Editor’s Note: The following investigative report is by the International Consortium of Investigative Journalists, based on millions of leaked records involving offshore secrecy. The International Consortium of Investigative Journalists is an independent network of reporters in more than 60 countries who collaborate on cross-border investigations. It is a project of the Washington-based Center for Public Integrity. This installment looks at how top managers of Russian state-controlled gians are owners of corporations registered owners of corporations registered in British Virgin Islands include top managers of state-controlled giants.
The deputy prime minister’s wife, as well as top managers of major
Russian military contractors and of giant government-controlled
companies, are among an array of Russian figures with secretive offshore
investments revealed in documents obtained by the International
Consortium of Investigative Journalists.
The disclosure puts President Vladimir Putin’s persistent call for
curbing offshore investments in a new and ironic light: he is well
acquainted with at least one of the offshore investors the documents
identify.
Even before the 2012 election returned him to the presidency, Putin was calling for curbs. In February, he introduced a draft law
to bar senior Russian officials from holding bank accounts or stocks
outside Russia, which has now passed the first stage of adoption in the
Russian Parliament. And in his state-of-the-nation address, Putin said Russia’s economy is hurt because so much of it operates through offshore tax havens.
Upon releasing a recent study
of the Russian economy, Global Financial Integrity, a Washington
research and advocacy organization, said illicit offshore flows of money
are so great that they raise “serious questions about the economic and
political stability of the nation.”
Ruslan Milchenko, a former Moscow police officer who heads the
Federal Information Center for Analysis and Security, a nongovernmental
organization, added in an interview: “When top managers of
state-controlled corporations linked with the defense sphere become the
secret shareholders of offshore companies, it may bring harm to state
security. … The question is: What is more important to them, the
interests of the state or their private offshore interests?”
ICIJ’s investigation found that owners of corporations registered in
the British Virgin Islands included top managers of state-controlled
giants including Gazprom,
one of the world’s largest extractors of natural gas. Others in the
documents include relatives of ranking Russian officials and prominent
private business people.
None of the Russians named in the documents responded to requests for
comment about the purposes of the companies. Among the offshore
investors were these well-connected luminaries:
Olga Shuvalova, wife of Igor Shuvalov, who has
served as first deputy prime minister since 2008. In 2007, the documents
show, she became a shareholder in Severin Enterprises Inc.,
which was registered in the British Virgin Islands and owned at least
two other offshore companies that owned still others. The dealings of
one of the companies, called Sevenkey Ltd., were laid out in a 2011
investigative article in Barron’s,
which tied the company to her husband, who has denied wrongdoing. But
new documents identify corporations beyond those Barron’s discovered.
Valery Golubev, deputy chair of the management committee of Gazprom. The documents show that he held half of the shares
of Sander International Inc., which was registered in the British
Virgin Islands in 2008 and was dissolved later the same year. His
personal ties to Putin go back to the 1990s, when they worked together.
Boris Paikin,
the general director of a Gazprom construction subsidiary called
Gazprom Sotsinvest that builds such projects as a $200 million stadium
in St. Petersburg and an Olympic ski resort. He also held Sander
International shares.
Andrey Reus, a former director general of Oboronprom,
a part of the Russian Technologies State Corporation whose products
include helicopters, jet engines and power plants. He is also a former
deputy minister of industry and energy. The documents show him as a
shareholder in a BVI corporation called Dreemlover Ltd. He could not be
reached for comment.
Vladimir Margelov, a member of the board of administration for the Russia-Belarus joint venture Defense Systems,
a state-controlled group of developers and manufacturers of air defense
systems. The documents show him as a shareholder and director of
Winkind Technology Development Ltd. in 2005 and Innovation Tech Group
Ltd. in 2008.
The ICIJ documents, the largest collection of secret offshore
corporate documents ever made public, identify many Russian businessmen
as owners of companies incorporated in the British Virgin Islands.
Much that happens offshore is illicit — money laundering, tax evasion
and bribery. But wealthy Russians have other reasons to do their
business offshore.
After the Soviet Union collapsed, the weak Russian state in the 1990s
offered little structure for business or for protection of money, and
much of the money made by the “oligarchs” — the early Russian business
figures who made billions by privatizing state-owned businesses — was
shipped offshore for protection.
Alexander Zakharov of Paragon Advice Group,
a private firm that offers tax advice to Russian businesses and high
net worth individuals, said that for legal matters the wealthy much
prefer the courts of Great Britain, which oversees many of the tax haven
islands, to those of Russia. Further, he said, offshore jurisdictions
conclude deals much faster than Russian financial institutions do.
Raymond Baker, director of Global Financial Integrity, agrees with
Putin that offshore dealings hurt Russia. “Hundreds of billions of
dollars have been lost that could have been used to invest in Russian
health care, education, and infrastructure,” Baker said
in announcing GFI’s recent report. “At the same time, more than a half
trillion dollars has illegally flowed into the Russian underground
economy, fueling crime and corruption.”
The International Consortium of Investigative Journalists is an independent network of reporters in more than 60 countries who
collaborate on cross-border investigations. It is a project of the
Washington-based Center for Public Integrity.
