Secret report filed with Caribbean financial regulators alleged Leonid Lebedev was ultimate owner of offshore firms
(Nicos Anastasiades described his relationship with Leonid Lebedev as ‘cordial’ and official. Illustration: Guardian Design)
A law firm founded by the president of Cyprus was accused of hiding the assets of a controversial Russian senator behind fake beneficial owners in a secret report filed with Caribbean financial regulators.
A Panamanian offshore company broker, Alcogal, complained that the Cypriot law firm Nicos Chr. Anastasiades & Partners had claimed to it that four of the offshore companies it was managing were beneficially owned by its staff.
However, in the report, filed to financial regulators in the British Virgin Islands (BVI) on 8 June 2015, it said it had come to believe it had been misled, and it now believed the true owner was the Russian businessman and former senator Leonid Lebedev.
Lebedev fled his home country in 2015 after being accused of failing to declare his assets. He denies the allegations, and has since become a Hollywood film producer.
Contacted by the Guardian and the BBC, Anastasiades & Partners strongly denied filing false information to the broker. The firm’s founder, Nicos Anastasiades, became president of Cyprus in 2013. He said that while he owned shares in the law firm until his election, he had no active role in its affairs after becoming leader of the opposition in 1997.
In a statement to the Guardian, Anastasiades said: “I have no knowledge and it would be impossible for me to know and be in a position to respond to any allegations concerning the handling of the affairs of my ex-law firm.”
There is no suggestion that Anastasiades was involved in the firm’s activities. However, the response raises questions about the president’s wisdom in allowing a legal firm, over which he apparently had neither oversight nor control, to operate under his name while he served as a prominent politician.
Both the firm and its founder have previously had separate dealings with Lebedev. Anastasiades & Partners is understood to have advised the Russian on procuring Cypriot citizenship via the island’s legal, though controversial, “golden passport” scheme, whereby wealthy applicants could buy the right to live and work in the EU, in 2011. Citizenship was granted that year.
The Pandora papers leak includes documents dating from 2015, including a suspicious activity report (SAR) sent by Alcogal to the BVI’s financial regulator.
What are the Pandora papers?
The Pandora papers are the largest trove of leaked data exposing tax haven secrecy in history. They provide a rare window into the hidden world of offshore finance, casting light on the financial secrets of some of the world’s richest people. The files were leaked to the International Consortium of Investigative Journalists (ICIJ), which shared access with the Guardian, BBC and other media outlets around the world. In total, the trove consists of 11.9m files leaked from a total of 14 offshore service providers, totalling 2.94 terabytes of information. That makes it larger in volume than both the Panama papers (2016) and Paradise papers (2017), two previous offshore leaks.
Where did the Pandora documents from come?
The ICIJ, a Washington DC-based journalism nonprofit, is not identifying the source of the leaked documents. In order to facilitate a global investigation, the ICIJ gave remote access to the documents to journalists in 117 countries, including reporters at the Washington Post, Le Monde, El País, Süddeutsche Zeitung, PBS Frontline and the Australian Broadcasting Corporation. In the UK, the investigation has been led by the Guardian and BBC Panorama.
What is an offshore service provider?
The 14 offshore service providers in the leak provide corporate services to individuals or companies seeking to do business offshore. Their clients are typically seeking to discreetly set up companies or trusts in lightly regulated tax havens such as the British Virgin Islands (BVI), Panama, the Cook Islands and the US state of South Dakota. Companies registered offshore can be used to hold assets such as property, aircraft, yachts and investments in stocks and shares. By holding those assets in an offshore company, it is possible to hide from the rest of the world the identity of the person they actually belong to, or the “beneficial owner”.
Why do people move money offshore?
Usually for reasons of tax, secrecy or regulation. Offshore jurisdictions tend to have no income or corporation taxes, which makes them potentially attractive to wealthy individuals and companies who don’t want to pay taxes in their home countries. Although morally questionable, this kind of tax avoidance can be legal. Offshore jurisdictions also tend to be highly secretive and publish little or no information about the companies or trusts incorporated there. This can make them useful to criminals, such as tax evaders or money launderers, who need to hide money from tax or law enforcement authorities. It is also true that people in corrupt or unstable countries may use offshore providers to put their assets beyond the reach of repressive governments or criminal adversaries who may try to seize them, or to seek to circumvent hard currency restrictions. Others may go offshore for reasons of inheritance or estate planning.
Has everyone named in the Pandora papers done something wrong?
No. Moving money offshore is not in or of itself illegal, and there are legitimate reasons why some people do it. Not everyone named in the Pandora papers is suspected of wrongdoing. Those who are may stand accused of a wide range of misbehaviour: from the morally questionable through to the potentially criminal. The Guardian is only publishing stories based on leaked documents after considering the public interest. That is a broad concept that may include furthering transparency by revealing the secret offshore owners of UK property, even where those owners have done nothing wrong. Other articles might illuminate issues of important public debate, raise moral questions, shed light on how the offshore industry operates, or help inform voters about politicians or donors in the interests of democratic accountability.
The SAR, which was not copied to the law firm, names four companies – including Doubleday Properties, Donmark Finance and Bloomfield Finance – and states: “We believe Mr Leonid Lebedev to be the UBO [ultimate beneficial owner] of these companies.”
In 2010, Anastasiades’ law firm took over the management of the companies and registered them with Alcogal. According to Alcogal’s SAR, when asked for the identity of their owner the president’s firm cited three beneficiaries.
Two were employees at the legal practice, while a third was an employee of a client of the firm and a legal consultant. Two worked out of Anastasiades’s office in Limassol, a seaside resort popular with wealthy Russians and where Lebedev bought a villa as part of his “golden passport” deal. The legal consultant worked in the same building.
However, the Alcogal report said it had come to believe the three individuals named by the president’s law firm were not the “real UBOs” and “strongly” concluded that the offshore shell companies actually belonged to Lebedev. It subsequently resigned as registered agent for the four firms, citing a “higher risk” to its reputation.
Anastasiades & Partners flatly denied wrongdoing and said it had no knowledge of the SAR or the concerns raised in it. It said the staff whose names were cited to Alcogal were never beneficial owners of the offshore companies, but were acting as trustees on behalf of the beneficial owner, entirely in accordance with Cypriot law. The legal consultant told the Guardian she had always been the true beneficial owner of one of the companies.
The firm declined to say if it acted for Lebedev, citing client confidentiality, but said it had always kept “proper records” in accordance with Cypriot law. It said Anastasiades had stepped back from “professional engagement” after becoming a political party leader in 1997, and described him as a “silent shareholder” in the firm up until 2013. “He was never involved in day-to-day activities of the office or had any conduct with clients and cases,” it said.
Lebedev did not respond to repeated invitations to comment. He has previously denied wrongdoing. He is among an estimated 6,779 people awarded citizenship by the Mediterranean island’s internationally recognised Greek-run south between 2007 and 2020.
The programme enabled the super-rich to acquire a Republic of Cypruspassport if they invested at least €2m (£1.7m) in real estate, stocks, government bonds or Cypriot businesses. Successful applicants got the right to live and work in the EU.
Following persistent criticism from Brussels, the government late last year announced the scheme’s suspension.
In addition to Russian oligarchs and Saudi potentates, the Cambodian leader, Hun Sen, was discovered to have been among the thousands of non-Europeans who received a Cypriot passport.
In July, the 75-year-old Anastasiades conceded there had been lack of due diligence on the part of the government in addressing “gaps, flaws and loopholes”. Apologising for what he described as mistakes, he admitted the passport furore had generated widespread public distrust. However, he denied a “personal connection” to the programme and said claims to the contrary were “myths”.
In a statement to the Guardian, the president described his relationship with Lebedev as “cordial” and official. It was never “lawyer-client”, he stressed. He added: “At no time and on no occasion did I handle the affairs of the firm’s clients, including Mr Lebedev.”
In June 2013, soon after winning the presidency, Anastasiades borrowed Lebedev’s private jet to fly to France for a meeting with the then French president, François Hollande.
Anastasiades said he used the jet “free of charge” because of a French air traffic controllers’ strike, adding the plane was due to fly to Geneva anyway for a service. He travelled home on a regular commercial airline, he said.
*Producer Leonid Lebedev with an award for Geographer Drunk Away His Globe at the 27th Nika awards ceremony in 2014. Photograph: Ekaterina Chesnokova/Sputnik
*Limassol, a seaside resort popular with wealthy Russians, where Lebedev bought a villa as part of his ‘golden passport’ deal. Photograph: f8grapher/Alamy