Queensway Group probed over use of 'secrecy jurisdictions'

The most detailed study to date on a Hong Kong-based business network behind a string of multi-billion-dollar deals with some of Africa's most oppressive and corrupt regimes has added to calls for a worldwide ban on the use of offshore front companies.

The study, published on Tuesday by the US defence department's Africa Center for Strategic Studies, reveals fresh details of the so-called Queensway Group, which has over the past decade amassed business interests ranging from Angolan oil to Zimbabwean diamonds and Manhattan real estate.

Its author, JR Mailey, has been tracking the group for seven years. He was part of the Congressional research team that first identified the network in 2009 and coined its informal name from the address to which dozens of interlinked companies are registered: the 10th floor of a gleaming tower at 88 Queensway in Hong Kong's financial district.

As Mr Mailey's new report outlines, the group makes frequent use of jurisdictions including the British Virgin Islands, the Cayman Islands, Bermuda and the US state of Delaware, where the true owners of companies can conceal their identity.

"Predatory investors like the Queensway Group thrive on loopholes in the international corporate and financial regulatory system," Mr Mailey writes.

A Financial Times investigation published last year found that the Queensway Group and its principal representative - a Chinese businessman with seven names best known as Sam Pa - have connections to powerful interests in Beijing, including Chinese intelligence and state-owned companies. It also has business connections to big western companies, including British oil group BP and Glencore, the London-listed commodity trader and mining house.

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Mr Pa and the two main Queensway Group companies had not substantively responded to requests for comment by the time of publication. Last year one of these companies, China Sonangol, told the FT: "We are not a listed company and the law does not require us to disclose all our business dealings in the same manner as listed companies."

Mr Pa has cut blockbuster resources and infrastructure deals in some of Africa's most troubled countries. One such deal, agreed with the military junta that ruled Guinea in 2009, caused outrage when it was unveiled days after security forces massacred opposition demonstrators. Mr Pa's group has also cultivated the ruling clique that has used Angola's oil boom to cement its wealth and power. Its activities in Zimbabwe - where it has denied accusations of funding Robert Mugabe's secret police in exchange for access to diamonds - led to Mr Pa being placed under US sanctions last year.

"In many ways the prototypical predatory investor, Queensway frequently appears in resource-rich states in Africa where it can operate with high levels of opacity," Mr Mailey writes.

Several Queensway Group companies are registered to the same address in the British Virgin Islands, with others incorporated in other so-called "secrecy jurisdictions". Some of these companies also have links to officials in Zimbabwe and Angola, company records show.

<>"In these territories it is cumbersome (and in some cases impossible) even for law enforcement officials and regulators to access beneficial ownership information about companies," Mr Mailey writes. Transparency activists have won some success for their campaign against corporate secrecy since the financial crisis, with bodies including the G20 and EU committing to pressing for greater openness. But moves towards comprehensive public registries of beneficial ownership have been faltering to date.

"Without exception," Mr Mailey writes, "every country - especially major financial centers - should be required to create and maintain a low-cost, searchable public registry of all corporate entities registered or operating within its territory." He adds: "Jurisdictions that fail to disclose beneficial owners should face serious penalties. Otherwise, reforms in one opaque offshore financial centre merely result in investors' migration to jurisdictions that continue to provide secrecy."

Mr Mailey suggests that the use of offshore companies and proxy shareholders allows the Queensway Group to maintain some distance between itself and Mr Pa. Queensway company representatives have described Mr Pa as merely an adviser, even though governments with which it deals frequently give him senior titles at Queensway companies in public statements.

Despite Mr Pa having been placed under US sanctions, the Queensway Group has retained its most prestigious asset: the former JPMorgan building opposite the New York Stock Exchange on Wall Street. China Sonangol, the group's joint venture with Angola's state oil company, highlights its ownership of the property on its website. But the building was purchased by a Delaware-registered company whose ownership is undisclosed. "This created yet another layer of distance between Sam Pa - who, under sanctions, is forbidden from doing business or owning a majority stake in any US property - and China Sonangol's Wall Street asset," Mr Mailey writes.

Mr Mailey's report also discloses new details of the Queensway Group's relationships with western multinationals. It has ties with Airbus, the supplier of aircraft used in contentious Queensway deals with African airlines, the report reveals.

Asked to comment, Airbus said it had "a strict policy of confidentiality and is not able to divulge information relating to its employees or customers". It added: "Airbus places a premium on conducting business in an ethical and sustainable manner and complies with international and national regulations pertaining to ethical business practices."

The report highlights the Queensway Group's use of the global financial system, despite the questions that have been raised in several countries over its business practices.

According to the report, in 2009 the Queensway Group sought to transfer funds from Zimbabwe to an HSBC branch in Singapore to pay for a $200m real estate acquisition. The transfer was initially blocked "because the bank could not determine the source of the funds".

Mr Mailey writes: "Having maintained an HSBC account with hundreds of millions of dollars throughout the global financial crisis, Sam Pa allegedly expressed having felt betrayed by the bank." The transfer was swiftly allowed to go through, Mr Mailey says.

HSBC did not respond to a request for comment from the FT.

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