Issue link: https://maltatoday.uberflip.com/i/975483
maltatoday SUNDAY 29 APRIL 2018 News 3 Azerbaijan-linked company director set up numerous Malta companies YANNICK PACE & MATTHEW VELLA MALTESE companies set up by an Australian national identified as being close to the Azerbaijani oligarchy, were in the main set-up through the services of the private bank Pilatus. Last week, Daphne Project jour- nalists broke the news that Pilatus Bank held accounts for up to 50 companies linked to Azerbaijani oligarchs. Account-holders report- edly included companies owned by members of the Aliyev ruling fam- ily, and that of Kamaladdin Hey- darov, Azerbiajan's minister for emergency situations, and report- edly one of the wealthiest men in the country. The Daphne Project is the work of 45 journalists from 18 media or- ganisations who are investigating Daphne Caruana Galizia's assas- sination and continuing her most important stories. Back in April 2017, Heydarov was named as one the bank's main clients by Caruana Galizia, while MaltaToday revealed the company interests of Heydarov associate Manuchehr Khangah – with com- panies opened by Nexia BT. Sources who spoke to the Daphne Project confirmed that Heydarov's sons Tale and Nijat were clients of the bank, along with Leyla and Arzu Aliyeva – daughters of Azer- baijan President Ilham Aliyev. The reports suggest that compa- nies holding accounts at the bank were part of a structure used by the Aliyevs and Heydarovs to hold Eu- ropean investments. One investment flagged is the ownership of the French com- pany Heritage Collection, which owns three French high-end arti- sanal businesses. The companies changed ownership in 2014 and 2015, and management staff were never told who the new owner of the business was, which has now been revealed to be the Heydarov brothers. Heritage Collection (France) is owned by a company called Her- itage Collection SA, registered in Luxembourg, but this company is in turn owned by the Maltese company Heritage Asset Holdings. Lawyers for the Heydarov broth- ers told the Daphne Project: "Our clients are the beneficial owners of companies which hold accounts at Pilatus Bank in Malta, which have entirely legitimate and lawful busi- ness." The structure was reportedly set up to "hold European property as- sets" and their ownership was in many cases in the public domain. In cases where it was not, they said this was due to legitimate privacy and security concerns. The Maltese company register lists Robert Baker as one of the three directors of Heritage Asset Holdings. Baker was flagged by the Daphne Project for appearing as a director of multiple entities with Pilatus accounts. According to the Maltese reg- istry of companies, Baker is the director of 18 Maltese companies, nine of which were opened using a Pilatus Bank account. 11 of the 18 companies are part of one structure, the ownership of which is equally divided between two holding companies; Argyle Holdings and Kimberley Holdings – which are Maltese tax-registered companies. These are in turn owned by New Zealand trusts registered Hawk Asia and Wolvering New Zealand, 'owned' by corporate services firm Denton Morell. According to Ra- dio New Zealand, this firm helped transfer the ownership of 16 Azer- baijan-linked companies and seven key companies holding European property assets, and five with ac- counts at Pilatus Bank, to the two New Zealand companies. Profit-shifting and layering An industry expert who looked over the Maltese companies' last filed accounts with MaltaToday journalists immediately pointed out that the company structure was a layered one where in many instances money is being loaned out between entities with very little explanation or apparent purpose. For example, Kimberly Holdings – one of the two Maltese holdings companies – borrowed money from an unknown entity at 6% interest, but then passed on that money to its subsidiaries without any interest and bearing the costs of its borrowing, while passing pro- ceeds to its sub- sidiaries without interest. The borrowing patterns, the ex- pert said, indicat- ed, at the very least, that the structure could be a scheme for profit shifting to Malta, ultimately with a view to benefit from beneficial tax rates in Malta. The expert pointed out that many of the companies were still in start-up and that the accounts, which cover the period up to 31 December 2015, give a snapshot of the start of the structure. Robert Baker is also one of the directors of another group of com- panies – Andalusia Property Alpha (APA), Andalusia Property Beta (APB), and Andalusia Property Gamma (APG) – which also have a Pilatus Bank account and were set up in December 2014. Between them, the companies appear to own some €25.8 million in property as well as a subsidiary company in Bulgaria. MaltaToday understands that the companies' accounts show that the property is intended to be rented or leased out, given that it is termed "investment property", and that all financing was made through borrowing from an un- known related party. While there is no suggestion of wrongdoing or that those men- tioned have acted illegally, the high concentration of companies linked to politically exposed per- sons from Azerbaijan – a country often criticised for alleged human rights abuses and violations of the rule of law – raises questions on the bank's operations. Secretary resigns after Pilatus reports All 18 companies were opened between July 2015 and December 2015 by Frendo Advisory, which said that once it became aware of the "problems" of Pilatus bank through media reports, it stopped providing services to the entities in question. The firm is headed by former Nationalist foreign minis- ter Michael Frendo. Luke Frendo, head of the firm's Private Client department, who was also company secretary for a number of the companies, said he was not aware of anything un- toward about Pilatus Bank until it was named in relation to money laundering and compliance issues in the media. He filed his resignation as com- pany secretary from 14 of these companies on 26 April 2017, soon after the first reports on Pilatus Bank and the mysterious Panama company Egrant were published by Daphne Caruana Galizia. He told MaltaToday that he had chosen to resign all his positions with the entities upon finding out about the allegations. "As soon as I became aware of the problems of Pilatus bank through the media reports, not on the advice of anyone, I resigned from that position and we no longer provide services to these entities. Until that point, I was not aware of anything untoward about Pilatus bank." Frendo stressed that the firm al- ways carries out the necessary due diligence but could not tell Malta- Today whether he was aware of the ultimate beneficial owners of the companies he helped set up. MaltaToday asked Frendo whether the necessary due dili- gence was carried out to be suf- ficiently aware if the UBOs of the companies were members or as- sociates of the Azerbaijani ruling family, such as the Heydarovs. "We always carry out our due diligence fully in line with our ob- ligations. You can appreciate that I am not able to divulge any profes- sionally confidential information." Pilatus Bank at centre of complex company structure linked to Azeri oligarch's family The Pilatus Bank offices in Ta' Xbiex: the bank was used for the Malta companies linked to Robert Baker