Tuesday, November 07, 2017

Angolan Graft

Jean-Claude Bastos charged with managing the oil wealth of the struggling African state of Angola was paid more than $41m in just 20 months.

The payments were made via a complex web of companies set up in the offshore jurisdiction of Mauritius.
Jean-Claude Bastos also used his position to help set up large investment deals he stands to further profit from, the Paradise Papers show. Bastos holds a personal stake in investments the fund made on his recommendation.
Like many oil rich countries, Angola set up a sovereign wealth fund to invest the proceeds of its natural resource wealth. Similar schemes have been used by other countries to help ensure a steady income for future generations. Angola is wracked by corruption, suffers extreme poverty and has one of the highest child mortality rates in the world.
The fund, Fundo Soberano De Angola (FSDEA), which began with $5bn (£3.75bn) in 2011, was mired in controversy from the start, after the then Angolan President Eduardo dos Santos' son, 39-year-old Jose Filomeno, was appointed to head it up. The fund paid management fees of more than $90m (£67.5m) to Bastos' Mauritius-based QG Investments Africa Management. This occurred over a 20-month period between May 2014 and the end of 2015. This money was split into two main chunks - with $41m declared as dividends, or pure profit, and deposited in a company in the British Virgin Islands, itself owned by a series of secretive offshore companies ultimately owned by Bastos. A further $34m was paid in advisory fees to a Swiss firm majority owned by Bastos. The rest, after minor expenses, was retained in the management company run by  Bastos. Within months of receiving the money, a company in which Bastos is a director purchased a 14-seater jet that had been priced at $31.75m. 
Typically, a fund of this size would spread the risk of investment among several asset managers, along with the fees it pays, said one expert. However, Bastos was given responsibility for investing almost all of the fund's money, and was paid accordingly. Today, his company Quantum Global Investments Africa Management, manages about 85% of it. One expert described the situation as "unusual". Andrew Bauer, an authority on sovereign wealth funds, told the BBC: "Funds want to hedge the risk. You don't want to put all your eggs in one basket." Tens of millions were committed to a deal with another of Mr Bastos' companies, Afrique Imo Corporation, to build a hotel, office and a retail complex in the Angolan capital, Luanda.  The deal represents a "very strong conflict of interest" according to Mr Bauer. "This absolutely should not be happening."
Tom Keatinge, a specialist in financial crime, told the BBC he was "sure they are going to come to a conclusion that this is not a transaction that they should be approving". Appleby "provide the client with the answer that he wanted", said Mr Keatinge. "It's hard to believe that just because he abstained from the voting, his views were not well understood by the meeting. So it's a scurrilous approach in my view." The web of companies run by Mr Bastos would appear to be designed to "to enrich a particular individual or... group of people", said Mr Keatinge. "Whoever has oversight of this structure... the political elite within Angola, there is either massive incompetence or there is complicity here."
There are also questions about whether the hotel project represented a good investment for the fund. A former employee of Quantum Global with a direct knowledge of the Luanda deal said in 2016 the project was assessed as "economically unviable" because it would not bring good enough returns for the fund. The investment advisers' recommendation was to drop it. Bastos insisted the investment was viable and said that "by developing what will become Angola's tallest building his group are demonstrating their belief in the long term potential of the Angolan economy".
As well as the Luanda complex, two other investments made for the fund in that period carried similar apparent conflicts of interest for  Bastos.

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