Leak reveals Farrer & Co established an offshore trust for Abubakar Bagudu prior to claims of corruption
The Queen, who has been on the throne for almost 70 years, has been assisted by 14 prime ministers and advised by nine private secretaries. One thing has not changed: the choice of her solicitors.
Farrer & Co has advised the Queen throughout her reign. This elite London firm has a long history representing the royal family as well as the aristocracy.
Thanks to the Pandora papers, the spotlight is now on the firm that has stood by Queen Elizabeth since her coronation.
There are no indications of wrongdoing. These documents don’t show that rules were broken. However, they do show that Abubakar Bagudu was one of its clients.
Bagudu, a Nigerian politician, is accused by the US Department of Justice of playing an “instrumental part” in a corruption scheme that saw billions of dollars stolen from West Africa.
How did Farrer & Co become part of Bagudu?
Although it is complex, the case highlights important issues. Farrer & Co is not only relevant for UK and US law enforcement agencies, as they need to understand how and why Farrer & Co make these decisions.
They have been frustrated over the way that corruption-linked individuals overseas used respectable English law firms for their money management in recent years.
The hunt for Abacha’s money
This story began in the 1990s, when Sani Abacha, the notorious dictator of the country, died.
The country’s new government in 1998 accused Abacha of leading a massive conspiracy to steal between $3bn-$5bn (PS2.2bn-PS3.7bn) from the Nigerian state coffers. The decades-long hunt for the money continues. It has been traced through a series of front companies to accounts located in Paris and London.
Bagudu was an associate to Abacha. He admitted in 1999 that he received funds from the dictator. Bagudu was accused by the Nigerian government of being involved in Abacha’s corruption. However, in 2003, Bagudu and Abacha reached a court-approved agreement. Bagudu agreed that he would return $300m of his fortune without admitting any wrongdoing.
Enter Farrer & Co.
According to the Pandora papers the law firm was working for Bagudu from February 2010 to help him and his brother Ibrahim transfer EUR98m (roughly PS81m) from a British Virgin Islands trust to a complex structure located in Singapore and Cook Islands. This secretive jurisdiction offers high levels asset protection.
Farrer & Co documents show that they engaged Asiaciti, a Singapore-based family-owned trust company, to manage the new structure, known as the Blue Group. Farrer & Co remained involved in the management of the trusts as well as the Bagudu family’s relationship to Asiaciti after it was established.
Although Bagudu had reached an agreement with the Nigerian government seven year earlier, Abacha’s claims regarding Abacha’s stolen money were not settled. They aren’t.
Farrer & Co. and Asiaciti both appear to have taken a reputational gamble by taking Bagudu on as a client. It was a risk they were willing to take. Farrer & Co told the Guardian that it had done “extensive diligence” on Bagudu to ensure that Bagudu had fulfilled the firm’s legal and regulatory obligations.
Certain checks were conducted. Farrer & Co was notified by another company representing Bagudu in April 2010. This firm had contacted Farrer & Co to inquire about the source of their mutual client’s offshore wealth. Bagudu was subject to criminal investigations in relation to the embezzlement scheme. The other firm confirmed that Bagudu had been detained and arrested in the USA for six months.
It assured Farrer & Co, however, that Bagudu had reached a deal with the Nigerian government which allowed him to keep the BVI trust funds.
Farrer & Co filed a suspicious activity (SAR), in August 2010, to the UK’s Serious Organised Crime Agency. This was to get the consent of the law enforcement body to transfer assets from Bagudu’s trust, BVI, to the new structure.
A spokesperson for the company stated that a detailed precautionary report on the transaction, including assets and whereabouts, was submitted to UK law enforcement. This was approved in September. Documents suggest that the EUR98m in cash and securities was transferred to the Blue Group two days later.
Bagudu’s brother and some of the money began to flow directly to Bagudu, who managed his financial affairs.
Asiaciti seems to have also made its assessment of Bagudu. Asiaciti’s head wrote an internal memo acknowledging Bagudu’s “unfavorable” background, but still considered him a client.
Asiaciti described his reasoning and wrote that he was “further consoled” by the fact that “a prestigious London legal firm, which acts for the royal family, accepted the explanations given and were prepared to act on behalf of the client.”
Asiaciti decided that Bagudu’s request for funds from Blue Group funding was worthy of “enhanced diligence” by May 2013. Farrer & Co intervened. The firm pointed out Bagudu’s brother “not entirely happy with the level of scrutiny” and suggested that Asiaciti not do this.
Asiaciti was reminded by the London firm that Bagudu had stated years ago that he wanted trust assets managed so that funds could be made available for his children and wife. He said that they should be supported in the same way as they are used to.
US prosecutors intervene
Four years later, Farrer & Co’s and Asiaciti’s judgments about the “somewhat controversial Bagudu” were viewed in a negative light.
The DoJ seized Bagudu’s assets in 2014 and claimed that he helped Abacha “launder proceeds of the conspiracy” via a complex network of fake companies. Prosecutors claimed Bagudu then swindled some of the money into accounts he controlled.
The DoJ made a public statement that stated: “The complaint alleges General Abacha and his son Mohammed Sani Abacha and their associate Abubakar Atiku Bagudu embezzled and misappropriated billions of dollars from Nigeria’s government and other governments. They then laundered their criminal proceeds through US banks and the purchase bonds backed in the United States.”
US prosecutors filed civil forfeiture proceedings in March 2014 against assets totalling more than $500 million. They claimed that the assets were part of an “international conspiracy” to conceal the proceeds from the embezzlement scheme of the Abacha-era.
The UK authorities helped US prosecutors obtain a court order freezing Bagudu’s assets in the UK within months. EUR107m was held in investment portfolios managed by Mayfair’s exclusive wealth managers. The National Crime Agency (NCA), Soca’s successor was present in court to confirm that the freeze had not been lifted.
Bagudu, aged 59, denies any wrongdoing.
Farrer & Co stated to the Guardian that any criticism of the company was unfounded. They pointed out that it had obtained consent from the UK authorities before transferring the assets to the trusts. Soca is now questioned about the reasons its anti-corruption and due diligence checks did not pick up the same concerns that the Americans.
Farrer & Co, as well as a Bagudu lawyer, denied that Bagudu tried to hide assets in the trust structure. They said they had provided details about how the assets were eventually controlled to the relevant authorities. Although they did not provide any explanation as to why Bagudu created the trusts (which are legal), they said that he was allowed to keep the funds under the 2003 agreement with Nigeria.