Exclusive
Status: 04.11.2022 18:01
German authorities want to freeze the Russian oligarchs’ assets, but first they need to find them. The ICIJ consortium of journalists uses data from Pandora Papers to show how stocks were parked in tax havens.
By Petra Blum, WDR, and Catharina Felke and Benedikt Strunz, NDR
Confidential data reveals the real owners behind hundreds of shell companies. The documents now released shed light on the offshore businesses of more than 800 Russian citizens, including several oligarchs and more than 42 billionaires who have parked their wealth in tax havens.
Eleven of these billionaires are already on international sanctions lists. The data is part of the Pandora Papers, a very large data leak from parallel financial centers. The International Consortium for Investigative Journalists (ICIJ) evaluated the Pandora Papers along with various media organizations around the world and published the results last fall. In Germany, journalists from the NDR, WDR and “Süddeutsche Zeitung” (SZ) were involved in the research.
Urgent change of ownership
“Oligarchs are aware that they are vulnerable to sanctions and have taken steps to ensure that their assets are as difficult to identify as possible,” said Tom Keatinge, director of the Center for the Study of Financial Security and Crime in London. “If governments don’t also attack the representatives and shell companies that support these elites, sanctions are useless.”
Who appears in the dataset now released is the Russian oligarch and businessman Alexei Mordashov. Among other things, he is the main shareholder in a Russian gold mine operator and – with assets of more than 20 billion euros – he is considered one of the wealthiest Russians overall.
In addition, the businessman had long held more than 30% of the shares of the German tourism group TUI. When sanctions against Mordashov were decided on February 28, Mordashov’s actions quickly changed hands. They are now owned by Unifirm, Mordashov’s holding company.
“Pandora Papers”
The “Pandoras Papers” are a massive data leak from the world of shadow financial centers. The data reveals the true owners of more than 27,000 offshore companies. The data includes politicians, the super-rich, oligarchs, criminals and celebrities. The 11.9 million confidential records include letters of incorporation from shell companies and funds, emails, account statements and other documents.
The data was evaluated in secret research by more than 600 journalists from 117 countries. Media outlets such as the Washington Post, BBC, Radio France, ORF, El País and Aftenposten were involved. In Germany, journalists from NDR, WDR and SZ researched the data leak.
The dataset was leaked to the International Consortium for Investigative Journalists (ICIJ) by an anonymous source. ICIJ shared the data with partner media and coordinated the research. ICIJ has led global research on parallel financial centers, including the “Panama Papers”, the “Paradise Papers” and the “Luxembourg Leaks”.
The confidential documents come from 14 offshore suppliers, i.e. from companies that help their clients to set up shell companies, trust funds, etc. Letterbox companies are often legally based in countries that are internationally noted for their weak money laundering controls, non-transparent financial practices and particularly low tax rates.
Owning a shell company is not illegal. Offshore companies can also be used for legal purposes. These company constructs are often used for money laundering, tax evasion or tax planning.
Partner takes actions
Without further ado, however, Unifirm has been transferred to a new owner, Ondero Limited, a shell company registered in the British Virgin Islands. Who the Ondero might belong to has been the subject of speculation for two weeks, because it’s not so easy – even for criminal investigators – to find out who owns companies in the Virgin Islands.
Russian oligarch Mordashov is considered one of the richest Russians of all time. Image: picture Alliance/dpa/TASS
However, a majority owner of Ondero would have to make itself known, as required by the German Securities Act. For weeks no one reported officially. However, the Pandora Papers reveal who is behind the shell company: Marina Mordashova, partner of Alexei Mordashov and mother of his three children.
Possible investigations against Mordashov
When the ICIJ and WDR, NDR and SZ sent an inquiry to Mordashov and asked about Mordashova’s role in Ondero, the oligarch’s life partner was suddenly reported to German travel group TUI and German authorities as the new owner – and, therefore, as a significant shareholder of TUI.
The Public Prosecutor’s Office in Hanover is examining investigations into suspected evasion of EU sanctions. Upon request, Mordashov stated that he always conducted all his business in accordance with applicable laws.
Oligarch involved in the biggest German gas producer
In addition to Mordashov, Russian oligarch Mikhail Fridman also holds shares in German companies. According to Forbes, he is also one of the richest Russians. Fridman’s Holding LetterOne has a 33% stake in Wintershall Dea, Germany’s largest gas producer. The remaining 67% belong to BASF heavyweight DAX.
Oligarch Fridman holds significant stakes in large companies, including German corporations. Image: photo alliance/AP Photo
Fridman became wealthy by founding the Russian industrial and financial group Alfa Group. Born in Ukraine, Fridman was one of the first oligarchs to take a clear stand against Russia’s war of aggression. However, this did not help him: the EU sanctioned him because of his “close relationship with Vladimir Putin”.
Still co-owner despite layoff
According to the EU, its Alfa Bank should benefit from the Kremlin’s decisions: “Vladimir Putin rewarded Alfa Bank’s loyalty by supporting the bank’s foreign investments,” reads the EU’s official justification for the sanctions. Fridman, now 57, resigned as director of LetterOne after the sanctions took effect.
However, according to the Luxembourg company register, Fridman continues to appear as a co-owner in at least nine group companies. One such company, LetterOne Investments Holdings, had assets of more than $13 billion in 2020. Overall, Fridman held shares in at least 67 companies in Luxembourg.
Shell Companies in the British Virgin Islands
As the Pandora Papers show, dozens of shell companies were created for Fridman in the British Virgin Islands, for example, to invest in real estate or oil. One of the shell companies had assets totaling $1.8 billion in 2016. Another company Fridman was involved in opened an account with Deutsche Bank’s Zurich private banking division, which held nearly $15 million in May 2018.
These companies and accounts are very hard to find for EU countries – neither Switzerland nor the Virgin Islands are particularly willing to provide information. When asked, Fridman said the Deutsche Bank account had already been closed.
Fridman also admitted that he remained a beneficial owner of LetterOne, but that his shares were frozen by the sanctions. As a result, he can no longer receive dividends. LetterOne confirmed this upon request and informed ICIJ, WDR, NDR and SZ that all communications with him had been stopped and that he no longer had control over the investment group.
Oligarch feels treated unfairly
At the same time, when questioned, Fridman emphasized that he considers the sanctions against him and his assets “completely unfair” because he was not involved in Russian politics, discussed any political issues with Vladimir Putin or had met him personally.
Oligarchs also need helpers – for example, to transfer their assets to tax havens, run shell companies or change ownership. And the Pandora Papers Russia also show that: In many cases it was the auditing firm PWC that got the Russian oligarchs as clients. The auditors took care of Fridman’s mailbox companies and a large part of Mordashov’s “Unifirm” business empire in Cyprus. PWC has already withdrawn from Russia and divested its Russian subsidiary.
But most Russian customers – corporate customers and oligarchs – are served by PWC in Cyprus. The company said it is currently in the process of “ending existing relationships with sanctioned individuals and companies.”