Five directors of Banco Amambay created a secret bank in the Cook Islands with no building and no staff.
Top officials of a Paraguayan bank owned by Horacio Manuel Cartes, the country’s leading candidate in this month’s presidential election, operated a secret financial institution in a tax haven in the South Pacific, files obtained by the International Consortium of Investigative Journalists reveal.
Cartes' father, Ramón Telmo Cartes Lind, and four other executives of Paraguay’s Banco Amambay S.A. created Amambay Trust Bank Ltd. in 1995 in the Cook Islands, a tiny chain of atolls and volcanic outcroppings more than 6,000 miles away from the South American nation.
Horacio Cartes is a successful Paraguayan cigarette maker who is running for president in the country’s April 21 elections. Both Horacio Cartes and Banco Amambay have recently been the subject of a money laundering investigation by the U.S. Drug Enforcement Administration and the Bureau of Alcohol, Tobacco, Firearms and Explosives, according to diplomatic cables released by Wikileaks in 2010.
It was not the only time that Banco Amambay and its officials made headlines for alleged money laundering, but the accusations have never resulted in convictions. Just last month the head of Paraguay's anti-money laundering agency said that the bank was being investigated alongside other financial institutions for illegal money transfers abroad. The following day the official recanted his words and said he had misspoken. Amambay denied any involvement in criminal activities.
The Cook Islands bank, Amambay Trust Bank Ltd., appears to have had no building and no staff in the Cooks but held a banking license that allowed it to perform financial transactions like a normal bank. In its license application, it stated that it intended “to provide banking services to investors that need financing alternatives not available from local banks in Paraguay.” That document is part of a cache of 2.5 million offshore files obtained by ICIJ.
The shareholders of the offshore bank were Ramón Cartes and Guiomar De Gásperi, at the time president and vice president of Banco Amambay.
Ramón Cartes died in 2011. Today his son, Horacio Cartes, is the head of the family business conglomerate, which besides Banco Amambay includes a cigarette factory and several agricultural ventures. Cartes is also the president of a popular soccer club (he is on leave now while he campaigns for president).
The Cook Islands bank, which was operational until 2000, is not listed among the more than 20 companies that the Cartes Group says on its website that it has established since 1961.
The president of Banco Amambay, Hugo Portillo, did not respond to detailed questions sent by ICIJ to him, nor did De Gasperi and other current directors of Banco Amambay who had been involved in the Cook Islands bank.
One former director of the offshore entity who no longer works at Banco Amambay, Mariano Roque Alonso, told ICIJ he does not remember the offshore bank or having any connections to it. “We never even considered an operation like that,” he said.
Jorge Raúl Corvalán Mendoza, president of Paraguay´s Central Bank, which oversees financial institutions, said the country’s legislation since the mid-1990s requires banks to get permission from bank regulators before opening subsidiaries, including in offshore destinations.
Corvalán, who became head of the Central Bank in 2008, said he did not know of the existence of Amambay Trust Bank Ltd. in the Cook Islands. “I have no knowledge of what happened in the 1990s,” he said.
Since Ramón Cartes and De Gásperi were listed as the only shareholders in Amambay Trust Bank Ltd. in the Cook Islands, it would appear that it was a separate venture, rather than a formal subsidiary of Banco Amambay.
A classified 2010 U.S. diplomatic cable published by Wikileaks said that both Cartes and Banco Amambay were at the center of a U.S. money laundering investigation called Operation Heart of Stone.
According to the cable, Horacio Cartes was the “head” of a money laundering and drug-trafficking organization that operated in the tri-border area of South America, where Paraguay, Argentina and Brazil meet. “Agents have infiltrated Cartes’ money laundering enterprise, an organization believed to launder large quantities of United States currency generated through illegal means, including through the sale of narcotics, from the TBA [tri-border area] to the United States,” read the cable.
In interviews with local media in 2011, Cartes denied wrongdoing and said he would be happy to see the results of the alleged U.S investigation. DEA and ATF officials declined to comment about the status of the probe.
The cable also said the alleged criminal enterprise smuggled cigarettes. Cartes’ tobacco company was featured in a 2009 ICIJ investigation that revealed that tiny Paraguay has become one of the world’s leading suppliers of contraband cigarettes. While his firm, Tabesa, serves a legitimate market in Paraguay, customs officials in Brazil and Argentina asserted that the factory supplies large quantities of cigarettes that end up being smuggled to their countries.
Horacio Cartes did not respond to ICIJ’s requests for comment.
In January 1995, a lawyer with the U.S. law firm Coudert Brothers approached the offshore firm Portcullis TrustNet to create a company in the Cook Islands for a group of Paraguayan clients.
In those years, the Cook Islands had started to build a reputation as a competitive offshore jurisdiction, with strong secrecy laws.
The clients were directors of a Paraguayan bank founded just three years earlier, Banco Amambay S.A. Right that around the time the Cook Islands entity was created, Paraguay was embarking on a massive financial crisis, fueled by widespread corruption, which resulted in a run on deposits and the closure of several banks.
The Paraguayans named their secretive Cook Islands company Amambay Trust Bank Ltd. and applied for a banking license to the Cook Islands Monetary Board.
In simultaneous letters to the Cook Islands Treasury Department and the solicitor general, the TrustNet staff said that the Coudert Brothers lawyers “have indicated to us that they have no reservations about the clients we are dealing with.”
Still, local regulations required that Interpol certify that the officials of the bank-to-be were not criminals. The background checks for shareholders Ramón Telmo Cartes and Guiomar De Gásperi and for directors Mariano Roque Alonso, Eduardo Campos Marín and Carlos Eduardo Moscarda took a while but came back clean.
TrustNet approved resolutions stating that the company would not hold regular annual meetings and that the bank would not have an auditor, records show. The address of the new bank was the office of TrustNet on the main island of the Cook Islands, Rarotonga. With the banking license approved and Cartes and De Gasperi each holding 1 million shares, the bank was ready to operate.
In 1998 a U.S. Department of State official, Jonathan Winer, wrote an article about the threats of tax havens to the global economy. He said the State Department had reviewed a group of offshore entities based in the Cook Islands and found unsavory clients behind them. “The review revealed connections between this village-sized ‘nation-state’, organized crime, Russia, and some of the most notorious financial players in the Asia Pacific region.” Among the Cook Islands bankers, Winer highlighted a notorious Italian family, Brazilian politicians investigated for money laundering as well as “six Paraguayans, several Russian speakers operating out of Cyprus and a number of Indonesian banks.”
Amambay Trust Bank Ltd. was de-registered as a Cook Islands company on May 23, 2000.
The following month, the Organization for Economic Cooperation and Development moved the Cook Islands onto its money laundering blacklist, a dishonor roll for places the OECD considers havens or conduits for dirty money.
OECD’s Financial Action Task Force on Money Laundering condemned Cook Islands’ laws for “excessive secrecy provisions” that allowed owners of offshore companies and accounts to hide in the shadows. It noted the islands’ government had “no relevant information on approximately 1,200 international companies that it had registered” and that the offshore banks located in the Cooks weren’t required to document the identity of their customers.
The Cook Islands remained on the OECD’s blacklist until 2005.
In the meantime, Paraguay also decided to clean up its connections to tax havens and it banned banks operating in the country from doing business with financial institutions that only existed in paper in far-flung offshore jurisdictions.
In 2004, Brazilian prosecutors charged four directors of Banco Amambay who had also been directors of the Cook Islands bank — Cartes, De Gasperi, Marín and Moscarda — accusing them and others of helping Brazilians evade taxes in 1996. They were all acquitted in 2008 for lack of evidence.
Marina Walker Guevara is ICIJ’s deputy director. Mabel Rehnfeldt is an ICIJ member in Paraguay and editor of ABC Digital.