Georgia’s former Prime Minister outed for offshore wealth by the Panama Papers
04 April, 2016
Georgia’s former Prime Minister outed for offshore wealth by the Panama Papers
One of the world’s largest data leaks, called the Panama Papers, is shedding light on the world of offshore financing , used frequently by many of the richest and most powerful around the globe. An anonymous source reportedly tipped off Suddeutsche Zeitung, an investigative newspaper in Germany, which then shared the information with the International Consortium of Investigative Journalists, Forbes informs.

After a yearlong investigation, ICIJ and 100 reporting partners around the world began publishing a series of articles on Sunday
based on the Panama Papers, which involved the leak of 11.5 million files including emails, invoices and bank records. The leak comes from Mossack Fonseca, a law firm in Panama that is reportedly one of the world’s biggest creators of shell companies. According to ICIJ, the files span decades, from 1977 to December 2015, and include details on 214,000 offshore entities with links to 140 politicians including Georgia’s former Prime Minister Bidzina Ivanishvili, the President of Argentina, Iceland’s Prime Minister and the King of Saudi Arabia. It also has details on at least 33 people and companies blacklisted by U.S., including Mexican drug lords and terrorist organizations...

Some of what has been detailed so far sheds light on people Forbes has long followed. In fact, the ICIJ report states that it includes information on “29 billionaires from Forbes list of top 500 Richest” as well as movie star Jackie Chan who Forbes profiled, and soccer star Lionel Messi, who ranked fourth on Forbes’ 2015 list of highest paid athletes. Many of the 29 billionaires have yet to be identified, but Forbes went through and found references to a number of them.

Bidzina Ivanishvili, who lives in a 108,000-square-foot compound in the mountains overlooking Tbilisi, was elected prime minister of Georgia in October 2012. (Forbes profiled him a few months before the election.) Thirteen months later he stepped down, after his party won the presidential elections, saying he’d fulfilled his task. Georgia’s richest person by far, he made his money in Russia and moved back home in 2003. According to the leaks, the British Virgin Island’s Financial Investigation Agency asked Mossack Fonseca for information about the ownership and activities of Lynden Management in 2011. Its Singapore office confirmed that Ivanishvili was a beneficiary of a trust set up by Credit Suisse. Two years later, according to the ICIJ, Mossack Fonesca BVI identified Ivanishvili as a “Politically Exposed Person” and asked its Singapore office for documents proving Ivanishvili’s identity and the source of funds for Lynden Management. Singapore, according to the ICIJ report, was unable to obtain them and later asked if Credit Suisse could handle the due diligence. A Swiss firm representing Ivanishvili apparently responded to ICIJ and said that he was willing to be transparent about his use of offshore companies and that banks like Credit Suisse regularly propose use of them, Forbes informs.

As the Organized Crime and Corruption Reporting Project website informs Mossack Fonseca needed Ivanishvili’s passport copy and proof of address in order to comply first with a 2011 British Virgin Islands Financial Investigation Agency inquiry, and then with 2012 amendments to the Anti-Money Laundering and Terrorist Financing Code Of Practice.

This refusal can be traced through dozens of e-mails and attached documents from 2011-15, according to internal data of Mossack Fonseca obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists (ICIJ) with OCCRP and over 110 media partners from 82 countries. Süddeutsche Zeitung received the files through an anonymous source and shared them with ICIJ which organized the global collaboration, OCCRP.org reports.

Even though Ivanishvili was acknowledged to be the beneficial owner of Lynden Management back in 2011, Mossack Fonseca’s compliance office spent the next four years trying to obtain Ivanishvili’s passport copy, which they needed to comply with anti-money laundering regulations. In August of 2015, they finally received a copy of his passport. As of September 2015, they still hadn’t received a proof of address.

Through Lynden Management and other structures, Ivanishvili and a close associate at one time controlled about 20 percent of the stock in Raptor Pharmaceuticals, a major US-based company that has had a roller coaster ride on the New York Stock Exchange. Raptor suffered in 2015 when a clinical trial for a drug to treat children with nonalcoholic steatohepatitis, an inflammation caused by a buildup of fat in the liver, failed to produce satisfactory results.

Ivanishvili has lost at least US$ 100 million in an account that includes this Raptor investment, and has filed lawsuits against Credit Suisse Bank in Switzerland, claiming one of the bank’s private investment bankers illegally hid losses on risky investments from Ivanishvili. The private banker is accused of taking money from Ivanishvili’s account and transferring it into the accounts of two yet-unnamed Russians with ties to the Gazprom energy conglomerate in order to cover losses in their accounts.
The loss is relatively small to Ivanishvili, who made his fortune mostly in banking and mining in Russia after the collapse of the Soviet Union. The Forbes Magazine 2016 ranking of billionaires calculates his net worth at US$ 4.8 billion, a drop of US$ 400 million in the past year.

The curious tale of Ivanishvili refusing to supply his documents begins on November 21, 2111, when Mossack Fonseca received a letter from the British Virgin Islands’ Financial Investigation Agency, requesting within seven days information on Lynden Management’s beneficial owners, directors, shareholders, beneficiaries, known bank accounts and assets, full details of connected companies, and Mossack Fonseca’s due diligence records on Lynden Management.

Within three weeks, Mossack Fonseca’s Singapore office, which was handling the Lynden Management account, notified its main office in Panama that Ivanishvili was the beneficial owner of the company. Eventually the 2011 Financial Investigation Agency inquiry was closed with no action taken.

But according to a long list of notes sent between Mossack Fonseca offices, the company was unable to obtain a copy of his Georgia passport until August 19, 2015. At one point the Singapore office asked about the consequences if no passport was obtained. The main office in Panama replied: “In case we receive a special investigation for this company and we fail (by) not having the information available, we may be subject of high administrative and statutory fines. Please note it is mandatory by law that the foregoing documents be kept on the registered agent’s files.”

Neither the Swiss lawyer handling Ivanishvili’s lawsuits against Credit Suisse nor Ivanishvili’s financial representatives provided any answers as to why Lynden Management was formed, what business it conducts, and why it took so long to provide a passport copy, OCCRP informs.
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