By John Helmer, Moscow
Reporters can hardly call themselves investigative journalists if their object is to report the obvious in plain sight — that people keep their purposes and their assets to themselves. But when reporters hide their own purposes and fortunes as assiduously as those they investigate, the purpose of the chase has been compromised, and the outcome isn’t so much an exposé as a cliché.
For the Guardian newspaper of London, there may be no cliché about Russia that isn’t worth repeating and reporting again, and again . But when the paper’s team of investigative reporters discovered this week that according to the headline, “Russians profit from Britain’s offshore secrecy”, was this an investigation of the wealthiest Russians living and working in London – Roman Abramovich and Oleg Deripaska? Was it an expose of how Alisher Usmanov managed to sell almost $1.7 billion worth of shares in his Megafon company on the London Stock Exchange before the price plummeted? Not at all.
According to the report  published on November 27, Dimitry Sergeev [sic], a mobile telephone games entrepreneur from Novosibirsk, has evaded a debt of $42,000 to a supplier in Manchester by registering his firm in the British Virgin Islands (BVI).
Then there is Evgeny Tikhonov, described by reporter David Leigh as a “London-based Shell trader [who] hid $2.4m (£1.5m) commissions offshore in a Russian fuel deal. A Latvian, he was hired by Shell for £120,000 a year plus bonus to obtain Russian fuel supplies. Tikhonov allegedly overcharged freight costs and skimmed off the proceeds to his British Virgin Islands entity with its Swiss bank account. He had another offshore account with HSBC in Jersey, used to buy a €800,000 (£645,000) flat in Riga. Shell had a UK high court judgment against him in 2009 for ‘dishonest’ behaviour, by which time the BVI company account had been emptied. He was acquitted, however, of criminal charges over this.” Shell admits, according to the Guardian, that part of its money claim has been returned.
How about Igor Tsukanov? According to the Guardian, he is “a prominent Russian fund manager with offshore holdings. The founder of CentreInvest Group, he partially sold out in 2007 to Gleb Fetisov, owner of My Bank, Moscow, and bought a £5m Notting Hill house. The exit deal with Fetisov left him in charge of the BVI entity CentreInvest Capital Partners Inc. He held interests in Russian poultry farm, Enid Investments Ltd, incorporated in the BVI, 2007.”
By the standards of the Central Bank of Russia, what these fellows have been doing is a minuscule drop in a huge bucket, and no news at that. This week the bank reported that the offshore flow of funds by individual Russians is running at $7 billion per quarter. Roughly four of every ten dollars these Russians transfer across the border are going towards the purchase of homes abroad or into foreign bank accounts. Roughly the same amount was moved in the same direction and for the same purpose in 2011. The Central Bank implies the flow of funds is regrettably negative for the balance of Russia’s current and capital accounts; it isn’t claiming it is unlawful.
So what is the scoop? How about the discovery that Rinat Akhmetov registered his purchase of a London apartment for £136 million through a BVI entity? Or that Mukhtar Ablyazov used BVI and Seychelles entities to stock £4 billion in loot? Or Badri Patarkatsishvili, who until he died operated a London office for a BVI front company; and Sean Quinn, who bought commercial real estate in Moscow and Kiev, passing the money through BVI shelf-companies of his own? For a start, these are, respectively, a Ukrainian, Kazakh, Georgian, and Irishman. They are not the Russians, as the newspaper headline intimates to have been the target for its investigation.
So what was the principle of selection for this investigation? First to be asked was Gerard Ryle, head of the International Consortium of Investigative Journalists (ICIJ), which has an address in Washington, DC, and reports a relationship with Novaya Gazeta in Moscow. A search for reporting on Russia in the ICIJ’s project archive turns up nothing until this week. The Guardian report claims the investigation is “a collaboration between the Guardian and the International Consortium of Investigative Journalists (ICIJ) headed by Gerard Ryle in Washington DC. Guardian investigations editor David Leigh is a member of ICIJ, a global network of reporters in more than 60 countries who collaborate on in-depth investigative stories that cross national boundaries.”
Of Irish extraction and Australian nationality, Ryle claims he spent “26 years working as a reporter, investigative reporter and editor in Australia and Ireland, including two decades at The Sydney Morning Herald and The Age newspapers. He uncovered some of the biggest stories in Australian journalism, winning that country’s highest journalism award four times.” His big scoop, he adds, was about a phoney fuel additive promoted by an Australian fraudster. That was several years ago.
Regarding the investigation of Russian use of offshore entities, Ryle was asked what was the principle of selection of the targets for his investigation. After detailed evidence was reported over the past year in the UK High Court case of Boris Berezovsky v Roman Abramovich, why, for example, was Patarkatsishvili, a minor figure, selected instead of Abramovich, a major one? Ryle asked for the question to be put in writing and sent by email. How about responding now, on the telephone? “I decline to the answer the question,” he replied.
Asked to identify the sources of funds for his organization, Ryle claimed they are on the ICIJ website. This reports “recent ICIJ funders include: Adessium Foundation, Open Society Foundations, The David and Lucile Packard Foundation, Oak Foundation, Pew Charitable Trusts and Waterloo Foundation.” George Soros, the creator of the Open Society Foundations, has had a business involvement in Russia since the early 1990s, using offshore-registered entities when they suited his purposes. David Packard’s fortune comes from the eponymous computer company he co-founded, Hewlett Packard, and from which he took two years off to serve as deputy secretary of defense during the Nixon administration. The Pew family made its fortune from the Sun Oil Company (Sunoco). Its charity, the Pew Charitable Trusts, has financed the John Birch Society, the American Liberty League, and the American Enterprise Institute, a Washington think-tank advocating US foreign policy objectives in the former Soviet Union.
At the Guardian office in London, Leigh was also asked to clarify how his investigation of Russian use of offshore entities selected its targets. He replied: “Who are you? who are you to ask questions out of the blue? Who are you?” He then requested an email. This repeated the question: “what was the principle of selection for those named in the story whose offshore chains of asset ownership were reported? For example, why was Badri Patarkatsishvili selected instead of Boris Berezovsky, Roman Abramovich, Oleg Deripaska, or Eugene Shvidler, all with much bigger residential and business assets in the UK, and with much more valuable offshore chains of ownership?”
Leigh wrote in reply: “I am not clear for who [sic] you work or from where you receive your income. You don’t apparently work for any international media that I recognise…You ask what principle of selection we employed. The principle of selection was to show a sample of the range of post-Soviet business people using British offshore secrecy jurisdictions for their various activities. There was no other principle employed. The selection was not intended to be comprehensive, but illustrative.”
He was then asked the follow-up query: “illustrative of what — secrecy? Illegality? Business activity? National character in business? “ Leigh did not reply.
The ICIJ has published this version  of the collaborative investigation.
Twenty-one paragraphs down the text of the story, the ICIJ qualifies the scope of the investigation: “These ownership details are being published in the interests of transparency. It is not suggested that the setting-up of such offshore companies was in itself illegal.” Leigh adds a similar disclaimer: “legal use of BVI entities to disguise Russian movement of funds into British companies, also appears to be widespread.”
The widespread business practice of keeping money transfers secret cannot be newsworthy unless the reporting is meant to suggest the innuendo of illegality. So what can be made of Ryle’s refusal to open up about the ICIJ’s money? And how about Leigh’s answer to the emailed request to disclose “what assets you hold in the UK or abroad, and in what individual, collective or corporate names your asset ownership is registered.”
“We have to be cautious, as you understand, when dealing with personalities in Russia. I am just what I seem – the Guardian pays my wages.”