The daughters of Azerbaijan’s president have a secret offshore company in the British Virgin Islands that was set up last year to help manage their multimillion-pound property portfolio in Britain
Leyla and Arzu Aliyeva – who have cultivated high profiles inside and outside their home country – are shareholders in Exaltation Limited, leaked documents reveal. The company was incorporated in April 2015 with the purpose of “holding UK property”. The London law firm that set it up, Child & Child, claimed – wrongly – that the two women had no political connections.
The business interests and property portfolios of President Ilham Aliyev and his family have been the subject of extensive reporting in recent years.
These fresh revelations come amid growing concern in government that house price inflation – particularly in London - is being fuelled by rich foreign investors, who are now estimated to own more than £170bn of UK property.
Three years ago, David Cameron launched a campaign to demand more transparency about the ownership of offshore vehicles.
The network of companies used by Azerbaijan’s ruling family and their associates are set out in the Panama Papers, a leak of the database of the offshore law firm Mossack Fonseca obtained by the German newspaper Süddeutsche Zeitung. It was shared by the International Consortium of Investigative Journalists in Washington with the Guardian, the BBC and other media around the world.
President Aliyev has ruled the country since 2003. During this time his daughters have reportedly amassed vast personal business empires. They own luxury apartments in the UAE, as well as interests in telecoms and gold mining.
It was already known that Leyla Aliyeva owned a £17m mansion on Hampstead Lane in north London, next door to Kenwood House and overlooking Hampstead Heath. She is an artist and socialite, with friends said to include Prince Andrew, Lord Mandelson and Elisabeth Murdoch.
The papers show that she set up a new offshore firm at the time of her 2015 divorce from Emin Agalarov, an ethnic Azerbaijani businessman and pop star. The couple lived in Moscow and also reportedly owned a luxury penthouse overlooking Hyde Park. Aliyeva, 30, is said to prefer Britain to Russia.
Under the British government rules, Leyla and Arzu Aliyeva are classified as “PEPs” – politically exposed persons. The term encompasses anybody with links to top political leaders, including family members and close associates. It is not illegal for people classified as PEPs to own offshore businesses, but those companies are supposed to be subject to greater scrutiny and due diligence checks by banks.
However, it appears that Child & Child, the firm of London solicitors that acted on behalf of Aliyev’s daughters, did not declare their high-profile status. Asked on company formation documents in January 2015 if the two women were PEPs, Child & Child ticked “no” rather than “yes”.
It is not clear whether their status as PEPs was overlooked. The Guardian repeatedly asked Child & Child to comment but it declined to do so.
Child & Child, whose Knightsbridge office overlooks the gardens of Buckingham Palace, bought Exaltation Ltd on behalf of the Aliyev daughters from the Jersey branch of the Panamanian law firm Mossack Fonseca.
Child & Child requested nominee directors for the new company, at the cost of $550 each.
The total value of Exaltation Ltd’s assets is unclear, but is put in documents at “over $1m”. The money is said to come from “personal savings”.
Hidden foundation
Another London solicitor, Derrick French, was involved in arranging a separate hidden foundation belonging to Azerbaijan’s first family. His firm, Derrick French & Co, set up a clandestine Panamanian trust called UF Universe Foundation, which controlled a majority stake in Ata Holding, one of Azerbaijan’s biggest conglomerates.
Ata Holding was established in 2003. The files suggest its first owner was Azerbaijan’s minister of taxes, Fazil Mammadov, with a secret controlling stake in the $600m conglomerate from 2003.
Documents in 2005 show how he planned to share Ata Holding, which owns two major banks, construction firms and Baku’s five-star Excelsior hotel, with President Aliyev’s three children.
Mammadov has been the country’s senior tax official since before Aliyev came to power, but his apparent financial links to the ruling family were until now unclear.
It is understood that Mammadov has never publicly declared an interest in Ata.
According to documents, the scheme was managed through the UK. In December 2002, a company called FM Financial Management Holding (UK) Ltd was incorporated in England. Its only share was held on trust by French, and it controlled 75% of Ata, according to company accounts. Its purpose appeared to be to channel tax free dividends from Ata to an offshore company, the Panama-registered FM Management Holding Group SA.
Records show Mossack Fonseca asked French for a letter explaining what the company was for and who owned it. He replied: “The ultimate owner of the structure is FM. At the moment I hold the share of the UK company on trust pending the setting up of the whole structure … FM is Azerbaijani. I have done all the due diligence on him within your guidelines … It is intended that the Panama company will act as a holding company receiving dividends from the UK company, which under UK law are paid without any withholding tax.”
Evidence to suggest Mammadov was the person referred to as FM comes from documents sent to Mossack Fonseca in 2005.
From his office in the City of London, French issued papers in 2005 outlining a change of control at UF Universe Foundation. Aliyev’s children were to become beneficiaries. Leyla, Arzu and their brother, Heydar, who at the time was just seven, would have a combined 50% interest in the trust. Their mother, Mehriban, was to be the “protector”, an anonymous role giving control over the foundation. The other “protector” was to be Mammadov.
According to documents, Mammadov was also pencilled in as a beneficiary with a 30% share, which represented the largest single stake. Ata’s chairman, Ahmet Erentok, was to receive just 15%. The remaining 5% went to minor beneficiaries.
Should the beneficiaries die, 18 children and other relatives were named as substitutes, with a date of birth, address and percentage share carefully noted next to each entry. Mammadov had 10 replacements, some of them young children.
A chart shows how money was to flow from Ata via two other offshore firms to the president’s three children: “anonymous beneficiaries”. Their payments are described in documents as tax free. UF Universe Foundation was wound up in 2007 but Leyla and Arzu Aliyeva are currently listed as the majority owners of Ata via yet another Panamanian firm, Hughson Management Inc.
In 2007 the solicitors’ disciplinary tribunal suspended French for failing to comply with “important regulatory requirements”. In his defence, French said he had been seriously ill and “suffered from a phobia of opening any kind of official correspondence”.
French reappears later in the Panama Papers not as a solicitor but as a “marine consultant”.
French, Aliyev’s daughters and Mammadov did not respond for requests for comment.
Officially, President Aliyev has no personal business interests. Leaked US diplomatic cables, however, suggest that he is Azerbaijan’s richest person. They add that after coming to power Aliyev transferred his pre-2003 assets into his wife’s name. The country’s political system was distinctly “feudal”, the US said, with “a handful of well-connected families” controlling practically all sectors of the economy.
Details of the family’s wider business interests and those of their inner circle have also come to light.
Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins
