The very vast international journalistic investigation of the Pandora Papers shows that many wealthy personalities, from the political, economic or artistic world, still escape tax by having recourse to tax havens. Trillions of dollars are in question.
The word “Pandora” speaks for itself. If the Panama Papers had been an electric shock, this new planetary investigation is a tsunami. The more we journalists dig, the more they discover. Despite regulatory changes, tax evasion appears to be a bottomless pit, and a sport practised in most countries of the world.The Pandora Papers represent the largest investigation ever conducted by the International Consortium of Investigative Journalists (ICIJ) and its partners Over many months, 600 journalists from 150 media outlets in 117 countries searched 11.9 million documents from 14 firms specializing in the creation of offshore companies. It is a huge source of information. Money from tax havens is still used to buy private jets, yachts, mansions, works of art by great masters … Findings confirm the study carried out in 2020 by the Organization for Economic Co-operation and Development (OECD ), which estimated the sums held in offshore centres at $ 11.3 trillion.
The troubled role of banks and specialist firms
If this system thrives, it is because certain institutions play a facilitating role, whether they are banks, law firms or accountants in the United States or Europe. A document from the Pandora Papers reveals in particular that thanks to a single Panamanian law firm headed by a former Panamanian ambassador to the United States, banks located in different parts of the world have created at least 3,926 offshore companies. Known as Alcogal, this firm has offices in a dozen countries. According to documents revealed by the ICIJ and its partners, it has created at least 312 companies in the British Virgin Islands alone, at the behest of US banking giant Morgan Stanley.
For a few hundred or a few thousand dollars only, offshore service providers allow their clients to create companies whose real owners remain hidden. For $2,000 to $25,000, they can also create a trust which, in some cases, allows its beneficiaries to manage their money while pretending that they do not have control over it.
To complete the system, it must be made more complex. Offshore firms, therefore, partner with other firms, which allows them to create nested layers of corporations and trusts. The more complex the arrangements, the higher the fees, and the more clients can expect to be protected by secrecy.
The King of Jordan and his 36 companies
Among the users of the companies uncovered by the Pandora Papers, notably appears King Abdullah II of Jordan. To help him secretly acquire 14 luxury homes worth over $ 106 million, in the US and UK, an English accountant based in Switzerland worked with lawyers from the British Virgin Islands. Of those residences, the King bought a $23 million property overlooking a California surf beach from a company based in the British Virgin Islands. For this, 36 fictitious companies were created between 1995 and 2017.
Internal emails show Alcogal and his Swiss adviser have discussed how to avoid disclosing the monarch’s name to authorities in the British Virgin Islands. In these documents, the offshore advisers use a code name to designate it by speaking of: “You know who”. In response to investigative requests, the king’s British lawyers stated that the king was not required to pay taxes under Jordanian law and that he held property in offshore companies for security reasons and confidentiality.
In Lebanon: do what I say, not what I do
In neighbouring Lebanon, a country in the throes of a deep economic crisis, the Pandora Papers show that leading political and financial figures have also had recourse to tax havens. Among them, the current Prime Minister, Najib Mikati, his predecessor, Hassan Diab, but also the former senior anti-corruption official, Muhammad Baasiri, and Riad Salamé, the governor of the central bank, who makes the under investigation in France for suspicion of money laundering.
Marwan Kheireddine, the former Lebanese minister of state, also president of the Al-Mawarid bank, also appears in the documents. In 2019, however, he criticized the inaction of his former parliamentary colleagues in the context of a catastrophic economic crisis. “There is tax evasion and the government needs to deal with it,” he said. Yet that same year, according to the Pandora Papers, he himself owned a company based in the British Virgin Islands, himself the owner of a two million dollar yacht. Confronted with this information, Riad Salamé assured ICIJ that he had complied with all the obligations provided for by Lebanese law. As for Muhammad Baasiri, he told the ICIJ that he had never owned an offshore company.
The French castle of the Czech Prime Minister
Among the other politicians pinned: Czech Prime Minister Andrej Babiš. He came to power promising to crack down on tax evasion and corruption. In 2011, he said he wanted to create a country “where entrepreneurs will do business and be happy to pay taxes”. Leaked documents show, however, that in 2009 Andrej Babiš injected 15 million euros into a series of front companies to buy a magnificent property known as Chateau Bigaud, in Mougins, near Cannes.
A year later, he acquired, through another Monegasque front company, seven properties a few meters from his castle, including a two-storey villa with a swimming pool and garage. However, these shell companies and houses do not appear in the asset declarations that he is required to file as a public official, according to documents obtained by the Czech partner of the ICIJ, Investigace.cz .
The beautiful homes of Tony and Cherie Blair
The Pandora Papers also shed a harsh light on certain statements made by other high personalities. In February 2021, the Tony Blair Institute for Global Change called on policymakers to tax land and houses more heavily. As early as 1994, while campaigning for the leadership of the British Labor Party, Tony Blair himself regretted that wealthy persons escaped tax: “For those who can employ good accountants, the tax system is a haven. of scams, advantages and profits,” he said during a speech in the West Midlands, England. “We must not make our tax rules a playground for tax abusers who pay little or nothing, while others pay more than their share.”
The Pandora Papers reveal, however, that in 2017, Tony Blair and his wife Cherie, became owners in London of a Victorian building worth $8.8 million where they housed the law firm of Cherie Blair. But for that, they did not buy the building. They bought out the shares of the British Virgin Islands company which owned the property, and which was owned by the family of Bahrain’s Minister of Industry, Trade and Tourism, Zayed bin Rashid Al Zayani. By taking control of this company rather than buying the building itself, the Blairs benefited from a legal arrangement that saved them from having to pay more than $400,000 in property taxes in England. Solicited, Cherie Blair said her husband was not involved in the transaction, and that its objective was to comply “with the UK tax and regulatory regime”. As for the Al Zayani, they claim that their “companies have complied with all British laws past and present“.
The United States, not watching
In December 2018, the Bahamas passed a law requiring companies and certain trusts to declare the identity of their beneficial owners. The archipelago was then under pressure from big nations, including the United States. Some Bahamian politicians opposed the move, fearing the new constraint would discourage wealthy Latin American clients from placing their money in the Caribbean. “The winners of these new rules are the US states of Delaware, Alaska and South Dakota,” said a local lawyer.
And it is true that since then tens of millions of dollars have been transferred from the Caribbean and Europe to South Dakota, a sparsely populated US state that has become a preferred haven for foreign assets. Over the past ten years, South Dakota but also Nevada, and more than a dozen other American states have turned into tax havens. If the American authorities have forced banks in Switzerland and other countries to disclose the information they have on American nationals with accounts abroad, they seem however much less prompt to grant them reciprocity. The country refused to join a 2014 agreement backed by more than 100 jurisdictions, including the Cayman Islands and Luxembourg,
South Dakota: New Tax Haven
As a result, South Dakota state lawmakers approved legislation that increasingly offered protections to clients of trusts. Their assets in the state have more than quadrupled over the past decade, reaching $360 billion. One of the state’s largest trust companies today is said to have clients in 54 countries and 47 US states, including more than 100 billionaires. According to a study by Israeli scholar Adam Hofri, 17 of the 20 least restrictive jurisdictions in the world for trusts are now located in the United States.
And it doesn’t matter where the funds come from. The ICIJ and the Washington Post have identified nearly 30 US-based trusts linked to foreign figures involved in questionable cases or accused of embezzlement. Among them: Guillermo Lasso, a banker and former Ecuadorian governor who was elected president in April 2021. Even if he denies it, the Pandora Papers reveal that he created trusts in South Dakota. According to Yehuda Shaffer, former head of Israel’s financial intelligence unit, it is “clear that the United States is a huge loophole. They criticize the rest of the world, but for them it is an extremely serious problem”.
A relative of Vladimir Putin
The names of several Russians also appear in the pandora documents. In 2015, an Alcogal compliance officer discovered that a Cypriot law firm, Nicos Chr. Anastasiades and Partners had helped Russian billionaire oil mogul, former senator, also a Hollywood-linked film producer – Leonid Lebedev, cover up four companies by claiming law firm employees owned its entities. Lebedev fled Russia in 2016 after authorities accused him of embezzling $220 million from an energy company.
The tycoon did not respond to ICIJ requests, but Theophanis Philippou, the law firm’s chief executive, told the ICIJ partner BBC that he never deceived the authorities or covered up the identity of the owner of a business.
Another Russian close to Vladimir Putin is also mentioned in the Pandora Papers. This is Konstantin Ernst, a famous television producer who helped shape the image of Vladimir Putin “saviour of Russia”.
The Pandora Papers reveal that he was involved in a very lucrative operation, shortly after overseeing the opening and closing ceremony of the 2014 Olympic Winter Games in Sochi. In a series of state-funded privatizations, he hid behind numerous offshore companies to buy dozens of cinemas and properties on the outskirts of Moscow. Transactions that he did not wish to comment on.