Scots shell firms linked to bribery ‘mega scan­dal’

The Herald on Sunday - - THE WEEK - By David Leask

SCOT­TISH shell firms have been named in a multi-mil­lion-dol­lar bribery court case in Ar­gentina.

Two of this coun­try’s lim­ited part­ner­ships were al­legedly used to fun­nel kick­backs in the lat­est twist in a cor­rup­tion “mega scan­dal” rip­ping through Latin Amer­ica.

Pros­e­cu­tors say one of the best­con­nected lob­by­ists in Buenos Aires used the anony­mously-owned Scot­tish firms – SLPs – to take cash from the Brazil­ian construction gi­ant Ode­brecht in re­turn for state con­tracts.

The case comes as a Herald on Sun­day in­ves­ti­ga­tion pub­lished to­day re­veals anony­mous SLPs and sim­i­lar English struc­tures were used to make hun­dreds of mil­lions of dol­lars of un­trace­able “for­eign” in­vest­ment in Uzbek­istan.

Anti-cor­rup­tion and hu­man­rights cam­paign­ers in the cen­tral Asian na­tion – still one of the least open so­ci­eties in the world – are de­mand­ing to know where the money comes from. They are par­tic­u­larly con­cerned over se­cre­tive buy-ups of the na­tion’s cot­ton in­dus­try, with its record of slav­ery and en­vi­ron­men­tal dam­age.

Con­cerns over both bribery in Latin Amer­ica and opaque in­vest­ments in the former Soviet Union prompted Bri­tain’s big busi­ness lobby to is­sue a warn­ing about SLPs.

Tracy Black, Scot­land di­rec­tor of the CBI, said: “Th­ese re­ports are con­cern­ing be­cause they pose a risk to the hard-won rep­u­ta­tion of Scot­tish busi­ness.

“We want Scot­tish firms to feel con­fi­dent about pitch­ing for in­ter­na­tional projects and ex­port­ing to global mar­kets.

“This comes at a time when busi­ness is work­ing tire­lessly in part­ner­ship with the Govern­ment to at­tract top tal­ent and much­needed in­vest­ment.”

Over the last three years The Herald and former Sun­day Herald have pub­lished scores of sto­ries about the abuse of SLPs. Th­ese in­clude al­le­ga­tions that Ode­brecht – whose of­fi­cials ad­mit pay­ing bribes of at least $800 mil­lion across the Span­ish and Por­tuguese-speak­ing world, used SLPs and other British cor­po­rate en­ti­ties to sub­orn of­fi­cials and politi­cians.

The UK Govern­ment – which is re­spon­si­ble for Scots cor­po­rate law – is cur­rently mulling new re­forms to the struc­tures un­der pres­sure from op­po­si­tion and back­bench MPs, such as the SNP’s Ali­son Thewliss.

British of­fi­cials – es­pe­cially since the at­tempted mur­ders in Sal­is­bury – are par­tic­u­larly con­cerned about the abuse of SLPs in Rus­sia.

UK firms, in­clud­ing SLPs and Scot­tish lim­ited com­pa­nies, were are the cen­tre of the $20 bil­lion Rus­sian Laun­dro­mat, one of the big­gest and most elab­o­rate money-laun­der­ing schemes ever un­cov­ered.

The CBI’s con­cerns echo those of Scot­tish politi­cians, who have long warned of a threat to the coun­try’s cor­po­rate rep­u­ta­tion from SLPs in­volved in global fraud and money laun­der­ing.

In some ma­jor mar­kets the words “Scot­tish firm” has come to have the same kind of im­age as “Swiss bank ac­count”.

Re­searcher Ben Cow­dock of anti-cor­rup­tion group Trans­parency In­ter­na­tional said: “It is now well es­tab­lished that SLPs have been a mon­ey­laun­der­ing ve­hi­cle of choice for cor­rupt in­di­vid­u­als around the world. Con­trolled by anony­mous off­shore com­pa­nies, they have proven to be ef­fec­tive in fun­nelling bribes to politi­cians and al­low­ing cor­rupt elites to gain con­trol of key in­dus­trial as­sets.

“Their con­tin­ued use in high cor­rup­tion risk ju­ris­dic­tions should raise red flags to law en­force­ment agen­cies in the UK and abroad.”

Cow­dock added: “It is clear that money laun­der­ers and cor­rupt in­di­vid­u­als have sought to ex­ploit the UK’s ease of do­ing busi­ness for crim­i­nal ends ... As the tally of crimes com­mit­ted with UK com­pa­nies mounts, the cost of in­er­tia be­comes in­creas­ingly clear.”

The SLPs in the Ar­gen­tinian case have not named their own­ers un­der rules Cow­dock cites. Nor have most of the SLPs and other firms mak­ing opaque in­vest­ments in Uzbek­istan. No busi­ness has been pros­e­cuted for fail­ure to com­ply with trans­parency laws.

The UK Govern­ment is ex­pected to un­veil re­forms be­fore Christ­mas.

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