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Frederik Obermaier
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All Putin’s Men: Secret Records Reveal Money Network Tied To Russian Leader
Apr 3, 2016 | ICIJ
By Jake Bernstein, Petra Blum, Oliver Zihlmann, David Thompson, Frederik Obermaier, Bastian Obermayer
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Op-Ed: Oligarchs hide billions in shell companies. Here's how we stop them
Apr 3, 2018 | The Guardian
By Frederik Obermaier and Bastian Obermayer
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Op-Ed: Whistleblowers are vital to democracy. We need to better protect them
Apr 9, 2018 | Los Angeles Times
By FREDERIK OBERMAIER and BASTIAN OBERMAYER
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The owner remains secret
Feb 5, 2019 | Süddeutsche Zeitung
By Christian Endt , Hannes Munzinger , Frederik Obermaier , Daniela Prugger and Vanessa Wormer
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Panama Papers? No thanks
Jan 27, 2019 | Süddeutsche Zeitung
By Thomas Knellwolf, Oliver Zihlmann and Frederik Obermaier
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Delivered
Jan 17, 2019 | Süddeutsche Zeitung
By Frederik Obermaier and Bastian Obermayer
English Language Press
German Language (Translated Using Google Translate)
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All Putin’s Men: Secret Records Reveal Money Network Tied To Russian Leader
Apr 3, 2016 | ICIJ
By Jake Bernstein, Petra Blum, Oliver Zihlmann, David Thompson, Frederik Obermaier, Bastian Obermayer
https://www.icij.org/investigations/panama-papers/20160403-putin-russia-offshore-network/
Vladimir Putin and Sergey Roldugin forged a bond as young men. Fast friends, almost like brothers, they cruised the streets of Leningrad, singing and, in Putin’s case, occasionally getting into fistfights.
As Putin rose to power as Russia’s supreme leader and Roldugin made a name for himself as a classical cellist and conductor, the two remained close. Roldugin has performed for Putin and high-profile guests at the president’s official residence and has given media interviews that softened Putin’s fearsome image.
Now a leak of secret documents reveals another, hidden side of their friendship.
The records show Roldugin is a behind-the-scenes player in a clandestine network operated by Putin associates that has shuffled at least $2 billion through banks and offshore companies, an investigation by the International Consortium of Investigative Journalists, German daily Süddeutsche Zeitung and other media partners has found.
In the documents, Roldugin is listed as the owner of offshore companies that have obtained payments from other companies worth tens of millions of dollars. A company linked to the cellist also grabbed secret influence over Russia’s largest truck maker, another snagged a big slice of Russia’s TV advertising industry.
It’s possible Roldugin, who has publicly claimed not to be a businessman, is not the true beneficiary of these riches. Instead, the evidence in the files suggests Roldugin is acting as a front man for a network of Putin loyalists – and perhaps for Putin himself.
Roldugin did not respond to detailed questions. Reporters from the Organized Crime and Corruption Reporting Project, an ICIJ partner, met briefly with the musician after a concert in Moscow last week. Roldugin told them he needed more time to review the questions and determine what he could say.
About 100 financial deals related to the network are described in the leaked documents. They are complex. Payments are disguised in various ways. On paper, shares in companies are swapped back and forth in a day. Documents are backdated. Questionable financial penalties are assessed. The rights to multimillion-dollar loans are sold between offshore companies for $1.
In almost every instance, the result is the same: money and power moves in the direction of the network, to companies and people allied to Putin. The network’s covert deals allowed it to receive money in a variety of ways including hundreds of millions of dollars in sweetheart loans from a bank controlled by the Russian government.
The leaked documents come from the files of Mossack Fonseca, a Panama-based law firm that registered some of the Roldugin companies and helped administer the network’s holdings in the British Virgin Islands and other offshore havens.
For years there have been reports – mainly from whistleblowers – about Putin’s secret wealth. A few offshore companies, a palace and a mega yacht have all been said to belong to the Russian leader. Various news organizations have also noted how the people around Putin have become rich. Yet a detailed picture of the hidden financial affairs of Putin’s circle has remained elusive.
The records reveal what until now has mostly been the stuff of rumor: how Putin’s cronies secretly conduct their business. The law firm’s internal files show how minions and proxies created structures to hide and move the secret wealth. The records include email correspondence, bank account forms, loan agreements, share transactions and passport scans. Dates, cash amounts and contract terms are detailed.
Loyalty and long-held relationships help bind the network together. It’s a fraternity of Putin confidants. Many of the men whose interests are reflected in the leaked files are Putin comrades whose history with him traces back decades to St. Petersburg, the city known, before the fall of the Soviet Union, as Leningrad.
There is Roldugin, who is godfather to Putin’s eldest daughter. Then there is Yury Kovalchuk, a banker who forged links with the future president when Putin was a municipal official, and Arkady Rotenberg, a childhood chum who has become a billionaire through state-sponsored construction projects, oil pipelines and other ventures.
Many of the men linked to the network, including Putin, share something else in common besides history. They are connected to the St. Petersburg-based Bank Rossiya, which the U.S. government has identified as Putin’s personal cashbox.
The files make clear that Bank Rossiya built the network. Its employees tended to it, working to create the offshore companies, assigning ownership to Roldugin and others and shepherding the transactions through banks in Russia, Cyprus and Switzerland.
The economic model for how members of Putin’s circle have shared the profits from this network was also established back in St. Petersburg. In the 1990s, Putin and the Bank Rossiya owners created a cooperative for a gated community where they all had houses. The cooperative kept a bank account in common. Each could put money in, and anyone could take it out.
Nowhere in the Mossack Fonseca files is the name of the Russian president, a former KGB spymaster, actually mentioned. Audio recordings and witness accounts show that even when Putin’s closest confidants privately discuss his financial dealings, they use pseudonyms for him or simply gesture to the heavens rather than utter his name.
It’s inconceivable, though, that the network could have existed without the knowledge and support of Putin, said Karen Dawisha, a U.S. political scientist who has written extensively about Putin and his regime.
“He takes what he wants,” said Dawisha. “When you are the president of Russia you don’t need a written contract. You are the law.”
After receiving detailed questions from ICIJ and its media partners, Kremlin spokesman Dmitry Peskov denounced the forthcoming articles in a press conference as “an attack” and “a series of fibs,” according to Russian news services. Peskov reportedly said that the questions concerned offshore companies and “a large number of businessmen Putin had never seen in his life.”
“Denying something numerous times or commenting on something that has no relation to us is just silly,” Peskov told reporters.
Ties of friendship
There is a video on YouTube of Arkady Rotenberg, a former judo instructor who became a billionaire thanks to Putin. He is standing with a group of men. Putin walks past, flanked by his security detail. Rotenberg doesn’t see him coming. Without breaking stride, Putin rubs Rotenberg’s head, mussing his hair, like one would a dog or a child.
Of all those in his inner circle, Arkady and his brother Boris Rotenberg have known Putin the longest. Their friendship dates to the 1960s, when as boys they sparred together in a martial arts club. The ties of friendship grew to encompass business as well.
The European Union and the U.S. government issued sanctionsagainst Arkady Rotenberg in 2014, in retaliation for Putin’s invasion of Ukraine. The U.S. also sanctioned his brother Boris.
The U.S. Treasury noted the two had “amassed enormous amounts of wealth during the years of Putin’s rule” from Russian government contracts, including roughly $7 billion for the Sochi Olympic games. The sanctions document coyly described the reason for the designation as “acting for or on behalf of… a senior official” of the Russian Federation.
In 2013, the year before the sanctions were issued, one of Arkady Rotenberg’s companies received potentially lucrative government contracts to work on a proposed $40 billion natural gas pipeline between Russia and Europe. Around the same time, three anonymous companies made huge payments into the Putin network, records show. Two of the shadow companies, and likely all three, were controlled by Arkady Rotenberg, according to the Mossack Fonseca files.
Loans from these Rotenberg companies totaling more than $231 million appear to have gone to a British Virgin Islands-based company called Sunbarn Limited, created by a manager at Bank Rossiya. The loans had no repayment schedule.
Arkady Rotenberg did not respond to a request for comment.
In the case of the Rotenbergs, the Mossack Fonseca documents suggest hidden business dealings between Putin and his old friends. When it comes to Sergey Roldugin, the documents in the files falsely state that he is not politically connected, obscuring the musician’s role in the scheme.
There’s no question that Roldugin and Putin are close. Some publications have called him Putin’s best friend. In the early 1980s, Roldugin arranged a double date on which Putin met his future wife, Lyudmila.
Putin selected Roldugin to be the godfather of his first child, Maria, a sacred role in Russian Orthodox tradition. A photo of Putin cradling Maria, beside his wife and Roldugin can be readily found on the Internet.
Mossack Fonseca and bankers in Switzerland appear to have ignored easily obtainable evidence of Putin and Roldugin’s bonds. Banks are required by law in Switzerland to determine if account holders are connected to politicians to safeguard against improper use of the account. The industry term for this is “politically exposed persons,” or PEPs.
The Mossack Fonseca files contain an application by Gazprombank Switzerland in 2014 to open a bank account for a company in Roldugin’s name. The form explicitly asked whether the owner of the company had “any relation to PEPs or VIPs.”
The answer: “no.”
“The bank had a legal obligation to check these declarations,” said Mark Pieth, former head of the organized crime section of the Swiss justice ministry. “Roldugin is, by his proximity to a serving head of state, clearly an exposed person.”
Gazprombank declined to comment.
In a letter to ICIJ, Mossack Fonseca said the firm has “duly established policies and procedures” to identify and handle cases involving politicians or people associated with them. It said the company considered those cases to be “high risk” and conducts more intense checks and periodic follow ups. “We conduct thorough due diligence on all new and prospective clients that often exceeds in stringency the existing rules and standards to which we and others are bound.”
Roldugin’s friendship with Putin likely landed him in the exclusive club of Bank Rossiya shareholders. In 2010, a Russian news service disclosed Roldugin owned more than 3 percent of the bank.
The cellist told the New York Times in 2014 that “years back” he had needed money and that arrangements were made to get him a stake. What he had to do for those shares was not specified.
The history of Bank Rossiya is all about its shareholders working together cooperatively.Lake of money
Yury Kovalchuk and Putin turned their attention to Bank Rossiya in 1991, when its largest shareholder was still the Leningrad Communist Party.
At that time, Putin was deputy mayor and the person responsible for attracting foreign investors and forming public-private partnerships.
After the fall of the Soviet Union in December 1991, Putin signed the documents bestowing ownership of the bank on a newly formed joint venture created by Kovalchuk and others, according to Dawisha, author of “Putin's Kleptocracy: Who Owns Russia?”
“Putin’s function was to make legal what would otherwise have been illegal,” Dawisha said.
Kovalchuk became majority shareholder and board chair of this new version of Bank Rossiya. When the U.S. government sanctioned him in 2014, it described Kovalchuk as one of Putin’s “cashiers.”
In the mid-1990s, Kovalchuk and a few other shareholders of the bank owned dachas a few hours outside of town on the eastern shore of the Komsomolskoye Lake. Putin found the money to buy a property. The men formed a co-operative society to benefit the eight residents of their shared gated community, which was called called Ozero (the Lake).
The Mossack Fonseca files show that the communal principles that defined Ozero continued with Bank Rossiya and its participants more than a decade later.
About an hour’s drive from the site of the Ozero cooperative is the Igora ski resort. According to local media reports, the high-end resort is Putin’s favorite place to ski. Bank Rossiya publicly helped finance its construction. The wedding of Putin’s youngest daughter, Katerina Tikhonova, took place amid great secrecy on the resort grounds in February 2013, according to Reuters.
Tikhonova married Kirill Shamalov, the son of Nikolai Shamalov, an Ozero cooperative member and original Rossiya shareholder. Within a year and a half of the wedding, the younger Shamalov, barely out of his twenties, managed to borrow about $1.3 billion from Gazprombank to acquire 21 percent of Sibur, one of the biggest petrochemical companies in Russia, a stake that was worth at least $2 billion a little more than a year later, Reuters reported.
A Russian company called Ozon holds title to the ski resort. Bank Rossiya’s Kovalchuk is a co-owner of Ozon. Beginning in late 2009, Ozon received $11.3 million worth of loans from a key offshore company in the Putin network, the Mossack Fonseca files show. The loans carried an interest rate of 1 percent.
One $5 million loan was revised and extended multiple times and was converted to Russian rubles; the exchange rate and new amendments reduced its value and ultimately, the amount owed, the leaked documents show.
A lawyer for Kovalchuk said information about Bank Rossiya was available from pubic sources, adding: “We do not understand why your decision was to address these questions to Mr. Yury Kovalchuk.”
Bank Rossiya did not respond to detailed questions about its role.War and peace
In early August 2008, Russian troops rolled into Georgia for what would be a five-day war. They traveled on Kamaz trucks. Putin had long been a champion of the company, visiting its factories and even taking a Kamaz racing truck for a spin for the benefit of news cameras.
Five months earlier, the leaked records show, the classical cellist Sergey Roldugin made moves to secretly gain a degree of management control over Kamaz, a company with revenue of $3.51 billion in 2007.
In March 2008, the Mossack Fonseca’s files show one of the Roldugin companies was given a secret option to buy a minority stake in Kamaz through a company called Avtoinvest.
Putin adviser Ruben Vardanyan was board chair and principal owner of the bank that ran Avtoinvest, a big shareholder in Kamaz. In 2008, Vardanyan wanted to consolidate a majority hold on Kamaz, according to press reports, but he needed help. The government of the Russian Republic of Tatarstan held a significant portion of the shares of the company; it had to be persuaded to sell.
As part of the deal, Roldugin’s company obtained a potential say over all aspects of the operation of Kamaz such as “approval of the business plan and budget” and approval over which foreign corporations would be able to invest in the company, if Avtoinvest got its majority.
Roldugin’s company paid $1.5 million for the option and potential rights.
In return, the agreement found in the Mossack Fonseca files spelled out that Roldugin’s company was expected to lobby for the “project,” which was described as getting Avtoinvest its majority.
By late April 2008, Tartarstan entered into an agreement to sell its shares to Avtoinvest, at below market price, according to press reports.
Putin relinquished the Russian presidency the following month, swapping positions with Prime Minister Dmitry Medvedev, another confidant who had been with him since the St. Petersburg days. Despite the change in title, there was little doubt that Putin retained control.
During his time out of the presidency, 2008 to 2012, Bank Rossiya’s balance sheet ballooned from under $4 billion to more than $8 billion. And the network of Putin associates kicked into high gear.
As Putin was stepping down, Kamaz was booming and making big plans. It announced that it would spend $1.5 billion by 2012 to modernize and double production. Kamaz also began exploring the sale of an ownership stake of up to 42 percent to a foreign buyer, according to press reports at the time.
Then the global financial meltdown hit Russia’s automotive sector hard. Kamaz cut its workweek to four days and slashed production.
Roldugin’s company never exercised its option to buy its Kamaz shares. In December 2008, German carmaker Daimler did buy a piece of the company – but 10 percent of it, not 42 percent. To get its slice of Kamaz, Daimler paid $250 million to the Vardanyan investment bank that owned Avtoinvest.Vardanyan declined to answer specific questions because it involves “proprietary and confidential” information, which he is not authorized to discuss.
“The project was arranged as commercial arm’s length transactions with consultation among legal and business representatives to ensure compliance with existing regulations,” said Vardanyan.
Kamaz did not respond to a request for comment.Hidden deals
In September 2009, a Mossack Fonseca compliance officer flagged a transaction for $103 million involving a company called Sandalwood Continental Limited. The manager for Bank Rossiya who was arranging the transaction wanted Sandalwood corporate directors – who were stand-ins provided by the law firm – to approve the deal. But its size seemed worrisome.
Sandalwood was the lynchpin of the entire Putin-linked network. One of Sandalwood’s roles appeared to be to borrow money from the Russian Commercial Bank (RCB) in Cyprus, which in turn was backed by Moscow-based, state-controlled bank, VTB. The $103 million began as a loan to Sandalwood from RCB Cyprus.
The owner on paper of Sandalwood was Oleg Gordin, a small businessman with a background in “law enforcement agencies,” according to an RCB bank account opening form found in the files. Gordin also had power of attorney on some of Roldugin’s company bank accounts.
Gordin did not respond to a request for comment.
Between 2009 and 2012, Sandalwood had lines of credit with RCB for about $800 million, according to the files. Sandalwood loaned out about $600 million in 2009 and at least $350 million in 2010.
The loans RCB made to Sandalwood were highly unusual for a bank. They went to a borrower who had no discernible business model that would allow it to pay back the money. The loans carried no security. Most did not require installment payments but instead relied on a promise that the entire amount would be returned after a certain time span.
“The assumption that RCB Bank Ltd is a so-called 'pocket' for highly-ranked Russian officials is utterly unfounded and certainly does not correspond to the actual state of affairs,” wrote Michael Maratheftis, head of media communications for RCB, in an email response to detailed questions from ICIJ and its media partners.
Maratheftis said the bank was legally precluded from answering questions about “third parties,” but it has always acted in “a transparent manner.” He said the bank has forwarded ICIJ’s questions to legal authorities in Cyprus for an “independent investigation.”
Sandalwood also functioned as a link in a chain of loan-swapping shadow companies. It assigned the rights to interest payments in the millions of dollars to companies – including one of Roldugin’s, which paid $1 dollar to receive $8 million a year in interest. Two banking experts who reviewed the Sandalwood loan assignments and an RCB loan made to the company said the documents raised multiple red flags and didn’t seem to make economic sense.
“It would appear that tax evasion, fraud and or some other predicate act is underlying these transactions for purposes of money laundering,” said David Weber, academic director of fraud management programs at the University of Maryland and former special counsel for enforcement for the U.S. Office of the Comptroller of the Currency.
RCB’s Maratheftis said the bank “was always in full compliance with the Anti-Money Laundering Regulatory Framework.”
According to an analysis of the Mossack Fonseca data by ICIJ and its reporting partners, about $2 billion passed through the network between 2008 and 2013, most of it through Sandalwood Continental.
Sandalwood also served as a credit card of sorts, lending to more than two dozen associated companies. It lent money to everything from the Igora ski resort’s owner to a hotel near the Finnish border. When Sandalwood loaned to other offshore companies, the repayment terms were sometimes as long as 20 years.
In the case of the $103 million loan, Sandalwood had borrowed it from RCB and immediately flipped the money to a Cyprus company called Horwich Trading.
The Bank Rossiya manager shepherding the transaction wanted Mossack Fonseca’s Panamanian directors to sign the Horwich Trading loan agreement on behalf of Sandalwood quickly. One of the Mossack Fonseca partners suggested that they get a letter indemnifying the law firm first, possibly to avoid being held responsible for the any looting of RCB.
Then Jurgen Mossack, a co-founder of the law firm, chimed in:
“I believe this is delicate,” he wrote in Spanish in an email. He was worried that “we could be witnessing payments of questionable origin and purpose.”
The Bank Rossiya manager explained that the loan was structured to take advantage of a tax treaty between Cyprus and Russia. To gain approval, he provided a letter of indemnity and other materials and created a regular repayment schedule for the loan. It’s the only loan from RCB to Sandalwood in the files that had a schedule of regular repayments. It is also the only time in the files that Mossack Fonseca appears to have objected.
The modifications satisfied Mossack Fonseca. The Panamanians also took comfort from the fact that a Swiss law firm, Dietrich Baumgartner & Partners, helped process paperwork for the Bank Rossiya network.
“As we are working with this client from a reputable Russian bank for some years now, and our legal client of reference is a well-known Swiss law office, I think we can accept the explanations and go ahead,” a lawyer from Mossack Fonseca’s Liechtenstein office wrote.
Deitrich Baumgartner & Partners declined to comment.
A later email detailed the fees Mossack Fonseca charged Sandalwood, which were based on the amount of the loans. For helping to create the paper trail for the $103 million, it earned $2,030.Media secrets
Mikhail Lesin was intimately involved in the efforts of Putin and Bank Rossiya to control Russian media. As Putin’s first media minister, he oversaw the regime’s propaganda push. Lesin’s government tenure paralleled the growth of the bank’s media empire.
While in government, Lesin played a key role in brokering deals that put critics in the media under ownership that was more closely aligned with the Kremlin. In the wake of these efforts, voices critical of the Russian regime fell silent.
After Medvedev replaced Putin as president, Lesin left the government and joined the nation’s biggest private media group, Gazprom-Media, which Bank Rossiya managed.
Gazprom-Media was only part of the media conglomerate that Bank Rossiya built. Its sprawl has earned the bank’s chairman, Yury Kovalchuk, the nickname the Russian Rupert Murdoch. In 2005, Bank Rossiya bought a stake in a small television network, which Putin then designated as a national broadcaster, greatly expanding its reach and profit. It also took over Ren-TV, muting critical voices and investigations of the government.
Now, the Mossack Fonseca files reveal that there was a secret component to both Lesin and Bank Rossiya’s media dealings. Lesin had a company called Gloria Market Ltd. based in the British Virgin Islands. He created it in 2011, to collect money from advertising, according to a source of funds form found in the Mossack Fonseca files.
In the late 1990s, Lesin had helped set up an advertising sales company called Video International that at one point controlled as much as two-thirds of the nation’s television advertising. While Bank Rossiya publicly owned 16 percent of Video International, a Roldugin offshore company created by the bank secretly held an additional 12.5 percent stake, the files show. According to its 2014 bank account forms, the company, International Media Overseas, had annual income of about $10 million from its holdings.
A lawyer representing Video International declined to answer detailed questions, stating the information was non-public in Russia.
Roldugin’s International Media Overseas did more than simply hold media stakes. In 2011, the company entered into backdated share agreements with an offshore firm based in the Cayman Islands. The revenue went to Switzerland where backdating is legal. Identical share amounts were swapped between the parties, offsetting each other, so no actual shares needed to change hands. Instead, the companies agreed to the exchange and then simply paid the profit as if it had actually taken place. In 2011, International Media Overseas gained $463,800 from the deals. Sandalwood Continental netted almost $4 million from these types of transactions between 2008 and 2011, the files reveal.Crisis management
Putin’s circle of friends and associates are driven by two imperatives: confidentiality and control. They hate risk. Putin has shown he is willing to take aggressive steps to maintain secrecy and protect communal assets.
By December 2011, the financial system of Cyprus, where Sandalwood Continental did most of its business, was in trouble. The country began negotiations with Russia for an emergency loan. Toward the end of that year, Sandalwood, which banked with RCB Cyprus, began to transfer its loans to another British Virgin Islands-based company called Ove Financial.
In 2012, Sandalwood assigned dozens of loans, sometimes in amounts of hundreds of millions of dollars, to Ove Financial for $1 each, sometimes for nothing at all.
Ove Financial also served as one of the shareholders of Mikhail Lesin’s Gloria Market.
Ove Financial banked in Luxembourg, which was safe from the kind of turmoil that afflicted Cyprus. The company also used another Panama-based offshore incorporator called Morgan & Morgan. Complaints sprinkled through the email traffic indicate Bank Rossiya managers were less than happy with Mossack Fonseca’s service because the law firm took too long to move documents or did not prepare them exactly as specified.
The network would continue but without Mossack Fonseca or Sandalwood Continental. As a result, in 2013, Sandalwood shut down.
Putin’s associates made other changes to shore up the network. A new proxy took Roldugin’s place as owner of the company that had been involved in Kamaz. Roldugin hadn’t always been the most conscientious front man. At one point, a Bank Rossiya manager had complained to Mossack Fonseca in an email that it was a challenge to arrange for Roldugin to sign documents. This would no longer be a problem.
Around the same time, the members of the Ozero Cooperative began to transfer some of the massive wealth they had accumulated to their children. And Arkady Rotenberg made his son Igor the owner of some of his secret Mossack Fonseca companies, the leaked records show.
These generational transfers are signs of the rise of a new Russian aristocracy.
The Rotenbergs and other billionaires who have flourished under Putin’s protection are having an impact on the Russian economy.
The top 10 percent of wealth holders in Russia own 85 percent of all household wealth in the country, according to a 2014 Credit Suisse report. Meanwhile, 83 percent of the population has less than $10,000 in personal wealth. Inequality in Russia is so bad it deserves its own separate category, the report stated.
In 2014, Lesin resigned from Gazprom-Media. Russian press reports blamed a conflict between him and Bank Rossiya’s Kovalchuk. Lesin relocated to America, where he allegedly owned millions of dollars in property, holdings that had raised the suspicions of U.S. authorities.
In November 2015, Russian media reported that Lesin died of a heart attack in a hotel in Washington, D.C. Four months later, Washington’s chief medical examiner announced a cause of death that seemed anything but natural. The medical examiner said Lesin died of blunt force trauma to the head and had bruises on his neck, torso and limbs. Police are investigating the death.
How many secrets of the Putin-linked network Mikhail Lesin took to the grave may never be known.
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Op-Ed: Oligarchs hide billions in shell companies. Here's how we stop them
Apr 3, 2018 | The Guardian
By Frederik Obermaier and Bastian Obermayer
https://www.theguardian.com/world/commentisfree/2018/apr/03/public-registries-shell-panama-papers
Two years ago we published the Panama Papers after an anonymous source provided 2.6 terabytes of internal data from the dubious Panamanian law firm of Mossack Fonseca. We shared the data with 400 journalists worldwide and together revealed how the wealthy and powerful use shell companies to hide their assets. Such companies are exploited by dictators, drug cartels, mafia clans, fraudsters, weapons dealers and regimes like North Korea and Iran to hide their shady business transactions.
As a consequence, Sigmundur Davíð Gunnlaugsson, the prime minister of Iceland, resigned. The Pakistani prime minister, Nawaz Sharif, did the same, and in the United Kingdom even David Cameron’s father was implicated. So far, the Panama Papers have helped tax authorities around the world to recover more than $500m in unpaid taxes and penalties. It could be far more if lawmakers finally take action.
After publishing the Panama Papers, we have heard a lot of promises from politicians around the world. They have talked about the need for transparency, and while the discussion is warm, the details are complicated: a multilateral exchange of information and stronger anti-money laundering regulations are as difficult to implement and control as they sound.
But why bother? There is a far less bureaucratic and more powerful measure: public beneficial ownership registries. Databases in which citizens can easily access and explore the owners of companies. Not the nominee director, not the fake shareholder – the real owner. The person at the center of the matryoshka-like corporate structures, or, as experts refer to them: the ultimate beneficial owner of a company.
A database of actual owners would enable companies to check with whom they are actually doing business. It would enable activists, journalists and skeptical citizens to investigate the individuals running dubious companies which earn millions in alleged “consulting contracts”, which are in many cases nothing more than concealed payments of corruption money. It would also give prosecutors the opportunity to follow dark money without having to rely on nerve-racking, time-consuming legal maneuvers with foreign governments.
Searchable by company and by individual names, it would enable investigators to see if Dictator X or Autocrat Y owns companies in Country Z. Combined with a public property register, it would narrow, if not close, loopholes which allow oligarchs and their relatives to betray their own citizens and stash plundered money across the globe.
Creating beneficial ownership registries will not be easy. Recently, the UK House of Lords rejected an attempt to force overseas territories under British control to create said registries. And in the United States, where some states make it more difficult to vote than to start a company, there has yet to be any reasonable public discussion about creating these transparent registries, making America a willing accomplice in global corruption. The treasury department in 2015 estimated that approximately $300bn in illicit proceeds are generated in the US per year!
Critics of public beneficial ownership registries often say that exposing company owners could put them in danger of blackmail or even kidnapping. However, no data supports such claims and there will probably never be any. As it is, the financial elite often surround themselves with the symbols and spoils of wealth, such as big cars, yachts and villas. There is no desire to hide their treasure; in fact, they often flaunt it.
Corruption is a scourge. It hits the poor first and hits them hard. Whole continents are plundered, the proceeds of human trafficking are laundered, wars are financed and violent religious extremism is supported.
The word “corruption” comes from the Latin “corrumpere”, which can mean “to destroy”. Corruption destroys democracy. Corruption costs citizens extraordinary amounts of money. According to estimates, corruption consumes more than 5% of the global gross domestic product.
Developing regions lose more than 10 times the money they receive in foreign aid to illicit financial schemes. Without corruption and the shell companies that make it possible, there might be no need for aid to Africa or Asia. Most importantly, corruption kills. According to Navi Pillay, the former United Nations high commissioner for human rights, “The money stolen through corruption every year is enough to feed the world’s hungry 80 times over.”
As Louis Brandeis, the late associate justice of the supreme court of the United States, once pointed out sunlight is the best disinfectant. Hence let the sunshine in! Lawmakers must make public beneficial ownership registries a priority to ensure that institutions remain transparent and democratic.
There is no legitimate reason to allow individuals to own anonymous companies or to help new “entrepreneurs” to create them. Lava Jato in Brazil, the Fifa scandal and nearly every other major corruption case have involved opaque company structures created to bribe, receive bribes or to hide dirty money.
Financial crimes rely on exploiting anonymous companies and trusts, and secrecy jurisdictions like the British Virgin Islands, the Cayman Islands and the states of Delaware and Nevada are partners in those crimes. They must be held accountable.
Waiting for a global solution means waiting a long time, if not forever. The only way to draw the corporate curtain back and expose corruption is for lawmakers to work in the public interest and create public beneficial ownership registries and public property registries now. The more countries that adopt these measures, the fewer places dictators, human traffickers, weapons dealers and oligarchs can hide.
Lawmakers that claim to stand against corruption should do so by fighting for these kinds of registries now, or forever hold their peace.
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Op-Ed: Whistleblowers are vital to democracy. We need to better protect them
Apr 9, 2018 | Los Angeles Times
By FREDERIK OBERMAIER and BASTIAN OBERMAYER
https://www.latimes.com/opinion/op-ed/la-oe-obermaier-obermayer-whistleblowers-20180409-story.html
Two years ago, we published the Panama Papers. The internal data from the dubious Panamanian law firm Mossack Fonseca revealed how dictators, drug cartels, mafia clans, fraudsters, weapons dealers and regimes like North Korea and Iran use offshore shell companies to hide their shady business transactions. The publication of investigations based on the papers brought down prime ministers in Iceland and Pakistan, triggered mass demonstrations and launched criminal trials around the world. Laws have changed and oversight committees have been adopted in numerous countries. The Panama Papers have helped tax authorities recover several hundred million dollars in unpaid taxes and penalties.
All this began with just one individual and his courage: A whistleblower who called himself (or herself, we still don't know) "John Doe." He anonymously leaked 2.6 terabytes of data to us. (We try not to think about what the drug dealers, dictators and organized crime figures would do to John Doe, if they could find him.) His life, his job and his family are still at risk because he saw corruption and decided to try to remedy it.
Society cannot thank John Doe enough. Without whistleblowers like him, the world would be a much less transparent place. We wouldn't know the details of the shady shell games of the financial industries. We would be in the dark about how national intelligence services intercept our communications, Russia's elaborate doping machine, Israel's secret nuclear program and the dodgy tricks of Cambridge Analytica.
Yet still, the way society treats whistleblowers is schizophrenic at best. They are regarded as vital to open societies, but there are few laws to effectively protect them. When they're revealed along with the secrets they uncover, they often end up marginalized, shamed or, worse, threatened. People love the betrayal, but not the betrayer.
Edward Snowden, whose trove of internal National Security Agency documents revealed eavesdropping by the United States and its allies, lives in forced exile in Moscow. Chelsea Manning spent years in prison after leaking diplomatic cables and Army reports from the wars in Afghanistan and Iraq, along with a video of American soldiers killing civilians in Baghdad. The United Nations special rapporteur on torture called Manning's sentence cruel and inhuman. Both face hate and anger in their home countries, and in Snowden's case, the most serious of criminal charges.
Former CIA employee John Kiriakou confirmed that the U.S. tortured prisoners with waterboarding and was imprisoned for nearly two years. Now his former colleague, Gina Haspel, who once oversaw a black site where torture took place, has been nominated to be the new director of the CIA.
Russian runner Yulia Stepanova saw her career come to an end after she exposed Russia's elaborate doping machinery, but athletes complicit in the scheme continue to compete. Grigory Rodchenkov, the former head of Moscow's anti-doping laboratory, who came clean about the misdeeds after Stepanova, is living under witness protection somewhere in the U.S.
NSA contractor Reality Winner is facing a multi-year-prison sentence for informing the public about Russia's attempts to manipulate the U.S. election in 2016. In the Philippines, self-confessed hitman Edgar Matobato has been on the run since he denounced his country's covert death squads, while Philippine President Rodrigo Duterte, the man Matobato says is responsible for the bloody offensive, runs the government.
This sort of treatment is a signal to others who might come forward: Look what can happen to you if you leak incriminating information. You may be ostracized, sued, imprisoned, ridiculed and intimidated. In the worst cases, you will have to go into hiding to protect yourself.
Not every whistleblower is a white knight, a role model in every way. Some are extremely unsympathetic. But they and their deeds deserve to be protected, not punished.
The U.S. has numerous whistleblower protection laws, but often they do not provide much actual protection. State laws vary in a number of respects and frequently hinge on whether the employer is private or public. Federal whistleblower statutes, including the Whistleblower Protection Act and the Intelligence Community Whistleblower Protection Act, are confusing at best.
One common problem is that many whistleblower laws do not make crystal clear what kind of activity is protected, or under what circumstances. To be effective, these laws cannot leave what constitutes protected activity up for interpretation.
Whistleblowers are consistently penalized for not using "proper channels" to make their disclosures, when doing so would require the whistleblower to trust the company or agency whose conduct he is exposing. The definition of "proper channels" should therefore be broadened to include the media. Often the media are a whistleblower's only real option, and exposing the unethical or illegal behavior to the public is crucial.
The U.S. uses the 1917 Espionage Act to go after government leakers like Snowden and Manning. Congress should move to insulate whistleblowers from the law by allowing for a public-interest defense. And as long as they do act in the public interest, whistleblowers should also be immune by law from civil lawsuits, to protect them from the threat of financial retaliation.
If we do not raise our voices in defense of whistleblowers, if there is no public outcry and no change for the better in laws and practice, criminals and corrupt elites will win.
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Feb 5, 2019 | Süddeutsche Zeitung
By Christian Endt , Hannes Munzinger , Frederik Obermaier , Daniela Prugger and Vanessa Wormer
https://www.sueddeutsche.de/wirtschaft/transparenzregister-firmeneigentuemer-eu-1.4317342
Since October 2017 there is a transparency register in Germany. Everyone should be able to see the owners of companies, so the idea.In fact, only selected people get access and often the data is incomplete. This makes it easy for money launderers and sanction breakers.Internal Treasury files available to SZ and NDR now show how companies have put policy pressure on legislation.
The promise was great: a register should be forthcoming, it should be accessible to everyone, and it should put an end to obscure corporate structures in Germany. It would be quite straightforward for anyone to know who owns a company, it said in 2016 from the Federal Justice and the Federal Ministry of Finance in Berlin. The Panama Papers - that publication about the dark business of the rich and powerful - was only a few days ago. Meanwhile, almost two years have passed. The Transparency Register was published in October 2017However, there is not much left of the original promise: only selected people get information from the Transparency Register, and even if they do, the data are often incomplete. The history of the Transparency Register is the story of a victory of lobby interests over the common good - and the story of a political fiasco.
To understand the full extent of the failure, you have to start from scratch: at the German Commercial Register. The federal states offer online access to the commercial register in a common portal. Anyone can look on this website, who is the shareholder of a company. The problem with a few simple tricks - such as intermediary companies that are noted as shareholders - can disguise the true owner. Money launderers, sanction breakers and other criminals have an easy time.Money launderers and other criminals continue to have easy time
This should be changed by the Transparency Register: "The significant beneficial owners, who are behind a letterbox company, may no longer remain anonymous," demanded in 2016, the then Minister of Justice Heiko Maas. Finance Minister Wolfgang Schäuble even submitted a ten-point plan. It was nothing but a beautifully wrapped turnaround of his previous policy. As can be heard from Brussels, Germany had initially stubbornly resisted a transparency register at EU level. But this negative attitude was before the Panama Papers. Tempi passati.
The EU finally obliged all member states to implement such a register. And the Ministry of Finance wrote a bill at the end of 2016 that went beyond the requirements: "The inspection of the transparency register is permitted for informational purposes," it said. The employers' organizations were appalled. Public access is disproportionate and does not contribute to combating money laundering. The Association of Family Businesses went further: not even journalists or non-governmental organizations should have access to the register. In the past, it was mainly their research that revealed corruption and money laundering scandals.
On 3 January 2017 , the family entrepreneurs submitted a letter to the Ministry of Finance. The letter is part of an internal file of the Ministry of Finance , which received the portal FragdenStaat.de by means of the Freedom of Information Act and left to SZ and NDR for evaluation. The public insight increases "the danger to life and limb of family entrepreneurs and their families," complained the association. An argument, which is also advanced in tax havens of transparency opponents, has not been proven so far. The family entrepreneurs also admitted on demand that the alleged threat is above all a feeling of their members. In the Federal Ministry of Finance, it was apparently still effective.
A few days after the letter of the association is sent an e-mail in the Ministry of Finance: An employee of the then Secretary of State Michael Meister (CDU) issued in consultation with Minister Schäuble the instruction to rewrite the bill and "in the Cabinet template public access to the Transparency Register not provide ". The official explicitly refers to the "arguments of family entrepreneurs".
On 22 . February 2017 , the bill is passed by the Cabinet. The idea of granting every citizen access to the Transparency Register has finally died out. Only persons and organizations with "legitimate interest" can gain insight. But only in register entries, for which they each have to prove their interest individually. Journalists must also explain to the Bundesanzeiger - a private company - why they want to know who is behind a company. Only if there is a reasonable suspicion of money laundering or terrorist financing, you get the information. The EU has meanwhile decided that the Transparency Register from 2020must be publicly accessible. The quality of the information collected there will not change.
In reality, the transparency register also offers all kinds of loopholes. Take the case of the Dortmund residential complex "Hannibal 2". The residents of the building complex had to leave their apartments from one day to the next in 2017, because the city administration had cleared the building because of fire safety shortcomings. Hundreds of residents moved to emergency shelters. Who owns the property, who bears responsibility for their condition is still unclear. The land register is owned by a company called "Lütticher 49 Properties GmbH". If you look for this in the transparency register, you will find: nothing. In the commercial register one finds a company in Cyprus as owner of the Liège. Who in turn is behind this, is not in the register.One encounters the owners of sanctioned corporate and mafia connections
This is where private companies and non-profit organizations come in, who systematically record the publicly available information of the commercial register and make it more searchable. One such company is the German start-up Northdata . Its website contains information on around four million German companies. For investigators and journalists not only an uncomplicated search for companies, people and addresses are of high value, but also the opportunity to disclose cross-connections.
This allows the British organization Open Corporates across borders. On their website are data on 167 million companies from more than a hundred countries and since this week for the first time also information about five million German companies and about 4.5 million involved business people. "Today there are millions of companies, often in complex, cross-border structures that hide all sorts of problems, from money laundering to organized crime, opaque technology companies and tax evasion." To counteract this, it is imperative that business registers be open data for the benefit of all available, "says Chris Taggart, Managing Director of Open Corporates.
SZ, NDR and the non-profit search agency Correctiv were the data of OpenCorporates before publication exclusively before. As initial research shows, there are numerous overlaps with data leaks from tax havens, such as the Panama and Paradise Papers, One encounters in the data on the owners of sanctioned companies - and a striking connection to the mafia milieu. In Konstanz, nine defendants are currently being tried for drug-related mafia transactions. One of the men had a company registered on his private address and appointed a previously unknown partner in connection with the group as managing director. About the company ran a catering business in Berlin-Mitte, to what extent it has been used for illegal business is unclear. In any case, according to information provided by SZ and NDR, this company was not yet known to the investigators.
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Jan 27, 2019 | Süddeutsche Zeitung
By Thomas Knellwolf, Oliver Zihlmann and Frederik Obermaier
https://www.sueddeutsche.de/wirtschaft/panama-papers-steuerbetrug-korruption-1.4304753
As part of the Panama Papers developments, the Federal Criminal Police Office has compiled data packages on tax fraud and corruption for investigators from 17 countries.However, the Swiss authorities do not want to accept the data offered - although they are likely to involve much evidence from the scandals revealed.
At 20 . In September 2018 , Wiesbaden had something like an early Christmas party for European top investigators. At the invitation of the Federal Criminal Police Office (BKA), police and prosecutors from 17 countries met at the headquarters of the police department. For each host state was a hard drive ready. On it was stored data from Mossack Fonseca: the Panamanian scandal firm around which the Panama Papers turned.
An anonymous whistleblower had once leaked the data to the Süddeutsche Zeitung , later the Federal Criminal Police Office had also obtained Mossack-Fonseca data. Now investigators from all over the world should be able to recount those stories that had been published by about 400 journalists for months . It was about tax evasion, fraud and corruption. Accordingly, the investigators attacked at the BKA.
All, except one: the expert of the Swiss Federal Office of Police, in short: Fedpol. The policeman received instructions from Bern: Stay away from the Panama Papers ! First, it was said, the Swiss Federal Police "check" how it goes on. However, according to research by SZ and the Swiss media group Tamedia, the Swiss authorities are not accepting the data offered - as the only country. "We can inform that no other state in the EU or the EU-associated states has refused to accept the local data packets," said the BKA.
The decision once again reinforces the impression that Switzerland is more concerned about confidential business with money from all over the world than the investigation of criminal offenses. This is particularly spicy, as in almost all scandals that were revealed by the Panama Papers, led to Switzerland. For example, in the case of the cello-playing Putin confidant Sergei Roldugin , the controversial entrepreneur Beny Steinmetz and many others.
The Swiss Federal Prosecutor's Office establishes its veto, however, by being "bound by legal principles regarding the taking of evidence and the use of evidence". Data obtained by private individuals are only useable "if they could also have been legitimately obtained by the law enforcement authorities and, in addition, a balance of interests for their usability speaks." One must know: The BKA is silent about the origin; from the SZ, the investigators did not get the data. In Switzerland, there is a discretion for investigators, says David Zollinger, an ex-member of the Federal Attorney's Office: "The law does not regulate how federal prosecutors or Fedpol may deal with evidence that was procured by private individuals."
The Swiss investigators escape so well a lot of money. Worldwide, hundreds of millions of euros have been collected through penalties as a result of the Panama Papers publications . The fact that the documents are promising has long been known: journalists found information on ongoing proceedings that the Swiss prosecutors apparently lack. Or, as one must say: will be missing in the future.
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Jan 17, 2019 | Süddeutsche Zeitung
By Frederik Obermaier and Bastian Obermayer
https://www.sueddeutsche.de/wirtschaft/schwarzgeld-ausgeliefert-1.4291678
Paris transfers a Panama specialist of the law firm Mossack Fonseca to Germany. The investment banker had cared for a number of very wealthy clients in their alleged illegal activity.
A former German employee of the Panama Papers law firm Mossack Fonseca is delivered to the Federal Republic. Dirk Brauer was arrested at Paris airport in November. The investment banker had worked for Mossack Fonseca's Asset Management Department, where he assisted a number of very wealthy clients in their alleged illegal activity. For him, therefore, not only German, but also Panamanian and American investigators were interested.
New York prosecutors have indicted brewers in absentia in early December. Among other things, the US authorities accuse him of founding and maintaining foundations and letterbox companies in Panama, Hong Kong and the British Virgin Islands, in order to hide their money from the authorities for customers. Brauer was eventually arrested on the basis of a US arrest warrant in Paris.
What the American authorities probably did not know: Brauer already cooperated with the public prosecutor's office Munich at this time. He had already handed the investigators several disks and unpacked extensively about his previous customers. As the prosecutor confirmed on SZ request, it was, among others, the former Siemens manager Hans-Joachim Kohlsdorf. This had first managed parts of the black money millions of Siemens - and later apparently let around two million to his numbered account in Switzerland. Kohlsdorf then apparently transferred this money to German accounts. The prosecutor investigates Munich against him.
On Wednesday, the Paris Cour d'Appel decided that Brauer should not be delivered to the US, but to Germany. "The other modalities of the transfer are currently not known," said a spokeswoman for the Munich prosecutor. Brauer himself was not available for a request.
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