Offshore tax haven concealing data may delay seizure of assets under Fugitive Economic Offenders law

New Delhi: The Enforcement Directorate (ED) last month carried out the biggest crackdown on Sadesara group by attaching properties worth Rs 4,700 crore but the investigators are perplexed over maze of companies in the most secretive offshore havens that were allegedly used for routing of funds. But, little they can do despite penetrating the veil of secrecy in some cases due to tax havens' non-cooperation in unearthing tax evasion and fraud. They are pinning hope on the Fugitive Economic Offenders Bill, which is likely to be passed in the monsoon session of the Parliament but the lack of documentary evidence, ownership data of properties will create major hurdles in bringing them to justice.

Nitin Sandesara, Chetan Sandesara and Dipti Chetan Sandesara are on the list of 31 suspected economic offenders, who have fled the country. The details reviewed by Firstpost shows the Riccioli Group SA was floated in June 2011 in British Virgin Islands and 50,000 shares of $1 each was held by Harriman Holdings Ltd BVI as nominees of Nitin and Chetan Sandesara, promoters of the group, who are absconding.

The company initially held an account 926236-32-2 with Clariden Leu Zurich, a Swiss private bank that merged with Credit Suisse in 2012. The balance in the account is more than $144,700,000. For day-to-day operations of the account and the company, Sadesara’s had given the address of their flat in Al Seef Tower, Dubai Marina, UAE. There are substantial transfer of funds from and to other offshore entities like European Finance Development Corp, Crownhouse International Corp, Sunshine Investment of the group and these were not disclosed to Indian authorities. Also some of these accounts are held in the name of various funds and their sub accounts like investment in Riccioli is held with Monterosa in the name of absolute Growth Fund.

Representational image. Reuters

Albula Investment Fund Limited and Cresta Fund Limited are sub-accounts of the main account. The shareholding in group companies were further controlled by other obscure funds like Taib Securities Mauritius, Afrasia Bank Limited, Prime India Investment Fund, Elara India and Silver Stallion.

The European Finance Development Corporation was floated in British Virgin Islands and entire shares were held in the name of Ramani Iyer. This offshore entity in the tax haven is operating two bank accounts -- 02945843301 at Standard Chartered Bank, Burj Dubai branch and account number 1494911 with Barclays Bank Burj, Dubai.

The company was used as a vehicle to transfer $20 million to Sapphire Oil & Gas Limited Lagos, Nigeria. It also facilitated transfer $500 million to SEEPCO BVI, another offshore unit, which further received $400 million from Global Finance Ventures BVI suspected to be operating as a mailbox company for paper transactions. Sunshine investment, investigators said, was registered in Liechtenstein, another tax haven in Central Europe, in April 2006 with registration number FL-0002-192-565-4.

Prokurations-Anstalt that was settler of the trust had noted: “This trust has been created for the benefit of Mr. Nitin Sandesara.” The First Advisory Group, trustee of the Sunshine Investment made it clear the class of beneficiary as Chetan Sandesara, Nitin Sandesara and Dipti Sandesara.

The First Advisory was told by Prokurations-Anstalt that they should heed wishes of Nitin Sandesara or through his advisor Murali Mohan Vagetty regarding the management and distribution of the trust fund. Further Artemis Advisory Limited, a UK-based company was appointed as the investment manager on a fee of 1 percent per annum. Another company with a similar name – Sunshine Investment Business Limited was created in British Virgin Islands and an account was opened with Bank Sarasin Alpin (ME) Limited, UAE. The company also has an account with Julius Baer Bank in Zurich, Switzerland with a balance of $41,091,444. But there is more to offshore secrecy.

To camouflage the transactions and layer the money flowing from other entities another account 6012011 was opened at Sarasin Bank, Geneva and an account number 23061376 with Liechtensteinische Landesbank was opened to facilitate fund transfer to and from other offshore entities. Within a year of establishment, funds to the tune of $99 million came from American Resource, another offshore company. For the tax dodgers and economic offenders, the facilitators in tax havens operate like a crime syndicate extending not only secrecy but also trust and faith to keep away the penetrating eyes of the law enforcement agencies.

Here is a classic example, the investigators have unearthed. Nitin Sandesara in his letter to First Advisory Group regarding Sunshine Investment Trust said: "During my lifetime, I would like you to heed any wishes of mine that I may communicate to you from time to time in writing or through my advisor Murali Mohan Vogety regarding the management and distribution of the Trust fund. After my death, I wish you to consider my wishes hereinafter written. I wish you to hold the Trust fund for the benefit of my brother Chetan Sandesara and his wife Deepti Sandesara and to deal with the management and distribution of the Trust fund as he shall communicate to you from time to time in writing.”

And, whenever the documents related to offshore companies are sent over email, the rule is to black out the name of the beneficiaries, leaving only initials visible in the documents.

Then there is Sunshine Manor Properties Limited that was created in British Virgin Islands. The company later purchased a property spread across 10 acres at Hayver hill, London for $6,750,000. Two other company with more or less similar names -- Sunshine Investment Trading Private Limited and Sunshine Investment House Limited, was floated and while the former maintained an account number 01393395401 with Standard Chartered Bank, UAE, the latter had account with client Identification number 1306898 with BNP Paribas (Suisse) in Zurich.

According to the investigators, none of these offshore entities appear to have any real business operations and were primarily used for the purpose of routing of funds. Sandesara group, its owners, bankers and several employees are facing multi-agency probe for tax evasion, defaulting bank loans and money laundering. According to the Central Bureau of Investigation (CBI), the group defrauded banks to the tune of Rs 5,383 crore.

The Panama Link

Sandesara’s also grabbed the advantage of Panama’s tax haven business model in layering the transactions and creating obscure entities to hide ownership information from the authorities back in India. Apex Investment Foundation was floated in Panama by the group to further this interest through a company based in Dubai. The foundation received shares from three offshore companies -- Master International, Premier International and Oceanic Group, suspected to be other fronts of the group.

The probe revealed that shares in all three companies are originally held by another company called Phoenix Global Limited. Nitin Sandesara address in the share transfer letter is shown as Road Town, Tortola, British Virgin Islands. Since tax havens provide greater anonymity, the investigation found out other entities as well in Panama like Energy Investment Foundation that was floated in 2010 with Nitin Sandesara to secretly hold the share capital of Sandesara Investment Corporation, British Virgin Islands.

In order to gain further financial privacy, the group floated Premier Foundation in Panama with two other alternate names, Globe Foundation and Elite Foundation. All these entities are allegedly interlinked to channelize slush funds and also to hold other investments.There are two other companies called SEEPCO Zeith and CREDIOTS that has been used as a courier to move money from one location to another.

According to investigators, it will be a tough task to identify the source of a particular investment or transfer of funds in the hands of any entity without having complete details. Funds have flown to other destinations using firms linked to the Trusts and Foundations and frequent bogus transactions were shown to camouflage movements of money.

Citing example of Premier Foundation, sources said, the entity in Panama was basically raised to have supply line running from two oil trading companies. The Foundation, in turn, would acquire shares of these oil firms. The effort of the agencies to gather more detailed information about the ownership and multi-layered fund movements for a concerted crackdown were stonewalled citing privacy by the tax havens.