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Gautam Adani: Billionaire Indian tycoon facing US bribery charges

AFP
November 21, 2024

Gautam Adani has been charged by US prosecutors with paying more than $250 million in bribes to Indian officials for lucrative solar energy supply contracts - Copyright AFP Sam PANTHAKY

Billionaire Indian industrialist Gautam Adani, whose business empire has been rocked by US bribery charges against him, is one of the corporate world’s great survivors.

The tycoon — a close ally of Hindu nationalist Prime Minister Narendra Modi — oversees a vast conglomerate encompassing coal, airports, cement and media operations.

The US court charges that he paid hundreds of millions of dollars in bribes sent his companies’ shares plunging. But Adani has seen off big threats before.

On New Year’s Day in 1998, Adani and an associate were reportedly kidnapped by gunmen demanding a $1.5 million ransom, before being later released at an unknown location.

A decade later, he was dining at Mumbai’s Taj Mahal Palace hotel when it was besieged by militants, who killed 160 people in one of India’s worst terror attacks.

Trapped with hundreds of others, Adani reportedly hid in the basement all night before he was rescued by security personnel early the next morning.

“I saw death at a distance of just 15 feet,” he said of the experience after his private aircraft landed in his hometown Ahmedabad later that day.

Adani, 62, differs from his peers among India’s mega-rich, many of whom are known for throwing lavish birthday and wedding celebrations that are later splashed across newspaper gossip pages.

A self-described introvert, he keeps a low profile and rarely speaks to the media, often sending lieutenants to front corporate events.

“I’m not a social person that wants to go to parties,” he told the Financial Times in a 2013 interview.

– ‘Stop Adani’ –


Gautam Adani, whose empire has been rocked by panic-selling and allegations of fraud, is one of the business world’s great survivors – Copyright AFP INDRANIL MUKHERJEE

Adani was born in Ahmedabad, Gujarat state, to a middle-class family but dropped out of school at 16 and moved to financial capital Mumbai to find work in the lucrative gems trade.

After a short stint in his brother’s plastics business, he launched the flagship family conglomerate that bears his name in 1988 by branching out into the export trade.

His big break came seven years later with a contract to build and operate a commercial shipping port in Gujarat.

It grew to become India’s largest at a time when most ports were government-owned — the legacy of a sclerotic economic planning system that impeded growth for decades and was in the process of being dismantled.

Adani in 2009 expanded into coal, a lucrative sector for a country still almost totally dependent on fossil fuels to meet its energy needs, but a decision that brought greater international scrutiny as he rose rapidly up India’s rich list.

His purchase the following year of an untapped coal basin sparked years of “Stop Adani” protests in Australia after dismay at the project’s monumental environmental impact.

Similar controversies plagued his coal projects in central India, where forests home to tribal communities were cut down for mining operations.

– ‘Extraordinary growth’ –

Adani is considered to be close to Prime Minister Modi, a fellow Gujarat native, and offered the leader the use of a private company jet during the 2014 election campaign that swept him to power.

The tycoon has invested in the government’s strategic priorities, in recent years inaugurating a green energy business with ambitious targets.

In 2022, he completed a hostile takeover of broadcaster NDTV, a television news service considered one of the few media outlets willing to outwardly criticise Modi.

Adani batted away press freedom fears, but told the Financial Times that journalists should have the “courage” to say “when the government is doing the right thing every day”.

Last year a bombshell report from US investment firm Hindenburg Research claimed the conglomerate had engaged in a “brazen stock manipulation and accounting fraud scheme over the course of decades”.

Hindenburg said a pattern of “government leniency towards the group” stretching back decades had left investors, journalists, citizens and politicians unwilling to challenge its conduct “for fear of reprisal”.

Adani Group denied wrongdoing and characterised the report as a “calculated attack on India” but lost $150 billion in market capitalisation in the weeks after the report’s release.

Its founder saw his own net worth plunge by $60 billion over the same period, and he is now ranked by Forbes as the 25th-richest person globally.

US prosecutors on Wednesday charged the tycoon and two other board members with paying hundreds of millions of dollars in bribes and hiding the payments from investors.

The indictment accuses Adani Group’s leadership of bribing Indian government officials to secure lucrative government contracts.

The conglomerate and its founder have yet to respond to the charges.

How Indian billionaire Gautam Adani’s alleged bribery scheme took off and unraveled

Indian billionaire Gautam Adani speaks during an inauguration ceremony after the Adani Group completed the purchase of Haifa Port in Israel on Jan. 31, 2023.(REUTERS/File Photo)

https://arab.news/pjuk8
Updated 50 sec ago
Reuters
November 22, 20240

Gautam Adani allegedly tried to bribe local officials in India to persuade them to buy electricity produced by his renewable energy company Adani Green Energy
The allegations caught the attention of US watchdog agencies as Adani’s companies were raising funds from US-based investors in several transactions starting in 2021


NEW YORK: In June of 2020, a renewable energy company owned by Indian billionaire Gautam Adani won what it called the single largest solar development bid ever awarded: an agreement to supply 8 gigawatts of electricity to a state-owned power company.

But there was a problem. Local power companies did not want to pay the prices the state company was offering, jeopardizing the deal, according to US authorities. To save the deal, Adani allegedly decided to bribe local officials to persuade them to buy the electricity.

That allegation is at the heart of US criminal and civil charges unsealed on Wednesday against Adani, who is not currently in US custody and is believed to be in India. His company, Adani Group, said the charges were “baseless” and that it would seek “all possible legal recourse.”

The alleged hundreds of millions of dollars in bribes promised to local Indian officials caught the attention of the US Justice Department and Securities and Exchange Commission as Adani’s companies were raising funds from US-based investors in several transactions starting in 2021.

This account of how the alleged scheme unfolded is drawn from federal prosecutors’ 54-page criminal indictment of Adani and seven of his associates and two parallel civil SEC complaints, which extensively cite electronic messages between the scheme’s alleged participants.

In early 2020, the Solar Energy Corporation of India awarded Adani Green Energy and another company, Azure Power Global, contracts for a 12-gigawatt solar energy project, expected to yield billions of dollars in revenue for both companies, according to the indictment.

It was a major step forward for Adani Green Energy, run by Adani’s nephew, Sagar Adani. Up until that point, the company had only earned roughly $50 million in its history and had yet to turn a profit, according to the SEC complaint.

The logo of the Adani Group is seen on the facade of its Corporate House on the outskirts of Ahmedabad, India, on November 21, 2024. (REUTERS)

But the initiative soon hit roadblocks. Local state electricity distributors were reluctant to commit to buying the new solar power, expecting prices to fall in the future, according to an April 7, 2021 report by the Institute for Energy Economics and Financial Analysis, a think tank.

Sagar Adani and the Azure CEO at the time discussed the delays and hinted at bribes on the encrypted messaging application WhatsApp, according to the SEC.

When the Azure CEO wrote on Nov. 24, 2020, that the local power companies “are being motivated,” Sagar Adani allegedly replied, “Yup ... but the optics are very difficult to cover. In February 2021, Sagar Adani allegedly wrote to the CEO, “Just so you know, we have doubled the incentives to push for these acceptances.”

The SEC did not name the Azure CEO as a defendant, but Azure’s securities filings show the CEO at the time was Ranjit Gupta.

Gupta was charged by the Justice Department with conspiracy to violate an anti-bribery law. He did not immediately respond to a request for comment.

Azure said on Thursday it was cooperating with the US investigations, and that the individuals involved with the accusations had left the company more than a year ago.

‘Sudden good fortune’

In August of 2021, Gautam Adani had the first of several meetings with an official in the southern state of Andhra Pradesh, to whom he allegedly ultimately promised $228 million in bribes in exchange for agreeing to have the state buy the power, according to the Justice Department’s indictment.

By December, Andhra Pradesh had agreed to buy the power, and other states with smaller contracts soon followed. Other states’ officials were promised bribes as well, US authorities said.

During a Dec. 6, 2021 meeting at a coffee shop, Azure executives allegedly discussed “rumors that the Adanis had somehow facilitated signing” of the deals, according to the SEC.

Gautam Adani said on Dec. 14, 2021, the company was on track “to become the world’s largest renewables player by 2030.”

“The sudden good fortune for Azure and Adani Green prompted speculation in the marketplace about the contract awards,” the SEC wrote in its complaint.

Letter from the SEC

Before long, the SEC began to probe. The agency sent a “general inquiry” letter to Azure — which at the time traded on the New York Stock Exchange — on March 17, 2022, asking about its recent contracts and if foreign officials had sought anything of value, according to the Justice Department indictment.
According to the Department of Justice, Gautam Adani told representatives of Azure during a meeting in his Ahmedabad, India office the next month that he expected to be reimbursed more than $80 million for the bribes he had paid officials that ultimately benefited Azure’s contracts.

Some Azure representatives and a leading investor in the company decided to pay Adani back by allowing his company to take over a potentially profitable project. The representatives and investor allegedly agreed to tell Azure’s board of directors that Adani had requested bribe money, but hid their role in the scheme, prosecutors said.

All the while, Adani’s companies were raising billions of dollars in loans and bonds through international banks, including from US investors. In four separate fundraising transactions between 2021 and 2024, the companies sent investors documents indicating that they had not paid bribes — statements prosecutors say are false and constitute fraud.

FBI search

During a visit to the United States on March 17, 2023, FBI agents seized Sagar Adani’s electronic devices. The agents handed him a search warrant from a judge indicating that the US government was investigating potential violations of fraud statutes and the Foreign Corrupt Practices Act.

According to prosecutors, Gautam Adani emailed himself photographs of each page of the search warrant on March 18, 2023.

His companies nonetheless went through with a $1.36 billion syndicated loan agreement on Dec. 5, 2023, and another sale of secured notes in March 2024, and once again furnished investors with misleading information about their anti-bribery practices, according to prosecutors.

On Oct. 24, federal prosecutors in Brooklyn secured a secret grand jury indictment against Gautam Adani, Sagar Adani, Gupta, and five others allegedly involved in the scheme.
The indictment was unsealed on Nov. 20, prompting a $27 billion plunge in Adani Group companies’ market value. Adani Green Energy promptly canceled a scheduled $600 million bond sale.

UK sanctions Angola’s Isabel dos Santos in graft crackdown


By AFP
November 21, 2024

Isabel Dos Santos is one of three people dubbed 'infamous kleptocrats' by the UK government - Copyright AFP/File Patrick T. Fallon

The UK government on Thursday announced sanctions on Angola’s Isabel dos Santos, the billionaire businesswoman and daughter of the country’s former president, as part of a new anti-corruption drive.

It also sanctioned Dmytro Firtash, a Ukrainian tycoon with links to the Kremlin, and Aivars Lembergs, one of Latvia’s richest people, who is accused of abusing his political position to commit bribery and money laundering, the foreign ministry said.

They are all subject to travel bans and asset freezes, it added in a statement, calling them “three infamous kleptocrats” and accusing them of “stealing their countries’ wealth for personal gain”.

Dos Santos, the ministry said, had “systematically abused her positions at state-run companies to embezzle at least £350 million ($443 million), depriving Angola of resources and funding for much-needed development”.

Considered Africa’s richest woman, she is currently wanted by Angolan authorities investigating alleged illegalities in the management of national oil company Sonangol between 2016 and 2017.

Her father, Jose Eduardo dos Santos, who died in 2022, ruled energy-rich Angola for 38 years until 2017.

She was sanctioned by the United States in 2021 for “involvement in significant corruption” and is barred from entering the United States.

Responding to the UK decision Thursday, dos Santos said that it was “incorrect and unjustified” and that she “intends to appeal”.

“I hope that the United Kingdom will give me the opportunity to present my evidence and prove these lies fabricated against me by the Angolan regime,” she said in a statement released in Portuguese.

“No court has found me guilty of corruption or bribery,” she added. “We are facing another step in Angola’s politically motivated campaign of persecution against me and my family.”

– ‘Ill-gotten gains’ –

Firtash is a one-time ally of ousted pro-Russian Ukrainian president Viktor Yanukovych.

He is currently in Austria fighting extradition to the United States, where he is wanted on bribery and racketeering charges.

In June 2021, Ukrainian President Volodymyr Zelensky signed a decree imposing sanctions on Firtash, including the freezing of his assets and withdrawal of licences from his companies, after accusing him of selling titanium products to Russian military companies.

“(Firtash) extracted hundreds of millions of pounds from Ukraine through corruption and his control of gas distribution and has hidden tens of millions of pounds of ill-gotten gains in the UK property market alone,” the UK government statement added.

Sanctions would also be imposed on his wife, Lada Firtash, and UK-based Denis Gorbunenko, a UK-based financial “fixer”.

Lembergs, a former mayor, is accused of bribery and money laundering. His daughter, Liga Lemberga, is also sanctioned.

In 2021, a Riga court found him guilty of 19 charges including extorting bribes, forging documents, money laundering and improper use of office.

The measures are the latest under 2021 anti-corruption sanctions legislation brought in by the previous Conservative administration.

“These unscrupulous individuals selfishly deprive their fellow citizens of much-needed funding for education, healthcare and infrastructure — for their own enrichment,” said Foreign Secretary David Lammy, a member of the UK’s new Labour government elected in July.

 ”I committed to taking on kleptocrats and the dirty money that empowers them when I became Foreign Secretary… The tide is turning. The golden age of money laundering is over,” he said.

The Conservative government of Boris Johnson announced the first sanctions under its new global anti-corruption regime in 2021.

Britain had previously followed the European Union’s sanctions regime but since leaving the bloc in January 2020 struck out alone with its own policy.

The global anti-corruption sanctions were designed to prevent Britain from being a haven for illicit funds and money laundering.

Sacred cow: coal-hungry India eyes bioenergy to cut carbon

By AFP

November 7, 2024

Dung from India's cows, sacred to many in the Hindu-majority country, is b

eing used to power a movement towards biogas fuel -

 Copyright AFP Punit PARANJPE

Philippe ALFROY

Venerated as incarnations of Hindu deities, India’s sacred cows are also being touted as agents of energy transition by a government determined to promote biogas production to cut its dependence on coal.

It is an understatement to say that Nakul Kumar Sardana is proud of his new plant at Barsana, in India’s northern Uttar Pradesh state.

Firstly, says the vice-president of a biomass joint venture between India’s Adani Group and France’s TotalEnergies, because it occupies “one of the holiest sites in the world”.

A four-hour drive south of the smog-filled capital New Delhi, among fields bristling with brickyard smokestacks, the small town of Barsana welcomes pilgrims who come to honour the Hindu goddess Radha.

But Sardana is also proud because his methanisation plant that opened in March is the “most technologically advanced and the largest biogas facility” in India.

It was built in Barsana to be as close as possible to its raw fuel — cattle dung and harvest stubble.

“This region is home to a million cows,” he said. “Their dung has been used as fuel for centuries in cooking”.

Cows have been blamed for contributing to global warming because they produce methane — a powerful greenhouse gas — in their manure or when they belch.

But in this case, the region is finding a creative use for the waste produced by the cattle, which are used for their milk. Eating them is taboo for many Hindus.

Stalks left behind after the rice harvest — that would otherwise be burned — join the slurry.

“Farmers are traditionally burning them, creating smog and pollution”, he added.

“In using natural waste, we are not only producing compressed biogas, but also high-quality organic fertiliser.”

Long lines of tractors dump dung and straw in the factory’s tanks, from which 10 tonnes of gas and 92 tonnes of fertiliser are produced each day.



– ‘Convert waste’ –



In its endless quest for power to fuel its economic growth, the world’s most populous nation — and third-largest fossil fuel polluter — has pushed biogas to achieve a much-promised transition to carbon neutrality by 2070.

In 2018, the government set itself an ambitious goal of building 5,000 biogas plants in six years.

But despite generous subsidies and the introduction of a buyback guarantee, the project attracted little initial interest — until the government forced the hand of producers.

From April 2025, at least one percent of liquid gas fuelling both vehicles and for domestic use must be biogas — rising to five percent by 2028.

That prompted a response from key players, starting with billionaires Mukesh Ambani and Gautam Adani — both close to Prime Minister Narendra Modi — eying lucrative public contracts.

Ambani promised his Reliance group would build 55 biogas plants by the end of 2025 to convert “food producers to energy producers” and generate 30,000 jobs.

His rival Adani plans to invest around $200 million in the sector in the next three to five years.

“The government is pushing to convert waste for the wealth of the country,” said Suresh Manglani, CEO of Adani Total Gas.

The International Energy Agency (IEA) says both China and India are leading global growth in bioenergy, seen as one solution to mitigate global heating.

Even though biofuel remains more expensive than conventional gas, Indian production is expected to grow by 88 percent by 2030, it predicts.

Biogas is considered a clean energy because the waste used to produce it is completely natural, said Suneel Pandey of The Energy and Resources Institute.

It is “a sustainable solution to make wealth from waste,” he told AFP.



– ‘Potential is huge’ –



But the contribution of biogas to India’s transition away from heavily polluting coal — currently fuelling nearly 70 percent of electricity — will be relatively small.

India plans to more than double the share of gas in its energy mix — from six to 15 percent by 2030.

But the bulk of that will be liquefied natural gas (LNG), with Adani and TotalEnergies opening an LNG port on India’s eastern coast at Dhamra.

Burning gas to produce electricity also releases damaging emissions, although less than coal and oil.

Total argues its backing of biogas is more about environmental responsibility than commercial opportunity.

“Biogas goes way beyond figures and business plans,” said Sangkaran Ratnam, TotalEnergies chairman and managing director for India.

“It has also a tremendously positive knock-on effect on the rural communities in terms of jobs, in terms of care for the environment, and alternative forms of income.”

Tejpreet Chopra, head of renewable energy company Bharat Light and Power, said the biogas market is “small in the big picture of things” but the “potential is huge”.

But the investments required are vast. The Barsana plant cost $25 million, while the price of biogas remains uncompetitive: $14 per cubic metre, compared to $6 for LNG.

Yet Sardana remains more convinced than ever that biogas is key.

“We will learn the nuts and bolts of it and improve all processes,” he said.

“We stop wasting energy, we create rural jobs, and we are contributing to a more sustainable environment.”

The Corporate Vehicles Changing International Commerce

John P. Ruehl

October 18, 2024
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Photograph by Nathaniel St. Clair

On September 17, 2024, thousands of pagers belonging to Hezbollah members simultaneously exploded across Lebanon, killing dozens and wounding thousands, including civilians. The pagers were licensed by Taiwanese company Gold Apollo from the manufacturer BAC Consulting, a Hungary-based company registered in 2022. BAC Consulting is suspected of being an Israeli front company, working alongside Israeli shell companies that facilitated transactions with Gold Apollo and Hezbollah entities. The operation shows Israel’s use of “corporate vehicles” to launch the attack and obscure responsibility.

After growing in use during the Cold War, the rise of the internet and global finance has made corporate vehicles easier to establish and operate. Though some serve legitimate purposes, the massive growth in new companies over the past two decades has masked the growing use of entities used for questionable purposes. Governments, corporations, ultra-wealthy individuals, organized crime, and militant groups use them to obscure their activities and assets. Their sophistication continues to evolve in an increasingly interconnected ecosystem.

The success of a front company hinges on its ability to appear legitimate. They engage in genuine business activities to blend in, making them particularly useful for intelligence operations. In the 1980s, for instance, Israeli intelligence established a resort and scuba business on the Sudanese coast to secretly smuggle Ethiopian Jews to Israel. But while this was a rare case with a humanitarian goal, intelligence agencies more often rely on corporate vehicles for less altruistic reasons.

In the 1960s, the CIA created several front companies to acquire Soviet titanium for the SR-71 Blackbird program. Later, in the 1980s, it used front companies to hide its role in the Iran-Contra affair, during which the U.S. sold weapons to Iran and funneled the profits to Nicaraguan rebels. The CIA then used a front company to quietly purchase the screen rights to the scandal to prevent a movie from being made about it. The role of CIA front companies in building black sites in Europe in the aftermath of 9/11 also raised concerns.

In 2020, Swiss authorities launched an investigation into the Swiss-based global encryption company Crypto AG after it was revealed that U.S. and (West) German intelligence had operated it for 50 years. More than 120 governments were spied on. The U.S. sold its remaining shares in 2018.

Other front companies are created for more short-term operations. In 2018, the FBI and the Australian police launched an encrypted messaging platform, AN0M. Marketed to criminal groups, it allowed international law enforcement to monitor communications and arrest 800 people across more than a dozen countries before being dismantled in 2021.

Conversely, criminal groups frequently establish front companies of their own to launder money and evade law enforcement. Common examples include construction companies, dock-loading enterprises, casinos, restaurants, and car washes. Throughout 2024, for example, thousands of pounds of cocaine have been discovered hidden in shipments of bananas throughout Europe.

U.S. adversaries also utilize front companies, with China increasingly employing them to access sensitive technologies and intellectual property in sectors like computers, aerospace, AI, semiconductors, and telecommunications. These front companies can also gather economic and industrial data and embed themselves into critical supply chains.

Western sanctions have also increased the use of front companies. Since 2022, Russian front companies have been used to transport natural resourcesand obtain Western technologies, similar to strategies long used by countries like North Korea, Syria, and Iran. Iran’s and Hezbollah’s use of front companies has often come with assistance from major Western financial institutions. Reports from 2024 indicated that two of the UK’s largest lenders, Santander UK and Lloyds Banking Group, provided bank accounts for Iranian front companies.

Front companies are commonly used by other companies as well. The Coca-Cola Company has employed front companies such as the Center for Consumer Freedom (CCF) and Global Energy Balance Network (GEBN) to lobby for its interests while minimizing the appearance of any connections. Pharmaceutical companies have similarly set up front companies to pressure health care providers and legislators to adopt their products.

In contrast to the more open nature of front companies, shell companies thrive on their subtlety. Typically registered in tax havens like the British Virgin Islands, Cyprus, or U.S. states like Delaware, these entities lack any assets or operations and exist solely on paper to store wealth and facilitate financial transactions. They can be established in lawyers’ names, with figureheads serving in official positions to mask true ownership.

Shell companies are easy and inexpensive to create, and are useful tools for tax evasion, generating false invoices and consultancy fees, and money laundering. Non-publicly traded companies often serve as shell companies, but the introduction of limited liability companies (LLCs) in the U.S. in 1977 expanded their use by offering greater anonymity, limited liability, and fewer regulatory burdens. Similar entities exist in Europe, and according to 2024 data from Moody’s, the UK leads globally, with nearly 5 million “suspect companies.” Meanwhile, the EU accounts for 4 million, largely in France and Cyprus.

The role of shell companies has been increasingly exposed over the last decade through leaks and whistleblowers. The Panama Papers, released by the International Consortium of Investigative Journalists in 2016, unveiled years of records from Panamanian law firm Mossack Fonseca, which created shell companies for various clients. Little attention was paid to who its clients were, which included Mexican drug cartels.

Politicians lack the will to combat this issue, as many are complicit. The fallout from the Panama Papers led to the resignation of Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson, who had hidden millions of dollars in an offshore shell company despite campaigning on financial justice. The Paradise Papers, released in 2017 and primarily sourced from Bermuda law firm Appleby, similarly implicated corporations, government officials, and other high-profile individuals from around the world.

This data highlights only two firms, but the globalization of finance has spread the issue worldwide. Former Pakistani Prime Minister Nawaz Sharifalso resigned due to revelations from the Panama Papers. The Pandora Papers, published in 2021, meanwhile exposed secret offshore accounts held by dozens of former and current world leaders. Additionally, an ongoing scandal in India has revealed how the current Chairperson for the Securities and Exchange Board of India (SEBI) and her husband had hidden assets in Bermuda and Mauritius. These funds were also used by Vinod Adani, India’s richest person, raising concerns over a conflict of interest in the prosecution of Adani Group for financial crimes.

While personal use of shell companies is common, corporations remain the main driver behind them. A 2017 report by the U.S. PIRG advocacy group revealed that 366 of the Fortune 500 companies have subsidiaries in offshore tax havens, largely in the form of shell companies. These corporations held over $2.6 trillion in offshore profits and owed an estimated $752 billion in back federal taxes.

Fearing financial and legal repercussions stemming from its role in the opioid crisis, Purdue Pharma family members began shifting billions of dollars out of the U.S. in 2007, much of it funneled through shell companies to hide the money’s trail. Many of these funds were then placed into trusts, another corporate vehicle where assets are held by a trustee, making them harder to seize as they are no longer considered part of the settlor’s personal estate. A trial began in 2019, and by 2022, they were ordered to pay $6 billion, though legal battles continue.

Financial misconduct aided by shell companies can be difficult to prove. A 2019 whistleblower report by Harry Markopolos, who previously had exposed Bernie Madoff’s Ponzi scheme, claimed that General Electric has underfunded its long-term care insurance reserves and established shell companies to take on its losses and lie about its true financial health. The year before, British defense company BAE Systems was reported to have used shell companies in the British Virgin Islands to send more than £135 million in bribes to public officials in Saudi Arabia and elsewhere. Both companies denied the allegations.

The 2020 FinCEN files meanwhile exposed how banks globally have been complicit in enabling the abuse of shell companies, despite consistent warnings and red flags. Political action targeting this problem is likely to remain slow—in 2023, Representative James Comer, who led an investigation into Hunter Biden’s alleged financial irregularities, including the use of shell companies, was himself implicated in using a shell company.

Front and shell companies are often set up quickly for specific purposes, but growing scrutiny has increased the appeal of shelf companies. These pre-registered, inactive companies can be sold or used immediately, allowing owners to bypass the registration process. Some even come with bank accounts, websites, and credit cards. Shelf companies can also be “warmed up” by conducting business with other shelf companies, building a transaction and credit history, and can function as both front and shell companies.

Though available globally, the UK and the U.S. lead in shelf company offerings. Ownership transfer can happen in a day, allowing immediate movement of money or assets. Selling shelf companies in itself is a huge business—new shelf corporations can sell for a few hundred dollars, while “aged corporations” can cost up to $10,000. In September 2024, a U.S. man was fined $75,000 for creating nearly 16,000 shelf companies in Colorado, exploiting the state’s discounted filing fees.

The long-term use of front companies, often in tandem with other corporate vehicles has become evident in high profile cases. In 1998, Nigeria’s oil minister, Dan Etete, awarded the rights to a large offshore oil block, OPL 245, to a shelf company he owned called Malabu. In 2011, Western energy firms Shell and Eni purchased the rights for $1.3 billion from Malabu, sparking a major anti-corruption investigation.

The case gained further attention in 2018, when Drumcliffe Partners, a Delaware-incorporated investment fund based in Washington, D.C., became involved. Through its shell company, Poplar Falls LLC, Drumcliffe Partners was poised to receive 35 percent of recovered assets, well above Nigeria’s traditional 5 percent limit. The fallout from the deal remains ongoing.

Other corporate structures have also become common. Holding companies, for example, own shares of assets of other businesses. The International Holding Company (IHC), based in the United Arab Emirates, saw its market capitalization grow from $215 million in 2018 to $240 billion by 2023. While rapid growth isn’t inherently controversial, the lack of transparency around IHC’s financial practices and its political connections to the Abu Dhabi royal family have brought attention to how holding companies can quickly accumulate value and serve as a vehicle for market manipulation and potential corruption. Charities and other types of nonprofits are also convenient vehicles for money laundering, hiding assets, and political influence, all while maintaining an air of legitimacy and goodwill.

International finance is now characterized by corporate vehicles, used by powerful individuals and corporations in ways that most can’t. The problem is institutional, with politicians often looking the other way or directly benefiting from these entities. Previous legislation, such as the U.S. Foreign Account Tax Compliance Act, the Corporate Transparency Act, and the EU’s 5th Anti-Money Laundering Directive have all failed to stem the problem. The United States’ refusal to sign the OECD Common Reporting Standard, designed to give automatic exchange of tax data, highlights the lack of real political commitment. Until that changes, corporate vehicles will remain an increasingly useful tool for hiding wealth, wielding influence, and dodging accountability.

This article was produced by Economy for All, a project of the Independent Media Institute.

John P. Ruehl is an Australian-American journalist living in Washington, D.C. He is a contributing editor to Strategic Policy and a contributor to several other foreign affairs publications. He is currently finishing a book on Russia to be published in 2022.