Revealed: Czech PM used offshore companies to buy £ 13million French mansion | Czech Republic

Billionaire Czech Prime Minister Andrej Babiš is under pressure to explain a convoluted offshore structure he used to finance his purchase of a £ 13million mansion in the south of France.

The revelation that Babiš controls a group of foreign companies comes as he runs for general election in the Czech Republic this week – and represents the latest embarrassing turning point for a former oligarch who entered politics promising to fight corruption. Babiš is the second richest man in the Czech Republic with a net worth of £ 2.7 billion, but his previous business dealings have sparked public protests and an ongoing clash with the EU.

Details of the secret offshore deals put in place by the Prime Minister are leaked in Pandora Newspapers, the largest mine of offshore data ever released. The leaked documents were shared by the International Consortium of Investigative Journalists with the Guardian, the BBC and other media outlets around the world.

Quick guide

What are Pandora papers?

Spectacle

Pandora Journals are the largest trove of leaked data revealing the secrets of tax havens in history. They provide a rare window into the hidden world of offshore finance, shedding light on the financial secrets of some of the richest people in the world. The files were leaked to the International Consortium of Investigative Journalists (ICIJ), which shared access with the Guardian, the BBC and other media outlets around the world. In total, the treasury consists of 11.9 million files disclosed by a total of 14 offshore service providers, totaling 2.94 terabytes of information. This makes it bulkier than the Panama Papers (2016) and Paradise Papers (2017), two previous offshore leaks.

Where do Pandora documents come from?

The ICIJ, a Washington DC-based nonprofit journalism organization, does not identify the source of the leaked documents. To facilitate a global investigation, the ICIJ gave remote access to the documents to journalists from 117 countries, including reporters from the Washington Post, Le Monde, El País, Süddeutsche Zeitung, PBS Frontline and the ‘Australian Broadcasting Corporation. In the UK, the survey was carried out by the Guardian and BBC Panorama.

What is an offshore service provider?

The 14 offshore service providers in the leak provide corporate services to individuals or companies looking to do business abroad. Their clients typically seek to quietly set up companies or trusts in poorly regulated tax havens such as the British Virgin Islands (BVI), Panama, the Cook Islands, and the US state of South Dakota. Companies registered abroad can be used to hold assets such as real estate, airplanes, yachts, and equity and equity investments. By holding these assets in an offshore company, it is possible to hide from the rest of the world the identity of the person to whom they actually belong, or of the “beneficial owner”.

Why do people move money overseas?

Usually for tax, secrecy or regulatory reasons. Offshore jurisdictions tend to have no income or corporate taxes, which makes them potentially attractive to wealthy individuals and businesses who do not want to pay taxes in their home country. While morally questionable, this type of tax evasion can be legal. Offshore jurisdictions also tend to be very secretive and publish little or no information about the companies or trusts incorporated there. This can make them useful to criminals, such as tax evaders or money launderers, who need to hide money from tax or law enforcement authorities. It is also true that inhabitants of corrupt or unstable countries may use offshore vendors to put their assets out of the reach of repressive governments or criminal adversaries who may attempt to seize them, or seek to circumvent hard currency restrictions. . Others may go abroad for inheritance or estate planning reasons.

Did everyone named in Pandora logs do something wrong?

No. Moving money abroad is not illegal in itself, and there are legitimate reasons some people do. Not all of those named in Pandora Diaries are suspected of wrongdoing. Those who are can be accused of a wide range of misconduct: from morally questionable to potentially criminal. The Guardian only publishes stories based on leaked documents after considering the public interest. This is a broad concept which may include improving transparency by revealing the secret offshore owners of UK property, even when those owners have done nothing wrong. Other articles could shed light on issues of important public debate, raise moral questions, shed light on how the offshore industry works, or help educate voters about politicians or donors in the interests of accountability. democratic.

Thank you for your opinion.

The revelations add to a growing list of controversies facing the Czech prime minister as he seeks to return to power. In June, Czech police demanded that Babiš be charged with fraud in the long-running ‘Stork’s Nest’ case, in which he allegedly fraudulently obtained € 2million (£ 1.72million) in EU funds for build a hotel.

Babiš has long rejected all allegations of wrongdoing and dismissed the police request as “politically motivated”. But in August, the European Commission threatened to suspend payment of EU grants to the Czech Republic due to alleged conflicts of interest in Babis’ trade relations.

Andrej Babiš stood for election “to fight corruption and other evils of the country’s political system”. Photography: François Lenoir / Reuters

His office did not respond to the Guardian’s requests for comment on its offshore companies, as it declined to speak to a BBC film crew about its French property when asked about the Czech election campaign .

Andrej Babiš confronted with BBC Panorama journalists on offshore companies - video
Andrej Babiš confronted with BBC Panorama journalists on offshore companies – video

Pandora diaries show that in 2009, the then tycoon – when he had not yet entered politics – spent 15 million euros through a succession of secret loans through three foreign companies: de Blakey Finance Limited, based in the British Virgin Islands, through a company called Boyne Holding LLC. in Washington DC to its subsidiary SCP Bigaud in Monaco. According to the leaked documents, he used the Panamanian law firm Alcogal to set up the three companies in the same year.

Once the money passed through the chain to the company in Monaco, it was used to buy a chateau and a neighboring villa in Mougins, near the French Riviera. The property has a private cinema, swimming pool, billiard room and wine cellar, as well as a master bedroom with two en-suite bathrooms.

Babis organization chart

Moving money overseas or using offshore companies to buy property is not illegal and is sometimes done for legitimate privacy or security reasons. The original source of the funds is unknown, however, as is why Babiš chose such a complicated structure to finance a purchase he could have made directly. The arrangements offered Babiš no obvious tax advantage, experts said.

Google Maps view showing the castle and the neighboring villa in Mougins
Google Maps view showing the castle and the neighboring villa in Mougins. Photograph: Google Maps

A Czech tax expert said: “[It] looks like a complicated structure to hide the ownership of companies or goods.

The Prime Minister does not appear to have declared the property or businesses to the Czech Ministry of Justice.

In 2012, Babiš founded his own political party, the populist ANO 2011, and stood for election “to fight corruption and other evils in the country’s political system”. However, he turned out to be a polarizing figure.

He was finance minister in 2014 and became prime minister after the 2017 elections, forming a minority government made up of his ANO party and the Social Democrats (ČSSD), which relies on the Communist Party (KSCM) to stay in power. Other parties refused to sit in a government led by Babiš because of the charges against him. The ANO has a short lead in the latest opinion polls but is under pressure from two opposition groups.

Andrej Babis Farm Stork's Nest
Babiš reportedly used European funds channeled through its conglomerate Agrofert to build Stork’s Nest, a hotel, leisure and conference complex. Photograph: Cum Okolo / Alamy

The Stork’s Nest scandal, in which he allegedly used European Union funds channeled through his agricultural and chemical conglomerate Agrofert to build Stork’s Nest – a hotel, restaurant, leisure and conference complex located in the Bohemian countryside about 65 km. south of Prague – occupied most of Babiš’s time in politics. He has led to the biggest street protests since the Velvet Revolution of 1989 and the fall of communism, and calls for his resignation.

The prime minister’s most recent clash with the EU came after he placed the huge Agrofert company in two trust funds. An EU audit found that it retained both ‘direct’ and ‘indirect’ influence on farms. As a result, he said, “all grants” awarded to Agrofert since February 2017 have violated a conflict of interest law.

Babiš – the Slovak-born son of a top Communist official who was Czechoslovakia’s representative in GATT, the precursor to the World Trade Organization in Geneva – has in the past said he used private savings of his stay in Switzerland to buy the old state- owned Agrofert with other partners, according to David Ondráčka, former director of Transparency International in the Czech Republic. Babiš turned it into a conglomerate of at least 300 companies in sectors ranging from food to fertility clinics.

Babiš’s ability to buy state-owned enterprises sold in post-communist privatizations was bolstered by his status as an employee of Petrimex, a Morocco-based public energy company.

He may have been further aided, according to some observers, by his alleged role as an informant with the Státní bezpečnost (StB), the communist-era secret police, which recruited him in 1982, allowing him to work abroad as a state trader. representing. Babiš disputed these claims, but they were confirmed by a court in his native Slovakia.

Do you have any information on this story? Email simon.goodley@theguardian.com

Babiš has been publicly critical in the past of offshore structures of the type he appears to have used to purchase the French castle, according to Czech commentators.

Albin Sybera, a member of Visegrad Insight, said the offshore arrangements might have appealed to Babiš for several reasons, including a desire for secrecy around his private finances. “This has many advantages for him,” said Sybera, who said Babiš’s business methods were “ruthless”.

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