Offshore trove exposes Trump-Russia links and piggy banks of the wealthiest 1 percent

This story is by the International Consortium of Investigative Journalists, and it was initially published by the nonprofit news organization Reveal from The Center for Investigative Reporting. Reveal airs Sundays at 5 p.m. on MPR News.

A trove of 13.4 million records exposes ties between Russia and U.S. President Donald Trump's billionaire commerce secretary, the secret dealings of the chief fundraiser for Canadian Prime Minister Justin Trudeau and the offshore interests of the queen of England and more than 120 politicians around the world.

The leaked documents show how deeply the offshore financial system is entangled with the overlapping worlds of political players, private wealth and corporate giants, including Apple, Nike, Uber and other global companies that avoid taxes through increasingly imaginative bookkeeping maneuvers.

One offshore web leads to Trump's commerce secretary, private equity tycoon Wilbur Ross, who has a stake in a shipping company that has received more than $68 million in revenue since 2014 from a Russian energy company co-owned by the son-in-law of Russian President Vladimir Putin.

In all, the offshore ties of more than a dozen Trump advisers, Cabinet members and major donors appear in the leaked data.

The new files come from two offshore services firms as well as from 19 corporate registries maintained by governments in jurisdictions that serve as waystations in the global shadow economy. The leaks were obtained by German newspaper Suddeutsche Zeitung and shared with the International Consortium of Investigative Journalists and a network of more than 380 journalists in 67 countries.

The promise of tax havens is secrecy — offshore locales create and oversee companies that often are difficult, or impossible, to trace back to their owners. While having an offshore entity is often legal, the built-in secrecy attracts money launderers, drug traffickers, kleptocrats and others who want to operate in the shadows. Offshore companies, often "shells" with no employees or office space, are also used in complex tax-avoidance structures that drain billions from national treasuries.

The offshore industry makes "the poor poorer" and is "deepening wealth inequality," said Brooke Harrington, a certified wealth manager and Copenhagen Business School professor who is the author of "Capital without Borders: Wealth Managers and the One Percent."

"There is this small group of people who are not equally subject to the laws as the rest of us, and that's on purpose," Harrington said. These people "live the dream" of enjoying "the benefits of society without being subject to any of its constraints."

The records expand on the revelations from the leak of offshore documents that spawned the 2016 Panama Papers investigation by ICIJ and its media partners. The new files shine a light on a different cast of underexplored island havens, including some with cleaner reputations and higher price tags, such as the Cayman Islands and Bermuda.

The most detailed revelations emerge in decades of corporate records from the white-shoe offshore law firm Appleby and corporate services provider Estera, two businesses that operated together under the Appleby name until Estera became independent in 2016.

At least 31,000 of the individual and corporate clients included in Appleby's records are U.S. citizens or have U.S. addresses, more than from any other country. Appleby also counted clients from the United Kingdom, China and Canada among its biggest sources of business.

Nearly 7 million records from Appleby and affiliates cover the period from 1950 to 2016 and include emails, billion-dollar loan agreements and bank statements involving at least 25,000 entities connected to people in 180 countries. Appleby is a member of the "Offshore Magic Circle," an informal clique of the planet's leading offshore law practices. The firm was founded in Bermuda and has offices in Hong Kong, Shanghai, the British Virgin Islands, the Cayman Islands and other offshore centers.

Appleby has a well-guarded 100-year reputation and has avoided public scrapes through a mixture of discretion and expensive client monitoring.

In contrast to Appleby's public image, the files reveal a company that has provided services to risky clients from Iran, Russia and Libya, failed government audits that identified gaps in anti-money-laundering procedures and been fined in secret by the Bermuda financial regulator. Appleby did not reply to ICIJ's detailed questions but released an online statement saying it had investigated ICIJ's questions and is "satisfied that there is no evidence of any wrongdoing."

The firm said it is "subject to frequent regulatory checks and we are committed to achieving the high standards set by our regulators."

The leaked cache of documents includes more than half a million files from Asiaciti Trust, a family-run offshore specialist that is headquartered in Singapore and has satellite offices from Samoa in the South Pacific to Nevis in the Caribbean.

The leaked files also include documents from government business registries in some of the world's most secretive corporate havens in the Caribbean, the Pacific and Europe, such as Antigua and Barbuda, the Cook Islands and Malta. One-fifth of the world's busiest secrecy jurisdictions are represented in these databases.

Taken as a whole, the leaks reveal offshore traces of spy planes purchased by the United Arab Emirates, the Barbados explosives company of a Canadian engineer who tried to build a "super gun" for Iraqi dictator Saddam Hussein and the Bermuda company of the late Marcial Maciel Degollado, the influential Mexican priest and founder of the Catholic religious order the Legionaries of Christ, and whose legacy was marred by allegations of child sexual abuse.

Queen Elizabeth II has invested millions of dollars in medical and consumer loan companies, Appleby's files show. While the Queen's private estate, the Duchy of Lancaster, provides some details of its investments in U.K. property, such as commercial buildings scattered across southern England, it has never disclosed details of its offshore investments.

The records show that as of 2007, the queen's personal estate invested in a Cayman Islands fund that in turn invested in a private equity company that controlled BrightHouse, a U.K. rent-to-own firm criticized by consumer watchdogs and members of Parliament for selling household goods to cash-strapped Britons on payment plans with interest rates as high as 99.9 percent.

Other royals and politicians with newly disclosed offshore ties include Queen Noor of Jordan, who was listed as the beneficiary of two trusts on the island of Jersey, including one that held her sprawling British estate; Sam Kutesa, Uganda's foreign minister and a former U.N. General Assembly president, who set up an offshore trust in the Seychelles to manage his personal wealth; Brazil's finance minister, Henrique de Campos Meirelles, who created a foundation in Bermuda "for charitable purposes"; and Antanas Guoga, a Lithuanian member of the European Parliament and professional poker player, who held a stake in an Isle of Man company whose other shareholders included a gambling mogul who settled a fraud lawsuit in the United States.

Wesley Clark, a one-time Democratic presidential hopeful and a retired four-star U.S. Army general who served as NATO's supreme commander in Europe , was a director of an online gambling company with offshore subsidiaries, the files show.

A spokesman for Queen Elizabeth II told ICIJ partner The Guardian that the Duchy has an ongoing investment in the Cayman Island fund and was not aware of the investment in BrightHouse. The Queen voluntarily pays tax on income from the Duchy and its investments, the spokesman said.

Queen Noor told ICIJ that "all the bequests made to her and to her children by [the late King Hussein] have always been administered according to the highest ethical, legal and regulatory standards."

Brazil's Meirelles said the foundation he created does not benefit him personally and will support education charities after his death.

Guoga said he declared his investment in the Isle of Man company to authorities and sold the last of his shares in 2014.

"I thought you could avoid, not evade, taxes but I found it was not practical," Kutesa told ICIJ's media partner The Daily Monitor. He said he did nothing with the companies. "I told Appleby to close it many years ago."

Clark did not reply to requests for comment.

In addition to disclosures about politicians and corporations, the files reveal details about the financial lives of the rich and famous — and the unknown. They include Microsoft co-founder Paul Allen's yacht and submarines, eBay founder Pierre Omidyar's Cayman Island investment vehicle, and music star Madonna's shares in a medical supplies company. Pop singer and social justice activist Bono — listed under his full name, Paul Hewson — owned shares in a company registered in Malta that invested in shopping center in Lithuania, company records show. Other clients listed their occupations as dog groomer, plumber and wakeboard instructor.

Madonna and Allen did not reply to requests for comment. Omidyar, whose Omidyar Network donates to ICIJ, discloses his investment to the IRS, a spokeswoman said. Bono was a "passive, minority investor" in the Malta company that closed down in 2015, a spokeswoman said.

Trudeau and Trump

When Appleby is not serving the interests of some of the world's wealthiest individuals, it provides nuts-and-bolts legal help to corporations that seek to reduce their taxes in the countries where they do business. Appleby is not a tax adviser, but the firm plays a role in tax programs used by companies across the world.

In addition to top-flight international banks such as Barclays, Goldman Sachs and BNP Paribas, other elite Appleby clients have included the founder of one of the Middle East's largest construction conglomerates, the Saad Group, and the Japanese company operating the crippled nuclear power plant in Fukushima.

The files reveal that America's most profitable company, Apple Inc., shopped around Europe and the Caribbean for a new island tax shelter after a U.S. Senate inquiry found that the tech giant had avoided tens of billions of dollars in taxes by shifting profits into Irish subsidiaries.

In one email exchange, Apple's lawyers asked Appleby to confirm that a possible move to one of six offshore tax havens would allow an Irish subsidiary to "conduct management activities . . . without being subject to taxation in these jurisdictions." Apple declined to comment on details of the corporate reorganization, but told ICIJ that it explained the new arrangements to government authorities and that the changes did not reduce its tax payments.

The files also reveal how big corporations cut their taxes by creating offshore shell companies to hold intangible assets such as the design of Nike's "Swoosh" logo and the creative rights to silicone breast implants.

One of Appleby's top corporate clients was Glencore PLC, the world's largest commodity trader. The files contain decades of deals, emails and multimillion-dollar loans to bankroll ventures in Russia, Latin America, Africa and Australia.

Glencore was such an important client that it once had its own room within Appleby's offices in Bermuda.

Company board meeting minutes document how Glencore representatives leaned on Daniel Gertler, an Israeli businessman with high-level friends in the Democratic Republic of the Congo, to help seal a deal for a valuable copper mine. Glencore lent millions to a company, widely believed to belong to Gertler, described in a U.S. Department of Justice inquiry as a conduit for bribes. Gertler and Glencore were not named in the case.

Glencore said its background checks on Gertler were "extensive and thorough." The Justice Department investigation "does not constitute evidence of anything against Mr. Gertler," his lawyers said, adding that he "rejects absolutely any allegations of wrongdoing or criminality by him."n No loans were used improperly or for inappropriate purposes, Gertler's lawyers said.

Offshore operatives

The offshore industry is a globe-circling labyrinth of accountants, bankers, money managers, lawyers and middlemen who get paid to serve the interests of the rich and well-connected.

Appleby, for example, is one link in a chain of offshore actors who helped sports stars, Russian oligarchs and government officials to purchase jets, yachts and other luxury items. The offshore experts helped Arkady and Boris Rotenberg, two Russian billionaires and childhood friends of President Putin, buy jets worth more than $20 million in 2013. U.S authorities blacklisted the Rotenbergs in 2014 for their support of "Putin's pet projects" and for having banked "high price contracts" through the Russian government. Appleby cut its ties with the brothers but, in one case, received approval from the Isle of Man government nearly two years after sanctions were imposed to disburse fees to keep one of the brothers' companies on the business register. The Rotenbergs did not reply to Suddeutsche Zeitung's requests for comment.

Clients prize Appleby for its expertise, efficiency and global network of professionals. Its peers repeatedly crown it Offshore Law Firm of the Year.

But decades of private documents also show that even one of the offshore industry's brightest stars has hidden shortcomings: accepting questionable clients and failing to monitor multimillion-dollar money flows.

Bermuda financial regulators fined the firm's trust unit for breaching anti-money-laundering rules, according to a confidential 2015 deal struck by Appleby and the regulator. This year, Appleby reached an $12.7 million settlement in a lawsuit in Canada in which nurses, firefighters and police officers accused the firm of unquestioningly circulating money on behalf of a client who designed an alleged tax-avoidance scheme. Appleby and the alleged mastermind did not admit wrongdoing.

Family-owned Asiaciti advertises itself as helping clients to accumulate and "preserve wealth from the ravages of litigation," political upheavals and family breakups. It has attracted Chinese millionaires, family members of a Kazakh official convicted of corruption and a broad swath of Americans, including doctors, poker players and a Colorado alfalfa farmer.

The leaked files from Asiaciti reveal how the firm set up trusts in the Cook Islands for Kevin Trudeau, a U.S. infomercial frontman who sold millions of copies of self-help books such as "The Weight-Loss Cure 'They' Don't Want You to Know About." In 2014, a Chicago judge sentenced Trudeau to 10 years in federal prison for criminal contempt, calling him a shameless fraudster who was "deceitful to the core" and once even used his mother's Social Security number in one of his scams.

Appleby said in its online statement that it is committed to meeting regulators' standards. Appleby provides advice to clients "on legitimate and lawful ways to conduct their business," the firm said, and it does not tolerate illegal behavior.

"It is true that we are not infallible," Appleby said. "Where we find that mistakes have happened we act quickly to put things right."

Asiaciti did not respond to requests for comment.

Adrian Alhassan, a former compliance manager at Appleby's Bermuda office told ICIJ that if someone is "hellbent" on breaking the law, there's only so much an offshore services provider can do. "It's not the FBI," he said. If the law firm spent years doing background research on clients, it wouldn't "get any work done."

"It's like cleaning a beach," Alhassan said in a telephone interview. "If you say that you've cleaned it up, at the end of the day, can you really say that you've picked up every piece of seaweed?"

Deepening inequality

Tax havens' secrecy laws entice those who wish to place their wealth and dealings beyond the reach of regulators, investigators and the tax collectors.

The documents from corporate registries in 19 such jurisdictions reveal company names and details, directors and real owners of companies created in many of the world's busiest offshore hideouts.

The documents come from high- and low-profile bastions of financial secrecy such as Marshall Islands, Lebanon and St. Kitts and Nevis, a low-lying Caribbean country recently battered by hurricanes. Some jurisdictions' records are publicly available but impossible to search by an individual's name. Others, such as the Cayman Islands' registry, charge more than $30 for a one-page record that provides only basic information. Six registries do not make information available online.

The leaked files contain more than a thousand records from Antigua and Barbuda, a Caribbean country that provides no online corporate information and more than 600,000 documents from the online registry of Barbados, which does not list shareholders or directors.

Over the past decade or more, the European Union and other international organizations have pressured offshore havens to reform their laws and require that offshore go-betweens aggressively screen clients. Progress has been slow, experts say, both because of the challenges of changing practices across a global web of jurisdictions, and because powerful people and big companies benefit from the offshore system.

They do so at the expense of the many - shifting the burden of taxation to middle-income taxpayers and giving multinational corporations an advantage over smaller competitors. Where it hurts most is in nations struggling to provide the basics for their populations.

In West Africa, Burkina Faso officials who monitor the tax payments of the largest companies doing business there work from cramped offices with broken air- conditioning units. Burkina Faso is among the poorest countries in the world. On average, a citizen there earns less annually than the owner of an offshore company in Bermuda pays in registration fees. The country's tax office sought $29 million in unpaid taxes and penalties from Glencore, the world's 16th-largest company and a major user of Appleby's services. Glencore protested and the penalty was reduced to $1.5 million.

Helping the rich get richer through offshore maneuvers is not a "benign benefit," said Harrington, the Copenhagen Business School professor. "When the rich get richer, the poor get poorer, because individual wealthy people are not paying their fair share of taxes."

"It won't be lost on wealth managers and those in the offshore industry," she said, "that we are reaching sort of French Revolution levels of inequality and injustice."