Heydarov business director Robert Baker set up numerous Malta companies at Pilatus Banks

Maltese companies set up by an Australian national identified as being close to the Azerbaijani oligarchy, were in the main set-up through the services of the private bank Pilatus.

Last week, Daphne Project journalists broke the news that Pilatus Bank held accounts for up to 50 companies linked to Azerbaijani oligarchs. Account-holders reportedly included companies owned by members of the Aliyev ruling family, and that of Kamaladdin Heydarov, Azerbiajan’s minister for emergency situations, and reportedly one of the wealthiest men in the country.

The Daphne Project is the work of 45 journalists from 18 media organisations who are investigating Daphne Caruana Galizia’s assassination and continuing her most important stories.

Back in April 2017, Heydarov was named as one the bank’s main clients by Caruana Galizia, while MaltaToday revealed the company interests of Heydarov associate Manuchehr Khangah – with companies opened by Nexia BT.

Sources who spoke to the Daphne Project confirmed that Heydarov’s sons Tale and Nijat were clients of the bank, along with Leyla and Arzu Aliyeva – daughters of Azerbaijan President Ilham Aliyev.

The reports suggest that companies holding accounts at the bank were part of a structure used by the Aliyevs and Heydarovs to hold European investments.

Robert Baker Infographic by maltatoday on Scribd

One investment flagged is the ownership of the French company Heritage Collection, which owns three French high-end artisanal businesses. The companies changed ownership in 2014 and 2015, and management staff were never told who the new owner of the business was, which has now been revealed to be the Heydarov brothers.

Heritage Collection (France) is owned by a company called Heritage Collection SA, registered in Luxembourg, but this company is in turn owned by the Maltese company Heritage Asset Holdings.

Lawyers for the Heydarov brothers told the Daphne Project: “Our clients are the beneficial owners of companies which hold accounts at Pilatus Bank in Malta, which have entirely legitimate and lawful business.”

The structure was reportedly set up to “hold European property assets” and their ownership was in many cases in the public domain. In cases where it was not, they said this was due to legitimate privacy and security concerns.

The Maltese company register lists Robert Baker as one of the three directors of Heritage Asset Holdings. Baker was flagged by the Daphne Project for appearing as a director of multiple entities with Pilatus accounts.

According to the Maltese registry of companies, Baker is the director of 18 Maltese companies, nine of which were opened using a Pilatus Bank account.

11 of the 18 companies are part of one structure, the ownership of which is equally divided between two holding companies; Argyle Holdings and Kimberley Holdings – which are Maltese tax-registered companies.

These are in turn owned by New Zealand trusts registered Hawk Asia and Wolvering New Zealand, ‘owned’ by corporate services firm Denton Morell. According to Radio New Zealand, this firm helped transfer the ownership of 16 Azerbaijan-linked companies and seven key companies holding European property assets, and five with accounts at Pilatus Bank, to the two New Zealand companies.

Profit-shifting and layering

An industry expert who looked over the Maltese companies’ last filed accounts with MaltaToday journalists immediately pointed out that the company structure was a layered one where in many instances money is being loaned out between entities with very little explanation or apparent purpose.

For example, Kimberly Holdings – one of the two Maltese holdings companies – borrowed money from an unknown entity at 6% interest, but then passed on that money to its subsidiaries without any interest and bearing the costs of its borrowing, while passing proceeds to its subsidiaries without interest.

The borrowing patterns, the expert said, indicated, at the very least, that the structure could be a scheme for profit shifting to Malta, ultimately with a view to benefit from beneficial tax rates in Malta.

The expert pointed out that many of the companies were still in start-up and that the accounts, which cover the period up to 31 December 2015, give a snapshot of the start of the structure.

Robert Baker is also one of the directors of another group of companies – Andalusia Property Alpha (APA), Andalusia Property Beta (APB), and Andalusia Property Gamma (APG) – which also have a Pilatus Bank account and were set up in December 2014.

Between them, the companies appear to own some €25.8 million in property as well as a subsidiary company in Bulgaria.

MaltaToday understands that the companies’ accounts show that the property is intended to be rented or leased out, given that it is termed “investment property”, and that all financing was made through borrowing from an unknown related party.

While there is no suggestion of wrongdoing or that those mentioned have acted illegally, the high concentration of companies linked to politically exposed persons from Azerbaijan – a country often criticised for alleged human rights abuses and violations of the rule of law – raises questions on the bank’s operations.

Secretary resigns after Pilatus reports

All 18 companies were opened between July 2015 and December 2015 by Frendo Advisory, which said that once it became aware of the “problems” of Pilatus bank through media reports, it stopped providing services to the entities in question. The firm is headed by former Nationalist foreign minister Michael Frendo.

Luke Frendo, head of the firm’s Private Client department, who was also company secretary for a number of the companies, said he was not aware of anything untoward about Pilatus Bank until it was named in relation to money laundering and compliance issues in the media.

Both Michael and Luke Frendo are individual agents of the Individual Investor Programme, Malta's citizenship-by-investment scheme.

He filed his resignation as company secretary from 14 of these companies on 26 April 2017, soon after the first reports on Pilatus Bank and the mysterious Panama company Egrant were published by Daphne Caruana Galizia.

He told MaltaToday that he had chosen to resign all his positions with the entities upon finding out about the allegations.

“As soon as I became aware of the problems of Pilatus bank through the media reports, not on the advice of anyone, I resigned from that position and we no longer provide services to these entities. Until that point, I was not aware of anything untoward about Pilatus bank.”

Frendo stressed that the firm always carries out the necessary due diligence but could not tell MaltaToday whether he was aware of the ultimate beneficial owners of the companies he helped set up.

MaltaToday asked Frendo whether the necessary due diligence was carried out to be sufficiently aware if the UBOs of the companies were members or associates of the Azerbaijani ruling family, such as the Heydarovs.

“We always carry out our due diligence fully in line with our obligations. You can appreciate that I am not able to divulge any professionally confidential information.”