Pandora Papers Reveals Ways Celebrities Use the Offshore Systems

Pandora Papers Reveals Ways Celebrities Use the Offshore Systems

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Among those named who use offshore systems are Shakira, Ringo Starr, Claudia Schiffer, Julio Iglesias, cricket legend Sachin Tendulkar, and Puerto Rican singer Chayanne. These and many more celebrities and government officials were named in Pandora documents that were sent to news organizations that reveal tax evasion and secrets.

All have set up offshore companies, in places like the British Virgin Islands, where tax rates are low or zero and where their businesses – and identities – are hidden from the public.

And they are among the celebrities, politicians and billionaires named in a trove of leaked files obtained by the International Consortium of Investigative Journalists (ICIJ). Those records are part of pandora Papers, an investigation of the offshore financial system that allows the rich and famous to buy yachts and private jets, invest in real estate and protect their families’ wealth by avoiding scrutiny.

Setting up companies and trusts abroad is easy and relatively cheap. A celebrity living in London or Los Angeles, for example, may hire a financial services provider in a “secret jurisdiction” to create and register a corporation.

In addition to low or no tax rates, these jurisdictions have laws that protect the identity of owners, making it difficult to determine why they use their businesses to hold assets.

Some of those jurisdictions are literally on the high seas, on islands, like Anguilla or the Bahamas, while others are in landlocked places like South Dakota and Switzerland.

In most countries, individuals and companies can set up companies in tax havens and secrets. But they can still be required to disclose those companies and pay taxes on them in their home countries.

Leaked records show that, for as little as a few hundred dollars, celebrities and other wealthy people have opened businesses abroad and, in some cases, saved hundreds of thousands or even millions of dollars in taxes.

Shakira performs during the Pepsi Super Bowl LIV halftime show at Hard Rock Stadium in Miami, Florida in February 2020. Photo: Michael Zagaris / San Francisco 49ers / Getty Images

But those savings come at a cost to the public.

By sending income and other assets, at least on paper, to offshore jurisdictions with low tax rates, the rich and powerful can shift the tax burden to ordinary citizens who pay taxes where they work and live, leaving them to bear the cost of services such as schools or paved roads. Economists say overseas holdings deprive governments of hundreds of billions of dollars in tax revenue each year.

Secrets revealed

The leaked documents give insight into what celebrities do with their money abroad.

Starr, with an estimated net worth of about $400 million, created two companies in the Bahamas that were used to buy real estate, including a “private home in Los Angeles.”

The former Beatle also established at least five trusts in Panama. Three of those trusts have life insurance policies, of which your children are the beneficiaries, and another trust has royalty income and live performances from Starr.

When contacted for comment by phone, Starr’s representatives declined to answer questions.

Schiffer, the German supermodel who has starred in ads for Victoria’s Secret, L’Oreal and Pepsi, owns at least six companies registered with the BVI. Records also show that he set up a trust there to invest his profits for the benefit of his family. Through her lawyers, Schiffer told ICIJ partner Süddeutsche Zeitung that she complied with tax law in the UK, where she lives with her husband, British film director Matthew Vaughn.

Many of the stars of the Pandora Papers are from the world of sports, including football players and coaches.

Supermodel Claudia Schiffer in 2008. Photo: Vittorio Zunino Celotto / Getty Images
Supermodel Claudia Schiffer in 2008. Photo: Vittorio Zunino Celotto / Getty Images

Revelations about the celebrities’ secret offshore companies have led to denials, investigations, and sometimes even more secrecy.

In 2018, Shakira’s use of offshore companies to manage her global music business sparked a tax evasion investigation in Spain. In July 2021, a Spanish judge ruled that there was sufficient evidence that the Colombian-born singer had failed to pay $16.4 million in taxes between 2012 and 2014 for her case to go to trial. His public relations agency said at the time that he paid the taxes he owed as soon as he learned of the debt.

The Pandora Papers show application forms for three offshore companies in Shakira’s name as of 2019, as the tax investigation progressed. These documents are normally used to incorporate new companies, but Shakira’s representatives said in a statement to ICIJ’s media partner, La Sexta, that the companies were incorporated many years earlier, before Shakira was a resident in Spain, and that the forms were part of the process. to transfer the companies to another law firm for dissolution. They said the companies have no revenue or activities.

Her representatives also told El País, a media partner of icij, that the singer used offshore companies because most of her income comes from outside Spain and that Spanish tax authorities know all of her companies.

Mario Vargas Llosa, the Nobel Prize-winning novelist, denied owning a company registered in the British Virgin Islands listed in the Panama Papers, an ICIJ investigation that exposed more than 214,000 offshore entities.

Royalties

But the new leaked documents show that Llosa has used another corporation registered in the British Virgin Islands to invest the royalties from his deed. A representative of Llosa confirmed to El País that the author owned the offshore company mentioned in the Pandora Papers, but said it was duly disclosed to tax authorities and liquidated in 2017.

Tendulkar, a former member of India’s parliament who has been called the “Babe Ruth of cricket,” owned a company registered in the British Virgin Islands, Pandora Papers records show, but dissolved it in 2016 shortly after ICIJ published the Panama Papers. His company was not named in the 2016 investigation.

A representative of Tendulkar’s foundation told ICIJ in an email that the company had legitimate investments and that Tendulkar was complying with its tax obligations. He also told ICIJ’s partner, the Indian Express, that there could be “no doubt that Mr Tendulkar had engaged in” illicit practices.

James S Henry, an economist, lawyer and investigative journalist who has investigated the use of tax havens, told ICIJ that the anonymity allowed by shell companies is often a priority for people living in the spotlight.

“Celebrities in particular are very sensitive about their private lives in many cases and, to some extent, that’s pretty legitimate,” he said.

However, he cautioned that privacy “is only part of the story” and, in some cases, could still facilitate tax evasion that can only be found by looking at individual tax returns.

Here are five ways Pandora Papers celebrities have used the offshore system.

Julio Iglesias, real estate magnate

Julio Iglesias performing at Carnegie Hall, New York in 2014. Photo: Brad Barket / Getty Images
Julio Iglesias performing at Carnegie Hall, New York in 2014. Photo: Brad Barket / Getty Images

The Spanish superstar and songwriter, whose net worth is estimated at $936 million, owns more than 20 companies in the BVI.

Eight of those companies have purchased real estate in and around Miami, Florida since 2008, according to property records. Two additional companies linked to Iglesias but not listed in the leaked documents also own real estate in Miami.

Pandora Papers records show that celebrities often use offshore companies to protect their identities when buying real estate. Secrecy helps them prevent their fans from knowing what they own and, in some cases, from being taxed on their property by the authorities.

Iglesias’ businesses owned five lots on Indian Creek Island, a private Florida enclave known as the “Billionaire Bunker,” with its own police force and armed marine patrol. Iglesias’ businesses sold two of the Indian Creek lots in 2020.

The New York Post reported that Jared Kushner and Ivanka Trump bought one of the lots for $32 million. Trump and Kushner did not respond to requests for comment.

Some of Iglesias’ offshore companies are eligible for tax exemptions on the properties they own. Under Florida law, owners of multiple residences can designate one of them as their primary home, and their other properties automatically receive a “non-housing exemption,” which reduces their appraised value.

Leaked documents show that Russell King, a Florida attorney, set up BVI companies for Iglesias with offshore financial services provider Trident Trust. King is also listed in public records as the contact for several of the Miami properties owned by Iglesias’ companies. But he declined to comment on iglesias’ offshore companies and real estate purchases, telling the Miami Herald that he “was not free to discuss any contact he might have had with current or former clients.”

However, King said using offshore companies to buy real estate in the United States makes sense for customers who are not U.S. citizens or permanent residents, because they have fewer estate tax exemptions. The U.S. government applies that tax on the assets (or estate) of a person who has died, before those assets can be inherited.

For non-resident properties, the tax is levied on assets over $60,000. For U.S. citizens and residents, the tax applies to properties valued at more than $11.7 million. But if a non-resident buys U.S. real estate through an offshore company, that property is not considered a U.S. asset and is not subject to inheritance tax.

“I’ve never advised clients to buy a property directly because it would be a terrible structure,” King said.

Iglesias did not respond to ICIJ’s repeated requests for comment.

Sir Elton John, business tycoon

Elton John performing at the 3Arena in Dublin in 2019. Photography: Laura Hutton
Elton John performing at the 3Arena in Dublin in 2019. Photography: Laura Hutton

The pop icon, whose estimated net worth is more than $530 million, owns more than a dozen companies registered in the British Virgin Islands that receive revenue from his various trade streams.

In addition to writing, recording and performing his own songs, Sir Elton has written the music for theatrical shows such as The Lion King and Billy Elliot: The Musical. The names of some of John’s companies in the British Virgin Islands echo those of his blockbusters: WAB Lion King Ltd, HST Billy Elliot Ltd, etc. He also created companies for the revenue generated by the use of a new logo, created in 2017.

In many cases, John set up his businesses in pairs, with one corporation for income generated in the UK and another for income earned outside the UK. All companies that receive income from the UK include David Furnish, John’s husband, as sole director.

Celebrities can classify their income from activities such as touring, royalties, and record sales as business income, unlike most workers, whose wages and salaries are subject to higher personal income tax rates.

John’s representatives said in a letter to ICIJ that his offshore companies pay corporate taxes in the UK and that he did not use them to reduce his tax bill or avoid paying taxes owed.

Richard Murphy, a professor of accounting practice at the University of Sheffield’s School of Management, told ICIJ that setting up a company overseas to do business in the UK, which would make that company liable for UK corporate tax, is usually done in secret.

“I would say that if [a] company is making revenue from all over the world, but under the management of the UK, all of its activities are located in the UK, even though the source of revenue may be outside the UK,” Murphy said. “Those accounts should be in the public record. Therefore, there should be no secret.”

Angel Di Maria, celebrity sponsor

Ángel di María from Argentina. Photo: Julian Finney/ Getty Images
Ángel di María from Argentina. Photo: Julian Finney/ Getty Images

The Argentine soccer star earns $14.5 million per year for his play on the field with Paris Saint-Germain, but he also has sources of off-field income, which he routes through an offshore company in Panama.

The Pandora Papers reveal that many celebrities who make money from “image rights” funnel those profits to offshore companies. An athlete, for example, could set up a company in a tax haven and transfer the right to benefit from their sponsorship deals to that company.

The move may slash the athlete’s tax bill and also attract scrutiny from regulators.

In June 2017, Di Maria pleaded guilty to two counts of tax fraud in Spain. He paid $2.2 million in back taxes and fines for failing to report 2012-2013 image rights revenue that he channeled through his Panamanian company, Sunpex Corporation Inc, while playing for Real Madrid.

A representative for Di Maria confirmed to ICIJ that the player created Sunpex and sold his image rights to the company in 2009. Leaked documents show that the company continued to earn revenue from Di Maria’s image rights even after he paid the fine. In August 2017, it signed a deal where it transferred its sponsorship revenue from Adidas to Sunpex.

Records show that other brands negotiated with Di Maria’s offshore company to back their products. In December 2014, Sunpex agreed a sponsorship deal for Di Maria, then a Manchester United player, with Japanese sports drink brand YOU. C1000. In exchange for Di Maria filming a commercial in Manchester with then-teammate Robin van Persie, posting on social media about the shoot and providing autographed T-shirts, the marketing agency that produced the ad agreed to pay Sunpex $150,000.

Di Maria’s representative told ICIJ that the player created Sunpex on the recommendation of a “tax professional” and said that many other foreign players in Spain were advised to set up offshore companies to receive income from image rights.

Under Spanish law, at least 85 percent of the money a player earns from his club must be a salary subject to personal income tax. The rest can be classified as image rights revenue and taxed at an often lower corporate rate. The Spanish government has tried to crack down on athletes and other celebrities who funnel that money through companies in tax havens.

George Turner, chief executive of TaxWatch, a British think tanks that studies tax compliance, called image rights strategies like Di Maria’s an attempt to separate an economic benefit from the person responsible, and said it’s vital that regulators remember the two are inextricable.

“It’s not that the image right exists on its own without the player,” he said.

Bernie Ecclestone and Flavio Briatore, luxury buyers

Bernie Ecclestone, former head of Formula One. Photo: David Davies / PA Wire
Bernie Ecclestone, former head of Formula One. Photo: David Davies / PA Wire

Some celebrities use offshore companies to buy yachts or private jets. Bernie Ecclestone, the former chief executive of the group that oversees Formula One (Grand Prix) car racing, and Flavio Briatore, the former owner of the Renault F1 team, bought a London football club.

They used a company registered in the British Virgin Islands, Sarita Capital Investment, to buy a majority stake in Queens Park Rangers in 2007 for $28.2 million. At the time, the club was in debt and had not played in the English Premier League for over a decade.

Ecclestone previously faced scrutiny for offshore financial transactions. It reached a settlement with UK tax authorities for $20 million in 2008 after a nine-year investigation, and paid $100 million to end a bribery trial in Germany in 2014. He denied wrongdoing in both cases, involving allegations related to his family’s offshore trusts.

Briatore and Ecclestone are not the only wealthy men who own UK football teams through companies registered outside the UK. In a 2018 report on offshore ownership in sport, the Tax Justice Network found that about one in four clubs in England and Scotland had significant stakes in ownership outside the UK.

TaxWatch’s Turner said the offshoring of team ownership is an extension of football’s growing wealth. “The clubs have been absorbed by ultra-senior people who already had a network of companies abroad,” he said.

Such a network was involved when Ecclestone and Briatore were looking to sell their stake in the club in 2011. AirAsia founder and former owner of F1 Team Lotus Tony Fernandes eventually bought the team through a Malaysian company and leaked documents from the run-up to the event. The sale reveals the extent to which the Queens Park club was owned by offshore entities.

The leaked files include a February 2011 “terms of sale” sheet in which a Jersey-based company, Exelixi Ltd, agreed to buy the team shares of Ecclestone and Sarita Capital (Briatore’s shares were part of Sarita’s stake).

The proposed deal also included taking over loans that Ecclestone, Sarita and four other offshore companies, based in the British Virgin Islands, Cyprus and Delaware, had given to the club.

The documents do not reveal what happened to this deal or who owns Exelixi Ltd. Fernandes told ICIJ by phone that he had no connection to Exelixi Ltd and did not own any business in Jersey. But the football club’s financial statements show that it eventually used its Malaysian company, now called QPR Asia Sdn Bhd, to buy the shares of Ecclestone and Sarita and take over the club’s loans.

The files also do not indicate whether Ecclestone and Briatore made a profit from the sale, but the club posted losses each year it owned it, according to the team’s annual reports.

Tax experts say such losses could be offset by Ecclestone and Briatore’s personal income and reduce their tax bills.

“In effect, what he’s doing is getting taxpayers to subsidize their ownership of the club,” Turner said.

In a telephone interview with ICIJ, Ecclestone said he could not provide details about Sarita Capital or the purchase and sale of the team. He said he got involved as a “favor” for Briatore and that his name was primarily used to attract other investors and managers to the club.

The 90-year-old billionaire also said Briatore and other investors were more optimistic about the club’s sporting prospects. Queens Park Rangers played three seasons in the Premier League in the last decade and finished in last place in two of them.

“The only one who wasn’t very excited about football was me, because I’m realistic,” Ecclestone told ICIJ.

Briatore did not respond to ICIJ’s repeated requests for comment

Jackie Shroff, Bollywood beneficiary

The Bollywood star and film producer was a recipient of an overseas trust, along with his daughter Krishna and son Jai “Tiger, who is also an actor.

Shroff’s mother-in-law, Claude Marie Dutt de Cavey, who died in 2010, set up New Zealand-based Media Trust in 2005. The leaked files include an invoice from the trustee, the London Fiduciary Trust group, for the establishment and administration of the trust.

Many of the celebrities found in the Pandora Papers are beneficiaries or creators of offshore trusts, which can be used to protect assets for future generations.

The leaked documents include a “memorandum of wishes” based on discussions between Shroff and the company overseeing the trust. According to that document, Shroff sought to be considered the Media Trust’s main beneficiary, noting that “its needs must be paramount” and calling for the funds to be “invested aggressively.”

Turner said beneficiaries trying to exert influence over the management of a trust could be tiptoeing along the edge of an ethical boundary.

“The key to the trust is that trustees must exercise genuine independence over the management of the assets involved,” Turner said. “When trusts become problematic is when that independence doesn’t really exist except on paper.”

Shroff’s wife, Ayesha, told ICIJ’s media partner, the Indian Express, that she and her husband “had absolutely no knowledge of such trust.”

Records show that Media Trust was closed in 2013.

Collaborators: Marcos García Rey (ICIJ), Kevin Hall and Antonio Delgado (Miami Herald), Ritu Sarin and Sandeep Singh (Indian Express), Joaquín Castellón (La Sexta), Daniele Grasso (El País), Mauritius Much (Süddeutsche Zeitung), Benedikt Strunz (NDR), David Conn and Simon Goodley (Guardian), Leo Sisti and Paolo Biondani (L’Espresso), Ivan Ruiz (Infobae)

The “Pandora Papers” are made public by nonprofit International Consortium of Investigative Journalists.

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