Worth a staggering $15.4-billion, Nigerian businessperson and industrialist Aliko Dangote is on the Forbes rich list as the wealthiest man in Africa. But does Dangote pay his fair share of tax in Nigeria, or is he hiding assets abroad? That remains unclear. Yet that question has become even more relevant following discoveries of several secret shell companies linked to him, his allies and his relatives.
According to the leaked internal data of Panama-based offshore legal services provider Mossack Fonseca, obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists (ICIJ), Dangote, his half-brother and his business allies have over the years used shell companies domiciled in controversial tax havens in their business transactions.
The unprecedented year-long investigation involving 11.5-million secret documents – which date from 1977 to December 2015 –has exposed the hidden underground of the world economy: a network of banks, law firms and other middlemen that use shell companies, sometimes to hide illegal wealth.
- Read more: M&G special report on The Panama Papers
The 2.6-terabyte trove of files, involving 214 488 entities, also reveals details about how former gun runners, contractors and other players in the spy world use offshore companies for personal and private gain.
The investigation unveiled the cloak of secrecy provided by Mossack Fonseca, a Panamanian law firm that specialises in creating offshore companies, some of which have been used by con men and women to hide Ponzi schemes, predatory lending scams and other financial fraud from their victims and the authorities.
Mossack Fonseca has, however, issued a statement denying wrongdoing. It said that as a registered agent, it merely helps incorporate companies and that before agreeing to work with a client, it conducts a thorough due diligence process, “one that in every case meets and quite often exceeds all relevant local rules, regulations and standards to which we and others are bound”.
Dangote and the game of shares
Dangote is one of Mossack Fonseca’s most prominent clients and in Panama alone, based on company registration addresses provided by shareholders, 13 shell companies registered by the firm are directly linked to people and companies who in turn are linked to the billionaire and his allies.
Dangote and his half-brother, Sayyu Dantata, the founder of MRS Holdings (a leading West African oil-marketing firm, which acquired Chevron-Texaco’s downstream assets in 2007), bought equal shares of 12 500 each in Ovlas SA, a shell company registered in the Seychelles, on October 6 2003.
The Seychelles is a well-known tax haven used by businesspeople, politicians and celebrities.
On the same date, a company they both owned, MRS Oil and Gas Company, bought 25?000 shares in Ovlas SA.
Panama City is at the centre of the global scandal. (Rodrigo Arangua, AFP)
According to the documents, three years later the trio – Dangote, Dantata and MRS Oil and Gas Company – ceased to be shareholders in the company. That was on April 12 2006.
But in an arrangement that seems curious, Dangote was issued a higher amount of shares – 250 000 – on the same day he resigned. His brother, Dantata, was also issued 250 000 shares. This suggests that the two simply resold the shares back to themselves. Their company, MRS Oil and Gas, was reissued with 500 000 shares.
After three years of holding the shares, they all ceased to be shareholders. Again, they resumed possession of the shares as on the previous occasion, but this time it seems Dangote sold his shares to Dantata and MRS.
Dangote ceased to be a shareholder permanently on July 6 2009, and Dantata’s shares doubled to 500 000 while MRS retained its 500 000 shares. Documents show that to date Dantata has never sold or transferred his shares, nor ceased to be a shareholder.
Same folks, same tricks
At the same time, Dangote, Dantata and their co-owned company, MRS, bought shares in Petrowest SA, another company registered in the Seychelles, on October 6 2003.
Dangote and Dantata bought 12 500 shares each from Petrowest SA, while MRS bought 25 000 – the same modus operandi used with Ovlas SA. Again, three years later, the trio ceased to be shareholders in the company. That development was also dated April 12 2006.
As was the case with Ovlas SA, Dangote suddenly ceased being a shareholder. According to documents made available to Nigerian online newspaper Premium Times, on the same day, Dangote was reissued a higher number of shares – 250 000 – and Dantata was also given 250 000 shares.
This again indicates that they resold the shares back to themselves. MRS was reissued 500 000 shares.
Name swap in the Seychelles
In what appears to be a plot to blur the tracing of Ovlas to the Seychelles, the shareholders filed for a change of name to Petrowest SA.
An official document seen by Premium Times certifies that Ovlas SA changed its name “and is now incorporated under the name of Petrowest SA” on April 27 2011.
In a separate document, it was shown that while Petrowest had swallowed Ovlas SA in the Seychelles in 2011, Petrowest SA Panama only bought 100 units of shares at $100 each from Ovlas to become a shareholder in the company on October 12 2012.
Web of intrigue
Dantata, Anil Kumar Ahluwalia and MRS Investments (a subsidiary of MRS Holdings) share the same business address on Lagos Island, in entities incorporated for them offshore by Mossack Fonseca.
Ahluwalia, whose company’s name is Santosh Investment Limited SA, is connected to a Panama shell company called Lotus Trust Services Sarl.
Similarly, MRS Investments is a shareholder in Chalmers Shipping Incorporation, which in turn is directly connected to another shell company named Afrex Sal, also domiciled in Panama. Afrex Sal is a client of Dantata and Dangote’s Ovlas Trading, based in Monaco.
Dangote and Dantata have allegedly used their multiple companies in Nigeria and other countries to secure huge loans. For instance, in 2010, the management of Bank PHB, a Nigerian bank, took Dandata’s MRS Holdings to court over the nonpayment of a $58-million loan the bank had granted it to purchase Chevron Texaco in 2008.
In September 2014, Sani Dangote, Dangote’s younger brother, was dragged before the federal high court in Lagos. In its suit, Union Bank alleged that in a bid to evade repaying his 5-billion naira loan, Sani Dangote tried to deplete the funds in his accounts by diverting them to Dubai, Canada and Switzerland.
Shell companies: A dark corridor
Shell companies are usually domiciled in tax havens such as the Cayman Islands, Monaco, Panama, Samoa, Switzerland, Luxembourg, Hong Kong, Singapore, Lebanon, Mauritius, the British Virgin Islands, St Lucia, Belize, Macao and close to 100 other, usually tiny, countries.
Shell companies, experts say, are entities that have no active business and usually exist only in name as vehicles for another company’s business operations. In essence, they are corporations that exist mainly on paper, have no physical presence, employ no one and produce nothing. They are frequently used to shield the identities of their owners and/or to hide money.
Owners create shell companies for a host of suspect business reasons. Some people own shell companies so that when they acquire assets such as private jets and real estate, governments do not find out and demand tax. Others set up shell companies to raise funds before starting operations, to attempt a takeover or as a front for an illegal business.
The reasons why Dangote and his allies set up secret companies are not clear. But shell companies are not illegal, and not all owners use them to dodge paying tax or to hide assets.
However, they are at times used for tax avoidance. This they do through transfer pricing, a complex structure that allows businesses (often in developing countries) to shift profits to shell companies overseas to allow them to pay little or no tax in the country where they made the money.
The leaked documents offer evidence that Mossack Fonseca offers clients aggressive “re-invoicing” services that are designed to help companies evade paying taxes. It remains unclear whether Dangote and his associates used their shell companies to procure any such service from Mossack Fonseca. Many people using offshore companies do so perfectly legally.
Because shell companies are at times associated with fraud, their activities are of major concern to international bodies such as the Organisation for Economic Co-operation and Development.
Money laundering, billing schemes, fictitious service schemes, bankruptcy fraud, tax evasion and market manipulation are some of the fraudulent activities facilitated by shell companies.
Given that they at times have nominee directors, and often have no phone number, no email address, no physical address, no company logo, no contact person and no federal identification number, and because the host country did not collect enough ownership information, there are usually no paper trails for law enforcement agencies to trace back to a particular individual or individuals.
More players uncovered
Using data-mining techniques and working in collaboration with a global network of investigators with access to secret databases, Premium Times was able to uncover several Nigerian business players associated with shell companies.
Among them are Sayyu Dantata, Aisha Dantata and Mariya Dantata, who are listed as shareholders of Koggi Shipping Incorporation, whose registered location is in Abuja, Nigeria.
In addition, Sayyu Dantata owns 25-million units of shares in Corlay Global SA, a company that is a client of Afrex Sal’s.
Other Dangote and Dantata allies were also flagged as shareholders in the shell companies used for their Panama deals. They include Ola Rosiji, a shareholder in Excalibur Holdings Services Incorporation, and Alex-Duduyemi Oyekunle, a traditional chief known as the Aro of Ife Kingdom.
Oyekunle holds shares in Sunningdale Assets SA, a company that shares its registered location with MRS Holdings.
MRS Holdings pops up regularly as a shareholder in other companies linked to Dangote and Dantata in Panama.
Corlay Global SA and SID Holdings Group are among the other companies owned by MRS Holdings and Dantata, and are clients of Afrex SA in Panama.
It is a similar story in the Seychelles, where Afrex SA and Bulldog Global Financial Services LLP are linked to Dangote and Dantata’s companies.
Dangote and the business of secrecy
A 2015 investigation by Premium Times, in partnership with French daily Le Monde, the ICIJ and a host of major media organisations named Dangote as being among the wealthy Nigerian industrialists, former government officials and their relatives who operated highly secretive foreign accounts with the Swiss branch of banking giant HSBC.
Some of those named in that global investigation were found to have concealed their identities for years and to have possibly used codes to deter tax authorities from probing their accounts, some of which held illicit assets from criminals, traffickers, arms dealers and other outlaws.
That investigation, published in February last year, showed how HSBC profited from doing business with some of the world’s most notorious con artists, including people who made a fortune fuelling wars in Africa.
The bank, it was discovered, helped questionable characters conceal their wealth despite knowing where it came from, and devised ways to hide the identities of the owners of secret accounts from governments around the world.
At least 100 000 secret bank account operators with financial assets of some $100-billion were exposed in the leaks, unsettling investigators in several countries.
One of the accounts was that of Dangote, who became an HSBC private account client in July 2003. The account appeared in the name of Development Projects Corporation, registered in Tortola in the British Virgin Islands. Dangote’s account was in operation until August 2004.
It is not clear what Dangote used the account for.
Our hands are clean – Dangote Group
Despite several documents linking Dangote to those offshore companies, his spokesperson has insisted that he never had any relationship with the offshore entities.
The spokesperson for the Dangote Group, Tony Chiejina, said: “Thank you for your inquiry concerning our alleged relationship with the following offshore companies: Paseo Trading Ltd, Seychelles; Petrowest SA, Seychelles; SID Holdings Corp, Panama; and Chalmers Shipping Inc, Panama.
“I wish to state categorically that neither Aliko Dangote nor Dangote Industries Ltd has any form of relationship with these alleged four offshore companies. The group has four quoted companies on the Nigerian Stock Exchange and we cannot afford to tarnish our reputation or conduct our business in an unethical manner, given this profile.
“Our reputation is paramount to us and we are conscious of the downside of it. We thank you for upholding the principal ethics in journalism – ‘when in doubt, check’.”
Dantata could not be reached for comment. The contact numbers listed on the MRS Holdings website failed to connect on the several occasions a reporter called.
‘We’re not liable for crimes by companies we register’
Mossack Fonseca, the company behind the registration of the shell companies, said it does not direct the companies it incorporates for its clients and therefore cannot be held liable for the uses to which the firms are put.
“Filing legal paperwork to help incorporate a company is a very different thing from establishing a business link with or directing in any way the companies so formed,” Carlos Sousa, the company’s public relations director, said in a statement to the ICIJ.
“We only incorporate companies, which just about everyone acknowledges is important, and something that’s critical in ensuring the global economy functions efficiently. In providing those services, we follow both the letter and spirit of the law.
“Because we do, we have not once in nearly 40 years of operation been charged with criminal wrongdoing. We’re proud of the work we do, notwithstanding recent and wilful attempts by some to mischaracterise it.”
The African Network of Centres for Investigative Reporting (ANCIR) supported development of this story.