BVI Offshore Business: Grey Area

A billionaire sheikh, senior member of the Qatari royal family, raised legal claims in the Spanish court against Barclays bank, over an alleged fraud in the amount of €50m ($70m).

It is said that the fraud took place in the period between December 2001 and February 2003; the sheikh alleges Barclays allowed its employee to set up ghost account in his name, and siphon off money from the legitimate account. The sums stolen from the personal account in Marbella were about €4m a month.

In such a way, total amount of €29m in cash was withdrawn, while €20m was transferred to other bank accounts, before the alleged fraud was revealed by the Qatari sheikh. During one four-day spell, €2.5m in cash was withdrawn from the account.

Money transfers of €2m or more were frequently made to bank accounts in Monaco, the British Virgin Islands and Switzerland. The sheikh said that, although he was a co-signatory, he was never contacted by Barclays about all these huge sums being moved in the account.

The sheikh has already recovered €500,000 from an account in the British Virgin Islands, and €3.4m has been reclaimed from a third party believed to have been involved in the alleged fraud. Another €1.3m has been arranged as legitimate household expenses that were paid from the account on behalf of the sheikh.

In the legal suit, the sheikh claims that Barclays still ows him about €42m. He also alleges that the bank failed to demand any proof of identity, or to conduct a face-to-face document-signing process.

The four co-owners of the BVI-controlled joint venture TNK-BP with British oil company British Petroleum (BP) plan legal action to deprive BP-nominated directors of their powers. The deadline for reaching agreement in the course of this long-running dispute passed on June 11, and the four billionaires are going to sue BP in a Stockholm court and launch separate legal action in Moscow.

BP offered the oligarchs, – German Khan and Michail Fridman of Alfa Group, Viktor Vekselberg and Len Blavatnik, - to sell their stakes in TNK-BP, which made net profits of $5.3 billion last year, but they are said to have no interest in selling.

A source close to BP denied that the company wanted to buy out the stakes of Russian shareholders, saying the Russians had in fact asked BP to buy their share.

It was said by the officials that Russian shareholders wanted to change TNK-BP’s CEO for a “truly independent” person, believing that current incumbent Robert Dudley represented only BP’s interests. The Russian side, in its turn, believes that BP violated the terms of an agreement governing the use of BP secondees by bringing in a large number of staff who worked in managerial rather than in technical positions.

Under the shareholding structure of TNK-BP, BP and the four Russians own equal shares in a British Virgin Islands-registered company, which in its turn owns through subsidiaries a 95% interest in the Russian company TNK-BP Holding. The remainder part is owned by the minority shareholders.

TNK-BP Ltd. was incorporated in BVI in 2003 as a result of a merger of Access/Renova consortium and Alfa Group with the British BP.

Sweden organized co-operation with the neighbor countries to put more pressure on tax havens and make them loosen their secrecy laws allowing people to avoid paying Swedish taxes. The Copenhagen-based Nordic Council has been negotiating with several jurisdictions which have rules and regulations making it easier for people to avoid paying Swedish taxes. During this year, Swedish tax authority, Skatteverket, is likely to sign an agreement with at least one offshore jurisdiction that will allow the agency to access information on companies, accounts, and banking transactions. Among tax havens with which discussions on this agreement have been commenced there are the Cayman Islands, the British Virgin Islands, Guernsey, Jersey and Bermuda. The full list of countries has not been made public.

Swedish Tax Authority has reckoned that the country loses annually about $7.65 billion in tax revenues because of people placing their money offshore. However, by words of Torsten Fensby, project leader for Nordic Council’s tax haven project, even this agreement with one of the above-named offshore jurisdictions would not affect tax revenues in Sweden. The capital will likely shift to another country with secrecy laws, but with every new agreement the possibilities for international tax avoidance will be reduced.

British Virgin Islands-registered company Riqueza operating in Singapore is probably involved in the activities of the director of the collapsed stockbroking firm Opes Prime, Anthony Blumberg, who may be linked to accounting irregularities and questionable loans at the failed firm. Some issues of Mr Blumberg’s role in the complex web of companies and transactions related to the Opes group are believed to have been referred by the Opes receiver Deloitte to the Australian Securities and Investments Commission.

Until now, ASIC was focused on Opes former chief executive Laurie Emini, whose location is now unknown. Now Deloitte handed Mr Blumberg and his lawyer Graeme Efron a letter of demand seeking the Opes director’s files. It is alleged that Mr Blumberg was involved with a number of questionable loans made to companies, many of them being offshore.

Opes Prime Stockbroking had two arm’s-length companies called Leveraged Capital Pty Ltd and Hawkswood Pty Ltd. These companies allegedly dealt with Opes through the BVI-registered Riqueza, which has been considered central to the Opes operations. In April this year, Opes administrator John Lindholm of Ferrier Hodgson took possession of BVI company’s books and records, which were surrendered by the Singapore-based sole director and shareholder Jay Moghe. It was said that Riqueza had allegedly hosted the “irregular” transactions that had enabled six favoured customers to avoid margin calls.

In November 2007, an international auditing firm KPMG refused to deal with the operations of the  fuel additive company Firepower. The documents lodged with the Australian Securities and Investments Commission revealed KPMG “withdrew consent” to act as a registered office for local Australian Firepower arms Firepower Holdings and Firepower Operations.

Perth-based Firepower is one of the biggest sports sponsors in Australia, endorsing the Western Force rugby union football club and the Sydney Kings basketball team, and Firepower chairman Mr Johnston is the sole director of both Firepower Holdings and Firepower Operations. Mr Johnston wholly owns Firepower Holdings, while компютриFirepower Operations is fully owned by Firepower Holdings Group, based in the British Virgin Islands.

In the last months the relations between the company and some of the teams and sports stars sponsored have been damaged. Firepower allegedly owes Western Force millions of dollars, which has raised questions concerning the financial position of the company. Last  week, a dispute between Firepower and Sydney Kings escalated after the company, which is the majority owner of the Kings, reportedly began legal action to recover damages against a former Kings player for breach of contract, claiming his leaving the team caused it to lose memberships and fans.