Why puzzling questions about #PanamaPapers can only be answered by a forensic audit

The Panama Papers exposé by the Indian Express throws up some puzzling questions.

For those who came in late, the source of these so-called Panama Papers was a leak from the database of Mossack Fonseca, the giant law firm headquartered in Panama, which is described, in an overview posted on the website of the International Consortium of Investigative Reporters, as “one of the world’s top creators of shell companies, corporate structures that can be used to hide ownership of assets”.

But several people listed by the Indian Express as clients of Mossack Fonseca, the giant law firm headquartered in Panama, denied any knowledge about the companies they purportedly ran as directors and shareholders.

Who owns these companies?

Take one Vivek Jain. In 2010, as the Express reported, he was a director and shareholder – with 79,000 shares – at Sacvinam Global SA, a company registered in the British Virgin Islands. The next year, he held 8.2 lakh shares in Radiant World Holdings, a company in Hong Kong which had shares in Sacvinam.

However, when the Express contacted Jain, it found he ran an agriculture equipment store in Mandsaur, a town in Madhya Pradesh. He told the paper: “I have no idea about the existence of these companies.”

This is one of the more intriguing aspects of #PanamaPapers. Most Indians named by the Indian Express – about 47 in all – are very wealthy. Most of them are businesspeople. The rest are self-employed professionals, miners, non-resident Indians or foreigners. Their ability to be in this list is relatively unsurprising.

But why are people like Jain showing up in the Mossack Fonseca database?

According to the Indian Express, at the time Jain held shares in Sacvinam, the company had another director called Pinkesh Nahar.

The two are related. Nahar, as Jain told the Express, is the brother of his cousin’s husband. The two also had business dealings. Jain used to supply “iron ore material” to Nahar till 2014.

Nahar is also the group chairman of Radiant World, which operates in diverse areas like iron ore mining and exports, logistics, shipping, textiles and real estate. This is not a small company. As a report in the Business Standard says, in 2014-15, the company was planning to export “7 MT of iron ore trade worth USD 600 million”.

What is puzzling is this. Jain claims Nahar used – without consent – his name and address while opening the accounts with Mossack Fonseca.“If a company is registered in my name and my address is given, I should have known,” he said.

Businessmen and senior politicians sometimes operate companies through proxies – by appointing their employees as directors to these companies, for instance. Nitin Gadkari, famously, appointed his driver – Manohar Panse – as the director of a company which invested in his Purti Group. Did something similar happen here?

Scroll sent questions to Pinkesh Nahar. At this time, his answers are still awaited.

Other cases

There are other instances in #PanamaPapers where people say they did not know accounts had been opened in their name.

Take Pradeep Kaushikray Buch. According to the Express, Mossack Fonseca records say he held as many as 900,000 shares in Overseas Pearl Limited – a company registered in the British Virgin Islands in 2001 – at least until 2004.

But Buch denies any links with the company.

“I have no overseas company. It does not belong to me. I am a professional engineer-manager. I do not know anything about companies like Overseas Pearl Limited. You may be mistaken about the address. I am basically a management consultant for companies in Dubai and Tanzania.”

Or take Uday Pratap Singh. He is listed as a shareholder of Steel Engineering Limited, a company incorporated in the British Virgin Islands on July 19, 2007. He told the Express:

“I have no idea about the company. It is the first time I am hearing the name. I am in India. I have not purchased any share.”

In another instance, people named by the Express said the accounts were opened at the behest of someone else.

Take Chinnamaruthu Shanmuga Sundarapandian of Choolaimedu, a middle-class neighbourhood in Chennai. He is a director in two offshore companies in the British Virgin Islands – Panasia Star Ltd and Wir Fashion Holding Private Ltd. When contacted by the Express, Sundarapandian said:

“I do not have any idea about these companies. It was my younger brother Deenathayala Pandian who added me.”

Deenathayala, as Sundarapandian told the Express, had been a journalist before he entered the real estate business – he runs Kaviyan Constructions. When asked how or why a journalist opened offshore companies, Sundarapandian told the paper that the question should be put to his brother’s boss. But, he refused to say who the “boss” was.

This creates two possibilities. Either the account-holders are being disingenuous or someone else does control the account. Take Singh’s Steel Engineering. One Umesh Somani held all 1,000 shares of the company since its incorporation but transferred them to Singh in 2011, according to the Express. Google searches by this reporter for Somani or Steel Engineering drew a blank.

This is one reason why India needs a forensic audit – tracing money flows into and out of these accounts to identify who benefitted from them. Merely focusing on those listed as the account-owners is not good enough.

What were these accounts used for?

The need for a forensic audit goes beyond establishing who owned these accounts.

That is partly because some individuals named in #PanamaPapers have been linked to illegalities in the past. Studying money flows into and out of these accounts might throw light on those cases.

Moturi Srinivas Prasad, who had four companies listed in the British Virgin Islands, had been arrested in 2012 for alleged irregularities in the export of bio-diesel. Prasanna V Ghotage, who held shares in Nordbell Commercial, a company set up in the British Virgin Islands in 2007, had been arrested by the Chhattisgarh police in 2013 after a company filed a case against him for supplying substandard iron ore at high prices.

Similarly, some individuals named in #PanamaPapers have links to others accused of illegalities.

Take Ashok Malhotra. The sixty-three year old was a shareholder and director of E&P Onlookers, a company set up in the British Virgin Islands on 25 September, 2008. He became the director of E&P Onlookers on February 18, 2009 when a Sandeep Rastogi resigned and transferred all five shares to Malhotra, says the Express.

Malhotra held the shares, says the paper, “at least till September 4, 2009, and signed a resolution as the sole director of E&P Onlookers Limited (BVI) on November 10, 2009. E&P Onlookers Ltd was inactivated on June 28, 2010.”

When contacted by the Express, Malhotra confirmed his link to the company but said it was “just for a couple of months”. And added, “Look at my home, does it look like the home of someone who has a lot of wealth?”

But things go deeper than that. In 2009, Ashok Malhotra had also set up a company called Swift Consultants. Later in the same year, he sold his shares in the company to Mohinder Kaur Anand and Jagjot Singh Anand but stayed on as director till 2011.

Now, there are links between the Anands and VK Sibal, ex-Director-General (Hydrocarbons) with the Government of India. Along with a Sanjiv Mittal, the Anands own at least five companies in the oil and petroleum space – Enquest Projects, Enquest Drilling, Enquest Petro Solutions, Enquest Offshore and Enquest Holdings.

As this India Today story says, three of these companies (Enquest Offshore, Enquest Petro Solutions and Enquest Holdings) received benefits from Sibal.

Another company owned by Mohinder Anand and Mittal – Quest Petroleum – has been linked to Sibal as well. As the India Today article says, “Sibal’s brother Gurpreet Singh Sibal was a promoter-director in Quest Petroleum floated in April 2008, barely two months before the deadline for submitting bids for New Exploration Licensing Policy (NELP) VII. The company bagged an exploration block in 2008 even though it had no prior experience.”

As the Express report points out, Enquest Petro Solutions has three offshore subsidaries in BVI – Aspire Investments, Antira Engineering and AEL Egypt.

When asked by the Express reporter what he does, Malhotra, says the paper, “first says “offshore”, then adds mysteriously, “oil”.”

It is not clear what happened here. Why would a person living in what the Express describes as a “modest peach coloured apartment building” own shares in an offshore company? Is it a coincidence that the people who bought his company – and subsequently employed him – were accused of receiving improper benefits in India’s petroleum sector?

As it were, in 2007, Mittal and the Anands had acquired another company – Wave Consultants – from a Divesh Kumar Gupta and Jeet Ram Gupta. The next year, the company’s name was changed to Enquest Offshore.

Put it all together and you are left wondering about the logic underpinning these deals – how money sloshes around in this country’s shadow economy.

Which is another reason why India needs a rigorous forensic audit into these cases.