Offshore Secrecy: The Horsemeat Scandal
by Romana Puiuleț, Daniel Bojin, and Paul Radu
It’s now known as the horsemeat scandal – and it has consumers and policy makers unnerved. How could horsemeat get passed off as beef lasagna and hamburger meat in some of Europe’s largest super market chains? The scandal has raised questions about the safety and transparency of food networks.
"I am selling a horse for the slaughterhouse," reads an advertisement posted on the 28th of January by a user called Remus on a Romanian agriculture and trade website. When called by an OCCRP reporter, Remus, who is from Sahateni, a village about 100 kilometers from the Romanian capital of Bucharest, said he sold the horse for about €22 euros to a local slaughterhouse.
It’s not an uncommon end for horses from impoverished rural areas of the EU country. The meat processors pay very little and the horse meat is exported at €2 to €3 per kilogram to Western European companies. Some of those rural horses like Remus’s have ended up as “beef” in dishes sold in major supermarket chains.
The Organized Crime and Corruption Reporting Project (OCCRP) working with the Guardian untangled the complex scheme behind the ownership of the meat distributors. It involves offshore companies that often obscure their beneficial owners, the sources of their food, and what taxes they pay.
Shifting the Blame
When the scandal first broke, French food companies accused two Romanian meat producers of exporting horsemeat labeled as beef. But the real answer is more complex.
Despite the claims of the French companies, the Romanian government and the slaughterhouses vehemently denied any wrongdoing and stated that the horsemeat sold out of Romania was properly labeled.
"The problem is not here, it is somewhere out there. We didn't send minced meat. We only sent unprocessed meat and we labeled it properly," said Iulian Cazacut, the owner of Doly Com, one of the accused Romanian slaughterhouses in an inteview with OCCRP reporters.
The Romanian prime minister and the minister of agriculture also released public statements denying Romania's involvement in the fraud. Subsequent investigations initiated in various European countries including France, The United Kingdom, Netherlands and Cyprus seem to confirm that the fraud took place after the meat left the borders of the Eastern European country.
The French consumer affairs minister, Benoit Harmon, said in the Guardian that Spanghero, a food company that is part of the large French holding company Pujol, was the first "agent" in the food chain to label the horsemeat as beef. The French investigation suggested the firm "knew that meat destined for ready meals was horse." The same investigation foundthat Spanghero had profited by more than €500,000 over six months by marketing the cheaper horsemeat as beef. Spanghero denied any wrongdoing via a statement posted on its website.
The Offshore Paper Trail
Some of Europe’s food trade is conducted by a secretive business network where large food deals take place away from any scrutiny, leaving room for fraud and tax evasion. The Romanian horsemeat loads were sent to a refrigerated warehouse in the Netherlands and from there sent on to France-based Spanghero and other companies. However, on paper, the meat took a strange detour through a secretive offshore haven.
The paperwork accompanying the Romanian horsemeat export-import operations reveals an offshore route via a secretive Cyprus company whose sole shareholder is another secretive British Virgin
Islands(BVI) firm. BVI law allows companies to hide beneficial owners.
Both Romanian slaughterhouses sold the horsemeat via Draap Trading Limited, a Limassol based company owned by Hermes Guardian Limited, a firm established in the British Virgin Islands. Iulian Cazacut, owner of Doly Com slaughterhouse, said his firm sold over 350 tons of horsemeat to the Cyprus company last year, at a price of €2 per kilogram.
He added that: "We worked for two years with this Cyprus company. They started buying beef from us a month ago but previously they only bought horse."
At a food fair in Paris in the end of last year, Cazacut was introduced by Draap Traing’s Jan Fasen to executives of the French company Pujol, the holding company that includes Spanghero.
"I met [Pujol representatives] in October 2012. [Fasen] introduced them to us. We were already working with Draap Trading. They were together there" said Cazacut.
This is not the first time Fasen has gotten into trouble. The Dutch broadcaster NOS reported that Fasen, operating as Fasen Meat Trading, was sentenced in January 2012 for selling South American and Canadian horsemeat as halal-slaughtered Dutch and German beef and for falsifying documents.
Jan Fasen denied any wrongdoing in a phone conversation with The Guardian and is appealing the verdict.
OCCRP combed through Cyprus and BVI records in search of the beneficial owner of Draap Trading Limited. A Draap representative who introduced himself as Andreas Mercuri from Cyprus refused to disclose the ownership of the company: "I'm sorry but with everything that is going on at the moment we are not able to comment on anything at this time," Mr. Mercuri answered from the offices of Trident Trust, a Cyprus firm that provides company formation and incorporation services on the island.
According to the Trident Trust website, beneficial ownership information of the companies it incorporates is not disclosed to any regulatory authority. Mr. Mercuri refused to say who is behind the BVI company that owns Draap. A graphic created by OCCRP partner RISE illustrates the ownership structure of Trident Trust.
OCCRP obtained the BVI records of Hermes Guardian and these indicate a slew of directors but no beneficial owner. Petros Livanios, the founder of the Cyprus Fiduciary Association (CFA), is one of the directors. His organization, CFA, heavily promotes and is at the core of the island’s offshore business services.
The same Hermes Guardian company that is the sole shareholder of Draap is a shareholder in at least a dozen other Cyprus, Panamanian and Russian based companies.
Trident Trust acts as the secretary of Draap Trading and Guardstand Limited acts as director, according to Cyprus records. Both companies appear to be proxies for the true owners and may be proxies for many other companies and people.
Both Guardstand and Trident Trust were parties, in 2010 and 2011, in a very complex $US539 million financial transaction that involved a group of offshore companies, the Russian Alpha Bank and Mechel, a Russian metals and mineral giant which, as part of the deal, acquired a steel mill in Donetsk, Ukraine.
None of the firms could be reached for comment.