Further controversy on the horizon for EU #freeports?

| April 15, 2019

Le Freeport Luxembourg, a hulking warehouse adjacent to Findel Airport which thanks to a special status allows goods from fine wine to Old Masters to remain untaxed almost indefinitely in its vaults, has been under heavy scrutiny recently.

After a group of MEPs expressed their concerns that the facility could be used “as a hotbed for money laundering and tax evasion”, the European Parliament has put getting rid of the free zones across the European Union at the top of its agenda. So far, however, European Commission President—and former Luxembourgish prime minister, under whose watch Le Freeport was built—Jean-Claude Juncker has responded to MEPs’ objections to the special tax zones with “condescension and dismissal”, as German MEP Wolf Klinz noted.

Juncker’s nonchalance notwithstanding, European journalists and lawmakers have identified a litany of issues with the Luxembourg freeport, from the possibility that looted antiquities from Syria and Iraq may be finding their way into such storage sites to the highly problematic profile of Le Freeport’s majority shareholder and so-called “freeport king”, Yves Bouvier. Bouvier, a shipper of luxury goods turned art dealer, is being sued by a former client in multiple jurisdictions around the world for more than $1 billion of alleged art fraud. He’s also being investigated by the Swiss authorities who believe he may owe more than CHF 165 million in back taxes. Le Freeport’s other shareholders have a chequered history as well—Jean-Marc Peretti apparently has links to organised crime in Corsica, while Olivier Thomas was accused of stealing three Picasso paintings from the renowned painter’s stepdaughter.

On top of this already-extensive catalogue of problems with the freeport model, a new worry has cropped up. An in-depth investigation reveals that Philippe Dauvergne, CEO of Le Freeport Luxembourg, may have links to individuals involved in the Azerbaijani Laundromat, a multi-billion-dollar money-laundering operation in which Azerbaijan’s ruling elite passed large sums of money through UK-registered shell companies.

Fraud on a massive scale

The $2.2 billion operation which has become known as the Azerbaijani Laundromat ran between 2012 and 2014. Institutions including the Azerbaijani government  and the state-owned International Bank of Azerbaijan (IBA)—which was nearly on the brink of collapse after defaulting on its debt in 2017—pumped huge amounts of money into four UK companies managed by shadowy figures in the British Virgin Islands: Hilux Services, Polux Management, Metastar Invest and LCM Alliance.

The cash laundered through these foreign firms then went to pay for everything from Azerbaijani elites’ luxury lifestyles to illicit lobbying of European and American politicians. The full details of this large-scale influence operation are still becoming clear. Earlier this year, German MP Karin Strenz was the first European policymaker to face consequences in her home country for accepting undisclosed gifts from Azerbaijani lobbyists, and witnesses have recounted appalling tales of brown-envelope bribes being handed out in the Parliamentary Assembly of the Council of Europe (PACE) before a vote on the human rights situation in Azerbaijan.

Among the key figures in organising this fraudulent scheme, according to the Organized Crime and Corruption Reporting Project (OCCRP), was former CEO of the IBA Jahangir Hajiev. Hajiev is currently incarcerated for 15 years after having been convicted of fraud, embezzlement and misappropriation of public funds. His wife Zamira fled to the UK, only to spend an unprecedented £16 million at Harrods and become the first recipient of an Unexplained Wealth Order under a new UK anti-corruption law.

Hajiev and Dauvergne’s mutual colleague: Khagani Bashirov

Hajiev’s former colleague Khagani Bashirov seems to have taken full advantage of the laundromat as well, according to an investigation by Azadliq, the Azerbaijani branch of RFE/RL. A French citizen of Azeri origin who lives in Luxembourg, Bashirov established a number of companies which received substantial loans from the IBA. These loans were never repaid thanks to Bashirov’s personal connection with Hajiev, according to Azerbaijani journalist Khadija Ismayilova. Instead, a number of companies Bashirov controlled sent and received funds from the UK-based companies which made up the Azerbaijani laundromat.

According to publicly-available corporate registers, Bashirov and Philippe Dauvergne—of Le Freeport fame—collaborated on at least 13 companies throughout the years, from 2008 to 2018, from VES Consultancy and Concept.com in the UK, to Slovalux Investment in Slovakia, to the European Sports and Entertainment Agency in Switzerland. While Dauvergne has left a number of the firms he shared with Bashirov, the two men remain on the board of the Chamber of Commerce Luxembourg-Azerbaijan together. Belgian authorities reportedly believe that there’s a high likelihood that Dauvergne has been associated with some of the companies involved in the Azerbaijani laundromat.

Adding to the weight of evidence against Luxembourg freeport

Dauvergne’s close business connections with Bashirov raise questions about whether he’s the right person to be defending Le Freeport Luxembourg against allegations that the facility, already tarnished by founder Yves Bouvier’s dubious reputation, could be “a black hole” for tax evasion and money laundering, as one MEP described it, and a “crime blind spot”.

Indeed, Dauvergne’s concerning business ties just add to the overall lack of transparency surrounding freeports. As MEPs have pointed out, it’s unclear what goods are being stored in European freeports, who these goods’ real owners are, whether the valuables have been legally acquired, how often the items held in freeports have been sold and for how much, and what taxes have been paid on them. With an estimated €110 billion—a full 1% of the EU’s GDP—laundered each year in the bloc and scandals from 2014’s Lux Leaks to the Azerbaijani Laundromat uncovering the extent to which dirty money has infiltrated European policymaking, it’s understandable that EU politicians like German MEP Wolf Klinz have concluded that the risks of maintaining facilities with a reputational profile like Le Freeport Luxembourg significantly outweigh the benefits.


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Category: A Frontpage, Economy

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