Germans among those featured in the Paradise Papers

November 06, 2017

The Paradise Papers reporting suggests that many high-ranking policymakers, major companies and celebrities have been putting a lot of their money in tax havens. More than 120 people from almost 50 nations are implicated in the documents, among them some Germans.

It was already known that former German Chancellor Gerhard Schröder had contacted law firm Appleby about “certain procedural issues concerning legislation on the Virgin Islands.” According to the Süddeutsche Zeitung newspaper, he was an independent member on the supervisory board of the Russian-British energy firm TNK-BP back in 2009, an offshore company based in the Virgin Islands. Information on who pulled the strings between BP and Russia’s Alfa group had been known for a long time, bot no one in Schröder’s Social Democratic Party seemed to bother.

Schröder is not the only German with a firm place in the Paradise Papers. The documents make a mention of roughly 1,000 German clients, beneficiaries or people otherwise involved in tax avoidance schemes, among them politicians, billionaires, entrepreneurs, aristocrats and investors.

Read more: Offshore – the legal and the not so legal

But being involved in offshore deals does not automatically mean being involved in any legal wrongdoing. What has become clear, though, is that many loopholes remain in the law that help people and companies cover up their finances.

Illegal internet gambling

The Paradise Papers claim that German companies Sixt, Deutsche Post, Siemens, Allianz, Bayer, Deutsche Bank and hotel chain Meininger are among those using the services of the Appleby law firm to exploit any tax-relevant loopholes.

And there’s mention of Paul Gauselmann, the head of Germany’s largest gambling company. His Merkur gambling halls made him a billionaire. Now he has turned to online gambling, despite the fact the practice is prohibited in Germany. It’s a growing business nonetheless.

Operating in somewhat of a legal grey area, Gauselmann provides online licenses for his Merkur autoplay games through a subsidiary based on the Isle of Man. He himself doesn’t violate any laws, but helps others to do so. Banks have been profiting from this scheme. It’s true that financial institutions are not allowed to transfer money from illegal businesses, but they often cooperate with foreign payment service providers enabling online gambling in the first place.

Tax avoidance of the super rich

The Paradise Papers have also put the Engelhorns, a Germany billionaire family, in the spotlight again. They didn’t seek to earn money with the help of Appleby, but they were out to avoid taxes to the tune of millions of euros, as the Süddeutsche Zeitung suggested.

Pharma mogul Curt Engelhorn, who died in 2006, sent millions of euros to two daughters via a trust abroad. Only, the heirs didn’t pay any taxes, which eventually led to a huge tax trial in Germany. In the end, the heirs had to fork over 145 million euros ($168 million) in back taxes in an out-of-court settlement with regional authorities in Bavaria.

Investigators admitted that they were not in a position to scrutinize the complex global financial dealings of the Engelhorns. Many had an inkling back then that the back-tax volume must be a lot higher. The Paradise Papers seem to support that assumption in that the documents reveal data about the Engelhorns’ financial dealings that were not known to investigators a couple of years ago.

The head of a finance employees’ union in Bavaria, Gerhard Wipijewski, says the Engelhorns are not necessarily off the hook yet as new data may lead to new investigations and possibly a retrial of the Engelhorn daughters.

The head of German tax union DSTG, Thomas Eigenthaler, said the revelations from the Paradise Papers are just “the tip of the iceberg.” He reckons that the German state loses between 50 billion and 70 billion euros ($58 billion and $81 billion) as a result of illegal financial dealings.

The German government has encouraged the journalists to share the clear-text data sets from the Paradise Papers. “We’re in favor of making this information accessible to our financial authorities for analysis,” a spokesman for the German Finance Ministry said Monday.

Global elite named in Paradise Papers

Bono and Nude Estates

U2 frontman and activist Bono was one of the highest-profile players named in the papers. In an elaborate web of financial transactions, Bono invested in a Maltese company called Nude Estates that was involved in a shady deal over a Lithuanian shopping mall. Malta is famous for its liberal tax policies. A spokesman for the singer denied any wrongdoing.

Global elite named in Paradise Papers

US commerce secretary

President Donald Trump’s Secretary of Commerce Wilbur Ross was listed in the papers for his interests in the Russian gas company Sibur. Ross has now been accused of failing to disclose his Russian connections to Congress during his confirmation hearing, though Ross has argued that as the company is not one facing US sanctions, he was not obliged to disclose them.

Global elite named in Paradise Papers

Queen’s private estate in hot water

Queen Elizabeth II is provided an income by her private estate, the Duchy of Lancaster. According to the Paradise Papers, the duchy invested 10 million pounds ($13 million) in offshore accounts in Bermuda and the Cayman Islands. The estate has said that the investments are legal.

Global elite named in Paradise Papers

Germany’s former chancellor

Gerhard Schröder, leader of Germany from 1998 to 2005, was named for his management role at the Russian-British energy firm TNK-BP in 2009. The company was registered in the tax haven British Virgin Islands. In 2013, TNK-BP was bought by Russian energy giant Rosneft — where Schröder is now the independent director of the board.

Global elite named in Paradise Papers

Colombia’s president caught

According to the papers, Colombian President Juan Manuel Santos is listed as the director of two offshore companies in Barbados. He previously claimed to have severed ties with them in 2000 when he became minister of finance.

Global elite named in Paradise Papers

Lifestyles of the rich and famous

Not all of the revelations in the Paradise Papers necessarily detail illegal activity. But they do shed light on some of the strange investments and luxurious possessions of the world’s elite, including Microsoft co-founder Paul Allen’s yacht. Besides Microsoft, other US companies like Apple, McDonald’s, Facebook and Walmart were found to have ties to Appleby.

Global elite named in Paradise Papers

Madonna medical supplies

One of the odd investments listed in the Paradise Papers is singer Madonna’s stake in a medical supply firm. Actress Keira Knightley was also found to have stock in a Jersey-based real-estate firm.

Author: Elizabeth Schumacher