A minister in Prime Minister Imran Khan’s government pulled out of making planned investments through offshore tax havens after he was told Pakistan’s tax authorities would be informed, documents in the Pandora papers suggest.
Moonis Elahi, minister for water resources and a member of the influential Chaudhry family from Gujrat, expressed “concerns” in August 2017 about the investment being reported to his home country, according to the papers, and instead decided to establish a trust structure in the UK, Guardian reported.
The leaked documents, reviewed by the Guardian and International Consortium of Investigative Journalists (ICIJ), do not specify why Elahi became concerned. But they show he had presented as his source of funds for the investments a $33.7m (£25m) sale of a family-owned company in Lahore that had been the subject of historical corruption allegations.
The revelations are likely to raise serious concerns in Pakistan, where in 2016 Khan, as an opposition challenger, expressed outrage after offshore interests linked to the political elite were exposed by the Panama papers.
“It is disgusting the way money is plundered in the developing world from people who are already deprived of basic amenities: health, education, justice and employment,” Khan said then. “This money is put into offshore accounts, or even western countries, western banks. The poor get poorer. Poor countries get poorer, and rich countries get richer.”
At the time, Elahi was a member of Punjab’s legislative assembly. In June this year, Khan appointed him as a minister.
A spokesperson for the Elahi family rejected any allegations of wrongdoing and said the family’s assets were all declared as required by law.
According to the Pandora documents, in January 2016, Elahi met officials from the offshore wealth management company Asiaciti Trust to discuss buying a 24 percent stake in RYK Mills, a large sugar and renewable energy company headquartered in Lahore.
Elahi told the officials he wanted to set up a trust and fund that would buy the 24 percent stake and also hold two properties in Britain.
To evidence his source of funds, Elahi showed Asiaciti a contract from his family’s May 2007 sale of their own sugar company, CSK Limited — previously called Phalia Sugar Mills — for which they were paid Rs2 billion, equivalent to $33.7m in 2007.
That sale, to another Lahore-based company, Colony Mills, was later subject to intense scrutiny in Pakistan, including allegations made by the Bank of Punjab that its own loan to finance the deal had been corrupt.
Due to Elahi’s status as a prominent politician — a “politically exposed person” (PEP), according to compliance rules — Asiaciti commissioned a thorough due diligence report on him by the risk management arm of the global information company Thomson Reuters.
Their report, dated 21 January 2016, based largely on media coverage in Pakistan in both Urdu and English, noted there had been serious allegations surrounding the $33.7m deal, including that the Bank of Punjab itself had filed complaints against the Elahi family to National Accountability Bureau.
The key complaint at the time was that the bank had made a corrupt loan that enabled the Elahi family to sell the Phalia sugar mill. Elahi’s father, Chaudhry Pervaiz Elahi, still a prominent politician holding the position of the speaker in the Punjab assembly, was at the time chief minister of the Punjab authority that owned the bank.
The Asiaciti due diligence report noted: “The BoP through its complaint alleged that [Moonis] Elahi, and the others [including his father], sanctioned an illegal BoP loan to the company of a director of the bank, in a bid to allow him to purchase Phalia Sugar Mills owned by Elahi’s family.”
Federal Investigation Agency was also reported to have instigated an investigation into the loans.
The Thomson Reuters report to Asiaciti stated that there were risks of corruption, money laundering and fraud relating to Elahi, but noted he and his family had always denied the allegations. The investigations had not concluded with any findings of wrongdoing against them, according to the report.
Asiaciti agreed to take Elahi on as a client, and did register a trust structure located in low-tax Singapore and the Pacific tax haven of Samoa, the papers show, in preparation for the investment in RYK Mills and to hold the two properties in the UK.
Asiaciti officials then advised Elahi that if they were to go ahead with the investments, they would need to share his financial information with the relevant tax authorities in Pakistan under the Common Reporting Standard (CRS), a global information-sharing system set up to combat tax evasion.
At that point, Elahi appears to have become concerned and decided not to go ahead.
Asiaciti noted of a telephone call with Elahi: “Moonis has concerns about the CRS reporting requirements of the structures to Pakistan […] Moonis advised that he obtained advice from his legal advisers and as a consequence established a structure in the UK, whereby [sic] his wife and children are residents.”
It is not clear what Elahi’s concerns were about CRS reporting to Pakistan or what the legal advice was that led to him establishing a structure in the UK.
A prestigious London property linked to him does appear to have subsequently been transferred, legally, into a trust. The property, an apartment at Riverlight Quay, near the South Bank, had been bought for £5.45m in September 2015 by a company named LO89 Ltd — the same company that paid Asiaciti its £7,000 in fees for the Elahi work.
Two years later, LO89 transferred the property, for no payment, to a UK company owned by a family member of Elahi’s.
In November 2018, the family member’s company transferred the apartment, again for no payment, to another British resident, who appears to hold it on trust.
The British resident did not respond to the Guardian’s questions about the property, and whether she does hold it on trust for the Elahi family. Citing confidentiality, the solicitor who worked on the property transfer also declined to answer questions, including whether he had been involved in forming a trust for the Elahi family, and if he carried out due diligence on the family and the source of their funds, particularly due to their probable status as PEPs.
A spokesperson for the Elahi family rejected any allegations of wrongdoing, saying: “In the past due to political victimisation, misleading interpretations and data have been circulated in files for nefarious reasons against the family in the name of so-called accountability.”
The family’s assets were all declared as required by law, the spokesperson added.
The Bank of Punjab said it could not answer questions about the allegations or its response at the time due to laws requiring customer confidentiality. Colony also did not respond to questions from the Guardian and ICIJ.
