The Panama Papers, corporate filings and the “bad guy” / “sharp guy” issues

Oil geek question: what do ConocoPhillips, Halliburton and Schlumberger have in common? Well… they all share the fact that they have, or at least at one point had, Panama incorporated subsidiaries. So why is that, if Panama isn’t actually producing any oil, as the U.S. Energy Information Administration states on their website?

With the Panama Papers big in the news, this will probably not come as a surprise. And to be clear, setting up local subsidiaries in Panama is not illegal, nor is it unusual for extractive companies to open up incorporations across the globe – even where they are not operating directly. That becomes obvious through the thousands of documents available in public domain, in which oil, gas or mining companies disclose their vast networks of affiliates, including those in Panama, but also those based in one of the various other financial centers, like the Caymans or the British Virgin Islands (BVI). So unlike all of the stories coming out of the Mossack Fonseca leak, the aforementioned offshore links can be found in the companies’ own filings, which means that you can find them on Aleph, OpenOil’s corporate filings database. In fact, a quick search on Aleph will bring up 500 similar references to Panama incorporations of extractives companies, close to 1,500 references to those in the BVI, or 2,000+ on the Cayman Islands.

Establishing such links between companies, people, and jurisdictions is essential to anyone wanting to map out corporate networks – may it be investigative journalists, risk analysts, tax authorities, or anyone else interested in finding out about who multinationals are dealing with. In particular, however, they help to address two major issues in the extractive industries as we have outlined in our case-study on BP.

1) The first issue is the “Bad Guy Issue”.
Corrupt access to natural resources, when dodgy companies are granted licenses for lucrative oil and mining concessions because they are politically connected. Such connections could conceivably be demonstrated using public documents, but it is obviously challenging to do so.

Looking at some of the Mossack Fonseca stories, for example, you will see that corporate filings will help you to lay the groundwork. Such as for this one on how the Beny Steinmetz Group Resources (BSGR) acquired rights to a mining license in Guinea for $165 million, but soon after sold 51% of the rights for more than ten times the price. Ultimately it was through a number of leaks and a series of criminal investigations that the details of the deal could be reconstructed. But Aleph’s 2,000,000 documents already provide you with some relevant leads. Such as this document, that suggests a connection between BSGR and Onyx – a company that in return represented a crucial link between BSGR’s acquisition of the mining site and a $2.4 million payment to Mamadie Touré, one of the wives of former Guinean president Lansana Conté. Then there is also Vale’s announcement on having acquired a 51% stake in the same assets for 2.5$ billion, which should have already alarmed anyone who was aware of the original asset transfer to BGSR for $165 million.

Example Aleph search term: “Caymans incorporated”~20
Search for the name of a jurisdiction and “incorporated” in proximity to find out which companies are registered in the country.

Example Aleph search term: “BSGR Onyx”~50
Proximity searches for two companies, here BSGR and Onxy, can bring up leads to whether there is a connection between them.


2) Then there is a second issue, the “Sharp Guy Issue”.
Whether complex corporate structures allow multinationals to engage in “aggressive” tax planning. By “sharp guys” we mean the small armies of lawyers and accountants who are engaged in handling the billions that pass through the accounts of oil, gas and mining companies. And as has been well documented elsewhere, these guys are sharp, so that –  in a world full of complex tax treaties – it is extremely difficult to prove any so-called “transfer mispricing”, or other means to shift profits out of resource producing countries into low- or no- tax jurisdictions, such as the above mentioned Caymans or British Virgin Islands… or Panama.

The question here is more whether governments in say, Africa, would act differently if they were able to see the whole corporate chain of the companies operating. Might they adjust their own taxation policies in light of that? Would they subject billions of dollars of tax-deductible costs submitted to their tax authorities to audit, or at least to more rigorous examination?

So while establishing such corporate chains can be powerful, it can also require you to spend a lot of time browsing through filings, only to find the one odd mention of a particular affiliate of interest. Companies operate globally, but they tend to report locally, meaning that there are many different places where you might have to search – the Canadian SEDAR database or the Australian stock exchange ASX to name just a couple. Fortunately, this is where two of Aleph’s strong points come in. First, Aleph helps you to search across various document bases simultaneously. Second, that you can fully text-search all of the two million available filings, allowing you to find text snippets deep-down in a 100-page long PDF – a service that many of the existing public databases do not allow you to do.

So keeping in mind a few general tips and tricks, there are many different searching techniques through which Aleph will help to map out company networks. To name one, you can choose to search “top-down” for subsidiary lists of a company group, such as listed companies are required to file in many jurisdictions, e.g. in the form of “Exibit-21” on SEC’s EDGAR database. Such filings will then provide you with the names of subsidiaries, their place of incorporation, and the equity held by the parent company – allowing you to follow a corporate chain from a holding company all the way down to an operating entity.

Alternatively, you might choose to search “bottom-up” by entering the name of a single affiliate of your interest and work your way up to it’s ultimate holding company. This works best if you type in the exact legal name of a company in quotes. And if your search brings up too many results for you to process, try to narrow down your search results by adding terms such as “subsidiary”, “owned” or “interest” via a proximity search – all this of course depending on your particular use-case.

While we are working hard to improve Aleph’s functionality and scope – so that you will soon be able to filter results by date, filing type, or company – you should of course also consider other information sources, such as OpenCorporates, or even the companies’ own websites. For all the oil geeks, however, it might be interesting to know that we are also establishing Aleph’s API – which for example will allow you to not just search for one entity, but many simultaneously – such as the 40,000 odd companies mentioned in the Panama Papers. How exactly you will be able to do so, will be described on our github page – so watch this space!

Example Aleph search term: “Ex-21 subsidiaries”~50
Search for subsidiary lists, such as the SEC required “Exhibit 21”, to research a company’s subsidiaries and their place of incorporation

Example Aleph search term: “Rio Tinto subsidiary”~10, “Rio Tinto owned”~10, “Rio Tinto interest”~10
Search for the name of a company and “subsidiary”, “owned” or “interest” in proximity to find out about the company’s affiliates.

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