Investigating with drones, stone tablets and the web (yes, LinkedIn, too)

This video was taken by a drone and then posted on a popular web portal in China. It provides an aerial view of the luxurious home of the son of Zhou Yongkang, the country’s security chief. There’s not much commentary here, just tracking shots of a white, two-story mansion built in the traditional style.

But the real evidence showing corruption in the Zhou family wasn’t dug up by drones.

Instead, it was names etched on tombstones in a village in China’s Jiangsu Province that allowed reporters to find the corruption trail. In China, names of family members, living and dead, are recorded on stone tablets in family burial plots. As Michael Forsythe and his team of New York Times reporters recounted recently, that’s how they found the names of Zhou’s first and second wives, his two sons, his brothers and in-laws.

Despite all the wonders of the digital era, a lot of information that journalists need is (still) not online, but in reams of paper gathering dust in government offices – or even in stone tablets in forgotten burial plots. Some of it is not even recorded at all, but resides in people’s heads.

The eureka moment often comes when information from humans or from paper (or stone, as the case may be) is matched with what’s available in digital format. In the case of Zhou, what the Times found was a trail of illicit wealth, none of it in the official’s name. That discovery was made by matching the names on the stone tablets with those on corporate records found on the website of the State Administration of Industry and Commerce, the government agency that keeps track of companies. They got paper records from the agency as well.

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The offshore exposé: bigger than Wikileaks’ ‘cablegate’

offshoreIt’s possibly the biggest single leak of documents in the history of investigative reporting. This week, the Washington, DC-based International Consortium of Investigative Journalists released a series of stories based on 2.5 million documents that its director, Gerald Ryle, had obtained while he was still doing journalism in Australia.

In the last 15 months, 86 journalists in 46 countries have been poring over the document cache. ICIJ, housed in the Center for Public Integrity, coordinated the investigation from DC, using a secure messaging system  to communicate with a worldwide team of journalists and free- text retrieval software and programmers in three continents to mine the information from the documents (for more, read this account of how this amazing project was put together).

In recent years, there’s been great work done on the offshore economy, including astounding estimates made by economists, advocacy groups, international financial institutions and academics of the trillions of dollars of global wealth that is stashed in offshore havens. What makes the ICIJ’s exposé such a blockbuster, however, is that it names names, in effect puncturing huge holes in the armor of secrecy that makes offshore havens so attractive.

The ICIJ  reports this week expose an array of individuals, including politicians (everyone from  a Kuwaiti sheikh to Imee Marcos in the Philippines to members of the Azerbaijani ruling  family), businessmen, criminals, and even a songwriter and art collector who have stashed their assets overseas. Up  till now, those assets – at least those in 120,000 offshore companies and trusts now on ICIJ’s database – were cloaked in secrecy, kept away from the prying eyes of journalists, government regulators and tax collectors. But no longer.

Offshore companies are not illegal. There are legitimate reasons for housing a company offshore. But because offshore havens guarantee their clients secrecy, they have become natural havens for corruption, organized crime and tax evasion.

In a tweet last night, ICIJ said it is contemplating making a public release of its data. If that happens,  more secrets are likely to emerge as journalists and others who were not originally part of the collaboration dig into the data and find their own stories. This indeed could be bigger than Wikileaks’ “cablegate,” not just in terms of the size of the leaked documents (Wikileaks had about 250,000  US State Department cables) but also in terms of the international journalistic collaboration. (Disclosure: I am a member of ICIJ and my former organization, the Philippine Center for Investigative Journalism, was part of the Offshore Project). Read the rest of this entry »


The secret world of private companies

You’d think that getting the names of the shareholders of a company would be fairly easy. Such information should be routinely available.

In fact in many parts of the world, it isn’t. Not if you’re talking about private companies, which have managed to elude public scrutiny even in an era of increasing transparency. To be sure, there’s a wealth of information on listed companies. But good luck researching a private firm. A recent World Bank study looked at the information stored by corporate registries in 40 jurisdictions. Its findings were pretty pathetic: Only a third of the registers required companies to release the names of their shareholders. Only one registry, Jersey, collected information on the beneficial or real ownership of a company. Everywhere else, the real owners can hide behind nominees.

Beyond ownership, registries generally collect only scant information on the finances and actual operations of private companies. Some registries don’t even require companies to give an address or physical location. Such secrecy allows them to evade government regulation and public scrutiny. It facilitates corruption, tax evasion and other crimes.

Those who want to dig into company information can only get so far by getting into corporate registers. They’d need to triangulate information from other public records (including those from other government regulatory bodies or the courts) as well as from well-informed human sources. There are also subscription databases (see list below) that aggregate information from a variety of sources worldwide. In addition, there are some helpful guides on investigating private firms (see below).

One of my favorite sites for researching private companies is Open Corporates, which has scraped company registers in some 60 jurisdictions worldwide and put the information on some 47 million companies in a single, easily searchable database. One can type in any name in the search box and get a list of all the companies on the database that have the name listed as a director or shareholder. It’s amazing.

But the problem is that Open Corporates can only scrape the data that company registers collect. As this presentation shows, that data is scant and much of what happens in the corporate world is invisible to citizens and even to regulators. There are limits to what scraping technology can do if the information does not exist.

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Unlocking Swiss secrets

Secrecy is deeply embedded in Swiss political, bureaucratic and business culture. It’s of course not surprising that the world’s banking capital puts a premium on discretion and confidentiality. Switzerland is still a preferred location for companies and rich individuals around the world because it offers tax and other advantages, including political stability and a low level of transparency. Many journalists probing business, corruption, and even organized crime are bound to encounter either a Swiss bank account or a Swiss company in the course of their reporting. And getting information on them is not going to be easy.

But even in Switzerland, the walls of secrecy are slowly being breached. Banking secrecy there is no longer as ironclad as it used to be, after the U.S. began aggressively forcing Swiss banks to open their records as part of an effort to collect taxes from American citizens stashing their wealth overseas. Read the rest of this entry »


How to track looted wealth

I am off to the annual conference of the Investigative Reporters and Editors, which will be held in Boston this year. I will be on a panel on international corruption together with Claudia Mendez Arriaza of the Guatemalan newspaper El Periodico and  the New York Times’ David Barstow, who shook Walmart with his blockbuster story on payments totaling $24 million that the company made to Mexican officials.

I will be talking about tracking looted wealth. Here’s a preview of my presentation,  published in The Global Muckraker, a blog put out by the International Consortium of Investigative Journalists:

It’s estimated that every year, over a trillion dollars flow illicitly out of the world’s economies. These are the proceeds of corruption, crime and tax evasion. A lot of that money ends up in bank accounts, companies and various assets overseas. The Global Financial Integrity Task Force says that a good portion of  it – about $2 trillion of the $10 trillion in deposits held by non-residents in offshore centers – has found its way to the United States.

It’s hard to document these illicit financial flows: banking secrecy and the opacity of corporate information in offshore jurisdictions, including the U.S., cover up the money trail. But it’s not impossible. Read the rest of this entry »


On the trail of Bo Xilai 2: Beyond China and Hong Kong

Page from a Hong Kong corporate filing shows that Hitoro Holdings, in which Gu Kailai’s sister is a director, is mostly owned by a British Virgin Islands company called Informatic Resources Limited.

Like many members of the Communist Party elite, recently purged Politburo member Bo Xilai and his family members did business in Hong Kong and the West, making it easier for journalists to find a document trail. Bo’s wife Gu Kailai, a high-powered lawyer, practiced in the U.S. and lived in the U.K. for some time. The couple also sent their son to a posh boarding school in England then on to Oxford and later Harvard, where he is currently in graduate school.

Last November, the son, Bo Guagua, provided Exhibit A for a Wall Street Journal essay on China’s princelings. The article opened with a bright red Ferrari the young Bo was supposedly driving around while in Beijing. As the piece said cheekily, he “was driving a car worth hundreds of thousands of dollars and as red as the Chinese flag, in a country where the average household income last year was about $3,300.”

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Follow the family: On the trail of Bo Xilai 1

Hong Kong-based Next magazine followed the trail of corruption left by the recently disgraced Chinese Communist party official Bo Xilai and his glamorous wife, who has been implicated in the alleged murder of the U.K. businessman Neil Heywood.

No recent political scandal has been more riveting than the one that has been swirling around Bo Xilai, the recently purged Chinese Communist Party official now in the international spotlight.

As most of the media focused on Bo’s precipitous fall from grace and its implications on the Party leadership, a feisty Hong Kong magazine began sniffing the corruption trail. In two weeks of intense reporting, the Hong Kong-based, Chinese-language Next Magazine uncovered previously unknown business dealings by Bo and his glamorous wife.

In subsequent weeks, reporters at the Wall Street Journal, the New York Times and Bloomberg, would be on that trail, too, trolling public records databases around the world to piece together information about the couple, information that in the pre-digital days would have been difficult to find.

This is the new era of investigative reporting. Governments and companies are publishing increasing amounts of information online – yes, even in China. And the ability to find and mine that information is now an essential part of any journalist’s toolkit. Read the rest of this entry »