Thursday, September 28, 2023

Panama papers and the Choppies connection

A network of proxies assisted Farouk Ismail, a major shareholder in Choppies and one of the wealthiest men in Botswana and his family to secretly set up a property company in the tropical heaven of the Bahamas, documents contained in the Panama Papers show.

In 2013, Ismail sold part of his stake in Choppies, a major retail chain store in Botswana in an off-market transaction to Standard Chartered Bank Mauritius earning him over US$60 million

The unprecedented leak from a Panama-based law firm, Mossack Fonseca, shows how the wealthy and powerful use a series of agents and lawyers to park their wealth in tax heavens in a way ordinary citizens cannot. Ismail is the founder and director of Choppies.

At least 121 Batswana, and one listed company, have been caught up in the Panama Papers scandal. The documents do not provide any evidence that the Choppies magnate used the network of companies set up by Mossack Fonseca to evade taxes, however, the commercial purpose these companies served has yet to be explained.

Documents obtained by a German newspaper, Suddeutsche Zeitung and shared by the International Consortium of Investigative Journalists (ICIJ), and to which INK Centre for Investigative Journalism has access, shows that in October 2014, Ismail and five members of his family used agents in London and Dubai to invest in Langney Road Investment Limited using an elaborate system, suggesting concealment, in the controversial tax haven of the Bahamas. Mossack Fonseca, a discredited law firm that has assisted politicians, criminals and gangsters to evade tax and hide funds offshore was subsequently used by Ismail’s agents to register the company in Bahamas.

Ismail who is the second largest shareholder in Choppies, a company listed on the Botswana Stock Exchange and Johannesburg Stock Exchange, has a shareholding of 14.6 percent valued at over US$100 million. The Ismail family used a complex network of agents, to invest an undisclosed amount of money in London through a company registered in the Bahamas.

Ismail’s son, Faizel, wife Fazeela and two daughters, Sadiyya and Ayesha joined Langney, an “international business company,” four months after it was established by a Dubai ÔÇô based front, Suliman Dockrat in October 2013, the Panama documents revealed.

 A certificate of incumbency shows that Langney’s “authorised capital” stood at US$50 000 in October 2013, “divided into 50 000 shares with a par value of US$1 each.” Ismail and Faizel, hold a majority share of two shares each, while the four others share one. Docrat, who registered the company, subsequently resigned in February 10, 2014, the same day the Ismails took over the company.

Ismail’s investment in the tax haven coincided with his decision to sell off 12.7 percent of his Choppies shares to Standard Chartered Bank of Mauritius. He then opened an account with Standard Chartered Bank of London and transferred an undisclosed amount to the British Bank.

“When you sell shares, it is not taxable,” Ismail disclosed this week. He invested in five “small” properties in London and says he has not declared any dividends.

“If I declare dividends, I will pay Botswana Unified Revenue Services. I am still growing the portfolio.” It is not clear why the family opened an account in the UK and bought a shelf company registered in the Bahamas that subsequently invested in shares in the UK. Ismail would not disclose the amount invested in Langney.  He said disclosure may result in his family being targeted by criminals.

 “The problem is that of late there have been kidnappings, I could set myself to be a target of these sort of things”, he said. “These are small properties, its not anything big”, he said, adding, “whatever rent we are collecting, we are paying tax in the UK.”

At a time when the Standard Chartered Bank transaction was being handled, Ismail and his son were also eyeing a Chicken Licken franchise in Botswana. Newspaper reports at the time indicated that Faizel purchased nine Chicken Licken stores in Botswana.

Documents obtained from the Registrar of Companies identify Faizel as the sole shareholder of Setso Home, a company that owns Ismail’s franchise. 

More than 11 million documents were leaked, revealing how Mossack Fonseca set up offshore companies for clients which could be used for tax avoidance purposes as well as alleged fraud and money laundering in some cases.

The Guardian quoted Fonseca saying it complies with international protocols to ensure its companies are not used for money laundering, tax dodging or other illicit purposes.

The Panama papers have however provided a peeping show into a hidden world the firm says it does not recognize ÔÇô one that sometimes facilitates crime, launders dirty money and finds ways of busting sanctions and evading tax.

How Ismail set up the offshore company

For the Choppies businessman, the offshore trail of companies and agents does, at face value, suggest a striving for secrecy.  While such secrecy would certainly make it difficult for notional kidnappers to know that Ismail is a worthy target, it incidentally also put Ismail’s financial affairs beyond the grasp of even the most feared tax inspector in Botswana. The trail starts through an agent in Dubai, then London, before darting to Mossack Fonseca in the Bahamas.

First, Leisure Homes, a property development company in Dubai took the trouble of registering a shelf company for a fee.

On 7 October 2013, Leisure Home’s, Nisha Krishna, coughed orders to Mossack Fonseca (Bahamas): “Kindly request to check the availability of the following names for the purpose of opening new offshore company…. Do the needful.”

When Ismail wanted to open a bank account in Britain, another London – based property development firm, Urban Spectrum Property Management Limited stepped in. Four months later, Ismail and his son, Faizel would be included as Langney directors with two shares each.

While investing in a company in a tax haven may have an innocent explanation, none has so far been provided by Ismail.  Asked to comment on the perception that his complex financial arrangements via Mossack Fonseca suggested that he had transactions to hide, Ismail replied: “I have no dealings what so ever in the Bahamas. My account is in the UK at Standard Chartered Bank. I am liable for global taxation.”

The Game of Taxation

Ranjith Ramachandran, Managing Director at Management Resource Centre, identifies working with “passive business investments” as part of his leisure.  A chartered accountant and tax consultant, Ramachandran has worked for Choppies main shareholder, Ramachandran Ottapathu, for about two years as Chief Executive Officer at Liquorama, a liquor chain store. Ottapathu and former president, Festus Mogae have interests in Liquorama.

It is not clear if Ramachandran is related to Ottapathu although they both originate from Kerala in India and have lived in Lobatse, Botswana. They have denied any relation.

Ottapathu said he was not aware of Ismail’s investments off shore investments, explaining that at Choppies directors are required to declare conflicting business interests.

“As long as there is no conflict, there is no obligation to declare personal investment,” he said.

The Panama papers also shine a particular light on the accountant, Ramachandran. Together with his colleague, Nndakumar Raja, Ramachandran was assisted by a South African law firm, Phatshoeane Henney Attorneys to secretly set up an offshore company, Exelle Financial International Limited in the British Virgin Islands in April 2008. The two worked for Mazars Accounting firm and sold their shares in the first week of December, 2009. Asked to explain the purpose of the tax haven investment, Ramachandran denied setting up a company in the British Virgin Islands.

“I have got no idea on this shares and have not signed any documents relating to its acquisition or sale,” Ramachandran explained. He befriended Ottapathu in 1993 and later worked for him in 2008. “He is a friend of mine, we are from the same village in India,” he said about Ottapathu. His colleague, Raja was not available for comment.


This story was produced by INK CENTRE For Investigative Journalism in collaboration with International Consortium of Journalists and African Network of Centers of Investigative Reporting.


Read this week's paper