Offshore Deals that deprive Africa of Billions . . .
The ICIJ, producer of the Panama Papers has published an article written by Will Fitzgibbon on July 25, 2016. It is about those Offshore Deals that deprive Africa of Billions; commonly known thing by many locals, members of the public, journalists and all, did finally make it through to the long-awaited international audience. It addresses issues of that nature that lasted only too long unchallenged on the African continent.
Once again, it looks as if, Algeria is doing it one more time, being at the forefront not of Africa’s liberation from colonisation but this time from perverse behaviour in the world of business.
Excerpts of this article are reproduced with our compliments to the author / publisher, in MENA-Forum for their obvious interest to all our members and readers generally.
Secret Offshore Deals Deprive Africa of Billions in Natural Resource Dollars
The Panama Papers show politicians and mining, oil and gas interests benefit from secrecy and dubious multimillion dollar transfers
◾Twelve of 17 companies under investigation by authorities in Italy in relation to a $10 billion oil and gas deal in Algeria were created by Mossack Fonseca
◾Italian authorities called one offshore company “a crossroads of illicit financial flows”
◾Dozens of companies created by Mossack Fonseca have been involved in law suits or public allegations of wrongdoing, according to an ICIJ analysis
When he wasn’t aboard his yacht, Farid Bedjaoui held court in the Bulgari Hotel in Milan, a renovated 18th century palace nestled between the botanical gardens and the La Scala theatre. Over five years, Bedjaoui’s hotel tab there exceeded $100,000.
In the plush rooms and the granite-lined lobby, Bedjaoui met with Algerian government officials and executives from Saipem, the Italian energy giant. Their agenda, according to witnesses later interviewed by Italian prosecutors: arranging some $275 million in bribes to help the energy company win more than $10 billion in contracts to build oil and gas pipelines from the North African desert to the shores of the Mediterranean.
To shift the bribe money between countries, Bedjaoui used a cluster of offshore companies that helped him shield the transactions from scrutiny, Italian prosecutors claim. Twelve of the 17 shell companies linked to Bedjaoui were created by Mossack Fonseca, the Panama-based law firm that is at the centre of the Panama Papers scandal, a review of the law firm’s internal records by the International Consortium of Investigative Journalists and other media partners has found.
The garden at the Bulgari Hotel in Milan. Photo: bulgarihotels.com
Italian investigators described one of those companies, Minkle Consultants S.A., as a “crossroads of illicit financial flows” that channelled millions of Dollars from subcontractors to an array of recipients whose identities are still being untangled. Prosecutors allege Bedjaoui used one company set up through the law firm to funnel as much as $15 million to associates and family members of Algeria’s then-energy minister.
The cross-border bribery scandal is one of dozens of cases in Africa in which companies created or administered by Mossack Fonseca have played a role in oil, gas and mining deals that have spawned public allegations of tax dodging, corruption, environmental destruction or other misconduct. In all, ICIJ’s review identified 37 companies within the Panama Papers that have been named in court actions or government investigations involving natural resources in Africa.
Ventures that drill or dig for oil, gas, diamonds, gold and other resources have long been dogged by evidence that contracts are often secured through bribery and other corrupt tactics that benefit a few and harm average citizens. Suspect mining and energy deals are usually organized through secretive companies and hard-to-trace bank accounts, corruption experts say.
“Companies may be given access to lucrative extractive projects because their owners are politically connected, or because their owners are willing to engage in questionable deals aimed at generating quick profits for a few rather than benefits for wider society,” Fredrik Reinfeldt, former prime minister of Sweden and now head of the Extractive Industries Transparency Initiative, told ICIJ.
He said the use of anonymous companies makes it harder to prevent money laundering and corruption because it allows wrongdoers to “hide behind a chain of companies often registered in multiple jurisdictions.”
ICIJ’s review of Mossack Fonseca’s internal records shows that the Panama-based law firm is a major provider of secrecy to companies involved in extractive industries. The firm’s internal files include more than 1,400 companies whose names refer to mining, minerals, oil, petrol or gas. Other less explicitly named companies – including the 12 companies allegedly used by Bedjaoui in the Algerian energy deal – also played roles in the extractive sector, the files show.
Mossack Fonseca’s files reveal offshore companies that were established to own, hold or do business with petroleum, natural gas and mining operations in 44 of Africa’s 54 countries. Many of them are controlled by politicians, their family members and business associates. Often, the oil, gas, gold and diamonds formed beneath the earth’s surface over millions – even billions – of years are traded by shadow companies that have existed for months.
Companies created and assisted by Mossack Fonseca include at least 27 subsidiaries of one of the world’s biggest gold producers, the mining behemoth AngloGold Ashanti and its predecessor. AngloGold told ICIJ it complies with relevant tax laws and that its offshore companies held investments and allowed it to “mitigate ‘double taxation.’”
Mossack Fonseca declined to answer detailed questions for this story. It told ICIJ that “our firm, like many firms, provides worldwide registered agent services for our professional clients (e.g., lawyers, banks, and trusts) who are intermediaries. As a registered agent we merely help incorporate companies, and before we agree to work with a client in any way, we conduct a thorough due-diligence process, one that in every case meets and quite often exceeds all relevant local rules, regulations and standards to which we and others are bound.”
The law firm added: “Filing legal paperwork to help incorporate a company is a very different thing from establishing a business link with or directing in any way the companies so formed. We only incorporate companies, which just about everyone acknowledges is important, and something that’s critical in ensuring the global economy functions efficiently.”
Saipem, the Italian energy company, told ICIJ it is “fully cooperating” with prosecutors and it has “implemented significant managerial and administrative restructuring measures.” External consultants reviewed the company’s books, Saipem said, and “found no evidence of payments to Algerian public officials through the brokerage contracts or subcontracts examined.” In February 2016, an Algerian court found a Saipem subsidiary guilty of fraud, money laundering and corruption in obtaining contracts from Algeria’s national oil company, Sonatrach.
Criminal charges have been filed against Bedjaoui by Italian authorities. Prosecutors allege that he inflated contracts for the benefit of Algerian officials, adding a standard cut for himself, which earned him the nickname “Mr. 3 Percent” after police found the ratio scrawled on Bulgari Hotel stationery during a raid.
Interpol issued a Red Notice – an international alert for a wanted person – on Bedjaoui at the request of Italian authorities.
Bedjaoui, the nephew of a former Algerian foreign minister, is currently living in a Beverly Hills-inspired gated community in Dubai. He did not reply to repeated requests from ICIJ for comment.
In previous responses to the media, his lawyers have denied he was involved in any wrongdoing. They insist that, as a thirty-something management graduate, he could never have wielded enough influence among Algeria’s political, military and business elites to coordinate a $275-million-dollar bribery scheme.
The Saipem-Sonatrach bribery case fits a pattern in Africa and other developing regions, where countries with the richest natural endowments often lose the most money offshore.
Between 2004 and 2013, Algeria, home to the second-largest oil reserves in Africa, lost an average of $1.5 billion annually through tax avoidance, bribery, corruption and criminality, the research group Global Financial Integrity estimates. Across the continent, the United Nations estimates at least $50 billion each year goes unaccounted for due to illicit money flows.
Read more at the ICIJ’s website address given above.