Joint probe by ICIJ, the BBC and the Guardian unmasks 28 "nominee directors" who pose as public faces for more than 21,500 companies.
The existence of a global network of sham company directors, most of them British, can be revealed today.
The UK government claims such abuses were stamped out long ago, but a worldwide joint investigation by the International Consortium of Investigative Journalists, the Guardian, and BBC's Panorama program, has uncovered a booming offshore industry that leaves the way open both for tax avoidance and the concealment of assets.
This is the first installment of ICIJ's worldwide research effort which aims to identify, country-by-country, thousands of the true owners of offshore companies.
One part of our research identified more than 21,500 companies who use a group of some 28 so-called nominee directors. The nominees play a key role in keeping hundreds of thousands of commercial transactions secret. They do so by selling their names for use on official company documents, whilst giving addresses in obscure locations all over the world.
Hiding behind nominee fronts are the real owners. They are of widely varying types, ranging from Russian oligarchs to perfectly legal but discreet speculators in the British property market. Their only common factor: the wish for secrecy.
Perhaps surprisingly, such activities are not illegal in the UK. Sometimes nominee directors have a legitimate role. But our evidence suggests this particular group of directors only pretend to control the companies they put their names to.
The companies themselves are often registered anonymously offshore in the British Virgin Islands (BVI), but also in Ireland, New Zealand, Belize and the UK itself. More than a score of UK agencies sell offshore companies, several of whom also help supply sham directors.
One British couple, Sarah and Edward Petre-Mears, who migrated from Sark in the Channel Isles to the Caribbean island of Nevis, have sold their services to more than 2,000 entities with their name appearing on activities ranging from Russian luxury property purchases, to pornography and casino sites.
In 1999, the government claimed Britain's sham director industry had been "effectively outlawed" after a judge, Mr Justice Blackburne, said the court would not tolerate "the situation where someone takes on the directorship of so many companies and then totally abrogates responsibility". But our findings show this has failed to be policed.
Sample owners we have identified include:
• Vladimir Antonov. The billionaire Russian purchaser of Portsmouth FC, who denies wrongdoing, is currently in London fighting an extradition request from Lithuania, where he controlled a bank.
• Yair Spitzer. This north London software engineer bought and sold London flats. He says: “We were advised by UK accountants that this structure . . . was perfectly legal.”
• The Hackmeys. Wealthy Israeli family, one of whom used a BVI company to buy a £26m London office block. Their spokesman says: “The deal was introduced by a [confidential] joint venture partner who set up the deal and structure.”
• Nicholas Joannou. His “Armstrong Group” sold shares from an address in London's Berkeley Square. Joannou has since proved difficult to contact.
• SP Trading, linked in 2009 to a Kazakh businessman and an arms-to-Iran scandal. The nominee directors in Vanuatu had no actual knowledge of the company’s true activities. They told us there were “very few cases of misuse by clients”.
A parallel undercover camera investigation by the BBC’s Panorama program, in collaboration with the ICIJ, has obtained footage of company incorporation agencies run by Britons offering to provide nominees for apparent tax avoidance schemes.
Today’s revelations launch ICIJ's worldwide investigative series Secrecy for Sale: Inside the Global Offshore Money Maze. When it completes in 2013, this series will have stripped away anonymity from the most shadowy aspect of the global financial industry – the offshore company.
The British Virgin Islands are a particularly successful offshore hideaway, thanks to the exceptional secrecy on offer. This Caribbean resort, which is ultimately controlled by the UK, has sold more than a million anonymously-owned offshore entities since launching itself in 1984 as a tax haven.
The purchasers are often people who, for a variety of reasons, some perfectly legitimate, do not wish to advertise what they are doing with their wealth.
The Guardian has collaborated with the ICIJ to analyze many gigabytes of the British data. This week we intend to reveal the names of more owners. We do not suggest criminal wrongdoing by them. Among those we have contacted, not all go so far as to employ nominee directors. Some insist they have done nothing improper, and are merely taking advantage of legitimate tax breaks or the opportunity for privacy.
Critics say, however, that the BVI’s secrecy system can be open to abuse because of its lack of transparency. We believe that disclosure is the best way to examine this problem.
Gerard Ryle, the director of the ICIJ, says: “We are applying specialist software to crunch through literally hundreds of thousands of offshore entities to look for patterns. We are marrying our findings with old-fashioned shoe leather and interviews from key insiders who can provide further context on this little known and loosely regulated world.”
Ryle believes the ICIJ's global project, when it completes next year, will haul into the open a shadowy financial system estimated to conceal the movement round the world of trillions of dollars.
David Leigh is a member of ICIJ. This story was also published in The Guardian.