One of the ways that billionaires use offshore trusts is for yacht acquisition. (Washington Post illustration; iStock)
When three of Africa’s wealthiest people wanted to win favors from the Nigerian oil minister, they didn’t pay cash, according to company filings and court papers describing the alleged transactions.
Instead, the oil tycoons arranged to influence her with shell companies, each one holding a valuable piece of London real estate, according to the documents.
Other shell companies owned by the oilmen provided the minister and her family with a chauffeured car, and they shipped her luxury furnishings worth hundreds of thousands of dollars, U.S. prosecutors later alleged.
With billions in Nigerian oil revenue at stake, the men engaged in “an international conspiracy,” according to U.S. prosecutors, offering millions of dollars’ worth of gifts in exchange for “lucrative business opportunities.”
While cash may be the traditional means of providing untraceable gifts to politicians, the very wealthy often turn instead to the offshore world to produce an alternative currency: companies registered in secrecy havens and stuffed with valuable assets.
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The tycoons who allegedly provided the oil minister with more than $17 million worth of gifts were, according to the court filings and documents, Olajide Omokore and Kolawole Aluko, both previously ranked by Forbes magazine as among the “richest people in Africa,” and Benedict Peters, a man who has been described by Bloomberg and African media as a billionaire.
Peters is identified by name in the Nigerian court filings and as “Co-Conspirator #2” in a forfeiture case by U.S. prosecutors. Through a spokesman, Peters denied dealing in improper benefits and his representatives wrote that one of the key pieces of evidence presented by Nigerian investigators is a “concoction malevolently contrived.” Attorneys for Omokore and Aluko declined to comment.
The world’s wealthiest are among the most avid users of offshore companies, a new cache of documents known as the Pandora Papers shows, and they turn to tax and secrecy havens for a variety of reasons.
The documents obtained by the International Consortium of Journalists (ICIJ) and shared with The Washington Post and journalists in 117 countries and territories around the world shed light on the Nigerian oil dealings and, in more breadth than was previously possible, the extent to which the world’s wealthy use offshore companies to conduct business.
While billionaires constitute a tiny portion of humanity, more than 130 of them who have appeared on the Forbes list of world billionaires turn up as owners or beneficiaries of offshore assets. At least a dozen additional people ranked as billionaires by other media show up as well.
Some previous estimates have suggested that the world’s ultra-wealthy own the bulk of offshore assets, but those projections were based on partial data. The new documents provide broader evidence of the role that the ultrawealthy play in the secretive realm.
The documents come from the firms that helped these billionaires set up the offshore companies, and collectively, they offer glimpses of exceptionally wealthy people, their yachts and jets, their inheritance planning and the other ways companies created in tax or secrecy havens benefit them. The most recent Forbes billionaire list includes more than 2,700 names from around the world.
It is often difficult to know from the records why a billionaire has set up an offshore company. In some instances, the reason may be as simple as privacy. But there are other uses.
A striking number of the billionaires who control offshore companies and trusts that were revealed in the documents — more than a dozen — have faced allegations regarding the sources of their fortunes, and shell companies often figured in the charges. Several billionaires have been charged with using their companies in thefts of money or natural resources; others have faced international sanctions for their ties to autocrats. A handful have been sentenced to prison.
Federal investigators experienced in kleptocracy and money-laundering cases said that they commonly run into offshore shell companies — entities that typically have no offices or employees but hold assets such as real estate or bank accounts.
Key questions to better understand the offshore system
What is the offshore system?
The offshore financial system offers privacy, which can provide an opportunity to hide assets from authorities, creditors and other claimants, as well as from public scrutiny.
Why is it called offshore finance?
This system is known as offshore finance because the countries that popularized this method of sheltering wealth were often in island or coastal locations, but today “offshore” signifies anywhere that is not a customer’s country of residence.
Is this legal?
Offshore providers are typically established according to the laws of the country where they are located. But some clients have used offshore services in ways that are not legal.
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One Israeli billionaire, for example, was accused of using shell companies to steal hundreds of millions of dollars from Congo, one of the poorest countries in the world. He denied the allegations. A Venezuelan television tycoon used shell companies in what U.S. prosecutors say was a $1 billion bribery scheme. His attorney did not respond to requests for comment. At least seven Russian oligarch billionaires under sanction by the United States have shell companies in the documents, too.
As with the Nigerian oilmen, the Pandora Papers extend what is known of their offshore assets.
Other ways that billionaires use the offshore companies highlight stark inequalities of wealth, especially in emerging economies, where the very wealthy avoid taxation and other obligations while millions of their countrymen live in poverty.
In Indonesia, for example, of the 31 people or families that Forbes lists as the country’s wealthiest — each with a net worth over $1 billion — 10 own offshore companies detailed in the data.
Likewise in Thailand, of the 34 people or families Forbes lists as the country’s wealthiest — again, each with a net worth over $1 billion — eight own offshore companies revealed in the Pandora data. One such family, the heirs of the Red Bull fortune, created three companies registered in the British Virgin Islands to receive millions in Red Bull dividends. An attorney for the family said they comply with the law.
A shell company “gives people a cloak of invisibility — they’re hidden from tax authorities. They’re hidden from law enforcement. They’re hidden from government authorities of all kinds,” said Tom Cardamone, president of Global Financial Integrity, a research and advocacy organization focused on illicit money, trade and corruption.
A vast world of hidden wealth
Over the last decade, economists have focused attention on measuring the vastness of the wealth hidden away in offshore accounts and companies. Because of the huge amounts of money that don’t show up in official country statistics, they note, measurements of global inequality may have been understated.
Estimates vary widely about how much money is out there, but loosely speaking, it’s a lot: from $1 trillion to more than $25 trillion. The most common type of estimate is based on national economic figures on investment, and such estimates generally come in the range of $5 trillion to $8 trillion.
Roughly, that corresponds to about 10 percent of global gross domestic product.
Exactly who owns that wealth is more difficult to know. One of the best-known estimates comes from a 2019 study that found that the wealthiest 0.01 percent of households owned 50 percent of financial assets held in foreign jurisdictions.
“The evidence shows that the very wealthy have the means and sophisticated legal help to hide money,” said Annette Alstadsaeter,…
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