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Panama Papers

After Panama Papers, new ‘Paradise Papers’ leak reveals secrets of the world elite's hidden wealth

The findings have emerged as part of the Paradise Papers released by the US-based International Consortium of Investigative Journalists (ICIJ), which was behind the 2015 Panama Papers

PUBLISHED : Monday, 06 November, 2017, 8:47am
UPDATED : Tuesday, 07 November, 2017, 12:02pm

US Commerce Secretary Wilbur Ross has business ties to a shipping firm linked to Vladimir Putin’s inner circle, according to a vast leak of financial documents that also revealed Britain’s Queen Elizabeth’s investments in tax havens.

And it revealed that Canadian Prime Minister Justin Trudeau’s top fundraiser and senior adviser Stephen Bronfman, heir to the Seagram fortune, moved some US$60 million to offshore tax havens with ex-senator Leo Kolber.

The details come from a leak of 13.4 million files that expose the global environments in which tax abuses can thrive – and the complex and seemingly artificial ways the wealthiest corporations can legally protect their wealth.

The findings have emerged as part of the Paradise Papers released by the US-based International Consortium of Investigative Journalists (ICIJ), which was behind the Panama Papers made public last year.

There is no suggestion that Ross, Bronfman or the queen’s private estate acted illegally.

But Ross’s ties to Russian entities raise questions over potential conflicts of interest, and whether they undermine Washington’s sanctions on Moscow.

A spokesman for British Prime Minister Theresa May said the UK’s tax authority wants to see the leaked documents.

“It is important to point out that holding investments offshore is not an automatic sign of wrongdoing, but HMRC (Her Majesty’s Revenue and Customs) has requested to see the papers urgently so it can look into any allegations,” he told reporters.

The leaked documents reveal:

UK Queen

Around £10 million (US$13 million) of the queen’s private money was placed in funds held in the Cayman Islands and Bermuda, according to the leaked papers.

They reported the funds reinvested the money in an array of businesses, including controversial rent-to-buy retailer, BrightHouse, which has been accused of exploiting the poor, and a chain of alcohol stores which later went bankrupt.

The investments, which were entirely legal, were made through the Duchy of Lancaster, which provides the monarch with an income and handles investments of her vast estate and remain current, the media outlets said.

There is no suggestion that the queen’s private estate acted illegally or failed to pay any taxes due.

But the leaks may raise questions over whether it is appropriate for the British head of state to invest in offshore tax havens.

Chris Adcock, the chief finance officer of the estate defended the investments, telling the BBC: “The Duchy has only invested in highly regarded private equity funds following a strong recommendation from our investment consultants.”

US commerce chief

Extensive offshore dealings by Donald Trump’s cabinet members, advisers and donors, including substantial payments from a firm co-owned by Vladimir Putin’s son-in-law to the shipping group of the US commerce secretary, Wilbur Ross.

Ross, a billionaire investor, holds a 31 per cent stake in Navigator Holdings through a complex web of offshore investments.

The 79-year-old reduced his stake when he took public office, according to public filings.

Navigator Holdings runs a lucrative partnership with Russian energy giant Sibur, which is partially owned by Putin’s son-in-law Kirill Shamalov and Gennady Timchenko, the Russian president’s friend and business partner who is subject to US sanctions.

The US imposed sanctions on Russian entities and individuals following its annexation of Crimea and aggression in Ukraine.

Ross’s private equity firm has been the biggest shareholder in Navigator.

His personal share of the firm’s stake was reduced when he took office in February, but the commerce chief’s investment is still valued at between US$2 million to US$10 million, according to his security filings and government ethics disclosure.

The New York Times reported that Ross’s stake in Navigator has been held by companies in the Cayman Islands. His wealth, estimated to exceed US$2 billion, is said to be tied to similar arrangements in various tax havens like the Cayman Islands.

“Secretary Ross was not involved with Navigator’s decision to engage in business with Sibur, a publicly traded company, which was not under sanction at the time and is not currently,” said James Rockas, a Commerce Department spokesman.

“Moreover, Secretary Ross has never met the Sibur shareholders referenced in this story and, until now, did not know of their relationship.”

Russia downplayed the leaks. The head of the foreign affairs committee of the Russian senate, Konstantin Kosachev, called them “stirring emotions and muddled wording”, speaking to RIA Novosti state news agency.

“When it is boiled down, what is described here is standard and legal commercial activity,” Kosachev said, insisting the US deals were being “presented as practically a plot against the foundations of Western democracy”.

Celebrities

Politicians aren’t the only famous faces named in the leaked Paradise Papers – Bono, Madonna and actress Keira Knightley all pop up, too.

Bono – who is listed by his real name, Paul Hewson- was revealed to have been a part owner of a shopping centre in the small town of Utena, Lithuania, after investing with a company based in Malta.

The U2 frontman had a stake in Nude Estates, a Maltese company which bought the Ausra mall just after it opened in 2007.

Because the island nation – located between the south of Italy and the North African coast – is a low-tax jurisdiction, the tax paid on any profits earned by foreign investors is reduced to 5 per cent.

The mall was transferred in 2012 to a company based in Guernsey, England, with a similar name: Nude Estates I.

“Bono was a passive, minority investor in Nude Estates Malta Ltd., a company that was legally registered in Malta until it was voluntarily wound up in 2015. Malta is a well-established holding company jurisdiction within the EU,” a spokesperson for the singer said.

Meanwhile, the ICIJ also claimed the documents reveal that pop star Madonna has a share in a medical supplies company, while actress Keira Knightley has invested in a Jersey-based real estate firm.

Pressure on leaders

The disclosures will put pressure on world leaders, including Trump and the British prime minister, Theresa May, who have both pledged to curb aggressive tax avoidance schemes.

The publication of this investigation, for which more than 380 journalists have spent a year combing through data that stretches back 70 years, comes at a time of growing global income inequality.

Meanwhile, multinational companies are shifting a growing share of profits offshore – €US$600 billion in the last year alone – the leading economist Gabriel Zucman will reveal in a study to be published later this week.

“Tax havens are one of the key engines of the rise in global inequality,” he said. “As inequality rises, offshore tax evasion is becoming an elite sport.”

At the centre of the leak is Appleby, a law firm with outposts in Bermuda, the Cayman Islands, the British Virgin Islands, the Isle of Man, Jersey and Guernsey.

In contrast to Mossack Fonseca, the discredited firm at the centre of last year’s Panama Papers investigation, Appleby prides itself on being a leading member of the “magic circle” of top-ranking offshore service providers.

It acted for the establishment offshore, providing the structures that helped to legally reduce their tax bills.

Appleby said it has investigated all the allegations, and found “there is no evidence of any wrongdoing, either on the part of ourselves or our clients”, adding: “We are a law firm which advises clients on legitimate and lawful ways to conduct their business. We do not tolerate illegal behaviour.”

The Guardian, Agence France-Presse, Tribune News Service, The Washington Post