A few blocks from the water, in the heart of Miami’s glitzy South Beach, is a drugstore not like the others. Tourists buying sunscreen and straw hats from the CVS on Washington Avenue are financing a Middle Eastern kleptocrat.
The plexiglass building housing the roughly 12,000-square-foot pharmacy is worth $18.3 million and, because of favorable rent terms negotiated with CVS, should generate significant profit for its landlord. In 2019, based on Miami property records, local press credited a Virginia-based real estate company, KLNB, with purchasing the building. But the Virginia firm’s inclusion in the property registrar was a diversion. “KLNB is not the owner of this property and had no involvement in the transaction,” a company representative said.
The actual purchase was made by an anonymous Delaware shell company. Buried in incorporation documents for this Delaware company’s Florida branch is the name of the building’s real owner: Masrour Barzani, the prime minister of Iraqi Kurdistan.
The Kurdish prime minister is not a benign pharmacy operator. But because of America’s underappreciated role as an enabler of corporate secrecy, if not for a clerical error, South Beach residents would have no idea about the Washington Avenue CVS.
No one knows the extent of the illicit wealth hidden inside the United States. Corporate secrecy laws, maintained by states like Delaware, keep it that way. But tracing the Barzani family’s investments, like this Miami pharmacy, explains why America has become an appealing destination for dirty money.
THROUGH OIL AND CORRUPTION, the Barzanis, whose agents did not respond to requests for comment, have amassed enormous amounts of wealth. For example, a real estate investment in Kurdistan, owned by a company secretly connected to one of the prime minister’s brothers, has been valued at $1.27 billion. Like other despots, the Barzanis turned to secrecy havens, the kind of places exposed by the Panama and Pandora Papers, to conceal their money.
Secrecy havens are jurisdictions that don’t require public disclosure of the names of the owners and shareholders of companies housed within their borders. This enables all sorts of financial crimes, from tax evasion to money laundering and facilitating bribery. But, unlike the king of Jordan and Argentina’s former president, whose secret companies got busted in previous offshore leaks, Barzani assets and business deals were not exposed in the Panama and Pandora Papers.
They’ve only been caught in one major leak, a database of Dubai property records, obtained by the nonprofit Center for Advanced Defense Studies, which contains details about the Barzanis’ assets in the uber-expensive Burj Khalifa complex and one of the city’s artificial islands, Palm Jumeirah, along with the family’s connections to United Arab Emirates royalty.
This is because instead of Cayman Island beaches, the Barzanis opted for an office building in Delaware owned by the CT Corporation, an American branch of a Dutch company, Wolters Kluwer, that specializes in creating anonymous companies.
Though less picturesque, America’s corporate secrecy regime is virtually equivalent to what is offered by any Caribbean island. In many states, rather than disclosing real ownership, wealthy individuals can hire agents and representatives to put their names and addresses on corporate paperwork instead, or aren’t required to supply ownership information at all. A network of accountants, law firms, and consultants, like Wolters Kluwer, will set up and manage these secret companies for anyone who can pay.
The Barzanis have enough secret property, which also includes mansions in California and Virginia, that they’ve now been caught hiding money in America four times. Collectively, the family has paid over $75 million for these four properties alone. These investments likely represent only a small fraction of the family’s secret wealth in the United States. None of these properties were discovered through a Panama Papers–style leak. Instead, all four properties, which had proxy owners and expensive law firms to protect them, were only unmasked because their agents made small slipups.
In the case of the CVS, it was a Pennsylvania-based law firm, Cozen O’Connor, that appears to have exposed their own secret client. Over two months, beginning in December 2018, the law firm opened three Florida companies and a Delaware company all named after the pharmacy’s Washington Avenue address. The paperwork for the Florida companies included the Kurdish prime minister’s name and signature, along with that of one of his other brothers, Muksi Barzani.
Those names were not meant to become public and, shortly after the pharmacy’s purchase, the law firm removed them from the companies. The Barzanis were replaced with one of Cozen O’Connor’s own lawyers, Matthew Weinstein. It wasn’t a perfect solution, but this legal triage was highly effective. You won’t find their names in popular corporation research databases, and it was enough to fool local journalists.
The CVS deal also highlights how far corporate lawyers will go to defend their wealthy dictator clients. When called for comment, Weinstein categorically denied that the Barzanis owned the building or were clients of Cozen O’Connor. Instead, he said the corporate documents held by the Florida secretary of state were incorrect. (Later, in response to follow-up questions, Weinstein denied saying any of the things that he had previously said. “If you choose to write an article about the Barzani family, your characterization of my response to you must be ‘Mr. Weinstein would not comment on these matters,’” he wrote in an email.)
His statements were all over the place, but Weinstein’s core claim, that the Florida secretary of state’s records were wrong, is implausible. The names of the Kurdish prime minister and his relatives don’t just randomly end up all over incorporation documents for multiple Florida companies for no reason. “The name is a significant piece of the corporate registry,” said Robert Appleton, a former senior prosecutor for the Department of Justice. These documents were prepared by Cozen O’Connor and many were signed by Weinstein personally. Submitting falsified documents to the Florida corporate registrar is a felony, but that’s essentially what Weinstein claimed his law firm had done, in a last-ditch attempt to conceal the identity of his clients.
Obviously, the Barzanis do not tolerate errors, but it was a similar mistake that exposed their Virginia mansion. It was purchased in 2010, by an anonymous Virginia company put together by a local law firm. For years, Kurdistan watchers had speculated the property belonged to Masrour Barzani, but documentary evidence didn’t emerge until someone accidentally allowed the registration for the Virginia company to lapse. Its reinstatement paperwork was signed by the chairman of Ster Group, a Kurdish conglomerate. According to State Department cables published by WikiLeaks, Ster Group is owned by members of the Barzani family.
Dosky was a middleman in a scheme where fuel purchases to supply American bases in Kurdistan were steered to the Barzanis’ preferred military contractors, who charged the Pentagon significantly above market prices. It’s quite possible proceeds from those deals were what financed these mansions.
All of this raises the question: How many hidden properties do the Barzanis, and other autocrats, have inside the United States? Corporate lawyers make mistakes, but not every time and probably not even often.
Most journalistic investigations into anonymous shell companies and secret real estate purchases end in failure. Even in the process of reporting this piece, I was unable to obtain ownership records to validate another probable Barzani property in California. The lawyers behind that company made no errors and kept it fully anonymous. As long as states like Delaware maintain corporate secrecy laws, journalistic investigations into corruption will continue to dead-end.
Delaware officials recently defended the status quo to the Prospect, with one former judge saying “there’s a reason it’s called the Panama papers and not the Delaware papers.” But the main distinction between Panama and Delaware is that there hasn’t been a Delaware whistleblower, yet.
IN JANUARY, CONGRESS PASSED the Corporate Transparency Act, which requires companies to file the names of their real owners with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), with some major exceptions. There’s already evidence this approach isn’t enough.
Providing law enforcement access to ownership records is a step in the right direction, but still inadequate. This ties the ability to effectively investigate corporate malfeasance to the priorities, resources, and legal handicaps of the Department of Justice. Federal investigators will probably be far more effective at catching terrorist financiers and drug smugglers, but anyone who doesn’t threaten national security, like the Barzanis, who are close American military allies, will likely be far less of a priority.
Another major leak of files from FinCEN showed that agency did little to stop financial crimes despite receiving evidence of hundreds of thousands of suspicious transactions from banks. There’s no evidence things will be different in corporate transparency investigations.
A public beneficial ownership registry is the only adequate reform, but even that approach has vulnerabilities. One often illegal service provided by companies in the secrecy industry is nominee ownership. This means that the company provides a fake owner, not just a lawyer or agent, to sign corporate paperwork. The real owner is protected by legal documents, like undated letters of resignation signed by the fake owner and a power of attorney that lets them dictate corporate decisions, all while remaining hidden from the public and law enforcement.
Corporate secrecy is going to remain a problem as long as people like the Barzanis have money to hide. The only real solution for it, in America, is a leak of the Delaware papers by a whistleblower. Employees of law firms, like Cozen O’Connor, and corporate service companies, like Wolters Kluwer, should take the internal databases of their kleptocrat clients and the names of their secret businesses and make them public.
Corporate whistleblower laws are an imperfect patchwork of protections, and any whistleblower brave enough to expose America’s criminal financial secrecy regime will face serious risks and potential retaliation for their act of civil disobedience. But we need those employees to stand up. They’re the only ones with the power to really bring down this system.
Source (Click Here)