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When it comes to divorce, the rich really are different

Offshore corporations - The secret shell game

Offshore corporations have one main purpose - to create anonymity. Recently leaked documents reveal that some of these shell companies, cloaked in secrecy, provide cover for dictators, politicians and tax evaders.
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Offshore corporations have one main purpose - to create anonymity. Recently leaked documents reveal that some of these shell companies, cloaked in secrecy, provide cover for dictators, politicians and tax evaders.

Christopher Williams had been waiting 90 minutes inside the office of a helicopter tour company on the Hawaiian island of Kauai, keeping a careful eye on the airport parking lot below.

In his hands he held court papers, ready to be served on a Russian billionaire locked in a high-stakes divorce. He wore a small video camera to record the moment.

Suddenly Williams saw his chance. He uncrossed his legs and exhaled. He opened the door and sprinted down stairs and across the asphalt to a convoy of white SUVs. Inside one of the vehicles was Dmitri Rybolovlev, a mining magnate whose wife, Elena, claimed he was hiding money she sought in the divorce.

“For Dmitri,” Williams said as he flung the court papers through an open driver’s side window into the lap of one of the billionaire’s chauffeurs. He locked eyes with Rybolovlev as the driver hit the gas pedal to speed away.

“Served!” Williams shouted, breathlessly.

Williams’ pursuit was one episode in a global asset hunt in one of the world’s bitterest divorces. It illustrates the lengths that spouses, their lawyers and professional trackers must go in search of wealth stashed offshore in complex networks of companies and trusts.

The details of the Rybolovlev divorce struggle – and many others – are contained in secret files obtained by the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung and other media partners, including McClatchy and its 29 news organizations. The more than 11 million documents provide records that illuminate a dark alternate universe where some people go to play by different rules, and of a firm that enables such behavior.

For decades, spouses – nearly always male and part of the global One Percent – have solicited Mossack Fonseca to help shield assets from soon-to-be exes, according to the files. And Mossack Fonseca has agreed with little hesitation.

“A dishonest husband is as much a fraudster as Bernard Madoff,” Martin Kenney, an asset recovery specialist in the British Virgin Islands who has worked on behalf of wives from Russia, the United Kingdom, Switzerland and the United States, told ICIJ. “These offshore companies and foundations . . . are instruments in a game of hide and concealment.”

At the heart of Elena Rybolovleva’s legal battle was the allegation that her estranged husband — now ranked by Forbes as Russia’s 14th richest man — had used tax havens to help obscure real estate and other wealth.

The documents Williams served that day targeted Rybolovlev’s $88 million New York City penthouse, a purchase that Elena claims violated an order by a Swiss court freezing his assets.

But there were greater treasures at stake elsewhere. In the British Virgin Islands, a shell company was used to buy artwork worth $650 million with the help of Mossack Fonseca & Co., a Panama-based law firm that specializes in creating offshore companies.

For decades, spouses – nearly always male and part of the global One Percent – have solicited Mossack Fonseca to help shield assets from soon-to-be exes, according to the files. And Mossack Fonseca has agreed with little hesitation.

In Thailand, the firm offered help when a husband asked in an email for a “silver bullet” in case his wife ever tried to strip him of his assets. In Ecuador, Mossack Fonseca employees proposed shell companies to “a customer who needs to acquire a Panamanian corporation to transfer assets before the divorce.” From Luxembourg, employees joked and sent emoticon winks when they agreed to help another husband, a Dutch man who wanted to “protect” assets “against the unpleasant results of a divorce (on the horizon!)”

A dishonest husband is as much a fraudster as Bernard Madoff.

Martin Kenney, an asset recovery specialist in the British Virgin Islands who has worked on behalf of wives from Russia, the United Kingdom, Switzerland and the United States

Offshore service providers that knowingly place a husband’s assets beyond a wife’s reach can be sued, experts say.

Michelle Young, who fought a well-publicized divorce battle, founded an organization in 2014 to help defrauded former wives navigate the costly British court system.

 

“It’s a blood sport,” Young said. “Unless you’ve got the funds, you’re dead and buried.”

Mossack Fonseca said it plays no active role in helping divorcing spouses hide assets.

“We are not involved in managing our clients’ companies,” said Mossack Fonseca in a statement. “Excluding the professional fees we earn, we do not take possession or custody of clients’ money, or have anything to do with any of the direct financial aspects related to operating their businesses.”

Dmitri Rybolovlev married Elena, a fellow student with whom he had fallen in love at a university in the Urals, in 1987. Over the next 20 years, the couple had two children, moved to Switzerland and became, as lawyers later stated, “fabulously rich.”

It’s a blood sport. Unless you’ve got the funds, you’re dead and buried.

Michelle Young, who fought a well-publicized divorce battle and founded an organization to help defrauded former wives

In December 2008, Elena Rybolovleva filed for divorce, citing “a prolonged period of strained marital relations.” Under Swiss law, each spouse was entitled to an equal split of the couple’s wealth.

Deciding what assets should be part of the split wasn’t so simple. As the Rybolovlevs’ wealth had increased, so had a complex network of offshore companies.

For instance, in 2002 Mossack Fonseca had incorporated Xitrans Finance Ltd. in the British Virgin Islands. The offshore company, no more than a post office box in sunny Tortola, was a mini-Louvre museum when it came to its assets; Xitrans Finance Ltd. owned paintings by Picasso, Modigliani, Van Gogh, Monet, Degas and Rothko. It also bought Louis XVI style desks, tables and drawers made by some of Paris’s grandest furniture makers.

As the marriage broke down, according to notes from a court hearing sent via email to Mossack Fonseca in January 2009 and included in the documents reviewed by ICIJ, Dmitri used Xitrans Finance Ltd to move these luxury items out of Switzerland to Singapore and London, beyond her reach.

In 2014, after years of legal wrangling, a Swiss court awarded Elena $4.5 billion. An appeals court later reportedly slashed this figure to $600 million when it re-calculated the undisclosed settlement based on money held in Ryboloblev’s Cypriot trusts.

Both Dmitry Rybolovlev and Elena Rybolovleva declined to comment.

This story is part of a larger series, involving McClatchy and other news organizations, working under the umbrella of the nonprofit International Consortium for Investigative Journalists.

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