BVI Offshore Business: Grey Area

Croatian President Stjepan Mesic is alleged of violating the authorities granted to President by the Constitution. Recently, Mesic has dismissed this claim and said that he finds the allegations about the transfer of gold to a bank in the BVI senseless and that the intelligence underground is responsible for this.

According to Mesic, he did not abuse his position and did not violate the constitution and constitutional regulations.

Mesic made comments on the claims noting that his Office had violated the division of government into 3 branches as far as his advisor Sasa Perkovic had secretly met in Vienna with General Vladimir Zagorec, who was suspected of war profiteering. President Mesic suggested that it would be impossible to transfer 19 tons of gold bars.

There are claims that one document was the reason of Perkovic’s and Zagorec’s meeting, which states that in 2003 Prime Minister Ivo Sanader deposited 19 tons of gold in the British Virgin Islands.

In accordance with a joint statement made by President Mesic and Prime Minister Sanader, the issue involved a set-up by the intelligence underground and criminal circles. They also stated that this would not trouble fighting against corruption and organized crime.

Gordon Brown has tried to hide the details of £100,000 of political donations made to his leadership campaign from the whole range of rich businessmen and trade unions. The Electoral Commission released the new information after news that private equity chiefs have handed more than £500,000 to Labour Party in recent weeks.

Among the backers of Mr Brown’s campaign the Commission named David Pitt-Watson of private equity and fund management firm Hermes who gave £2,500, and former Labour ministers Lord Simon and Lord Haskell who donated £3,000 and £5,000 respectively.

Mr Brown was also given the amount of £20,000 from a Labour peer and steel magnate Lord Paul, beside the amount of the £25,000 he gave in March. Earlier Lord Paul was engaged in a row concerning his tax status: it was revealed by the Evening Standard that Lord Paul does not pay tax on his overseas earnings because he is non-domiciled in the UK for tax purposes. His donations came through his firm Caparo Industries, whose parent company is registered in the British Virgin Islands.

Chris Grayling, Shadow Cabinet Member, has said in his comments, “Gordon Brown has spent his entire leadership campaign promising to restore trust in politics. Now as soon as he’s become Prime Minister, he’s trying to burying bad news about embarrassing donations to his campaign. This sort of spinning doesn’t bode well for his time in Number 10”.

On Tuesday last week Kuala Lumpur Sessions court acquitted Eric Chia, the former steel tycoon who was involved in Malaysia’s biggest financial scandal and alleged of corruption. It was stated by the trial judge that the prosecution’s arguments failed to be sufficient as they had not called crucial witnesses who could strengthen their accusations.

Eric Chia, who had been closely tied to the government of former Prime Minister Mahathir Mohamad, has been charged for graft since the time when current Malaysian leader Abdullah Ahmad Badawi took office in October 2003 and pledged to fix Malaysia’s reputation for corruption and protectionism. Chia was the managing director of Malaysia’s top steel company, Perwaja, when in 1990s it became close to collapse and its debts and losses exceeded 10 billion ringgit (US$3 billion). He was charged with criminal breach of trust in February 2004 for allegedly misapplication of 76.4 million ringgit (US$22 million) from Perwaja. The illegal payment of 76.4 million ringgit perhaps was made to the BVI company offshore account in Hong Kong.

It was stated by prosecutors that Chia approved the payment of this amount in February 1994, into a Hong Kong account held by Frilsham Enterprise Inc. for “technical assistance” provided by Japanese steelmaker NKK Corp. However, no such payment was owed to NKK. Prosecutors say Frilsham Enterprise was a bogus company; tracing the payment took investigators to Switzerland and the Virgin Islands.

Eric Chia has been let out on bail immediately after he was charged. He was the only person arrested in connection with a government-led investigation into fraud and malpractice at Perwaja that was initiated in 1996. Perwaja was a national project launched in 1982 in the industrialization course launched by Mahathir Mohamad. His government invested billions of ringgit into the company to keep it alive, until in 1997 it was purchased by privately held Maju Holding.

After the Australian Securities & Investments Commission (ASIC) succeeded in receiving court approval to confiscate and sell the shares of Sydney biotech company Novogen, held by a BVI-registered Leominister Co Ltd, new facts were revealed in the course of investigation and new court orders were given.

After attempts to discover the identity of BVI company owners failed, new information appeared that linked David Kelly, the son of Novogen’s founder Graeme Kelly, with the mysterious owner of the BVI company. The court was informed that Mr Kelly had sent an email to the British Virgin Islands companies regulator where confirmed that two directors of the Leominister Co Ltd had tendered their resignation.

Mr Kelly has already been linked to Leominster after his office was raided by Australian Crime Commission investigators two years ago, as part of the tax investigation. During these raids, it was believed Graeme Kelly was linked to the BVI offshore entity, while having failed to declare their worldwide income for tax authorities. BVI office of international accounting firm Moore Stephens Associates, which is the registered agent for Leominster, has told ASIC that it cannot identify the ultimate owner of the shares.

BVI-based Leominster also failed to provide the full details of its interest in the Novogen shares, as well as details of any other persons who are exercising control over the Novogen shares. The shares have been the subject of a restraining order preventing Leominster for dealing with or disposing of the shares whilst the proceedings were before the Court.

Leominster was created from a BVI shelf company sold in August 1998. After a year, this company was the owner of 6.7% of Novogen, but it has steadily sold its shares down since that time, and now the company owns just 2.2% of the company.

Leominster Co Ltd held a $4.4 million package of company shares which are now confiscated. ASIC assured that it would not “pocket” the remaining proceeds that are withheld; it had six months in which to sell the shares, and they would be placed in an unclaimed monies account.

The UK defence company BAE Systems now is alleged of using a secret payments system to channel more than £13m to another offshore company based in the British Virgin Islands and linked to David Hart, the controversial former Conservative defence adviser.

The company named Defence Consultancy Ltd (DCL) was registered anonymously under the BVI law in 1997. Mr Hart’s representatives say that none of the payments were linked to BAE’s arms deals with Saudi Arabia on the amount of £40bn, which were at the centre of corruption inquiries.

This is the last allegation that emerged from corruption investigations into BAE Systems, being conducted by prosecutors from three countries – Switzerland, Sweden, and the UK Serious Fraud Office (SFO). Previous BAE case that included six continuing SFO investigations was on the commission in the amount of hundreds of millions of pounds, transferred through the BVI-registered Red Diamond Trading and Poseidon Trading Investments to confidential agents all around the world.

By the information from legal sources, the payments to the BVI-based Defence Consultancy Ltd, were among the biggest discovered by the SFO when its started its inquiry. However, in the course of investigation no connection was revealed with any of BAE’s arms deals in Europe, African countries and in the Middle East region.

The sources close to the arms industry say that Mr Hart was hired by BAE to promote its interests in the US, where the company was involved in a series of joint deals and acquisitions. When asked by Guardian, BAE has refused to explain why it had paid Mr Hart so much money through an offshore BVI company, as well as to reveal the purpose of its elaborate operations with Red Diamond.