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CRIME
The secret world of tax havens
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An anonymous source has provided extensive insights into a worldwide network of tax evaders. Media in more than 30 countries are currently sifting through a mountain of data.
260 gigabytes of documents - that's the printed equivalent of 500,000 copies of the Bible. This is the massive amount of data that was passed on more than a year ago by an anonymous whistleblower to the International Consortium for Investigative Journalism (ICIJ) in Washington. More than two million emails and other confidential documents sketch a picture of a dubious shadow world. More than 130,000 people from 170 countries are alleged to have secreted their money in tax havens. Analyzing the data is a mammoth task that is still nowhere near completion.
Challenge for computer forensics experts
The anonymous source secretly lifted the data from two company servers and transferred it via the Internet. "Unfortunately, in order to protect the source, it's not possible to say anything more about exactly how this was done, but it's clear that there was a substantial leak," says German data journalist Sebastian Mondial, who is one of those analyzing the material. This means that at a certain point these companies' secrets were accessible in such a way that someone was able to make a copy, Mondial explained in an interview with DW.
Germany's Süddeutsche Zeitung daily writes that much of the data was not very well organized, and that some of the documents first had to be converted so they could be read by machine. "We were lucky that we had some specific forensic software that's usually used by criminologists," says Mondial. This, he explains, made it possible to scan these databases and examine them to find out things like what connections existed between pieces of data, when documents were created, when emails were sent and who received blind copies of emails.
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The Virgin Islands are just one of many tax havens
Havens of tranquility and tax evasion
The British Virgin Islands, the Cook Islands, the Seychelles, Panama: All of them have something very attractive to offer to certain companies and private individuals - anonymity. "'Come to us and you won't have to worry about the tax office finding out.' This is the kind of slogan these so-called offshore islands use to attract rich people," says Thomas Eigenthaler from the German financial managers' union (DSTG). He explains that the tax evasion is made easier by the fact that the taxpayers don't have to deal with it themselves. A whole industry has sprung up to advise them and offer tailor-made solutions. Sebastian Mondial adds that many tax havens don't even keep any kind of register with information on company owners or capital.
The EU estimates that every year around one billion euros in tax revenue is lost through tax evasion or tax avoidance. According to a study by the non-governmental organization Tax Justice Network, a fortune estimated at between 21 to 32 billion dollars is stashed away in tax havens. By comparison, in 2011 the gross domestic product of the United States was around 15.1 billion dollars. The figure doesn't even include non-financial assets and gold held abroad, foreign properties, or luxury yachts sailing under foreign flags.
"According to my colleagues working on the project, there's a particularly clever trick they pull when someone is sued by an offshore company. They agree on a settlement, and the complaint is dropped," explains Sebastian Mondial. Then the settlement money, which, as part of a lawsuit, does not have to be taxed, is transferred to the offshore account.
There are other tricks, too. For example, a company can set up a subsidiary in a tax haven to deal with its foreign operations, thereby avoiding paying tax on foreign profits.
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Offshore firms often are little more than a letter box
Is Germany also a tax haven?
Private individuals resident in Germany have to pay tax of up to 45 percent on their earnings. Companies whose main office is in Germany have to pay corporate tax and business tax. But in Germany too there are loopholes that the cunning can take advantage of.
"If a German-based business seeks advice from an offshore company, the offshore company issues an invoice, and the money is transferred. To the tax office, this looks like a perfectly normal transaction," says Mondial. However, it means that the money has been moved out of the country, and no further taxes will be paid on it. According to German law the burden of proof lies with the tax office, not with the companies.
And this burden is too heavy for the German system to bear, Eigenthaler says: "We don't have the capacity to do all the checks. Sometimes we wait years for an answer from overseas authorities. But there's also a lack of political will. I always have the sense that people at the top are being too lax in their pursuit of tax evaders."
Furthermore, the influence of the German state ends at the border. "If money is transferred out of Germany to another country, the German treasury has no way of locating it - unless Germany has a tax agreement with the relevant state that includes the exchange of information," Eigenthaler explains. But why would somewhere like the Cayman Islands have an interest in torpedoing its own business model by signing such an agreement? And as Eigenthaler points out, even if an agreement were reached, it doesn't mean it would necessarily be followed to the letter.
The data leak and its consequences
For years now international organizations like the OECD (Organization for Economic Cooperation and Development) have been trying to establish measures against tax fraud and standardize regulations. According to the OECD, progress has been made since a blacklist was published in 2009 naming four countries as tax havens. 700 agreements were reached regarding the exchange of information, and around 40 judicial verdicts have led to some changes in the law.
Might the revelations contained in these databases be of assistance in the international fight against tax fraudsters? Yes, but only indirectly, according to the computer forensics journalist Sebastian Mondial. He says he hopes that the actual data will never be published. The point of the exercise is not simply to put all of these firms' data on the Internet and let everyone look at it to see who has transferred how much money, or who owns which companies. Rather, says Mondial, "The lawmakers and the respective countries must somehow find a way of establishing transparency."
DW.DE
Tax evasion made easy, legally
Some prominent German artists and athletes do not pay taxes in Germany. This is perfectly legal in certain circumstances, but it can sometimes backfire, as Boris Becker found out. (12.01.2013)
On the trail of lost taxes in Greece
A Greek journalist has published a list of 2,000 wealthy Greeks purported to have Swiss bank accounts. Some are asking whether his publication will force the government to change the way they collect taxes. (29.10.2012)
Greece fights eternal battle against tax evasion
Greece is struggling to combat tax evasion and corruption. Last summer, the tax debts reached a record level of 45 billion euros. But so far, the state has recovered just 19 million euros of this debt. (25.10.2012)
Merkel downplays tax row with Switzerland
Tax disputes between Germany and Switzerland are nothing new. Germans who invest in Swiss banks in order to evade taxes have long been a source of contention. A solution seemed near until recently. (03.04.2012)
Date 04.04.2013
Author Rayna Breuer, Insa Wrede / cc
Editor Andreas Illmer
http://www.dw.de/the-secret-world-of-tax-havens/a-16722318
Global media investigation finds 612 Indian firms in tax havens
Ritu Sarin Posted online: Thu Apr 04 2013, 04:18 hrs
New Delhi, Washington : In the biggest global expose of its kind on offshore investments and secret financial transactions, an international group of investigative journalists has found details of more than 1.2 lakh offshore entities and trusts belonging to individuals and companies in more than 170 countries and territories, including India.
These individuals and companies include politicians, the mega rich and tax offenders, among others, who have invested in tax havens such as the British Virgin Islands, the Cook Islands, Samoa and other offshore hideaways.
The 612 Indians in this list include two members of Parliament — Lok Sabha Congress MP Vivekanand Gaddam and RS member Vijay Mallya — and several industrialists such as Ravikant Ruia, Samir Modi, Chetan Burman, Abhey Kumar Oswal, Rahul Mammen Mappillai, Teja Raju, Saurabh Mittal and Vinod Doshi.
The list also includes businessmen who have had a brush with authorities such as the Income-Tax department and the CBI. Several of the offshore investments were made in possible violation of RBI and FEMA rules.
Details of these transactions were contained in 2.5 million secret files and accounted for more than 260 gigabytes of data. They were obtained by the International Consortium of Investigative Journalists (ICIJ) and their total size is more than 160 times larger than the leak of the US State Department documents by Wikileaks in 2010.
Based in Washington DC, ICIJ (www.icij.org) is an independent network of reporters who work together on cross-border investigations.
ICIJ collaborated with 38 media organisations around the world, including the The Indian Express, for this ambitious global project and to analyse the documents. The other media partners include The Washington Post in the US, The Guardian and BBC in Britain, Le Monde in France and the Canadian Broadcasting Corporation.
The secret files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how financial secrecy has spread aggressively around the globe. They represent the biggest stockpile of inside information about the offshore system ever obtained by a media organisation.
Besides several well-known Indians, the lists include American doctors and dentists, middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, East European and Indonesian billionaires, Russian corporate executives and international arms dealers.
These people used international financial services providers such as the Portcullis Trustnet (PTN) of Singapore and the Commonwealth Trust Limited (CTL) in the British Virgin Islands to register offshore companies in tax havens. PTN and CTL, it has been found, have helped tens of thousands of people set up off-shore companies, personal financial trusts and hard-to-trace bank accounts.
Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. The stolen asset recovery initiative, a programme of the Wold Bank and the United Nations, has estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $ 1.6 trillion a year.
On the other hand, offshore defenders counter that most offshore patrons are engaged in legitimate business transactions. Offshore centres, they say, allow companies and individuals to diversify their investments, force commercial alliances across national borders and do business in entrepreneur-friendly zones that eschew the heavy rules and redtape of the onshore world.
The 15-month long investigation has found that alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging and political corruption to thrive. The expose has also thrown light on the functioning of “nominee directors’’ in offshore companies, several of whom have also been engaged by Indian patrons of offshore companies.
For instance, a cluster of 28 “sham directors’’ have been identified as having served as the on-paper representatives of more than 21,000 companies between them, with some individual directors representing as many as 4,000 companies each.
The expose comes shortly after a list of 18 Indians who had bank accounts in the LGT Liechtenstein Bank and around 700 Indians who had accounts in HSBC in Geneva became public. In both cases, account holders were prosecuted and paid penalties to Income-Tax authorities for deposits they had made abroad without paying taxes in India.
Incidentally, India had signed a double taxation treaty called the Tax Information Exchange Agreement with the BVI in 2011 to check tax evasion and money laundering from the tax haven. Finance ministry officials said that similar agreements are in the process of being drafted with the Cook Islands and Samoa.
While the Liberalized Remittance Scheme 2012 permits Indians to deposit up to $200,000 abroad annually, the RBI has made it clear that this does not include deposits in tax havens. “As yet, the $200,000 facility for remittances abroad is not applicable for individuals to open accounts or companies in tax havens,” a RBI spokesperson told The Indian Express.
Auditors said the legality of holding offshore accounts and registering offshore companies is complex. The RBI restriction on individuals incorporating companies abroad, they said, can be easily circumvented if an offshore company is first incorporated and the shareholding then transfered to the beneficial owner.
In the cases under scrunity, documents show that both patterns have been followed. The date of incorporation and the date of the patrons being appointed shareholders/directors is either identical — which is a violation of RBI guidelines — or is a month or so later. If it is the latter, these individuals can say they just acquired shares of an offshore company.
However, with individuals debarred from using LRS for setting up companies, even the remittance dispatched by them for setting up an offshore entity can be a violation. Under rules of the Foreign Exchange Management Act (FEMA), the use of the offshore route to bring in FDI is also prohibitted and is a violation of Section 8 of the act.
There is also a restraint on individuals setting up offshore companies without the prior approval of the RBI.
MEGA BYTES
* 15-month investigation based on 260 GB data in 2.5 million secret files including 2 million emails covering nearly 30 years
* Data had details of over 1.2 lakh offshore firms/trusts and 12,000 agents
* Owners, benefactors of offshore accounts spread across more than 170 countries, territories
* 86 ICIJ journalists from 38 media organisations in 46 countries collaborated in investigation
* Data found 28 ‘sham directors’ who together represented 21,000 firms
http://www.indianexpress.com/story-print/1097501/
Why tax havens exist; and how India has its own tax havens
by R Jagannathan Apr 4, 2013
The business of money in tax havens excites the imagination. One can conjure up loads of ill-gotten wealth being stashed away in some underground cellar, with the owner decked in diamonds and rolling on a bed of greenback.
Today’s Indian Express has a story about 612 Indians who are among thousands with accounts in tax havens. It will make waves. Apart from our own 612 tax haveners, the story talks of 1.2 lakh offshore entities and trusts involving 170 countries.
The story, which has been done through the collaborative efforts of several global investigative journalists banded together under the banner of the International Consortium of Investigative Journalists (ICIJ), names 20 of the 612 Indians today. The most prominent names among them are Vijay Mallya (of Kingfisher infamy), Teja Raju (son of B Ramalinga Raju of Satyam ignominy) and Ravi Ruia (of Essar) – apart from a motley bunch with surnames such as Oswal, Modi (not you know who), Mittal (of Indiabulls), Mammen Mappillai (MRF) and Oswal (scion of the Ludhiana-based textile and chemicals group), among others. (See the full list
here)
What we have to brace for is more disclosures in the coming days, which could be even more sensational – though that is still to be seen. At the very least, the Indian stock markets may be roiled with a new bout of concerns about who will get named tomorrow or the day after.
The Express says that the details of the tax haven transactions of Indians and other global mega-rich who like to keep their nest-eggs outside their home countries will dwarf the documentation of
WikiLeaks. It says: “Details of these transactions were contained in 2.5 million secret files and accounted for more than 260 gigabytes of data. They were obtained by the International Consortium of Investigative Journalists (ICIJ) and their total size is more than 160 times larger than the leak of the US State Department documents by Wikileaks in 2010.”
It adds: “The secret files provide facts and figures – cash transfers, incorporation dates, links between companies and individuals – that illustrate how financial secrecy has spread aggressively around the globe. They represent the biggest stockpile of inside information about the offshore system ever obtained by a media organisation.”
In the coming days, the stuff will surely hit the fan as more big names are disclosed both in the Indian media and abroad. However, some cautionary notes need to be stated upfront.
First, and most obvious, the volume of documents accumulated, while important for an investigation on this scale, is less important that the value of the data they contain. Details of cash transfers, dates of incorporation, et al, are important pieces of evidence, but closing the loop between the persons named and the money trail will need much, much more investigation. It is worth recalling that even though the 2G scam is sure to have involved a lot of slush money, the money trail has more or less been lost.
Using tax havens to stash away funds needn’t always be illegal. Reuters
Second, not all accounts and corporate presence in tax-havens may necessarily be in violation of the law. Many of the persons named – Ravi Ruia, for instance – are non-resident Indians (NRIs) who only have to be in compliance with the tax laws of their domicile countries. Disclosures to Indian entities may also have been made, but may not be known to the investigators. Indian companies and Indian residents who have to be in compliance with our laws – most of which lead to more harassment than legal convictions – may not have much to worry about.
Third, the moral argument against those with accounts/businesses in tax havens is that they may be evading domestic law and taxes. However, laws change all the time. It was once a crime to hold a single dollar in your wallet; today, you can do so without fear. Moreover, it may be part of a specific government policy to encourage inflows from tax havens. Take our own government: we have deliberately left open a loophole for companies to route their investments to India through Mauritius, and this is benefitting our stock markets, and also helps us in meeting our current account deficit.
Not only that, we have now specifically announced that the General Anti Avoidance Rules (GAAR), which Pranab Mukherjee introduced in the 2012 budget to deter ruses meant to evade tax, will not be implemented for three years. The message is simple: when we are in trouble on the external front, we will not look at the colour of the money.
Fourth, it goes without saying that capital will try to reside where it is taxed the least. A tax haven is not necessarily a shady place to park your money (though some of them surely are): it is merely about giving individuals and companies tax or other breaks and get them to invest there. Even today, countries have double-tax avoidance treaties, which enables companies to legitimately pay lower taxes in one country and avoid the higher tax rate in another country. Mauritius is famous because it has zero tax on certain types of incomes – and we have a double-tax treaty with that country. We have created a tax haven, not they.
Fifth, tax havens exist within India as well. When Narendra Modi offers the Tatas a tax credit for putting up the Nano factory in Gujarat, he is offering a sales tax haven for the project for some years. When Nitish Kumar demands special status for Bihar, he is essentially demanding that his state should become a tax haven for domestic and global investors in order to develop faster.
Not only that. Politicians create their own tax havens to favour their voters. Today, farmers pay absolutely no income tax whatsoever – so if you want to evade income tax legitimately, you could do worse than marrying into a farming family and show most of your income as derived from agriculture.
Seen in this perspective, tax havens are instruments through which states which would never have got capital are using the bait of tax advantage to develop themselves.
Look at the same picture globally, and this is what is happening. Switzerland, once the prime tax haven, is now becoming less of a haven under pressure from the US and neighbouring countries. This is what makes the British Virgin Islands, Cook Island etc more attractive now.
The only real way to avoid the flow of tax-evaded money across borders is to have similar tax rates and laws across the whole world. Which ain’t going to happen.
This is not to say that businesses and individuals who move their wealth to tax havens are pure as the driven snow. They are crooks as defined by domestic laws. But not all of them can be tarred with the same brush.
Just as one man’s terrorist is another man’s freedom fighter, a tax haven is one country’s red carpet for investors, and a red rag for taxmen in another.
http://www.firstpost.com/business/why-tax-havens-exist-and-how-india-has-its-own-tax-havens-685571.html
Indian Express-ICIJ probe: Vijay Mallya, Ravikant Ruia in tax havens
Ritu Sarin Posted online: Thu Apr 04 2013, 04:10 hrs
The 612 Indians on the list of those who have invested in tax havens such as the British Virgin Islands include two MPs, a former royal and top industrialists. RITU SARIN puts together details of 20 among them
SONU LALCHAND MIRCHANDANI
Mirchandani is the founder of popular consumer electronics firm Onida. Mirchandani and his wife, Soni, opened a BVI company called Strong Wing Overseas Ltd in 2006 with an authorised capital of $50,000. Both are directors and shareholders of the company.
Mirchandani, however, said he did not recall opening such a BVI entity. “The personal details in the papers are mine. Maybe someone else has opened the company in my name,” he said when shown the documents.
Investigation finds 612 Indian firms in tax havens
TEJA RAJU
Teja is the eldest son of Ramalinga Raju, the disgraced former chairman of Satyam Computers Ltd. Teja is said to be the brain behind Maytas Infrastructure, whose planned merger with the software giant went on to unravel the alleged corporate fraud that sent Ramalinga Raju to jail for 32 months.
The Rajus set up two BVI companies, Global Network Overseas and Stapley Universal Limited. Teja Raju is listed as the beneficial owner of both but records show their current status as “defunct”. Each company was registered with an authorised capital of $50,000.
Teja Raju denied any link with the companies. “Looks like a case of mistaken identity,” he said.
RAVIKANT RUIA
An NRI, Ruia is vice-chairman of the Essar group, which has interests in steel, oil, gas and power. His company has been embroiled in the alleged irregularities in the telecom spectrum allocation of 2001-02; last month, a special court named Ruia an accused.
He has registered three firms in the BVI and his daughter Smiti is a shareholder in two of them. Also, one of Ruia’s flagship companies, Essar Power, has five BVI accounts with their authorised capitals ranging from $100 to $100,000.
Essar officials said that of the eight companies, five were liquidated in 2011 and 2012 and three are “existing and operational”. They said necessary filings and compliance have been done in India in accordance with laws and Smiti has declared her holding in Paprika Properties Ltd and Paprika Holdings Management Ltd in her wealth tax returns. “These companies were started as SPVs to make investments and are in the knowledge of the authorities concerned,” Essar said.
RAMAKRISHNA KARUTURI
Bangalore-based Karuturi is the chairman of Karuturi Global Ltd, the largest producer of cut-roses in the world. He has diversified into farming and has leased 300,000 hectares of land in Ethiopia to produce cereals and edible oil.
In 2007, Karuturi registered companies in tax havens and with huge authorised capitals. He is shareholder or beneficial owner of six companies that have a collective authorised capital of $2.2 million. His wife, Anitha, is also a shareholder in one company, Maxworth Investment Ltd.
Reached in Ethiopia, Karuturi said he did not recall the companies and did not respond to subsequent calls.
VIJAY MALLYA
The other MP on the list, Mallya registered a BVI company called Venture New Holding in 2006 with an authorised share capital of $50,000. Mallya, who has been in the news for the trouble over his Kingfisher Airlines and with the tax authorities, is the beneficial owner of the firm.
“Dr Mallya is a non-resident Indian with business activities in different parts of the world. It is common practice to use BVI registered companies in connection with such activities which are not confined to India alone. All disclosures in regard to Dr Mallya’s wealth have been duly made to Parliament,” a UB group spokesperson said.
VIVEKANAND GADDAM
Gaddam is a Congress MP from the Peddapalle reserved constituency in Andhra Pradesh. The seat was earlier represented by his father, former union minister G Venkatswamy. Gaddam, who has a MBBS degree, is an industrialist and owns asbestos firm Visaka Industries. He is also chairman of CII’s Andhra Pradesh chapter.
Gaddam and his wife, Saroja, became directors and shareholders of British Virgin Islands (BVI) company Belrose Universal Ltd in 2009. The address mentioned in documents is the official Hyderabad address that is also mentioned in his Parliamentary records.
Reached for his comment, Gaddam said he was not aware of the existence of any such offshore company. “I do not remember being involved with such a company and have no connection with it,” he said.
ABHEY KUMAR OSWAL
Son of Ludhiana-based business tycoon Vidya Sagar Oswal, Abhey is chairman of Oswal Agro Mills and Oswal Chemicals and Fertilizers and managing director of Oswal Spinning and Weaving Mills. In 1999, tax authorities raided his establishments for suspected evasion.
He is one of the biggest Indian players on the BVI list. Starting in 2006, he registered 11 companies in Samoa and the BVI and controlled them through the Rising Wealth Trust, registered in the Cook Islands. While the trust owns shares in several of the companies, Abhey owns shares in others. Abhey is the protector of the trust and his son Shael is the settler. The combined authorised capital of the 11 companies is $5.3 million.
“I have not registered any offshore firms. You must be in the knowledge of business entities of my son Shael Oswal, who is a Singapore resident and an NRI. My companies or myself have no relation whatsoever with his business or business entities,” Abhey said.
SAMIR MODI
Son of top industrialist K K Modi, who owns the diversified Modi Enterprises, Samir is an executive director in Godfrey Philips. He pushed the group’s diversification by launching a string of new ventures such as Modicare, Colorbar and Twenty Four Seven.
His BVI company is called Gilvin Rock Enterprise Limited. He and his wife, Shivani, are joint directors and shareholders in the firm ,which has an authorised capital of $50,000. “The company was set up as a route for investments but hasn’t done any business or trade transactions,” he said.
CHETAN BURMAN
Chetan Burman is a fifth-generation member of the Burman family, which owns the Rs 1,500 crore ayurvedic and food products brand Dabur. He was executive director of Dabur Nepal but has now branched out into other ventures.
Burman registered a BVI company in 2007 called Heavenly Bloom World Ltd. He is both director and shareholder of the company, which started with an authorised capital of $50,000.
Burman said the BVI firm was set up to route exports, mainly of honey, through Singapore but that plan didn’t take off. “The company was set up through a verbal communication since I wanted to make Singapore the export hub for my products. But no trade transactions actually materialised and the company has thus remained dormant,” he said.
GAEKWAD RADHIKARAJE SAMARJITSINH
In January 2008, members of the former royal family of Baroda opened a BVI firm with an authorised capital of $50,000. The directors and shareholders of the company, called Brentwood Consulting Limited, are Gaekwad Radhikaraje Samarjitsinh, wife of Samarjitsinh Gaekwad, and her sister Kumari Meenal. The Laxmi Vilas Palace, one of the largest residences in the country, is given as Radhikaraje’s address in documents.
She did not respond to questions sent to her.
RAHUL MAMMEN MAPPILLAI
The founder of MRF Tyres, the late K M Mammen Mappillai, was among those on the list of 18 people who had accounts in the European tax haven of Liechtenstein. It has now come to light that members of the MRF family registered a BVI company, Moon Mist Enterprise Limited, in 2007 with an authorised capital of $50,000. Its directors are Mammen Mappillai’s two sons, MRF chairman Kandathil Mammen and its MD Arun Mammen. Kandathil’s son Rahul Mammen Mappillai, also an MRF director, is the third shareholder.
Rahul did not respond to questions sent to him.
GURBACHAN SINGH DHINGRA
Dhingra is vice-chairman of Berger Paints, the second largest paint manufacturer in the country. In the BVI, Dhingra is the beneficial owner of a company called Crossley Hill Corporation. It was incorporated in 2008 with an authorised capital of $50,000.
Dhingra, however, denied any links with the company. “I have nothing to do with this company even though the address being quoted by you is my address. You must have got wrong documentation,” Dhingra said.
RASHMI KIRTILAL MEHTA & BHAVIN RASHMI MEHTA
The Mehtas are prominent Mumbai-based diamond traders, with a base in Belgium, and are facing allegations and action for parking money in offshore accounts. Rashmi is the son of patriarch Kirtilal Mehta and Bhavin is Rashmi’s son. Some of their relatives, including Rashmi’s brother Prabodh Mehta, were named in the list of 18 Indians who had accounts in the LGT Liechtenstein Bank. In April 2011, the family was raided by tax authorities and their tax evasion cases are under assessment.
Rashmi and Bhavin are directors and shareholders in a BVI company called Bapaji Inc. The company was incorporated in 2004. Another BVI company, called Dimension Worldwide Ltd, is linked to the Mehta
family but its status is described as “defunct”.
The Mehtas did not respond to questions sent to them in Belgium.
LANKALINGAM MURUGESU & REETA LANKALINGAM
Known as the Papad King, Murugesu is the chairman of the Lanson Group, involved in the manufacture and export of papads. The group also owns Lanson Toyota, a Toyota car dealership of which Reeta, Murugesu’s wife, is the joint MD. They also own a biotech firm called Lanson Biotech involved in ayurvedic research.
Murugesu and Reeta are joint shareholders in a Hong Kong-registered Portcullis TrustNet company called Ready On Company Limited. The company was “sold” to the couple in 2008 and began with an authorised capital of HK $10,000.
Murugesu confirmed having set up the company. “We started the company for better tax planning but with full tax now required to be paid by export units like ours, no trading through it really materialised. We just thought it is better to pay full taxes,” he said.
THIAGARAJAN MURUGESAN
Breaking away from his family business of cotton trading and textiles, Murugesan launched the now-defunct Paramount Airways, a niche airline catering to the southern sector, and was its MD at the age of 28. He started five BVI companies in 2008, each with an authorised capital of $50,000. He is director and shareholder in all of them.
Thiagarajan confirmed the existence of the five BVI companies but clarified that they are “wholly owned” subsidiaries of Indian companies of the Paramount group and not individual holdings. “The BVI companies were opened with the aim of getting foreign investments in the textile business but that did not happen. So these are just companies on paper with very little or hardly any capital. Since the investments did not come in we did not activate the companies,” he said.
MAITREYA VINOD DOSHI
Doshi is the chairman of Premier Ltd, formerly Premier Automobiles Ltd, one of India’s oldest automobile manufacturers. He opened a BVI company called McGuffin Ltd in 2006 with an authorised share capital of $50,000 and is named as the beneficial owner.
“McGuffin Ltd has invested FDI in our Indian company with prior approval of the RBI. We regularly file all the required disclosures with the RBI as per their rules. All details of McGuffin have been given to the income-tax authorities as part of my local company’s routine tax assessment, including audited balance sheets, shareholders list certified by auditors and details of investments made by it. All remittances by McGuffin have been made through HDFC Bank after due KYC checks,” Doshi said.
YASHOVARDHAN LOHIA
Lohia is the CEO of Chamong Tee Exports, one of India’s largest tea exporters. Lohia registered Golden Charm Universal and Golden Success Offshore Inc in the BVI in 2007 but these are now shown as “defunct”.
Lohia did not respond to questions sent to him.
MEENAKSHI JATIA
One of the three daughters of the late jute baron Arun Bajoria, Meenakshi and her husband Sharad Kumar Jatia are among the claimants to Bajoria’s empire, valued at Rs 2,500 crore and the subject of family disputes.
The couple are named jointly as directors and shareholders in two BVI companies, Supreme Bonus Enterprises Limited and Plazzo International Management Ltd. Each was acquired in 2007-2008 with an authorised capital of $50,000. She did not respond to questions.
SAURABH MITTAL
Mittal is a co-founder and vice-chairman of Indiabulls, the country’s first e-commerce and Internet brokerage company.
BVI documents show Mittal registered a company named Alta Vista Development Corporation in 2008. He is both director and shareholder in the company, which began with an authorised capital of $50,000. He did not respond to questions put to him.
NEESHA SUNIT KHATAU, PANNA SUNIT KHATAU & REENA SUNIT KHATAU
They are heirs to the 150-year old Khatau empire. Panna is the wife of Sunit Khatau, the late chairman of the group who was shot dead in 1994. She is chairman of their flagship textile firm, Khatau Makanji Spinning and Weaving Company. Neesha and Reena are her daughters and directors of the company.
In 2007, the three registered four companies in the BVI through Portcullis TrustNet and are either together or individually named as beneficial owners of the firms. In each case, the authorised capital is $50,000. Neesha did not respond to questions sent to her.
How international journalists' team analysed offshore files
http://www.indianexpress.com/story-print/1097494/
How international journalists' team analysed offshore files
Posted online: Thu Apr 04 2013, 11:00 hrs
Washington : By Duncan Campbell
The International Consortium of Investigative Journalists' exploration of the secretive world of offshore companies and trusts began after a computer hard drive packed with corporate data and personal information and e-mails arrived in the mail.
Gerard Ryle, ICIJ's director, obtained the data trove as a result of his three-year investigation of Australia's Firepower scandal, a case involving offshore havens and corporate fraud.
The offshore information totaled more than 260 gigabytes of useful data. ICIJ's analysis of the hard drive showed that it held about 2.5 million files, including more than 2 million e-mails that help chart the offshore industry over a long period of explosive growth. It is one of the biggest collections of leaked data ever gathered and analysed by a team of investigative journalists.
The drive contained four large databases plus half a million text, PDF, spreadsheet, image and web files. Analysis by ICIJ's data experts showed that the data originated in 10 offshore jurisdictions, including the British Virgin Islands, the Cook Islands and Singapore. It included details of more than 122,000 offshore companies or trusts, nearly 12,000 intermediaries (agents or "introducers"), and about 130,000 records on the people and agents who run, own, benefit from or hide behind offshore companies.
When ICIJ further analysed the data using sophisticated matching software, it found that about 40 per cent of files and emails were duplicates.
The people identified in ICIJ's analysis of the data are shareholders, directors, secretaries and nominees of companies and trustees, "settlors" or "protectors" of offshore trusts, as well as power-of-attorney holders who direct the actions of third parties. Many of the structures are designed to conceal the true ownership and control of assets placed offshore. Their identified addresses are spread across over more than 170 countries and territories.
A large number of positions are held by so called "nominee directors," whose names appear again and again, sometimes in hundreds of companies. Nominee directors are people who, for a fee, lend their names as office holders of companies they know little about. It is a legal device widely utilized in the offshore world - akin to having your motor vehicle registered in the name of a stranger.
The records indicated that company directors and shareholders were often nominee companies, law firms or other types of "corporate persons," some of which were managed and owned by still other nominees and companies.
ICIJ's data analysis showed that the people setting up offshore entities lived most often in China, Hong Kong and Taiwan. Another important group of clients comes from Russia and former Soviet republics. This helps explain why the second-largest source of capital investment flowing into China is the tiny offshore tax haven of the British Virgin Islands. Similarly, a large source of investment flowing into Russia is from Cyprus, a country that also features heavily in the data - and whose financial stability was recently undermined by a crisis precipitated by Cypriot-based banks being bloated by Russian money.
ICIJ's team of 86 investigative journalists from 46 countries represents one of the biggest cross-border investigative partnerships in journalism history. Unique digital systems supported private document and information sharing, as well as collaborative research. These included a message center hosted in Europe and a U.S.-based secure online search system. Team members also used a secure, private online bulletin board system to share stories and tips.
The project team's attempts to use encrypted e-mail systems such as PGP ("Pretty Good Privacy") were abandoned because of complexity and unreliability that slowed down information sharing. Studies have shown that police and government agents - and even terrorists - also struggle to use secure e-mail systems effectively. Other complex cryptographic systems popular with computer hackers were not considered for the same reasons. While many team members had sophisticated computer knowledge and could use such tools well, many more did not.
Tackling the data
Analyzing the high volume of information was the team's first and central challenge. With this much data, relevant information, and good stories, cannot be found just "going and looking." What's needed is to use "free text retrieval" (FTR) software systems.
Modern FTR systems can work with huge volumes of unsorted data, many times larger than even in this landmark investigative project. They pre-index every number, word and name, making it possible for complex queries to be completed in milliseconds. The searches are akin to using advanced features on Google or other internet search engines but are more sophisticated - and, critically, are private and secure.
The use of FTR, as well as relevant features such as timelines that tools can extract and display, have been critical to the success of the project. It sounds complicated, but still boils down to asking one of the most important questions that investigative journalists ask: "Who knew what, when?"
In their modern form, high-end FTR and analysis systems have been sold for more than a decade, in large quantities, to intelligence agencies, law firms and commercial corporations. Journalism is just catching up. Many of the tools are too expensive for most journalism organizations and may be too sophisticated for most to use. Perhaps the best-known intelligence analysis system, i2 Analysts Notebook, has been used by very few journalists or news organizations.
The major software tools used for the Offshore Project were NUIX of Sydney, Australia, and dtSearch of Bethesda, Md. NUIX Pty Ltd provided ICIJ with a limited number of licenses to use its fully featured high-end e-discovery software, free of charge. The listed cost for the NUIX software was higher than a non-profit organization like the ICIJ could afford, if the software had not been donated.
Computer programmers in Germany, the UK and Costa Rica designed sophisticated data mining and cleaning software for ICIJ to support data research. Before it was used, though, manual analysis had established much country-by-country identification of clients and thus provided an initial look at the scope and range of clients. This painstaking work was done in New Zealand and it proved crucial in early decisions on what countries ICIJ needed reporters to work in.
ICIJ's online search and retrieval system - named Interdata - was developed and deployed by a British programmer in less than two weeks in December 2012 to support an urgent need to get relevant documents and files out faster for research by dozens of new journalists who were joining the expanding Offshore Project.
Interdata allowed team members to access and download copies of any of the offshore documents that were relevant to their countries and interests. Journalists using the Interdata system have to date made over 28,000 online searches and downloaded more than 53,000 documents.
Unreadable documents
Before loading Interdata or using NUIX or similar analysis tools, the team's data experts had to deal with a major problem affecting tens of thousands of the leaked documents. Computers could not automatically read them because they were photographs or other images that do not contain text.
The solution was large scale re-scanning of unreadable files by optical character recognition (OCR) software that identifies and writes in the names and numbers on top of the images. This brought to the surface dozens of important new documents, including passports, contracts and letters explaining how companies were controlled.
ICIJ's offshore 260-gigabyte data collection is more than 160 times larger in size as measured in gigabytes than the U.S. State Department cables leaked to and published by Wikileaks in 2010. The formats of the data that ICIJ's team worked with were more complex and diffuse than the collected U.S. State Department cables passed to Wikileaks, and needed more levels of analysis.
One specially built program has been prepared to check and match names and addresses, and has spotted thousands of cases where the same person's data has been entered numerous times in different ways for different companies. Another special program identifies the country associated with each person and company, even when geographic data has not been entered fully or correctly.
Unlike the U.S. cables and war logs released by Wikileaks, the offshore data was not structured or clean. As delivered, it consisted of a large and mainly unsorted collation of company and trust documents and instructions, e-mails, large and small databases and spreadsheets, personal identity documents, accounting information and agents' and companies' internal papers and reports.
As might be expected in any office computer network, many documents and e-mails had been shared and copied many times over. Some of the programs ICIJ used could automatically sift out duplicates, but others could not.
Large databases detailing offshore companies and the people who had set up and operated them were found in the data. Over three months, ICIJ recovered and rebuilt the databases in an effort to run them in their original format. When the database reconstruction was done, there were surprises. The databases had been built to record and check who really lay behind each company and trust, as required by international regulations on money laundering and "due diligence." ICIJ's journalists hoped the data as to who was behind a company was a click away.
In fact, database entries for "beneficial owners" were often empty. Often too, the offshore services providers had passed the legal responsibility for holding the information to intermediaries in other countries who had brought the client to the service provider. The lesson was that the empty fields were not an accident; it was the design.
A frustrating but rewarding road
In the rebuilt databases, researchers were excited by occasional electronic flashes. Sometimes, on accessing a company record, an alert screen popped up over the registered data, giving a name and contact details for the person or persons who really owned the company and its assets. A further feature in one database masked a deeper layer of secrecy, identifying thousands of people as hidden stand-ins.
ICIJ's fundamental lesson from the Offshore Project data has been patience and perseverance. Many members started by feeding in lists of names of politicians, tycoons, suspected or convicted fraudsters and the like, hoping that bank accounts and scam plots would just pop out. It was a frustrating road to follow. The data was not like that.
But persistently following leads through incomplete data and documents yielded some great rewards: not just occasional and unexpected top names, but also many more nuanced and complex schemes for hiding wealth. Some of the schemes spotted, although well known in the offshore trade, have not been described publicly before. Patience was rewarded when this data opened new windows on the offshore world.
(British journalist Duncan Campbell is a founder member of The International Consortium of Investigative Journalists (ICIJ) and has worked as the organisation's Data Journalism Manager for this project. Trained in physics, Campbell has worked as an investigative journalist and television reporter and producer since 1975. He has specialised in investigating sensitive political topics, including defence, policing, intelligence services and electronic surveillance. He has also specialised in medical fraud and malpractice. His awards include Britain’s Investigative Report of the Year.)
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