What Is a Company Formation Agent?
Hidden assets, money laundering, tax dodging, and the firms that help make it all possible. Here’s how formation agents can facilitate abuse of the global financial system.
In late August 2012, around 50 protesters blocked the first-ever attempt of the Kyrgyz government to sell the country’s mineral deposits through an open tender. Protesters, many wearing traditional Kyrgyz felt hats, stormed a television studio shortly before the scheduled live broadcast shouting: “We won’t let you sell our motherland!”
The government was offering 11 small gold concessions, most with still unproven reserves that were in the exploration stage. Bidders included companies from China, Russia, Turkey and Azerbaijan. While the list did not include any major mining companies, one of them stood out: Redgold Estates Azerbaijan Ltd. The relatively new company had been incorporated about 20 months earlier in Azerbaijan. It submitted bids for five of the gold fields.
What nobody knew was that the Kyrgyz government was offering to sell the country’s assets to what is likely the family of the president of another country: Azerbaijan. The Azerbaijani company is likely majority owned by the First Family of Azerbaijan.
Despite the fact that corporate ownership information has been confidential in Azerbaijan since 2012, the family’s ownership was revealed in internal data of the Panama-based offshore-services provider Mossack Fonseca obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the Organized Crime and Corruption Reporting Project (OCCRP) and more than 100 other media partners.
According to the Mossack Fonseca’s files, a company of identical name – Redgold Estates Ltd.—had been incorporated in the Seychelles six weeks before the Azerbaijani company was formed. The Azerbaijani Redgold company also shares a same address in Baku with a partner of the mining consortium. According to the Tax Justice Network, a coalition of researchers and activists focused on the harmful impacts of tax avoidance, tax competition and tax havens, the Seychelles is one of the world’s most opaque and secretive tax havens.
Redgold Estates Ltd. is owned by three offshore companies and one in the United Kingdom (UK). Panama-based Londex Resources S.A. owns 45 percent; Willy & Meyris S.A. (which couldn’t be found in any jurisdiction) owns 29 percent; Seychelles-based Fargate Mining Corp. owns 15 percent; and the UK company Globex International LLP owns 11 percent. The same four companies own another gold mining consortium, which was awarded six gold fields in Azerbaijan.
An earlier investigation by the OCCRP revealed that Globex International LLP, one of the owners of Redgold Estates Ltd., is itself owned by three Panamanian companies: Hising Management S.A., Lynden Management Group Inc., and Arblos Management Corp, which in turn are managed by Aliyev’s two daughters, Leyla and Arzu Aliyeva, and by Olivier Mestelan, a Swiss businessman close to the ruling family.
Mossack Fonseca’s files reveal the same three Panamanian companies also own Londex Resources S.A. The trio’s control of Londex Resources means that President Aliyev’s family and inner circle controlled a majority stake – 56 percent – in both consortiums, far more than has been known to date.
The family’s interest in setting up a gold mining operation in Kyrgyzstan was also not previously known.
The family’s mining operations in Azerbaijan are currently suspended pending future funding according to financial records obtained by OCCRP. The investigation by OCCRP showed the consortium is deep in debt and has not paid workers salaries nor met some of its commitments to the Government of Azerbaijan.
The family did not respond to repeated requests for comment.
Kyrgyzstan, a poor, mountainous country, is rich in gold and other mineral deposits. The country, whose fragile economy depends heavily on gold exports from a single gold mine, sought to end illicit license trading under new mining laws adopted in April 2012 during an anti-corruption drive. The mining law amendments require all small concessions to be auctioned publicly to the highest bidder.
Following the protests, the auction was abandoned and was supposed to be rescheduled. It is not clear whether the Aliyevs received other mining licenses in Kyrgyzstan. The family owned Globex, one of the ultimate owners of Redgold Estates stated it was intending to participate in gold mining projects in Azerbaijan, Russia and CIS countries.
Additional reporting by Eleanor Rose and Vlad Lavrov