Media: Jersey’s ‘money-laundering empire’ helped oligarchs dodge taxes for decades

La Hougue, a Jersey-based trust company registered on the Island of Jersey in the English Channel, for several decades helped clients dodge taxes and launder large sums, including through forged documents, according to journalists from European Investigative Collaborations (EIC), The Bureau of Investigative Journalism and Open Media.

EXPOSED: A huge leak of secret files from a Jersey trust company has revealed it was helping its clients avoid tax in schemes that at times bordered on tax evasionhttps://t.co/DhZnbrlJlP

— The Bureau (@TBIJ) October 5, 2020

The Jersey Offshore archive contains more than 350,000 pages of memoranda, contracts, emails and banking documents.

The creator and head of the offshore empire was the 82-year-old Canadian billionaire John Dick, born into a family of Russian émigrés. He now sits on the board of the American telecommunications giant Liberty Global and lives in Panama.

The boxes of financial documents shedding light on La Hougue’s activities were discovered as early as 2012 by John Dick’s daughter, Tanya Dick-Stock.

La Hougue’s clients ranged from businesspeople worldwide. Among them the investigation names Denver-based owner of “sexually oriented” entertainment services Edward Vedelshteedt, Israeli art dealer Ronald Fuerer, Russian entrepreneur Igor Vishnevsky and former father-in-law of Roman Abramovich, Alexander Zhukov.

The La Hougue laundering scheme

Originally aimed at John Dick’s own business and his close associates, La Hougue, from 1991, broadened its client base. The company positioned itself as a trust offering the “highest possible level of confidentiality.”

In a letter to one client, Richard Wigley admitted that he “hates paying taxes,” and stressed that La Hougue offers opportunities for “substantial tax savings.”

Through La Hougue, clients registered offshore companies in Jersey and the British Virgin Islands. Each firm was assigned an individual four-digit code used in documents and bank transfers.

“This allowed not only to conceal the names of the ultimate beneficial owners but also the names of the offshore structures,” the investigation notes.

According to an internal memo, the company followed the following lines of operation:

• transferring funds on fake invoices for unrendered services;
• investing in “paper” projects and drawing up reports showing no profits from them;
• assisting clients in anonymous purchase and resale of real estate without paying taxes;
• providing untraceable credit cards linked to shell companies;
• issuing checks for amounts up to $10,000 to move money to Jersey, and then to the accounts of offshore structures;
• transactions between dozens of offshore structures, making money movements hard to trace;
• providing fictitious loans allowing clients to legalise receipt or transfer of funds.

Sometimes La Hougue resorted to forging documents, such as forged certificates of credit, the investigation notes. One of the trust’s employees told clients about the director Wigley’s capabilities:

“He has old printers, old typewriters, old paper, old pens, so everything is done correctly. If he needs a agreement with you from 1996, it will be printed on a typewriter that existed in 1996, on paper from 1996 and signed with a 1996-era pen.”

Legal proceedings

In 2007, concerned about tightening money-laundering legislation, La Hougue’s leadership moved jurisdiction to Panama. The new Pantrust trust company initially tried to cooperate with Mossack Fonseca, infamous for the Panama Papers scandal in 2018.

Panama Papers: banks and private blockchains in the service of corruption

However, Wigley later deemed Mossack Fonseca to be “too clean, by the book,” and found another lawyer, “much more pragmatic,” according to correspondence.

Panama’s regulators began examining Pantrust in 2013 for numerous breaches of tax law, and, two years later, revoked its licence. Wigley had managed to establish on the British Virgin Islands a backup company, La Hougue Trustee Limited, which still exists. It is unknown whether it assumed La Hougue and Pantrust’s obligations.

“The investigation raises serious questions about the ability of Jersey authorities to properly supervise the financial sector,” The Bureau of Investigative Journalism notes. “Despite the documents made public and the accusations, authorities have taken no action. La Hougue’s representatives have said many of the allegations are ‘clearly false’, without specifying what the errors were. They intend to challenge these facts in court.”

In 2016, Tanya Dick-Stock filed a lawsuit against her father for misappropriating $50 million from the family trust’s accounts and handed over La Hougue’s archive to the U.S. Internal Revenue Service and journalists from EIC.

John Dick denies all charges and says he did not know about the deals conducted by clients through the firm. He places all responsibility for the wrongful actions on La Hougue’s director Richard Wigley, who has already pleaded guilty in a U.S. court to forging documents.

Heinrichs v Pantrust and Ors 02-May-2018 by ForkLog on Scribd

Hearings in Denver over John Dick’s case are due to commence in the coming months.

Experts’ views

The La Hougue case neatly demonstrates that oligarchs prefer fiat schemes for tax avoidance and money laundering.

Economist and entrepreneur Sergei Mendeleev, explaining ForkLog, said:

“When it comes to real money, people prefer proven reliability of value. And this applies not only to financial operations, but to the full range of services for the ultra-wealthy. Big money loves quiet and privacy.”

Another argument for fiat over crypto in grey schemes is the volume of trading activity.

“There are still serious frictions with fiat-crypto transactions for sums above $10 million. The option of ‘laundering through crypto’ provokes more of a smile and distrust among even serious market players than genuine interest,” says Mendeleev.

Crypto remains the domain of a relatively small group of enthusiasts, and envisioning crypto-to-crypto calculations between large companies is very difficult:

“It would be strange to expect a crypto-enabled edge in tax avoidance from a fiat-soaked world,” explains the expert.

Maria Agranovskaya, managing partner at the Grad law firm, a member of the Expert Council on the Digital Economy and Blockchain Technologies under Russia’s State Duma Committee on Entrepreneurship, notes that cash is used hundreds of times more than Bitcoin for transferring large sums.

“Large sums are difficult to move in cryptocurrencies. Furthermore, crypto transactions, if the sender is identifiable on entry, can be tracked and cannot be wiped out. Banks, with great suspicion, treat any operations with digital assets therefore tax avoidance and money laundering more often occur in fiat,” the expert says.

According to her, strict regulation of the turnover of Bitcoin, for example in Russia, somewhat overstates the role of crypto in money-laundering, incomparable with cash.

In late September, a leak of FinCEN-secret documents revealed criminal schemes of oligarchs from various countries, allowing them to launder about $2 trillion through the largest banks from 1999 to 2017. Among those named revealed the founder of OneCoin, Ruja Ignatova.

The leader by mentions in the FinCEN dossier was the payment processor BTC-e – the British company Mayzus Financial Services.

Experts consulted by ForkLog said the banking system is less transparent than cryptocurrencies, which creates prerequisites for its corruption and involvement in schemes linked to organised crime.

This is supported by Messari analysts’ July 2019 data showing traditional money is used for laundering 800 times more often than Bitcoin.

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