The Center for Public Integrity

The tangled trail of the Magnitsky Affair, a case that’s strained U.S.-Russian relations and blocked American adoptions of Russian orphans, snakes through an offshore haven in the Caribbean. 

The death of Moscow tax attorney Sergei Magnitsky sparked international outrage. It also fueled a push to unravel secret deals that had prompted him to claim that gangsters and government insiders had stolen $230 million from Russia’s treasury.

Magnitsky and other private attorneys investigating the affair on behalf of a major hedge fund followed a path from Russia to bank accounts in Switzerland and luxury properties in Dubai — ending up at a small firm based in the British Virgin Islands that specializes in setting up offshore companies for clients who want to remain in the shadows.

This is the story of behind-the-scenes players in the Magnitsky affair — and the tale of how an offshore go-between provided shelter to fraudsters, money launderers and other shady characters from Russia, Eastern Europe and the United States.

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A cache of 2.5 million files has cracked open the secrets of more than 120,000 offshore companies and trusts, exposing hidden dealings of politicians, con men and the mega-rich the world over.

The secret records obtained by the International Consortium of Investigative Journalists lay bare the names behind covert companies and private trusts in the British Virgin Islands, the Cook Islands and other offshore hideaways.

They include American doctors and dentists and middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers and a sham-director-fronted company that the European Union has labeled as a cog in Iran’s nuclear-development program.

The leaked files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike. The records detail the offshore holdings of people and companies in more than 170 countries and territories.

The hoard of documents represents the biggest stockpile of inside information about the offshore system ever obtained by a media organization. The total size of the files, measured in gigabytes, is more than 160 times larger than the leak of U.S. State Department documents by Wikileaks in 2010.

To analyze the documents, ICIJ collaborated with reporters from The Guardian and the BBC in the U.K., Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post, the Canadian Broadcasting Corporation (CBC) and 31 other media partners around the world.

A number of so-called nominee directors of companies registered in the British Virgin Islands (BVI) have connections to military or intelligence activities, an investigation has revealed.

In the past, the British arms giant BAE was the most notorious user of offshore secrecy. The Guardian in 2003 revealed the firm had set up a pair of covert BVI entities.

The undeclared subsidiaries were used to distribute hundreds of millions of pounds in secret payments to get overseas arms contracts.

Today the investigation by the International Consortium of Investigative Journalists and the Guardian uncovers the identities of other offshore operators.

Louthean Nelson owns the Gamma Group, a controversial computer surveillance firm employing ex-military personnel. It sells bugging technology to Middle East and south-east Asian governments.

Nelson owns a BVI offshore arm, Gamma Group International Ltd.

Gamma's spyware, which can be used against dissidents, has turned up in the hands of both Egyptian and Bahraini state security police, although Nelson's representative claims this happened inadvertently.

He initially denied to us that Nelson was linked to Gamma, and denied that Nelson owned the anonymous BVI affiliate.

Martin Muench, who has a 15 per cent share in the company's German subsidiary, said he was the group's sole press spokesman, and told us: "Louthean Nelson is not associated with any company by the name of Gamma Group International Ltd. If by chance you are referring to any other Gamma company, then the explanation is the same for each and every one of them."

Britain’s friendly regime of offshore secrecy has tempted an extraordinary array of post-Soviet billionaires to descend on London, sometimes to the sound of gunfire.

These billionaires justify their use of British-controlled secrecy jurisdictions because they say they must protect themselves from corporate predators and political enemies in their home countries.

Vladimir Antonov fled permanently to Britain after his father, Alexander, was gunned down in a Moscow street in 2009. Another associate, German Gorbuntsov, narrowly survived a volley of shots in London last March.

When Antonov bought a luxury yacht in Antibes, the Sea D, he was careful to register its ownership to an anonymous British Virgin Islands (BVI) entity, Danforth Ventures Inc.

He also got his hands on enough cash to try to take over the ailing Swedish car manufacturer Saab, though he did not take control. He did succeed for a while in owning Portsmouth FC, the even more ailing British football club.

Antonov is currently on bail in Britain. Lithuanian authorities are trying to extradite him for allegedly looting their collapsed bank Snoras, which he denies.

The allegation that oligarchs exploit Britain’s offshore secrecy regime to shift assets out of their own countries is not an uncommon one. Another refugee from the law is the Kazakh billionaire Mukhtar Ablyazov, who was last seen in February allegedly heading out of London on a coach to France.

Ablyazov has been sentenced to 22 months in jail for contempt of a UK court as the BTA Bank in Kazakhstan attempts to pursue his maze of offshore assets. The bank’s lawyers claim Ablyazov, who denies it, has made off with an astonishing £4 billion using BVI and Seychelles companies, nominee directors and layers of front-men.

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Selective trusts and companies born in the British Virgin Islands have helped anonymous buyers snap up luxury properties in London and other UK locales.

Today we are setting out to demolish the wall of offshore secrecy that hides many UK property transactions.

In our joint investigation with The Guardian, we disclose the identities of some of the people secretly buying up Britain.

Our findings, covering nearly 60 sample premises, demonstrate the way the UK is turning into a property speculators' haven, thanks to tax loopholes and the secrecy offered by the British Virgin Islands. Anonymous buyers are taking over more and more blocks of luxury housing, particularly in London.

Some purchasers live abroad. Other buyers live in the UK itself while they build up property empires using these artificial structures.

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The existence of a global network of sham company directors, most of them British, can be revealed today.

The UK government claims such abuses were stamped out long ago, but a worldwide joint investigation by the International Consortium of Investigative Journalists, the Guardian, and BBC's Panorama, has uncovered a booming offshore industry that leaves the way open both for tax avoidance and the concealment of assets.

This is the first installment of ICIJ's worldwide research effort which will identify, country-by-country, thousands of the true owners of offshore companies.

One part of our research identified more than 19,000 companies who use a group of some 20 so-called nominee directors. The nominees play a key role in keeping hundreds of thousands of commercial transactions secret. They do so by selling their names for use on official company documents, whilst giving addresses in obscure locations all over the world.

Hiding behind nominee fronts are the real owners. They are of widely varying types, ranging from Russian oligarchs to perfectly legal but discreet speculators in the British property market. Their only common factor: the wish for secrecy.

Click through to ICIJ.org to continue reading.