Very rarely will a lawyer offer as unequivocal a comment as: ‘it couldn’t be more blatant’.
Barrister Andrew Mitchell KC’s assessment of Deloitte’s alleged falsification of documents on behalf of Roman Abramovich in Cyprus, as reported by the BBC, speaks to the clearcut nature of what appears to have been uncovered.
BBC’s Panorama, working with the Bureau of Investigative Journalism, has reported this morning that Deloitte Cyprus reviewed and signed off on backdated documents which meant superyachts, mansions and private jets worth $672 million ‘vanished’ from Abramovich’s accounts.
The reports allege that the actions were taken to circumvent a 2006 Cyprus law that company accounts had to be made public. This was achieved, according to the report, by transferring the assets to a parent company in the British Virgin Islands (BVI), and backdating the change by three years to make it look like the asset transfer had happened in 2003.
Related
[See also: The new geography of wealth protection]
Anand Doobay, a partner with sanctions experts Boutique Law, told Spear’s that if what has been reported had taken place in the UK: ‘I certainly think there would be a criminal investigation.’
‘As to who would conduct it, there are a number of alternatives given what the issues are here,’ he said, ‘but I certainly think that if there was a credible allegation that a professional adviser had been involved in criminal contact with their client, that there would be a criminal investigation.’
Doobay added: ‘If there is said to be a benefit from the criminal offences which may have occurred in Cyprus then dealing with that benefit may be money laundering.’
Content from our partners
‘That could give rise to investigations in relation to money laundering in other countries where assets may be, but also could give rise to a risk that civil action could be taken to try and forfeit assets,’ he said.
[See also: Shvidler fails to overturn UK sanctions in Supreme Court test case]
David Pickstone, head of Stewarts’ tax litigation and resolution team, told Spear’s that Cyprus may take a reputational hit from the reports, but that the country is very different today.
‘A lot of the old Abramovich-type money that was in Cyprus before the Ukraine war has now left and is in the process of leaving and a lot of those quite opaque shell company structures have been shut down as a result of the Cypriot government’s approach,’ he said.
Pickstone added that the reports are ‘obviously very bad news’ for Deloitte, and the company may struggle to contain the fallout.
‘They will have known that this is coming,’ he said. ‘They will have been warned about it in advance to allow them to comment on it, but they will be worried about contamination of their brand outside Cyprus, so they will presumably try and contain this as an isolated issue that the associated businesses in Cyprus were not, in fact, Deloitte businesses.’
[See also: Hong Kong overtakes Switzerland to become top centre for global offshore wealth]
What is likely to happen now, Pickstone said, is ‘a sort of musical chairs game of finding the right person to blame’.
‘There’s no defence to the action in of itself. It’s going to be more a question of who’s responsible. Is it Deloitte? Is it Abramovich? Is it some smaller entity that’s now vanished? My guess is people will be finding a scapegoat that’s no longer there or that is unconnected with them.’
A criminal investigation into Abramovich’s financial affairs by the authorities in Jersey is currently ongoing, with £5.3 billion of his assets frozen in the Channel Island. Abramovich’s lawyers filed a claim to the European court of human rights (ECHR) in April this year, arguing the investigation had breached his human rights.
The BBC said its reporting was based on leaked documents from corporate services firm MeritServus, which Deloitte owned until 2005. The BBC added that the two companies ‘worked closely together’ after they split with Abramovich’s associates to manage his wealth.
The report cited an email written by Deloitte in September 2005 which stated that ‘certain changes will have to be made to the accounts (bank account balances, interest income, profit and loss account)’ because of backdated changes to assets belonging to one of Abramovich’s Cypriot companies.
Deloitte declined to comment when contacted by Spear’s, but the BBC reported that Deloitte Cyprus said it ‘acts in compliance with applicable laws’.
