Panama Papers: British-Canadian billionaire mysterious middleman in ‘corruption scheme’
U.S. officials say he “enriched himself” with $400 million (U.S.) in mark-ups and paid tens of millions of dollars in bribes to Bahraini officials.
|Report an Error|
Share via Email
Victor Phillip Dahdaleh, a British-Canadian billionaire honoured recently by York University with his name on a new health institute, is the mysterious middleman in a 20-year “corruption scheme” in which U.S. officials say he “enriched himself” with $400 million (U.S.) in mark-ups and paid tens of millions of dollars in bribes to Bahraini officials, a Torstar News Service/CBC investigation has found.
Until now, U.S. government court records only identified an anonymous figure named “Consultant A” as the “middleman” between Bahraini and U.S. alumina companies pocketing huge profits and paying bribes through a British Virgin Island-based shell company called Alumet Limited.
Documents contained in the Panama Papers confirm Dahdaleh, 72, is Consultant A in a scandal that forced Alcoa, one of the world’s largest aluminum companies, to plead guilty in 2014 to U.S. Department of Justice (DOJ) charges that it paid “millions of dollars in bribes through an international middleman” in violation of the Foreign Corrupt Practices Act.
In addition to the DOJ, Alcoa also settled with the U.S. Securities and Exchange Commission (SEC) and was slammed with one of the largest anti-corruption fines ever — $384 million (all figures U.S.).
In a plea agreement with the SEC, Alcoa conceded its involvement in the “corruption scheme” which “facilitated at least $110 million in corrupt payments to Bahraini officials” through “Consultant A.”
“The consultant was paid a commission on sales where he acted as an agent and received a markup on sales where he acted as a purported distributor,” it says. “No legitimate services were provided to justify the role of the consultant as a distributor.”
Alumet, the company at the nexus of that scheme, has maintained a secretive corporate ownership structure until now thanks to the anonymity provided by offshore tax havens like the BVI.
“This email confirms...my capacity as the owner and director of Alumet,” reads a March 2007 email Dahdaleh sent to Panamanian law firm Mossack Fonseca — one of dozens of internal records obtained by the International Consortium of Investigative Journalists and shared with the Torstar and CBC confirming Dahdaleh registered the offshore company through the Royal Bank of Canada in 1989.
That’s the same year the DOJ claims the elaborate bribery plot commenced.
Alumet was used as a “shell” company that “had no legitimate business operations,” the DOJ claims in court filings, and the “corrupt arrangement” allowed “Consultant A” to “enrich himself and pay bribes to senior government officials of Bahrain.”
Dahdaleh declined interview requests. Written statements from his London spokesperson, Lord Timothy Bell, chairman of the British PR firm Bell Pottinger, did not respond to direct questions about Dahdaleh’s identity as Consultant A, saying names were “deliberately anonymised by the U.S. Department of Justice for sound reasons of fairness and justice.”
Bell wrote that Dahdaleh has not been involved in any wrongdoing nor convicted of any offence “in any court in the world.”
Dahdaleh did face criminal charges in the U.K. for corruption and money laundering for which he was acquitted in 2013. Dahdaleh never gave evidence in the trial. The prosecution’s case collapsed when two key U.S. witnesses refused to testify and another witness significantly changed his testimony.
Dahdaleh’s defence, detailed in media reports and court documents, does not deny he made payments to Bahraini officials but contends that those payments did not amount to bribes. Instead, the defence cites the legal concept of “principal consent” to argue the payments were not bribes because they were known about and approved by Bahraini officials.
Britain adopted bribery legislation in 2010 that specifically addressed what one prominent British criminal lawyer calls “loopholes” in the century-old law under which Dahdaleh was tried.
“We were dealing with a 1906 statute that was very English-based because international commerce barely existed in 1906,” says London-based Julian B. Knowles, QC. “One thing the 2010 Act did was to create a specific new offence of bribing a foreign public official. It’s pretty clear that even if that foreign public official has the go ahead, it doesn’t stop it from being a crime.”
The Dahdaleh case, he says, is “an example of why we changed our law because there were so many loopholes in place.”
Here’s how the corruption scheme worked according to DOJ court filings and agreed statements between Alcoa and the U.S. government:
In 1988 — the year before Alumet was created by Mossack Fonseca and RBC — officials with Alba, a Bahraini aluminum company, asked officials with Alcoa of Australia (an arm of global mining and alumina firm Alcoa World Alumina and Chemicals) to hire Dahdaleh as “Alcoa’s agent” and that he be paid a “commission.”
That request was made by a member of the Bahraini Royal family who was also a member of Alba’s board, the DOJ statement says. Dahdaleh had “close contacts with certain members of Bahrain’s Royal Family, some of whom were senior officials in the Government of Bahrain,” it reads.
Alcoa’s sales manager told his supervisor that the company “would lose the supply contract if (Dahdaleh) was not retained as its agent.”
On November 2, 1989 — six weeks before Alumet’s incorporation — Alcoa of Australia started using Dahdaleh’s services, the court claim says, “at the request of Members of the Royal Family of Bahrain.”
On Jan. 1, 1990, Alcoa of Australia entered into “confidential” agreements with the newly minted BVI corporation promising commissions to Alumet through to 2000, the DOJ filing says.
Alcoa of Australia would regularly send invoices for alumina shipments — alumina is a fine white powder that is transformed into aluminum metal in the smelting process — through “Consultant A’s shell companies.” In turn,
“Consultant A” would “mark-up the price of alumina” sold to a Bahraini aluminum smelter company, “thereby creating a significant margin over the price he paid to Alcoa of Australia,” according to the DOJ filing.
In 1993, Alcoa of Australia’s sales manager arranged shipments of alumina to Alba through another of Dahdaleh’s company’s called Kwinalum — a deal that netted $18.7 million between 1993 and 1996, the claim says.
By 1996, with Bahraini demand for alumina growing rapidly, Alumet became a “purported distributor,” the DOJ says, allowing Dahdaleh to “impose a significant mark-up on increasing volumes of alumina sales, from which he was able to create an even greater margin on his own purported purchase price.”
Alumet’s role as an intermediary was valuable for Alcoa, the document says.
The global alumina giant viewed Alba to be one of its “blue ribbon” accounts. And Dahdaleh’s firm was seen as a key to giving Alcoa a competitive advantage, according to an email from an Alcoa manager cited in the court records.
“As a Middle Eastern company well versed in the normal ways of Middle East business, Alumet is strategically placed to direct the alumna through the necessary channels which will keep the various stakeholders in the Alba smelter happy … and hence give Alcoa a fair chance of obtaining the business.”
Between 1993 and 1996, Dahdaleh made more than $3 million in “corrupt payments” to two Bahraini Royal family officials “from bank accounts at RBC in Guernsey held in the name of shell entities Alumet and ULECO (another of Dahdaleh’s companies).”
And business between the Bahraini and Australian companies was growing.
Between 1997 and 2001, Alumet received a mark-up windfall of more than $108 million as the middleman selling to Alba and another $6.2 million in commissions from Alcoa of Australia, the DOJ statement says.
In the same period, Dahdaleh paid $26 million in “corrupt payments” to three Bahraini officials through RBC accounts in Guernsey and Switzerland, the statement says.
But questions were starting to be asked by Alcoa lawyers.
In January 1997, an attorney at Alcoa of Australia emailed her supervisor in Pittsburgh, noting that the Alumet contract “looks odd” and raised “concerns about the pricing and the fact that the contract is with Alumet … I do not really understand why in that case we are selling to Alumet to supply to Alba.”
A 2003 email from an attorney at Alcoa asked a company executive about Alumet, saying “we will need to understand the distributor’s role completely….for Foreign Corrupt Practices Act purposes.” In October, 2004, another in-house attorney emailed that Alumet’s “current engagement created a lot of anxiety in the organization.”
Dahdaleh’s profits expanded with distribution agreements in 2002 and 2004 reaching as much as 1.78 million tonnes of alumina annually through Alumet and a second shell company for which the companies earned $79 million in mark-ups.
In those two years, Dahdaleh paid another $30 million in “corrupt payouts” to two Bahraini officials, the statement says.
In the five years between 2005 and 2009, another $188 million in mark-ups were paid to Dahdaleh’s two shell companies. And another $30 million in payments went to Bahraini officials, the DOJ statement says.
The arrangement lasted until the end of 2009, the DOJ alleged.
The Royal Bank of Canada is found throughout the documents on the case — helping register Alumet and acting as the company’s administrator until at least 2010, the documents show.
The Royal Bank of Canada is currently the target of a Canadian federal court application by the Minister of Revenue seeking a judge’s order compelling the bank to release details about clients with ties to Mossack Fonseca as well as records detailing the bank’s own due diligence procedures.
RBC has not opposed the order.
In response to questions from Torstar, RBC spokesperson Catherine Hudon declined an interview request. She wrote in response: “We fully co-operate with all regulators. No charges were brought against RBC in this matter.”
Dahdaleh is a close friend of international power players.
The self-described metals magnate has rubbed shoulders with the Queen, former U.S. president Bill Clinton and former British Prime Minister Tony Blair.
In December, York University announced The Dahdaleh Institute for Global Health “to address some of the most pressing issues of our time.” The move came after a $20-million (Canadian.) donation to the university by Dahdaleh, who graduated from York with an honours BA in administrative studies nearly four decades ago, according to a press release.
York officials did not respond to requests for comment.
“Where there was a lot of reasons to be concerned about this guy, York University showed no reluctance to name a very high profile new initiative after him,” said Jim Turk, former executive director of the Canadian Association of University Teachers for 16 years and now a distinguished visiting professor at Ryerson University.
Dahdaleh has been honoured by two other Canadian universities.
He has been on the board of the McGill University Trust in the U.K. and arranged for Bill Clinton to come to McGill in 2009 to receive an honorary degree.
Last December, Nova Scotia’s St. Francis Xavier University honoured Dahdaleh with an honorary doctorate at its fall convocation.
McGill and St. Francis Xavier officials also declined comment.