The story begins in October 2012.
The government of Angola, home to some of the largest oil reserves in Africa, founded a sovereign wealth fund to invest oil export revenues long-term. Angola was to follow the example of Norway, which has cultivated such a fund for decades. The Scandinavian country uses this reserve to prepare for the time when its oil and gas revenues will be depleted. Returns on investments are already used to finance kindergartens, parental-leave benefits and pensions.
Norway’s model – oil wealth for the people rather than for the ruling class – was supposed to be reproduced in Angola, a country that tore itself apart in a long civil war that came to an end in 2002. To this day, the once-Marxist liberation movement MPLA is still in power and still even bears the same name it did back in the 1970s, when it fought against Angola’s Portuguese colonists: the Popular Movement for the Liberation of Angola. Over the years, however, the organization has distanced itself from its old socialist ideals and cleared the way for a form of Wild West capitalism that is unparalleled, even in Africa.
Rampant corruption in Angola means that one in three people there lives beneath the poverty line and a third of all children are malnourished, while the country’s elites live a life of privilege and luxury. A glittering skyline rises above the capital, and the daughter of the former president regularly flies to Angola’s old colonial master of Portugal to acquire stakes in banks, media companies and energy concerns.
The source of the money is extremely difficult to trace. The only thing that’s certain is that there have repeatedly been huge inconsistencies in the state budget. In late 2011, for instance, the International Monetary Fund said it was unclear where some 32 billion euros in oil revenues from the past four years had gone. Just over 10 months later, in October 2012, the government presented its new sovereign wealth fund, based on the Norwegian model and led by a three-member board including José Filomeno dos Santos, nicknamed “Zenú,” one of the sons of former President José Eduardo dos Santos, who ruled the country from 1979 until September 2017.
In an interview with the Süddeutsche Zeitung at the time, Rafael Marques de Morais, the country’s best-known anti-corruption activist, criticized the idea of placing such gigantic sums of money into the hands of a president’s son. “In Norway, the profits of the sovereign wealth fund benefit the people,” Marques said. “Here, they benefit the presidential family.” He warned that the arrangement lent itself to “abuse.”
The Paradise Papers show his warnings were justified.
The president’s son, in turn, entrusted the management of the sovereign wealth fund to a certain Angolan-Swiss businessman, a person who likes to champion himself as a philanthropist and facilitator of Africa’s economic rise: Jean-Claude Bastos.
The two had been friends for years, having reportedly met in London. Dos Santos had studied there, while Bastos’ uncle was serving as the Angolan ambassador.
Together, they later built Angola’s first investment bank. “We have the same vision,” Bastos said during an interview in 2012, adding that Africa should be able to live up to its “potential” and “innovative power.”
The law firm Appleby
The law firm Appleby saw the close connection a bit more critically.
In various internal documents, it gave a Bastos a “high” risk profile. His proximity to the president’s son could “raise some concerns regarding the transparency of the management” of the sovereign wealth fund. One internal paper stated there were “several allegations of nepotism and corruption” against dos Santos.
Mauritius and the Quantum Global
The Paradise Papers reveal Bastos’ company group, Quantum Global, set up seven investment funds between 2014 and 2015 in the tax haven Mauritius. So far, they contain a total of $3 billion in capital from the Angolan sovereign wealth fund. Those funds, in turn, are managed by another Quantum Global company owned by Bastos, a service for which the firm receives a significant chunk of money. The Bastos company receives 2 to 2.5 percent of the $3 billion each year, making for a guaranteed annual income of $60 million to $70 million from 2015 onward.
On top of these fees, which are extremely high by international comparison, other payments were made as well in 2014.
According to the sovereign wealth fund’s annual report, various Bastos companies received around $120 million that year for advisory services.
The revenues Bastos’ company earned from the Angolan wealth fund were so high that he was able to pay himself enormous dividends: $13 million in 2014 and $28 million in 2015.
Bastos
Bastos recently received journalists for this story at his “family office” in Zurich, Switzerland.
During the conversation, he raved about his unique business ideas and the projects through which he has improved so much in Africa. “I don’t want to pretend that I don’t earn well,” Bastos said. When asked about the accusation that he unduly benefits from managing the Angolan wealth fund, he said the fees charged were according to “industry standards.”
Besides, Bastos said, projects in Africa are “much more costly to procure and develop.”
Andrew Bauer, a Canadian economist and expert on sovereign wealth funds, sees things differently.
- Bastos’ fees were “extraordinarily high” and his procurement of the contract betrayed a “real lack of due diligence,”
- Normally, sovereign wealth funds made a public call for tenders when selecting managers, but in Angola’s case that didn’t happen.
- “Managers with a previous conviction would hardly be chosen in such a procedure.” which Bastos has.
In July 2011, Bastos and a business partner were charged in a criminal court in the Swiss canton of Zug with “repeated qualified criminal mismanagement.” They both illegally helped themselves to funds from a holding company they controlled.
Criminal conviction – Mauritian regulator misled
When Bastos later founded the investment companies in Mauritius, he had to fill out a number of forms for the local financial supervisory authorities.
With regard to his conviction, he provided incomplete and at times misleading information. In an enclosed letter, his lawyer explained that he had not enriched himself at the time. Yet the court ruling from 2011 stated plainly that Bastos and his business partner had “indirectly enriched themselves” in connection with an 80,000 franc payment. One could assume a “certain self-serving mentality,” the court found.
In addition, Bastos checked “No” next to a question about whether he was involved in any ongoing personal litigation – although a civil procedure against him in Switzerland still continues to this day.
When asked about these apparent inconsistencies, Bastos declared that he had “never made false statements.”
But the high management fees and consulting payments are just the beginning.
Documents from the Paradise Papers suggest Bastos will profit from multiple investments of the sovereign wealth fund as a private businessman.
These include a planned deep-sea port in Cabinda, the exclave from which Angola derives most of its oil. The Angolan sovereign fund has allocated $180 million to this project alone.
Many of the profits are expected to find their way into Bastos’ bank account. After all, he owns almost three-quarters of the port, a fact he is happy to confirm, though he claims to have already invested some $70 million in its development.
The Paradise Papers reveal that other prominent Swiss managers have also profited from the port project.
One is Monika Ribar, president of Swiss Federal Railways (SBB), who also sits on the supervisory board of Germany’s flagship airline Lufthansa. Before Ribar took up her position at SBB, she served on the board of Bastos’ port company. Her role was largely in an advisory capacity “based on her experience in logistics,” according to a statement. One document in the leaked Appleby data showed Ribar’s annual salary to be $100,000 for her services on the board. She did not confirm nor deny the sum, but “kindly pointed out” in the statement that a privately owned company is not required to disclose levels of remuneration paid. Ribar did write, however, that she had “carried out a careful examination” before joining the board and was “still convinced of this project.”
Another project involving Angolan oil money from which the self-proclaimed philanthropist Jean-Claude Bastos will profit is the construction of the so-called High Tech Tower in downtown Luanda, Angola’s capital. So far, the modern skyscraper only exists on paper, but the ground upon which it is to be built belongs to a company privately owned by Bastos. On Dec. 19, 2014, one of the Mauritian funds that manages Angola’s sovereign wealth entered into a contract with the company. In it, the fund guaranteed $157 million for the construction of the skyscraper. The project is a joint venture. The contract also stipulates that a second company owned by Bastos is to manage the project and will develop the office section of the building.
The contract states that $100 million of the $157 million from the fund will go directly to this second Bastos company in the form of an assumption of debts incurred during construction. In the end, the fund is only set to receive the hotel section of the new structure. Tom Keatinge, the director of the Centre for Financial Crime at the renowened British think tank Royal United Services Institute (RUSI), analyzed documents from the deal and concluded: “Obviously, Bastos directs the fund to invest in a project from which he personally profits. There is a risk that the fund will pay too much for the hotel and also finance the part of the building, which at the end will belong to Bastos.” When contacted for comment, Bastos said he had changed the financing model in the meantime.
Criminal?
Bastos rejects the accusation that he is lining his own pockets with Angola’s oil wealth. “There is not now, nor was there ever a conflict of interest,” he said, adding that his group of companies reached all agreements “at arm’s length.”
By that, he meant they were always in accordance with standard market conditions – just like the deals one reaches with business partners with whom one has no personal relationship.
The verdict of financial crime expert Tom Keatinge in the case of all these deals is clear. “Whoever approved the structure and the operations on the side of the Angolan SWF, is either highly incompetent or complicit. Such a structure has only one goal: to hide something, namely the true beneficiaries of transactions. I am afraid we see here how the money of the people of Angola disappears. A country where every dollar counts. Maybe this is all legal. But that does not change the fact that it is highly immoral.”
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