Oligarchs and dictators' daughters apparently have a penchant for bunkering their assets on the British Virgin Islands. Barons and composers, on the other hand, seem to prefer the Cook Islands. To cheat on taxes, they create bogus firms with imaginative names like Tantris, Moon Crystal or Sequoia.
Those are just a few details published this week on a major global system of tax evasion, which sheds new light on the methods used to deceive fiscal authorities and hide money. In what is believed to be the largest data leak in history, anonymous informants have provided an international consortium of journalists with around 2.5 million documents detailing activities in tax havens around the world.
The virtual Everest of data exposes some 120,000 letterbox entities, offshore accounts and other dubious deals in more than 170 countries, in addition to the names of 140,000 individuals alleged to have placed their money in known tax havens. The list includes politicians, celebrities, weapons dealers, oligarchs, financiers and a very diverse cast of characters. It also includes hundreds of Germans. Reporters at the Süddeutsche Zeitung newspaper noted that the most famous German featured on the list is society playboy Gunter Sachs, best known abroad as Brigitte Bardot's husband for a brief period in the 1960s, who committed suicide in 2011 at the age of 78.
A 15-Month Reporting Project
"The investigation lifts the curtain on the offshore system and provides a transparent look into the secret world of tax havens and the individuals and companies that use and benefit from them," said Gerard Ryle, director of the International Consortium of Investigative Journalists (ICIJ), the organization that managed the global research. "We already knew how secret and inaccessible the offshore industry is, but we were surprised by how vast and far-reaching it is."
IJIC managed the mammoth 15-month research project together with 86 journalists from 46 counties. Participating media included the BBC, the Guardian, the Washington Post, Le Monde, Switzerland's Sonntagszeitung, and German daily Süddeutsche Zeitung and public broadcaster NDR.
Investigators and governments have been probing massive offshore money flows -- both legal and illegal -- for years. In Germany, an intensive debate broke out in recent years over the purchase of CDs containing data on tax evaders. With its banking secrecy laws, Switzerland is also routinely placed under pressure for creating a friendly environment for tax cheats. And during discussions over providing euro-zone member Cyprus with a bailout package, slush accounts and tax evasion there were a major subject of debate. This week, the admission by former French Finance Minister Jérôme Cahuzac -- who stepped down in a tax evasion scandal two weeks ago -- that he held an offshore bank account has deeply shaken the government of President François Hollande. Politicians, investigators and activists have been fighting in vain against these secret and often illegal networks. One 2012 study estimated a total of between $21 trillion and $32 trillion had been hidden in tax havens. Now, reporting by the ICIJ consortium could help eliminate the system.
"A well-paid industry of accountants, middlemen and other operatives has helped offshore patrons shroud their identities and business interests, providing shelter in many cases to money laundering or other misconduct," ICIJ writes. This involves "many of the world's top banks -- including UBS, Clariden and Deutsche Bank," which it accuses of having "aggressively worked to provide their customers with secrecy-cloaked companies in the British Virgin Islands and other offshore hideaways." A spokesperson for UBS told the journalists investigating the accounts that the bank applies "the highest international standards" to fighting money laundering.
'I've Never Seen Anything Like This'
The documents investigated cover a period of close to 30 years. They expose numbers and facts, money transfers, the dates letterbox companies were founded and connections between companies and individuals. The total mass of data is reported to be 160 times larger than the trove of State Department cables published by WikiLeaks in 2010. "I've never seen anything like this. This secret world has finally been revealed," said Arthur Cockfield, a law professor at Queen's University in Canada interviewed by Canadian public broadcaster CBC.
The list of alleged tax evaders is as long as it is diverse. ICIJ claims it includes government officials and their families in places like Pakistan, Azerbaijan, Thailand and Canada. It also includes, "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 labelled as a cog in Iran's nuclear-development program."
The following are but a few examples cited in ICIJ's reporting.
- ICIJ partner Süddeutsche Zeitung in Germany reported allegations on Thursday that Gunter Sachs, who committed suicide in May 2011, had not declared the entirety of his alleged assets with tax officers before his death. At issue are two companies and five trusts based on the Cook Islands. Sachs reportedly had similar "constructs" in Panama, the British Virgin Islands and Luxembourg. The executor of his estate has denied the allegations, claiming the companies had already been disclosed "during his lifetime."
- German public broadcaster NDR has reported that another prominent offshore client on the British Virgin Islands was top Russian oligarch and multibillionaire Mikhail Fridman. It claimed the most important man behind his construct of firms was Franz Wolf, the 60-year-old son of former East German spy chief Markus Wolf. NDR reported the Wolf refused to answer any questions from journalists with the broadcaster about the allegations.
- ICIJ also explored Greek tax evaders and found that just four out of 107 offshore companies present on the British Virgin Islands it investigated are registered with tax authorities. "The companies' owners are a surprising cross-section of Greek society, from the richest districts in Athens to remote northern villages," it noted.
- The list also includes Imee Marcos, the governor of the Philippines' Ilocos Norte province and the eldest daughter of former dictator Ferdinand Marcos. She is believed to hold secret trusts on the British Virgin Islands. ICIJ reports that Filipino authorities now want to investigate whether some of the billions in assets Marcos is believed to have taken out of the country are parked in the tax haven.
- The wife of Russian First Deputy Prime Minister Igor Shuvalov, as well as two top executives of Gazprom, are also included on the list of alleged tax evaders, according to the ICIJ reporting. They, too, are alleged to hold stakes in companies based in the British Virgin Islands. All declined to comment to the consortium.
- Meanwhile, Leyla and Arzu Aliyeva, the daughters of Azerbaijani President Ilham Aliyev, appear several times in the records. Radio Free Europe/Radio Liberty has reported that they have three holdings on the British Virgin Islands.
- ICIJ also questioned the deputy speaker of Mongolia's parliament, Bayartsogt Sangajav, about records showing he has an offshore company and a secret Swiss bank account in which he had deposited over $1 million for a time. "I shouldn't have opened that account," he told ICIJ reporters. "I probably should consider resigning from my position."
- The list of names from Spain includes baroness and art collector Carmen Thyssen-Bornemisza, who is identified in the documents as using a company based in the Cook Islands to buy artwork through auction houses like Sotheby's and Christie's. According to ICIJ, her attorneys acknowledged that she gains tax benefits by holding ownership of her art offshore, "but stressed that she uses tax havens primarily because they give her 'maximum flexibility' when she moves art from country to country."
- Also featured in the list, which includes some 4,000 people born in the United States, is composer Denise Rich, who has written hits for stars like Celine Dion. According to the records obtained by ICIJ, she had $144 million in April 2006 in a trust in the Cook Islands at the time. The trust's holdings included a yacht called the Lady Joy. Rich's ex husband, hedge fund manager Marc Rich, was prosecuted in the United States in 1983 for tax evasion. In a highly controversial move, former President Bill Clinton pardoned Rich during his last day in office. Denise Rich gave up her US citizenship at the end of 2011 and lives in Austria today.