Category: Investigative Reports

ICIJ: Release of offshore records draws worldwide response

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By Emily Menkes
The Global Muckraker
http://www.icij.org/blog

THE investigative series of the International Consortium of Investigative Journalists (ICIJ) on offshore secrecy – which draws from a cache of 2.5 million secret records – has ignited reactions around the globe.

In the 48 hours since the initial release of stories by the ICIJ and its media partners across the world, public officials have issued statements, governments have launched investigations, and politicians and journalists have been debating the implications of the records and the reporting.

Among the reactions and responses:

- Philippine government officials said they will investigate evidence that Maria Imelda Marcos Manotoc, a provincial governor and daughter of the late dictator Ferdinand Marcos, was the beneficiary of a secret BVI offshore trust.

- George Mavraganis, the Deputy Finance Minister of Greece announced that the Greek government is moving to address offshore-driven tax dodging. Greek members of parliament asked Mavraganis what he planned to do about the 103 offshore companies that ICIJ found hadn’t been registered with Greece’s tax authorities. George Sourlas from Greece’s Ministry of Justice said the revenue loss caused by offshore was huge. “By the actions of offshore companies in Greece, the revenue loss to the Greek government is in the order of 40 per cent or more of the debt of our country,” Sourlas said. “The offshore companies cast a shadow at this time of great crisis, when some get rich and many get poor.”

- In France, President Francois Hollande denied knowledge of the offshore accounts held by his 2012 campaign manager, Jean-Jacques Augier, asserting that it’s up to the tax administration to monitor Augier’s private activities. Reports about Augier’s offshore dealings by Le Monde, the BBC and other ICIJ partners came in the wake of news about tax fraud charges against Hollande’s ex-budget Minister, Jerome Cahuzac.

- The office of Azerbaijani President Ilham Aliyev asserted there was nothing unusual about the information in the leak – which showed that his two daughters were shareholders of three offshore companies. The statement said the President’s daughters “are grown up and have the right to do business.” A spokesperson for Azersun – a holding company controlled by Hasan Gozal, a corporate mogul who was listed as the director of the daughters’ companies – said the report was biased and based on inaccurate information. “I regret that authority of Press Council doesn’t go beyond Azerbaijan and there is no such institution worldwide to fight racketeer journalists,” the spokesman said.

- Ex-Columbian President Álvaro Uribe Vélez publicly defended his sons’ involvement in offshore business. Uribe stated that his sons Tomás and Jerónimo are entrepreneurs and “have participated in business dealings since they were children” and “they are not tax evaders.”

- In the UK, David Cameron is facing renewed pressure to take action over Britain’s entanglements within the offshore world. Lord Oakeshott, a senior Liberal Democrat said that the secrecy haven of the British Virgin Islands “stains the face of Britain.” Oakeshott and others are questioning whether Cameron will raise the issue in June of at the G8 summit of wealth nations. “How can David Cameron keep a straight face calling for the G8 to make big business pay tax when we let the BVI use British law and British protection to suck in billions in dirty money?” Oakeshott asked.

- German Finance Minister Wolfgang Schäuble stated on public radio that he was “pleased” with the ICIJ reports. He went on to say, “I think that such things as have been made known will increase the pressure internationally, and we will be able to increase the cooperation with those who have been more reticent”, a sentiment reflected in Germany’s previous lobbying to stamp out tax avoidance.

- Canadian Federal Revenue Minister Gail Shea called the released of offshore banking information as “good news” for Canadians and bad news for tax evaders. Ms. Shea urged ICIJ or anyone else with information on tax cheats to come forward.

- Pascal Saint-Amans, director of the Organization of Economic Cooperation and Development, said: “Secrecy is no longer acceptable. We need to get rid of it. If the rules make it possible, then we’ll change the rules.”

Highlights of offshore leaks so far

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By Emily Menkes
The Global Muckraker
http://www.icij.org/blog

THIS week marks the beginning of one of the biggest financial leaks in history.

The International Consortium of Investigative Journalists has just released the first stories from a global collaborative project into the world of offshore money.

The Tax Justice Network, an advocacy group claims that a third of the world’s wealth is tied up in the secret area of offshore.

For the past 15 months, journalists from over 40 countries have worked together to shed light on this issue.

And here’s some of what they found.

- François Hollande’s treasurer during the 2012 presidential campaign, businessman Jean-Jacques Augier, is revealed to have investments in the Cayman Islands.

- Philippine government officials said Friday that they will look into the disclosure that Maria Imelda Marcos Manotoc, the eldest daughter of the late dictator Ferdinand Marcos was a beneficiary of a secret offshore trust in the British Virgin Islands. “We are duty bound to investigate and, depending upon informed preliminary findings, decide whether to pursue the matter,” said Andres Bautista, the chairman of the Presidential Commission on Good Government, tasked with recovering the Marcos family’s alleged ill-gotten wealth.

- Germany’s largest financial institution, Deutsche Bank, helped its customers maintain more than 300 secretive offshore companies and trusts through its Singapore branch.

- New light is shed on a half-billion-dollar Ponzi scheme in Venezuela that shuffled investor money among a maze of offshore companies, hedge funds and bank accounts stretching from the Cayman Islands to Switzerland and Panama, smoothing the way by funneling bribes to officials in Venezuela.

- Commonwealth Trust Limited, a BVI-based firm, is revealed to have set up companies involved in the Magnitsky affair, a case that’s strained U.S.-Russian relations and blocked American adoptions of Russian orphans.

- One of Mongolia’s most senior politicians says he is considering resigning from office after being confronted with evidence that he has an offshore company and a secret Swiss bank account.

- A prominent Canadian lawyer, husband to a Liberal senator, moved CA$1.7 million (US$1.1 million) to secretive financial havens while he was locked in battle with the Canada Revenue Agency over his taxes, according to documents in a massive leak of offshore financial data.

- A corporate mogul whose business empire has won building contracts worth billions of dollars amid Azerbaijani President Ilham Aliyev’s massive construction spree is tied to the president’s family through secretive offshore companies.

- The prominent Thais listed in secret documents as owners of offshore holdings includes the former wife of ousted Prime Minister Thaksin Shinawatra, a sitting senator, a former high-ranking defense ministry official, Forbes-listed tycoons, and a former government minister whose assets in the United States are frozen because of her alleged links to Zimbabwean dictator Robert Mugabe.

- Greek citizens who own or direct offshore companies in the British Virgin Islands and other tax havens rarely declare them to Greek tax officials, a review of more than 100 companies shows. Just four out of 107 offshore companies investigated by ICIJ are registered with tax authorities as the law usually requires, particularly when the firms hold assets or conduct business in Greece. Officials apparently have no record of the other 103 firm – or whether the owners declared any assets held by these entities or paid taxes on them.

- A list containing examples of some of the most high-profile names uncovered in this investigation, along with records of their offshore companies. Those named come in the form of politicians, businessmen, army generals, tycoons, relatives of dictators, and are scattered across 29 different countries.

Finally, for those interested in how ICIJ managed to tackle records cache, the data manager of the project, Duncan Campbell, writes an in-depth explanation of how our journalists were able make sense of the 260 gigabytes of information obtained.

Four large databases, half a million text, PDF, spreadsheet, image and web files were dissected to reveal over 130,000 records on the people and agents who run, own, benefit from or hide behind offshore companies.

Manny Villar, JV Ejercito linked to offshore accounts

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SENATOR MANUEL ‘Manny’ B. Villar Jr. and Congressman Joseph Victor ‘JV’ G. Ejercito are from rival political coalitions. Villar played a lead role in the impeachment and eventual ouster from the presidency of Ejercito’s father Joseph Estrada.

In the May 2013 elections, Villar’s wife Cynthia is running for senator with President Benigno Aquino III’s Team PNoy while Ejercito is part of the senatorial slate of the United Nationalist Alliance (UNA) led by Vice President Jejomar ‘Jojo’ Binay.

But in one important respect, Villar, 63, and Ejercito, 43, are pretty much alike. Both businessmen-politicians own secret offshore corporations in the British Virgin Islands (BVI), a privacy and tax haven where a global elite of wealthy people like to keep their money away from the prying eyes of the authorities.

Villar is the beneficial owner of a BVI international business corporation called Awesome Dragon Holdings Limited. It was incorporated in the BVI on July 26, 2007 while he was president of the Senate. Villar served as Senate president from July 2006 to November 2008.

Ejercito is a director of a BVI company called Ice Bell Properties Limited formed on July 8, 1999, when his father was still president. In 2001, Ejercito became mayor of San Juan City, and in 2007, a freshman congressman form his father’s political bailiwick.

Check out full text and related documents, Part 2 of the PCIJ report, “Offshore and Politicians in the Philippines” here:

Part 2: Manny Villar, JV Ejercito linked to offshore accounts

Sidebar: Repentant, reticent, rude

In their separate written replies to the PCIJ, Villar and Ejercito differed yet again, however.

Villar admitted to being the “ultimate shareholder” of Awesome Dragon Holdings Limited but said it was a dormant company with a capital of just one US dollar. He said it was put in place in 2007 “as a ready corporate vehicle for any strategic multinational business opportunity that may become available.”

PCIJ checked with the BVI authorities and learned that contrary to Villar’s statement, Awesome Dragon Holdings remains active as of April 2, 2013.

Ejercito did not confirm or deny his directorship in Ice Bell Properties Limited. Instead, he raised questions about the timing of this story, which, he said, “is highly suspicious considering the on-going electoral campaign of which I am one of the leading contenders among the UNA senatorial candidates.”

Ejercito wrote: “I have held high respect to (sic) the PCIJ as an institution. I hope that you will not allow yourself to fall in (sic) the manipulative efforts of desperate people in (sic) dirty politics.”

Both Villar and Ejercito did not report their links with their respective offshore companies in their annual Statements of Assets, Liabilities, and Net Worth (SALNs), copies of which were gathered by PCIJ.

The PCIJ secured copies of Villar’s SALNs from 1992, when he was first elected member of Congress, to 2011, the latest available, as well as Ejercito’s SALNs from 2001, when he began his political career as San Juan City mayor, to 2009, the year for which the latest copy is available.

As public officials, Villar and Ejercito are required by law to list all their assets, liabilities, business interests, and financial connections, including those located in other countries, in their annual SALN.

In his reply, Villar said Awesome Dragon Holdings Limited does not appear in his SALN because it is owned by Fine Properties Inc., which he has already enrolled in his SALN. “I do not own it – it is owned by Fine Properties Inc.,” he said.

Fine Properties does not appear as shareholder or officer of Awesome Dragon Hioldings, however.

Records maintained by Portcullis Trust Net Limited, the offshore servicing company that was instrumental in incorporating Awesome Dragon Holdings Limited in the BVI, listed Villar as “beneficial owner” in the data sheet of the offshore corporation.

His ties to the offshore company are also apparent from the due diligence documents submitted by UBS AG (Hong Kong) to Portcullis Trust Net. In a September 5, 2007 letter to Portcullis with the subject heading “Re: Manuel Bamba Villar (‘the Client’),” UBS AG (Hong Kong) certified that Villar was a client of good standing of the bank since 1999 and confirmed his residential address.

Attached to the letter was a certified true copy of an image of the main page of Villar’s passport with a handwritten note stating “Re: BVI Co – Awesome Dragon Holdings Limited.” It was signed by Linda Chew, UBS AG (Hong Kong) executive director at that time.

Ejercito’s net worth has grown steadily through the years – from P53.3 million in 2001, when he was only 32 years old, to a high of P64 million in 2009

While he disclosed a fairly detailed list of his business interests and financial connections in over two dozens of family-owned and publicly listed companies, he did not include Ice Bell Properties Limited.

In his reply to PCIJ, Ejercito did not squarely address the question why Ice Bell Properties Limited is not mentioned in his SALN. He merely said: “To the best of my knowledge, I have truthfully and accurately declared all my assets, liabilities, and net worth in my Statement of Assets, Liabilities and Networth (SALN) since 2001 when I became Mayor of San Juan and up to the present, that I am now a member of the House of Representatives.”

Like Villar, JV Ejercito’s name also appears in the documents – he is listed as the sole director of Ice Bell Properties Limited. Records show the same San Juan city residential address that Ejercito wrote in his 2001 SALN.

Ownership, however, is lodged in a single-bearer share, which means no record of ownership is maintained by the company. Rather, ownership rests with whoever is in possession of the bearer instrument at any given time.

Ejercito’s Ice Bell Properties was incorporated in the BVI in July 1999, a time when he was overseeing a business conglomerate of close to 30 companies, including almost a dozen founded by his mother Guia Gomez, one of Estrada’s wives who is now the re-electionist mayor of San Juan City.

PCIJ checked with BVI authorities and found that Ice Bell Properties remains active as of last Tuesday, April 2, 2013.

Though they may not breaking any laws per se, politicians and public officials with ties to secret offshore corporations are regarded rather dimly by advocates of good governance.

“The intention is to hide the transactions or hide their income so they made use of tax havens or places where there are no rules on transparency,” said Milwida Guevara, a former undersecretary at the Department of Finance and one of the founders of the Movement for Good Governance, a civil society organization.

“It’s hypocritical that they are sponsoring legislation that calls for faithful compliance with laws. At the same time, they are themselves trying to get away with it,” says Guevara. - PCIJ, April 2013

Unlocking secret offshore accounts: A 46-country investigative report

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OVER THE LAST 15 months, a network of investigative journalists from 46 countries — including the Philippine Center for Investigative Journalism — had been hard at work verifying and validating data enrolled in 260 gigabytes of about 2.5 million files, including more than 2 million e-mails.

The subject matter of inquiry: 122,000 offshore companies or trusts, nearly 12,000 intermediaries (agents or “introducers”), and about 130,000 records on the people and agents who run, own, benefit from or hide behind offshore companies.”

The global investigative reporting project was led by the International Consortium of Investigative Journalists (ICIJ) that is based out of Washington DC. But rather than just rush to upload the documents online, ICIJ thought it best to partner with journalists and media agencies to check out and verify first.

ICIJ collaborated with reporters from The Guardian and the BBC in the U.K., Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post, the Canadian Broadcasting Corporation (CBC) and 31 other media partners around the world.

In all, “86 journalists from 46 countries used high-tech data crunching and shoe-leather reporting to sift through emails, account ledgers, and other files covering nearly 30 years.”

After all, the file was more than massive — “more than 160 times larger in size as measured in gigabytes than the U.S. State Department cables leaked to and published by WikiLeaks in 2010.”

Read Part 1 of the PCIJ’s report on “Offshore and Politicians in the Philippines”:

- Ferdinand Marcos’s daughter tied to offshore account in the Caribbean

- What Imee disclosed and didn’t

Today, the massive outcome of the global investigation of offshore accounts goes public worldwide.

Excerpts from the ICIJ reports, “Secrecy for Sale: Inside the Global Offshore Money Maze,” follow:

“A cache of 2.5 million files has cracked open the secrets of more than 120,000 offshore companies and trusts, exposing hidden dealings of politicians, con men and the mega-rich the world over.

“The secret records obtained by the International Consortium of Investigative Journalists lay bare the names behind covert companies and private trusts in the British Virgin Islands, the Cook Islands, and other offshore hideaways.

“They include American doctors and dentists and middle-class Greek villagers as well as families and associates of long-time despots , Wall Street swindlers , Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers, and a sham-director-fronted company that the European Union has labeled as a cog in Iran’s nuclear-development program.

“The leaked files provide facts and figures – cash transfers, incorporation dates, links between companies and individuals – that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike. The records detail the offshore holdings of people and companies in more than 170 countries and territories…

“The vast flow of offshore money – legal and illegal, personal and corporate – can roil economies and pit nations against each other. Europe’s continuing financial crisis has been fueled by a Greek fiscal disaster exacerbated by offshore tax cheating and by a banking meltdown in the tiny tax haven of Cyprus, where local banks’ assets have been inflated by waves of cash from Russia.

“Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. The Stolen Asset Recovery Initiative, a program of the World Bank and the United Nations, has estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $1.6 trillion a year.

“ICIJ’s 15-month investigation found that, alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging and political corruption to thrive.

Offshore patrons identified in the documents include:

- Individuals and companies linked to Russia’s Magnitsky Affair, a tax fraud scandal that has strained U.S.-Russia relations and led to a ban on Americans adopting Russian orphans.

- A Venezuelan deal maker accused of using offshore entities to bankroll a U.S.-based Ponzi scheme and funneling millions of dollars in bribes to a Venezuelan government official.

- A corporate mogul who won billions of dollars in contracts amid Azerbaijani President Ilham Aliyev’s massive construction boom even as he served as a director of secrecy-shrouded offshore companies owned by the president’s daughters.

- Indonesian billionaires with ties to the late dictator Suharto, who enriched a circle of elites during his decades in power.

“The documents also provide possible new clues to crimes and money trails that have gone cold.

“After learning ICIJ had identified the eldest daughter of the late dictator Ferdinand Marcos, Maria Imelda Marcos Manotoc, as a beneficiary of a British Virgin Islands (BVI) trust, Philippine officials said they were eager to find out whether any assets in the trust are part of the estimated $5 billion her father amassed through corruption.

“Manotoc, a provincial governor in the Philippines, declined to answer a series of questions about the trust.”

Do men dominate the field of investigative reporting?

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SHEILA S. CORONEL, founding executive director of the Philippine Center for Investigative Journalism (PCIJ) and currently director of the Tony Stabile Center for Investigative Reporting in Columbia University, struck a sensitive chord online in the proverbial battle of the sexes with a March 10 blog post titled: “Is investigative reporting dominated by men?”

“It’s true that more and more women are entering journalism now than ever before… In many countries, the journalism profession is being “feminized.” But women in top editorial positions are still a minority.  And certainly, while there are a number of high-profile women investigative reporters, their numbers do not overwhelm,” Coronel’s blog reads.

Coronel cited the Women’s Media Center report last month that in 2012, women comprise only 37 percent of the staff of newspapers and account for only about one-third of the supervisory jobs. She goes on to say that the ratio of women in leadership positions in U.S. newsrooms has remained unchanged at about 30 percent since 1999. This, despite the fact that a woman is now at the helm of the one of the enduring newspapers in the U.S.–The New York Times.

According to Coronel, “A quick look at the 100 or so nonprofit investigative reporting centers, funds and associations worldwide shows that the face of watchdog journalism is male.”

However, here in the Philippines, investigative reporting takes on a more feminine face, as Coronel points out the experience of Filipino women at the height of then-strongman Ferdinand Marcos’ imposition of Martial Law.

“Many of the male journalists at that time had sold their souls to Marcos and spent the evenings after work drowning their torments at the bar of the press club. They were hardly role models. The women, on the other hand, were irreverent and feisty. They played a cat-and-mouse game with the censors,” Coronel writes in her later blog post, “Ensuring a place for women.”

For more on the latest trends in investigative reporting and insights from Sheila Coronel, check out her blog at http://watchdog-watcher.com/.

Coronel’s blog site also offers tips on investigative reporting and a comprehensive collection of the investigative reporting network of resources.