What the leak has re­vealed – from Rus­sian con­tracts to royal in­vest­ment

A who’s who has emerged from dis­clo­sures about the com­plex net­work of ar­range­ments that pro­vide tax shields for firms and su­per-rich in­di­vid­u­als

The Guardian Weekly - - International news - David Pegg

The Par­adise Papers last week shed new light on the murky world of off­shore fi­nance, re­veal­ing the in­ner work­ings of ar­cane schemes through which the world’s wealth­i­est in­di­vid­u­als and cor­po­ra­tions can opt out of their tax re­spon­si­bil­i­ties.

Heads of state, tech­nol­ogy gi­ants and govern­ment of­fi­cials are among those to have found their in­ter­ests in tax havens brought into the cold light of day. Sev­eral gov­ern­ments an­nounced in­ves­ti­ga­tions based on the re­port­ing. So what have we learned?

An im­por­tant point to bear in mind: though morally ques­tion­able and in­creas­ingly con­tro­ver­sial, go­ing off­shore merely to avoid (rather than evade) tax is not against the law. But as Barack Obama said of the Panama Papers one year ago: “A lot of it’s le­gal, but that’s ex­actly the prob­lem.”

Wil­bur Ross

Don­ald Trump’s com­merce sec­re­tary was re­vealed to be in busi­ness with the son-in-law of the Rus­sian pres­i­dent, Vladimir Putin. He holds shares in Nav­i­ga­tor, a ship­ping com­pany spe­cial­is­ing in the trans­port of liq­ue­fied nat­u­ral gas. Nav­i­ga­tor holds a valu­able con­tract with Sibur, a Rus­sian gas com­pany co-owned by Kir­ill Shamalov, who is mar­ried to Putin’s daugh­ter.

The dis­cov­ery has the po­ten­tial to be highly em­bar­rass­ing, and po­ten­tially dam­ag­ing, to Trump’s ad­min­is­tra­tion as it strug­gles to fend off in­ves­ti­ga­tions into Rus­sian in­flu­ence over the 2016 pres­i­den­tial elec­tion, and whether Trump won through col­lu­sion with that ef­fort.

Ross de­nied wrong­do­ing, but has since said he would “prob­a­bly” sell his stake in the com­pany. A spokesper­son said that he re­cused him­self as com­merce sec­re­tary from any dis­cus­sion of in­ter­na­tional ship­ping.


Two in­sti­tu­tions with close con­nec­tions to the Rus­sian state funded ma­jor in­vest­ments in Face­book and Twit­ter, the papers re­veal. The in­vest­ment was made through Yuri Mil­ner, a Rus­sian tech­nol­ogy in­vestor.

In 2011 2 the state-con­trolled VTB Bank f funded a $191m in­vest­ment in Twitte Twit­ter, while – sep­a­rately – a sub­sidiary of the state en­ergy firm Gazprom fi­nanc fi­nanced an off­shore com­pany that in turn funded an en­tity that owned more t than $1bn of Face­book shares.

Mil Mil­ner said VTB’s fund­ing did not buy it in­flu­ence at Twit­ter, and he hadn’t known Gazprom backed the stake in Face­book. The dis­cov­ery could in­form US and UK in­ves­ti­ga­tion tions into Rus­sian dis­in­for­ma­tion cam cam­paigns on so­cial me­dia.

The Queen and Prince Charles

The Queen, via the Duchy of Lan­cast caster, was re­vealed to have in­vest­ment ments in an off­shore port­fo­lio with in­dire in­di­rect in­ter­ests in the UK rentto-buy re­tailer Bright­house, as well as the Thresh­ers off-li­cence chain. Bright Bright­house was re­cently crit­i­cised by the UK Fi­nan­cial Con­duct Author­ity for ir­re­spon­si­ble lend­ing to those with poor credit records, and or­dered to pay £15m ($19.6m) in com­pen­sa­tion. Thresh­ers went into ad­min­is­tra­tion in 2009, four years af­ter the duchy placed its in­vest­ments. The duchy, which pro­vides in­come for the monarch, said it did not know about its stake in Bright­house un­til ap­proached by jour­nal­ists. While ad­mit­ting it held other “over­seas” in­vest­ments, a spokesper­son de­clined to make the de­tails pub­lic.

Prince Charles fea­tures in the Par­adise Papers by virtue of his pri­vate es­tate’s in­vest­ment in a Ber­muda busi­ness set up to trade car­bon cred­its and run by one of his close friends. The duchy said Charles had no “di­rect in­volve­ment in in­vest­ment de­ci­sions”.


The com­modi­ties gi­ant se­cretly loaned $45m to the Is­raeli di­a­mond mag­nate Dan Gertler on con­di­tion that he se­cure a min­ing con­ces­sion in the Demo­cratic Repub­lic of the Congo for the firm.

Gertler was charged with ne­go­ti­at­ing with the DRC au­thor­i­ties over the Katanga cop­per mine, over which Glen­core as­sumed ef­fec­tive con­trol in 2009. Gertler’s com­pany, Lora En­ter­prises, was loaned $45m in pledged shares to en­able him to keep his ex­ist­ing in­ter­est in the mine. But the papers also re­veal that the loan could be re­called if Gertler was un­suc­cess­ful in se­cur­ing a min­ing agree­ment that Glen­core needed. Gertler’s lawyers said that there was no im­proper be­haviour with re­gard to the loan. Glen­core said the loan “was made on com­mer­cial terms ne­go­ti­ated at arm’s length”, recorded ap­pro­pri­ately and re­paid in 2010.

Justin Trudeau

As­so­ciates of the Cana­dian prime min­is­ter ap­pear in the doc­u­ments in con­nec­tion with the mov­ing of mil­lions of dol­lars to off­shore tax havens. The fam­ily in­vest­ment busi­ness of Stephen Bronf­man, Trudeau’s chief fundraiser and ad­viser, cre­ated a com­plex ar­range­ment of le­gal en­ti­ties in the US, Is­rael and the Cay­man Is­lands.

Trudeau came to power on a plat­form of tack­ling eco­nomic in­equal­ity, and his fam­ily in­her­i­tance was scru­ti­nised af­ter pub­li­ca­tion of the Panama Papers last year. The two as­so­ciates de­clined to com­ment, but Trudeau said last week the ar­range­ment had been ex­plained to his sat­is­fac­tion. “We re­ceived as­sur­ances, rances, the same as­sur­ances that hat are in the pub­lic dec­la­ra­tion ion made in this case, and we are sat­is­fied with that,” he told old a press con­fer­ence.

Lewis Hamil­ton

The For­mula One world cham­pion and Monaco tax ex­ile, worth £130m m ($170m), is re­vealed d to have used a con­vo­luted scheme to o avoid pay­ing VAT on his pri­vate jet. His ad­vis­ers con­cocted d a de­vice whereby a Bri­tish Vir­gin Is­lands com­pany would own the jet, then lease it to o an Isle of Man com­pany, any, which would then lease ease

the jet on to a UK com­pany. The re­sult would be Hamil­ton leas­ing the jet out to him­self. It only had to land in the Isle of Man once and never re­turned, but con­tin­ues to tech­ni­cally be part of a jet-leas­ing com­pany on the is­land.

Hamil­ton’s lawyers said he had made all nec­es­sary nece dis­clo­sures to tax and cus­toms au­thor­i­ties.

Lord Ashcroft

AThe fo for­mer trea­surer and deputy chair­man of the Con­ser­vati ser­va­tive party, who has dona nated mil­lions to it over the years, is linked to a pre­vi­ously un­known Ber­muda trust that made sub­stan­tial pay­ments to him, the papers show. In­ter­nal cor­re­spon­dence from Ap­pleby, the firm at the heart of the Par­adise Papers, re­vealed that the firm was un­com­fort­able with the trust’s m man­age­ment. “There are ver very sig­nif­i­cant pay­ments bei be­ing made from time to tim time and we must en­sure tha that these are prop­erly con con­sid­ered and recorded by the trustees,” a 2009 revi re­view warned. When ap­proa proached for com­ment by the Guardian, Ashcroft’s spokesman re­fused to pass ques­tions on to him, and when con­fronted by the BBC’s Panorama pro­gramme at the Con­ser­va­tive party con­fer­ence Ashcroft tried to es­cape the con­ver­sa­tion. He later tweeted a state­ment say­ing he had never con­trolled the Ber­muda trust.

Isle of Man Jets

The Isle of Man, a UK crown de­pen­dency, helped ul­tra-wealthy in­di­vid­u­als de­vise schemes to help them cut VAT bills on pri­vate jets to zero by claiming they were leas­ing their air­craft from them­selves.

Pri­vate jets must be able to prove VAT was paid on their pur­chase in or­der to cir­cu­late freely within Europe. But VAT can be re­claimed on goods if they are part of a busi­ness. So Ap­pleby helped clients to set up chains of com­pa­nies that would lease the air­craft out, typ­i­cally to the jet’s true owner. VAT would nor­mally be payable were the jets for pri­vate in­di­vid­ual use.

The con­sul­tancy firm that helped de­vise the scheme said its ad­vice was “based on our knowl­edge of tax law and pro­vid­ing trans­parency to tax au­thor­i­ties”. While the is­land’s cus­toms ser­vice claimed it had found no wrong­do­ing with the schemes, the Isle of Man govern­ment held a press con­fer­ence to an­nounce it had called in the UK Trea­sury to re­view VAT re­funds worth £790m it had is­sued to 231 jet-leas­ing firms since 2011.


The tech­nol­ogy gi­ant be­gan scout­ing for new op­tions for its in­ter­na­tional tax struc­tur­ing af­ter crit­i­cism of its be­haviour by a US Se­nate com­mit­tee in 2014. Se­na­tors ac­cused it of art­fully cre­at­ing a “byzan­tine” ar­ray of cor­po­rate en­ti­ties, some of which were ef­fec­tively tax-res­i­dent nowhere. Af­ter Ire­land an­nounced plans to close a tax loop­hole, Ap­ple ap­proached the Par­adise Papers law firm Ap­pleby (no cor­po­rate re­la­tion) to ask ques­tions about the ad­van­tages of the dif­fer­ent tax havens in which the off­shore firm op­er­ated. Ap­pleby was ec­static: “This is a tremen­dous op­por­tu­nity for us to shine on a global basis.”

The papers show two of Ap­ple’s key sub­sidiaries chang­ing their tax res­i­dency to Jersey. Ap­ple de­clined to com­ment on specifics, but said: “The changes we made did not re­duce our tax pay­ments in any coun­try.” y.


The doc­u­ments shed new ew light on how Nike, one of the e best-known brands in the e world, re­duced its global tax bill us­ing an in­ter­na­tional al ar­ray of le­gal en­ti­ties. One of the most per­plex­ing, Nike ke In­no­vate CV, which holds the com­pany’s in­tel­lec­tual prop­erty is not tech­ni­cally based d any­where. Nike said it fully com­plied mplied with all tax reg­u­la­tions.

The Brex­iters

Sev­eral of the most prom­i­nent nent sup­port­ers of the cam­paign for the UK to leave the EU ap­pear in the e Par­adise Papers. Ar­ron Banks, the in­sur­ance nsurance busi­ness­man now un­der in­ves­ti­ga­tion by the Elec­toral Com­mis­sion, is­sion, coowns the Isle of Man-based dC on is t er Bank, which opened ac­counts ounts for a busi­ness­man whose on­line line gam­bling firm and busi­ness part­ner tner were be­ing pur­sued by the US De­part­ment epart­ment of Jus­tice. Con­is­ter said it meets all com­pli­ance obli­ga­tions ns and a spokesman for Banks said he had no over­sight role.

Sep­a­rately, the papers men­tion an ef­fort by the Bar­clay broth­ers, own­ers of the Daily Tele­graph, to ob­scure their own­er­ship of a com­pany by ap­point­ing an­other com­pany to act as share­holder in their place. The prac­tice is not il­le­gal and a spokesper­son for the Bar­clays de­clined to com­ment.

Ap­pleby, firm at the heart of the Par­adise Papers

Ap­pleby, the off­shore law firm at the cen­tre of the panoply of schemes ex­posed in the Par­adise Papers, in­sists it has com­mit­ted no wrong­do­ing. But a 2013 com­pli­ance re­view found se­ri­ous prob­lems with the firm, which re­mained un­re­solved one year later. The off­shore lawyers were found want­ing in 12 com­pli­ance re­views over a decade, tak­ing place in the Isle of Man, Cay­man Is­lands, Ber­muda and the Bri­tish Vir­gin Is­lands.

The 2014 Ber­muda Mon­e­tary Author­ity re­view found that “over­sight weak­nesses were re­peated in high­risk find­ings in both the 2013 and 2014 re­ports … These omis­sions have height­ened the author­ity’s con­cern about the firm’s reg­u­la­tory com­pli­ance and con­trol en­vi­ron­ment, and its fail­ure to demon­strate a co­op­er­a­tive ap­proach to the author­ity’s man­dated ini­tia­tives. These is­sues will be es­ca­lated within the author­ity for con­sid­er­a­tion of en­force­ment ac­tion.”

Around the same time the firm was part of a con­sor­tium of off­shore lawyers lob­by­ing against govern­ment re­form of Bri­tish tax havens. Ap­pleby de­clined to com­ment on de­tails of the com­pli­ance re­views, but in a gen­eral state­ment said it did not tol­er­ate il­le­gal be­haviour and was com­mit­ted to meet meet­ing high reg­u­la­tory stan­dards where it op­er­ated. “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,” it said.

Wil­bur Ross, Don­ald Trump’s com­merce sec­re­tary, with the pres­i­dent

An en­tity with Rus­sian links bought a stake in Mark Zucker­berg’s Face­book

Rac­ing driver Lewis Hamil­ton used a con­vo­luted scheme to avoid pay­ing VAT on his pri­vate jet, in essence leas­ing it out to him­self The Queen, via the Duchy of Lan­caster, was re­vealed to have off­shore in­vest­ments

As­so­ciates of Cana­dian prime min­is­ter Justin Trudeau were linked to mil­lions moved off­shore

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