Shaheen Empire’s Hidden Companies

In cooperation with ICIJ- International Consortium of Investigative Journalists, Süddeutsche Zeitung

Shaheen Jordanian and Foreigners partners in Foreign Companies

Jordanian Governments Tax in dealing with offshore companies and the result millions of dinars in corruption

Investigative report by: Musab Shawbkeh, Imad Rawashdeh

 

In clear words written in the case file, after swearing in at the Jordanian Attorney General, Khaled Shaheen stated: “I own most of the shares in the Infra Mena Limited Partnership, which is registered in the British Jersey Island and has a capital of $500 million.” Shaheen didn’t divulge in this testimony who with him in the remaining shares are allocated to and how much are they worth. The documents of the case don’t reflect who this unknown partner is. He has remained a mystery even to the Jordanian Refinery Company for whose (Fourth Expansion monopoly) tender he had applied for.

“We still need the commercial registration, and the full address of Infra Mena”, this was what the technical team looking into the Refinery tender by Infra Mena was looking for, according to the case file, which Radio al Balad has a copy of.

The investigative team of Radio al Balad didn’t succeed in finding Shaheen’s hidden partner.

After three months of intensive research the most we were able to find was that Infra Mena is a simply holding company established on March 5^th, 2009 and is registered in the island of Jersey according to the 1994 laws applicable there.

The capital in the amount of $500 million is not actual, according to an August 4th 2009 letter sent by Adel Qdah the Chairman of the Refinery at the time to the then Prime Minister Nader Dahabi. Radio al Balad investigative team was never able to locate an actual address or a website for the company. The only address available is an office in Jersey.

This investigation is part of an international joint effort for 330 investigative journalists around the world led by the Washington DC- ICIJ- International Consortium of Investigative Journalists, based on documents, official records and leaked emails for offshore companies in 12 safe havens around the world covering the period 1979-2015.

Tax Havens

They are entities that have very strong secrecy laws for their clients and foreign customers whose citizenship is different. In the world there are fifty of these entities. These tax havens provide agents who are able to register a company for a small amount of money with total secrecy and very little administrative procedures. In some cases they require very few documents.

These entities have local companies that can help process these applications and provide their address and their legal offices instead of the agents in total secrecy.
The main unique feature of these entities is that they don't tax the clients at all or make a very small symbolic tax in comparison to the countries of origin and they are outside the legal arm of the country of origin of those setting up a company in.

This part of the investigation reveals never before revealed information about the working of the Jordanian businessman Khaled Shaheen and his relationship with some 26 companies registered in three tax havens around the world. It shows how these companies entered into official tenders such as the Fourth Expansion of Jordan's only Refinery and the transport of water from the Disi wells in south Jordan. This investigation by Radio al Balad unit also reveals the dangers of Jordanian governments entering into agreements with offshore companies registered without due search for the real owners of these companies and how this led to these files being sent to the Anti Corruption Commission.

This investigation reveals that business man Khaled Shaheen owned the lion’s share of stock in some 26 foreign offshore companies at least three of them registered in tax havens of Jersey, Virgin Island and Luxemburg with a combined declared capital of $1.3 million dollars for all three companies. (See details about tax havens in the box nearby).

At least two companies entered into a general tender in Jordan. The first Infra Mena entered into the Refinery tender and the second Invest Corps Securities received two contracts from the Investment and Development Fund of the Jordanian Armed forces to transport water from the Disi well.

The company also profited the commission of building the General Security Forces headquarters. This company received a total of 16 million US dollars according to the Anti Corruption Commission.

Khaled Shaheen owns stock in 34 companies in Jordan. There are nine companies whose majority shares are owned by these two main companies SBIG.SA and Ole Holding Limited.

These two companies own the majority of the stocks in 12 Jordanian offshore companies registered in the British Virgin Islands. The total declared capital in all companies owned by Shaheen inside and outside Jordan nine million Jordanian Dinars among them eight million are for Jordanian companies and one million for offshore companies.

Despite that his efforts to pay part of his tax burden has resulted in three cases against him in Jordanian courts in the period between 2003-2015, this has resulted in Shaheen paying back taxes in the amount of 22,000 Jordanian Dinars.

The hidden man

Following up on the various Shaheen companies in Jordan and outside has shown the strategy that he uses to avoid paying taxes by using his safe tax havens abroad.

In the first instance this looks complicated but in reality it is very simple. The idea is based on the creation of a company in Jordan. Our investigation shows that the idea was to establish a company in Jordan and to distribute its shares to owners whose names are allowed in the company registrar while the majority of the stock is listed in the name of a company registered in the same havens which guarantees that the names of the real owner is never identified.

This is exactly what happened with the Arab Car Manufacturing Company which is a Jordanian company owned by Khaled Shaheen and some of his brothers and was established in 1999 with 100,000 shares each share worth a single Jordanian dinar.

Khaled and his brother Riyad and Akram each own one share while their wives Manal Awad, Hanadi al Sayeed and Ghadeer al Bakhit owned all the rest of the shares, according to the company registrar.

After four years in August 2003, the three wives shares were transferred to a company called Shaheen Business and Investment Group S.A, which is registered in the Luxemburg tax haven and is owned by Khaled Shaheen and his brothers according to company documents that this investigation uncovered.

Locally, the company registration in Jordan shows that the three Shaheens only own three shares mentioned earlier while the foreign company owns the rest. This means that the Shaheen brothers are able to avoid paying taxes in Jordan on all the shares distributed by the foreign registered company.

Article 3

The following will be exempted from tax on the profits of their stock and the shares distributed to the residents: Profits from Investment funds, Bank Funds, Communications Companies, Mining Companies, Insurance companies, Financial middle agents, and all financial companies who work in financial dealings.
The exempted income mentioned in clause (A) shall pay a 25% tax of its expenses so long as this amount doesn't exceed the total accepted taxes for the taxing period.

In other words, the real owners of all the shares of the Arab Car Manufacturing company are the Shaheen brothers, but through a foreign company registered in a safe haven which allows them to avoid paying in Jordan the vast majority of the taxes they are due. This was the opinion of a tax expert in a major international auditing firm after reviewing the registration of the Shaheen companies.

The auditor who preferred not to reveal his name in order to protect his company said that in reality the Arab Car Manufacturing company should be paying 14% tax on the company since it is registered as in the industry sector according to current tax law in Jordan. (See box on article 41 of the tax law)

If the partner is Jordanian or a Jordanian resident, the amount that is exempt shall be taxable at the rate of 25% of expenses so long as the total of the expenses is not more than the taxes for that period, according to the auditor. This means that the real partners, in the case of the Arab Car Manufacturer, the Shaheen brothers shall be liable at a lower tax because they will be exempt from the 25% of the exempted income. (See box with executive directives).

Hatem Qawasmeh, the head of the Jordanian Auditor's Society and the Executive Director of KPMG Auditing, told Radio al Balad that if the investor's capital in the tax haven is Jordanian money then all the profits are taxable. What Qawasmeh says appears to be true in case the government is able to know that the capital kept in these secret tax havens is in fact belonging to its citizens. Qawasmeh replies to Radio al Balad investigation team "if there is a violation of the law, the government has to find a solution to that."

Jordan's Investment Law #30 for 2014 allows a foreign investor to take his capital and his profits out of Jordan. This applies to Shaheen two companies SBIG SA and Ole Holding Limited in that they were described as foreign companies.

This model was repeated by the Shaheen brothers in 12 different companies.

Initially what Jordan's company registrar Dr. Mahmoud Abbabneh thought was that the aim was bad faith and obfuscation behind the attempt to register a single share in someone's real name while the rest of the shares are in the name of a foreign company. The majority of the Shaheen investments are based in the British Virgin Islands which is one of three major tax havens around the world. The amount of the Shaheen investments in this island was around 30 million which belong to 11 companies working in Jordan according to company registration records. A total of 67 foreign companies with an "un-working branch" and 30 companies with a "working branch" exist in Jordan according to official company registration records.

Tax Evasion

Advocate Tamer Obeidat, says that the first reason to set up an offshore company is for the investor to avoid paying taxes on his investment. Despite that, foreign companies in Jordan don’t pay taxes on the profits it shares from the local company. On the other hand it will bear part of the tax burden in terms of what the local company will pay in taxes of its profits before distribution.

This is also what Musa Tarawneh, the spokesman of the Department of tax and sales also said.

In Jordan as in other countries like the US, taxes are collected from local companies twice. Once on the overall profits before distributions and a second time on the profits made by each shareholder in terms of his share in the company, according to Obeidat. Obeidat sees that the “tax evasion is a legal way used by investors to pay less and even no taxes.”

Michel Hijazin, a Former Member of Parliament and a member of the Jordanian Auditors Society who himself is an auditor, says that a Jordanian partner or a resident pays 25% tax on his exempted profits from his shares something that a foreign shareholder doesn’t have to pay.

Lack of competence

Infra Mena applied for the expansion of the Jordan Refinery tender on April 3rd 2009 after one month of the signing of the agreement with the Refinery. Dr. Fayyad Qdah, a member of the Anti Corruption Commission, asks how can a company sign a contract with the government to produce electric energy even though the company has not produced a single energy station?

The talk of Qdah applies to Infra Mena, the company just born which had not implanted the tender for the expansion of the Refinery in its lifetime. According to Qdah, the purpose of this company is to take the tender and then to find contractors to do the implementation while it take away the commission while the government must resolve the problem of the competence or lack thereof of the contractors that Infra Mena has chosen to carry out the tender.

Shaheen didn’t hide in front of the Attorney General that his goal was to sell part of Infra Mena in the future. He said “the way we work in terms of ownership allows us to sell part of our investment ownership in the future if we win the tender we applied for in the Refinery.” Ramzi Nuzha, the Former member of the Anti Corruption Commission doesn’t hide that offshore companies that have previously signed agreements with the government were established after the signing of the agreement. He continues: “what is the competence of these companies, and what are the projects that they have implemented?”

Registering via Email

In a single day on October 10^th, 2005 Khaled Shaheen registered three offshore companies in the British Virgin Islands, Tharwa Investments S.A., Handasa wa I’mar Services and Strafield Real Estate Limited. Each company had a declared capital of $50,000. This was not the first time that Shaheen has registered more than one company on the same day. On the first of September 2004 he registered three companies. He registered two companies on September 4th 2006 and also on June 22nd 2009.

Shaheen doesn’t have to do much work to register these companies. All he has to do is to contact Musak Company which is specialized in registering companies around the world via email. Leaked emails from Musak show that at least five companies were registered by Shaheen in this manner from afar.

Where is the Rule Of Law?

Dr. Fayyad Qdah, the Professor of Commercial Law at Jordan University, says that the hiding of the real owner obstructs attempts to enforce the constitution and laws. Qdah who was a member of the Anti Corruption Commission says that the constitution forbids Cabinet Ministers to engage in business while they are ministers. It also forbids Members of Parliament from signing any contract with the government. By hiding the true owner, the Law for Illegitimate Profit (previous called Financial Disclosure Law) is disabled, says Qdah.

Ramzi Nuzha, a Former Member of the Anti Corruption Commission, agrees with his Former colleague Qdah regarding the problem of hiding the conflict of interest issue when you register a company without declaring who is the identity of real beneficiary.

Khaled Shaheen justified to the Attorney General his establishment of Infra Mena as a company with hidden names of shareholders by saying “I wanted to keep the company vague and it is a method used internationally because I didn’t want my name to appear when the Refinery Company evaluates my offer objectively without any positive or negative influences.”

Abdel Rahim Biqai, the member of the Finance Committee in the Jordanian Parliament, says that these companies are created “100% to be a source of corruption.” But Advocate Tamer Obeidat blames the government for not knowing the identity of the investor it plans to begin work with.

Tax evasion is the major reason why individuals create offshore companies in tax haven so that they can come back and participate as a Jordanian company, says Nuzha.

Away from Justice

The registration of an offshore company whereby a person is allowed to hide his money even if it was made in a legitimate way is done to hide money outside, away from the ability of Jordanian courts putting their hands on it, according to Nuzha.

When the Attorney General in March 7th 2010 decided to freeze all the monies and assets of Khaled Shaheen regarding the Refinery case we didn’t see any attempt to freeze any of the 23 offshore companies that Shaheen has stock in outside the Kingdom, according to the files of these offshore companies.

Ramzi Nuzha who worked as a military judge says “not knowing the true owner of these companies weakens your ability to enforce judgments against them.” Jordanian Investment Law # 40 for 2014 allows foreign investors to take out the capital which they bring into the Kingdom and the profits that they made in addition to their original share. This applies to both companies owned by Shaheen SBIG SA and Ole Holding Limited in terms of being foreign investors.

Millions have gone

Dr. Fayyad Qdah as a practicing lawyer has gone to court representing the government against offshore companies and has won cases in Jordanian courts and with arbitration committees. But when we tried to enforce these judgments all he was able to find was an office with chairs and tables. “In other words we found nothing,” he told us.

Nuzha also confirms Qdah’s experience. “When we try to go to court against these companies we have a problem. Virgin Islands is outside the realm of British legal system and has its own legal scheme.

Shaheen's partners

The records which Radio al Balad has received in cooperation with ICIJ- International Consortium of Investigative Journalists reveal a web of Jordanian and Arab businessmen who partnered with Shaheen in this tax paradise in the British Virgin Islands.

In the middle of 2002, Shaheen and businesswoman Daed Sharab created a company Brothers Alliance Limited in the Virgin Islands with a declared capital of $50,000 divided equally between them (we have a copy of their registration). Daed Sharab had supervised during the reign of Moamar Qadaffi the investments of the Libyan government abroad. After seven years, Shaheen and Sharab created the second company in the same place and with the same capital in the name of Global Investments Enterprises Group Inc. but this time an individual named Isam Hakeem joined them with almost an equal share.

Business man Rami Nijem Ghanem also joined the Shaheen brothers in 2009 to create Project Bay Group Ltd, a company registered in the British Virgin Islands with a declared capital of $50,000, according to company records.

One of the earliest projects of Khaled Shaheen in Jordan was the establishment with Shareef Shaker Ben Zaid in 1991 the Mutawaset Air Delivery company with limited responsibility and a capital of JD200,000. This company continues to exist till now according to the Jordanian company registry.

Six years ago Khaled Shaheen and George Jamil Kawwar also created a company carrying Kawwar’s name with a capital of JD 200,000. However this company didn’t last long as Kawwar left it quickly, according to Jordanian company records.

Nazeeh Al Mooh established with Khaled Shaheen and his father a limited responsibility company in the name of Unified Industrial Tawkeelat with a capita of JD 10,000. Malooh owns four thousand share.

Shaheen brothers also established The Iraqi Investment and Trade Company with the British Investments and Trade Company represented by three British businessmen of Iraqi origin, Nathmi Oje, Namir Aqabi and Loya’I Al Tarihi, according to official Jordan company records.

Akram Abu Hamdan and Manal Awad, the wife of Khaled Shaheen, as well as Hanadi al Sayeed, the wife of Riyad Shaheen, and Abdel Qader, the son of Khaled Shaheen, Yousef the son of Riyad Shaheen and Faisal the son of Akram Shaheen all are listed as shareholders in the various companies established by the Shaheen brothers.

Shaheen’s Tax stories

The Jordanian Tax Appeals Court supported the decision to register Khaled Shaheen as having to pay sales tax and demanded that he pays JD 2,500 according to a judgment carrying the number 30 for the year 2014.

This is not the first time that Khaled Shaheen has been convicted on tax issues. In July 2003 Khaled and his brother Riyad were ordered by Jordan’s appeals court to pay JD42,000 to include partners, fees and other expenses.

In 2012, the Tax Rights Court rejected a case by Khaled Shaheen and insisted that he has to pay taxes.

Checks without Balance

The Amman Basic Court ordered November 24th 2015 Khaled Shaheen and his company Ole Car dealership to pay JD 2.9 million for issuing a check without balance. In the past ten years Shaheen has faced ten cases in which he issued checks without sufficient balance, court records show.

Smuggling oil

Forty percent of all companies created by Khaled Shaheen in the Virgin Islands were established in 2004 after the suspension of the Millennium Company for Oil products at the end of 2003, which was owned by Shaheen brothers and sons.

Millennium, which was operated by Akram Khaled Shaheen’s brother, was named in an investigation by the UN oil for food program in its second section for smuggling 7.7 million barrels of oil from Khor Port in Iraq.

The name “Shaheen” was mentioned in a 260 pages report by the authors of the UN report.  Shaheen put the concerns of Samir Najem, the Iraqi oil Minister at the time, saying to him the Pentagon and the CIA are in my pockets, according to the report.

Jordan’s Minister of Energy at the time, Mohammad Batayneh, signed a power of attorney issued by his Ministry on February 6^th, 2003 carrying the number 866/2/1110 authorizing the Millennium company owned by the Shaheen brothers to be the representatives of the ministry in carrying crude oil from Iraq to other ports. A copy of Batayneh’s power of attorney with a cc to the Prime Minister Ali Abu Ragheb is printed below.

Recommendation to the Prime Minister

The Anti Corruption Commission discussed the problem of the offshore companies when Fayyad Qdah was a member of the commission between February 2011 and November 2013. Qdah said that a letter was sent to current Prime Minister Abdallah Ensour with the recommendation that no major tender should be awarded to any of these companies. "As far as I know this recommendation has not been taken up,” said Qdah.

Government spokesman Minister of state for Information Mohammad Momani told Radio al Balad that the government only works with companies that are properly vetted.

The former member of the Anti Corruption commission concludes “until this day tenders are being won by these offshore companies. I am talking about 2015 and 2016 and we have no idea who owns these companies,” Qdah told the Radio al Balad investigative team.