Fraud trail leads to OAP’s tiny flat

A hard-drinking pensioner in Latvia has been revealed as the frontman for a network of scandal-hit companies

By Jon Ungoed-Thomas, Craig Shaw and Kevin Dowling in Riga Published in Sunday Times | 16 June 2013
 
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IN A bustling cobbled street in central Riga, an alleyway leads to a modest red-brick and wooden apartment block. It is the last known address of an apparent business colossus — Erik Vanagels.

Friends and relatives of the former factory worker claim he has poor sight, is a capacious drinker and disappears for weeks on end.

A leak of offshore documents to the International Consortium of Investigative Journalists (ICIJ) reveals a rather different figure: an apparent tycoon with interests in banking, investment funds, pharmaceuticals and shipping. He is a director or an owner of several hundred companies around the world.

On paper Vanagels is probably a billionaire. In reality the 73-year-old is a corporate cipher used as a veil to conceal the real beneficiaries of companies.

Among the world of investigators and lawyers who unravel complex frauds, Vanagels is an almost mythical figure. His companies have been involved in a series of financial scandals and alleged frauds. These include:

■ The Hermitage Capital fund money laundering scandal in which $230m (£146m) was allegedly looted between December 2007 and February 2008 in a fraud involving the fund’s Russian operations.

■ Technomark Business, a London company, is alleged to have received $43m of stolen Hermitage funds that were wired to a Latvian bank account. Vanagels was a director of Technomark’s parent company.

■ Mukhtar Ablyazov, who has been sued by BTA Bank, for which he worked, for misappropriating billions of dollars using various companies including British-based Loginex Projects. Vanagels was a shareholder and director of the companies that controlled Loginex.

■ A Ponzi scheme that operated in America in 2009 — the Rockford Group — routed more than $500,000 illicit funds to a British company, Intercity Transit, according to court filings by the US Securities and Exchange Commission.

A Cypriot company in which Vanagels was a director was used as a UK corporate director of Intercity Transit.

Vanagels has not just been caught up in complex financial scandals. In September 2008 Somalian pirates hijacked the Faina, a Ukrainian ship which was carrying 33 Soviet-era tanks, rocket-launch systems and anti-aircraft guns bound for Sudan, which was the subject of an arms embargo. It emerged that the ship had been chartered by Marine Energy Trading Company (METC), a UK firm. Vanagels was a shareholder and director of the companies that owned METC.

More recently, in May 2010, the High Court ruled on allegations that a Shell trader, Evgeny Tikhonov, had hidden commissions in an offshore deal. Tikhonov was acquitted, but Shell is still pursuing him for compensation, along with a company that received some of the funds, T Capital Ltd (TCL).

In a High Court judgment in July 2010, Mr Justice Jack identified a familiar figure. His judgment stated: “TCL was incorporated in the British Virgin Islands and Mr Erik Vanagels was the nominee shareholder and director.”

Vanagels has also been named in a financial scandal in Ukraine in which it was alleged that the government was overcharged for pharmaceuticals.

 (PAUL VICENTE/GUY CRITTENDEN) Who is Vanagels? For some years it was considered he might be a useful namesake, the John Doe of the corporate world. It was a suspicion fuelled by the fact that he appears to have two different dates of birth in British company records.

The leak of 2.5m offshore records to ICIJ included British Virgin Islands (BVI) for the first time and revealed the scale of Vanagels’s interests. He has acted as director and shareholder in two key BVI companies, Milltown Corporate Services and Ireland and Overseas Acquisitions, with interests in other companies around the world including Britain, Cyprus and Panama.

Among the documents was a photocopy of Vanagels’s passport and numerous emails testifying to his existence. An April 2007 email from a company agent said Vanagels’s two key companies were involved in “several thousands (mainly UK) companies”.

Graham Stack, a journalist based in Kiev, Ukraine, has previously tried to track down Vanagels and reported many of the scandals connected to his network. Stack said Vanagels was in a network of Latvian nominee directors recruited as the country emerged from communism.

In the late 1990s the British government cracked down on the scandal of some residents on the tiny Channel island of Sark offering their services as nominee directors to disguise company ownership. Enterprising company agents were already enlisting recruits elsewhere and Latvia proved promising territory.

Vanagels, who was first appointed a BVI director in 2000, was willing to provide identity documents and for his name to be used in companies around the world. He would have been paid at least £1,000 a month for the use of his identity but would not have been aware of the companies’ alleged involvement in unlawful activities.

One of Vanagels’s sidekicks in the corporate structures was a fellow Latvian, Stan Gorin, who worked in a Latvian office which helped to construct the companies. He lives with his wife in a small fourth-floor flat near the centre of Riga. He said last week that he had allowed his name to be used in the past as a nominee director, but said he now works exclusively as an insurance broker.

“My name was used but I did not do any operations with these companies,” he said.

Philip Burwell, a company agent who works from a house in Dublin, told The Sunday Times that he had set up companies with Vanagels, Gorin and other Latvians as nominee directors or shareholders. He said he was always acting on client instructions and was never aware that any of the companies might be used for unlawful activities.

One of the British addresses used by some of the companies set up by Burwell was a London law firm, Pearson Lowe. James Pearson, a lawyer at Pearson Lowe, said last week that his company provided legitimate services as a registered office for companies, but he was not aware of any unlawful activities involving any of them.

■ The ICIJ this weekend launched the offshore leaks database, which allows users to search details of more than 100,000 offshore companies, trusts and funds. See offshoreleaks.icij.org.

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About craig shaw
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