The Paradise Papers come from the offshore law firm Appleby<\/a> and corporate services provider Estera, two businesses that operated together under the Appleby name until Estera became independent in 2016.<\/p>\n The emails, bank account applications, PowerPoint presentations on tax avoidance, and other confidential documents open a window into the operations of Appleby\u2019s 40-plus-employee operation in Mauritius; By extension, they illuminate the surprising importance of Mauritius, an island nation with a multiethnic population of 1.3-million, as a hub in the secretive offshore financial network that enables legitimate, humdrum business to thrive but also helps wealthy people and profitable businesses shield their assets and profits from taxation.<\/p>\n Using an array of complex schemes and companies that are little more than addresses on a piece of paper, this global system has helped corporations shift $100-billion to $300-billion a year in tax revenue away from developing countries, according to the International Monetary Fund.<\/p>\n Offshore business transactions and the use of tax havens are often legal, but governments and representatives of civil society have increasingly criticized such behavior, which helps impoverish African governments and widen wealth inequality between the region and the rest of the world.<\/p>\n Research shows that companies are more likely to use questionable tax avoidance maneuvers when operating in developing countries than in wealthier countries where tax enforcement is stronger.<\/p>\n African countries are vulnerable to tax avoidance and evasion because corporate taxes contribute more to Africa\u2019s overall tax revenue, on a relative basis, than such taxes do for other countries.<\/p>\n \u201cSome of the most important ways of stripping profits from African countries are done through offshore jurisdictions, including Mauritius,\u201d said Alexander Ezenagu, an international tax researcher at the International Centre for Tax and Development.<\/p>\n The Angolan sovereign wealth fund, Fundo Soberano de Angola, or FSDEA, manages $5-billion on behalf of a country where, despite its considerable oil wealth, one in three people lives in povertyand where corruption among government elites is perceived to be widespread.<\/p>\n Since its launch in 2012, the FSDEA has come under scrutiny because of its structure and concerns about how it is managed.<\/p>\n Its chairman, Jos\u00e9 Filomeno dos Santos, was appointed by his father, then president of Angola, Jos\u00e9 Eduardo dos Santos, who led the country from 1979 until this year.<\/p>\n The younger Dos Santos\u2019 appointment of Bastos, a personal friend, to manage the fund \u2013 which included billions of dollars set aside for investment in Africa and that would use companies in Mauritius \u2013 drew the attention of journalists.<\/p>\n In a statement to ICIJ, the FSDEA said, \u201cQuantum Global was selected because of its exemplary performance on previous mandates with the Angolan authorities, its availability to carry out capacity building programs and commitment to develop a regional private equity management partnership with FSDEA.\u201d<\/p>\n In a separate statement, Quantum Global denied that the relationship between Bastos and the Angolan president\u2019s son influenced the FSDEA\u2019s selection. Quantum Global told ICIJ that its selection was due to its \u201cexpertise investing in the continent\u201d and its having outperformed other fund managers.<\/p>\n The Appleby records show that the law firm did its own research on its new client. A compilation of internet search results compiled in January 2014 by an employee at Appleby\u2019s Mauritius office included media references to lingering \u201cquestions\u201d about how the fund would operate.<\/p>\n The Appleby employee highlighted in yellow an article included in the search results that noted the \u201cclose personal\u201d friendship between Bastos and dos Santos.<\/p>\n Appleby\u2019s customer-screening process also flagged media accounts of Bastos\u2019 past legal problems in Switzerland.<\/p>\n Records show that Appleby\u2019s Mauritius office had classified Bastos as a \u201crisky client \u201d but moved forward with its new business.<\/p>\n The first step was getting a coveted Mauritius business license. In a letter accompanying Quantum Global\u2019s license application, Appleby\u2019s Mauritius office told regulators that it had \u201cmade all reasonable enquiries\u201d into Bastos, Quantum Global and their plans to manage the Angolan money.<\/p>\n On the application form \u2013 supplementing a question about whether any company director had been convicted, penalized or sanctioned in court \u2013 a summary was appended in which his personal lawyer disclosed that Bastos had paid a $5,390 fine after a Swiss court convicted him in 2011 of approving loans that he shouldn\u2019t have.<\/p>\n Bastos\u2019 lawyer, however, failed to mention that the Swiss court had also imposed a suspended fine of nearly $188,646.<\/p>\n The application form also didn\u2019t mention that the Swiss court also found Bastos guilty of withdrawing about $100,000 from a company account without authorization, according to a copy of the judgment obtained by ICIJ media partner SonntagsZeitung.<\/p>\n Bastos acknowledged the suspended fine but told ICIJ that the larger of the two fines did not have to be paid under a good conduct probation provision.<\/p>\n Bastos said the suspended fine and convictions have since been expunged from Switzerland\u2019s register of convictions.<\/p>\n \u201cThe authorities were informed correctly,\u201d Bastos said.<\/p>\n With the license approved, Appleby\u2019s Mauritius office helped Bastos and his company move some Angolan public funds slated for the management of investments in African hotels and infrastructure.<\/p>\n The money moved through offshore companies in three jurisdictions \u2013 including some incorporated in Mauritius, known for its low taxes and high tolerance for secrecy. In an email sent to Appleby\u2019s Mauritius employees to remind them of the sensitivity of their new client, Quantum Global\u2019s lawyer wrote \u2013 in boldface type \u2013 that a British Virgin Islands company called Red Sahara Ltd. (later renamed QG Investments Ltd.), which would later receive tens of millions of dollars in dividends, was ultimately owned by Bastos.<\/p>\n The information was \u201chighly con\ufb01dential,\u201d the lawyer wrote. \u201cThat is to say, please do not share any information.\u201d<\/p>\n The Angola fund once paid $20-million 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\u2019s sovereign wealth fund twice mentions Capoinvest, which also owns the Angolan company that is developing the port.<\/p>\n There is no mention, however, of the additional offshore companies that own Capoinvest. Appleby\u2019s files reveal it is owned by a chain of three companies incorporated<\/a> in the British Virgin Islands and two more in the Seychelles, in the Indian Ocean, all of them ultimately owned by Bastos<\/a>.<\/p>\n In his statement, Bastos said Quantum Global complies \u201cin all countries with legal, tax and regulatory standards.\u201d<\/p>\n He said, \u201cI have routinely disclosed my shareholding in Capoinvest.\u201d<\/p>\n Mauritius also provided a low-tax haven for substantial fees the Angolan fund paid Bastos\u2019 operation.<\/p>\n The financial statements of QG Investments Africa Management Ltd., Bastos\u2019 Mauritius company, show it received $63.2-million in management fees throughout 2015, of which $21.9-million was sent to a Quantum Global company in Switzerland.<\/p>\n \u201cThe fees seem extraordinarily high,\u201d said Andrew Bauer, an economic analyst and sovereign wealth fund expert who reviewed the fee payments.<\/p>\n Records show one Bastos-owned company paying dividends to another. In 2014 and 2015, QG Investments Africa Management paid $41-million in dividends to his QG Investments, based in the British Virgin Islands.<\/p>\n Bastos told ICIJ that Quantum Global was paid advisory fees \u201caccording to standard industry practices, all of which have been and continue to be fully disclosed.\u201d<\/p>\n He said that \u201cas any other shareholder, I am earning dividends out of the distributions of my companies.\u201d He said his ownership of QG Investments Africa Management is tax-efficient.<\/p>\n Bastos declined to comment on \u201cconfidential business matters\u201d that led him to approach Appleby offices in Jersey and the Isle of Man.<\/p>\n Bastos said Quantum Global chose Mauritius because of its its low taxes, \u201cexcellent infrastructure, relaxed reforms\u201d and advantageous tax treaties, known as \u201cdouble taxation agreements,\u201d with most African countries.<\/p>\n Infrastructure Africa Ltd.\u2019s structure as setup by Appleby<\/em><\/p>\n Mauritius is an island of white coral beaches and low mountains in the Indian Ocean.<\/p>\n Colonized first by the Dutch, then the French and the English, Mauritius was for centuries used mostly to grow sugar cane, originally cultivated by slaves from the African region and Asia. The island diversified into textiles and tourism, but sugar held sway even after Mauritius, which is considered part of Africa, gained independence in 1968.<\/p>\n \u201cSugar was king,\u201d said Hassen Auleear, 58, a cane farmer in northern Mauritius. Today, sugar accounts for just over 1 percent of the economy. Glass-clad towers in a suburb of the capital, Port Louis, house banks, accounting firms and law firms. The high-rises sit on what were once some of the country\u2019s most fertile cane fields. And none of Auleear\u2019s children intend to follow him into farming. Two of his daughters are accountants, one in Ebene CyberCity, the financial center.<\/p>\n Auleear said that the Mauritius government has abandoned sugar cane farmers and that the country looks down on those with dirt under their fingernails. \u201cThey think that people wearing a neck tie, a good shirt and shoes, sitting in an air-conditioned office is just fine,\u201d Auleear said.<\/p>\n In 1989 the government embarked on a plan to turn the island into a hub for investment from all corners of the world. The island positioned itself as the \u201cgateway to Africa\u201d for foreign corporations, touting Africa as \u201can unfathomed mine of opportunities next door.\u201d<\/p>\n 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 neighboring African nations and others.<\/p>\n The double taxation agreements (DTAs) 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.<\/p>\n In theory, DTAs are supposed to help companies avoid being taxed twice on the same economic activity. In practice, however, signing a DTA with a low or no-tax country such as Mauritius means that some taxes may not be applied at all.<\/p>\n Businesses rushed to set up subsidiary companies in Mauritius and began to take advantage of tax treaties between Mauritius and other countries by channeling revenue through the island haven, a practice that has come to be known as \u201ctreaty shopping.\u201d<\/p>\n By 2000, the country\u2019s offshore financial industry had become, as described by the International Monetary Fund, \u201cenormous.\u201d Global businesses based on the island have assets valued at more than $630-billion, 50 times the amount of Mauritius\u2019 gross domestic product.<\/p>\n \u201cOnly Luxembourg has a bigger stock of foreign direct investment relative to the size of its economy,\u201daccording to the Financial Times<\/em>.<\/p>\n In recent years, Mauritius\u2019 African neighbors have complained that the island\u2019s gains have come at their expense, and they have taken their case to the international community. In 2013, the U.N. Economic Commission on Africa criticized the island as \u201ca relatively financially secretive conduit\u201d that contributes to poverty on the continent.<\/p>\n In 2015, the European Commission temporarily placed Mauritius on a top 30 blacklist of tax havens. Last year, Mauritius made nonprofit Oxfam\u2019s list of the world\u2019s 15 worst tax havens.<\/p>\n \u201cWhile the full scale of tax losses from treaty shopping are shrouded in secrecy, countries in Africa are potentially losing a fortune,\u201d said Attiya Waris, a tax law expert at the University of Nairobi.<\/p>\n Mauritius\u2019s tax treaties withstood a landmark challenge in 2012 when India\u2019s Supreme Court ruled that the Indian government couldn\u2019t collect $2.2-billion from cell phone giant Vodafone\u2019s purchase of an Indian operating company through offshore firms, including one in Mauritius. The way the purchase was structured had the effect of sidestepping Indian taxes.<\/p>\n Government agencies in Mauritius responded to ICIJ questions with an 11-page statement that denied that the island is a tax haven or secretive.<\/p>\n Where necessary, the agencies said, Mauritius will continue to enhance the country\u2019s transparency and strengthen rules against tax evasion, terrorist financing, money laundering and corruption.<\/p>\n The agencies also said that no party to a treaty can impose conditions on the other and that a treaty is a \u201cwin-win situation\u201d for both sides. Mauritius does not intentionally deny taxing rights to other African countries, the agencies said; some countries choose to forgo taxes to attract foreign investment.<\/p>\n Appleby opened its doors in downtown Port Louis in 2007. The law firm occupies the top floors of a prominent building, above the busy shopfronts of modest clothing stores selling such items as Superman and Homer Simpson boxer shorts.<\/p>\n Secrecy on Mauritius is one of the office\u2019s 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 strictly confidential.<\/p>\n The leaked Appleby records show that the firm administered a trust fund worth more than $100-million for a European princess who told the firm that she would not send any emails and would keep calls to a minimum because, an internal memo said, \u201cshe did not want any trail.\u201d<\/p>\n Mauritus\u2019 economy has significantly changed.<\/p>\n In April 2014, a South African-based investor, Luca Bechis, asked Appleby to create a Mauritius company that would buy mineral concentrate from mines in Mozambique. The plan was to send \u201cany positive balance\u201d offshore in the form of \u201cconsulting fees,\u201d he said.<\/p>\n Bechis told Appleby that he wanted to make sure that no tax would be paid in Mauritius \u2013 and that his name would not appear on corporate records. \u201cI don\u2019t want my involvement to be disclosed for privacy reasons,\u201d Bechis wrote.<\/p>\n In an email, Bechis told ICIJ that Mauritius was one offshore alternative considered to hold mines across Africa and that it was legally vetted to comply with tax rules. Bechis said that the kidnapping risk faced by wealthy people and their families was behind his request for privacy.<\/p>\n From the start, Appleby\u2019s Mauritius office has emphasized the services it offers to companies seeking to reduce or eliminate the tax burdens on their operations in Africa. Potential clients receive a full-color 50-page guide that extols Mauritius\u2019 tax treaties.<\/p>\n Thirteen of the 36 treaties on Appleby\u2019s list are with African partners. Mauritius offers \u201can effective tax rate of 3% or\u2026 a tax liability of up to nil,\u201d reads a typical marketing email Appleby sent to prospective clients.<\/p>\n The office\u2019s \u201cAfrica Team<\/a>\u201d has served corporate clients with business in South Africa, Togo, Mozambique, Madagascar, Kenya, Equatorial Guinea, Nigeria, Zimbabwe and Liberia.<\/p>\n In 2013, Appleby shared with another law firm a PowerPoint presentation about a hypothetical company operating in Mozambique with $10-million in interest payments due to be paid to its parent company in Singapore. If the money went from Mozambique directly to Singapore, the presentation explained, Mozambique would take $2-million in taxes.<\/p>\n With the payments shunted through a company incorporated in Mauritius, however, a treaty between the two countries would slash the tax owed Mozambique by more than half. Mozambique receives $800,000<\/a>, and the company, assuming the operation in Mauritius costs $30,000, saves $1.17-million.<\/p>\n Countries are giving up \u201c5, 10 or 15 percent of revenue from a deal. That\u2019s a very significant amount of money,\u201d said Catherine Ngina Mutava, associate director of the Strathmore Tax Research Centre at Strathmore Law School in Nairobi, Kenya.<\/p>\n For officials in Mauritius, Mutava said, \u201cultimately \u2026 their state comes first, even if it means that other African countries suffer in the process.<\/p>\n In 2012, Pacific Andes Resources Development Ltd., one of the world\u2019s biggest producers of fish oil and fish meal, moved into the lucrative Namibian horse mackerel market.<\/p>\n The bluish-green or gray fish is so important to Namibia\u2019s identity and economy that the country\u2019s 5-cent coin features an engraving of one over the injunction: \u201cHORSE MACKEREL: EAT MORE FISH.\u201d<\/p>\n The company had come under scrutiny before arriving in Namibia. Since the early 2000s, reports by experts, international organizations and tribunals had alleged that Pacific Andes was operating an illegal fishing ring in the Pacific Ocean.<\/p>\n A 2002 report by members of the fishing industry alleged that Pacific Andes used unlicensed boats to poach fish near Antarctica \u201con a scale never seen before.\u201d Pacific Andes denied wrongdoing. The company told ICIJ that it improved internal controls to comply with sustainability and health requirements.<\/p>\n Pacific Andes had made powerful friends inside Namibia and partnered with a local operation, Atlantic Pacific Fishing (Pty) Ltd. to catch the mackerel. Atlantic Pacific Fishing was no ordinary company; documents obtained by The Namibian<\/em> newspaper and shared with ICIJ reveal that its directors included Namibia\u2019s deputy minister of lands, deputy secretary of higher education, a former capital city mayor, as well as advisers to Namibia\u2019s prime minister and president.<\/p>\n Mauritius has taken some steps to reform its offshore sector.<\/p>\n In 2012, Appleby did its part by helping Pacific Andes, headquartered in Bermuda, set up a subsidiary in Mauritius. The new company, Brandberg (Mauritius) Investment Holdings Ltd., received a government-issued tax certificate the same year that would allow the company to benefit from the two countries\u2019 double taxation agreement. Bastos and the Angolan fund<\/h5>\n
Appleby vets Bastos<\/h5>\n
\u2018Please do not share\u2019<\/h5>\n
\nInfrastructure Africa Ltd.\u2019s structure as setup by Appleby.<\/p>\n![](\"https:\/\/cs.mg.co.za\/content\/images\/2017\/11\/13\/kIH5SCfJTTuS0wAxCFFn_Bastos-Structure-600w-POTRAIT.png\")
<\/p>\nAn island on the rise<\/h5>\n
\nAuleear represents the third generation of his family to grow sugar cane \u2013 and his generation will be the last. Financial support for sugar farmers has dwindled, and every year, hundreds of them pack up and walk off land they have owned for decades.<\/p>\nAppleby\u2019s \u2018Africa Team\u2019<\/h5>\n
A Namibian fish tale<\/h5>\n
\n<\/a><\/p>\n