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Opaque structure of horsemeat company shows need for company reform

17th February 2013

Global Witness available for comment

The Observer alleged today that one of the key companies involved in the horsemeat scandal was set up such that it hid the names of the people who own and control it.  "This illustrates why hidden company ownership is such a problem," said Rosie Sharpe, campaigner at Global Witness. "Criminals – whether they be fraudsters passing horsemeat off as beef, arms dealers fuelling wars, or corrupt dictators nicking their country’s wealth – need to hide their identities, and at the moment it’s all too easy to do this by setting up a company.”

One of these companies is the Cypriot company Draap Trading, which bought horsemeat from Romanian abattoirs and sold it to the French company Spanghero which sold it on to food processing company Comigel.  Draap insists the meat it sold into France was labelled as horse. Spanghero says the meat arrived labelled as beef.  Jan Fasen, who runs Draap, has denied any wrongdoing.

Draap – which is Dutch for horse, spelled backwards – is owned by Trident Trust and directed by a company service provider called Guardstand.  Both these arrangements hide the identities of the people who own and control this company.  And both arrangements are linked to notorious convicted arms trader Viktor Bout: Trident’s director used to be a director of one of Bout’s companies [1] and Guardstand used to be a shareholder of one of Bout’s companies [2].  “Bout, known as the merchant of death, not only used this Cypriot company, but also twelve American shell companies to disguise his identity, smuggle arms, and fuel some of the most brutal conflicts of recent times,” said Sharpe.

"Cypriot companies frequently turn up in criminal investigations," Sharpe said. "They have been used by the Iranian government to evade sanctions, by Slobodan Milosevic to provide arms for the wars in Bosnia and Kosovo, and by Russian officials who used them to steal hundreds of millions of pounds."  It is not just Cypriot companies which are so opaque; this is a problem across Europe, where the ownership or control of companies can be hidden perfectly legally by using nominees or companies incorporated in secrecy jurisdictions.

“David Cameron has said that he will use the UK’s presidency of the G8 to push for transparency.  This scandal shows why transparency of company ownership is such an important part of this.  What’s needed is for there to be public registries of the true, ‘beneficial’ owners of companies and other corporate vehicles.  Failing to do this aids criminals and undermines the UK’s poverty reduction efforts around the world,” said Sharpe. 

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Notes to editor:

[1] The Observer reports that “Petros Livanios […] runs Trident and was once a director of Ilex [Ventures]”  Livanios declined the Observer's requests for an interview.

[2] The Observer reports that Guardstand owned a share in Ilex Ventures according to a 2011 joint report by the International Peace Information Service and TransArms. The Observer also reports that “documents filed in a New York court by US prosecutors allege that in 2007 Bout and an associate transferred almost $750,000 (£483,000) to Ilex for the purchase of aircraft to fly arms and ammunition around Africa's trouble spots in breach of embargos” and that “the prosecutors said Ilex was owned and controlled by Bout”.