Panama Papers Ramifications: Quist investigates money laundering allegations against ex-Pakistan Premier: Nawaz Sharif Corruption Case

August 2017

Quist worked with the Pakistan Supreme Court investigation team to uncover critical evidence implicating ex-prime minister Nawaz Sharif and his family.

The former premier and his children became the subject of criminal proceedings. Quist gave evidence for the prosecution in the Avenfield (Mayfair properties) reference.

The kleptocratic rule of corrupt politicians in Pakistan appears to be tied up with laundering funds through a sophisticated global network which requires other players such as powerful business figures and unscrupulous professionals with expertise to utilise anonymous offshore companies to accumulate assets in the West.

The International Monetary Fund has stated that as much as 5% of the world’s gross domestic product is laundered money and only 1% of it is ever uncovered. Illicit cross-border financial flows have been estimated at $1 trillion to $1.6 trillion each year. It is estimated that the total private wealth held offshore is as much as $32 trillion and that since the 1970s elites from 139 low to middle income countries had parked as much as $9.3 trillion in offshore accounts.

An article appearing in the Washington Post on 5 January 2017 referred to a 2016 report showing that developing countries collectively had lost $16.3 trillion to elicit leakages since 1980.

Over the past year, there has been a global wide clampdown on corruption, particularly within the political and social elite. From Brazil to Korea, there has been a torrent of scandals, leading to investigations and prosecutions leaving political careers in ruins.

This seeming increase in anti-corruption efforts may be a result of various factors, including the advance and availability of technology, the ‘Wikileaks’ phenomenon and politics.

Why the sudden increase?

Advances in technology and its broad affordability has enabled wider access to all matters of public record, for example Companies House and H.M. Land Registry in the UK, meaning that anyone with an internet connection is able to trace company ownership and accounts, and find the owner of almost any property in the UK. The use of social media has also meant that such allegations are exposed, and are not able to be brushed under the carpet by the mainstream media. The advance in technology also has its drawbacks: the ability of hackers to access restricted documents and information. There is an insatiable appetite for such restricted information which has resulted in various scandals effecting the establishments of almost every country in the world, such as the Wikileaks releases, and more recently the Panama Papers, which shook the UK’s establishment to its core, and of course, the Pakistani government, amongst others.

In the current climate of ‘fake news’ and the widespread acknowledgment of the lack of free media, one of the few methods of uprooting perceived autocrats in the face of such a white-wash is to challenge those individuals’ integrity on the basis of facts supported by documentary evidence: allegations which cannot be ‘twisted’ via social media, and only rebuffed by participating in the arena of judicial scrutiny.

The Panama Papers

One of the most notable scandals in the form of a data breach which spurned the more recent anti-corruption tide, was the 2015 release of the so-called Panama Papers. Over 11.5 million documents belonging to the Panama based law firm Mossack Fonseca were leaked by an anonymous source to the German media. The documents included legally privileged and confidential information about the finances, companies and complex trusts used by the world’s rich and famous to hide their wealth from the tax man. The leaked documents revealed the names of the individuals associated with over 200,000 companies for which Mossack Fonseca acted as registered agent. These shell companies were being lawfully used to anonymously hold property and bank accounts, on behalf of wealthy individuals in various tax havens internationally. At the heart of the scandal was the British Virgin Islands, which held more than half of the 200,000 anonymous companies.

Although the use of anonymous off-shore companies is not illegal, the revelations caused significant embarrassment and undermined many political leaders’ positions as to the use of tax avoidance schemes.

Some of the most notable corruption cases are summarised below in this article.

Quist engaged in the corruption case against former Prime Minister of Pakistan, Nawaz Sharif

Former Prime Minister of Pakistan, Nawaz Sharif has faced similar investigations following revelations in the Panama Papers. It was revealed through the leaked Mossack Fonseca documents that Sharif’s children owned millions of pounds worth of property across the world, predominantly in the UK, through off-shore companies set up in the British Virgin Islands. Following these revelations, the opposition leader and well known personality Imran Khan, petitioned Pakistan’s Supreme Court to look into the allegations contained the leaked Mossack Fonseca documents. Sharif is now banned for life from heading a political party and is the subject of criminal proceedings.

Supreme Court proceedings were commenced in Pakistan[1] to hear several Constitution Petitions.

A Joint Investigation Team (JIT) was established by the Supreme Court pursuant to Orders made by it on 20 April 2017 and 5 May 2017.

JIT was charged with undertaking an investigation to assist the Court with a determination of various issues arising in the Supreme Court proceedings for which purpose JIT was authorised to exercise a wide range of investigative powers.

Quist was engaged by JIT to review evidence and investigate matters in issue arising principally in the UK – this included, amongst other things, assets alleged to be owned by the Sharifs. In particular high-value properties situated in London’s Mayfair became the focus of attention. One central feature of the UK case revolved around the authenticity (and legal effect) of several versions of trust declarations produced by Sharif’s daughter, Maryam Safdar during the Supreme Court proceedings and the JIT investigation.

Forensic evidence, correspondence with the Sharifs’ English lawyer and a range of other factors demonstrated that the trust documentation was forged to disguise details of the true ownership of the properties.

These and other matters were included in a substantial 10 volume report produced by JIT for the Supreme Court[2].

On July 28 the apex court directed Pakistan’s antigraft organisation, the National Accountability Bureau (NAB), to file references against Nawaz Sharif and his children in the Accountability Court and directed a speedy criminal trial.

The Supreme Court also appointed Justice Ijazul Ahsan in a supervisory role to monitor the progress of the accountability court proceedings.

NAB filed three references on 8 September 2017 against the former premier and his family. Another NAB reference was filed against the former Finance Minister, Ishaq Dar.

The former premier and his children became the subject of criminal proceedings. Quist gave evidence for the prosecution in the Avenfield (Mayfair properties) reference.

The kleptocratic rule of corrupt politicians in Pakistan appears to be tied up with laundering funds through a sophisticated global network which requires other players such as powerful business figures and unscrupulous professionals with expertise to utilise anonymous offshore companies to accumulate assets in the West.

The International Monetary Fund has stated that as much as 5% of the world’s gross domestic product is laundered money and only 1% of it is ever uncovered. Illicit cross-border financial flows have been estimated at $1 trillion to $1.6 trillion each year. It is estimated that the total private wealth held offshore is as much as $32 trillion and that since the 1970s elites from 139 low to middle income countries had parked as much as $9.3 trillion in offshore accounts.

An article appearing in the Washington Post on 5 January 2017 referred to a 2016 report showing that developing countries collectively had lost $16.3 trillion to elicit leakages since 1980. While their people struggled, starved and died, exported corruption effectively make these governments net creditors to the world economy, in such circumstances, it is hardly surprising that people begin to see government as a criminal racket instead of a legitimate provider of public services.

Quist continues to advise in numerous other substantial international corruption cases.

From Brazil to Malaysia (and not forgetting Europe)

Brazil

Corruption allegations in Brazil continue to have a huge impact on the face of their political landscape – three former Presidents face serious allegations, with once popular former President Luiz Inacio Lula da Silva (‘Lula’) currently in prison serving a 12-year prison sentence while awaiting an appeal hearing. What began as a money laundering investigation in March 2014, ‘Operation Car Wash’ quickly grew into a widespread investigation of bribery and corruption deep into the heart of the political elite. Having been credited with revolutionising the economy and improving the standard of living across the country, the former President who boasted of creating a ‘more confident Brazilian people’, has fallen on his own sword, as the power of the people turned against him and the Brazilian people came out in support of the investigators and judiciary.

Allegations against Lula first arose after his Presidential term ended. Officials investigating complaints made by the owner of an electronics company that individuals were attempting to launder money through his business, identified several high-profile criminal ‘rings’. Investigations into the heads of these criminal rings, uncovered payments made to them by companies which ultimately won contracts from some of the largest Brazilian companies, including some controlled by the State. Tracing back these payments, it became clear that those at the top of Petrobras, a state-controlled oil company, were routinely awarding public contracts to construction firms at inflated prices in return for bribes, which filtrated right to the top of government, filling the personal pockets of some officials, and funding the election campaigns of their parties.

The evidence against Lula comes largely from testimony provided by Marcelo Odebrecht, the former CEO of the Odebrecht Group, the largest construction conglomerate in Latin America. Obdebrecht, who is himself serving a 19-year prison sentence for corruption. Marcelo Odebrecht testified that Odebrecht paid $30m to Lula’s political party in return for contracts and influence in various sectors. The Panama Papers confirmed that the findings of the Operation Car Wash investigation with documentation disclosed confirming that Odebrecht had used off-shore companies run on their behalf to facilitate illicit payments.

Further allegations against Lula include him receiving a beachfront apartment worth $1.1m from OAS, another large Brazilian infrastructure and engineering conglomerate in return for contracts, access and assistance within the sector.

Following years of investigations, in July 2017 it was ruled that there was sufficient evidence against Lula for him to stand trial. In a trial which gripped the nation and saw street demonstrations supporting both sides, in July 2017 Lula was found guilty of corruption and money laundering and sentenced to over 9 years imprisonment. Lula was permitted to remain free whilst his appeal was on-going. However, in January 2018, an appeal court upheld his conviction and extended the sentence from 9 to 12 years. Lula appealed to the Supreme Court, claiming that he should be allowed to be free whilst the appeals process was exhausted. In April 2018 the Supreme Court rejected his appeal by one casting vote, and a warrant for his arrest was issued.

Lula’s predecessor President Dilma Rousseff faces similar allegations of falsifying budget laws, having received illegitimate and undeclared funding for her political campaign. Again, these allegations were based on the testimony of Marcelo Odebrecht. In a second dramatic fall from grace, Rousseff was impeached and forced to step down from office in August 2016.

Her successor, Michel Temer faces similar allegations to Lula, having been accused of condoning bribes to imprisoned businessmen to prevent them from testifying against other colleagues.

Malaysia

Ending six decades of his party’s power, Former Prime Minister Najib Razak was recently defeated in elections almost solely as a result of the corruption allegations and investigations against him and his family. Corruption allegations against Razak first arose in early 2015 stemming from 1 Malaysia Development Berhad (1MDB), a state-owned investment firm setup by Razak as part of his economic liberalisation policy in 2009. Allegations by the Wall Street Journal in 2015 that Razak had channelled $700m from 1MDB into his personal bank accounts caused a dramatic fall in the Malaysian Ringgit, and Razak’s control began to spiral out of control. Although Razak was ultimately cleared of stealing money from 1MDB, in the process of accounting for the money received, it was disclosed that Razak had received hundreds of thousands of dollars in donations from anonymous overseas donors, the details of which, nor the purpose of the donations were explained. This, coupled with reports of the extraordinarily lavish lifestyle and spending habits of Razak’s family led to numerous investigations into the source of their wealth, most notably by the US Department of Justice on the basis of the numerous properties and bank accounts held by Razak and his family within the US jurisdiction.

In April 2016, Razak’s son Mohammed Naziuddin Razak was uncovered in the Panama Papers as having held directorships at two companies registered by Mossack Fonseca in the British Virgin Islands. This led to further investigations of the family’s assets and in June 2017 the US Department of Justice issued a civil action, seeking forfeiture of assets located throughout the world which it alleged were traceable to money laundered through 1MDB.

On the basis of the detailed information uncovered by the US Department of Justice, the current Prime Minister formed a special task force to investigate 1MDB and Razak’s family’s involvement.

Razak and his wife are currently the subject of travel bans, preventing them from leaving the country whilst the investigations are on-going. The Prime Minister’s task force has raided several properties owned by the Razaks, with cash and luxury items including handbags, hundreds of watches and boxes of jewellery being seized.

South Korea

Earlier this year, the first democratically elected leader of South Korea, and the first female elected leader of an East Asian country, President Park Geun-hye was sentenced to 24 years in prison for corruption and abuse of power. The web of allegations surrounding Geun-hye are intrinsically linked to her relationship with her close associate (and top aide during her Presidency) Choi Soon-sil. Soon-sil is the daughter of Choi Tae-min, a religious leader in South Korea who himself had befriended and became a mentor to Geun-hye following her mother’s assassination in the 1970s.

Allegations against Geun-hye and Soon-sil have reared their heads and largely disappeared unnoticed by the South Korean media over the decades before Geun-hye was considering running for Presidency. Back in the 1980s and 1990s, allegations were made that Geun-hye was allowing Soon-sil’s father (Choi Tae-min) to embezzle money through charitable foundations of which she was the head. Allegations arose but were brushed under the carpet, with whistle-blowers throughout the years being imprisoned and silenced.

More recently, during Geun-hye’s first bid for presidential nomination in 2007, a member of her own political party accused her of having received a property in return for awarding a lucrative construction contract whilst she was head of one of South Korea’s leading Universities. The whistle-blower, Kim Hae-ho, was imprisoned within 2 months of the allegations being made on charges of breaching electoral finances rules. Kim Hae-ho’s trial was not held publicly and therefore the details of the allegations remain a mystery. However, it is known that Geun-hye’s close associate, Soon-sil, was a key prosecution witness.

The allegations which led to Geun-hye’s downfall surfaced during an investigation into the South Korean mafia and their international gambling rings. Bribes across the legal system, in particular the bribing of judges and the practice of hiring attorneys on the basis of their law-school associations were exposed and corruption became a hot topic in the media.

In September 2016, Geun-hye’s house of cards began to crumble when her most trusted advisor Soon-sil was investigated after her tablet was discovered by one of South Korea’s leading news broadcaster, JTBC. The tablet showed that Soon-sil wielded such a degree of control over President Geun-hye, that she had edited her presidential speeches, instructed Geun-hye on appointments and dismissals of members of the Cabinet, she had been in charge of the President’s wardrobe, managed the presidential staff and been in possession of state-secrets, despite the fact she held no official position or office.

The extent of Soon-sil’s influence and the President’s apparent lack of control led to thousands of protestors surrounding the Presidential palace, demanding Geun-hye’s resignation. Geun-hye refused to resign, simply issuing an apology for the control she had allowed to be exerted over her.

The media and public attention led to a complaint being lodged against the conduct of Mir and K-Sports, two charitable foundations set up by Geun-hye and Soon-sil. Allegations were made that the pair had managed to extort more than $60m from wealthy South Korean conglomerate families, including the Samsung and Lotte families. The investigation into the allegations was swarmed with controversy, with investigators failing to attend the foundations’ offices for almost a month after the initial allegations were made.

When investigators finally did attend, the media photographed the investigating team entering the foundations’ offices with empty evidence boxes and leaving with the same empty boxes several hours later. It was later alleged that a senior member of Geun-hye’s government (whose mother-in-law is a friend of Soon-sil) had ordered the delay in investigating the allegations into Geun-hye and Soon-sil’s sporting foundations.

Although Geun-hye appointed a special investigator to look into allegations against her and promised to step down if found guilty, the public protests were so great that opposition parties called for a vote on Geun-hye’s impeachment. On 8th December 2016, 234 of the 300 members of the National Assembly voted in support of Geun-hye’s impeachment. Her impeachment was celebrated in the streets by thousands.

The South Korean Constitutional Court, which was perceived as conservative and favourable to Geun-hye, having largely been appointed under her Presidency, upheld the National Assembly’s impeachment vote unanimously.

Geun-hye was arrested in March 2017 and was held in detention in Seoul until her trial commenced. Geun-hye boycotted the legal proceedings and refused to attend her trial from October 2017 to the verdict on the basis that the trial was unfair. Although she continues to deny the allegations, Geun-hye was found guilty in respect of 16 of the 18 charges she faced, including bribery, abuse of power, coercion and leaking government secrets, and was sentenced to 24 years imprisonment.

This scandal has been played out in the mass media, demonstrating to the general South Korean public the endemic level of the corruption which is deep rooted within South Korea’s political elite and tradition. It therefore seems unlikely that Geun-hye will be the last member of the elite to be held accountable and those who remain in office struggle to re-shape the decimated political landscape in order to maintain a functioning democracy.

South Africa

Despite having been dismissed as Deputy President by Thabo Mbeki in 2005 on the basis that he had used his position to elicit a bribe, Jacob Zuma remained popular and was elected as President of South Africa 2009.

The 2005 allegations arose during the trial of Zuma’s financial advisor and close associate Schabir Shaik. It was alleged during his trial that he had secured a bribe payable to Zuma annually in return for awarding a defence contract.

Following Shaik’s conviction and imprisonment for 15 years, Zuma was also charged. The trial was repeatedly delayed until 2008, when it was held that the charges against Zuma were procedurally unlawful on the basis that prosecutors had failed to give Zuma the opportunity to answer the allegations or make representations before the charges were brought. This decision was appealed by Thabo Mbeki, however this appeal was ultimately dismissed and the charges against Zuma were dropped in April 2009.

Notably Shaik was released from prison shortly after Zuma was elected as President, having only served 28 months of his 15-year sentence.

Over the course of his Presidency, the increasingly lavish spending on the development and decoration of Zuma’s private residence continued to cause controversy and disbelief within the electorate, many of whom fail to be provided with basic utilities and social security. In 2013 opposition parties accused Zuma of misusing public funds in respect of his residence upgrades. Zuma ordered an investigation by the Public Prosecutor, which surprisingly confirmed that the Zuma family had improperly benefited from public funds, as the improvements to the property, including a swimming pool and a cattle kraal, went beyond the necessary security upgrades which were to be funded by the public purse.

The basis of the Public Prosecutor’s report was challenged in court, with Zuma’s supporters claiming that the report was not binding and therefore ought not to be upheld. In March 2016, the Constitutional Court ruled that the Public Prosecutor’s report was binding, and that the Zuma family were to repay sums to be determined by the Treasury, representing the amounts by which they improperly benefited. Although a subsequent impeachment vote failed to unseat Zuma, the judgment against him upholding the Public Prosecutor’s report was a fatal blow and the tides began to turn against Zuma.

In the week following the judgment, one of Zuma’s closest allies and his major financial supporters, the Gupta family, left their positions in South Africa and fled to Dubai. The Gupta family were listed as the seventh wealthiest family in South Africa, with an estimated net worth of more than $770m, and their close involvement with Zuma had been an increasing cause of controversy, with protestors taking to the streets to demonstrate against the level of influence the Gupta’s held over Zuma.

Following various political misjudgments and scandals relating to Zuma’s attempted replacement of his Finance Minister with a largely unknown ally in 2015 (who it later transpired had links to the Gupta family), and a major reshuffle (against the views of his party) in 2017, the ANC began to lose confidence in his capability as leader.

So great was the loss of control over the government and ANC party, a raid was ordered on one of the Gupta’s properties in February 2018: something which would have been unthinkable a few months prior. The raid was seeking evidence in relation to allegations that the Gupta’s controlled lucrative government contracts and exerted influence over political positions to such a degree that they had offered cabinet jobs to those who they sought to control.

Despite his repeated refusal to leave office, on the eve of a no confidence vote by the ANC, Zuma resigned as leader of the party on 14th February 2018.

Only 2 months later, on 6th April 2018, Zuma was in court, again in relation to the same multi-million dollar defence contract in the 1990s involving Zuma’s former financial advisor, Schabir Shaik.

Following an application in 2016 requesting that the Pretoria High Court reconsider the 2009 decision to drop the charges against Zuma, the Court declared the 2009 decision was irrational and set aside the 2009 judgment. Zuma’s appeal of this decision was refused, and he now awaits trial having been charged with 16 counts of corruption, racketeering, fraud and money-laundering.

A trial date is yet to be agreed.

France

Europe has not escaped the anti-corruption clamp down. Former President Nicolas Sarkozy was taken into custody by police in March 2018 to answer questions in respect of allegations that he received more than $40 million from the former Libyan leader Muammar Gaddafi ahead of his successful 2007 election campaign. Sarkozy is also accused of receiving envelopes of cash by way of illegal donations from the L’Oreal heiress.

Whilst the investigation into the illegal L’Oreal campaign funding was ongoing, Sarkozy seems to have further implicated himself, now facing trial on charges of corruption and influence peddling, after he contacted the senior judge involved in the L’Oreal funding investigation. A tapped telephone call appears to show Mr Sarkozy offering the judge a sought-after position in Monaco in return for information about the investigations and allegations. The trial has been delayed for some years following numerous appeals by the defence for Sarkozy and others who also face charges for their involvement.

The French political elite were further rocked earlier this month. Vincent Bolloré a close friend of former President Nicolas Sarkozy, was held by police for questioning in relation to influencing elections in West Africa. Bolloré, who is one of France’s richest men, is accused of using his advertising and marketing companies to run the Presidential campaigns of Alpha Condé in Guinea and Faure Gnassingbe in Togo at lower than market rates. Following their successful campaigns, both Condé and Gnassingbe are alleged to have given control of numerous ports within their jurisdictions to Bolloré’s shipping group companies.

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