Boris Johnson laughs off the Pandora papers as the super-rich’s cash rolls in

Western politicians seem complacent about or complicit in the iniquity of hidden wealth

It was a classic TV doorstep. After doing the morning media round, Boris Johnson emerged from a booth and set off with his minders across the main hall of the Conservative party conference in Manchester. What was his reaction to the Pandora papers?

And would the Tories be giving back the money they had taken from certain donors?

Johnson professed not to have read the detail. “At the moment we are getting on with building back better,” he said. Asked whether the revelations of “corrupt deals” were embarrassing for the Tories, he replied: “You mean Tony Blair?” The prime minister laughed at his own joke and scuttled off, as his aides looked on furiously.

The encounter was telling. This week has seen the publication by the Guardian and global media partners of an extraordinary financial leak. It has exposed, among other things, the Conservative party’s narrow reliance on the international super-rich and on a tiny group of privileged donors. All are enmeshed in the secret offshore world.

And yet, as ever, the prime minister was unwilling to engage with the substance of the leak, or to reflect on the implications for political funding. Instead, he offered a deflective quip. Tony and Cherie Blair had indeed saved themselves more than £300,000 in stamp duty when they bought a London office in 2017 via an offshore company – entirely legally, it has to be said.

The Pandora papers are the largest trove of leaked data exposing tax haven secrecy in history. They provide a rare window into the hidden world of offshore finance, casting light on the financial secrets of some of the world’s richest people. The files were leaked to the International Consortium of Investigative Journalists (ICIJ), which shared access with the Guardian, BBC and other media outlets around the world. In total, the trove consists of 11.9m files leaked from a total of 14 offshore service providers, totalling 2.94 terabytes of information. That makes it larger in volume than both the Panama papers (2016) and Paradise papers (2017), two previous offshore leaks.

Where did the Pandora documents come from?

The ICIJ, a Washington DC-based journalism nonprofit, is not identifying the source of the leaked documents. In order to facilitate a global investigation, the ICIJ gave remote access to the documents to journalists in 117 countries, including reporters at the Washington Post, Le Monde, El País, Süddeutsche Zeitung, PBS Frontline and the Australian Broadcasting Corporation. In the UK, the investigation has been led by the Guardian and BBC Panorama.

What is an offshore service provider?

The 14 offshore service providers in the leak provide corporate services to individuals or companies seeking to do business offshore. Their clients are typically seeking to discreetly set up companies or trusts in lightly regulated tax havens such as the British Virgin Islands (BVI), Panama, the Cook Islands and the US state of South Dakota. Companies registered offshore can be used to hold assets such as property, aircraft, yachts and investments in stocks and shares. By holding those assets in an offshore company, it is possible to hide from the rest of the world the identity of the person they actually belong to, or the “beneficial owner”.

Why do people move money offshore?

Usually for reasons of tax, secrecy or regulation. Offshore jurisdictions tend to have no income or corporation taxes, which makes them potentially attractive to wealthy individuals and companies who don’t want to pay taxes in their home countries. Although morally questionable, this kind of tax avoidance can be legal. Offshore jurisdictions also tend to be highly secretive and publish little or no information about the companies or trusts incorporated there. This can make them useful to criminals, such as tax evaders or money launderers, who need to hide money from tax or law enforcement authorities. It is also true that people in corrupt or unstable countries may use offshore providers to put their assets beyond the reach of repressive governments or criminal adversaries who may try to seize them, or to seek to circumvent hard currency restrictions. Others may go offshore for reasons of inheritance or estate planning.

Has everyone named in the Pandora papers done something wrong?

No. Moving money offshore is not in or of itself illegal, and there are legitimate reasons why some people do it. Not everyone named in the Pandora papers is suspected of wrongdoing. Those who are may stand accused of a wide range of misbehaviour: from the morally questionable through to the potentially criminal. The Guardian is only publishing stories based on leaked documents after considering the public interest. That is a broad concept that may include furthering transparency by revealing the secret offshore owners of UK property, even where those owners have done nothing wrong. Other articles might illuminate issues of important public debate, raise moral questions, shed light on how the offshore industry operates, or help inform voters about politicians or donors in the interests of democratic accountability.

But the revelations about Johnson’s party were of a different order. Documents in the Pandora papers set out how Mohamed Amersi – a major Tory backer – had advised on a $220m (£162m) Swedish telecoms deal, later found to be corrupt.

The money – a bribe, according to US prosecutors – was paid to the daughter of Uzbekistan’s then dictator. (Amersi’s lawyers say he had “no reason” to believe this at the time and the underlying arrangements for the deal had been put in place two years before.)

Then there is Viktor Fedotov, a UK-based Russian-born tycoon. His firm Aquind is seeking ministerial approval to build a power interconnector under the Channel. It has given cash to 33 Tory MPs. Fedotov, the Guardian discovered, owns a New Zealand trust that appears to have taken $97m from the Russian state monopoly Transneft.

Lawyers for Aquind said Fedotov did not personally donate to the Conservative party, was not involved in the management of the company and had “no influence” over its donations.

The files also feature Lubov Chernukhin and her husband, Vladimir, a former Russian government minister. She has gifted £2.1m to the Tories, spending £160,000 on a game of tennis with Johnson. The couple’s oligarch lifestyle – mansions, yachts, a chicken house and a robot to clean the London swimming pool – is paid for via offshore accounts.

All deny wrongdoing in the strongest terms.

There is nothing inherently illegal about setting up a tax haven structure. Yet at a time of empty shelves, national insurance rises and a rumbling fuel crisis, the laissez-faire philosophy of Johnson’s party towards the allegations seem unusually jarring.

As does its willingness to offer access, from the prime minister downwards, to well-off donors in exchange for cash.

True to form, the UK is not investigating the Pandora papers. But other countries have taken a different view of the claims: Pakistan, India, Mexico and Brazil, as well as Panama, Spain and Australia.

The leak comprises 11.9m documents from 14 service providers. There are emails, share certificates and diagrams. Thirty-five world leaders, past and present, 300 public officials and 130 billionaires appear in them.

Some of those exposed have reacted badly.

The Czech prime minister, Andrej Babiš, used a complex offshore chain in 2009 to buy a £13m mansion in the south of France. A BBC Panorama reporter who tried to ask him about it was bundled out of the way. Babiš said he was the victim of a plot by his political foes, with national elections taking place on Friday and Saturday. The purchase was historical, he added.

Another indignant leader was Cyprus’s president, Nicos Anastasiades. The law firm that bears his name was accused of helping to conceal the assets of a Russian tycoon by hiding them behind the names of fake beneficial owners. At an EU summit in Slovenia on Wednesday, sheltering under an umbrella, Anastasiades said he had done nothing wrong.

Cyprus's president @AnastasiadesCY was visibly angry and incoherent while talking to the press upon his arrival at an EU summit in Slovenia. He was responding to questions about #PandoraPapers and argued that they were saying nothing about him.https://t.co/aN9WF5jT8N

— Stelios Orphanides (@stylian65) October 6, 2021

Grilled by German journalists, Anastasiades implied it was ludicrous to link him with his law firm, now run by his daughters. He seemed annoyed and defensive. “Can you tell me who of those oligarchs, those officials, who their lawyer is?” he asked, before walking off.

Others responded to the Pandora papers by attempting to ignore them.

Ukraine’s actor turned president, Volodymyr Zelenskiy, was named in connection with a network of offshore companies co-owned with his friends from TV. The president refused to answer questions about his undeclared British Virgin Islands firm, Maltex, and left it to his spokesperson to say that no anti-corruption rules had been breached.

In Russia, Vladimir Putin’s press secretary, Dmitry Peskov, claimed the papers did not implicate the president nor anyone close to him. The reverse was true: Putin’s alleged former lover and childhood friend appeared in the leak, together with a billionaire oil trader Putin has known since the early 1990s. All have assets hidden in Monaco, including a luxury apartment overlooking the yacht club and marina.

This week’s leak is the latest in a series of disclosures, which also includes the Panama and Paradise papers. Together, they throw into sharp relief what is in effect a vast and complicated shadow world.

Over the last five years, the Guardian, working with partners, has shone a light on capitalism’s murky secrets. Despite all the disclosures, and all promises from politicians about closing loopholes and making things more transparent, the rich and influential continue to hide their assets, paying little or no tax.

Faced with this obvious iniquity, western politicians seem complacent or complicit.

In the US, at least, there have been bipartisan attempts to do something about this two-tier system. Joe Biden broke off from a row over federal debt to say he would examine the leak. Meanwhile, in Congress a Republican and a Democrat have proposed landmark legislation. It would target professionals who enable foreign corruption: law firms, art dealers, banks.

Under the proposals these facilitators would have to report suspicious activity and to carry out checks on money lodged in offshore accounts. The draft law recognises that billions of dollars in dirty cash is swirling around the US, crippling the countries from where it is stolen.

The US itself emerges from this week’s leak as a major tax haven, with $300m (£220m) stashed in the state of South Dakota alone.

“The Pandora papers have ushered in a historic moment for a sweeping policy response,” Josh Rudolph, fellow for malign finance at the German Marshall Fund, said. Paul Massaro, a congressional anti-corruption adviser, praised the work of investigative journalists, adding: “Global corruption is an existential threat to democracy.”

Not everyone seems to have got the memo. With spectacularly bad timing, EU finance ministers meeting in Luxembourg on Thursday decided to reduce the number of countries on a tax haven blacklist. Anguilla, Dominica and Seychelles were removed. The British Virgin Islands is not even on the list, despite accounting for two-thirds of the shell companies in the Pandora files.

In Britain, Downing Street appears to show little interest in offshore reform. The chancellor, Rishi Sunak, said he would “look into” the revelations. Thus far, though, the government has not implemented proposed legislation that would reveal the identities of those who use offshore companies to buy UK property. For now, there is no public register.

Which means London remains a highly attractive destination for kings and kleptocrats. We learned this week that the king of Jordan has quietly amassed a $100m property portfolio including a Malibu mansion and three buildings in Belgravia.

Azerbaijan’s ruling family has also bought into UK property. In 2009 the Queen’s crown estate bought a £66.5m building from a British Virgin Islands-based company that was owned by the Azerbaijani president’s family.

More than any other global city, London facilitates offshore transactions, the leak suggests. It is home to PR firms, company incorporation agents and peers, whose job it is to assist the super-rich. There are lawyers too. .

Graham Barrow, a financial crime consultant, said the leak revealed an “all-encompassing global network”. He said: “Most offshore companies provide exceptional levels of secrecy. Money from organised crime and corruption rubs shoulders with funds from those who merely seek to evade public scrutiny. And therein lies the problem. If you hang out with the mob, you get tarred with the same brush.”

In Manchester the Conservatives have ignored the issue, hoping it will soon be forgotten.

The party’s co-chair Ben Elliot – the nephew of the Duchess of Cornwall – set up his own British Virgin Islands company in 2007 to fund a documentary about cricket. The Tory ex-minister Jonathan Aitken got £166,000 in secret offshore cash for writing a flattering book about Kazakhstan’s president.

Do you have information about this story? Email investigations@theguardian.com, or use Signal or WhatsApp to message (UK) +44 7584 640566 or (US) +1 646 886 8761.

One insider who attended the Tory conference was pessimistic. “I don’t think things will change. It’s absolutely systemic,” they said. The party says it declares donations to the Electoral Commission, adding they are an essential part of how democracy functions. It adds that donors such as Lubov Chernukhin are UK citizens, free to give money to whoever they want.

Faced with a choice of doing the right thing, or the easy and amoral thing, critics of Johnson say it’s not hard to guess which way he will probably jump.

Contributor

Luke Harding

The GuardianTramp

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