Divorce ‘a blood sport’ for the ultra-rich
How Panama global law firm helps clients shield assets from soon-to-be ex-spouses
Christopher Williams had been waiting 90 minutes inside the office of a helicopter tour company on the Hawaiian island of Kauai, keeping a careful eye on the airport parking lot below.
In his hands he held court papers, ready to be served on a Russian billionaire locked in a high-stakes divorce. He wore a small video camera to record the moment.
Suddenly Williams saw his chance. He sprinted down a short flight of stairs and across the asphalt to a convoy of white SUVs. Inside one of the vehicles was Dmitri Rybolovlev, a mining magnate whose wife, Elena Rybolovleva, claimed he was hiding money she sought in the divorce.
“For Dmitri,” Williams said as he flung the court papers through an open driver’s side window into the lap of one of the billionaire’s chauffeurs. He locked eyes with Rybolovlev as the driver hit the gas pedal to speed away. “Served!” Williams shouted, breathlessly. Williams’ pursuit was one episode in a global asset hunt in one of the world’s bitterest divorces. It illustrates the lengths that spouses, their lawyers and professional trackers must go to in search of wealth stashed offshore in complex networks of companies and trusts.
The details of the Rybolovlev divorce struggle and many others are contained in secret files obtained by the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung and other media partners. The documents, numbering more than 11 million, date from 1977 to December 2015. They show the inner workings of Mossack Fonseca, a global law firm based in Panama that helps customers create offshore shelters.
The files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illuminate a dark alternate universe where some people go to play by different rules, and of a firm that enables such behaviour.
“A dishonest husband is as much a fraudster as Bernard Madoff,” said Martin Kenney, a Canadian lawyer who is an asset-recovery specialist in the British Virgin Islands and has worked on behalf of wives from Russia, the United Kingdom, Switzerland and the United States. “These offshore companies and foundations . . . are instruments in a game of hide and concealment.”
At the heart of Elena Rybolovleva’s legal battle was the allegation that her estranged husband, ranked by Forbes as Russia’s 14th richest man, had used tax havens to help obscure real estate and other wealth.
The documents Williams served that day targeted Rybolovlev’s $88million (U.S.) New York City penthouse, a purchase that Elena claims violated an order by a Swiss court freezing his assets.
But there were greater treasures at stake elsewhere. In the British Virgin Islands, a shell company was used to buy and store artwork worth $650 million with the help of Mossack Fonseca.
For decades, spouses, nearly always male and part of the global one per cent, have solicited Mossack Fonseca to help shield assets from soon-to-be exes, according to the files. And Mossack Fonseca has agreed with little hesitation.
In Thailand, the firm offered help when a husband asked in an email for a “silver bullet” in case his wife ever tried to strip him of his assets. In Ecuador, Mossack Fonseca employ- ees proposed shell companies to “a customer who needs to acquire a Panamanian corporation to transfer assets before the divorce.” From Luxembourg, employees joked and sent emoticon winks when they agreed to help another husband, a Dutch man who wanted to “protect” assets “against the unpleasant results of a divorce (on the horizon!)”
Offshore service providers that knowingly place a husband’s assets beyond a wife’s reach can be sued, experts say.
“The closer in proximity to a divorce when these people take these kinds of steps, the more likely these assets will eventually be set aside for marital fraud,” said Sanford K. Ain, a Washington, D.C.-based attorney who worked on one divorce case so complex he kept an intricate diagram of the husband’s bank accounts, companies and trusts on a notebook in his desk. “It looked like someone had thrown spaghetti on a page,” said Ain, recalling it cost $2 million to $3 million to track it all down.
Michelle Young, who fought a wellpublicized divorce battle, founded an organization in 2014 to help defrauded ex-wives navigate the costly British court system.
“It’s a blood sport,” Young said. “Unless you’ve got the funds, you’re dead and buried.”
Young has spent seven years and millions of dollars tracing assets linked to her ex-husband, property developer Scot Young, who used Mossack Fonseca and other offshore service providers to manage a tangled financial empire that included companies and bank accounts in Russia, the British Virgin Islands and Monaco.
“It’s like a baby Enron, there are so many assets,” she said in an interview from London.
In 2013, Young won $32 million in a divorce settlement. Shortly after his appeal against the settlement failed, Scot Young was found impaled on spiked railings after plummeting from the fourth floor of his London apartment. His girlfriend said he’d told her he was going to jump, but authorities said they could not say for sure if he committed suicide or simply fell.
“We are not involved in managing our clients’ companies,” said Mossack Fonseca in a statement. “Excluding the professional fees we earn, we do not take possession or custody of clients’ money, or have anything to do with any of the direct financial aspects related to operating their businesses.”
We regret any misuse of companies that we incorporate or the services we provide and take steps wherever possible to uncover and stop such use.”
Dmitri Rybolovlev married Elena, a fellow student with whom he had fallen in love at a university in the Urals, in 1987. Over the next 20 years, the couple had two children, moved to Switzerland and made a fortune. Dmitri became known as Russia’s “fertilizer king.” They were, lawyers later stated, “fabulously rich.”
In December 2008, Elena Rybolovleva filed for divorce, citing “a prolonged period of strained marital relations.”
Under Swiss law, each spouse was entitled to an equal split of the couple’s wealth.
Deciding what assets should be part of the split wasn’t so simple. As their wealth increased, so had a complex network of offshore companies.
For instance, in 2002 Mossack Fonseca had incorporated Xitrans Finance Ltd. in the British Virgin Islands. The offshore company, no more than a post office box in sunny Tortola, was a mini-Louvre museum when it came to its assets; Xitrans Finance Ltd. owned paintings by Picasso, Modigliani, Van Gogh, Monet, Degas and Rothko. It also bought Louis XVI-style desks, tables and drawers made by some of Paris’s grandest furniture-makers.
As the marriage broke down, according to notes from a court hearing sent via email to Mossack Fonseca in January 2009 and included in the documents reviewed by ICIJ, Dmitri used Xitrans Finance Ltd. to move these luxury items out of Switzerland to Singapore and London, beyond Elena’s reach.
While Xitrans Finance Ltd. was held by the Rybolovlev family trust, according to Mossack Fonseca’s records, only Dmitri Rybolovlev held shares in the company despite Elena’s claim that Xitrans bought assets “on behalf of herself and her husband.”
In 2014, after years of legal wrangling, a Swiss court awarded Elena $4.5 billion. An appeals court later reportedly slashed this figure to $600 million when it recalculated the undisclosed settlement based on money held in Rybolovlev’s Cypriot trusts.
Dmitri Rybolovlev and Elena Rybolovleva declined to comment.