Billionaire Bob Duggan, the Panama Papers, and the Outer Banks Club

The Outer Banks Journal did an article recently on the US Bankruptcy Court’s denial of Matt and Kathy Feshbach’s attempt to discharge $3.8 million in back taxes via bankruptcy. This led me to do further research on Matt Feshbach’s Bahamian stem cell medical company called Okyanos Heart Institute. Please see my article on Matt Feshbach and Okyanos.

In the course of my research I found Feshbach and his business partner and fellow Scientology OT Manuel Vianna listed in the Paradise Papers:

Curious as I am about Scientology and its sources of money, I checked into Okyanos and discovered its $14.2 million dollars in capitalization largely came from a Scientologist named Ali Shawkat, a man whose father is Mudhar Shawkat, a former member of the Iraqi parliament. The ICIJ Offshore Leaks Database page on Mudhar Shawkat states that Appleby Global — an offshore law firm that some have compared to the notorious Panamanian firm of Mossack Fonseca — set up the “Passion Group S.A.” for the Shawkat family. “S.A.” is a business term meaning “Society Anonymous.” A person who owns shares in an S.A. corporation can have those shares held by an offshore law firm. An S.A. grants a certain degree of anonymity.

There were concerns at Appleby about the Shawkat money and its Passion Group S.A., this according to an internal Appleby e-mail leaked by the Paradise Papers:

According to 2008 confidential emails, the lawyer representing Shawkat and his son, Ali, asked Appleby to hold in escrow about $140 million, the proceeds of the sale of the Shawkats’ shares in a joint venture with a Kuwaiti telecommunications company. The law firm refused that request but accepted them as clients later in 2008.

Appleby set up the Passion Group Trust for the benefit of Mudhar Shawkat’s family members and registered three affiliated companies in the British Virgin Islands in 2008 and 2011, according to the files. Shawkat was identified in the Appleby documents as an “additional settlor” (a person who creates and funds a trust) of the Passion Group Trust and as a shareholder of Passion Investment Ltd., the trust’s investment arm.

However, upon the incorporation of a not-for-profit entity, which was also a beneficiary of the trust, concerns about the Iraqi family’s reported association with Chalabi [Ahmed Chalabi, 1944-2015. A controversial Iraqi politician.] emerged at the law firm. “It is suspicious,” an Appleby employee wrote in an email, “that they are setting up a charitable company offshore [Passion for Change S.A.] for funds coming out of Iraq – there does not seem any benefit other than lack of accountability in doing so.”

A Paradise Papers page on Mudhar Shawkat shows the relationships for the Shawkat family and its Passion group; there are ties to Amman, Jordan and the British Virgin Islands:

In a development that could portend trouble for the Shawkat’s and all other Appleby clients, Appleby confirmed in October 2017 that it had been the victim of a massive computer hack. Some in financial circles are saying the hacked information from Appleby Global will amount to a Panama Papers II. In November 2017 Appleby released a less than reassuring statement to its clients:

We wish to apologise to our clients and to our colleagues for the difficulties which have arisen from this incident. We remain committed to working with each and every client to talk to them about what has happened so that they can understand its impact on them and in order to support them with their own reporting requirements.

I note in passing that when your offshore legal firm tells you that it will help you understand the impact of it being hacked and will support you with your “reporting requirements” this is not a good thing, particularly if one has not self-reported.

Ali Shawkat and his wife Noor donated $5 million to the IAS. This was covered in a 2014 article by Tony Ortega at the Underground Bunker.

Ali and Noor Shawkat receiving their IAS trophy for donating $5,000,000

Things were intriguing at this point so I called upon my erstwhile colleague Dr. Jeff Wasel. As Jeff and I learned from the Okyanos website, Ali Shawkat’s Passion Group invested money in Feshbach’s stem cell company:

FREEPORT, The Bahamas, March 18, 2014 – Okyanos Cell Therapy, whose mission it is to bring a new standard of care and a better quality of life to patients with coronary artery disease (CAD) using adult stem cell therapy, announced today it has raised $8.9 million in its Series B offering. Passion Group founder Ali Shawkat led the round and is a visionary entrepreneur-investor with success in a diverse set of industries including cellular services, telecom, media and healthcare.

Shawkat’s investment in Feshbach’s Okyanos is borne out by the Panama Papers’ mention that the Shawkat family invested in two medical companies:

In the following months, in 2009, the leaked files show that the Shawkats transferred more than $30 million to the family trust and one of its affiliated companies, some of which was converted into shares. Board meeting minutes of Passion Investment Ltd. chaired by Shawkat’s son show that from 2013 to 2016, the company has invested in two medical companies and in an Iraqi dealership for Peugeot cars.

On a side note to this story, Freewinds Captain Mike Napier’s son Sean Napier appears on the Okyanos website as the Director of IT & Operations:

Former US Ambassador to the Bahamas John Rood was brought in by Matt Feshbach to serve as a Director at Okyanos Holdings Co LLC. Because the Bahamian government had to pass a law allowing Okyanos to operate, Former Ambassador Rood’s contacts were undoubtedly invaluable. On a related note, John Rood is the Chairman of the Vestcor Companies Inc. This firm invests in multifamily dwellings. Scientology OT8 Grant Cardone’s firm Cardone Acquisitions follows the same business model as Rood’s Vestcor Companies Inc. This raises the question: Was Cardone introduced to John Rood via Matt Feshbach? If so, was Cardone inspired to get into investing in apartment buildings by seeing Rood’s success?

I found three UCC filings on Okyanos Operating Company Ltd. A “UCC filing” is an instrument that allows a lender to secure its interest on equipment for which they loaned money to a debtor to purchase. UCC’s are routinely used where a company borrows money to purchase expensive office equipment, phone systems, computer systems, medical equipment, etc. In the event of a default on the loan, the UCC protects the lender as it prevents the debtor from selling the equipment. The UCC also allows the lender to take physical possession of the equipment if the firm goes bankrupt. The UCC gives the lender first priority over other creditors in a bankruptcy.

The three UCC’s filed on Okyanos were filed by Prince’s Gate LLC of Santa Monica. A quick check shows Prince’s Gate LLC to be an entity owned by EarthLink founder and Scientologist Sky Dayton:

According to news reports, Black Beret Life Sciences of Houston acquired Okyanos in a leveraged buyout in July 2017. This begs the question: Why would BBLS need to use an LBO to acquire an insolvent company? BBLS has cash. Indeed, in January 2017 Affigen announced a $17 million Series A led by Black Beret Life Sciences.

Genuine First Aid International Ltd

In the map below of the Shawkat offshore money we see a company with the innocuous name of Genuine First Aid International Ltd. A search of the Paradise Papers shows that Robert “Billionaire Bob” Duggan and Ali Shawkat to be shareholders and directors of Genuine First Aid International Ltd.:

Another Panama Papers diagram shows the relationship of Robert “Bob” Duggan with the Shawkat’s; Amman, Jordan; Beirut, Lebanon; and the British Virgin Islands via Duggan’s ties to Genuine First Aid International Ltd:

What is Genuine First Aid International Ltd.? It is a company registered in the British Virgin Islands and based in Fujian, China. The company’s Chairman is a Danish Scientology OT8 named Michael Holstein. His Scientology Completions page is extensive:

Michael Holstein’s LinkedIn page leads to dietary supplements, vitamins, diabetes supplements, etc:

Another Panama Papers diagram shows Ali Shawkat to be a director of Genuine First Aid International Ltd:

Yet another Panama Papers diagram shows Robert Duggan to be a shareholder of a company called Spang CM Ltd:

A more micro Panama Papers diagram shows a tighter Duggan relationship to Spang and Genuine First Aid International Ltd:

While Spang CM Ltd. is registered in the Cayman Islands (tax identification number: 139726), the company is a Chinese manufacturing firm:

The Scientology Money Club Investigation, as Dr. Wasel and I are calling it, will take a look into the intertwining  world of wealthy Scientologists and their money. We are not alleging anything untoward whatsoever. Rather, we are examining linkages amongst Scientology whales who donate big money to the IAS. That these relationships have been found in the Panama and Paradise papers is part of what Dr. Wasel and I will discuss in an upcoming podcast.

Dr. Wasel’s comments on offshore corporations:

So why go offshore? Well first, “offshore” has many connotations, and can denote both legal and illegal financial behavior. There are legitimate reasons for high net worth individuals to maintain offshore companies, trusts, and other “vehicles”, mainly to lessen one’s tax obligation or to ensure privacy in sensitive, though legal financial matters.

Other reasons include political instability or corruption in their home country, or the registration of expensive assets such as planes and boats, as well as financing the associated insurance costs. Lawful tax avoidance involves organizing one’s financial affairs to legally minimize the amount of tax to be paid, versus tax evasion, which involves hiding one’s assets altogether, from the responsible reporting authorities.

Large corporations such as Apple, Google, and others use favorable tax regimes in Ireland as an example of tax mitigation/avoidance, as do individuals in the Caribbean, Liechtenstein, Switzerland, and other “tax havens”.  These “Offshore Financial Centers” (OFCs) exist primarily to provide anonymity and tax regimes favorable to the investor and not the regulator; where the illegality occurs, is when an individual or entity fails to declare an interest in an OFC to their respective nation’s tax authority or financial regulator. The use of OFCs is significant; while verifiable data is difficult to collect, it’s estimated that some 20 percent of all private wealth is located in OFC’s, as is an estimated 75 percent of the captive insurance market.

The nexus of the OFC phenomenon is geography. In other words, “sunny places for shady people” to some extent, though the post-9/11 regulatory environment has drastically altered this perception. Indeed, The Cayman Islands, Bermuda, and other former “light touch” OFC locales, now often exceed US and EU anti-money laundering and tax reporting requirements.

That said, many significant loopholes exist in the structure of OFC’s, loopholes that, in a variety of ways, are structurally resistant to regulation, and still offer the less-than scrupulous individual or entity plenty of ways to create private banks, phantom or “shell companies” and fake trusts, and to hide money and other assets. One such option within this structure is the use of “bearer shares”, a term often reflected in the associated charts in this story. Implicit in the many OFCs available to the “sophisticated” investor, is the International Business Company, (IBC), which is a corporate vehicle that can be owned anonymously, and does not do business in the country where it’s domiciled (has physical residence), and usually located in an extremely “light touch” regulatory and tax locale. An IBC can be created online in less than an hour, involves minimal regulatory and ownership filings, and has limited liability. It’s unrestricted in the type of business it can entertain, and an IBC can consist of multiple sub-entities, complicating any future audit trail.

The main ownership stake in an IBC is a bearer share, which simply means that if you physically own the shares, you own the company, yet nowhere is it recorded that you physically hold them. In essence, the IBC is a truly “portable company”, allowing one to schlep a veritable business empire in one’s briefcase.

Adding to the attractiveness of portability, is a lack of accountability, in that most IBC’s allow for “nominee” directors; that is, hired-hand “directors”, who are usually employees of the registering agent, say a corporate registration house in Curacao. Thus there is no “official” record of who owns the bearer shares, and therefore, the company’s beneficiaries, nor is there any direct owner – a responsible fiduciary –  that can be held responsible for the company’s actions. While a more thorough discussion of all the permutations of this murky financial world is beyond the remit of this article, suffice to say, it’s the concepts of “plausible deniability” and anonymity, as well as the ability to hide one’s financial affairs,  that is the greatest lure to go offshore.
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Here is the Appleby Global document on the creation of the Shawkat’s Passion Group Trust. Hover over the document with your mouse to invoke the control panel at the bottom of the Document: