Panama Papers: Red flags went up in Mossack Fonseca as CBI accused set up 12 companies

The chargesheet in the ongoing Andhra Pradesh Industrial Infrastructure Corporation-Emaar case was filed by the CBI in February 2012 and in April, Koneru surrendered before the court and got bail. The allegation against Madhu Koneru, as per the chargesheet, is that around Rs 138 crore from excess payments Koneru Rajendra Prasad took from luxury flat owners was routed to Madhu Koneru in Dubai.

The clarification sent by Trimex group on the CBI case to Mossack Fonseca on April 9, 2013

Interestingly, the case against the Koneru clan also figured in Blackberry text messages exchanged between former CBI Director A P Singh and meat exporter Moin Qureshi (as first reported in The Indian Express, October 30, 2014).

Some of these exchanges reveal that Pradeep Koneru, Madhu’s brother, was taking Qureshi’s help in trying to fix meetings with the CBI chief to ostensibly try and help out with the bail petitions filed by his father and brother (Madhu Koneru).

Now, details of the CBI case against Madhu Koneru have spilled out in the internal MF mails and documents.

They reveal that since 2007, Koneru has been registering off-shore companies (mostly in the British Virgin Islands) through Mossack Fonseca. These firms are marked by complex web of inter-connecting shareholding patterns.

For instance, there are details of 49,900 shares of one MEC Resources being capitalized and sold to another company, Sharewin Holdings Ltd (of which Lebanese businessman named Khater Massaad is Director), at a value of $7,615 per share.

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Records show that while doing its due diligence and its “world check” process, MF makes several references to the Andhra Pradesh CBI case.

But while Madhu Koneru himself faced the heat of the CBI in 2011-2012, the Financial Investigating Agency (FIA) of the BVI, it transpires, had been raising questions about his companies with Mossack Fonseca as early as 2010.

In fact, on September 28, 2010, the FIA wrote to the money laundering reporting officer of MF asking for all registration documents of Preston Assets Holding Inc, a company of which Madhu Koneru is Director and Beneficial Owner.

The FIA noted that they have introduced a new piece of legislation — The Anti Money Laundering and Terrorist Financing Code of practice, 2008 — and that the “onus” was thus now on clients to give information on particular companies.

The e-mails also reveal that following the FIA’s missive, in October 2010, MF officials themselves raised questions about the other Director of the company, that is, Khater Massaad.

This is because Massaad is shown to be an advisor to the Crown Prince and Deputy Ruler of Ras Al Khaimah (the fourth largest of the seven emirates which comprise the UAE) and thus described as a “PEP (politically exposed person) in MF records.

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An e-mail dated October 10, 2010 points out that MF was the registered agent for Preston Assets Holding Inc and several other MF companies in their inventory were also either linked to Madhu Koneru or Khater Massaad.

Among these companies are Sherwin Holdings Limited/Global Access Capital limited and Minerals Energy and Commodities Holdings Limited.

Massaad, however, resigned from Preston Assets in September 2012.

MF officials have also drawn up a flowchart to show the linkages between seven companies which are either associated with Koneru or Khater and thus between them.

However, despite knowledge of the CBI case, the MF eventually gives Madhu Koneru a sort of “clean chit” which is evident from a bunch of e-mail exchanges on the subject.

The clarification on Koneru comes from Trimex group executive Shonali Chaudhary in a mail dated April 9, 2013 in which she distances Preston Assets from the ongoing case by stating: “Madhu Koneru does not have any direct involvement in the matter and has never been involved in the Boulder Hills (Emaar-MGF’s Hyderabad luxury residential project) in any manner whatsoever. The chargesheet filed by the investigating agency is merely in the nature of allegations and will need to be substantiated with conclusive evidence….neither Preston Assets Holdings Inc nor any of its direct or indirect shareholders has any role or involvement in the matter and there is no reference or allegation of any sorts against the company…as in any court case in India, this matter too will take time to achieve closure..”

In an MF mail on the subject of the CBI case in April 2013, an official describes Chaudhary’s written explanation as “reasonable” and finally, another MF official concludes: “The client’s comments have been duly noted and may be accepted at this time. However, I believe it is prudent on our part to monitor this company and the pending court case to see if anything further develops…”

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Response sent by Madhu Koneru’s counsel from Dubai:

“At the outset, we would like to state that the recent leak of Mossack Fonseca files do not implicate Mr. Madhu Koneru in any manner and there has been no allegation of wrong doing or misconduct on his part. Mr. Koneru is a law abiding individual and has complied with applicable laws in his business operations and personal finances and any reports suggesting otherwise are speculative, refutable and have no basis.

“Mr Madhu Koneru is a Non-Resident Indian residing in the UAE since 1992. He is a businessman and has several offshore companies incorporated for his business operations. As a non-resident, he is compliant with taxation laws in India and has no reporting obligations to the Indian tax authorities viz the offshore entities. All offshore entities are holding companies for underlying business operations and are compliant with applicable laws.

“Mr Madhu Koneru is a respectable businessman and there is no illegality in his business operations via offshore companies.’’