. According to historians who studied the site, the relics are characteristic of the region, which like many other areas of Azerbaijan is now home to families displaced in the early 1990s by the Nagorno-Karabakh conflict with Armenia, a long-simmering dispute which flared up again on Saturday.
But Chovdar stood out in one important way: it sits atop fabulous deposits of gold ore estimated at one point to be worth as much as US$ 2.5 billion. Chovdar is thought to be the richest of several gold deposits in the country. Because industrial gold production requires investment and infrastructure, it was not until after the fall of the Soviet Union and independence that Azerbaijani authorities took notice.
In the oil boom of the mid-1990s, foreign capital flooded into Azerbaijan through production sharing agreements (PSAs) in which investors paid down costs and contributed expertise to develop rich natural resources, in return for a share of the profits.
In 1997, the oil industry PSA model was applied to the right to mine nine copper and gold development properties in three areas of Azerbaijan. These were signed over with much fanfare by then-President Heydar Aliyev to RV Investment Group Services LLC, a US firm based in Delaware that today is known as Anglo Asian Mining PLC.
Anglo Asian Mining is run by Iranian businessman Reza Vaziri.
Vaziri at first failed to secure capital to invest and the project nearly died, but a large and continuous rise in gold prices from US$ 350 an ounce in 2001 to more than US$ 1,800 an ounce 10 years later saved him. Azerbaijan started to think big about gold mining. The media wrote of large-scale construction of modern gold-mining tunnels and factories that would put Azerbaijan among the largest suppliers of gold on the world market.
In June 2005, Azerbaijan Minister of Ecology and Natural Resources Huseyn Baghirov announced that 30 new fields of precious metals, including four gold deposits, had been identified through survey work over the previous three years. One was of special importance: Chovdar in western Azerbaijan.
The media reported that the gold reserves in Chovdar dwarfed all of the other fields and Minister Baghirov announced that talks about developing Chovdar were underway with foreign companies.
Only one name was ever mentioned: RV Investment Group Services LLC, which told Trend News Agency in August 2005 that it was preparing a proposal to present the government for developing Chovdar. Company experts visited the field.
By the end of 2005, the price of gold had almost doubled to more than US$ 600 per ounce. RV Investment Group Services LLC begun to build facilities to extract 20 tons of gold at its Gedebey site, not far from Chovdar. Chovdar was not mentioned again.
But more than 12,000 kilometers away in Panama, one of the most popular places in the world to set up new companies in secret, a company called Londex Resources S.A. appeared. Londex took a leading role in a consortium it formed with three other companies. The company, on behalf of the consortium, would lead negotiations with the government and the president of Azerbaijan for a mining license to get at some of the country’s best deposits.
The PSA: Aliyevs’ Gain, Azerbaijan’s Loss
On Dec. 30, the last Saturday of 2006 and a non-working day, the government of Azerbaijan secretly signed over rights to the Chovdar mine and five other sites to the Londex-led consortium.
Unlike the PSA agreements signed with RV Investment Group Services LLC in Azerbaijan, this one was never published. The only information about it came during a Parliamentary discussion in June 2007. The contract was approved even though members of Parliament complained that the consortium’s ownership wasn’t transparent, that the contract did not follow normal bidding procedures, and that none of the companies had any record of actual mining. The Parliamentarians complained that the deal worked against national interests.
At the hearings, Valeh Aleskerov, chair of the Natural Resources Committee of the Milli Mejlis (the Azerbaijani parliament), the body that reviewed the contract, advocated for the deal.
Aleskerov had worked with President Aliyev when they were both vice presidents at the state oil company, and he said the government had negotiated with three other companies, but dismissed their offers because those firms had demanded exclusive rights and offered no guarantees.
OCCRP could find no evidence that a tender was ever issued regarding the gold mine.
The other terms of the deal included a 30-year lease on the mineral fields, and a government profit share of 30 percent after all consortium costs were recovered. The deal was much more favorable than the one RV Investment Group Services LLC had signed a few years earlier. The consortium would end up getting 70 percent of profits compared to only 49 percent in the RV Investment Group Services LLC deal.
Aleskerov praised the fact that government would also receive a US$ 2 million bonus. But financial records OCCRP obtained show that the consortium not only never paid the bonus, but is facing a US$ 2.8 million penalty for non-payment. While not paying the bonus represents a breach of contract that would allow the government to terminate the contract, the records show consortium members were not at all concerned about such an event. Auditors who examined the financial statements noted that the government never requested the payment.
The consortium received other benefits. It was not required to pay any taxes other than the 22 percent income tax, and, unlike RV Investment Group Services LLC, it had higher quotas for hiring foreign nationals. Azerbaijan does not have a mining tradition and the ability to hire skilled foreign workers is of huge importance for any mine’s success.
“Once the agreement was signed we realized they had much better terms then we did,” said a mining executive with knowledge of the company who asked to remain anonymous. “Perhaps the fact that daughters were involved had something to do with that.”
Fall of the Empire: Naivety or Greed?
The Aliyevs were quick to get the business going.
“When I joined they had already committed a fair amount of money to setting up the project company and quarry assets, the portfolio of mining projects and mineral properties, but they obviously were not mining people,” said Carl Caumartin, CEO from 2008 until 2011 of AIMROC, the local operating company established by Londex Resources S.A.
With the price of gold at US$ 900 per ounce, the company was “chasing all kinds of properties and projects” and throwing money around. Caumartin says he stopped it and focused on Chovdar, believing it potentially held 1.3 million ounces of gold, which at the time was worth more than US$ 1 billion.
And the price was still rising, with some estimates saying it could reach as much US$ 3,000 per ounce. With some US$ 3 billion at stake, the Aliyevs were eager for a big return on their investment.
Caumartin tells a story of what he calls AIMROC’s naivety. In Ganja, they bought a farm that was supposed to be used as an exploration base. Londex Resources leaders picked the place because it had an underground cave where they wanted to smelt their gold securely.
“We got a gold room all figured out. Let’s find gold now. It became our inside joke,” said Caumartin.
He left in mid-2011. He said he was not totally in favor of the direction owners wanted to take the firm. The company had decided to speed up development of the project while Caumartin preferred to complete the full evaluation and engineering studies first before digging.
That might have been one of the factors that contributed to the project’s failure to date. “They probably took a shortcut technically speaking … they were eager to get a return on the money invested,” Caumartin said.
After he left, the company commissioned the plant and started production. The first gold bar was produced in late 2012. “The performance was not optimal and they were struggling to get the (financial) recovery they were hoping to get,” said Caumartin.
Still, according to workers, the company managed to produce more than 2,000 kilograms of gold before it abruptly stopped production in April 2014. The offices closed, and the workers were put on leave. No one is responding to calls.
Nacaf Mammadov, a supervisor of gold production, who has worked for the company since August 2012, said: “Production of the gold went very well. Our directors told us to produce, let’s say, 150 kilograms of gold a month. And we did it. We have seen them take (away the) gold with special security cars.”
Despite this, workers were put on leave.
On June 27, 2014, Arda Arkun, AIMROC’s then-chief executive officer, emailed workers saying they would not be able to make salary payments “due to having no access to funding” and he expressed hope they would receive funding in the nearest future so that “we can restart producing gold.”
“We are working very hard on getting funding into the company to be able to start operations in the near future. We are meeting with various gold refineries to sell our gold production and to be able to start operations at our Chovdar mine.”
Workers never heard from the company again.
Caumartin said the Aliyevs got in over their heads: “There is certain naivety or paradox there that they can be very successful in retail, financial, and in other areas – transportation, hotels – and they assume that just because they made a fortune in other sectors, going into mining can be just as easy. And it is not that complicated, but there are some things you need to know. We call it dumb money.”
The consortium, unlike its counterparts in Azerbaijan, did not take the traditional mining path to a listing on the London (or some other) Stock Exchange.
“The great majority of mining companies are publicly listed companies. It’s only small ones or ones in underdeveloped countries where you might get private ones. It takes quite a lot of capital to get a mine going. So you’ve got to be a fairly rich individual to be able to fund it privately,” said a mining executive with knowledge of the company who refused to be named.
AIMROC couldn’t be found on the lists of any major stock exchange. It didn’t publish production results – in fact, its right to hide information about its business activities was enshrined in its PSA.
Unlike other mining companies that raised funds for exploration through capital markets, Londex Resources S.A. took out massive loans from several banks, including two owned by the family: Xalq Bank and Pasha Bank. Both banks have benefitted from deposits coming from the state, public authorities and state companies.
By the end of 2012, Londex Resources S.A. had borrowed US$ 146 million. It does not appear from records that any of that was paid back. At the same time, it has spent nearly US$ 230 million starting mining operations.
It is unknown what future AIMROC has. According to its latest annual report: “The process is currently suspended pending more funding, however, the members are confident the funding will be obtained and exploration subsequently restarted.”
Workers said officials from the Ministry of Ecology and Mineral Resources told them that since July 2014, Londex Resources, S.A. has tried in vain to sell its shares. According to the spokesman, “Maybe after selling, all the problems could be fixed.”
Workers Left High and Dry
Today the mine that was supposed to bring hope and employment to the village is deserted. OCCRP reporters recently visited it in the steep mountains surrounding the village. The last few kilometers are not much more than a dirt path. Once past a decrepit railroad freight station, there are no buildings anywhere along the last five kilometers to the mine entrance.
From a distance, recently constructed worker housing can be seen on a hill near the mine entrance. At the mine entrance, a single guard acknowledged that the mine has not been operating “for a couple years.”
As soon as the reporter took a cellphone out of his pocket, the guard warned him and his driver to leave the area immediately. Seeing nothing else moving in sight, the reporter left.
Poverty, however, is evident. Life remains hard in Chovdar, where many of the mine’s 300 workers lived. Hard times can be seen in the old houses, broken windows and doors, and people bundled into old clothes to protect themselves from cold.
Others, unable to get jobs elsewhere, have endured personal tragedies.
Miner Yahya Verdiyev, who spent two days in prison after a court sentenced him for not paying back a bank loan, wonders why the mine owners, who havn’t paid him in two years, aren’t in jail. The mine is owned by the President Ilham Aliyev’s daughters. (Credit: RFERL)
Yahya Verdiyev had been a mineworker. “I took credits from the bank. After we couldn’t get our salary, I couldn’t pay my credit. The bank took me to court and I was sentenced to two days in prison. I don’t understand how, if I can’t pay my loan, they can arrest me. But the company does not pay anything to 300 people and they can’t even find it.” Workers also told the story of a colleague who lost his apartment and now must lives in a rented place.
Another worker, Parviz Isayev said: “We all put our lives at risk. Cyanide and other chemicals are very bad for our bodies. But we needed to work. We are residents of the Azerbaijan Republic. But our government doesn’t care about our problems. We don’t know where to go. Who can help us. Even courts… We don’t know what to do.”
Last Bit of Hope
Barnaby Pace, a campaigner at Global Witness said “The clear corruption concerns raised here shows the need to know who really owns and controls companies, especially those involved in natural resources extraction where transparency is especially important.
Global Witness is calling for tax havens to end the abuse of anonymously owned companies by creating public registries of who really owns and controls companies.
“Secretly owned companies are the getaway cars for terrorists, dictators, money launderers and tax evaders all over the world. The time has clearly come to take away the keys, by requiring the publication of information on who really owns and controls these companies. This would make life much harder for the criminals,” he said.
But that will be too late to help Azerbaijan’s miners.
In late January 2016 and again in March, dozens of gold mine workers marched across the capital to the Ministry of Labor and Social Protection of Population, the Ministry of Ecology and Natural Resources, and the Presidential Administration building before reaching the Parliament.
“All we want is our unpaid salary,” said geologist Asgerli, who hasn’t been paid for almost two years. “But there is nobody who could help us.”
“All of them say it is not their responsibility,” said Mehman Ismayilov, another protesting worker.
Zohrab Ismayil, a Michigan University researcher with expertise on the use of oil revenues, public investments and public policy, said, “Right now we can see the results of the conflict of interest. Officials are ‘silent’. Workers have protested several times with no results. Because everybody knows they can’t do anything against this company. They haven’t been paid and the government is still silent. They broke the condition of the agreement and the government is still silent … because ‘officials’ don’t have any ability to do anything against this ‘international’ company.”
Officials advised the workers to go to court. It represents their last hope. Most workers said they don’t believe the court will help them. But two decided to trust the system.
Asgerli first filed a lawsuit against Aliyevs’ Londex Resources S.A. in February demanding his unpaid salary. The Yasamal District Court where the company had an office referred him to Khatai District Court because that’s where Londex is formally registered.
The Khatai District Court will hear his case on Wednesday (April 6). He said he read these companies are owned by the First Family, but he did not see their names anywhere.
“For me everything will be crystal clear after my court case against Londex Resources S.A. I will see how just they will be during the court process. We will see.”
Additional reporting by Irene Velska, Lejla Sarcevic and Stella Roque. Radio Free Europe/Radio Liberty contributed to this report.
VOA Zimbabwe Service Reporter Mines Panama Papers
7 April 2016
When Ray Choto got a call inviting him to team up on "one of the biggest data projects ever," the reporter for VOA's Zimbabwe service couldn't resist.
He joined hundreds of other members of the International Consortium of Investigative Journalists (ICIJ) in reviewing more than 11.5 million documents leaked from the Panamanian law firm Mossack Fonseca. Their findings from the so-called Panama Papers began rolling out Sunday, revealing a vast global network of secret offshore tax havens for the privileged and the powerful.
Choto's initial report detailed how Zimbabwe's leading platinum mining company, Zimplats, allegedly funneled managers' salaries through an offshore company, violating the country's exchange control rules. Zimplats' majority shareholder, South Africa's Impala Platinum (Implats), has called for "an urgent investigation."
The documents also showed that Mossack Fonseca clients include 23 people who've been sanctioned for supporting regimes in Zimbabwe, North Korea, Russia, Iran and Syria, Choto reported.
The VOA reporter is one of 370 journalists, scattered among more than 100 news organizations in roughly 80 countries, working with the Washington-based ICIJ.
The broad collaboration nonetheless is "an exclusive project, not open to any journalist. There's a lot of vetting that has to be done," said Choto, who has been involved with ICIJ since 2001.
ICIJ Director Gerard Ryle told VOA that more than half of the reporters on the project are not ICIJ members, but collaborating with these journalists is a key part of the group's publication strategy.
"In the traditional American nonprofit [journalism] model, you get funding … and at the end of the project you approach a publication partner. I think a better way of doing it is getting the publications involved from the start. … You're able to basically parlay the value of the story to get the resources of all the media partners."
Choto built a reputation for strong investigative work at The Standard in Harare, Zimbabwe. In 1998, the journalist linked some cabinet ministers, police officials and business people to drug rings and money laundering. The following year, he reported that 23 Zimbabwe military members, including some officers, were jailed for conspiring to overthrow longtime dictator Robert Mugabe.
Choto says he and his publisher were arrested and tortured for refusing to divulge the names of military sources.
"I was beaten with wooden planks on my naked body," Choto said, adding that his captors also "would apply electric shocks. The torture was for three days; my editor was held for 10 days."
The two were released after steady publicity from South African media pressured the government to relent. Choto and his editor, Mark Chavunkuka, later were jointly honored with the International Press Freedom award.
Choto came to the United States in the fall of 2000 as a Knight Journalism Fellow at Stanford University. Three years later, he joined Voice of America in Washington. Now 54, he covers breaking news while also continuing investigative work.
Early last year, he collaborated with ICIJ on an investigation into the foreign accounts of international banking giant HSBC. Its Swiss private banking arm "made huge profits by allegedly engaging in shady deals of over $270 million with some Zimbabwean citizens seven years ago, in the process, disadvantaging the poor southern African nation of the much-needed foreign currency," he wrote for VOA.
That story arose from files shared with ICIJ by the French newspaper Le Monde.
ICIJ's Ryle told WIRED that the Panama Papers' document trove represents the biggest leak in history, "about 2,000 times larger than the WikiLeaks state department cables."
The journalists worked in secret on the files — some of them for up to a year — sharing information via secure websites and avoiding email or any other communications that might compromise confidentiality, according to WIRED. Journalists have a proprietary claim on information relating to their own countries, Choto said, and they pass along information they discover that might be useful to a foreign colleague.
His ICIJ colleagues have turned out stories of possible misdeeds. While offshore havens themselves are legal, their lack of transparency makes them attractive for hiding crime and corruption. In Iceland, Prime Minister Sigmundur Gunnlaugsson, tendered his resignation Tuesday, a day after angry crowds gathered in Reykjavik to protest what they suspect was an effort to hide assets offshore.
Close associates of Presidents Vladimir Putin of Russia and Xi Jinping of China also have been linked to the law firm's secretive services.
Choto suspects Zimbabwe residents "are excited in their hearts" about his findings, but he says his homeland "is one of those places where people cannot freely express themselves, to go out and demonstrate … unless you belong to the ruling party. … You've seen people being beaten for demonstrating peacefully."
He continues digging into the Panama Papers. "There are a lot of amazing stories that are still to be told."
Panama Papers: Steinmetz Guinea deal pried open
4 April, 2016
Leaked documents pry open the corporate structure of companies involved in a mining rights scandal in Guinea
Heavy is the head that wears the crown. For the Beny Steinmetz Group Resources (BSGR), the company’s investment in the world’s largest iron ore deposit, Simandou, located in the far interior of Guinea, may not be worth the mineral’s perceived value: $10 billion.
In 2009, the BSGR empire’s namesake, Beny Steinmetz, acquired rights to mine the Northern portion of Simandou at the bargain bin price of just $165 million. Soon after, he sold 51% of the rights to Vale for a whopping $2.5 billion. The strategy made sense: Steinmetz had no significant experience in mining outside diamonds – a mineral easier to mine and sell than iron, which requires extensive infrastructure that costs hundreds of millions for such projects. That’s precisely what Rio Tinto, the mining company that previously held the whole concession, had done through investing more than $450 million.
Steinmetz let slip in a rare 2012 interview with the Financial Times that sometimes, “you have to get your hands dirty” – a comment said in the context of aggressive business strategies, not corruption. But the article also quoted Guinea’s Mines Minister Mohamed Lamine Fofana as saying BSGR “didn’t follow the law”. Allegations abounded about bribery. Guinea’s incoming elected government under President Alpha Conde began to probe the deal. So did the US’s Federal Bureau of Investigation (FBI) and the US’s justice department. An FBI sting resulted in Fredric Cillins, a BSGR representative, being charged with destroying evidence and tampering with a witness. That witness was Mamadie Toure, one of several women married to former Guinean president Lansana Conte.
In 2015, after serving two years in the US, Cillins was released. BSGR conceded it had used Cillins as a representative of the company, but stipulated that he was not an employee. According to Global Witness, the UK-based NGO that played a significant role in exposing the deal, Toure received a $2.4 million payment from a company called Pentler Holdings, a company registered in the British Virgin Islands (BVI) through Matinda, Toure’s own company. Pentler held a 17.65% share of BSGR Guinea. The sum is one of several pledged payments, alongside 5% of BSGR shares in Simandou, to Toure’s Matinda.
Internal data from Mossack Fonseca, a Panama-based offshore fiduciary, shared by the International Consortium of Investigative Journalists (ICIJ) and obtained by Germany’s Süddeutsche Zeitung pries open the corporate structure of companies involved in the deal.
The question of who established Pentler is integral to resolving a possible source of corruption. In August 2014, Mossack Fonseca’s legal department requested the company open case files about three entities represented by the company: Pentler, Windpoint and Astopak. The email was in response to the Tax Information Exchange Agreement (TIEA) notice from the US government into BSGR. All three companies were administered under Mossack Fonseca’s Swiss-based arm. Windpoint, a company known to belong to BSGR, was represented by Onyx, a financial advisory group that had a long relationship with BSGR. Pentler and Astopak were managed by Swiss-based Agefor.
By 2014, the date of the inquiry, the company was no longer functioning. Agefor’s senior partner with whom Mossack Fonseca had been in contact, Menachen Eitan (also known as Menahem Eytan) was described by the US Security and Exchange Commission (SEC) as a fugitive and wanted in connection with a $50 million ponzi scheme.
Mossack Fonseca’s Geneva representative, Adrian Simon, clarified that while they provided their nominee “to act as [Pentler’s] shareholder”, and that while Agefor was listed as beneficiary, “Agefor … from its side had a private mandate with the final user to act on a Fiduciary basis as Nominee Beneficiary”. Mossack Fonseca appeared to be unable to determine the ultimate beneficiary of Pentler.
The question came down to Onyx – a company that helped incorporate Pentler.
“Onyx is important because it set up … Pentler Holdings, a shadowy offshore company that signed corrupt deals in one of the world’s biggest mining scandals. BSGR has claimed that Pentler was set up independently. But BSGR’s close ties to Onyx show that claim is misleading,” said Leigh Baldwin from Global Witness.
Is Onyx, as claimed, a separate fiduciary agent and adviser - described by BSGR, “wholly separate and fully independent of BSGR?” Or is it a de facto part of the Steinmetz diamond empire? Both companies share directors that are old Steinmetz hands such as Dag Cramer and Sandra Merloni-Horemans. And Onyx’s website registration shows @bsgms (Beny Steinmetz Group Management Services) as the registrant. Publicly accessible information including corporate data from Company House reveals a name change from BSG Management Services, incorporated in May 2005 to that of Onyx Financial Advisors.
Another entity working in tandem with Onyx, and also seemingly separate is Margali, a company that has often acted as sole director on many Steinmetz firms including Koidu Holdings, Octea and myriad others.
On February 16 2006, Merloni-Horemans, acting for Onyx, informed Mossack Fonseca of the appointment of two Mossack Fonseca directors to Pentler Holdings Limited. The email stated that Margali, a director of Pentler since incorporation in 2005, was in the process of resigning from its directorship. But the email is relevant for its slipped language. Merloni-Horemans writes of the sole director of Margali “approving his resignation and the appointment of two Mossfon directors”.
Margali’s sole directorship then referred to a single individual who was male. A certification document dated 2012 identified Dag Cramer as Margali’s representative but not the company’s beneficial owner.
On March 23, 2006, an email from Onyx’s Merloni-Horemans included three attachments: the first, a certificate from BSG Guinea, incorporated in the British Virgin Islands confirming 8,825 shares to Pentler Holdings and the second, BSG Guinea’s certificate providing 41,174 shares to BSG Steel Holdings; this rendered both shareholders in BSG Guinea. The third was a document confirming both transactions with all three companies under the directorship of Margali.
On October 2 2015, Merloni-Horemans from Invicta (formerly Onyx) emailed MF with a document declaring Margali’s source of funds. The jurisdiction disclosed was Guernsey where BSG Resources is based. “Proceeds from contractual obligations” was listed for income generation. No other information was provided. The email stipulates the company’s activity as, “a corporate director in several companies which form [part] of the BSG Group of companies”.
This is frequently underscored in the emails dated back at least a decade: On October 28 2005, for instance, Onyx’s Merloni-Horemans sent an urgent email confirming the incorporation of several companies including BSG Energy Holdings, BSG Gold, BSG Metals and others in the BVI using Margali as director, and allocating power of attorney to herself.
BSGR declined to comment through their media spokesperson Anna Michniewicz.
As revealed in another Mossack Fonseca document, Cillins entered the picture on May 23 2007 as holding a Power of Attorney (PoA) – authorization to act on the behalf of another. Cillins’s PoA symbolizes his representation of an unknown principal. He was joined a month later by Avhraham Lev Ran. Both Ran and Cillins as well as Michael Noy were listed as beneficial owners of Pentler in a document dated May 14 2010.
BSG Resources later claimed, “Lacking a permanent presence in Guinea, BSGR sought to work with Michael Noy, Avraham Lev Ran and Frédéric Cilins, who had extensive business operations in Guinea, which they subsequently established as Pentler Holdings.”
But this does not answer the question of Margali or Onyx and what they represent within the BSGR empire. It also does not speak to what appears a much later entrance by Cillins.
If so, the documents identify a timeline indicating the inherent improbability of Pentler as independent and separate of BSGR as claimed by the company.
In May 2014, Mossack Fonseca’s attorney noted the U.S. investigation into Pentler, BSG Resources and Onyx. The company’s lawyer, summarizing media reports, recommended immediate resignation of the company as representative for BSG. As for Onyx, Mossack Fonseca’s compliance department concluded of Onyx and BSG in 2014: “They are the same.”
This story was produced by the African Network of Centers for Investigative Reporting (with link: https://panamapapers.investigativecenters.org/) and the International Consortium of Investigative Journalists.
Panama Papers: Flaws in Sierra Leone’s diamond trade
Khadija Sharife and Silas Gbandia
4 April 2016
Dodgy dealings within the Steinmetz Group seems to indicate undervaluing of diamonds, which is costing Sierra Leone tax payments
He is De Beers’ most prolific diamond buyer, a supplier to the luxury jewelry brand Tiffany & Co., and an alleged criminal, accused of bribing the wife of a former Guinean president to land a multibillion-dollar iron deal.
Given that profile, it’s not surprising that Beny Steinmetz and his eponymous company try to stay out of the limelight. But with the Steinmetz Group’s alleged tax avoidance scam in South Africa and an ongoing US grand jury investigation into corruption in Guinea, for the past two years, Steinmetz hasn’t been able to keep his name out of the headlines. So, to avoid exposing the company, the embattled billionaire allegedly sold his 37.5% share in the Steinmetz Group’s diamond segment, Diacore, to his brother, Daniel, in 2014.
Steinmetz left the Steinmetz Group’s diamond business, Diacore, but has kept a business in Sierra Leone diamonds through the British Virgin Islands-based entity Octea. The company, which he runs through BSG Resources (BSGR), counts the Steinmetz family as beneficiaries. Unlike BSGR which operates in West Africa, Diacore maintains a presence in Namibia, Botswana and South Africa.
Leaked data from a Panama-based offshore fiduciary Mossack Fonseca, shared by the International Consortium of Investigative Journalists (ICIJ) and Germany’s Süddeutsche Zeitung newspaper, sheds light on the internal financial structures created by BSGR to camouflage Octea’s financial activities. The data reveals a BSGR corporate structure, dated 2015, identifying Octea as wholly owned by Guernsey-based BSGR Resources – the latter directly involved in the Guinea scandal. In turn, BSGR is owned by several foundations based in Liechtenstein and Switzerland such as Nysco and Balda.
Panama Papers: Botswana judge’s offshore investments raises questions
Sierra Leone is one of Africa’s leading diamond producers by value – and Steinmetz, who reportedly had a personal fortune of $6 billion in 2012, is its biggest private investor. According to a source at the World Bank, “for a long time, the national government calculated its forecast of national growth closely tied to the success of two companies, the BSGR and AML [African Mineral Limited]”.
Incomplete diamond export data, obtained by the African Network of Centers for Investigative Reporting (ANCIR), show that during some months from 2012 to 2015, Octea exported more than US$330 million in rough diamonds. Yet, although Octea’s rough diamonds average $350 per carat, the company is alleged to be more than US$150 million in the red. Dozens of creditors are waiting to be paid, including the government of Sierra Leone and Standard Chartered Bank. If these debts are not paid, the company could lose its license.
But some say this could be by design. Sources close to the company said the its strategy was to exploit alluvial diamonds, feign financial struggles and leave creditors high and dry. The company declined to answer questions about its financial practices, threatening legal action over issues it claimed were confidential.
The conspiratorial rumors, unanswered enquiries and legal threats speak to the financial opacity of Octea’s mining operation. Analysis of the available data raises many questions: Why can’t Octea pay its bills? How are the diamonds from Koidu mine valued? Why doesn’t company data document the payment of taxes? And who in the murky diamond trade is Octea connected with?
In 1995, the government of Sierra Leone entered into an agreement with the South African company Branch Energy Limited, an arm of Executive Outcomes (EO), a mercenary outfit that assisted governments across Africa with internal and cross-border wars. The agreement, negotiated under the Mines and Minerals Act of 1994, was scheduled to last 25 years. Sierra Leone’s military government handed over the Koidu mine to the firm in payment for helping to suppress the rebels during the country’s civil war.
In 2002, the bloodshed ended, and the following year, a new agreement transferred rights, duties, and responsibilities from Branch Energy to Koidu Holdings, a company belonging to Octea of BSGR Resources. Steinmetz was able to snag the mine for what was called a $28 million deposit, according to trade magazines such as IJCK* - a bargain for a mine that yields some the world’s most valuable diamonds.
Steinmetz retained EO’s Jan Joubert, the self-described founder of Octea, to continue running the Koidu mine. He would be listed as a director for some years. The government of Sierra Leone’s new contract with Koidu Holdings, which would later be reviewed and renewed again in 2007, listed the terms: Koidu Holdings would pay a US$200,000 annual lease every year with a 3% increase from the prior year; income taxes of 35% would be deducted from Koidu’s net profit; the government would impose an 8% royalty rate for exceptional diamonds valued at more than US$500,000 per stone, with other diamonds priced on received sales value.
The agreement also stated that a government valuator would oversee the company’s sorting and pricing process and granted the company the right to deploy armed security forces throughout the concession. It also stipulates that on or before the 15th of each month, data concerning weight, value, size and categories of diamonds must be provided to Sierra Leone’s director of mines and the Central Bank.
The data leak from Mossack Fonseca confirms a secretive financial structure connecting Koidu Holdings and Octea to wholly owned Steinmetz entities in Liechtenstein, the British Virgin Islands and Switzerland. Some of these entities hold a great deal of money, especially when compared to Koidu Holdings, which had only US$5,401 in its HSBC account in 2007. That same year, Nysco listed $27.7 million in a single HSBC bank account. Beny’s brother and business associate, Daniel, was listed as attorney for an HSBC bank account with more than US$250 million.
Despite active diamond mines and money in its parent companies, Koidu Holdings owes more than $150 million in outstanding loans to Tiffany & Co. and Standard Chartered bank. Loan agreements between Standard Chartered and Tiffany document floating and fixed charges in the form of diamonds from Octea. The exact nature of these payments is unknown. Neither Tiffany nor Standard Chartered responded to questions sent via email. Despite media reports, BSGR claimed it had not defaulted on the loans to either party.
The company has also failed to pay outstanding fees to the government of Sierra Leone - a situation that has threatened closure of the mine and contributed to the resignation of Octea CEO Brett Richards. According to media reports, Richards encouraged GoSL to press for immediate payment from BSGR. It claimed it was not in arrears to GoSL. Local incidents challenge BSGR’s denial. For instance, the mayor of Koidu city, Saa Emerson Lamina, stated to the author that Octea owed $700,000 in outstanding property tax.
“There is not a single iota of corporate responsibility,” he told us. In exchange for reduced taxes, the company pledged to provide a 5% profit-sharing agreement to the local community, and 1% of annual profits to the community development fund. None of this, said Lamina, has come to pass.
Yet the company’s financial difficulties do not appear to add up: During some months between 2012 and 2015, 987,000 carats were documented as exports by Koidu at a value of more than $335 million. An analysis of Octea’s exports show the company as producing 50% or more of Sierra Leone’s annual exports. The veracity of the data, say mining sources, is largely self-regulated, with companies reporting their own exports in terms of volume and values. But it does suggest Koidu is one of Sierra Leone’s most important exporters. Disaggregated or monthly data by exporter reveals the company accounted for between 60 and 90% of all diamond exports in Sierra Leone.
But, unlike other companies, taxes for Koidu were never documented on available sources from 2012-2015. During September 2015, for instance, taxes were registered under all exporters except for Koidu, which exported about half ($9.5 million) of all exports ($19.5 million). The previous month, Koidu’s exports accounted for $7 million of a total $9 million in exports; again, with no taxes documented.
Octea and Koidu Holding’s financial accounts from 2012 to 2015 could not be accessed because they are incorporated in tax havens. Nor could we access the costs of management services, staff, related companies and other critical details that comprise operations of business affecting pre-tax profits. BSGR Resources declined to answer questions pertaining to payments between subsidiaries and the purpose of specific entities that appear to be passive holding companies hosting only bank accounts and shares in other shell companies. The company also threatened legal action.
There is also more than one Octea. Multiple variations, all incorporated in the British Virgin Islands, exist, including Octea Diamonds, Octea Limited, Octea Technical Services, Octea Mining and the like. BSGR did not clarify the different roles played by the companies.
The government department responsible for overseeing mining activity, the National Mineral Agency (NMA), declined to respond to questions around corporate structures, taxes, profits and valuation.
Until 2005, the NMA, formerly named the Gold and Diamond Office, used a price book based on 1996 figures to value diamonds, creating room for potentially significant undervaluation. Companies often lower their diamond value on exports to reduce taxes and externalize profits. Once exported to another foreign subsidiary where no taxes are owing, prices usually increase.
A third independent party, Diamond Counsellor International (DCI), is used to advise and check the pricing of diamonds alongside Octea and the GoSL. The company consults for governments in Liberia, Guinea, Angola and Sierra Leone. The independent valuer’s price book is currently used by the NMA. This means two seemingly independent positions rely on one source. The formulation behind DCI’s price book is not known; the company claims it uses industry contacts and market trends as source data. The price book complements the value placed on sales value by the company and the independent valuator, alongside the NMA.
A source formerly part of the Octea group said the company’s management also had no idea how the company valued its diamonds, why diamonds were exported to Switzerland, or why the company was financially strapped.
It is not known whether Octea exports to Swiss-based Diacore, now run by Beny’s brother, Daniel. Diacore is registered in Mossack Fonseca’s client database as client 90168 with more than an estimated 30 companies. On the surface it appeared that Beny Steinmetz gave over control of Diacore, the group’s diamond entity, to his brother Daniel.
An email dated January 2015 shows 50% of the company indirectly owned by Oceanview Trust (British Virgin Islands) under the beneficial ownership of Nir Livnat; 12.5% is indirectly owned by Zamaria Foundation (Liechtenstein) owned by Daniel Steinmetz; and 37.5% indirectly owned by Surfwave Foundation (Liechtenstein) also owned by Daniel. But Beny appears to have retained power of attorney until June 2015. That is, until Diacore requested their fiduciary agent, Mossack Fonseca, to backdate the revocation of Steinmetz’s power of attorney to 2013. In a leaked email dated June 24 2015, (titled “PoA backdated 2013’) Mossack Fonseca states that it, “knows very well the situation of Mr Benny Steinmetz”.
The statement is made in response to Diacore’s request: “We urgently want to finalize the cancellation and back-date the cancellation to the date mentioned in our initial request in 2013. The POA, dated 05.07. 2007, was not only issued to Benjamin Steinmetz but also to Daniel Steinmetz and Marc Bonnant.”
In a subsequent email, Mossack Fonseca confirmed to client 90168, Diacore, that it would consider backdating the 2007 power of attorney to remove Beny’s name and replace it with another. Diacore claims maintaining Beny’s power of attorney was an accident and not a deliberate strategy for him to discreetly maintain control of the diamond company.
When asked to provide due diligence information for anti-money laundering requirements, Onyx, the Switzerland-based advisers to the BSGRR, responded that the company supplied Tiffany, as if an association with the US jewelry brand precluded any wrongdoing. Onyx claimed that “the above company is the owner of a diamond mining lease in Sierra Leone and has marketing engagements with Tiffany & Co group companies.”
For its part, Tiffany told the media that it had done rigorous due diligence. Our questions were not answered by Mark Aaron, Tiffany’s media spokesperson.
The true state of Octea’s finances remain unknown.
Silas Gbandia reported from Sierra Leone.
This story was produced by the African Network of Centers for Investigative Reporting (with link: https://panamapapers.investigativecenters.org/) and the International Consortium of Investigative Journalists.
The DRC’s Gold Standard
6 April 2016
Despite international laws stipulating disclosure of the origins of gold, a tranche of leaked documents points to unsavoury behaviour by tax havens trading in commodities, writes Khadija Sharife.
The law was hailed as the first step toward ending the trade of so-called “blood minerals” in the Democratic Republic of Congo (DRC). Section 1502 of the Dodd-Frank Act does not require divestment from potential conflict areas, but it does compel companies to disclose the origins of gold and the 3Ts (tin, tantalum and tungsten). The reputational risk of being identified financing “blood minerals” was supposed to be enough to sway multinationals into extensive due diligence. But the process has only led to new strategies of deniability, especially in the gold industry, and has created opportunities for banks and refineries to wash clean the histories of conflict minerals.
In 2014, for instance, the United Nations’ Panel of Experts Report found that gold continued to be a major source of funding for the Congolese army as well as armed rebel groups. An estimated 70% of DRC gold left the continent via Uganda for Dubai, where it was sold “with no trouble”, according to the report.
Yet frequently there is the regulatory exclusion of banks accepting gold payments in countries like the DRC where gold remains a de facto currency. Against this gap is placed the hidden role of the refiners’ horizontal trade with one another from operational steps in the supply chain. The result is the lack of scrutiny that ignores a key component of the industry and, in the process, makes the provenance of gold unknown. This renders other systems ineffective, and means that any end-user of gold could be using “blood” minerals.
Leaked data from Mossack Fonseca, a Panama-based offshore fiduciary agent, obtained by Germany’s Suddeutsche Zeitung newspaper and shared with the International Consortium of Investigative Journalists (ICIJ), show that secrecy has become the rule for corporate trade and that where secrecy is allowed to govern, the process of differentiating the legal from the illicit becomes impossible. This is especially true of tax havens specialising in commodities - such as Dubai and Switzerland – where gold is without nationality or origin.
Rawbank and the Rawji family
With over 40 branches across the DRC, Rawbank has become a leading financial institution in a country that desperately needs it. Leaked data shows that the Rawji family, the shareholders of the family-owned Rawbank, make extensive use of tax havens and shell companies. The purposes of these companies remain unclear. The bank itself was previously owned by Rawholding, an entity based in Luxembourg, a secrecy jurisdiction, and owned by the Rawji family before being shifted in 2015 to Mauritius under the same ownership.
A source in the audit committee at Rawbank spoke anonymously about the role of gold in Katanga, a resource-rich province in southern DRC: “Almost the whole economy is based on these metals, much more than on cash currencies. We are accepting payments in gold and diamonds from all our clients, if they are able to prove that they are the legitimate beneficial owners of these precious metals.”
It is not unusual for banks in the DRC, or globally, to buy or sell gold. The role of institutions such as Rawbank is invaluable in providing critical financial infrastructure. But the presence of banks in countries such as the DRC is fraught with politics.
According to sources, Rawbank’s role is to ensure that due diligence for important state-related projects, referred to as “Kabila projects”, can take place through a private sector actor and that the bar leans towards political not regulatory standards. ANCIR formally put questions to Rawbank, including: how the legitimacy of beneficial owners is verified; whether gold is registered in the accounts or converted to money; whether they buy gold or simply store it; and if the latter, where the gold is stored, which jurisdictions are involved, and so forth. These procedures are particularly important in light of the UN report’s conclusion that gold from the DRC is essentially untraceable. After initially requesting information about why certain questions were being asked, Rawbank’s communication officer ceased responding.
Leaked data from Mossack Fonseca show details of the Rawji family offices based in Dubai and extending to multiple tax havens. The office maintains a web of offshore corporate structures, including Khazana Holdings and Hurricane Investment in the British Virgin Islands; Impala, Ginko International, Pix Business and Trading Mamu Investments in Panama; and numerous others. Members of the Rawji family are directors for several of these companies. Each entity appears connected to multiple other shell companies. For example, the Caymans-based Rawson Investment had registered beneficial ownership through five additional companies. These included Ponki, Farmer, MR Investment, Carbucco and Mutoto. Rawbank, the Rawjis and the legal officer at their Dubai-based hub did not respond to questions concerning the purpose or use of these companies.
The presence of offshore companies owned does not imply wrongdoing nor is it illegal. But the opaque corporate structure, including Rawholding – itself a family business and the DRC’s strongest financial actor - appears wedded to the company in a manner that renders it deliberately difficult to identify or separate what the entities are used for and why.
Publishing due diligence standards, and documenting the origin and provenance of gold on its way in and out by geography, trading partners and logistical systems, would remove allegations against Rawbank, and would make it the industry standard by ensuring that only responsible gold is traded.
Dubai’s rise as a gold buyer and onward seller is particularly worrying as it operates as a secrecy jurisdiction. Allegedly the end destination for over 70 percent of the DRC’s gold, it holds the largest cash-for-gold market in the world. Gold is sold directly to refiners there with little in the way of paperwork and due diligence. This gold is then primarily exported to Indian or Swiss-based refiners that comprise the majority of the world’s credible refineries selling to major multinationals.
Currently, Dubai’s gold industry is worth more than $75 billion. Regulation is implemented by a quasi-private body called the Dubai Multi-Commodity Marketing Center (DMCC), which has in the past, as this author investigated, severely bent or changed the rules as well as turned a blind eye to grossly illicit activities in mineral commodities.
A jurisdiction like Dubai can gain a financial competitive edge in the gold trade by writing laws that give it the advantage over other jurisdictions where significant economic activity takes place.
“There are occasions where international banks are unable and prejudiced against working with refiners that operate in certain jurisdictions or areas,” said a source at Kaloti. That is, while currencies are attached to regulatory systems, reserve banks, and, ultimately, nationalities, gold is without identity, borderless and ever valuable.
We asked the DMCC, Dubai’s public regulator, the following questions: What is the largest sum allowed in cash-for-gold transactions? Who comprise members of the DMCC review committee and are there any active traders or banks present? If so, is there a conflict of interest? What is the process of importing gold into Dubai by commercial airlines, private lanes and cargo shipments?
The DMCC initially confirmed responses would be forthcoming; later, they enquired whether the article would be positive or negative. When we replied it would reflect fact, they declined to comment.
The questions, ANCIR informed them, were based on information provided by sources concerning the regulatory gaps within the DMCC and its role as an enabler of Dubai as a hub for conflict gold.
Where research has exposed a lack of paperwork attesting to the origin of gold, the situation was covered up. In 2012, Dubai’s Kaloti, valued at $12 billion and exporting over 40% of Dubai’s gold, primarily to Switzerland, was found by Ernst & Young partner Amjad Rihan to have acquired $5.2 billion in cash from sellers without substantive paperwork. The company has supplied the mineral, including “scrap gold”, to other refiners, including Swiss-based Valcambi.
Valcambi declined an interview related to its process of sourcing gold from other refiners. What emerges, then, is that while companies like Kaloti are no longer on the supply list for major multinationals, like Apple, the exclusion is void if the hidden trade between refiners continue.
Rihan informed the media that when he raised concerns, not only were they quashed by Ernst & Young as well as the DMCC, but the latter also changed auditing procedures, according to reports by Global Witness (PDF), to remove particular aspects of culpability. He could not be reached for comment. ANCIR’s own investigation shows proof of gold transaction between Valcambi and Kaloti.
Kaloti may have made the headlines, but within Dubai it is Emirates Gold, founded by Swiss national Mohamed Shakarchi in 1991, that is most renowned. In addition to recycling scrap metals, Emirates is the largest gold bar manufacturer in the Middle East. Emirates Gold is part of the same machinery as Swiss-based PAMP, purchased by Shakarchi in the 1980s and one of Switzerland’s leading refiners. Through a series of holding companies in the Netherlands and Luxembourg, the system is ultimately owned by a trust based in the Bahamas - Sharaf. While companies are required to disclose at least the names of subsidiaries integral to the functioning of businesses, digging through the actual paper trail reveals a host of shell companies with no shareholders or substantial business activities.
Documents leaked to ICIJ show PAMP Holding Mauritius entering into an agreement with MKS Holding BV and two shell entities: Panama-based Mountside Investment and Hong Kong-based Dynamic Bonus Limited. Both shell entities are based at nominee postbox addresses and are described as beneficial owners of the company. The persons and entities behind Dynamic Bonus and Mountside are unknown and confidential, save to advisers of the companies. As of 2010, MKS Holding owned 72% of MMTC-PAMP India, a joint venture between India’s state-owned MMTC and Switzerland’s PAMP. MMTC-PAMP (India) supplies major multinationals including US-based Apple.
The infrastructure may be designed for purely innocent purposes. But why use - or hide - behind a raft of tax havens and hidden beneficial owner in places where gold is neither produced nor where the real corporate seats are located?
Dubai’s role is less as the source and more as the vehicle – driving towards Switzerland. Yet speaking about “Swiss refineries”, does not necessarily involve any separation between Dubai and Switzerland or even the London Bullion Market Association (LBMA). The LBMA is considered the world’s foremost gold trade association and uses refiner “referees” to vet the credibility and legitimacy of other refiners. For instance, not only is PAMP, a Swiss refinery, an LBMA “referee”, but there is also a shared connection through LBMA director Mehdi Barkhordar, who is also a director of PAMP India – the latter a country that comprises one of the world’s leading gold importers.
Why does a refinery like PAMP create, or indeed need, multiple seemingly separate entities instead of one consolidated company? A senior Geneva-based source from Trafigura, a multinational commodities trading company, answered the question of why MKS existed in Switzerland, for instance, as a separate entity from PAMP: “MKS Finance is heading the ‘delicate’ trading of gold, silver and jewels, which can’t go through Pamp.”
Emirates Gold did not respond to questions sent via email at the time of publication, although the email was opened from Dubai. MKS and Pamp declined to comment. The questions included whether the entities purchase from the cash-for-gold market and if so, how provenance is established or documented; the presence and purpose of offshore entities and jurisdictions; the different roles of Pamp, MKS and Emirates Gold within the corporate structure; and details about the trade between Dubai, Switzerland and India.
For its part, the LBMA claims information pertaining to the company’s structure, audits and other corporate data is confidential. It does not publish non-price data, such as volumes or purchasing jurisdictions.
Even the audit process, results and classification of refiners ranked on the good list is confidential, save that they are approved. The question of whether refiners purchase from other refiners, particularly between and within secrecy jurisdictions, appears to be off the radar.
The system provides a gold standard that perfectly allows for for banks and refineries using Dubai and Switzerland to remove origin. Gold is faceless and placeless. “Good” gold is blended with “bad” gold. And regulatory vacuums – involving or enforced by quasi-private bodies like the LBMA and DMCC - help to ensure that all such trade is technically legal save for exceptional cases. But for the DRC, this hidden trade is lethal and one where the advocacy and regulatory markets have generally failed or feared to tread.
Rawbank’s CEO, Thierry Taeymans, was director of KPM Finance, a company created in 2004 in Belgium at Rue Lesbroussart 76, with Kathy Delmotte and Frank Verhoestraete. This corresponded with a period when he was Rawbank’s CEO.
KPM Finance was liquidated in 2012, the same year the Bank of Congo issued a suspension of the company for fraudulent activity. Delmotte and Verhoestraete established a new import-export company: North & South Air Logistics.
The company maintains bases in Dubai, Belgium, South Africa and across the DRC. The company uses the moniker ‘KPM’ and is also based at Rue Lesbroussart 76.
Though scant details are available, employee profiles show continuity between KPM Finance, KPM Cargo and North & South Air Logistics.
North & South Air Logistics has a subsidiary known as Multimo and also appears to use the trade name of KPM Multimo. According to sources, the company Multimo International belonged to a diamond trader that operated under former dictator Mobutu Sese Seko, exporting minerals, including diamonds, to Belgium.
The company was allegedly sold over a decade ago to a group of Belgian businessmen. ANCIR checked Belgium’s corporate registry, which confirmed the company Multimo International was created in December 1991 and later sold. It is now part of North & South Air Logistics and is based at the same address.
KPM Multimo declined to comment. Rawbank did not respond to questions.
To get in contact with the author of this story, please contact ksharife[at]gmail.com
Did this company engineer the largest tax dodge in Canadian history?
By Bruce Livesey
25 April 2016
Cameco President and Chief Executive Officer Tim Gitzel speaks with media following the company's annual general meeting in Saskatoon, Wednesday, May 28, 2014. Canadian Press photo
For Don Kossick it’s been a lonely battle – a sort of one-man crusade, if you will.
The Saskatoon-based activist and community organizer runs Saskatchewan Citizens for Tax Fairness, which lobbies against corporate tax evasion. Two years ago, Kossick managed to raise enough money to pay for a billboard sign in downtown Saskatoon with the blaring headline “Pay Up Cameco”.
Headquartered in Saskatoon, Cameco Corp. is the world’s largest publicly-traded uranium company – producing as much as 15 to 20 percent of the global uranium supply. In fact, it provides most of the uranium used in Canada’s nuclear reactors.
But Cameco is now in hot water: the federal government is accusing the $2.8-billion company of operating a massive tax dodging scheme for years – and potentially depriving state coffers of as much $2.1-billion in cash. Cameco, which denies these allegations, goes on trial in Toronto this September. And If the company is found guilty, it would constitute the largest tax avoidance case in Canadian history. Meanwhile, the US Internal Revenue Service (IRS) is seeking (US) $32-million in back taxes from Cameco – and is investigating to see if the company owes more.
Yet, despite the vast sums involved, Kossick is finding it difficult to raise awareness in Saskatchewan about the Cameco case. “What (Cameco does) is give away money here and there so everybody thinks they’re fine,” he explains. “They are very effective at dodging public concern.”
Last year, Kossick arranged for Dennis Howlett, executive director of Canadians for Tax Fairness, an Ottawa-based NGO that lobbies against tax avoidance, to tour Saskatchewan and talk about the Cameco matter. Kossick says this stirred up some attention, but notes Cameco has been burnishing its image with a hospital fundraising campaign of its own called “Cameco Cares” – which involves sponsoring prominent musical acts to visit Saskatchewan, including the Barenaked Ladies in 2014, and Huey Lewis and the News last year. “They are having Sarah McLachlan coming to play this summer,” says Kossick.
Overall, the Cameco tax dodging case has received scant attention in Canada. But this might change, especially with the Panama Papers thrusting tax evasion and offshore havens into the limelight once again.
While the Panama Papers highlights the controversy of mostly wealthy individuals hiding money offshore, multinational corporations are just as prone to this practice. Two weeks ago, Oxfam released a report that estimates America’s top 50 multinationals dodge (US) $111-billion in taxes every year, while sapping an estimated (US) $100-billion from poor countries, and use at least 1,600 subsidiaries to horde (US) $1.4 trillion offshore. The result was that, on average, these corporations pay about a 26 percent tax rate – as compared to the 35 percent US tax law demands – with only 5 of them paying the full amount. “We are interested in the fact that these big multinational companies are playing by a different set of rules than either most individuals or ordinary taxpayers or small businesses,” says Robbie Silverman, Oxfam’s senior tax adviser.
The case of Cameco reveals how Canadian corporations are doing the very same thing. In fact, both Loblaws Cos. Ltd. and the silver mining company Silver Wheaton Corp. are being pursued by the Canada Revenue Agency (CRA) for avoiding taxes by using offshore havens, potentially owing hundreds of millions in back taxes (both companies deny the allegations). As Arthur Cockfield, one of Canada’s leading tax scholars who teaches at Queen’s University’s law school explains: “The Income Tax Act is filled with provisions that encourage companies like Cameco to do what they are doing.”
How Cameco set up its offshore scheme
Cameco is a big player in Saskatchewan’s economy. It was created in 1988 as a result of a merger of two crown corporations which finally became fully privatized 14 years later.
Today, Cameco operates uranium mines around the world, but principally in northern Saskatchewan, where it owns the McArthur River and Cigar Lake mines – among the largest and richest uranium deposits on the planet. Cameco also runs a uranium refinery and conversion facilities in Ontario. The company was also recently in the news for laying off 500 workers at its Rabbit Lake mine due to a worldwide glut of uranium.
According to the government’s lawsuit, Cameco’s tax scheme originated in the late ‘90s. By then, the company was worried about low-priced Russian uranium flooding the world market due to the collapse of the Soviet Union and decommissioning of its nuclear weapons. The uranium in the warheads was now available to be used in nuclear reactors. “Which could have a devastating effect on (Cameco’s) business and its survival,” says the lawsuit. Meanwhile, uranium prices were low, stuck at about $10 a pound.
In 1999, Cameco decided to restructure its operations to deal with this market threat. Previously, the company sold its uranium directly to customers. Now Cameco was going to do things differently.
To begin with, they entered into purchase agreements with other uranium companies, notably Russia’s Tenex, that controlled massive stocks of Russian uranium. By doing so, they were helping to stabilize and ultimately increase uranium prices.
But they also took steps to minimize their Canadian tax burden. To do so, the company established a marketing subsidiary in the low-tax haven of Switzerland, in the canton of Zug. Cameco then drafted a 17-year uranium supply agreement with this Swiss subsidiary at a fixed price of $10 a pound. The plan was to sell their uranium to their customers through this Swiss operation instead of directly from their Canadian offices.
Today, the federal government says this subsidiary really existed only on paper and had no real business activity: in fact, it had just one employee, who actually lived in Germany. The subsidiary rented an office within a law firm that did some legal work for the company. In the government’s claim, it says Cameco’s Swiss subsidiary “performed only nominal functions” and that “all substantive functions” were performed by its Canadian head office and staff.
So how did Cameco lower its tax bill? Before, when it sold uranium directly to customers, it did so for whatever world prices were going at the time. Which also meant, the higher the price, the more profits it made in Canada and the higher the tax paid to the CRA.
But by setting up a Swiss subsidiary, Cameco could now employ “transfer pricing” to lower its tax bill because most of the profits would be made in Switzerland, where taxes were much lower (around 10 percent compared to closer to 30 percent in Canada).
What few people realize is that about 60 percent of trade between countries is actually done between subsidiaries of individual corporations – such as Apple’s head office in California selling iPhones to an Apple-owned subsidiary in Canada. A transfer price is the price of a good sold between two subsidiaries of the same company.
Transfer pricing becomes an issue for governments because it's a way for companies to shift their profits to countries where taxes are lower. As the UK-based Tax Justice Network has observed: “Transfer pricing is not, in itself, illegal or necessarily abusive. What is illegal or abusive is transfer mispricing, also known as transfer pricing manipulation or abusive transfer pricing.”
By establishing a subsidiary in Switzerland, and entering into the 17-year contract that fixed the price of its uranium at $10 per pound, Cameco is now accused of mispricing its uranium, especially after uranium prices began to rise.
Indeed, starting in 2003, uranium prices started to ascend, hitting almost $140 by 2007. But Cameco was claiming artificially low profits in Canada because it was only getting $10 a pound from its Swiss subsidiary, thus paying much less tax than it should have to the Canadian government. Meanwhile, through its Swiss subsidiary it was selling both to itself and to other customers uranium at world-level prices – and recording the profits in Switzerland.
Indeed, the Swiss subsidiary became the repository of all of Cameco’s profits – where it was taxed at a much lower rate than in Canada – even though only 16 percent of its sales were in Europe (most of its sales were in Asia and the US). Thus, in 2012, the Bay Street equity research firm Veritas Investment Research estimates Cameco paid just $36-million in cash taxes on $680-million pre-tax cash flow from operations – or at a 5-per-cent rate. The difference between that and the statutory rate of 27 per cent meant a tax cut of more than 20 per cent, Veritas estimated.
Indeed, by 2012, the Swiss subsidiary had earned $4.3-billion in profits during the previous six-year period. Meanwhile, Cameco was claiming its Canadian operation was losing money – a total of $1.3-billion during the same period.
But Cameco was not done: the company also established a subsidiary in the low-tax haven of Barbados, which has a tax treaty with Canada. Court documents show Cameco paid this subsidiary 50 percent of its Swiss subsidiary’s pre-tax profits of (US) $78-million in 2005, although it was also entirely a paper front with no actual business operations. Whether it used the Barbados subsidiary to repatriate its offshore profits is not clear, but is highly likely.
According to the government, these paper subsidiaries had the sole purpose of dodging taxes because they performed no business activities: all of the activities were carried out by its Canadian head office. And therefore the CRA believes the Swiss subsidiary’s profits must be taxed at Canadian rates. “Neither (its Swiss or Barbadian subsidiaries) performed any function in the series of transactions… for which an arm’s length party would pay,” the government alleges at one point. “The series of transactions directed by (Cameco) amounts to a sham designed to deceive the Minister into concluding that (its Swiss operation), not (Cameco), was undertaking a business and incurring real risks.”
In short, the buying and selling of uranium through Cameco’s foreign operations were merely paper transactions, the government is claiming, designed to avoid paying taxes. And due to the abuse of transfer pricing and low taxes paid in places like Switzerland, the total sum avoided now totals $2.1-billion.
Cameco, on the other hand, won’t discuss the case, but argues its foreign subsidiaries are legitimate and its transfer price for uranium was set at realistic levels. They also claim that their offshore structures were permitted by Canada's income tax laws and are confident of prevailing in court. In regards to the IRS allegations, the company said in its February conference call with analysts: "We disagree with the stance taken by the IRS and will dispute it."
Veritas feels otherwise. After examining the government’s case, the research equity firm is convinced Cameco will lose. “We feel the CRA has a good case based on the facts we have been able to compile publicly,” says Veritas’ president, Anthony Scilipoti.
Meanwhile, according to a 2013 court order, the government discovered Cameco had not provided them with all of the documents they requested in discovery, some of which were also redacted. The company has put only $50-million aside to pay for a possible settlement with the CRA – a sum Veritas finds alarmingly small given the serious allegations involved. Grant Isaac, Cameco's chief financial officer, said in February that this sum was determined as a result of "additional contract information we acquired... We concluded that the pricing uncertainty in our intra-company arrangement was less than originally determined and reflect our confidence we will be successful in our case."
Saskatchewan government faces deficits, and is saying little
Despite the amounts the CRA alleges Cameco dodged in taxes, there’s been little hue and cry about the matter in Saskatchewan – even though the provincial government would have received almost half the money owed.
Premier Brad Wall has expressed concern over the issue going back to 2013, but has avoided publicly condemning Cameco. The premier’s office declined to respond to an interview request over the issue. “For the most part the Wall government has been supportive of Cameco,” claims Don Kossick.
This might be surprising given that Wall admitted in February his government is facing "serious revenue shortfalls" and will run a deficit this fiscal year and next (the province had moved away from a projected surplus to a $262-million deficit when it presented a budget update last fall).
Meanwhile, as the Panama Papers continues to reveal the extent of how much money is being squirreled away offshore, it’s apparent that Corporate Canada is knee deep in this practice. As Dennis Howlett of Canadians for Tax Fairness, who visited Regina, Moose Jaw and North Battleford last year to discuss the Cameco case, observes: “Cameco is not alone we suspect. It may be more bold… A lot of companies are using offshore subsidiaries to shift profits in various ways and some cross the line – as I think Cameco’s case will end up finding… But a lot of them go unchallenged either because it’s too difficult to convict… or because the rules are so loose.”
Israeli Diamond Tycoons Listed in Leaked Panama Papers
Diamond and mining magnate Dan Gertler is mentioned more than 200 times in the leaked documents of Panamanian law firm Mossack Fonseca, a leader in establishing shell companies that often serve to conceal the ownership of assets.
Uri Blau and Daniel Dolev
7 April 2016
The Israeli billionaire Dan Gertler, who made his fortune in diamonds and mining, is mentioned more than 200 times in the Panama Papers.
Gertler is among some 600 Israeli companies and 850 Israeli shareholders listed in the leaked documents of Panamanian law firm Mossack Fonseca, a leader in establishing shell companies that often serve to conceal the ownership of assets.
Gertler is mentioned in connection to a number of companies, and registered as a beneficiary for some of them. Mossack Fonseca’s internal correspondences includes a draft of a contract between Gertler and a company called Callery Resources, seemingly for consultation on a mining deal in Congo.
Haaretz’s investigation has found that this company is controlled by Yitzhak Abuhatzeira, son of millionaire Rabbi David Abuhatzeira and apparently one of Gertler’s closest associates.
The leaked documents also show that the Panama-based law firm had stopped representing Gertler due to alleged investigations into his companies.
In 2011 Gertler was at the center of an extensive correspondence between various figures in Mossack Fonseca. According to the files, the law firm failed to carry out a due diligence examination before registering two Panamanian companies, Burford Commercial S.A. and Norseville Estates S.A. The two companies were registered at an unusual request of a Swiss law firm. Only after registration did Mossack Fonseca find out that the beneficiaries of both companies were “Anat Gertler, her husband Dan and their children.”
After this discovery, the head of the firm’s client department sent an email recommending the firm immediately stop working with these companies and halt cooperation with the Swiss firm that represented them.
“…We discovered that the [beneficial owner] is a Mr. Dan Gertler who is an Israeli diamond dealer under investigation… His name is plastered all over the internet and we have entities of his with our [British Virgin Islands] license that are currently under investigation by the BVI Financial Securities Commission,” the email says.
Another email says Gertler is suspected of bribing Yisrael Beiteinu leader Avigdor Lieberman; a correspondence from 2011 confirms that Mossack Fonseca ceased representing the companies.
Emails sent in 2015 again mention Gertler’s name. They include a draft of a contract between Gertler and a Panamanian company Callery Resources, which was registered by Mossack Fonseca in January of that year.
According to the contract, Callery provided valuable consultation services to Rowny Asset Limited and other companies “associated” with Gertler on mining in Congo’s Katanga Province. The outcome of the consultation was the creation of a company called Mumi, which was jointly owned by Rowny and the mining giant Glencore. Mumi’s holdings in Katanga are estimated to be $1.8 billion. The contract states that Rowny received a dividend from Mumi in the last quarter of 2014.
In the contract, Gertler also undertakes to “recommend” that Rowny to pay Callery $10 million for its services, with further payments if additional dividends are received from Mumi. Callery’s power of attorney is signed by one Yitzhak Abuhatzeira of Ramat Gan, according to the leaked papers.
Yitzhak Abuhatzeira is the son of David Abuhatzeira, formerly Nahariya’s chief rabbi. In 2012 Rabbi Abuhatzeira’s fortune was valued at 750 million shekels by Forbes Magazine and he was listed as Israel’s second wealthiest rabbi. David Abuhatzeira is also the grandson of Rabbi Israel Abuhatzeira, known as the “Baba Sali.”
Although Rabbi Abuhatzeira usually avoids being endorsing with a specific political party, in the last elections he openly supported Shas. The rabbi is known as one of Gertler’s confidants. Three years ago he reportedly spent a weekend in Bnei Brak, where Gertler lives, to take part in the diamond merchant’s son’s bar mitzvah.
Gertler is also reportedly a frequent guest at the Abuhatzeira family’s celebrations.
There is no evidence in the files that the contract draft has been signed or implemented. Gertler refused to answer questions on the matter and Yitzhak Abuhatzeira was unavailable for comment.
Gertler isn’t the only diamond merchant associated with companies that were registered by Mossack Fonseca. Lev Leviev, for example, is named in the files as the owner of Lexinter International Inc., which holds shares in Vauxhall Securities Inc., a company registered in the British Virgin Islands.
The extensive activities of diamond and mining tycoon Benny Steinmetz, his brother Daniel Steinmetz and their business partner Nir Livnat are mentioned in hundreds of Mossack Fonseca documents. Internal correspondences between the law firm and Diacore, part of Steinmetz’s diamond group BSGR, identify Construction Minister Yoav Galant as a confidant of Steinmetz.
In view of this, the law firm requested the company to provide “the pertinent explanations related to the information found.”
Galant’s office said in response that “Galant doesn’t know Daniel Steinmetz, he saw him a few times in social circumstances. Benny Steinmetz has been a friend of Galant’s for many years to this day.”
Gertler responded to the report through lawyer Boaz Ben Zur, saying that "according to an initial examination , the two firms noted in the report are non-active, and were being held as shelf companies (the use of shelf companies is a matter of routine practice in international business). Moreover, my client had no knowledge of the claims raised regarding the [Panamanian firm's decision] to terminate representation [of Gertler for alleged investigations]. In this regard, it should be noted that firms under the trusteeship of the Gertler family do business on a global scale, working with some of the most prominent publically traded firms around the globe. Mr. Gertler's reputation is under constant scrutiny and he has always been found to be unblemished, with his businesses run according to the law and official requirements.
Regarding the draft of the contract, Ben Zur said "the contract was not signed by Mr. Gertler and was never fulfilled, and no money was transferred to Yitzhak Abuhatzeira or any firm acting on his part. Mr. Yitzhak Abuhatzeira was employed in the past (until a year ago) by a foreign consulting firm tied to Mr. Gertler. Mr. Abuhatzeira performed his duties well. It was further reported that Rabbi David Abuhatzeira is Mr. Gertler's rabbi for many years. The ties between them are between a man of faith and his rabbi, and have no connection to his businesses."
Haaretz reached out to Yitzhak Abuhatzeira numerous times in both writing and on the phone but was unable to receive his response.
The leaked files, which were obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with Haaretz and other media organizations, provide a glimpse of the economy that until now had been hidden from the Israeli public.
Major BC Liberal Donor Named in Panama Papers
Haywood Securities listed as a shareholder in firms registered in British Virgin Islands.
By Andrew MacLeod
The name of a major donor to the British Columbia Liberal Party appears in a database drawn from the Panama Papers leak.
Haywood Securities Inc., a Vancouver company that has given the BC Liberals $332,000 since 2005, is described in the database as a shareholder in companies registered in the British Virgin Islands, a researcher with the Dogwood Initiative environmental group in B.C. discovered.
According to the database, Haywood held shares in Kola Gold Ltd., a company incorporated in the British Virgin Islands in 2014. The investment firm held the shares both directly and in trust for a holding company.
The database also lists Haywood as holding shares in African Aura Resources Ltd., a mining company incorporated in the British Virgin Islands, in trust for 22 investors. And it held shares in trust for an investor in Gem Diamond Mining Company of Africa, which is also registered in the British Virgin Islands.
The International Consortium of Investigative Journalists published the database on May 9. On its website, the ICIJ describes the Panama Papers as a "giant leak of more than 11.5 million financial and legal records exposes a system that enables crime, corruption and wrongdoing, hidden by secretive offshore companies."
A disclaimer in the ICIJ website stresses that there are legitimate uses for offshore companies and trusts, and the organization does not intend to imply anyone appearing in the database has broken any laws or otherwise acted improperly.
Finance minister won't 'speculate'
The Tyee's call to Haywood was put through to company president Rob Blanchard's office. An assistant to Blanchard took the message, but the call was not returned by publication time.
Michael de Jong, the finance minister for B.C., said when asked about Haywood appearing in the Panama Papers database, "Haven't had any briefing. No knowledge. Don't want to speculate. If it's a particular company, I'll ask."
Asked in general what information from the Panama Papers might mean for B.C., de Jong said, "I haven't got a full briefing amidst all the other stuff, so I'm not really in a position to say. I'm not aware of any direct implications, but I haven't got a full briefing yet."
David Eby, the NDP MLA for Vancouver-Point Grey, said that while having an offshore bank account is legal, it is often an indicator that a company or an individual may be avoiding paying provincial or federal taxes in Canada.
"The concern that I would have is that a major BC Liberal donor could influence government policy in for example declining to invest in additional auditors to study this Panama Papers disclosure and find out whether or not people are avoiding provincial taxes," he said.
"I would ask the question about whether or not the BC Liberals should be receiving donations from people who have significant offshore holdings," he said. "I think it sends a certain message about tolerance for revenue avoidance mechanisms, whether or not it's actually the case."
Pursue tax evaders, Eby says
Eby and the NDP have been pressing the government to ban corporate and union donations to provincial political parties, and he has said large contributions give the public the impression that money buys favourable treatment from the government and access to top officials, including Premier Christy Clark.
Provincial officials should make good use of the information in the Panama Papers, Eby said. "Certainly I think the province should be looking carefully at all the Panama Papers disclosures to ensure that the people who are named there, who have accounts there, are appropriately paying all of their taxes and disclosing all of their income in British Columbia."
Tax evasion is a real problem in B.C. and Canada, he said. "This is a serious issue the province needs to get on, and they might not be as incented to do it if they think their major donors might not like it."
The Panama Papers database lists African Aura Mining Inc., a company Sedar indicates is headquartered in Vancouver, as an intermediary (which it defines as "lawyers and service providers who help set up or act as the registered agents for the offshore companies") for African Aura Resources Ltd., as well as for 18 other entities.
Individuals that Haywood held shares in African Aura in trust for include Michael Halvorson, Ron Lankester, Virginia Clarke, Matthew Clarke, David Elliott, Laurence Guichon, David Shepherd, Ed McKim, David Berg, Andrew Williams, John Day, Linda Benson and Terry Evancio.
Haywood also held shares in African Aura for Batell Investments Ltd., Remap Management Ltd., Dana H. Prince Law Corp., Dragon Equities Ltd., Ak Abbi Professional Corp., Millerd Holdings Ltd., Datmix Investments Inc., Trafalgar 1805 Ltd. and the numbered company 0707677 B.C. Ltd., which according to the province's corporate registry has a Vancouver address and is headed by Marcel de Groot.
Shares in Gem Diamond Mining were held in trust for Robert Disbrow and shares in Kola Gold were held in trust for Aldat 2000 Holdings Ltd.
Panama Papers: Behind Malcolm Turnbull's deal for a tax haven payout
13 June 2016
For two decades, Malcolm Turnbull's great Russian gold adventure has been the stuff of legend – an exotic but largely untold story.
"There's nothing new here," Turnbull said last month when The Australian Financial Review revealed that the prime minister appeared in the Panama Papers as a director of a British Virgin Islands company, Star Technology Systems.
In October 1993 his merchant bank, Turnbull & Partners helped an Australian listed company, Central Mining, to acquire Star Technology, which held a stake in a huge gold deposit in Siberia. Turnbull and his partner, the former NSW Premier Neville Wran, ended up on the boards of both companies.
That was Turnbull's only link with Panama law firm Mossack Fonseca, as the Prime Minister told it on May 12 – he had held an entirely conventional and uncontroversial role as director of an Australian publicly listed company.
"If it made any profits, which it did not, regrettably, it would have paid tax in Australia," Mr Turnbull said.
But new documents show the Prime Minister's firm earned an estimated $7 million from his time with Central Mining, including a $1.8 million commission paid in shares held in Mossack Fonseca companies, that an independent director says was he was unaware of.
The tax haven holdings are revealed in the Panama Papers – a massive leak of files obtained by Munich newspaper Süddeutsche Zeitung and accessed through the International Consortium of Investigative Journalists.
The web of tax haven shareholdings in Central Mining (which was renamed Star Mining Corporation in December 1993) included six million Star Mining shares held for Turnbull & Partners.
The question is, how did Turnbull's firm get the shares, and why were they held in companies linked to Mossack Fonseca?
"The Prime Minister notes that Turnbull & Partners Ltd's interests were accounted for and disclosed in accordance with the relevant legal requirements," a spokesman for Mr Turnbull said last week in response to detailed questions from the Financial Review. "He has nothing further to add to his earlier responses on this matter."
Just how Australia's Prime Minister came to be in such a situation is a very Russian tale, which began with a trip to Moscow by Sydney businesswoman Ludmila Melnikoff in 1989 – a story she tells in her unpublished manuscript, Smoke, Mirrors, Cognac and Vodka.
Melnikoff, who now lives on Sydney's northern beaches, is an Australian whose parents were white Russians.
When Melnikoff returned to Russia in 1989, her mother's contacts gave her access to Russia's most senior government figures, including support from the then emerging leader Boris Yeltsin.
Melnikoff identified mining opportunities for gold and platinum which she then introduced to Australian mining entrepreneur Ian MacNee.
Melnikoff and MacNee ended up with a 34.88 per cent interest in a Russian joint stock company, Lenzoloto, which held the mining rights to the huge Sukhoi Log deposit.
In early 1992 MacNee and Melnikoff were waiting – and waiting – on Yegor Gaidar, the First Deputy Prime Minister in charge of Finance and Economics, to sign a government ordinance approving the Lenzoloto deal.
In her bombshell manuscript, Melnikoff says that on April 6 MacNee returned from meeting one of Gaidar's aides, who had told MacNee he needed to contribute $US1 million into an account called the Protection of Private Property Fund.
Melnikoff says that MacNee flew to Zurich to arrange the money transfer, though there are no documents to substantiate a payment. MacNee died in 2008.
Gaidar signed the government ordinance that approved the Lenzoloto setup on April 9.
MacNee had persuaded Melnikoff that for tax reasons the 34.88 per cent stake in Lenzoloto should be held in the British Virgin Islands, in Star Technology Systems – and the ownership would be hidden by a maze of other BVI and Bahamas companies that MacNee controlled.
In 1993 MacNee sold Star Technology to his Australian listed company, Central Mining. The price was $US5 million cash, 200 million Central Mining shares and 100 million Central Mining options.
These were called "vendor shares" and they were issued to the nine companies, linked to Mossack Fonseca, which MacNee had set up as the original "owners" of Star Technology.
What the Panama Papers show – and what Central Mining directors including Bill O'Neill didn't know – was that all of these companies were owned by Ian MacNee.
But the shares weren't all for MacNee.
As part of the sale process, MacNee had allocated 6 million of the vendor shares and 3 million vendor options to Turnbull & Partners. The shares were issued at 30 cents apiece, which valued the parcel at $1.8 million (by the time the deal closed they were trading way above this, at 44 cents).
It's not unusual for advisory firms to receive a commission in a deal – in this case the six million shares and three million options represented 3 per cent of the purchase price. But it's unconventional for someone advising the buyer in a deal to be paid by the seller.
In Turnbull's defence it should be noted that Central Mining had already decided three months before on the sale price to buy Star Technology. Turnbull's firm was advising on a cash placement that would pay out the cash component of the Star sale as well as funding work on Sukhoi Log.
But why didn't Central Mining just issue shares directly to Turnbull & Partners, and why was it not publicly disclosed at the time?
It also raises questions whether Turnbull had a potential conflict of interest, and whether the arrangement made him an associate of Ian MacNee.
Bill O'Neill, who was on the Central Mining board as an independent director until the day after the Star sale was completed, says he knew nothing of the shares for Turnbull's firm.
"I opposed the whole deal because I couldn't see why the Lenzoloto stake hadn't been put in Central Mining from the start – how does a director get to sell an interest that should have been there already," O'Neill told the Financial Review this month.
Turnbull and Wran are said to have disclosed the commission to the board after O'Neill resigned from the board.
However Turnbull & Partners came to own the shares, they were locked up with the rest of the 200 million vendor shares under ASX escrow, held in the original Mossack Fonseca-linked companies.
And they would be worth nothing if the continuing political infighting in Russia overturned Star's claim on Sukhoi Log.
With the purchase of Star Technology completed, Wran and Turnbull joined the board of Central Mining, now renamed Star Mining Corporation, and immediately deployed their Labor connections.
In December 1993 Prime Minister Paul Keating wrote an open letter to Wran confirming Star's bona fides: "I am taking the opportunity to write to you to assure you I agree with the Australian ambassador that this particular venture is important, not just in itself, but because a successful project of this kind will encourage further investment in Russia from Australia."
Keating wrote directly to Russian PM Viktor Chernomyrdin in July 1994 to urge support for Star, and again later that year – three letters in 12 months.
Melnikoff discovered that Turnbull was a huge success at negotiating with Russians. Melnikoff told officials that Turnbull was on track to be Australia's prime minister, if not president. Russians loved him.
One of Star's toughest critics was the head of the Committee for Natural Resources (Geolkom), Boris Yatskevich, who controlled the granting of mining licences. He told Melnikoff the Sukhoi Log deposit was the pearl of Russia, which should not go to a mining nobody like Star.
In February 1994 Turnbull met with Yatskevich and reported back that the man the Star team had taken to calling "Yat the Rat" was softening his resistance. But it wasn't enough.
"Yat liked Malcolm very much, but more needs to be done," a Russian intermediary told Melnikoff a month later.
"Yat spoke to the Irkutsk branch of Geolkom and they would like a contribution of $30,000 and he would like $70,000."
On March 24 1994 a request was faxed to Turnbull to approve payments of $US70,000 in Moscow and $US30,000 in Irkutsk which was described as covering "private detectives, gifts and for newspaper articles".
Turnbull, who knew nothing of the planned bribery, was bemused, and assumed that the sender must have been drunk, Melnikoff says.
Yatskevich needed the money for renovations to his home and unbeknown to Turnbull, the payment was made.
"I was there in the office when the bags of money were handed across," Melnikoff says.
Star Mining documents from 1996, after Turnbull left the board, refer to "black money" kept in the Star office safe in Moscow, and include notes handwritten by MacNee detailing how $US250,000 was to be paid to a Swiss account operated by the leader of the ultra-nationalistic Liberal Democratic Party, Vladimir Zhirinovsky, and the Moscow account of his niece, Natalia Sokolova, who was also on Star's payroll as a consultant.
In June 1995, Yatskevich flew to Sydney, after Star arranged for then Labor Resources Minister David Beddall to invite him to Australia.
The "Yat" met government officials in Canberra, spoke glowingly of Star's prospects at a press conference at County NatWest, and spent a weekend at Turnbull's farm at Scone, with hotels and hire cars at Star's expense (Yatskevich had paid his own airfare).
The highlight of his trip was a series of long appointments at a Sydney dentist, undergoing major dental work for a "full oral makeover", all at Star's expense.
The daughter of the governor of Irkutsk, Anastasia Nozhikov, was also a beneficiary of Star hospitality.
On August 9 1995, Turnbull wrote to Nozhikov to invite her to come to Sydney to work as an intern at the Star Mining offices for seven weeks, with Star picking up the cost of the airfare.
Despite all of Star's efforts, feuding between Russian power brokers continued to block all attempts to move forward. The big breakthrough came on September 30 1994, when prime minister Chernomyrdin signed a decree confirming the rights to Sukhoi Log license and ordering government departments to issue a new mining licence for Lenzoloto and to release geological data.
Star hailed the decree as a game-changer, finally confirming their rights to the gold tenement.
Melnikoff tells a different tale of how the decree came to be signed.
She says that in mid-September 1994, MacNee met a Russian intermediary in a tunnel behind the Star offices in Moscow who told him that Chernomyrdin needed "$1 million deposited into a Swiss bank account – I have the numbers here".
"I don't need an answer, but I must tell you once this is done, the Decree will be signed," MacNee was told.
There is no documentary verification that MacNee made this payment, though Chernomyrdin was infamous for demanding bribes – so much so that the CIA issued a report on his corrupt dealings, and a Swiss judge investigated payments others made into a Swiss account linked to him.
"I know MacNee paid $10 million of his own money in Russian deals," McNeill says, though he was not aware of a specific payment to Chernomyrdin.
Chernomyrdin's September 30 decree confirmed Star's mining rights just as the shares in the Mossack Fonseca companies came out of escrow. This was money time and it triggered a flood of sales by MacNee.
Star Mining's half-year report, signed by Turnbull on March 15 1995, showed that 82 million vendor shares held by the Mossack Fonseca companies had disappeared, representing sales and transfers worth more than $25 million.
Some of these shares appear to have ended up with Turnbull's firm. His interest in Star Mining shares had jumped to 22.5 million shares, plus 7 million of the vendor options.
Turnbull outlined his holdings in a signed fax to MacNee dated May 7 1995, at a time when NatWest was pressing for a new "lock-up" of the vendor shares.
Turnbull proposed he would:
"1. Sell 10 million of my 21 million shares to a third party.
"2. Transfer 30% of [Turnbull & Partners'] remaining 11 million shares to Neville [Wran] and 70% to me."
Turnbull and Wran would give undertakings not to sell those 11 million shares while they remained directors of Star Mining (they resigned four months later).
"I should note that of that 11 million shares only 6 million are 'vendor shares'."
Turnbull & Partners earned more than $2 million in fees from Star Mining in addition to share sales. By late 1995 it is believed the firm had sold almost all of its Star shares, raising more than $5 million at the current share price.
Turnbull and Wran resigned from the Star Mining board in September 1995. By 1996 the company's fortunes were in decline as the alliances that Turnbull had helped build up fell apart.
Turnbull has made it clear that he was never aware of any bribery payments by Star, and it is not suggested that he was. But critics will suggest he should have been aware.
Any such payments, and the government decisions they influenced, would have helped to boost the Star Mining share price, which in turn would have helped to lift Turnbull & Partners' share profits. Turnbull remained blithely unaware, the happiest and most unwitting of beneficiaries, with the handy knack of a timely exit line.
Panama Papers Reveal Canadian Victor Dahdaleh As Key Figure In International Bribery Scheme
The Huffington Post Canada - http://www.huffingtonpost.ca/2016/05/25/panama-papers-victor-dahdaleh_n_10129454.html
25 May 2016
The Panama Papers have outed a Canadian billionaire and prominent university donor as a key figure in an international bribery scandal.
Victor Dahdaleh, a Jordan-born businessman who holds Canadian citizenship, is named in a 2007 email linking him to companies that helped facilitate a deal for mining giant Alcoa to sell a mineral to officials in Bahrain.
That email was disclosed in the Panama Papers, according to a joint investigation by CBC and The Toronto Star.
Dahdaleh had previously appeared as "Consultant A" in records relating to a 2014 U.S. Department of Justice (DOJ) case.
Mining giant Alcoa had pleaded guilty to paying "millions of dollars in bribes through an international middleman," which is a crime under the U.S. Foreign Corrupt Practices Act.
The company also paid a historic US$384 million settlement to the U.S. Securities and Exchange Commission (SEC) after it admitted its involvement in a "corruption scheme" that saw at least $110 million paid to Bahraini officials through a then-anonymous consultant.
"The consultant was paid a commission on sales where he acted as an agent and received a markup on sales where he acted as a purported distributor," case documents said, as reported by The Toronto Star.
The Bahrain connection
Court documents show that Alcoa's Australian arm tapped an individual known as "Consultant A" to help it secure a deal to sell alumina, an aluminum-based chemical, to Alba, a Bahraini aluminum-smelting company, beginning in 1989, according to court records obtained by CBC.
Then, by 2002, Consultant A had started routing documents related to the Alba deal through Alumet and AAAC, two companies he controlled. The latter company hiked the price of alumina by $79 million from 2002 to 2004.
Consultant A started buying alumina from Alcoa and selling it to Alba in 2005. Price markups netted the companies $188 million up to 2009, but they never actually handled the chemical itself.
The consultant kept some of the money and paid $110 million to officials in Bahrain, including a member of the Middle Eastern kingdom's royal family.
Dahdaleh's relationship with Alumet is confirmed in a 2007 email sent to Mossack Fonseca, the Panamanian law firm at the centre of the Panama Papers.
"This email confirms ... my capacity as the owner and director of Alumet," he wrote.
Dahdaleh registered Alumet in the British Virgin Islands through Royal Bank of Canada (RBC), which has helped to establish approximately 370 offshore companies, according to info contained in the Panama Papers.
Dahdaleh has not been convicted of any offenses, his London spokesman Lord Timothy Bell told the Star.
He was acquitted in a separate corruption and money laundering case in the U.K. in 2013, after one witness shifted his testimony and two more refused to testify at all.
Bell would only say that names in the DOJ's case were anonymized in order to ensure "fairness and justice."
Dahdaleh has also been a generous benefactor to Canadian universities.
Last year, York University established the Dahdaleh Institute for Global Institute after he donated $20 million, "the largest gift ever made by a member of York's alumni," the school said in a news release.
He has also sat on the board of the McGill University Trust in the U.K. He helped arrange for ex-U.S. president Bill Clinton, a personal friend, to receive an honourary doctorate from the university in 2009.
Dahdaleh also received an honour doctorate from St. Francis Xavier University last year.
All of the schools declined requests for comment from CBC and The Toronto Star.
Panama Papers reveal scale of offshore firms' African operations
Mossack Fonseca files name hundreds of mining firms, raising concerns about use of tax havens to exploit the continent
25 July 2016
Offshore companies connected to 44 of Africa’s 54 countries appear in the Panama Papers leak, according to new research.
More than 1,400 companies in the files of the offshore law firm Mossack Fonseca have names that indicate mining or resource extraction interests – raising fresh concerns about how tax havens can be used to exploit the natural wealth of the world’s poorest continent.
The files contain at least 37 offshore companies with operations in Africa that have been named in legal proceedings or criticised by national or international agencies.
The research was published on Monday by African partners of the International Consortium of Investigative Journalists (ICIJ), which coordinated the initial investigation into the offshore law firm’s leaked files.
Across Africa, 18 media organisations have published their findings – including the African Network of Centers for Investigative Reporting, The Namibian and Verdade in Mozambique.
The revelations include:
- Twelve of 17 companies named by Italian prosecutors as being connected to a middleman in an alleged bribery scheme surrounding an Algerian oil and gas deal appear in the files, including one company described as a “crossroads of illicit financial flows”.
- Mossack Fonseca allegedly helped process a $30m loan for a client in Nigeria despite press reports that he had been “on the run” over potentially criminal petroleum deals.
- At least 30 wildlife safari companies in Africa are identified as being connected to offshore companies, mostly incorporated in the British Virgin Islands.
Mossack Fonseca told the ICIJ in response to the recent findings that it follows “both the letter and spirit of the law”.
It said: “We have not once in nearly 40 years of operation been charged with criminal wrongdoing. We’re proud of the work we do, notwithstanding recent and wilful attempts by some to mischaracterise it.”
The offshore industry has long protested against the charge that it facilitates the theft of Africa’s natural resources.
A report published in 2014 by a lobbying group for Jersey’s financial services sector argued that tax havens facilitated efficient investment in the developing world, a claim that has been echoed by a US group that lobbies in favour of tax havens.
But such claims have been contradicted by other research into illicit financial flows from Africa. According to a 2015 study commissioned by the African Union and the United Nations Economic Commission for Africa, more than $50bn (£38bn) a year is stolen from countries across the continent via fraud and tax avoidance.
Earlier this year an investigation into the leaked files of Mossack Fonseca by about 100 media organisations exposed the role in the offshore industry of facilitating tax avoidance and alleged crime.
The revelations prompted the former prime minister David Cameron to announce a new agreement between the UK and its network of crown dependencies and overseas territories that would allow law enforcement to access information about the true owner of an offshore company.
Further rules on the automatic exchange of beneficial ownership information were agreed at an international summit on anti-corruption in May.