Mauritius and black money: Riding roughshod over regulators

6 décembre 2017, 19:06


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Mauritius and black money: Riding roughshod over regulators

Mauritius’ international reputation is taking a knocking of late with the country being named and shamed in various tax dodging scandals and leaks – the latest of which is the Paradise Papers. Weekly examines how such black money comes to Mauritius and how and why the government seems to be encouraging it. And ultimately, how this funny business is hollowing out our institutions. 

The Paradise Papers leak has exposed Mauritius as a haven for tax-dodgers. The leaks obtained by the German newspaper Süddeutsche Zeitung and trawled by the International Consortium of Investigative Journalists, publicised 13.4 million records from two offshore firms, Appleby and Estera as well as 19 corporate registries in offshore tax havens – including Mauritius. What they found is that Mauritius is increasingly being used by the super-rich from abroad to avoid tax, or simply to cover up dodgy transactions abroad. Just to take a couple of examples, three British TV stars were found to have diverted £2 million via Mauritian firms to avoid tax claims by the British exchequer. A former Kenyan minister of agriculture, Sally Kosgei, was found to have used Zonrisa Ltd, a Mauritius-based company, to buy a flat in London near the iconic Harrod’s department store. While Jean Chrétien, a former Canadian prime minister, was awarded stock options by the Madagascar Oil Company in 2007 in return for his consultation services via two Mauritian firms that the company had founded. 

That, however, is just the tip of the iceberg when it comes to Mauritius playing host to dodgy cash from abroad. In fact, recent years have witnessed such largesse actually hollowing out the country’s institutions, with the government bending over backwards to wave such money through. Nowhere is this fast and loose attitude more evident than when it’s clear that the money is tainted. And, in these cases, the modus operandi seems eerily similar. 


Take the case of controversial Angolan billionaire Alvaro Sobrinho. We first heard about him in relation to the Planet Earth Institute, an NGO supposedly engaged in  promotimg scientific development in Africa. In 2015, the NGO boasted none other than President of the Republic Ameenah Gurib-Fakim as its vice-chairperson and instituted scholarships in her name. In return for that and for other favours, Sobrinho got the red carpet treatment, using VIP facilities at the airport 31 times between 2015 and February 2017. 

This altruism, however, hid a darker side, where the real business was. The government in its previous budget changed the law to allow the Financial Services Commission (FSC), rather than the Bank of Mauritius, to issue investment banking licences. Shortly thereafter, Sobrinho applied for, and got, an investment banking licence. Things appeared to be going swimmingly until Sobrinho’s legal troubles abroad made headlines locally: Portuguese authorities had reopened an investigation against him, his role in embezzling funds from the Angolan central bank as well as the Swiss companies used to move that cash around started being called into question. Suddenly, Sobrinho went from foreign benefactor to hounded businessman, with Mauritius being one of the few places left willing to enthusiastically embrace him. The president hurriedly resigned from Sobrinho’s NGO promising an investigation. None came. And Deputy Prime Minister Ivan Collendavelloo swore that Sobrinho’s money was clean. 

In 2017, The FSC, rattled by allegations that Portuguese prosecutors looking into Sobrinho, amongst others, were themselves facing accusations of bribery, asked Sobrinho’s firms not to start business until cleared by the regulator. In the meantime, the FSC commissioned Kroll to come up with a report on Sobrinho. In its April report, Kroll urged caution and offered to dig deeper into Sobrinho’s shady past and it got the FSC’s go-ahead in May. Shortly after that, the FSC’s board suddenly underwent a metamorphosis: four board members suddenly resigned. The government replaced them with political loyalists like Yandraduth Googoolye, first deputy governor of the Bank of Mauritius and two other functionaries. These four now constituted a new quorum and this bureaucrat-only board (half from the Prime Minister’s Office (PMO)-finance office) unsurprisingly green-lighted Sobrinho’s businesses without bothering to wait for what Kroll managed to dig up. Another thing this new FSC did not bother waiting for was the police enquiry into allegations that Sobrinho’s firm had falsified its applications to the FSC by naming people as references who denied ever giving him permission to do so. The police produced nothing and the FSC did not seem to care either. 

Such questions to do not seem to have bothered the Board of Investment (BOI) either. Real estate was also on Sobrinho’s mind. Recently, he was given the go-ahead by the BOI to buy 12 villas in Balaclava. The prime minister, Pravind Jugnauth, last week told parliament that the permission came on conditions of Sobrinho routing the investments through a reputable international bank. When mulling the decision, the BOI too commissioned Kroll to come up with a report. It did so in August which again said that allowing Sobrinho in would risk reputational damage to the country. The BOI then went to three lawyers. Maxime Sauzier cautioned against the decision, but Rishi Pursem and another lawyer from the State Law Office gave the go-ahead.  

Once again, the way all this was done was far from above board. Sobrinho’s real estate spree was done through his company Vango Properties Ltd. Dass Appadu, former chief of staff at the Presidency, and subsequently permanent secretary at the Ministry of Civil Service in February, took a year of leave without pay to work for Vango as its CEO. After helping Sobrinho with the paperwork on his application, Appadu simply walked back in and resumed his former post in the civil service. No questions were ever raised about conflict of interest, or whether it was appropriate for an investment application under consideration by a state to be drawn up by one of its own civil servants. The application was given to the BOI in August and, by 21 September, it was approved. The decision also betrayed divisions within the BOI. The very day that Sobrinho’s application was approved – 21 September – one of the BOI’s board members, René Leclezio handed in his resignation. Leclezio’s resignation was confirmed to Weekly by the BOI’s managing director Ken Poonoosamy. Like the FSC, the BOI too now started looking like a rubberstamp filled with political appointees and ministerial apparatchiks who now make up 5 out of 8 board members at the BOI. When solicited for an opinion, Gérard Sanspeur, chairman of the BOI said that, he “cannot comment on the internal process of the decision-making” and that the board “did not take a decision that would cause problems for our jurisdiction”. 

Far from being a reputable jurisdiction, Mauritius is now looking more like a banana republic where it’s not business than fits in with regulation, but the other way around. And where the government does not hesitate to ride roughshod over its own regulatory institutions if it means bringing in some easy cash.

The Crociani case

The Crociani case also made headlines elsewhere, and here too it started out in a similarly rosy-hued way. The first that the country had heard of the Crocianis was when Camilla Crociani came to the country in February this year ostensibly to found a charity, ‘The Princess Camilla de Bourbon Charitable Foundation’. The aim was to “help environmental protection”. The NGO, as well as the princess, were tom-tommed around by Environment Minister Etienne Sinatambou, with national television coverage, press conferences, and the lot. 

Until a verdict from the Royal Court in Jersey revealed that this was all part of a much murkier plot. Just like Sobrinho’s Planet Earth Institute, this foundation too was just a smokescreen and a big part in a wider-ranging family dispute over a crooked fortune. An Italian industrialist, in exile in Mexico to avoid jail time for his part in the Italian Lockheed scandal in the 1980s, left his money in a trust for his widow – Edoarda Crociani – and his two daughters, Camilla and Cristiana. The fortune was deposited in the Grand Trust. By 2010, one of the daughters, Cristiana, claimed that Edoarda had founded a new Trust and was busy shifting money into it, putting the family fortune under Edoarda’s sole control. When that did not work, Edoarda wrapped up her own trust and went on another tack. In 2012, she appointed Appleby Mauritius (Appleby’s global operations being where the Paradise Papers came from) as sole trustee of the Grand Trust and put it under Mauritian law. The court viewed this as a way to put impediments in Cristiana’s way. 

In an interview, Gilbert Noël, a former executive at Appleby Mauritius, denies that Appleby Mauritius was involved but rather another entity, Estera. But according to Estera’s own website, it was simply a “rebranding of Appleby Fiduciary Business” in 2016. In any case, the link between Edoarda and Appleby Mauritius – dating back to 2012 – long predates the founding of Estera in 2016. Which is why the court also had no problem identifying Appleby Mauritius either. What Appleby Mauritius proceeded to do was to give the right to recover money of the Grand Trust to another Trust (the Agate Trust) of which Camilla and a foundation owned solely by Edoarda were beneficiaries. According to the court, the idea was to allow the Agate Trust to lapse, leaving the foundation – of which Sinatambou and the Mauritian government became the unwitting pawns – as the sole beneficiary. And, ultimately, Edoarda. Appleby Mauritius also then appointed GFin Corporate Services – another Mauritian firm – as sole trustee over the Grand Trust, which proceeded to start rival court cases against Cristiana in Mauritius.  Appleby Mauritius was found guilty of breach of trust by a court in Jersey, Edoarda and others were ordered to pay back $100 million into the Grand Trust. And the foundation that was bandied about on the MBC was never heard from again. It then became clear that the entire episode was just a family feud over a crooked fortune in which Mauritius had been dragged along, with the government and the FSC left with egg on their face.

The government strategy

That Mauritius is figuring prominently in corruption and tax-dodging investigations should come as no surprise. Aside from the dangers of reputational damage and the obvious danger of corruption that it entails and a hollowing out of our regulatory framework, the problem is also that this denouement is the logical consequence of successive governments’ addiction to easy money from abroad. 

Since 2002, Mauritius has opened itself up to wealthy foreigners, allowing them to purchase property, even giving permanent residencies to those buying properties worth at least $500,000. What this strategy aims at is to attract wealthy foreigners to settle with their money in Mauritius. Between 2006 and 2016, the number of millionaires in the country shot up by a staggering 230 per cent, according to AfrAsia’s Africa Wealth Report in 2017. Which is curious since economic growth has been largely sluggish in recent years (just 3.8 per cent this year). Instead of creating new millionaires and wealth, Mauritius has aimed simply to import existing millionaires and their cash from abroad. The AfrAsia report estimated that 280 millionaires have come from South Africa alone since 2006. Grand-Baie is already the second most expensive piece of real estate in Africa, after Cape Town. 

And this is part of the problem. Where there are winners, there must be losers. Mauritius’ efforts to attract wealth from Africa is coming at the latter’s expense and often in very shady ways. Take for example the case of Quantum Global, owned by Angolan businessman Jean-Claude Bastos, a close friend of the son of Angola’s president. After being rejected by other jurisdictions such as Jersey and the Isle of Man (other notorious tax havens), Bastos was welcomed by Appleby Mauritius although its own internal communications termed Quantum Global to be “a risky client”. What Bastos from his new base in Mauritius proceeded to do was skim US$41 million in 20 months off the $5 billion Angolan Sovereign Wealth Fund, that he got to manage thorough his friendship with the Angolan president’s son, in terms of dividends and moving money to and from one company to the other. Mauritius’s strategy of attracting wealth is like a suction on the wealth of mainland Africa. 

For the Mauritian government – aside from the obvious temptations of corruption that an opaque tax-haven provides – this artificial injection of the well-heeled from elsewhere boosts per capita incomes in Mauritius. Right now, it stands at $25,700, making Mauritius (at least on paper) the richest country in Africa, allowing Mauritian governments to boast of taking Mauritius one step closer to becoming a high income country, without of course worrying much about doing it the old fashioned way by creating jobs and opportunities for their people. 

But as we are witnessing now, this addiction to easy – and in some cases, funny – money is exacting a high price.