Documents falsified to evade tax on Abramovich's wealth

Watch: The documents that were falsified to allow Roman Abramovich to evade tax

By James Oliver, Rory Tinman, BBC Panorama and Simon Lock, the Bureau of Investigative Journalism

An investigation by BBC Panorama has revealed that Deloitte played a significant role in falsifying documents intended to obscure Roman Abramovich's wealth and facilitate tax evasion.

Documents signed by Deloitte in Cyprus allowed for the omission of assets valued at $672 million (£508 million), including superyachts, mansions, and private jets from Abramovich’s company accounts.

The investigation suggests that Deloitte provided advice on a scheme to circumvent substantial tax obligations related to the oligarch's wealth through document falsification.

Legal expert Andrew Mitchell KC highlighted that the evidence presented by Panorama indicates the scheme exemplifies "straightforward" tax evasion and is "strikingly blatant."

Abramovich's legal representatives maintain that he denies any wrongdoing concerning tax evasion or concealment of assets. They assert that Panorama has not presented evidence demonstrating his knowledge of or authorization for the document alterations and that reliance on professional advice was entirely legitimate.

Deloitte Cyprus stated that it "acts in compliance with applicable laws."

These allegations emerge from a collaborative investigation by BBC Panorama and the Bureau of Investigative Journalism.

Background

For nearly twenty years, Roman Abramovich was a prominent figure among Russian oligarchs in the UK, having acquired Chelsea Football Club in 2003 and funding the club during its most prosperous era. However, the situation dramatically changed following Russia's full-scale invasion of Ukraine in 2022, leading to sanctions imposed by the UK government due to his ties to President Vladimir Putin, which resulted in the forced sale of the football club.

Currently residing in Turkey, a country that has not imposed sanctions against him, Abramovich has his assets amounting to £5.4 billion frozen in the Channel Islands of Jersey, where a criminal investigation has been ongoing for four years.

His lawyers have conveyed to the BBC that he refutes the claims made in the Jersey investigation, arguing that the inquiry is politically motivated.

This investigation has uncovered pertinent revelations regarding the administration of Abramovich's business ventures while calling into question the credibility of certain professional advisors.

The leaked evidence

The evidence stems from a leak that consists of thousands of documents detailing the finances of Abramovich and the operations of a network of offshore companies managed from Cyprus, a locale that was previously regarded as a tax haven for Russians, covering the period from 1995 to 2022.

The BBC and multiple media partners, including the Guardian, Paper Trail Media, the Organised Crime and Corruption Reporting Project, and the Cyprus Investigative Reporting Network, as well as the Bureau of Investigative Journalism, have been reporting on these leaked files since 2023 as part of the International Consortium of Investigative Journalists' Cyprus Confidential investigation.

Previously, in 2022, Panorama highlighted that Abramovich's wealth derived from a controversial transaction involving the acquisition of a Russian state-owned oil company in the 1990s, which he sold back to the government for substantial profits a decade later. Abramovich has refuted claims of corruption linked to this transaction.

The Cyprus corporate network

Proceeds from Abramovich's oil dealings in Russia were redirected into a complex network of offshore companies, managed by a corporate services firm named MeritServus located in Limassol, the second-largest city in Cyprus.

Until 2005, Deloitte, recognized as one of the "big four" accounting firms, owned MeritServus. Even after their separation, both entities collaborated closely with Abramovich's associates to oversee his global financial interests.

Documents leaked from MeritServus reveal troubling practices related to asset management.

Panorama - Roman Abramovich: How He Hid His Fortune

He was the Russian oligarch who brought his wealth to the UK. But what's the truth about Roman Abramovich's fortune? Panorama investigates the documents that were falsified to conceal his wealth and avoid tax.

Watch now on BBC iPlayer or on BBC One at 20:00 BST on Monday 12 October.

The 2006 backdating scheme

One notable instance of backdated documentation occurred in 2006 following the enactment of a new law in Cyprus, which mandated the public disclosure of company accounts, thereby presenting a risk of exposing the details of Abramovich's considerable wealth.

Deloitte Cyprus prepared draft accounts for 2003 for Abramovich's Cypriot company, Amiscan Investments, illustrating assets totaling $672 million in luxury properties.

Included among these assets were a mansion in West Sussex, a luxury flat in London, an estate in southern France, helicopters, private jets, and a fleet of boats, including the $147.5 million Pelorus.

To maintain secrecy, Abramovich’s associates and MeritServus opted to retroactively alter the historical record. They devised a scheme to evade the transparency law by transferring the assets to Amiscan’s parent company located in the British Virgin Islands (BVI), thereby keeping them concealed. They backdated this asset transfer to 2003 to create the illusion that it had occurred three years prior.

Deloitte Cyprus reviewed these backdated documents, deeming them "adequate" to facilitate the removal of assets from Amiscan's accounts.

When Deloitte approved Amiscan’s 2003 accounts in 2006, the assets of homes, planes, and yachts vanished with a mere stroke of the pen, leaving only $75,000 in assets on record.

Deloitte sanctioned these accounts despite being aware, as indicated in the leaked documents, that they were fundamentally deceptive.

Lord Sikka, a professor of accounting at the University of Sheffield, described this action as a "violation of a statutory duty" and characterized it as "pretty scandalous" to misrepresent transaction dates and fail to provide true and fair accounts.

The Kravin tax evasion scheme

Further evidence from Panorama points to the existence of another backdated documents scheme related to tax evasion.

This scheme involved a separate Cypriot entity of Abramovich's, Kravin Investments, which held nearly $2 billion in assets as of 2003.

Given its substantial interest earnings, Kravin should have been liable for tax payments to Cypriot authorities.

However, advisers suggested a plan to modify history.

In August 2005, an email from MeritServus to Abramovich's Russian associates indicated that a strategy had been formulated following discussions with Deloitte, stating, "If you agree, it will be necessary to change the financial statements and the accounting records accordingly for 2003 and 2004."

MeritServus further informed the Russian associates that Kravin's "Provisional Tax Assessments for 2005" would be filed to indicate no income.

A month later, a Russian associate expressly agreed to this proposition.

Subsequently, MeritServus generated a series of backdated documents that falsely indicated Kravin was merely managing and investing funds on behalf of its BVI parent company, effectively suggesting that Kravin did not own the funds and therefore was not subject to tax liabilities in Cyprus.

In a September 2005 correspondence, Deloitte admitted that “certain changes will have to be made to the accounts (bank account balances, interest income, profit and loss account)" due to the adjustments made to Kravin's records.

This suggests that Deloitte was involved in the advice surrounding the falsification of financial records, effectively enabling Abramovich's company to evade millions in taxes.

Andrew Mitchell KC affirmed that the situation exemplifies "straightforward" tax evasion, stating, "If it happened in England and involved millions, His Majesty's Revenue and Customs would undoubtedly consider prosecution."

Cypriot MP Christos Christofides remarked that if tax evasion occurred, "we must explore how we can recoup our money and ensure that those culpable face legal consequences."

The $10 billion disappearance

Alongside the backdated documents facilitated by Deloitte, Abramovich's consultants at MeritServus fabricated another set of records pertaining to the oligarch’s vast business holdings—over $10 billion—associated with a company named Electus Investments situated in Cyprus.

MeritServus backdated documentation to falsely represent that Electus did not retain ownership of this fortune.

The firm utilized another entity, with the identical name, also called Electus Investments, based instead in the more clandestine British Virgin Islands, which did not mandate public disclosure of accounts.

Evidence obtained reveals that in 2006, MeritServus recognized that the wealth belonged to Electus Cyprus. However, they proposed a revision of history, aiming to "transfer the beneficial ownership to Electus Investments in the BVI," retroactively arranging it to appear as if this change had transpired three years earlier.

MeritServus documented and backdated these misleading transactions to indicate that the BVI company had owned the $10 billion fortune since November 20, 2003. Thus, when the accounts for the Cypriot company were released, they suggested that it had assets totaling merely $145,000.

As a result, Abramovich's extensive wealth was effectively concealed.

Andrew Mitchell KC expressed to Panorama: "This illustrates the readiness of professionals to bend or violate both professional and legal standards, demonstrating a willingness to go to great lengths to fabricate documents."

Expert commentary

Vladimir Milov, who served as Russia's deputy minister of energy during Abramovich’s wealth accumulation and is now a vocal critic of the Russian government, pointed out, "For every Russian oligarch, as well as for their counterparts from the Middle East or Africa, there exists a substantial network of Western financial, legal, and public relations service providers, who readily profit from sanitizing reputations and presenting them as legitimate."

Responses and denials

Roman Abramovich's legal representatives have categorically refuted any allegations of misconduct, asserting that he was "not involved in the day-to-day operations of those companies" and that reliance on professional advice was both appropriate and lawful.

Deloitte Cyprus refrained from commenting on the specific allegations due to the age of the documents, which exceed 20 years and are no longer accessible.

MeritServus ceased operations following the exposure of the Cyprus Confidential leak.