[PDF]Follow the Money: A Digital Guide for Tracking Corruption

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About the Author


Paul Radu, a Knight International Journalism Fellow, is project coordinator and
co-founder of the Romanian Center for Investigative Journalism. In 2004, he
received the Knight International Award for Excellence in Journalism. He was an
Alfred Friendly Press Fellow based at the San Antonio Express-News for six
months in 2001. A graduate of West University in Timisoara, Romania, Radu
began his journalism career as an investigative reporter for Realitatea
newspaper in Timisoara. He also worked as an investigative reporter at
Evenimentul Zilei, a national newspaper based in Bucharest, and later headed


Introduction

Names, DoBs and Proxies

Unusual Off-Shore Companies

Hiding Off-Shore

Layers of Secrecy

Let's Go Fishing

Court Records and the Power of the Web
Software- and Web-based Analysis
Fieldwork and Cross-Border Cooperation
Security


Online Company Research Tools


The Online Investigative Journalist Tool Kit


Follow the Money: A Digital Guide for Tracking Corruption


Introduction


When journalists with the Center for Investigative Journalism in Bucharest,
Romania started investigating a gold mining operation in the village of Rosia
Montana, in the heart of Transylvania, they didn’t know they would soon be
looking at a far wider web of corruption that linked commercial enterprises on five
continents.


The name of a company and the name of its founder led the journalists to
Russian oligarchs, officials in Eastern European governments, former employees
of well known corporations and even NATO officials.


The tangled network of connections unraveled as journalists looked deeper and
deeper at corporate records in more than 20 countries. Company records
exposed the connections between former Communist government officials and
shady, Western-based companies, as well as the fact that big chunks of Eastern
European economies are still handled by former employees of the Communist
secret services.


Dozens of exposés published in a few countries and on various Web sites led to
the disruption of some of these businesses and proved that investigative
journalism is a powerful tool.


The public reacted through messages posted on Internet forums, non-
governmental organizations pressured politicians in various governments, and
the business community used the journalists’ research in due diligence reports
that influenced the behavior of investors in the web of companies described
above.


As a result, a gold mining operation in Transylvania that would have moved
people from their homes and severely damaged the environment has been
stalled.


The Rosia Montana case is one in a string of cross-border journalistic
investigations that brought about change at various levels of society.


Journalists in Bosnia and Herzegovina, Bulgaria, Croatia, Romania, Serbia, and
other Balkan countries are cooperating on transnational investigative projects
with counterparts in the former Soviet Republics and in Western countries.
Information exchanges that now flow across borders are revealing the complex
connections among criminals and corrupt politicians who are milking public
money. And a labyrinth of fraudulent enterprises that stretches across continents
is being exposed through company records in all of these countries.


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Introduction


A name in a corporate record in Bulgaria led to an investigation into the Irish
Republican Army’s money laundering through purchases of real estate on the
shores of the Black Sea. A company record in Hungary led to

one of the most powerful Russian organized crime bosses and his questionable
interests in the natural gas industry.


Following the money trail has become an increasingly global undertaking that
requires new tools for obtaining, analyzing and interpreting the data.


This handbook highlights a few methods that can be used by investigative
journalists to track companies across borders. It also points out tips and tricks
investigators can use to effectively untangle complicated company ownership
schemes.


Attached to this report is a list of national and international databases that can be
used by investigative journalists who want to track down companies across
borders.


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Journalists uncovered a deep web of
corruption in Transylvania’s Rosia Montana.


Follow the Money: A Digital Guide for Tracking Corruption


Names, DoBs and Proxies


An investigative journalism research project often starts with just a name. A few
years ago, the Center for Investigative Journalists received information from
French journalists that one of the most notorious gangsters in Marseille, a city in
the south of France, was arrested in an international anti-drug operation.


The Perletto gang was moving huge amounts of cocaine from South America to
Europe. According to the French journalists, Franck Perletto had, among other
passports, a Romanian passport.


It took just minutes for the Romanian journalists to check the name of the
mobster in the Romanian Registry of Companies. They discovered that the
gangster had established several companies in Romania together with high
profile local figures, including former Romanian tennis champion llie Nastase. In
fact, the French mobster and his criminal group had operated under the nose of
Romanian authorities for more than 10 years.


The Romanian arm of their operations had remained undetected until the search
of the Registry of Companies. Asked about his involvement with the Perlettos,
llie Nastase said they gave him some money and promised to name a South
American coffee after him. In exchange, their companies were shielded from
being checked by the authorities. Because Ilie Nastase was a national icon, no
law enforcement agency dared check his company’s books. Ironically, one of the
Perlettos’ companies was based just across the street from the Bucharest
Organized Crime Police headquarters.


It is not unusual for organized crime figures to surround themselves with famous
people and make use of famous names in their criminal enterprises.


Name-based searches across many business databases may often reveal webs
of companies established by organized crime figures and corrupt politicians who
want to hide their business interests and their conflicts of interest.


The Centers for Investigative Journalism in the Balkans regularly check names
that are indexed in newly published books on international organized crime in
articles indexed on lexisnexis.com, in the U.S. government's lists of persons and
commercial entities banned from doing business in the United States, and in
Interpol’s most-wanted lists.


Searching for names can prove to be straightforward, but quite often criminals
hide their company ownership by using aliases as well as multiple addresses
and dates of birth.


In some cases, they still make mistakes that can be tracked through combined
searches. One Romanian woman who was wanted for various financial crimes


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established several companies in the United Kingdom using aliases. Some of the
fake identities she used included Mona de Freitas, Mona Bradley, Mona Alton
and Mona Offord.


Multiple searches on lexisnexis.com, a database that offers access to registries
of companies in many countries, shows that besides using the same first name

“Mona,” she was almost always using the same address in the county of Surrey,
in South London, United Kingdom, as well as the same date of birth.


Searches including the first name and the address led to many other companies
and aliases. On the other hand, the connection between her various identities
was established by further searches for her business associates. This enabled
journalists to establish her social circle and discover new sources for reporting
on Mona’s criminal enterprises.


As journalists and law enforcement officials make advancements in their ability to
identify criminals and their companies, the criminals devise more and more
complicated schemes to remain hidden. Organized crime figures may use
innocent citizens as fronts in their commercial companies and deals. A few years
ago, a scandal broke out when an unknown, newly formed, Hungarian-based
company was appointed as an intermediary for Gazprom’s natural gas sales in
Western Europe. It was a business worth hundreds of millions of Euros, while no
one knew who Eural TransGas was.


Corporate records in Hungary indicated that the shareholders of the company
were three Romanian citizens living in the city of Cluj-Napoca. Data were
exchanged among Russian, Hungarian and Romanian journalists.


The Romanian journalists visited the three shareholders. They were a former
actress in her eighties and a young couple living with their parents.


None had any idea about Gazprom, Eural TransGas or the fact that they were
shareholders in a business worth hundreds of millions. All they cared about was
how to pay their next phone bill and their next meal.


Controversial Russian businessmen who wanted to hide their involvement in
Eural TransGas asked a lawyer based in Hungary lawyer to find citizens whose
names could be used by the company. The lawyer knew the daughter of a
Romanian actress.


Through her, they got to the young couple, who were not related but living next
door to the actress. The unsuspecting citizens were promised a small amount of
money if their passports could be used in Hungary.


No further details were given. Still, even in a case like this, there is almost
always a connection that journalists can track down.


In the Eural TransGas gas case, the daughter led journalists to the lawyer and, in
turn, to the Russians. Very often, family members and relatives of friends are
used to establish new companies. A politician may use his wife and children to
disguise ownership and avoid conflict of interest.


Names mentioned in criminal investigations abroad must be
checked across many registries of companies and other
databases as very often the national law enforcement agencies
don’t go across the borders of the country they work in.


Data from foreign press reports as well as from official press
releases in other countries may prove very valuable for
investigative journalists working in various countries.


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Follow the Money: A Digital Guide for Tracking Corruption


Cyprus hides the secrets of former communist secret
services and of today’s oligarchs.


On the other hand, criminals and shady businessmen don't hesitate to make use
of loose regulatory systems put in place by politicians in certain “safe haven”
countries to attract capital. Under the veil of banking and commercial secrecy
laws, huge amounts of money exchange hands in such havens outside the
jurisdiction scrutiny of the source countries.


Capital cycled through such dealings can be transformed into real estate, bonds
or other goods and then moved back into the country or to other global markets
legitimately. Such transactions are closely looked at by international law
enforcement because they raise suspicions of money laundering associated with
organized crime and terrorism.


Although off-shore havens are usually associated with tropical islands
somewhere in the Caribbean, in many instances countries such as Austria,
Switzerland or the United States have off-shore-like facilities that enable
businesses and individuals to hide ownership and deter investigators from
finding out who owns companies that are involved in crooked deals.


Organized crime figures would rather use Privatstiftungs (private foundations) in
Austria or companies in the American state of Delaware than companies in the
British Virgin Islands (BVI), the Isle of Man, Aruba or Liberia; the latter group of
safe havens has been associated by the media and law enforcement with money
laundering and shady deals for so long that even the mention of a company in
the BVI puts a red flag on a transaction that is then monitored by international
law enforcement.


Well known off-shore havens are fighting to clean up their names and show that
proper control mechanisms are in place. It should be mentioned that in most
cases, such jurisdictions now are used for tax purposes.


The principality of Liechtenstein, a European country of 35,000 people in the
Alps, was hit hard in the beginning of 2008 when data stolen by a former bank
employee were sold to law enforcement agencies in many European countries.


The data showed that Liechtenstein’s banks have been used in tax evasion
schemes by wealthy citizens in many countries. As a result of the leak, the
German authorities who bought the disks containing the information managed to
recover over 150 million US dollars in back taxes within months of obtaining the
data. The United States, Canada, Australia and European Union countries are
also in possession of the data and are pursuing their own investigations into tax
evasion involving banking in the tiny state.


The scandal not only shook Liechtenstein’s political relationships with other
countries but spread to Switzerland and Luxembourg, two other European

countries that have a record of bank secrecy and non-transparent financial
transactions.


The head of the Swiss Bankers’ Association, Pierre Mirabaud, was so outraged
by the fact that the stolen data ended up in German law enforcement’s hands
that he said in an interview with a Swiss TV station that the methods of the
German investigators reminded him of Gestapo practices, referring to the secret
police of Nazi-era Germany. He later apologized for the unfortunate comparison.


Leaks and whistle blowing lead to journalistic exposés that are embarrassing to
banks, institutions and the political establishments that allow them to foster
criminal activity.


In September 2008, | was invited to the island of Cyprus, where ironically the


government organized a conference with financial aid from Liechtenstein on how
to fight money laundering in the Mediterranean region.


Just like Liechtenstein, Cyprus has been blamed many times for harboring
money from organized crime groups and former communist officials from Eastern
European countries.


At the conference, international law enforcement and government officials talked
about instruments and measures they could use to enforce anti-money
laundering laws and treaties.


The growing problem of off-shore havens and the damage they bring to the
global economy was once again pointed out in November 2008, in the context of
the global financial crisis. The Organisation for Economic Co-operation and
Development, together with French and German government leaders vowed to
make the offshore industry “disappear”. They called the off-shore areas the
“black holes of global finance.”


Hiding Off-Shore


The off-shore company formation industry is kept alive by scores of lawyers,
formation agents and solicitors. They advertise complex business schemes to
maximize returns and minimize taxation.


Web sites like http://www.off-shore.co.uk/faq/company-formation/ present
potential customers with the possibility of hiding the real ownership of a company
behind a nominee shareholder or director: “A nominee shareholder or director is
a third party who allows his/her name to be used in place of the real or beneficial
owner and director of the company. The nominee is advised particularly in those
jurisdictions where the names of the officers are part of a public record, open for
anyone who cares to look can find out these identities. The name of the nominee
will appear and ensure the privacy of the beneficial owner,” states the Q-and-A
section of the above-mentioned Web site.


The same philosophy applies to myriads of formation agents across continents.
When researching such companies that use nominees, the investigative
journalist should look for nominees who have hundreds of companies recorded
in their names.


Patterns and real identities may in some cases by revealed through laborious
research on all these companies and through cross-searches on parallel
databases on the activity of such companies.

Off-shore jurisdictions such as the Isle of Man (IOM) are trying to clean up their
name by monitoring the nominees’ activities. On its government Web site, IOM
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