Economy

My Yacht, My Shell Company: Cheating, Divorce And Panama Papers

There may be only one thing super-rich men fear more than the tax authorities, and it's a wife gearing up for divorce. Panama has havens for that too.

Offshore
Offshore
Nicolas Richter

MUNICH â€" The divorce of Dmitry Rybolovlev and his then wife Elena was not just spectacular melodrama, but also a textbook example of the lengths rich people (in most cases men) go to protect their considerable wealth in case of a marital breakup.

Rybolovlev, one of the richest men on the planet according to Forbes, had not only tucked away his wealth away in tax havens but tried to literally hide paintings, home furnishings and a yacht to prevent his wife from being able to lay claim to them. The internal papers of Mossack Fonseca, a Panama law firm, document Elena Rybolovlev’s lawyers’ efforts to recover these items.

The material that Süddeutesche Zeitung received and which was analyzed by journalists from around the globe also demonstrates that the Mossack Fonseca law firm also offered their "cover-up" services purposefully as part of their divorce packages. Wealthy clients â€" again, almost always men â€" asked off-shore experts at Mossack Fonseca to hide their money from someone they feared even more than the Ministry of Finance, namely their spouse. The Panama-based company's advisors, fazed by no sort of interpersonal issues, duly obliged.

On some level, a divorce winds up as nothing more than horse trading. It is usually the lawyers rather than the spouses who will sit across from one another to hammer out the financial details. But the very rich try to prevent this situation from occurring by either arranging for pre-nuptial agreements to be signed, or for the experts of law firms such as Mossack Fonseca to "disappear" the assets by investing them in foundations and front companies. Explicit emails which were leaked as part of the Panama Papers investigation detail the involvement of the employees of Mossack Fonseca to aid their clients in carrying out such a strategy.

One note that an employee of the firm's Luxembourg branch wrote to a colleague came with a winking smiley: "This one should be an easy challenge for you. But don’t use your extensive knowledge for your personal goals ;-) Now: A Dutch man wants to protect a part of his assets from the unwelcome side-effects of a divorce (which is on the horizon!). What would you recommend? Can I use an old-fashioned trust fund to prevent the ex-wife’s access to these assets?"

Sometimes, but this is very rarely the case, it is actually the wife who wishes to hide her money. The documents discovered at Mossack Fonseca highlighted the case of a Peruvian woman who, as she openly tells her financial consultants that she had stowed her assets away in front companies to prevent her husband from discovering that she had inherited money.

Half the assets

In the case of Rybolovlev vs. Rybolovlev, fraud was never proven, but in the Peruvian case above, the mistrust between the spouses and the suspicion of off-shore money investment were the focal point. The Rybolovlevs had met while both studying medicine, and married in 1987 in Russia. The husband became a businessman after the opening of the Iron Curtain and started to deal in fertilizers.

Billionaire Dmitry Rybolovlev â€" Photo: Francknataf

Dmitry Rybolovlev moved to Switzerland with his wife and two daughters in the 1990s. On Dec. 22, 2008, Mrs. Rybolovlev filed for divorce at a court in Geneva. According to Swiss law, she was therefore entitled to half of her husband’s assets.

The Rybolovlevs are, as stated by their lawyers, "incredibly rich." Mr. Rybolovlev ranks 59th on the Forbes 500 list of the world's wealthiest, and the couple's lifestyle reflected that position. Mrs. Rybolovlev’s lawyers, among other things, referred to the family's "impressive collection of modern art," including paintings by artists such Pablo Picasso, Vincent van Gogh, Claude Monet and Mark Rothko.

But it seemed very difficult for Mrs. Rybolovlev to unwind the various strands that was the entangled mess of assets and to actually get a hold of those that were rightfully hers. Dmitry Rybolovlev had, long before a divorce was on the horizon, transferred most of his assets to various trust funds, to, supposedly, protect his daughters’ financial future. But it was not clear whether the wife was now entitled to these growing assets as part of the wealth under discussion.

But what raised Mrs. Rybolovlev’s suspicions was the fact that the owners of the paintings, furnishings and yacht were, officially, three front companies registered in the British Virgin Islands. She was unsure if she had access to these items and feared that her husband was in sole control of these companies â€" and that these treasures could, therefore, disappear at any moment. These front companies had once been established by Mossack Fonseca.

It seemed clear to Mrs. Rybolovlev that she was only going to be able to get her share of the assets if she acted quickly and struck with considerable force. Only a week after the divorce filing in Geneva, three of her lawyers appeared before a judge at a court on Tortola, the main island of the British Virgin Islands, on Dec. 30, 2008. The lawyers thanked "her ladyship" for receiving them between the holidays and apologized that, due to the holidays, they were not as prepared as they usually would have been.

Where's the Picasso?

After this brief exchange of pleasantries they voiced their concern that Dmitry Rybolovlev was squirreling away the family’s treasures. The paintings, for example, among them Van Gogh’s Landscape with Olive Tree and Picasso’s Pierrette’s Wedding had always been stored in Geneva, where the family usually resides, but many of these had now been moved to Singapore or London. The lawyers also mentioned the valuable furnishings as well as the yacht My Anna, worth $60 million, and which nominally belonged to a front company called Treehouse. Mrs Rybolovlev, they explained, feared that her husband was going to move the yacht out of the Virgin Islands territorial waters or sovereign territory of Switzerland and take it out of her reach.

Picasso's "Les Noces de Pierrette" â€" Source: Wikimedia Commons

The judge in the end agreed that there was "a significant risk" that the yacht, paintings and other goods were going to "vanish" and ordered the assets of these front companies to be frozen for the time being.

Dmitry Rybolovlev is a media-shy man who declined to comment for the purpose of this article when asked. It was never proven that he committed fraud intentionally by hiding his assets from his wife, and he denied several times having done so. But cases such as these imply that that was the case. "The closer certain business transactions are in time to the divorce, the more likely it is that one of the spouses is trying to cheat the other," says Sanford Ain, lawyer in Washington.

Hiding mutual assets so as to not have to share these in case of divorce can, of course, be viewed as fraud, which incurs punishment. But Mossack Fonseca representatives have stated that they "regret any misuse of the companies we create or services we offer. Wherever possible we take steps to either uncover or stop such misuse." Still, the leaked documents demonstrate that the employees are aware of the fact that some clients wanted to purposefully hide money from their future ex-spouses.

It was never revealed how much money Mrs. Rybolovlev eventually received after the settlement in autumn of last year. But it is the service providers in tax havens who are the true winners of such cases. The local branch of Mossack Fonseca aided the Rybolovlev’s in hiding their money in the first place, and another law firm helped Mrs. Rybolovlev to recover part of the family’s assets as part of her divorce deal.

Lawyer Ain Sanford once represented a female client in a divorce case, and it cost $2 to $3 million to uncover and disentangle the web of front companies into which the assets had been poured by her husband. That is a lawyer’s fee not many are able to pay. If viewed rationally, covering up and uncovering assets, and their attendant industries, seems to be a very lucrative business.

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Geopolitics

How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.


But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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