Just a few months after the story of the Panama Papers had broken, a new volume of leaked offshore company data has been released.
The records of more than 175 thousand companies registered in the Bahamas contain information on companies linked to Hungary as well, showing, for example, that László Horváth, a wealthy Hungarian businessman with close ties to the government served as a director of an offshore company for years in the early 2000s. In the same period, the firm had a joint company with MÁV, the state railway company.
The leaked files show the offshore connections of some influential political figures, including Neelie Kroes, a Dutch politician who served in the European Commission from 2004 to 2014 and as a commissioner had clashes with the Hungarian government over its controversial media laws. The records show that Kroes was a director of a Bahamas firm between 2000 and 2009, and despite the regulations, she failed to declare it among her business interests.
The leaked records have been processed largely by the same team that broke the Panama Papers stories earlier this year. The data were obtained by the German newspaper Süddeutsche Zeitung, which shared it with the International Consortium of Investigative Journalists and its partners. Direkt36 is the only news organization from Hungary participating in the project.
Even though the volume and the depth of this new leak is smaller than that of the Panama Papers, it still provides a significant insight into an important part of the shady world of offshore companies. While the records in general do not reveal the firms’ activities or their owners but other fundamental details, including the date of foundation, address, and in many cases the name of directors, can be learned from the files.
As ICIJ explains, in the Bahamas’ capital, Nassau, company documents can be consulted in person. An online registry, in theory, serves the same purpose. Yet the information in the online registry maintained by the Bahamian government is often incomplete. In addition, retrieving one company’s documents will cost at least $10, despite the recommendation of the international association of company registries, which discourages search fees.
The leaked records provide a fuller picture and the data are made public on ICIJ’s Offshoreleaks site, which already contains the data gleaned from the Panama Papers and a previous leak on offshore companies.
Friend of ministers
The leaked records contain information on at least 20 companies with connections to Hungary. In some cases, however, the connection means only that international companies used Bahamas firms for their activities in Hungary.
A firm called Chewton Limited stands out because for years its director was László Horváth, a Hungarian businessman who has become nationally known thanks to his expanding business empire and his close ties to the current government.
The companies of Horváth, who had worked as a border guard before the regime change, are present in several sectors, including transportation, commerce, and even in the hospitality business. Even though Horváth tries to downplay his political connections, he has publicly acknowledged that he has a long and close relationship with the current government’s ministers, Mihály Varga, the minister for the economy, and Sándor Fazekas, the minister for agriculture. ”We meet every two or three months to discuss strategic issues and they are always nodding but it does not mean that they can be influenced,” Horváth told Figyelő, a weekly magazine earlier this year. He added that “this is not the kind of friendship when you are chatting over coffee every evening.”
Records show that Horváth was the director of Chewton Limited between July 2000 and February 2006. The leaked files do not reveal who the company’s owner is or what its activities are but Hungarian company records show that Chewton was a co-owner of several Hungarian firms, most of them linked to Horváth. In 2004 and 2005, for example, the Bahamas company was a shareholder in L.A.C. Holding, the company that is holding together most of Horváth’s business interests.
Chewton did business with MÁV, the Hungarian state railway company. From October 2002 to December 2004, the Bahamas firm and MÁV jointly owned MÁV-REC, a company whose activities include waste management, environmental protection, and defence technology. Chewton was the majority owner with 51 percent of the shares, according to Hungarian company records, which also show that Horváth represented the Bahamas firm in its dealings in Hungary.
Horváth refused to answer to a detailed list of questions, which touched on Chewton’s assets, its owners and activities. MÁV told Direkt36 that “as a minority owner MÁV has no influence over the company’s operations, neither in legal, nor in economic sense.” The company added that even though now it is illegal for state companies to co-own businesses that are not transparent, they emphasized that this law came into effect only in 2011.
From black to grey
Offshore companies, which are often registered in exotic countries, are used in general for two purposes. One of them is for minimizing the tax burden on income that a company or a person makes in other countries. Since the ownership data of these entities are in most cases very hard to access, these companies are also used for hiding assets or conducting shady businesses. It is because of these two characteristics that even though owning or using offshore companies is legal, there have been major international efforts to crack down on their use.
One of the best-known offshore jurisdictions is of the Bahamas, which is a constellation of 700 islands, south of the Eastern shore of United States.
As ICIJ pointed it out, in 2000, the Organisation for Economic Co-operation and Development, the world’s leading tax policy forum, placed the Bahamas on a blacklist of countries that aid tax dodging. After the Bahamas hurriedly introduced nine new laws, the OECD removed it from the blacklist in 2001. In 2009, though, the OECD put the Bahamas on the organization’s “grey list,” a less severe categorization that nonetheless signified nonconformity with international standards.
In 2014, the most recent review of the Bahamas’ anti-money laundering systems by the OECD faulted the country on half of the core measures used to judge countries’ compliance with international standards, recalled ICIJ. This included no requirement for banks or financial institutions to know the real identity of a company or trust owner. Although the OECD now considers the Bahamas compliant, in June 2015, the European Union listed the Bahamas and 30 other countries as uncooperative tax havens.
Lobbyist turned EU commissioner
The EU’s concerns make it especially uncomfortable for Neelie Kroes that the new leaks have revealed her own offshore connections. The records show that she was a director of Mint Holdings Ltd., a company registered in the Bahamas, between 2000 and 2009. The documents do not contain information on the firm’s activities but they reveal that a Jordanian businessman called Amin Badr-El-Din also served as one of its directors.
As ICIJ’s investigation has found, Badr-El-Din founded UAE Offsets Group, a company that reinvests proceeds from weapons sales into the United Arab Emirates. UAE Offsets Group previously contracted with the weapons manufacturing giant Lockheed Martin Corp. Kroes worked as a lobbyist for Lockheed prior to being named as EU competition commissioner
Even though EU commissioners are required to declare their current and former business interests, Kroes failed to report her position in the Bahamian firm. Kroes, 75, is currently director or board member in several companies and advises Bank of America Merrill Lynch and Uber. She remains an influential member of the Netherlands’ ruling People’s Party for Freedom and Democracy. Most recently, she made headlines when she criticized the current EU Commission’s decision to order Apple to pay Ireland 13 billion euros of unpaid taxes.
Kroes is not the only political figure in the leaks. The records also link Colombia’s minister of mines and energy between 1999 and 2001, Carlos Caballero Argáez, to Bahamian companies.
He was listed as president and secretary of a Bahamian company, Pavc Properties Inc., between 1997 and 2008. Caballero Argáez also appeared as director of Norway Inc., a company registered in the Bahamas between 1990 and 2015.
Argáez told ICIJ that Norway Inc. held a Miami bank account owned by his father. The account’s assets were distributed to his sons upon his death, Argáez said. Pavc Properties owned an apartment in Miami, Argáez said, and his relationship with the company ended in 2008, when he sold his shares. Argáez said he and others chose the Bahamas on lawyers’ advice. He denied any conflict of interest. He said the company was set up in the Bahamas for “tax purposes.”
This piece is based in part on the story written by ICIJ’s Will Fitzgibbon and Emilia Díaz-Struck. Additional reporting by Mar Cabra, Rigoberto Carvajal, Miguel Fiandor Gutiérrez, Juliette Garside, Gaby de Groot, Michael Hudson, Carlos Eduardo Huertas, Frederik Obermaier, Bastian Obermayer, David Pegg, Martijn Roessingh and Vanessa Wormer.