Billionaires Flee Havens as Trillions Pursued Offshore

Russian Billionaire Dimitry Rybolovlev (right). Lionel Cironneau/AP Photo

Stephen: The disclosures around the world’s super-rich continue to tumble out. This article comes from Bloomberg News and, while it seems to be following a similar line to the series of articles on the super-rich and their off-shore tax havens that the International Consortium of Investigative Journalists (www.icij.org) kicked off last month, it is at least coverage of more financial world secrets in a respected and more-mainstream outlet. Thanks to Lance.

By David de Jong & Robert LaFranco – April 30, 2013

http://www.bloomberg.com/news/2013-04-29/billionaires-flee-havens-as-trillions-pursued-offshore.html

Billlionaire Dmitry Rybolovlev, Russia’s 14th-richest person, and his wife, Elena Rybolovleva, have been brawling for almost five years in at least seven countries over his $9.5 billion fortune.

In a divorce complaint originated in Geneva in 2008, Rybolovleva accused her husband of using a “multitude of third- parties” to create a network of offshore holding companies and trusts to place assets — including about $500 million in art, $36 million in jewelry and an $80 million yacht — beyond her reach.

She has brought legal action against the 48-year-old Rybolovlev in the British Virgin Islands, England, Wales, the U.S., Cyprus, Singapore and Switzerland, and is seeking $6 billion.

The suits provide a window into the offshore structures and secrecy jurisdictions the world’s richest people use to manage, preserve and conceal their assets. According to Tax Justice Network, a U.K.-based organization that campaigns for transparency in the financial system, wealthy individuals were hiding as much as $32 trillion offshore at the end of 2010. Fewer than 100,000 people own $9.8 trillion of offshore assets, according to research compiled by former McKinsey & Co. economist James Henry.

“For a lot of people, it’s not just the objective of not paying taxes,” Philip Marcovici, an independent Hong Kong-based tax lawyer and board member of Vaduz, Liechtenstein-based wealth adviser Kaiser Partner Group, said in a telephone interview. “It’s the objective of obtaining the human right to privacy and seeking confidentiality about their financial affairs.”

Van Gogh

More than 30 percent of the world’s 200 richest people, who have a $2.8 trillion collective net worth, according to the Bloomberg Billionaires Index, control part of their personal fortune through an offshore holding company or other domestic entity where the assets are held indirectly. These structures often hide assets from tax authorities or provide legal protection from government seizure and lawsuits.

Rybolovlev, who lives in Monaco, made most of his fortune from the sale of two potash fertilizer companies for a combined $8 billion in 2010 and 2011. He held both companies — OAO Uralkali and OAO Silvinit — through Cyprus-based Madura Holding Ltd.

Some of his art — including works by Van Gogh, Monet and Picasso — is now held in Xitrans Finance Ltd., a British Virgin Islands-based company, and stored in Singapore. Rybolovlev bought a New York City apartment for $88 million in 2011 using a trust associated with his daughter, Ekaterina. The penthouse was purchased from the wife of former Citigroup Inc. chairman Sandy Weill, according to divorce documents filed in New York.

Liechtenstein, Cyprus

In the suit, Rybolovleva said the billionaire moved many of his assets, including jewels, furniture and the yacht, under the control of two trusts, Aries and Virgo, that he established in Cyprus in 2005, a few weeks after she refused to sign a post- nuptial agreement he offered her.

Sergey Chernitsyn, a spokesman for Rybolovlev at his Monaco-based family holding company Rigmora Holdings Ltd., said he declined to comment. Marc Bonnant, Rybolovleva’s Geneva-based attorney, also declined to comment.

Since the onset of the global financial crisis in 2008, the laws and treaties that created and sustained the offshore tax- dodging industry and allowed for the kinds of maneuvers used by Rybolovlev have been undergoing a shift toward transparency.

Liechtenstein, once fabled for its banking secrecy laws, began in 2009 to require its financial institutions to hold — and release when required — details about the beneficial owners of all accounts held there. Andorra and Switzerland made their own concessions within a day of Liechtenstein.

Money Laundering

Singapore, the heart of Asia’s banking and offshore industry, will make laundering of profits from tax evasion a crime under a law taking effect on July 1. Luxembourg announced on April 10 that it would end its bank secrecy policy in 2015.

Cyprus was bailed out of its financial troubles in March by the European Union, which required the nation to impose a tax on bank deposits of more than 100,000 euros. That month, the country lost $2.4 billion in deposits, according to data from the European Central Bank.

The shift toward transparency has led many of the world’s wealthiest to reassess how and where they hold their assets, according to Goran Grosskopf, a Lausanne, Switzerland-based economist who has advised several billionaires, as well as the Russian government.

Li, Lee

Li Ka-Shing and Lee Shau Kee, Asia’s two richest men, control parts of their fortunes through offshore structures. Li owns his 43 percent stake in Hong Kong-based property developer Cheung Kong Holdings Ltd (1). through namesake trusts and companies in the Cayman and British Virgin Islands, according to regulatory filings. Lee holds his shares in Henderson Land Development (12) Co. through 10 firms set up in the two British island territories and Panama, filings show.

Li ranks 15th on the Bloomberg index with a net worth of $27.5 billion, while Lee is No. 18 with a $25.1 billion fortune.

Alisher Usmanov, Russia’s richest man, earlier this year restructured the way he holds his $19.7 billion fortune, moving the majority of his assets — including his two most valuable, Metalloinvest Holding Co. and OAO MegaFon (MFON), worth $12.7 billion combined — under the control of British Virgin Islands-based USM Holdings.

He controls at least one asset — a 30 percent stake in London soccer team Arsenal worth $225 million, which he shares with a partner — through Red & White Securities. The holding company is based on the Channel island of Jersey, a Crown dependency of the U.K. that has threatened to sever ties with the country after being criticized during 2012 for its tax policies.

Kaiser, Rocca

U.S. energy billionaire George Kaiser’s $13.5 billion fortune benefits from the $3.4 billion in assets held by his tax-exempt George Kaiser Family Foundation, according to filings with the U.S Internal Revenue Service. The charity paid $110 million for a liquid natural gas tanker in 2003. It then signed an exclusive agreement that gave control of the ship to Woodlands, Texas-based Excelerate Energy LLC, a for-profit gas delivery operation Kaiser controls with publicly traded German electric utility RWE AG.

Paolo Rocca, an Italian billionaire living in Argentina, is continuing a cat and mouse game with the Argentine government that was started by his grandfather in 1949. The family first established its San Faustin SA holding company in Uruguay that year, moving it to Panama in 1959, to Curacao and then to Luxembourg in 2011, using side entities in the British Virgin Islands and the Netherlands from which to control it.

Double Taxation

A small part of the $15.3 billion fortune controlled by Texas billionaire Elaine T. Marshall, 70, is based in Liechtenstein, where her late husband, E. Pierce Marshall, started a foundation for their grandchildren, according to his will. The Dallas resident controls almost 15 percent of Koch Industries Inc., the second-largest closely held company in the U.S., after inheriting the stake in 2006.

Many of today’s wealthy remain focused on finding places to minimize their taxes and avoid double taxation, Grosskopf said. Mario Gassner, Chief Executive Officer of Liechtenstein’s Financial Market Authority, said there are other reasons the wealthy seek discretion.

“If you are married and have a girlfriend in another country, you may have a lot of assets that perhaps you don’t want your wife to know about,” he said. “Or perhaps you are looking for a solution for your children to finance university studies, or you’re not in good relations with them and you don’t know what is going to happen to your fortune in the future.”

German gGmbh

Russian billionaires create entities in the British Virgin Islands because they find its legal system, which is based on British law, more attractive than their own, Valery Tutykhin, an attorney with John Tiner & Partners, a Geneva-based law firm that specializes in wealth management, said in a phone interview.

The Cayman Islands are popular among billionaires because they don’t impose any type of income or investment taxes on funds organized in the Caribbean country, according to a 2013 taxation report by Amstelveen, the Netherlands-based tax and accounting firm KPMG International.

Delaware is the legal home to more than half of the corporate entities in the U.S. The state’s favorable tax laws cuts companies’ tax burdens by an average of 40 percent, according to a 2011 study by Jacob Thornock at the University of Washington Foster School of Business. Delaware also doesn’t require officers and directors to be U.S. citizens, and allows them to remain anonymous, according to its business code.

Limited Liability

There are other structures, such as the Dutch stichting, the Liechtenstein foundation, and the German gGmbH, that billionaires can use to control their assets.

Ingvar Kamprad, who controls Ikea Group, the world’s biggest home-furnishings retailer, fled Sweden for Switzerland in the 1970s in what he said was a protest of his home country’s tax policies. He placed shares of Ikea into a Dutch foundation in the 1980s, and later put the company’s intellectual property rights into a Liechtenstein foundation.

The transfers removed Kamprad, the world’s fifth-richest man, from any direct ownership of Ikea. He is credited with the wealth by the Bloomberg index because he controls those entities. The billionaire disputes that he controls the company.

Per Heggenes, a spokesman for Stichting INGKA Ikea, the owner of the Ikea Group, said in an interview last year that Kamprad’s goal was to protect Ikea. The multiple layers of ownership serve as a deterrent to takeover, he said. The foundations, if kept intact, will hold the ownership of Ikea in perpetuity.

Monaco Resident

Dieter Schwarz, Germany’s second-richest man, created a gemeinnuetzige Gesellschaft mit beschraenkter Haftung — a limited liability company with a charitable purpose — in 1999 to hold his Lidl and Kaufland discount supermarket chains, which form the largest closely held food retailer in Europe.

The 73-year-old controls a $23.6 billion fortune through the Neckarsulm, Germany-based Dieter Schwarz Stiftung gGmbH, a tax-exempt entity that had more than 30 million euros designated for charitable giving through October 2012 — about 0.1 percent of Schwarz’s net worth — according to Gertrud Bott, a company spokeswoman. The retail chains are overseen by his company, Schwarz Group.

In the U.K., structures that help billionaires avoid taxes are attracting increasing public scrutiny, according to Chizu Nakajima, a co-director of the Center for Research in Corporate Governance at London’s Cass Business School. Billionaire Philip Green controls Arcadia, the clothing retailer that includes the Topshop and Topman fashion chains, through London-based Taveta Investments Ltd., according to filings with the U.K.’s Companies House registry.

Wife’s Dividend

Taveta Investments is owned by Jersey-based holding company Taveta Ltd., the documents show. Taveta Ltd. is controlled by Green’s wife, who is a Monaco resident. The arrangement enabled a 1.2 billion-pound ($2.3 billion) dividend paid by Arcadia to Green’s wife in October 2005 to go untaxed, according to an article published in London’s Guardian newspaper.

Green, who didn’t respond to a request for comment, defended the arrangement in a November 2012 interview with the Financial Times newspaper. He said the structure was legal, and that Arcadia had paid 2.3 billion pounds in taxes since 2002.

Establishing an offshore account remains cheap and easy, according to Tutykhin. The typical structure costs about $1,500, he said, though he has seen ones marketed by Russian students for $200. Even the most-reputable firms don’t charge much more to establish an offshore structure, he said, though billionaires will often spend “tens of thousands” of dollars a year on lawyers to manage their holdings and assure discretion.

‘Get Out’

Those wealthy individuals should stop searching for new tax havens to hide their assets, said tax adviser Marcovici.

“We live in a world where you only have two choices: play by the rules of the country you live in, or get out if you don’t want to play by the rules,” he said.

The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York and listed in U.S. dollars.

‘Female DNA’ on Boston ‘Bomb’

Female DNA

Stephen: Female? I thought there were two male‘bombers’… but then there’s also plenty of analysis-type footage online showing ‘actors’ being ‘injured’ and ‘in make-up’ so this shouldn’t really be a surprise, should it? Nevertheless, what an expected turn of events. Even if it turns out to be not directly connected to the incident, even the mention that female DNA was present is enough to plant a small seed of doubt in the minds of many as to what may have really occurred and who was really responsible.

By Evan Perez, Alan Cullison, and Devlin Barrett, Wall Street Journal – April 30, 2013

http://online.wsj.com/article/SB10001424127887323798104578453190708251284.html

Investigators have found female DNA on at least one of the bombs used in the Boston Marathon attacks, though they haven’t determined whose DNA it is or whether its presence means a woman helped the two brothers suspected in the bombings, according to U.S. officials briefed on the probe.

In another development, Russian officials revealed details about contacts between the older brother and suspected Islamist radicals in the Caucasus, including Internet exchanges that led to concerns by investigators that he was trying to join up with jihadist fighters.

Speaking Monday about the DNA discovery, the U.S. officials cautioned that there could be multiple explanations for why genetic material from someone other than the two bombing suspects—Tamerlan Tsarnaev and his younger brother, Dzhokhar—could have been found on remnants of the exploded devices. It could have come, for example, from a store clerk who handled materials used in the bombs or a stray hair that ended up in the bomb.

Monday, Federal Bureau of Investigation agents visited the Rhode Island home of the parents of Katherine Russell, the widow of Tamerlan Tsarnaev. He died after a shootout with police four days after the April 15 bombings.

“The FBI is there as part of our ongoing investigation, but we aren’t permitted to discuss specific aspects of the case,” said FBI spokesman Jason Pack.

Ms. Russell has been staying with her parents since the bombings, and FBI agents have been seen posted outside the house since her late husband was identified as one of the bombers. Her lawyer has said she is “doing everything she can to assist with the investigation.”

William Plotnikov, left, with an alleged member of the Islamist underground, in a photo released by the Dagestan Federal Security Service. Mr. Plotnikov exchanged emails with suspected Boston bomber Tamerlan Tsarnaev.

One official familiar with the case said agents went to the house Monday to collect a DNA sample from Ms. Russell, the culmination of days of negotiations. FBI officials also have been negotiating with Ms. Russell’s attorney in recent days to gain fuller access to question her, the officials familiar with the case said. The officials said the DNA request was needed to determine whether it matched the DNA found on the bomb remnants.

Ms. Russell is one of as many as a half-dozen people in whom investigators are interested as they seek to determine if the brothers had any help in the bomb attack or the days afterward, the officials said. Ms. Russell’s lawyer didn’t immediately respond to a request for comment about the latest developments.

Investigators have no evidence that any of the associates of the brothers had knowledge of the bombing plot, and they believe that if anyone helped to dispose of evidence—a point that remains uncertain—it may have been unwitting, according to officials briefed on the investigation.

Both U.S. and Russian authorities are trying to learn more about Tamerlan Tsarnaev’s activities while staying in Russia from January to July of 2012. President Barack Obama and Russian President Vladimir Putin spoke by telephone Monday and agreed to boost antiterror cooperation, officials on both sides said.

Two Russian government officials said Tamerlan Tsarnaev exchanged notes over the Internet with William Plotnikov, a boxer who moved with his parents from Russia to Canada before joining militants in the North Caucasus. And they said Mr. Tsarnaev met several times in early 2012 with Mansur Makhmud Nidal, an alleged militant from the Russian province of Dagestan and suspected jihadist recruiter. The meetings happened in a mosque in Dagestan’s capital of Makhachkala known for its adherence to a puritanical strain of Islam, they said.

The Tsarnaevs’ parents have denied their sons were involved in terrorism.

Mr. Nidal died in a firefight in Makhachkala last May after a five-hour standoff that ended with him throwing a grenade at police officials, according to Russian authorities. Mr. Plotnikov died two months later, in mid-July, during a raid in the hinterland of Utamysh, a village southwest of Makhachkala.

Mr. Tsarnaev was in the region at the time of both raids but left Russia for the U.S. three days after the second one. He left before picking up a Russian passport that had been prepared for him at the local migration office in Dagestan’s capital.

“He intended to join the fighters, but he lost his contacts,” one of the Russian officials said. “In the end he picked an easier enemy in Boston.”

The Russian officials said it was unclear whether Mr. Tsarnaev and Mr. Plotnikov ever met in person. The parents of the two boxers say they don’t recall any interaction between the two. There are no indications that the two men ever boxed together, and Russian officials haven’t yet produced any of the online communication that they say exists.

A U.S. official said Russian authorities haven’t shared any information about Mr. Tsarnaev related to contact with any suspected militants during his trip last year to Dagestan. Several U.S. officials, however, said they believe Russia has more information about Mr. Tsarnaev that hasn’t been handed over.

By EVAN PEREZ , ALAN CULLISON and DEVLIN BARRETT

FBI/Associated Press

Remnants of a pressure-cooker bomb used in the Boston attack that killed three people.

Investigators have found female DNA on at least one of the bombs used in the Boston Marathon attacks, though they haven’t determined whose DNA it is or whether its presence means a woman helped the two brothers suspected in the bombings, according to U.S. officials briefed on the probe.

In another development, Russian officials revealed details about contacts between the older brother and suspected Islamist radicals in the Caucasus, including Internet exchanges that led to concerns by investigators that he was trying to join up with jihadist fighters.

Speaking Monday about the DNA discovery, the U.S. officials cautioned that there could be multiple explanations for why genetic material from someone other than the two bombing suspects—Tamerlan Tsarnaev and his younger brother, Dzhokhar—could have been found on remnants of the exploded devices. It could have come, for example, from a store clerk who handled materials used in the bombs or a stray hair that ended up in the bomb.

Monday, Federal Bureau of Investigation agents visited the Rhode Island home of the parents of Katherine Russell, the widow of Tamerlan Tsarnaev. He died after a shootout with police four days after the April 15 bombings.

“The FBI is there as part of our ongoing investigation, but we aren’t permitted to discuss specific aspects of the case,” said FBI spokesman Jason Pack.

Ms. Russell has been staying with her parents since the bombings, and FBI agents have been seen posted outside the house since her late husband was identified as one of the bombers. Her lawyer has said she is “doing everything she can to assist with the investigation.”

One official familiar with the case said agents went to the house Monday to collect a DNA sample from Ms. Russell, the culmination of days of negotiations. FBI officials also have been negotiating with Ms. Russell’s attorney in recent days to gain fuller access to question her, the officials familiar with the case said. The officials said the DNA request was needed to determine whether it matched the DNA found on the bomb remnants.

Ms. Russell is one of as many as a half-dozen people in whom investigators are interested as they seek to determine if the brothers had any help in the bomb attack or the days afterward, the officials said. Ms. Russell’s lawyer didn’t immediately respond to a request for comment about the latest developments.

Investigators have no evidence that any of the associates of the brothers had knowledge of the bombing plot, and they believe that if anyone helped to dispose of evidence—a point that remains uncertain—it may have been unwitting, according to officials briefed on the investigation.

Both U.S. and Russian authorities are trying to learn more about Tamerlan Tsarnaev’s activities while staying in Russia from January to July of 2012. President Barack Obama and Russian President Vladimir Putin spoke by telephone Monday and agreed to boost antiterror cooperation, officials on both sides said.

Two Russian government officials said Tamerlan Tsarnaev exchanged notes over the Internet with William Plotnikov, a boxer who moved with his parents from Russia to Canada before joining militants in the North Caucasus. And they said Mr. Tsarnaev met several times in early 2012 with Mansur Makhmud Nidal, an alleged militant from the Russian province of Dagestan and suspected jihadist recruiter. The meetings happened in a mosque in Dagestan’s capital of Makhachkala known for its adherence to a puritanical strain of Islam, they said.

The Tsarnaevs’ parents have denied their sons were involved in terrorism.

Mr. Nidal died in a firefight in Makhachkala last May after a five-hour standoff that ended with him throwing a grenade at police officials, according to Russian authorities. Mr. Plotnikov died two months later, in mid-July, during a raid in the hinterland of Utamysh, a village southwest of Makhachkala.

Mr. Tsarnaev was in the region at the time of both raids but left Russia for the U.S. three days after the second one. He left before picking up a Russian passport that had been prepared for him at the local migration office in Dagestan’s capital.

“He intended to join the fighters, but he lost his contacts,” one of the Russian officials said. “In the end he picked an easier enemy in Boston.”

The Russian officials said it was unclear whether Mr. Tsarnaev and Mr. Plotnikov ever met in person. The parents of the two boxers say they don’t recall any interaction between the two. There are no indications that the two men ever boxed together, and Russian officials haven’t yet produced any of the online communication that they say exists.

A U.S. official said Russian authorities haven’t shared any information about Mr. Tsarnaev related to contact with any suspected militants during his trip last year to Dagestan. Several U.S. officials, however, said they believe Russia has more information about Mr. Tsarnaev that hasn’t been handed over.