Tuesday, November 07, 2017

Paradise Papers: Tycoon made $41m from 'people's fund'

One of the most shocking documents in the "Paradise Papers," which have leaked the secrets of the super rich to the world revealed an "entrepreneur" charged with managing the oil wealth of the African state of Angola, where most of the population live in poverty, was paid more than $41m in just 20 months by the wealth fund he managed according to extracts from the documents opublished by The Guardian.

The money was paid as management fees (a standard euphemism for funds filtered by corporate crooks,) via a complex web of companies set up in offshore jurisdictions, mainly the Inidian Ocean island republic of Mauritius but with links to tax havens in The Caribbean and Europe. Jean-Claude Bastos also used his privileged position to help set up large investment deals he stands to further profit from, the Papers show.

All sides deny any wrongdoing.

Like many oil rich countries, Angola set up a sovereign wealth fund to invest the proceeds of its natural resource wealth. Similar schemes have been used by other countries, notably Norway, to help ensure a steady income for future generations.

Angola, like most African nations, is wracked by corruption and suffers extreme poverty. It also has one of the highest child mortality rates in the world.

The fund, Fundo Soberano De Angola (FSDEA), which was set up with capital of with $5bn (£3.75bn) in 2011, was surrounded by controversy from the start; the then Angolan President Eduardo dos Santos' son, 39-year-old Jose Filomeno, was appointed as its first CEO. Jean-Claude Bastos, sometimes also known as Jean-Claude Bastos de Morais, a Swiss-Angolan and close friend of the then president's son, was chosen as the fund's asset manager.

Typically, a fund of this size would spread the risk of investment among several asset managers, along with the fees it pays, said one expert. Instead of this risk spreading, Mr Bastos was given responsibility for investing almost all of the fund's money, and was paid accordingly. His company Quantum Global Investments Africa Management, manages about 85% of it.

One expert described the situation as "unusual". Andrew Bauer, an authority on sovereign wealth funds, told the BBC: "Funds want to hedge the risk. You don't want to put all your eggs in one basket."

Well we can guess that's why they are known as 'hedge funds'.

In a statement, the FSDEA said the appointment of Mr Bastos' company to manage the fund followed "an objective process". The firm was selected, it said, because of its "exemplary performance on previous mandates with the Angolan authorities".

The fund also said giving near total control of investments to one asset manager was part of its policy for the first 18 months only. Leaked documents included among the Paradise Papers investigation show the fund paid management fees of more than $90m (£67.5m) to Mr Bastos' Mauritius-based QG Investments Africa Management. This occurred over a 20-month period between May 2014 and the end of 2015.

The leak offers an unprecedented insight into what happened to the management fees after being paid into Mr Bastos' company. This money was split into two main chunks - with $41m declared as dividends, or pure profit, and deposited in a company in the British Virgin Islands, itself owned by a series of secretive offshore companies ultimately owned by Mr Bastos. A further $34m was paid in advisory fees to a Swiss firm majority owned by Mr Bastos. The rest, after minor expenses, was retained in the management company run by Mr Bastos.

Unfortunately such arrangements are perfectly legal. Such practices are made possible by the process of globalisation, while politicians and the media hype up the touchy - feely, all-join-hands-and-sing-Kumbaya aspects of globalism, such as free movement of people, which far from helping the poor actually facilitates people trafficking rackets, but the real benefit of globalsation is it allows the free movement of money, which benefits the hyper rich enormously.

When asked whether secrecy surrounding his activities was the reason for the series of companies registered offshore, Bastos said it was entirely his personal choice how he receives dividends from his companies. He also said the dividends he receives "pale in comparison to the long term positive impact my projects will have in Angola".

Both the fund and Mr Bastos said the management fees paid to Quantum Global Investments Africa Management are in line with global industry standards.

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