A “Nest Egg” in the Bahamas Database Exposes Offshore Holdings of Prominent Germans

A group of internet activists has posted data from a Bahamas corporate registry online. Searches of the database have turned up a number of prominent Germans whose offshore holdings weren’t previously known to the public. By DER SPIEGEL Staff
Documents from the corporate registry: the key to the network of companies

Documents from the corporate registry: the key to the network of companies

Foto: RAMON ESPINOSA / AP / MONTAGE DER SPIEGEL

By Malta Born, Rafael BuschmannRoman HöfnerMuriel Kalisch, Sebastian Mondial, Nicola Naber, Sara Wess, Sabrina Winter, Christoph Winterbach and Michael Wulzinger

The group's name alone reflects its combative mission: The collective of transparency activists calls itself Distributed Denial of Secrets (DDoS), a name that recalls denial of service, a form of online attack that knocks out servers and websites by targeting them with huge numbers of superfluous requests. Committed as they are to the fight against secrecy, DDoS have made it their goal to publish as much confidential information as possible. They have assembled around two exceptional activists from North America: Emma Best and Lorax Horne, who are proponents of the freedom of both data and sexual orientation. Their motto: "Be gay, do leaktivism." Both are 34 and neither of them see themselves as belonging to a binary gender. They feel neither male nor female and their pronouns are they/their.

Best and Horne are well versed in uncovering secrets that other people would prefer remained hidden. Best says that they used to do contract work for U.S. intelligence services and comes across as fearless and provocative. With their radical transparency, they and the DDoS team want to make progress in an area where politicians have found only limited success in recent decades: that of shutting down tax shelters around the world. Four months ago, they shared with DER SPIEGEL a large database from the corporate registry in one of the world’s most famous tax havens: the Bahamas. The role of DDoS is that of an intermediary, and the activists don’t want to reveal their source for the information.

DER SPIEGEL, in cooperation with the investigative journalism network European Investigative Collaborations (EIC) and the Henri Nannen School of Journalism in Hamburg, has reviewed around 1 million documents in total. The results of that search make it clear why the island nation continually resists international pressure to establish transparency. And why the country's efforts no longer go far enough to protect its clients and their letterbox companies today.

In addition, the case shows how difficult the handling of massive leaks can be. DDoS wants to make the database available over the internet so that anyone in the world can have a look. Yet the data also includes people who have done nothing wrong and have reliably paid their taxes - at least the data doesn't indicate the contrary. It isn't forbidden, after all, to have a company or a letterbox company in the Bahamas.

The data does reveal the names of well-known Germans who have had a difficult time with their explanations, such as BMW majority shareholders Susanne Klatten and Stefan Quandt as well as former football legend Uwe Seeler and some of his sporting friends.

None of that was known until now.

The DDoS activists are focused on the big picture. "We currently live in a society that is very sick, and I don't mean only with corona," Horne says. "I mean economic inequality and the simultaneous planetary suicide with human-made climate change." Tax evasion and avoidance is one of the major problems facing the world and is one of the causes of inequality, Horne says.

DER SPIEGEL 22/2020
Foto:

SVC.OrisWFL

The Caribbean offers both private individuals and companies from abroad a full-service package for their money. They don't have to pay corporate taxes or income tax, nor are there any levies on capital gains, wealth or inheritance – and it's all legal as long as it is declared to the tax office back home. According to the Tax Attractiveness Index maintained by the University of Munich, the Bahamas is in third place in the world rankings. Thousands of companies have set up their headquarters there, at least on paper – some to take advantage of legal tax loopholes or to evade taxes illegally.

The key to the network of companies based in the Bahamas should be the publicly accessible corporate registry, but that’s a farce. The official website doesn’t allow users to search using the names of the people behind companies, they can only perform searches using the names of the companies and their registration numbers. And even if you have that information, you won't generally find information about the people behind them. The data from DDoS, however, now makes that information publicly accessible.

Cold War Fears?

If it were up to the Quandts, the existence of their companies in the Bahamas would never have come to light. Susanne Klatten and Stefan Quandt are both the heirs of Herbert Quandt, the major industry figure who restructured BMW. Neither of them is prone to bombast or showing off. The siblings generally have a reputation of being responsible corporate citizens. But last week, BMW drew criticism for issuing a dividend of more than 700 million euros to the Quandt heirs in the midst of the coronavirus pandemic, which has seen the furlough of thousands of its workers.

The Quandt heirs’ history in the Bahamas apparently began in early 1985. At the time, Stefan Quandt was just about to graduate from high school while his sister, who is four years older, was studying business in Buckingham in the United Kingdom. They were both, in other words, still quite young. One day in February of that year, two companies with matching structures were set up in the Bahamas. The data trove shows that Susanne acted as a director of Suvel Holding, while Stefan headed up Stevel Holding. The shareholders for the two companies were identified as two companies called Wuhu and Winooski, both of them listed as being based in Nassau, the capital of the island nation. There are hundreds of other matches in the data trove for Wuhu and Winooski. The companies are used by the Swiss bank UBS as fiduciaries for its Bahamas-based companies. According to the corporate register, UBS is also responsible for the post boxes belonging to the Quandt family.

The Quandts, who are BMW’s primary shareholders, try to avoid the limelight, but when it comes to the structuring of their assets, they aren't fully opposed to providing information. As such, it is known just how well organized the inheritance from family patriarch Herbert Quandt, who died in 1982, and his third wife Johanna was. And it is always in the public interest when the members of one of Germany's wealthiest families comment on the taxation of assets, inheritance and gifts. Which makes it all the more surprising that there isn't a word to be found about the Quandt family's Bahamas activities in books or press coverage.

Stefan Quandt and Susanne Klatten are BMW's primary shareholders.

Stefan Quandt and Susanne Klatten are BMW's primary shareholders.

Foto:

[M] S.BRAUER / BRAUERPHOTOS

When DER SPIEGEL contacted Klatten and Quandt to request an interview about the offshore companies that had thus far remained in the shadows, the family spokesperson said he was interested in complete transparency. In several phone conversations and emails, he explained the purpose of the two companies Suvel and Stevel.

According to the family spokesperson, the idea to establish shell companies in the Caribbean was born out of Herbert Quandt's skittishness. Out of concern that the East-West conflict might escalate, the family deposited a "nest egg" in the "low, two-digit millions" in the Bahamas. The companies, the spokesperson said, came out of the reorganization of the family's finances after the patriarch passed away. So, one of Germany's most important industrialist families made preparations to flee the country on the off chance the Soviets could invade?

It isn't immediately obvious why such fears about war in the country in 1985 would trigger the founding of the companies. Just a month after they were registered, Mikhail Gorbachev rose to power in Moscow, where he introduced reform and transparency in the form of glasnost and perestroika. There was no longer much likelihood of an attack by the Soviet army. And both Quandt companies continued to exist even after the Soviet bloc collapsed. For years, fees of $1,000 per year and company had to be paid to the corporate registry. Suvel and Stevel were only deregistered on Aug. 5, 2005.

The Quandt spokesperson said that the companies never held industrial shares, but only liquid securities, adding that the entire amount, along with all earnings both domestic and foreign, was reported to the German tax authorities. The spokesperson also sent along two coversheets from a tax office in Frankfurt documenting that both companies had been reported to German tax authorities for the year 1986. On the coversheets, a tax official had checked the box next to a sentence reading: "The company is resident in the Bahamas and therefore in an area with low tax rates, preferential tax rates or exemptions for legal entities. The company is subject to low taxation." The documents say nothing about the amount of tax paid.

In the past, Stefan Quandt and Susanne Klatten have spoken on a few occasions about their feelings on taxation. Klatten emphasized in a 2016 interview that she is happy to pay taxes, "here in Germany as well, and that will remain the case." But the family also knows how to take advantage of tax law. When Klatten received a dividend of 2.37 billion euros in 2007 – the highest one ever paid in Germany at the time – she moved the sum into a holding company, which lowered her tax bill. In another instance, Quandt and Klatten received part of their inheritance from their mother Johanna several years before her death. The move, Stefan Quandt explained, was more favorable due to gift tax regulations.

When it comes to the Quandt family's holdings in the Caribbean, the family spokesperson said that all income from assets based inside and outside Germany "were appropriately taxed in accordance with tax regulations at home and abroad." He did not answer questions about where the money ended up after the companies were disbanded and whether the family had benefited from legal tax advantages. He also stated that the family would inform the Frankfurt tax authorities responsible for issues pertaining to the foreign transactions tax law about the inquiry from DER SPIEGEL, though it is unclear why they would take such a step.

Sports Heroes

Uwe Seeler, however, proved much more reticent when contacted by DER SPIEGEL. The former star of the Hamburger SV (HSV) football team is now 83 years old, and the fact that his name turned up in the corporate register is in no way consistent with his reputation. There is hardly another football player around who embodies down-to-earth modesty to the degree "our Uwe" does. The son of a Hamburg port worker, he spent his entire career playing for the hometown team, consistently rejecting offers from foreign teams, as lucrative as they may have been. And whereas other retired football players maintain something of a jet-set lifestyle, Seeler, who still lives right next door to the HSV training grounds, prefers playing dice with his wife Ilka.

But the two are apparently the owners of a Bahamas-based company that remains active today. The Triton company was registered in the city of Freeport in 1980. Along with the Seelers and five other shareholders who are based in Germany, the registry entry also lists Max Lorenz and Willi Holdorf as part owners. They, too, were sports heroes from the 1960s. Holdorf won decathlon gold in the 1964 Olympic Games and has been a member of Germany's Sports Hall of Fame since 2011. He is also a part owner of THW Kiel, Germany's most successful professional handball team. Lorenz, meanwhile, was part of the Werder Bremen football team that won the German championship in 1965. He also spent many years playing alongside his friend Seeler on the German national team.

After the conclusion of their careers in sports, all three traveled across Germany as representatives for Adidas. Together with Franz Beckenbauer and other athletes, they would make an annual ski trip to Obertauern in Austria, hitting both the bars and the slopes. It’s a tradition that started in 1980, the same year that Seeler, Lorenz and Holdorf registered their company Triton in the Caribbean. Over the years, the group from Germany had to pay significant fees to the Bahamas corporate registry, with $7,000 due in 1998 and another $8,000 one year later.

Former football star Uwe Seeler: $8,000 in service fees

Former football star Uwe Seeler: $8,000 in service fees

Foto:

[M] MAURIZIO GAMBARINI / DPA

DER SPIEGEL contacted Seeler back at the beginning of May to discuss his offshore company. Seeler's office declined the request for an interview. DER SPIEGEL instead submitted a long list of questions to Seeler, just as it did to Lorenz and Holdorf.

The magazine asked Seeler, Lorenz and Holdorf what purpose Triton served in the Bahamas and whether they still have holdings in the company today. There was no response to that or to the question about whether the company had ever been reported to the German tax authorities and if it had perhaps even been the subject of a voluntary disclosure. The three also didn’t respond to a question about whether a shell company in the Bahamas might look like a tax avoidance strategy.

Fighting for Documents

This isn’t the first leak stemming from the DDoS activists. The group has posted around 5 terabytes of confidential documents online since 2018. Some DDoS members have experience in journalism, some are IT experts and others describe themselves as hackers on the DDoS website. The group denies that its members hack other persons or institutions in order to get their hands on data.

Emma Best is one of the group’s founding members. Best has spent years fighting to get classified U.S. government documents released to the public. Since 2016, they have submitted more than 5,000 requests to U.S. authorities under the Freedom of Information Act, including numerous requests to the U.S. intelligence services and the FBI. Best releases the documents they do acquire publicly, as well as their disputes with the authorities. "Getting and publishing government documents means that with five years’ effort, you can change 50 years of history,” Best says, explaining their motivation.

Best says that a few years ago, they worked for subcontractors hired by U.S. counterintelligence. "I left after running into bureaucratic obstruction and disregard for source safety from an international organization that was connected to a matter I was working on,” Best says. But Best says they don't want to provide any details about their intelligence activities. That was a long time ago, Best says, and "I haven't kept in touch with old colleagues.”

Best later joined a narrow group of WikiLeaks contributors. Julian Assange's whistleblower platform had made headlines with numerous revelations it had exposed, and it had recently come under intense criticism because it published emails from the Democratic Party’s national headquarters during the election that appeared to have been obtained through an attack by Russian hackers. In 2016, Best fell out with Assange, accusing him, among other things, of having lied about the source of the leak. "I chase facts and data, not agendas,” said Best.

Assange is currently in prison in London and is awaiting possible extradition to the United States, where he could face a prison sentence of up to 175 years for betrayal of secrets, among other charges. Best is aware that they, too, could be prosecuted for the documents they are publishing on the net. "I'm aware that it might happen, but no,” Best says, they’re not afraid. "I’ll fight it, but I won’t regret it.”

The Bahamas, and it's not only Best who sees it this way, is a perfect example of the cat-and-mouse game that tax havens and international organizations have been playing for years. In 2000, the organization added the Caribbean nation to its list of countries that assist in tax avoidance. The Bahamas reacted and appeared to accommodate the demands being made of it with changes in legislation. In 2009 and 2014, however, the OECD again criticized the Bahamas. At the beginning of 2018, the European Union also listed the country as one of nine uncooperative tax havens.

Even today the Bahamas isn’t taking the transparency it promised very seriously. Most recently, at the beginning of May, the European Commission once again placed the Bahamas on a list with 20 other countries in which there is a high risk of money laundering. Lakshmi Kumar, of the American think tank Global Financial Integrity (GFI), points out that "there might be legitimate commercial reasons to set up an offshore entity, but there’s no legitimate reason for staying anonymous.” She highlights a World Bank study of corruption cases from three decades. In 70 percent of the cases, anonymous companies played a significant role.

Since 2014, the OECD has been relying on an automatic exchange of information between countries to ensure greater transparency. Zayda Manatta, the head of the OECD secretariat responsible for the issue, is optimistic that this will also work. "I see it as a big lake, and the water is going down,” she says. "The more the water level sinks, the more big fish will appear.”

However, numerous medium-sized fish can also now be found in the trove of Bahamas data from DDoS. Many companies from Germany’s Mittelstand, the small- to medium-sized companies that form the backbone of the German economy, and members of the professional classes are listed as shareholders in Caribbean companies, including a chief physician from the Lower Rhine region, a plant manufacturer from East Germany and an import-export entrepreneur from the Ruhr region. Some may have been attracted by the secrecy of the Bahamas, others may have been conducting legitimate business on the islands. When DER SPIEGEL called one asset manager in southern Germany to inquire about her Bahamas company, she didn’t want to comment at first. A moment later, she shifted tactics and explained abruptly, "I don’t have a company in the Bahamas.” The woman then hung up.

With their guerilla digital tactics, the activists with DDoS are creating a lot of powerful enemies. "My life has become a legal minefield,” Best once tweeted. The activist is defiant when asked about the threat of expensive lawsuits or personal acts of revenge. "If we go down, then we go down,” Best says. "Those 'in power' are the ones who are afraid because they have so much more to lose.”

Editor's note: This article is from the current print edition of DER SPIEGEL. We learned after the magazine went to press that Uwe Seeler suffered from a severe fall in his home and was admitted to a Hamburg hospital with a hip injury. DER SPIEGEL wishes Mr. Seeler a speedy recovery.

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