Graham Stack in Kyiv -
The British media are following in bne's footsteps in trying to track down the people who set up UK companies to hide beneficiary ownership - and in doing so are picking up plenty of leads on dodgy Eastern European businessmen.
Picking up on a 2011 investigation by bne, the Organised Crime and Corruption Reporting Project, Latvia's Rebaltika and the UK's Private Eye in November reported on the "thousands of Ukraine-controlled limited liability partnerships created under British company law and subject to near non-existent regulation" that are engaged in "very dubious operations indeed."
The "Eye", a British national institution for satire and investigation, visited an empty Cardiff corner shop where 700 abuse-prone limited liability partnerships (LLPs) are registered - with nary a sign of life to be seen. All that a peek through the letterbox revealed was a letter on the doormat from a Ukrainian bank addressed to an obscure UK company Datlux Contracts LLP - a small limited liability partnership that's exempt from independent auditing, according to Companies House, and with no paper trail besides the forlorn envelope.
But in Ukraine Datlux does have a paper trail, according to bne enquiries - pointing to the umbilical cord between the Cardiff corner shop and Kyiv's gilded elite. Ukrainian Ministry of Economy records indicate that Datlux has an outstanding debt of $0.25m due to a Ukrainian counterpart TOV Magistral Full, on a contracted consignment of fish that apparently never arrived. Perhaps due to Datlux's failure to deliver fish consignments paid for, Magistral was bankrupted by a consortium of small banks from which it had raised a total of $5m, according to court records.
Closer examination indicates something smellier than just fish. Magistral is registered at the same address near Kyiv as a branch of Zlato Bank, believed controlled by shadowy oligarch banker Leonid Yurushev (the bank is formally owned and run by one of his top managers). Yurushev, who could not be reached for comment, indeed openly owns a chain of fish supermarkets in Ukraine called Skandinavia.
But the bank address is suggestive that the transaction may have been more about exporting money than importing fish. Fictive import contracts that are paid but never delivered are a classic Ukrainian scam for moving money tax-free out of the country, and British LLPs that are secretly controlled by Ukrainian "importers" are a beloved counterparty for such tax dodges. As a first-world jurisdiction, UK companies do not ring tax inspectors' alarm bells as do black-listed Caribbean offshores.
Tax evasion may seem run-of-the-mill, but another LLP registered at the same Welsh corner shop triggered a nationwide scandal in Ukraine in 2011 when it was linked to alleged grand corruption put at hundreds of millions of dollars. "Massive corruption by top officials is taking place involving Ukrainian budget funds where money is siphoned off to fictive companies in UK," claims Ukraine's jailed former prime minister and leader of the opposition Yulia Tymoshenko, in a report she filed from her prison cell to the Financial Action Task Force, the global anti-money laundering watchdog, in May 2012.
According to Tymoshenko's report, Ukraine's government in 2011 paid anonymous intermediaries around 60% over market prices for a drilling platform and supply vessels intended for use in the Black Sea - purchased from a UK intermediary Highway Investment Processing LLP, registered at the Cardiff corner shop. The report argues that Ukraine's state energy company Naftogaz bought a drilling rig from Highway Investment in 2011 for $400m that Highway Investment itself sourced for just under $250m from Norwegian offshore operator Seadrill. The UK company reported just under Â£300,000 profit for 2011 to the UK authorities.
Under the regulatory radar
While this corner shop address may be in Wales, the man pulling the strings to set up the UK LLPs registered at the address has been based in Dublin, Ireland for the last two decades, as described by Organised Crime and Corruption Reporting Project and the Baltic Center for Investigative Journalism in 2011. According to documents seen by bne, it was a certain Philip Burwell and his company International Overseas Services that set up the companies at the Welsh address, including Highway Investment in 2008, using Latvian nominee directors Erik Vanagels, Stan Gorin and Danny Bangers. "Irish businessmen are the Ukrainians' conduit into the UK," writes Private Eye, with reference to the 2011 investigation. In fact, the "Irishman" is actually a blithe Aussie: Burwell took Irish nationality and moved to Ireland at the end of the 1980s when Ireland was itself an offshore zone. And one further advantage: Irish nationality allows him to alternate between the English spelling of his name and the Irish Pilib Boireil.
Burwell and his company IOS was also pinpointed in November 2012 by a massive joint investigation by the Guardian and BBC Panorama programme into the people setting up anonymous UK companies for dodgy businessmen using nominee directors. But in Dublin regulators are looking the other way. "The Anti-Money Laundering Compliance Unit has no record of company service provider International Overseas Services," says Ireland's Department of Justice.
International Overseas Services flies below the radar in Ireland, but not so in Ukraine. Until exposed by journalist investigations in 2011, the company's Kyiv office was located a stone's throw from Ukraine's notoriously corrupt parliament and government, making it easy for officials to do business there.
While the Ukrainian clients have consisted partly of tax dodgers and embezzlers for two decades, most worrying is that Burwell has established numerous UK companies on behalf of Ukraine arms traders - such as a shipment of Ukrainian tanks to South Sudan in 2008 on the MS Faina that was seized by Somali pirates - as well as traders of nuclear equipment, according to documents seen by bne.
Burwell's connections to Ukraine's notorious arms export operations stretch right back to the 1990s, when Ukraine supplied and transported much of the weaponry that fueled the horrendous civil war in Democratic Republic of Congo (DRC), that cost over five million lives. Burwell was and is co-director of Irish company East/West Alliance Ltd, set up in the 1990s by Ukrainian air cargo magnate, Anatoly Liovin, as an offshore adjunct to Liovin's cargo airline ATI.
The records of Uganda's Porter Commission that investigated the plundering of DRC during the 1990s civil war - with arms flown in and precious minerals exported - show Liovin's ATI to have been one of the main aviation operators flying between the war zone and Entebbe in Uganda. But in 2009, thanks to his Irish company co-directed by Burwell, Liovin persuaded Member of European Parliament Gay Mitchell to file a parliamentary question to the European Commission on his behalf: pressuring Ukraine's government to return planes confiscated from him in a domestic tax dispute. Liovin has denied any involvement in illegal activities.
Burwell also denies systematic involvement in the arms trade. "There's always going to be one or two bad ones," Burwell says of his Ukrainian clients, while averring he does background research on all his clients "on the internet".
Lavo, lavare, Latvia
The crucial link between Ukraine and the UK/Ireland is Latvia, with banks in the small Baltic country laundering dirty post-Soviet money looking to move west. Burwell's IOS set up business in Dublin in the year that the Soviet Union collapsed in league with Latvia's first and largest commercial bank Parex - a bank which became synonymous with money-laundering across the former Soviet Union until it went to the wall in November 2008 under the impact of the world financial crisis.
In an interview in 2011, Burwell acknowledged "being close" to the former owners of the bank, Valerijis Kargins and Viktors Krasovickis. The network continues running flawlessly even after the demise of Parex, indicating both that the Parex network is still active but now simply using other Latvian and Lithuanian banks to channel dirty funds.
Irish regulators are also in denial about the Latvian link. "We have no information about money-laundering activities by Latvian banks in Ireland," says the Department of Justice.
At least one Irishman disagrees. Michael J. Bourke was head of Latvia's Rietumu Bank, in which Irish magnate Desmond Dermot holds a stake, for over ten years. Now he is in charge of Latvian efforts to retrieve assets owned by Parex, including from the former owners. "Burwell is the director of companies that received loans from Parex that we believe were hidden loans to the former owners of Parex," Bourke says.
Ireland's very own asset recovery bank- the Irish Bank Resolution Corporation - is hurting over failure to gain control over Kyiv's Ukraina shopping mall, now it seems controlled by top Ukrainian politicians. But when it comes to missing assets, Ukraine - and Latvia - have plenty reason of their own to complain about Ireland.
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