Pandora Papers: ĐUKANOVIĆ FAMILY HID OWNERSHIP THROUGH FIVE COUNTRIES  

 

Authors: Vanja Ćalović Marković & Dejan Milovac

In 2012, Milo and Blažo Đukanović concluded secret agreements on the management of their property, hiding behind a complex network of affiliated companies from Great Britain, Switzerland, the British Virgin Islands, Panama and Gibraltar.

Son of the President of Montenegro also used this structure to set up two hidden companies with daughter companies in London and Montenegro.

 

MANS Investigative Centre obtained this data through a global investigation of offshore business called “Pandora Papers”, conducted by the International Consortium of Investigative Journalists (ICIJ) with partners from 117 countries. So far, the largest collection of leaked data contains nearly 12 million documents from 14 offshore agencies. One of them is ALCOGAL, a leading law firm in Panama with offices in all major offshore destinations, including the British Virgin Islands, through which the businesses of the Đukanović family have been run.

In the documentation of that Panamanian company, MANS found certified copies of the agreement on the setting up of trusts that Milo and Blažo Đukanović concluded on June 21, 2012 with the company CM Skye 2 (PTC) Limited registered in the British Virgin Islands.

Trusts do not exist in the Montenegrin legislation, while in offshore destinations they usually serve to hide the true owners of a property. The trust founder transfers ownership of the property to another person or company that becomes the official owner, even though he/she only manages it. A trust agreement, which remains hidden from the public and is not submitted to any institution, specifies who actually benefits from the use or sale of that property.

The agreement shows that Đukanović Sr. set up the Victoria Trust, while his son set up the Capecastel Trust. They state the minimum initial capital, and specify that property can be entered into trusts at any time, both by the founders themselves and other persons. Trusts are established for a period of 80 years, while the company that manages them is authorized to buy and sell real estate and companies on behalf of Đukanović, set up new companies and bank accounts, give and take loans and perform various other tasks.

Excerpt from the due diligence form of the company that manages Đukanović’s trusts

That this was indeed the President of Montenegro and his son was shown by the certified documentation that was attached during the set-up of the trusts: diplomatic passport of Milo Đukanović and the water bill from his address in Podgorica, which served as proof of residence. His son submitted Montenegrin ID card and an invoice for renting an apartment in London.

The documents state that the Đukanović family set up trusts for the purpose of inheritance planning and protection of property, while their careers earnings and investment proceeds were listed as source of funds. These are irrevocable trusts, which enable the real owners to have their hidden property protected, even when it is the subject of court proceedings or creditors’ claims.

The agreements stipulate that the funds in trusts are accumulated until Milo i.e. Blažo give different instructions.

It started in London…

It all started in the elite area of London, at 39-40 St James’s Place, where, without visible features, law office Charles Mia Limited was located until a week ago.

On May 25, 2012, a lawyer from that company, Edward Harold Charles Cain, certified Blažo Đukanović’s Montenegrin ID card, which was valid until September 27, 2019. Five days later, his colleague from the same law firm, Mark Peter Stiebel, certified diplomatic passport of Milo Đukanović, which was issued on January 20, 2011, with a validity period of four years.

The stamps certifying the documents state that Milo and Blažo Đukanović brought the originals of their documents personally in order for the lawyers to confirm their identity.

… through Switzerland

“Pandora Papers” show that certified copies were sent from London to Switzerland, to CM Management (Suisse) SA company, which changed its name to LJ Management (Suisse) SA in March 2013 [1].

The office of that Swiss company was located in the town of Neuchâtel, at the address Rue du Seyon, number 2. It is at that address that the documentation of the company that managed Đukanović’s trusts was kept, as well as the data on hidden owners and business of at least 182 more companies from the British Virgin Islands.

In early 2017, LJ Management (Suisse) SA closed its Nuchatel office and moved to Geneva. It now operates at the address Rue de St-Léger 8.

 

… and Panama

MANS found out that the Swiss company was hiding secret business of Đukanović family thanks to the data of the law firm Aleman, Coldero, Galindo & Lee Trust (ALCOGAL) from Panama, which deals with the registration of companies in numerous offshore destinations, whose data leaked.

In late 2014, ALCOGAL requested from Swiss LJ Management information on affiliated companies that were registered in the British Virgin Islands with its help.

ALCOGAL explained that an international audit was coming and asked LJ Managament to provide the documents needed to check the due diligence.

On November 18, the director of LJ Management, Barbara Haldi, certified copies of personal documents of the Đukanović family, and on December 16, 2014, they were sent by registered mail to the ALGOCAL’s address in Panama.

 

On December 23, the company confirmed that they had received the shipment and stated that information for Milo and Blažo Đukanović regarding the company LJ Skye 2 (PTC) Limited had been provided. That is what the company CM Skye 2 (PTC) Limited, with which Đukanović family entered into agreements on the establishment of trusts, was named at the beginning of 2013.

… and the British Virgin Islands and Gibraltar

The first official owner of the company that managed trusts of the Đukanović family was Puffin Agencies Limited from Gibraltar. The ownership was then taken over by Clambake Limited, which at the same time held the position of director together with Cellar Limited. These two companies are registered in the British Virgin Islands and list the mailbox at Rue du Seyon No. 2 in Neuchâtel as their business address, where the LJ Management (Suisse) office is located.

All of these companies were managed by Barbara Haldi, Director of LJ Management (Suisse).

These are companies that provide services of hiring directors and company secretaries, and officially represent a number of other companies, allowing the real owners to hide their identity.

These companies are also listed in two companies whose real owner is Blažo Đukanović.

Judging by the documentation available in “Pandora Papers”, cooperation of the Đukanović family with companies from this network began with Blažo’s secret affairs. On February 23, 2012, with the help of ALCOGAL and with the mediation of the then CM Management (Suisse) SA, he formed Victoria Bridge Finance Ltd. in the British Virgin Islands. This is shown by the internal documents of ALGOCAL, which list the real owners of almost 15 thousand companies that the law firm founded.

In the case of the company Victoria Bridge Finance Ltd, Blažo Đukanović is listed as the beneficial owner, his passport number (S91HG1950), which expired on March 27, 2019, was registered, his date of birth, citizenship and the residence address in London.

The official owners and directors of that company are the same as of the company that managed hidden trusts, and its business documentation is also kept at the same Swiss address.

… to London

On June 28, 2012, seven days after the set up of Blažo’s trust, his company Victoria Bridge Finance, together with Arcola International Ltd from the British Virgin Islands, founded DGT Energy in London.

The first headquarters of that company was at the same address where the firm of the London law office, Charles Mia Limited, was located, which certified Blažo’s and Milo’s personal documents for the needs of setting up trusts.

On February 4, 2015, DGT Energy joins Laymarsh Investments Limited and Artemis Ventures International Limited, also from the British Virgin Islands, while Arcola leaves a day later. The same law firm, Charles Mia, is helping them with these changes.

… and Montenegro

Meanwhile, on January 15, 2014, Blažo Đukanović set up another hidden company in the British Virgin Islands, Resilton Investments Ltd. Its directors are the same as in other companies related to business of the Đukanović family, Cellar Limited and Clambake Limited. That company also kept business documentation at the same address in Switzerland.

That Blažo Đukanović is the real owner of Resilton is shown by the internal document of ALGOCAL, which lists the real owners of the companies managed by LJ Management (Suisse) SA, and an affiliated company with a similar name, registered on the Isle of Man, LJ Management (IOM) Limited.

The document states the passport number and other personal data of Blažo Đukanović as the real owner of Resilton.

 

Resilton is one of the founders of the Montenegrin company Proenergy Montenegro, which was registered on April 10, 2014 and has never submitted financial statements. The second founder is Keyman Land Holdings Inc., while the third is Marko Ćosić, a member of the board of directors of Hrvatska elektroprivreda, Croatia’s national energy company.

Đukanović family admitted that they are the owners of hidden trusts and companies

In response to questions from MANS and ICIJ, Milo Đukanović admitted that he had founded the Victoria Trust in 2012, emphasizing that he was not a public official at that time.

“In 2012, at the time when I was not holding a public office in Montenegro and was not performing any state duties (my term as the prime minister had expired in 2010), I worked on organizing business infrastructure looking to start business activities with my son. At that time, I established the Victoria Trust I was asked about”, Đukanović said.

He claims that at the end of that year, after his appointment as the prime minister, he transferred ownership of his trust to his son Blažo.

“At the end of 2012, I returned to the office of the prime minister, which I did not plan. After that, I transferred the complete ownership of the Victoria Trust to my son Blažo Đukanović “, the President of Montenegro said, stating that his son would provide us with other information about the business and fate of that trust.

Blažo confirmed that he is the real owner of the companies Victoria Bridge Finance Ltd and Resilton Investments Ltd hidden in the British Virgin Islands. He did not answer a follow-up question about the ownership of his father’s trust[1], and claims that he does not remember even his own.

“I remember there was a story about it as a part of a possible business structure while I was living in the UK, but I don’t remember if it was set up. If it was, I had nothing to do with it and it must have been closed down a long time ago”, Đukanović Jr. said.

Both father and son are denied by the leaked documents which show that in November 2014, while Milo Đukanović was in the middle of the prime minister’s term, he was still the sole owner of the Victoria Trust, while his son was the owner of the Capecastel Trust.

This is shown by the documentation of the Swiss company LJ Management (Suisse), repeatedly associated with the secret affairs of Đukanović, which sent the data on the beneficial owners of the hidden trusts to its agent in December 2014.

In mid-2014, in a letter submitted to ALGOCAL, the company confirms that it knows who the real owners of the companies and trusts it manages are, explaining that in this way it respects the rules on the prevention of money laundering. At the same time, the director of that company also managed the company with which the Đukanović family concluded secret agreements, so she had to know about all the changes related to their trusts.

In their answers to the questions of MANS and ICIJ, Milo and Blažo Đukanović claim that they never invested in trusts and that these hidden deals did not bring them any money. This is also confirmed by the agents in charge of managing their trusts, who are usually obliged to hide information about their clients’ business from the public.

The agreements stipulate that, in addition to the initial capital, which in both cases amounted to a minimum £ 100, any individual or company may pay additional funds or transfer assets to trusts owned by the Đukanović family.

The company that manages their trusts was not obliged to submit financial reports in the British Virgin Islands, and it kept the documentation on its business in Switzerland. Due to that, the data on the property owned by secret trusts of the Đukanović family were not part of the leaked documents.

Behind whom the Đukanović family was hiding

The companies that enabled the Đukanović family to set up hidden trusts state that they discreetly provide their services to extremely rich families around the world, whose money they mainly invested in buying real estate in Europe, Asia and America.

It is a very complex business structure that has provided business start-up services and investment aid around the world, through affiliated companies from the UK, Switzerland, Portugal, Hong Kong, Singapore, the United States and the Isle of Man.

In 2012, secret affairs of the Đukanović family were run by a group of companies operating under the CM Skye brand. In 2013, the majority ownership of that network of companies was taken over by LJ Group. In mid-2016, a part was bought by the Peterson Group from Hong Kong, while during 2018, one of the members of the royal family of Qatar became the owner of 40% of the shares.

 

According to official financial reports, British Alvarium Investments Limited is the beneficial owner of most of the companies from the complex network that served the Đukanović family to hide trusts and companies: LJ Skye 2 (PTC) Limited, LJ Management (Suisse), Cellar Limited, Clambake Limited, as well as Puffin Agencies Limited. Sheikh Jassim Al-Thani and Sai Hong Yeung are listed in the British register as “persons with significant control of ownership” in that company.

One of the partners in the Alvarium is the lawyer who certified Blažo’s personal documents, Edward Cain.

They did not recognize Milo, but they know who Blažo is

The companies that enabled Milo Đukanović to set up a secret trust did not mark him as a politically exposed person (PEP) in any available document, although they were obliged to do so by the Anti-Money Laundering and Terrorist Financing Law in the British Virgin Islands.

The law stipulates that PEPs are also persons who have ceased to hold public office for a period of two years.

Đukanović used his diplomatic passport, issued in January 2011, to establish the trust, which clearly states that he is the former Prime Minister of Montenegro.

He resigned as the prime minister in December 2010, thus, in June 2012, when he signed the trust agreement, he still had to be recognized as a politically exposed person.

In addition, the law recognizes a high-ranking political official as a PEP, and Đukanović was the head of the Democratic Party of Socialists at the time the trust was set up.

Although it also checked other clients by searching the Internet, there is no evidence in the leaked documents that ALCOGAL tried to determine whether Đukanović was a politically exposed person.

At the same time, ALCOGAL describes his son Blažo Đukanović in internal documents as a politically exposed person.

Agents who register companies in the British Virgin Islands have a legal obligation to determine the sources of PEP funds and to regularly monitor their activities, which did not happen in the case of Đukanović, judging by the leaked documentation.

Unusual name changes and dissolving after the elections

The company that hid Đukanović’s business changed its name to LJ Skye 2 (PTC) Limited in April 2013. That was the previous name of its sister company, which changed its name three times in just seven days.

CM Skye 1 (PTC) Limited and CM Skye 2 (PTC) Limited were established on the same day, 16 February 2009, in the British Virgin Islands to provide services to trusts. The registration numbers of these companies, 1521209 and 1521210, show that they were set up one after the other.

On April 5, 2013, CM Skye 1 (PTC) Limited changed its name to LJ Skye 1 (PTC) Limited, and three days later, on April 8, to LJ Skye 2 (PTC) Limited.

Four days later, on April 12, LJ Skye 2 (PTC) Limited, registered under number 1521209, again changed its name to LJ Skye 1 (PTC) Limited. On the same day, the company that manages the secret affairs of the Đukanović family, registration number 1521210, changed its name from CM Skye 2 (PTC) Limited to LJ Skye 2 (PTC) Limited.

According to the data from the Virgin Islands Official Gazette, exactly one month after the change of government in Montenegro, on September 30, 2020, the company LJ Skye 2 (PTC) Limited, which managed secret affairs of the Đukanović family, initiated a voluntary liquidation procedure and was soon dissolved.