Jean-Claude Bastos de Morais was trying to invest offshore but was battling to find a place in which to put his money. The Swiss-Angolan financier turned to Appleby, an elite law firm with offices in tax havens around the globe.
In 2011 Bastos tried Appleby’s office on the island of Jersey, a popular offshore financial centre. But its employees balked at his request to set up a shell company without being told why it was needed or what assets it would hold. Appleby’s lawyers were concerned about the possibility that the shell company would own a shipping port in corruption-prone Angola.
Bastos, who runs asset-management firm Quantum Global Group, tried Appleby’s office on the Isle of Man. It decided that Appleby would require a seat on the offshore company’s board of directors to supervise what they described as his high-risk business. The arrangement did not go ahead.
Finally, in 2013, after Angola’s sovereign wealth fund entrusted Bastos with $5bn, he turned to another Appleby outpost: Mauritius. "We are pleased to be able to act on your behalf," Appleby’s top Mauritius lawyer, Malcolm Moller, wrote to Bastos’ Quantum Global in October 2013.
This e-mail is one of more than 500,000 secret records from Appleby’s Mauritius office obtained by the German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ) and 94 media partners around the world.
The documents come from the offshore law firm Appleby and corporate services provider Estera, businesses that operated together under the Appleby name until Estera became independent in 2016.
The e-mails, bank account applications, presentations on tax avoidance and other confidential documents open a window on Appleby’s operation.
They highlight the importance of Mauritius as a hub in the secretive offshore financial network that enables legitimate business to thrive but also helps wealthy people and profitable businesses shield their assets and profits from taxation. Using complex schemes and companies that are little more than addresses on paper, this global system has helped corporations shift $100bn-$300bn in tax revenue away from developing countries, according to the IMF.
Offshore business transactions and the use of tax havens is often legal, but governments and civil society have increasingly criticised such behaviour, which helps to impoverish African governments and widen wealth inequality between the region and the rest of the world.
"Some of the most important ways of stripping profits from African countries are done through offshore jurisdictions, including Mauritius," says Alexander Ezenagu, a researcher at the International Centre for Tax and Development.
The Angolan sovereign wealth fund, Fundo Soberano de Angola (FSDEA), manages $5bn on behalf of a country where, despite its oil wealth, one in three people lives in poverty and where corruption in the government elite is perceived to be widespread. The FSDEA has come under scrutiny because of its structure and concerns about how it is managed.
Its chairman, José Filomeno dos Santos, was appointed by his father, then president of Angola, José Eduardo dos Santos. The younger Dos Santos appointed Bastos, a friend, to manage the fund, which included billions of dollars set aside for investment in Africa.
The FSDEA said Quantum Global had been selected because of its "exemplary performance on previous mandates with the Angolan authorities, its availability to carry out capacity building programmes and commitment to develop a regional private equity management partnership with FSDEA".
Quantum Global denied that the relationship between Bastos and Dos Santos influenced the FSDEA’s selection. It was due to its "expertise investing in the continent" and its outperformance of other fund managers.
The Appleby records show that the law firm researched its new client. A compilation of internet search results compiled in January 2014 by an employee at Appleby’s Mauritius office included media references to lingering "questions" about how the fund would operate. The employee highlighted an article included in the search results that noted the "close personal" friendship between Bastos and Dos Santos.
The screening also flagged media accounts of Bastos’s past legal problems in Switzerland.
Appleby’s Mauritius office classified Bastos as a "risky client" but moved forward with its new business.
In a letter accompanying Quantum’s licence application, Appleby’s office told regulators that it had "made all reasonable inquiries" into Bastos, Quantum Global and their plans to manage the Angolan money.
On the application form his lawyer disclosed that Bastos had paid a $5,390 fine after a Swiss court convicted him in 2011 of approving loans that he shouldn’t have. Bastos’s lawyer failed to mention that the Swiss court had also imposed a suspended fine of nearly $188,646 or that Bastos had been found guilty of withdrawing about $100,000 from a company account without authorisation.
The FSDEA has come under scrutiny because of its structure and concerns about how it is managed
Bastos acknowledged the suspended fine but said that the larger of the two fines did not have to be paid under a good-conduct probation provision. He said the suspended fine and convictions have since been expunged from Switzerland’s register of convictions.
With the licence approved, Appleby’s Mauritius office helped Bastos and his company move some Angolan public funds slated for the management of investments in African hotels and infrastructure through offshore companies in three jurisdictions — including some incorporated in Mauritius, known for its low taxes and high tolerance for secrecy.
In an e-mail sent to Appleby’s Mauritius employees to remind them of the sensitivity of their new client, Quantum Global’s lawyer wrote that a British Virgin Islands company, Red Sahara (later renamed QG Investments), that would later receive tens of millions of dollars in dividends, was owned by Bastos. The information was "highly confidential", the lawyer wrote. "That is to say, please do not share any information."
The Angola fund once paid $20m for shares in a company incorporated in the British Virgin Islands, Capoinvest, which was helping to finance the development of a major port in northern Angola. In its 2014 annual report, Angola’s sovereign wealth fund twice mentions Capoinvest, which owns an Angolan company that is developing the port. There is no mention, however, of the additional offshore companies that own Capoinvest.
Appleby’s files reveal it is owned by three companies incorporated in the British Virgin Islands and two others in the Seychelles owned by Bastos.
Bastos said Quantum Global complies "in all countries with legal, tax and regulatory standards. I have routinely disclosed my shareholding in Capoinvest."
The financial statements of QG Investments Africa Management, Bastos’s company in Mauritius, show it received $63.2m in management fees throughout 2015, of which $21.9m was sent to a Quantum Global company in Switzerland.
"The fees seem extraordinarily high," says Andrew Bauer, an economic analyst and sovereign wealth fund expert.
The double taxation agreements were sold to treaty partners as a development tool
Records show one Bastos-related company paying dividends to another. In 2014 and 2015, QG Investments Africa Management paid $41m in dividends to QG Investments based in the British Virgin Islands, also owned by Bastos.
Bastos says Quantum Global was paid advisory fees "according to standard industry practices, all of which have been and continue to be fully disclosed. As any other shareholder, I am earning dividends out of the distributions of my companies."
He says that Quantum Global chose Mauritius because of its low taxes, "excellent infrastructure, relaxed reforms" and advantageous tax treaties, known as double taxation agreements, with most countries in Africa.
In 1989 the Mauritius government decided to turn the island into a financial hub for money globally. The 1992 Mauritius Offshore Business Activities Act created corporate vehicles known as global business companies, which enabled non-Mauritians to incorporate there with little fuss and limited public disclosure. The island slashed its taxes and entered into tax treaties with neighbouring African nations and others.
The double taxation agreements were sold to treaty partners as a development tool that would encourage investment in those countries by the growing number of global companies incorporating in Mauritius.
By 2000, the country’s offshore financial industry had become "enormous", the IMF said. Global businesses based on the island have assets valued at more than $630bn, 50 times the Mauritius GDP.
In recent years, Mauritius’s neighbours have complained that the island’s gains have come at their expense, and they have taken their case to the international community. In 2013, the UN Economic Commission on Africa criticised the island as "a relatively financially secretive conduit" that contributes to poverty on the continent.
In 2015, the European Commission temporarily placed Mauritius on a Top 30 blacklist of tax havens. In 2016, Mauritius made nonprofit Oxfam’s list of the world’s 15 worst tax havens.
Government agencies in Mauritius denied the island was a tax haven or secretive.
The agencies said no party to a treaty could impose conditions on the other and that a treaty was a "win-win situation" for both sides. Mauritius did not intentionally deny taxing rights to other African countries, the agencies said; some countries chose to forego taxes to attract foreign investment.
Appleby opened its doors in Port Louis in 2007. Secrecy is one of the office’s selling points.
The Mauritius government maintains a corporate registry of more than 20,000 companies chartered on the island and keeps most information about them confidential.
Countries are giving up "5%, 10% or 15% of revenue from deals. That’s a very significant amount of money", says Catherine Ngina Mutava, associate director of the Strathmore Tax Research Centre in Nairobi, Kenya. For Mauritius, Mutava says, "ultimately their state comes first, even if it means that other African countries suffer in the process".
Mauritius has taken steps to reform its offshore sector. To discourage misuse of offshore companies, authorities introduced requirements that such companies become more active in Mauritius – which would include having employees and meetings there.
In July, Mauritius signed a global anti-tax-avoidance treaty and agreed to review half of its double taxation agreements.
• Christian Brönnimann contributed to this story.
• From the International Consortium of Investigative Journalists
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