We were served the Luxembourg Leaks in 2014, the Panama Papers in 2016, the Paradise Papers in 2017 and now we have the Pandora Papers. What they have in common is that ‘The leaked records vividly illustrate the central coordinating role London plays in the murky offshore world’ (The Guardian 3 October 2021). While the previous leaked papers focused on offshore tax evasion (illegal) and tax avoidance (legal) the Pandora Papers focus on offshore trusts and shell companies used by the rich and powerful to conceal their wealth and escape taxes. While that wealth takes many forms, for example as yachts and works of art, more often it is held as land and buildings. TREVOR RAYNE reports.
Trawling through 11.9m documents, over 600 journalists, coordinated by the Washington-based International Consortium of Investigative Journalists (ICIJ), examined the leaked records of 14 financial services companies. People of 78 nationalities are represented in the papers but the biggest group among them are British. More than two-thirds of the companies identified in the Pandora Papers were set up in the British Virgin Islands (BVI) in the Caribbean. According to the Tax Justice Network the three places that do most business stashing stolen cash are the BVI, the Cayman Islands and Bermuda. All are under British administration as British Overseas Territories. A 2020 study by the Organisation of Economic Cooperation and Development (OECD) reckoned that at least $11.3 trillion was being held in offshore accounts. Questions arise: why do these offshore havens flourish and why is the City of London at the centre of their web? We might also wonder why such as The Washington Post, The Guardian and the BBC publish these findings, when whistleblowers such as Julian Assange, Chelsea Manning and Edward Snowden have been denounced by the same media which previously profited from their disclosures?
The prospects for the usual way of making profits out of productive investment are diminishing. Corporations and wealthy individuals have built up huge cash piles. This is money that cannot find an adequately profitable outlet for investment. What were productive ways of investing to make profits have been replaced: profit increasingly takes a parasitic form – interest on loans, currency exchange deals and speculation. Tax avoidance and evasion and fraud are extensions of these methods of securing a share of surplus value and are invaluable to the ruling class. These are features of the capitalist crisis. Buying land and rent-yielding property and benefitting from their rise in price, without doing anything, is a form of this parasitism. Fortunes are pumped into this speculation rather than into investment in production. Lenin, after Marx, called this a feature of the rentier economy.
The people using the offshore shell companies are a mixed bunch, but they all have surplus cash, however they got it – and lots of it. Ukraine’s President Zelensky sits alongside Elton John, Kenya’s President Uhuru Kenyatta is there with Colombian singer Shakira, and what is Pep Guardiola, the manager of Manchester City FC, doing on a list that includes the governor of Lebanon’s central bank? The dealings of every one of them would be revealing of the world we are living in, but a select few can tell the tale of how offshore companies channel the proceeds of deepening global inequality.
The Blair rich project
Ninety of the 330 politicians and public officials identified in the Pandora Papers are Latin American, including three serving presidents, a finance minister and central bank governor. Honduras, one of the America’s poorest countries, has more politicians named than Nigeria. Prominent among the 35 current and former national leaders identified was Tony Blair. Blair was leader of the British Labour Party from 1994 to 2007 and Prime Minister from 1997 to 2007. As Labour leader Blair spoke out against offshore trusts, but he did nothing as Prime Minister. The Blairs saved £312,000 in stamp duty when they bought a BVI-based company which owned a London building worth £6.45m from the family of Bahrain’s minister of industry and tourism. Stamp duty is due on the sale of real estate itself, not when a company that owns the real estate is sold. We can thank Tatler magazine and its managing editor Louisa Parker Bowles, married to a nephew of the Duchess of Cornwall, for informing us that the Blair family fortune now exceeds £200m (‘The Blair rich project’ 21 September 2021). The Blairs have bought seven properties in London and the Home Counties.
King Abdullah II, ruler of Jordan since 1999, has shown loyalty to his British mentors, for which he has been rewarded. He owned 36 front companies in the BVI and Panama. The companies were used to disguise the ownership of at least 14 luxury homes in the UK and USA. Abdullah’s ties to the UK and USA run deep. He trained at the Royal Military Academy Sandhurst, served as a second lieutenant in the British Army and commanded the 13th/18th Royal Hussars before studying at Pembroke College, Oxford. Abdullah took an officers’ course with the US military and served at Fort Knox, Kentucky – where the gold is stored.
Curiously, the papers do not name any US politicians. The ICIJ is Washington-based, but they do point out that South Dakota, Nevada and Delaware have ‘transformed themselves into leaders in the business of peddling financial secrecy’. Last year, President Biden pledged to ‘lead efforts internationally to bring transparency to the global financial system and go after illicit tax havens.’ Joe Biden was senator for Delaware from 1973 to 2009, when it became a tax haven, but it was a US tax haven, and hence, for Biden, legal. The US government and the OECD have been pushing for a global minimum corporation tax on profits of 15%. We might expect such pressure to fall short of South Dakota and the BVI.
The case of Lebanon
With its snow-capped peaks and discreet banking arrangements Lebanon was known as the Switzerland of the Middle East. In June 2021 the World Bank reported that Lebanon was undergoing ‘one of the world’s most severe economic crises since the mid-19th century’. The country’s former Finance Ministry Director-General said that Lebanon’s banks had ‘smuggled’ up to $6bn out of the country between October 2019 and July 2020, evading financial controls that had cause panic. Banks had shut their doors and emptied cash machines. The Lebanese pound had lost 90% of its value in two years. ‘A Unicef report estimates that 77% of families in Lebanon don’t have enough food; in 30% of families a child has to skip meals; 15% have stopped sending their children to school…It is estimated that 40% of doctors and 30% of nurses have left since 2019’ (London Review of Books 21 October 2021).
In this social crisis hundreds of Lebanese companies and individuals appear in the Pandora Papers. Among them is the billionaire current Prime Minister, Lebanon’s richest man Najib Mikati. Mikati owns a Panama-based company he used to buy a $10m property in Monaco. His son owns at least two companies in the BVI, which he used to buy an office in central London for the Mikati family’s international investment company, M1 Group. Also present in the Papers is Riad Salemeh, who has run Lebanon’s central bank for nearly 30 years. Salameh is under investigation by French authorities for money laundering. He owned two companies registered in the BVI.
Gomorrah
The Pandora Papers revealed that the Czech Republic’s Prime Minister Andrej Babis set up offshore companies to buy a chateau on the French Riviera. He transferred the money through the BVI. Babis lost in the Republic’s 9 October 2021 parliamentary elections. No doubt the electorate were not impressed by his financial chicanery. The president of oil-rich Azerbaijan and friend of Prince Andrew, Ilham Aliyev, features in the Papers. The Aliyevs have traded almost £400m of UK property in Kensington, Mayfair and Knightsbridge over the past 15 years. This included selling a £67m property to the Queen’s Crown Estate. No doubt the Aliyevs and Blair are uncomfortable being found in the company of Raffaele Amato, Naples Camorra boss and cocaine smuggler tied to a dozen murders and inspiration for TV’s Gomorrah series. Amato used a UK-registered shell company to buy land and property in Spain. He is currently serving a 20-year gaol sentence for drugs and arms smuggling and mafia membership.
If a head of the Camorra is unsavoury company, what about a corporate lawyer who has donated over £750,000 to the Conservative Party since 2018? Mohamed Amersi’s donations included £100,000 towards the 2019 general election campaign and £10,000 for Boris Johnson’s leadership bid. Amersi worked for a Swedish telecommunications company, Telia, seeking to continue operating in Uzbekistan. Amersi was involved in the transfer of $220m to a Gibraltar-based offshore company owned by the daughter of Islam Karimov, then president of Uzbekistan. Gibraltar is also a British Overseas Territory. A US court fined Telia $965m for bribery. Amersi used offshore companies to buy two properties in the UK: a Mayfair townhouse and a country home in Gloucestershire.
‘Access capitalism’
In July 2021 Amersi said the Conservative Party was running an ‘access capitalism’ scheme for donors like himself. ‘You get access, you get invitations, you get privileged positions, if you are part of the setup,’ he said. The Financial Times revealed that the Conservative Party co-chair Ben Elliot ‘oversees a secretive “Advisory Board”, some of whose members had given at least £250,000 to the party, which regularly meets with Johnson and Rishi Sunak, the chancellor’. Ben Elliot is another nephew of the Duchess of Cornwall. What a small world it is. He arranged for Amersi to meet his uncle, Prince Charles, for dinner at Dumfries House in Ayrshire, Scotland. In July 2021 the Financial Times reported that the Conservative Party had received £18m from donors with property interests since Boris Johnson became party leader in May 2019. Electoral Commission figures show that 13% of donations to the Conservative Party come from property developers. The donations and the access they buy seem to be paying off: Johnson said he wants to rip up restrictions on property developers and to ‘transform the sclerotic planning system’ by forcing all councils to rewrite their development plans. A Conservative Party spokesperson said, ‘Government policy is in no way influenced by the donations the party receives.’ You wonder why the donors bother.
Despite declarations of intent to tackle offshore tax avoidance and corruption from Tony Blair’s premiership onwards ‘Some tax advisers expressed worries that the current rules are proving ineffective at tackling corruption, with entire industries of lawyers and accountants facilitating the flow of cash…and the sheer amount of dirty money going through one of the world’s financial centres’ (Financial Times 7 October 2021). The National Crime Agency’s international corruption unit has an annual budget of £4m, ‘one quarter of the sum spent by its target, Zamira Hajiyeva, wife of a fraudulent Azerbaijani banker, in Harrods on jewelry and designer clothes. Needless-to-say, her £15m Knightsbridge home was owned by a company based in the BVI’ (Ian Birrell, ‘The corruption of Britain’ UnHerd). The ‘industry’ of lawyers, accountants and estate agents that facilitate the flow of cash are paid by the British government to advise on drafting the laws.
To call all this corrupt is to miss the point that it is now normal behaviour among the capitalists. We are dealing with a usurious, parasitic and decaying system that encourages and rewards pathological behaviour. It is a particularly refined bourgeois cruelty that takes £20 a week from Universal Credit for Britain’s most needy people. Offshore companies and mechanisms radiating out of the City of London are symptomatic of the crisis of accumulation, not causes of it. However, the capitalist ruling classes need to maintain an appearance of integrity and fairness in competition; the Pandora Papers and previous leaks are used to suggest the system is still sound, with anomalies that can be reformed. Even more useful when associates of Russian President Putin can be identified as parking their assets in the BVI. The imperialists still intend to weaken and dismember Russia. What Manning, Snowden and Assange did was to show the brutal methods used by imperialism to dominate the world’s oppressed and conduct the inter-imperialist rivalry that keeps the cash flowing in.
