A trove of 13.4 million leaked documents exposes ties between Russia and a host of western officials, including Donald Trump’s billionaire commerce secretary, Wilbur Ross. The leaked "Paradise Papers" also expose the business dealings of Canadian Prime Minister Justin Trudeau’s main fundraiser and the offshore interests of Queen Elizabeth II and some 120 politicians from around the world, as well as a number of Israeli businesspeople.
The "Paradise Papers" leak reveals the extent to which American politics relies on personal wealth and the financial system outside of the United States. It also sheds light on corporate giants like Apple, Nike and others, who manage to minimize the taxes they pay through increasingly imaginative accounting maneuvers.
The leaked data discloses offshore ties of more than a dozen Trump advisers, cabinet members and major donors.
One of the biggest revelations in the Paradise Papers touch on investments by Ross, Donald Trump’s commerce secretary and owner of a shipping company who recorded income of more than $68 million since 2014 from a Russian energy company, which is partly owned by Russian President Vladimir Putin.
Ross has also used companies registered in the Cayman Islands to hold financial interests in the shipping firm Navigator Holdings, whose clients include the Russian energy company Sibur, which is partly owned by the state.
Among Sibur’s owners are Putin's son-in-law Kirill Shamalov and Gennady Timchenko, a billionaire who has been subject to U.S. sanctions since 2014 because of his ties with Putin. Sibur is a key client for Navigator Holdings, which paid it over $23 million in 2016.
Ross ended ties to 80 companies upon joining the Trump cabinet, but continues to own nine companies, including four that tie him to Navigator and its Russian clients.
The new files arrived from two service companies located in Bermuda and Singapore and from 19 corporate registries maintained by two governments, in countries that often serve as “way-stations” in the global shadow economy.
The leaks were obtained by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists and a network of over 380 reporters and newspapers in 67 countries, including Haaretz.
New from Russia
The leaked Paradise files also had new revelations about business ties between Russia and the United States. One paper directed ICIJ to public documents and to files in the Panama Papers, which shed light on relationships between two finance companies owned by the Kremlin, and a Russian billionaire who is heavily invested in Twitter and Facebook
In 2011, when the Russian bank VTB Bank secretly invested $191 million in Twitter, the deal was mediated by the investments fund belonging to Russian tycoon Yuri Milner. The papers also show that a subsidiary of Russian authority giant Gazprom, which is controlled by the Kremlin, financed a front company, which by virtue of belonging to a company associated with Milner, owned about a billion dollars worth of Facebook share, shortly before the company floated stock on Wall Street in 2012.
Shortly before that, Milner put $850,000 into Cadre, a real estate company established by Trump’s son-in-law and adviser Jared Kushner.
Milner is a Russian citizen living in Silicon Valley. His connections with Twitter, Facebook and Kushner’s company have been revealed beforehand, but his connections with Kremlin financial institutions have not been known until now.
A spokesman for Milner’s investments firm confirmed that VTB did invest through it in Twitter. Milner himself said in an interview that he hadn’t been aware of Gazprom’s involvement in his business. He also said that none of his investments have a political side, and that the investments in Kushner’s firm had been done with his own money.
Tax shelters promise secrecy. They make it easier to hide the control over companies. Setting up a company is perfectly legal, but secrecy attracts money launderers, drug traffickers, kleptocrats robbing their own countries blind, and others who prefer to act in the shadows.
Front companies with no employees or offices are also a way to dodge tax and steal billions from one’s mother country.
As far as the Israeli tax authorities are concerned, owning property or companies in tax shelters is not an offense, if done openly.
This habit of registering companies in tax shelters makes the poor poorer and exacerbates inequality, argues Brooke Harrington of the Copenhagen Business School, who wrote “Capital Without Borders: Wealth Managers and the One Percent”, There’s a clique that isn’t subject to the law like everybody else, she says: they live the dream life, but don’t pay the piper.
The Paradise Papers are a significant expansion beyond the Panama Papers, leaked in 2016, which ICIJ and its partners in the press also investigated.
The records significantly expand on the revelations from the leak of offshore documents that spawned the 2016 Panama Papers investigation by ICIJ and its media partners. The new files shine a light on a different cast of underexplored island havens, including some with cleaner reputations and higher price tags, such as the Cayman Islands and Bermuda.
The most detailed expose is how a law firm named Appleby and Estera, which had been Appleby’s corporate services division until being spun off in 2016, registered companies in tax shelters over decades.
Appleby’s clientele applaud its expertise, efficiency and network of experts around the world. Other law firms frequently use it when operating abroad. But documents dating over decades indicate that it wasn’t too fussy about its customers, and didn’t oversee cashflows.
The nearly 7 million files of Appleby and its subsidiaries date from the 1950s to 2016. The information includes emails, loan agreements worth billions and bank statements of at least 25,000 companies, affiliated with people in 180 countries.
With offices in Bermuda, Hong Kong, Shanghai, the British Virgin Islands, the Cayman Islands and other offshore tax shelters, Appleby’s belongs to the unofficial association of leading global law firms. The company had jealously protected its good name for about a century and avoided scandal. But the files reveal that it provided services to dubious clients such as Iran, Russia and Libya; concealed audits of failing governments that were laundering money; and that it had secretly been fined by the Bermudan regulator.
Appleby’s did not respond to questions by ICIJ, though it did publish a statement on its site: “Appleby has thoroughly and vigorously investigated the allegations and we are satisfied that there is no evidence of any wrongdoing, either on the part of ourselves or our clients.”
Appleby also said that it “operates in highly regulated jurisdictions and like all professional organizations in our regions, we are subject to frequent regulatory checks.”
The leaks also reveal spy planes bought by UAE, a company in Barbadoes that makes explosives owned by a Canadian engineer who tried to build a super-gun for Saddam Hussein, and the company registered in Bermuda by the deceased Mexican priest Marcial Maciel Degollado, who founded the Catholic order called the Legion of Christ, and who has been accused of molesting children.
Secrets from the board room
When Appleby isn’t serving the interests of the world’s richest people, it is giving legal advice to companies seeking to pay less in taxes.
The firm is not a tax advisor, but it has a significant share of the tax schemes used by companies around the world.
The files reveal that Apple Inc, the most profitable company in the United States, was looking for a new tax haven in Europe and the Caribbean after a Senate inquiry found that the technology giant had avoided tens of billions of dollars in tax payments by transferring its profits to a subsidiary in Ireland.
Appleby is a link in a chain that helps sports stars, Russian tycoons and government officials to buy private jets, yachts and other toys. Experts in the tax shelters helped Arkady and Boris Rotenberg, two Russian billionaires and childhood friends of Putin, to buy executive jets worth more than $20 million in 2013. The following year, America put the brothers on a blacklist because of their support for Putin pet projects, and their work with the Russian government. Appleby ended its relationship with the brothers. The Rotenbergs declined to comment to Zeitung.
PowerPoint presentations prepared originally by an Appleby employee, and other documents, show that among Appleby’s unsavory clients are a corrupt Pakistani official, two children of the Indonesian dictator Suharto and an alleged dealer in “blood diamonds”. Sometimes Appleby reported suspicions pertaining to its clients to the authorities, as the law requires.
But in other cases, the dubious clients remained so for years on end, without anybody noticing.
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