New Zealand: the Shell Company Incorporation Franchises (II) (and Ukraine)

In our first post in this series, we reminded readers of the nearly complete demolition, by the New Zealand Company registrar, of the GT Group and Company Net shell company incorporation franchises in New Zealand.

In the second post, we highlighted another franchised shell incorporator, Unicredit, incidentally trampled by the NZ Registrar’s giant Monty Python foot as it descended on the shell companies created by GT Group and The Company Net.

That was semi-good work by the Registrar, but The Company Net had another deal going, with another incorporator, and the Registrar, despite a frenzy of striking off back in 2011, didn’t clean it all up. This post gives the background to that deal, and should make it pretty obvious why these particular shells matter. Subsequent posts will round out the picture and bring it up to date.

Once again, the stooge directors recorded in the New Zealand register are the indicators.

Their names are Juri Vitman (associated with one NZ company), Erik Vanagels (associated with 318 NZ companies), Voldemar Spatz (associated with 360 NZ companies), and Inta Bilder (associated with 897 NZ companies). All the New Zealand companies the stooges purportedly directed were originally incorporated by The Company Net. They all have Latvian addresses; Erik Vanagels (who may be two people of the same name, father and son perhaps; no-one’s quite sure) often has an address in Panama, as well as his Latvian one.

Here is their pedigree, from a 2011 article by Graham Stack, then of Business New Europe, fittingly entitled “Massive Ukrainian government money-laundering system surfaces”:

What do Ukrainian tank exports to Kenya, flu vaccine imports from Oregon and oil rig imports from Wales all have in common? They are all deals carried out by the same shell companies that are linked to a small set of Latvian directors. A scandal is unfolding in Ukraine that could be dubbed Vanagels-gate as more details of dodgy and outright illegal deals using a string of shell companies emerges, which can be traced directly back to the upper echelons of the Ukrainian government.

…

According to an investigation conducted by bne, Vanagels and Gorin – together with Latvian colleagues such as Juri Vitman, Elmar Zallapa and Inta Bilder – preside over a sprawling network of companies with Baltic bank accounts that have extensive dealings with the Ukrainian state, covering everything from arms exports to machinery imports.

The “Ukrainian government” mentioned here is the Yanukovych one, recently turfed out either by neo-Nazis and the CIA, or by concerned freedom-loving citizens, depending on which Manicheism you subscribe to.

The back story of the network that shows up in this group of New Zealand shell companies just grows and grows. For a 2012 baseline, try this Swiss summary of the trail left in Ukraine, Russia, Moldavia and Rumania by one of these stooges, Erik Vanagels (I was tempted to make the prose more English, but resisted):

The Vanagels connectio’s role is only coming to light recently as the Latvian and Ukraine local press starts digging out more and more information. The network’s activity can be traced back over a decade to the establishment in the mid-1990s. Evidence suggests this connection laundered money for an amount of 10 to 100 billion $ around the world and those media information are only the ones that have come to light so far. This will catapult the value of the Erik Vanagels™ tradmark higher than the one of Apple! The Vanagels connection has been recently quoted in the media related to the following major allegued criminal cases:

1. The Faina vessel Case – Ukraine / Sudan – Illicit Arm Trading

2. The Chernomoreneftegas Case – Ukraine – Gov. Corruption

3. The flu vaccines Case – Ukraine – Gov. Corruption

4. The Ukrspetseksport Case – Ukraine – Illicit Arm Trading

5. The Rockford Funding Case – Latvia – Financial Fraud

6. The Moldavian Cases – Moldavia / Romania – Gov. Corruption / Fraud

7. The Hermitage Capital Management Case – Russia / Switzerland – Massive Money Laundering

8. The Trade Construction Company LLC Case – Russia – Financial Fraud

9. Hoa Le Duc’s Mafia Case – Romania / Vietnam / China – Organized Crime

10. The EURO 2012 Case – Ukraine – Corruption

11. The Mexicam Sinaloa Drug Cartel Case – Mexico – Organized Crime / Drug

12. The GT Group Case – North Korea / Iran – Illicit Arm Trading / Terrorism financing

13. The ex.ua file-exchange Case – Ukraine – Massive Internet Piracy

14. The forextime.com Case – Russia / New Zeeland / Nigeria – Money Laundering / Financial Fraud

The bolding is mine. Mindful of the sheer volume of NZ company registrations in which these stooge directors turn up, never mind many more overseas, that $10Bn to $100Bn estimate is perfectly plausible (though terribly hazy), especially since the back story continues to grow, as we will see in our next post.

So who’s behind this network of shells and stooges? A further article by Inga Spriņģe, of the Latvian journal Re:Baltica, and Graham Stack, (he seems to pop up all over the place), from October 2012, pieces it together :

…in Vanagels case, it proved surprisingly easy to trace the company incorporation firm using his name. In June 2010, the London High Court of Justice handed down a judgment related to a lawsuit brought by the oil giant Shell against a former employee who was an oil trader from Latvia in relation to wrongful dismissal.  The judgment mentions Erik Vanagels as the Latvian director of the company.  Shell fired the oil trader over allegations of accepting kickbacks.  The court records show that payments were made to the account of a company incorporated in the British Virgin Islands of which Mr Erik Vanagels was the nominee shareholder and director.

In the judgment, the oil trader from Latvia cited the company which “sold” the British Virgin Islands-registered company to him together with Vanagels.  The company is located in Rīga and in Smilšu Street, which is seen as the financial centre of Latvia.  Indeed, it is located right opposite the now-fallen symbol of financial might in Latvia – the Parex Bank.  Right nearby are the Latvian Finance Ministry and the State Revenue Service, both of which are supposed to be engaged in making sure that people pay their taxes fairly.

There is a largish bronze plaque outside the door of the small two-floor office building at Smilšu Street 18.  It reads “International Overseas Services (IOS)”.

Spriņģe and Stack keep digging:

IOS was initially known as International Offshore Services, and its office in Latvia was registered in 1998.  The address of the parent company is in the United States, and its representative in Latvia is an American resident.  And yet the investigation by journalists painted an entirely different picture.  The fact is that the senior officials of IOS are much closer – in Ireland and right here in Latvia.

The IOS homepage www.ioserv.com, offers more information.  It shows contact addresses in Rīga, London, Kyiv and Moscow.  At the same time, however, the company also claims to be represented at other major financial centres in the world – Cyprus, Ireland, Panama, New Zealand and the US city of Wilmington, Delaware.

Via the history of a local basketball team (investigators Spriņģe and Stack are on fire!) they find a local called Poišs who gives them a clue about IOS’s MO:

Poišs says that IOS operates on the basis of franchising and probably does not have any single owner.  Poišs is very familiar with the man who has represented IOS in Latvia for many years, the Irish resident Phillip Burwell.

“Represented”: Spriņģe and Stack brush aside this little misdirection. In their account, Burwell is the central figure:

It seems that several Latvian banks used IOS services, because for many years, the company was one of the largest and most trustworthy sellers of offshore companies in Latvia.  That was true at least until 2005, when the United States declared that Latvian banks were being used to “launder” major amounts of illegal funds and demanded that a stricter bank oversight system be implemented.  After this, Scandinavian banks became far more demanding, while others hired US lobbyists to ensure Latvia’s elimination from the blacklist.

The first bank to hire US lobbyists was the Parex Bank, with which Burwell had very close links.  Parex was located on the opposite side of the street from the IOS office in the heart of Old Rīga, and from the very beginning, the bank’s business was largely focused on services rendered to non-residents.  Representatives of the current management of Parex confirmed to investigators that Burwell was a partner of the bank.  He provided new clients and often served as a nominal director himself.  This means that Burwell knew and offered guarantees about the true owners of offshore companies.

The reader is encouraged to remember the very close Parex Bank/Burwell connection for just a few paragraphs longer.

Burwell is not just in Latvia, either; he also incorporates in Panama, Ireland and the UK:

Phillip Burwell claims that he left IOS, the company which establishes offshore companies, in 2003, but documents which we have suggest that he is still active in this area of business.  One document that we found during our investigation is a bill from his business partner in Dublin.  The bill is addressed to the IOSG Secretaries company, which is registered in Panama, and it relates to several companies that were registered in England last year.  Burwell’s E-mail address is shown as the contact address for the Panamanian company.  Some of these companies have already submitted annual reports to the British Company Register.  The documents show that all of them are owned by two other offshore companies which for many years were platforms from which Burwell established other offshores (Milltown Corporate Services; Ireland and Overseas Acquisitions).  The nominal representatives of both companies are the Latvians Vanagels and Gorins.

Next, Graham Stack pops up at the Organised Crime and Corruption Reporting Project, six months later, to add an American connection, more Irish and Latvian detail, and another unreliable-looking denial from Burwell:

International Overseas Services is a Virginia private corporation founded in 1996, which owns subsidiaries in Riga, Kiev and Moscow that sell offshore companies. Latvian company records list, Philip Burwell, or in Irish, Pilip Boireil, as the company’s representative in Latvia.  The corporation originally listed as its address Sandford Road in Dublin, Ireland but in 2007 changed it to the same address in Dublin, Virginia in the United States. There is no Sandford Road in Dublin, Virginia.

Burwell (Boireil) also figures as the representative in Latvia of Offshore Management International, a company registered from 1999 until 2003 at the same address as Feldmanis’ OMI.

Feldmanis in an interview said that the initials OMI did not stand for anything. According to testimony in from a 2010 Ukrainian court case, in 1999 through 2003 Parex Bank sent clients needing offshore companies to Offshore Management International registered at the same address as Feldmanis’s company OMI.

According to representatives of post-nationalized Parex Bank, Burwell was director of companies that received loans from Parex before nationalisation that the bank now suspects were hidden loans to the former shareholders Kargins and Krasovickis.

Burwell is registered with the Irish Ministry of Justice as a company services provider, trading as PB Consult, although IOS itself is not registered in Ireland at all. In an interview in Dublin, Burwell acknowledged knowing Gints Poiss for about 20 years and having some common business interests with him, being close to the former Parex owners, and having met most of the proxy directors. But he denied that he currently has any connection either to the proxies or to the company IOS as of 2003.

However, documents show that Burwell signed as president of the Virginia corporation International Overseas Services in 2010.

Via Duncan Campbell of The Sunday Times, April 2013, who has the additional assistance of the ICIJ’s Offshore database, we have still more: it looks as if that Swiss summary from 2012 is out of date:

Burwell also helped to create a company for Mukhtar Ablyazov, the Kazakh billionaire accused of looting the BTA bank in Kazakhstan of $5bn. The company, Loginex Projects LLP, was among a number of companies that were allegedly used to move $1bn illegally from the bank.

Burwell said the financial ransacking of the bank was considered “the biggest fraud” in history. He created Loginex Projects LLP, but said he did not know it would be used for laundering. Burwell also set up offshore companies for the son of Valery Kargin, one of the founders of Parex, Latvia’s largest private bank.

The bank collapsed in December 2008. Kargin and a fellow director were sued for having “enriched themselves at the bank’s expense”.

Armed with this mass of connections and unconvincing disavowals, we return at last to New Zealand and The Company Net. By now it really shouldn’t seem particularly outrageous to suggest that when The Company Net registered all those Vanagels, Spatz and Bilder companies, it was acting, knowingly or not, as Burwell’s franchisee. If the thousandfold coincidence of stooge directors somehow isn’t enough, an utterly spectacular spot by Graham Stack, at the OCCRP again, backs up the claim in a whole new way:

In October 2008, a New Zealand registration agent made a number of filings to the New Zealand company register, on behalf of companies using Vanagels, Gorin and other Latvian proxies.

The filings notified the register that one Latvian proxy director Inta Bilder would replace another Latvian proxy director Voldemar Spatz for a batch of 18 shell companies owned ultimately by Unihold Ltd, which listed as its director Vanagels.

The paperwork filed by the NZ company services provider still bore the fax headers from the name of the company who ordered the change in proxies.  That company was Parex Bank of Riga.

That New Zealand registration agent was The Company Net, and the document with the Parex fax header is still sitting on the New Zealand registry, here. The connection between Burwell and Company Net, via the stooge directors, is now augmented by the connection between The Company Net and Parex and Burwell.

But The Company Net stopped registering offshore shell companies in mid-2011, and the New Zealand Registrar struck off loads and loads of its creations, so, what’s the point of rehashing all of this?

For a start, there’s the grim topicality of the “West”‘s facilitating role in the looting of Ukraine, where the connection to these very offshore companies is direct; see Ben Judah’s piece, quoted in our recent post:

East European corruption fighters are discovering that Western countries and their systems of offshore economies have enabled the colossal theft of their countries’ resources. Bubbling up from beneath the surface of both the Russian opposition and the Ukrainian Maidan is a new sense of disdain for the West…

This is what happened to Daria Kaleniuk at Kiev’s Anti-Corruption Action Centre. The director of one Ukraine’s most important NGOs battling corruption spent years investigating how corruption actually works. But the more she learned, the more she viewed both America and the European Union as hypocrites.

Kaleniuk explains:

What we found was that the money stolen in Ukraine was heading into British and European tax havens and hidden using shell companies inside the European Union. This was very uncomfortable to find out. What we felt is the Western elites were being hypocritical to us—preaching anti-corruption but allowing this offshore world to flourish.

In  posts to come, we develop a nuts-and bolts view of these very looting mechanisms; mechanisms which, in Ben Judah’s phrase, sank Western soft power. The relevance of the story told by the New Zealand register continues to grow, and it’s time to bring it up to date.