Paradise Papers

The Paradise Papers Hit the Headlines

As expected, following Appleby’s admission a few weeks ago that it (and its sister company Estera) had been cyber-hacked back in May 2016, the international media has had a field day this week publishing a wide array of articles detailing this latest leak’s juiciest tidbits.

The Bermuda-based offshore financial services company, which had been approached earlier this year by media sources such as International Consortium of Investigative Journalists (ICIJ) for information on its clients, revealed this cyber-hack in an attempt to preempt the eventual onslaught of negative press resulting from the intrusion.

Close to 13.4 million documents were leaked to the German newspaper Suddeutsche Zeitung and subsequently the ICIJ, and plenty of questions surrounding the world’s wealthiest and most powerful have been raised as a result.

The world's (second) biggest data leak

Now, as was the case with the Panama Papers more than two years ago, the international media is rolling out article after article with details on Appleby’s rich clients and their use of offshore structures to avoid taxes, among others.

As summarized by the ICIJ and explained by TIME, the Panama Papers “resulted in an estimated $135 billion being wiped off the value of nearly 400 companies, the recuperation of over $110 million worth of unpaid taxes, and at least 150 inquiries, audits or investigations by police, customs, financial crime and mafia prosecutors.”

Will the Paradise Papers lead to similar results?

Some Paradise Papers Highlights

Facebook and Twitter: One of the most explosive revelations of the Paradise Papers was Russian billionaire Yuri Milner’s investment of millions of dollars in both Facebook and Twitter on behalf of parties linked to the Russian government.

As revealed by the leak and reported by the New York Times, Milner’s investment in Twitter “was backed by VTB, a Russian state-controlled bank often used for politically strategic deals,” while that in Facebook partly came “from Gazprom Investholding, another government-controlled financial institution.”

From Russia to Silicon Valley

Even though Milner no longer owns parts of Facebook and Twitter—at one point 8 and 5 percent, respectively—this “use of the state-directed apparatus employed by so many Russian oligarchs to enrich themselves shows how the Kremlin has extended its long financial arm not only to his company but to some of America’s technology giants.”

Milner, however, made it clear that these investments were purely of a business nature.

“We are getting money, and we are putting them in Facebook and Twitter. We are making money for our limited partners, and we are giving money back to them. For me, it’s a commercial arrangement,” Milner said.

Apple on Paradise Papers

Apple: American tech giant Apple popped up as part of the Paradise Papers leak, having hired Appleby to set up a firm in Jersey to store most of its untaxed offshore income after the Irish government determined in 2013 that companies housed in the country could not be deemed without a state for tax-related reasons.

As shown in the Paradise Papers and reported by the BBC, “Apple's two key Irish subsidiaries, Apple Operations International (AOI), believed to hold most of Apple's massive $252bn overseas cash hoard, and Apple Sales International (ASI), were managed from Appleby's office in Jersey from the start of 2015 until early 2016.”

Furthermore, the aforementioned ASI, an Apple branch that staked a claim in the company’s prized intellectual property, purportedly “sold the intellectual property back to an Irish company,” which the Irish firm would then use “to offset the enormous cost against any future profits.”

Additionally, “since the IP holder, ASI, was registered in Jersey, the profits of the sale would not be taxed.”

According to the BBC, statistics for 2015 show that Apple had played this card as there was “an extraordinary 26% spike in Ireland's GDP in 2015 which media reports put down to intellectual property assets moving into Ireland,” while “intangible assets rose a massive €250bn in Ireland that year.”

In response to these allegations, the American company told ICIJ: “The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over three years [2014, 2015 and 2016] we’ve paid $1.5bn in tax there — 7 per cent of all corporate income taxes paid in that country.”

USA on Paradise Papers

Wilbur Ross: Donald Trump’s Secretary of Commerce Wilbur Ross was also implicated in shady activities as a result of the Paradise Papers.

After receiving his appointment as head of commerce for the Trump administration, Ross, writes the New York Times, “retained investments in a shipping firm he once controlled that has significant business ties to a Russian oligarch [Gennady Timchenko] subject to American sanctions and President Vladimir V. Putin’s son-in-law [Kirill Shamalov].”

According to the New York Times, the company involved, Navigator Holdings, “earns millions of dollars a year transporting gas for one of its top clients, a giant Russian energy company called Sibur, whose owners include the oligarch and Mr. Putin’s family member.”

Ross’ investment in Navigator ranges from 2 million to 10 million dollars and belonged to a set of offshore companies Trump’s Secretary of Commerce set up in the Cayman Islands.

Analysts interviewed by the New York Times suggest that “if Mr. Ross stands to benefit, albeit indirectly, from a Russian firm controlled by members of Mr. Putin’s inner circle, it poses a potential conflict with his role as the lead cabinet member on trade policy.”

Ross’ press secretary James Rockas told the media that his boss “recuses himself from any matters focused on transoceanic shipping vessels” as a way of avoiding any conflict of interest.

Not even the Queen of England escaped the Paradise Papers unscathed.

Queen of England: Not even the Queen of England escaped the Paradise Papers unscathed. The leak shows that the Queen, via the Duchy of Lancaster, invested approximately 13 million dollars offshore with funds channeled to Bermuda and the Cayman Islands.

Some of this money went to problematic companies such as BrightHouse, which has been accused of handing out loans irresponsibly, and Threshers, a firm that is now bankrupt and failed to pay close to 17.5 million pounds in taxes to the UK.

While there have been no signs of illegal activities, analysts have questioned the Queen’s decision to move the money offshore.

For instance, BBC royal correspondent Nicholas Witchell believes these findings are “certainly embarrassing” and “many will also view the Duchy of Lancaster's offshore investments in BrightHouse and Threshers as dubious and inappropriate.”

Witchell did mention, however, “it is not a question of tax avoidance, but of judgement on behalf of her advisers” as it is “puzzling that her advisers could have felt that it was appropriate - for somebody whose reputation is based so much on setting a good example - to invest in these offshore funds.”

Are there any other Paradise Papers stories that have caught your attention? Share them with us in the comments section below!

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