Officials say they will check ICIJ’s data for any evidence of misconduct by owners of offshore companies.
Greek citizens who own or direct offshore companies in the British Virgin Islands and other tax havens rarely declare them to Greek tax officials, an International Consortium of Investigative Journalists' review of more than 100 companies shows.
Just four out of 107 offshore companies investigated by ICIJ are registered with tax authorities as the law usually requires, particularly when the firms hold assets or conduct business in Greece. Officials apparently have no record of the other 103 firms — or whether the owners declared any assets held by these entities or paid taxes on them.
After learning about ICIJ's findings, the Greek Finance Ministry said it would examine the data and determine whether there's any evidence of improper or illegal conduct by owners of offshore companies.
The companies’ owners are a surprising cross-section of Greek society, from the richest districts in Athens to remote northern villages. They include retail executives, shipping magnates and middle-class families. What these people have in common is that they are connected to offshore companies that appear to operate under the radar of tax authorities at a time when endemic tax evasion is fueling a financial crisis that has devastated Greece’s economy and threatened the future of the euro.
Two of the offshore companies in the ICIJ data were used to buy and refurbish one of the world’s most storied yachts — the Christina O, where the Onassis family once entertained John F. Kennedy, Marilyn Monroe and Winston Churchill, among other celebrities and statesmen.
Others are linked to a defense contractor working for the government and to top Greek executives who made a fortune on bonds sales.
Greeks are taxed on their worldwide income, so in theory they should pay taxes on income generated by offshore companies. But experts say tax regulation is complex in Greece and there are many legal loopholes citizens can use to avoid declaring their assets.
In this context, it’s not surprising that tax revenue from Greek offshore companies fell 90 percent in the past two years to €345,000 ($440,000) in 2012 from €3.4 million ($4.5 million) in 2010, according to figures from the Ministry of Finance.
The Greek documents ICIJ analyzed are part of a trove of 2.5 million secret offshore files obtained by the global reporters’ network. The documents, the largest cache of offshore data ever gathered and analyzed by a media organization, reveal the inner workings of offshore jurisdictions and the activities of real owners behind anonymous offshore companies.
“Offshore companies are used by Greek homeowners to evade taxes, businesses to hide their profits and by politicians for unlawful enrichment,” George Kanellopoulos, the Greek government’s former top financial crimes investigator, told ICIJ. Others say that there are legitimate uses of offshore companies, such as joint ventures by investors from different countries.
Kanellopoulos said that in 1998 his team at the Finance Ministry discovered the shocking scale of Greek offshore interests — 2,400 companies registered in tax havens in the Pacific and the English Channel.
Until that point, he said, the existence of Greek-owned offshore entities was known only to a handful of law firms that had helped their clients set up the companies.
“Today they are widespread,” he added, reaching all sectors of society.
Sources within the Ministry of Finance gave ICIJ a list of more than 23,000 companies incorporated in other countries, including tax havens, and that have been registered with Greek tax authorities over the years.
ICIJ reporters cross-checked the information with the list of 107 offshore companies identified in the ICIJ data and found that only four entities in the BVI had been cleared with Greek tax authorities.
The secretary general of state revenues at the Greek Finance Ministry, Charis Theocharis, said that ICIJ’s findings were “of great concern,“ and that the government will examine the information to see “if evidence regarding illegal activities or irregularities arises.”
At a recent conference on “Transparency and Offshores” held at the Greek Parliament, the deputy minister of finance, George Mavraganis, said the government is planning to close some of the loopholes that allow Greek offshore owners to avoid paying taxes. It will also audit and tax companies that are incorporated in tax havens but are conducting business in Greece.
Tax evasion is so rampant in Greece that it’s at the core of an economic crisis that continues to cripple the country’s economy despite the infusion of billions of dollars in bailouts from wealthier European neighbors. As austerity measures and riots have garnered unwelcome international attention, Greece has become known as a worst-case example of the toll of the 2008 economic meltdown and the dangers of fiscal irresponsibility.
According to a recent report by the European Union and the International Monetary Fund, Greeks owe about $70 billion in unpaid taxes to the state, about a quarter of the country’s gross domestic product.
Last year, a Greek journalist caused a political storm when he published the names of about 2,000 Greeks with bank accounts in Geneva — the “Lagarde list,” named for IMF head Christine Lagarde, who handed out lists of tax dodgers to authorities of several European countries when she was France’s finance minister.
To add to the drama, a former Greek finance minister, George Papaconstantinou, was accused of deleting the names of his relatives when he first got the Lagarde list. Papaconstantinou has denied wrongdoing.
Many of the Greek-owned companies in the ICIJ data are incorporated in the British Virgin Islands (BVI), a chain of coral and volcanic islands in the Caribbean. The islands host about 500,000 active companies, about 40 percent of all the world’s offshore firms.
Kanellopoulos, the former financial crimes chief, said that back in 1999, his team asked the Organization for Economic Cooperation and Development to demand that its members stop hosting offshore companies for Greek citizens.
The request, he said, was rejected.
“If rich countries can withstand tax evasion from offshore companies, Greece cannot,” he said. “The international community stands silent, covering the actions of these companies.”
With its canopied decks and marble bathtubs, the 325-foot Christina O yacht symbolizes an era in Greece. It was here where, in 1957, John F. Kennedy and Winston Churchill met for the first time – and where, in 1968, owner Aristotle Onassis and Jackie Kennedy held their wedding reception.
One visitor to the yacht was John Paul Papanicolaou, a well-known ship owner and friend of Onassis. In 1998, two decades after Onassis’ daughter Christina had donated the yacht to the Greek government, Papanicolaou set out to buy and refurbish the boat.
Two years later, he set up shop in one of the world’s most secretive offshore jurisdictions, the Cook Islands in the South Pacific. On April 7, 2000, Papanicolaou and Irish lawyer Ivor Fitzpatrick created a Cook Islands company called Christina GP Limited. Both men were named directors of Christina GP in the company documents but they used a nominee firm, Stockcorp, as shareholder.
Nominees are persons or firms that, for a fee, lend their name so the real company owners — in this case Papanicolaou and Fitzpatrick — don’t have to disclose theirs. This is a legal artifice of the offshore economy.
The offshore structure used to own the Christina O didn’t stop there. Five days later, Papanicolaou and Fitzpatrick created a Cook Islands limited partnership called The Christina Limited Partnership. They made Christina GP one of the partners.
Another partner, added in August 2000, was millionaire Irish developer Robert “Pino” Harris. According to court records, Harris invested nearly €145,000 ($130,000) in the boat and gave €14.3 million ($13 million) as a loan in exchange for a 4 percent share in the partnership. The partnership ended up paying nearly €66 million ($60 million) for the ship.
The partners’ goal was to refurbish the yacht and restore its past glory, so they could charter it profitably. But drama over management of the Christina O ensued, and they ended up in the London Court of International Arbitration.
Fitzpatrick retained a leading role in the partnerships that owned the ship. Papanicolaou sold his stake in the Christina O, according to the executor of his estate, Mariella Tzoni. Papanicolaou died in 2010.
None of the Cook Islands entities created by Papanicolaou and Fitzpatrick to acquire and remodel the yacht appear in the list of Greek-owned offshore companies maintained by the Ministry of Finance. Tzoni said that her client never received any income from the ship; therefore, she said, he didn’t need to report taxes.
According to Tzoni, ship owners in Greece use offshore entities routinely because they facilitate business with foreign partners.
“It’s legal, nothing peculiar,” she said.
As for the Christina O, she still boasts her famous mosaic swimming pool that converts into a dance floor and the barstools Aristotle Onassis had upholstered in fine leather made from minke whale foreskins. Charter prices start at $60,000 a day for a small group.
In the meantime, Harris made news in Ireland in 2008 for winning a court judgment of €9 million in income tax refunds, a decision that upheld his deduction for his expenses in buying and remodeling of the Christina O through the Cook Islands limited partnership.
Fitzpatrick and Harris did not respond to ICIJ’s requests for comment.
The reach of the Greek offshore economy extends also to the public sector, particularly to military contractors.
Last year a former minister of defense, Akis Tsochatzopoulos, was arrested and jailed, charged with receiving millions in bribes through offshore companies connected to his associates. Tsochantzopoulos has denied wrongdoing. His trial is set to start later this month.
The ICIJ data reveals that a contractor for the Greek air force is closely connected to secretive entities registered in the BVI. Interoperability Systems International Hellas S.A. is one of the companies that since 2003 has participated in a $242 million contract for the production of electronic warfare equipment for Greek F-16 fighter jets. The company has also provided electronic hardware and software for the U.S. Navy and governments around the world.
At the time the F-16 contract began in 2003, a BVI entity called Bounty Investments Ltd. owned 33 percent of ISI Hellas S.A. Some of the shareholders of the offshore company were managers of ISI: David Adams, Johan Boskemper, Gerhard Mazenier, Heinz Winter and David Tham.
The offshore structure had yet another layer. Bounty Investments was a shareholder in another BVI company called Interoperability Systems International Ltd, almost the same name as ISI Hellas SA, according to the corporate records reviewed by ICIJ. One of the directors of this company was Nikolas Papatsas, ISI Hellas SA’s current president.
There was a third and even more secretive company, Belchamps Management Limited, which for several years used bearer shares — meaning that the owners of the shares were not officially registered anywhere.
In 2005, Commonwealth Trust Limited, an offshore services firm that BVI authorities sanctioned for its lax anti-money-laundering controls, took over management of the three companies.
Under CTL’s management, ownership of the three companies became even more opaque. In January 2005 Sarah Petre-Mears, a Brit who acts as nominee director for 1,200 companies in the Caribbean, U.K., New Zealand and Ireland, became director and shareholder of Bounty Systems, Interoperability Systems International and Belchamps Management.
Of the three BVI entities, only Bounty Investments Ltd appears in the list of offshore companies kept by the Ministry of Finance and reviewed by ICIJ.
A lawyer for ISI Hellas SA, Nicholas Karambelas, said Bounty Investments currently owns 40 percent of the Greek defense contractor and “has fully satisfied each obligation it has to the Greek tax authorities.” Karambellas said the other two BVI entities are “dormant.” He said the offshore firm Interoperability Systems International Ltd. has no tax liabilities because it never raised any capital.
Economist Evangelos V. Vasilakos, a former general director for armaments at the Greek Defense Ministry believes that defense contractors should not be part of the largely unaccountable offshore economy.
“Any direct or indirect contractual relationship between defense ministries and offshore companies, in any form, should be condemned, even if only for transparency reasons, in a sector replete with corruption allegations,” Vasilakos said.
The $43 million bond deal
Another way Greeks use offshore companies is to buy and sell bonds — thus keeping the arrangements cloaked in secrecy and avoiding taxes on the profits, according to Panayiotis Douvis, author of the book Offshore Activities and former director of investigations at the Greek Financial Crimes Unit.
On February 21, 2007, a Cyprus law firm created an offshore company in the BVI called Karpathia Ltd. It used the same registered agent as the Greek military contractor, Commonwealth Trust Limited. It named two companies as nominee directors of Karpathia.
Documents obtained by ICIJ reveal that the single shareholder behind the mysterious entity was Apostolos Vakakis, chairman of the retail conglomerate Jumbo SA, one of Greece’s largest companies.
In July 2007, Karpathia purchased 3.5 million convertible bonds issued by Jumbo SA for €36.7 million ($49.7 million), according to records from Greece’s security and exchange commission. Within the next six months, while Jumbo’s stock remained stable, Karpathia made a windfall: It sold 2.85 million bonds for €65.1 million ($92.6 million) –a $43 million profit, financial records show.
The buyers of the bonds remained anonymous and are part of the mystery surrounding the transaction.
Vakakis did not answer detailed questions sent to him by ICIJ, but he said in an email: “I have declared officially all without exception my transactions that should be announced in public, as provided by relevant Greek legislation.”
Vakakis also said that capital gains from buying and selling bonds at the time of Karpathia’s transaction was “absolutely tax-free anyway” in Greece. He didn’t respond to a follow-up question from ICIJ about whether Karpathia’s capital gains had at any point become taxable dividends upon distribution to him, the sole shareholder of the offshore company.
“One does not use a legal entity in order to hide the identity of the beneficial owner by using shadow names but to be able to complete a transaction in a straightforward manner,” said Vakakis.
Harry Karanikas is a reporter for the newspaper Ta Nea. Marina Walker Guevara is the deputy director of ICIJ.
Mar Cabra contributed to this story.