How Oligarchs Stash Money in Foreign Real Estate
4 Apr 2022 (Prospect)
On his website, Virginia property lawyer Dan Withers boasts that he can make your money invisible. From offshore companies to private trusts, he offers “innovative legal strategies” to his mega-rich clients “for whom anonymity and protection from liability are of paramount concern.”
Hiding wealth is often done for illicit reasons, like tax evasion and money laundering, or at least sketchy ones like exploiting legal loopholes to keep down one’s tax bill. This service is especially attractive to foreign dictators and corrupt politicians who need to keep their citizens from discovering how much money they have stolen. Since Russia’s invasion of Ukraine, the harm caused by the financial secrecy industry has received more attention, but sanctioned Russian oligarchs and war criminals aren’t the only people with money to hide.
One of Withers’s clients appears to be the family of Nechirvan Barzani, president of Iraqi Kurdistan. The family has ruled this semi-independent region in northern Iraq as a quasi-monarchy for generations, piling up vast wealth from allegedly crooked oil, telecom, and real estate deals. In December, The American Prospect exposed how the Kurdish president’s cousin, Masrour Barzani, who serves as the region’s prime minister, was exploiting American corporate secrecy laws to hide an eight-figure property investment in Miami. (Mr. Barzani denied the allegations.) The Barzanis may not have invaded a neighboring country, but State Department cables, leaked by WikiLeaks, have documented how the Kurdish state operates on systematic corruption.
Like his cousin, the Kurdish president is connected to secret overseas properties. But, in this case, his name doesn’t appear on any of the ownership documents directly. Instead, these assets are hidden behind complex systems of trusts and intermediaries, including employees, friends, and family.
That’s why the lawyer, Withers, was necessary.
There’s no good colloquial expression in English to describe the people who facilitate financial secrecy or put their names on a company or property to disguise its real owner. A wide range of people, from art dealers to accountants, can provide these services, and the actual mechanics of what they do is camouflaged in legalese. But the citizens of another country with a history of corruption scandals, Brazil, coined a simple way to describe this job. Financial proxies of this type are known as laranjas, which means “oranges” in Portuguese. What many corruption schemes have in common, from Brazil or the United States to Russia and Iraqi Kurdistan, is that they’re concealed by the laranja industry.
The United States doesn’t want to be the next United Arab Emirates, stuffed to its back teeth with the anonymous money of kleptocrats, narco traffickers, and arms dealers.
Neither Withers nor representatives of Nechirvan Barzani responded to requests for comment, and it’s not clear any laws have been broken, but the Kurdish president appears to have lots of laranjas. Between McLean, Virginia, and Dubai, The American Prospect identified nearly 300 properties, with a combined worth in the nine-figure range, connected to his relatives and associates.
The trail starts on Mottrom Drive, a street named after a Confederate soldier in Northern Virginia. Withers, the apparent laranja lawyer, went to a great deal of effort to hide the owners of four adjacent properties on this street, collectively purchased for over $20 million.
There are several layers of secrecy. On the county assessor’s website, the owners’ names have been either recorded as controlled by Withers as a trustee or “withheld by request.” The physical deeds for the four properties show that they are controlled by two related living trusts, the Mottrom Trust and the Dulany Trust, along with an anonymous company. This entire apparatus was set up and operated by Withers.
It is an effective smoke screen, but old records reveal the name of a real person connected to the purchases. One of the properties was transferred into the Mottrom Trust by a Nabila Mustafa. Even this is obfuscation. Mustafa is also known by another name, Nabila Barzani. She is the wife of the Kurdish president.
A similar network is involved with buying and selling other assets in the surrounding area. With help from the same lawyer, at least two more properties, worth $3 million, passed through a vehicle called the Blue Ridge Trust. Again, the owners’ names were withheld online, but this trust was operated by a man named Jameel Sindi. A source familiar with the Barzanis confirmed Sindi was an employee of the Kurdish president—making him almost certainly another laranja. Sindi also granted the lawyer, Withers, a power of attorney to purchase a third property for close to $1 million. Just like the last set of properties, these are also linked to a close relative of Nechirvan Barzani. One of his brothers is named on documents transferring property into the Blue Ridge Trust.
A cool $24 million is a lot of money, but it’s chump change compared to another set of laranja properties held overseas.
According to a leaked ledger of Dubai property data, obtained by the Center for Advanced Defense Studies, Salar Hakim, the husband of the Kurdish president’s late aunt, is the largest identified Iraqi property owner in the city. He is linked to at least 288 different skyscraper apartments across the city, including nearly a sixth of the units at The Grand, a fancy new waterfront tower with an infinity pool. (When contacted, Hakim confirmed he owned the properties, but otherwise declined to comment.)
It’s hard to put an exact price on these assets, but the cheapest properties that are comparable to ones owned by Hakim are worth hundreds of thousands of dollars. Others go for much more. The Kurdish president’s uncle’s full holdings are certainly worth well over $100 million at least and could generate millions in rent every month.
It is hard to imagine a licit reason for Hakim to possess this wealth. He is a successful banker and chairman of the Kurdistan International Islamic Bank, but the bank’s public financial documents do not indicate it generates the profit or is paying its leadership the type of salary that can float these purchases. Neither does it seem plausible that the properties are a legitimate bank investment. The bank’s most recently available annual report shows the only properties it owns are inside Iraqi Kurdistan and worth about $16 million.
Hakim’s finances are deeply intertwined with those of his relatives. Another of the Kurdish president’s brothers owns part of Hakim’s bank, and the president’s son just sold over $30 million worth of the bank’s shares.
The United States doesn’t want to be the next United Arab Emirates, stuffed to its back teeth with the anonymous money of kleptocrats, narco traffickers, and arms dealers. But the strategies that the Kurdish president’s family has used to accumulate secret American properties are the same tools that other oligarchs, including Americans and Russians, are using to hide their own wealth here. We are on our way to becoming another major international haven for crime and corruption.
Luckily, some reforms are on the table. Banning laranjas and requiring the full public disclosure of the beneficial ownership of every property and company in the United States would be the best step, but a good stepping-stone is the ENABLERS Act. Introduced by several members of Congress after the release of the Pandora Papers, the ENABLERS Act would require laranjas to do basic due diligence on their clients. “If a client walks in your door and asks you to set up a company, or asks you to serve as a trustee, you should have to know whom you’re dealing with,” said Scott Greytak, the director of advocacy for the U.S. office of Transparency International. “At the least, this means collecting and reporting key information about them to Treasury that can be used to guard against money laundering and the financing of corruption.”
The role the West has played in housing money for Putin and his oligarchs has proved beyond any question that financial secrecy, used to facilitate corruption, is much more than some minor good-government issue. The Department of Justice has created a new task force to focus on Russian corruption, but there is every reason they should target other kleptocrats in the process. “Let’s not let these efforts end with seizing the dirty money and assets of one specific country’s corrupt leaders,” said Greytak. “Let’s go after all of the people who have been stealing from their people and laundering that money into the United States.”