Monday, October 4 2021

Dive In


He did not have a ticket or a boarding pass, no allotted seat number or cabin. He reached the dock to board and the authorities screened him. His luggage along with that of his friends was also screened and nothing was found.

That’s Aryan Khan’s lawyer making it clear that no drugs were found on him during a raid on a rave party on a cruise headed from Mumbai to Goa. Shahrukh Khan’s son was arrested in the course of an undercover sting operation conducted by the The Narcotics Control Bureau. But he seems to have been charged entirely based on WhatsApp messages—including those deleted. Outlook offers a good overview. Quint has more on the charges. Indian Express offers a short explainer.

Big Story

Pandora Papers: A global exposé of offshore wealth

The TLDR: In 2016, the great and the mighty were shaken by the Panama Papers—a massive leak of 2.6 terabytes of information revealing their offshore entities and accounts. The same international group of journalists have now unveiled a far bigger leak of financial documents dubbed the Pandora Papers. Those embarrassed range from the King of Jordan to Pakistan Prime Minister Imran Khan, Sachin Tendulkar, and Kiran Mazumdar Shaw.


Editor’s note: This is less in-depth than our usual explainer primarily because we want you to read the details over at Indian Express—whose journalists have spent 12 months working on the Indian angle. We only offer context and an overview. 


The basic deets

  • The investigation was led by the International Consortium of Investigative Journalists (ICIJ)—with more than 650 reporters and a number of partner publications, including the Indian Express in India.
  • They had access to nearly 12 million documents and files from 14 financial services companies—which set up about 29,000 off-the-shelf companies and private trusts.
  • Unlike the Panama Papers—where the papers were leaked from one law firm—these companies are located around the world, including Belize, Singapore, New Zealand, United States and the UAE. The offshore system is global—not limited to exotic islands.
  • Around 35 current and former world leaders and 300-plus public officials are featured in the documents—and more than 130 people listed as billionaires by Forbes magazine.
  • The documents include “emails, memos, incorporation records, share certificates, compliance reports and complex diagrams showing labyrinthine corporate structures. Often, they allow the true owners of opaque shell companies to be identified for the first time.”
  • The leaked records span two decades (1996-2020)—while the offshore entities were set up between 1971 to 2018.


Quote to note: Gerard Ryle, the director of the ICIJ, said of the investigation: “This is the Panama papers on steroids. It’s broader, richer and has more detail.”


Why this matters: Not all of the activity uncovered here is illegal. But they show how the very wealthy have found new loopholes and business entities to protect their money—after the Panama Papers resulted in a regulatory crackdown. In India, for example, tax authorities found Rs 200 billion (20,000 crore-plus) in undeclared foreign and domestic assets thanks to the Panama leak.


First, tell me about India

There were 300-plus Indian names in the leaked documents—and the Indian Express investigated 60 prominent individuals and companies. It rolled out the first tranche of stories today. 


Trusting in trusts: The biggest reveal is the use of offshore trusts to move money. In a trust, there is typically a ‘settlor’ who sets up the trust. And there’s a ‘trustee ‘who holds the wealth on the behalf of ‘beneficiaries’—named by the ‘settlor’. Here’s what a trust offers:


  • It creates a separation between the settlor—i.e. the very rich person—and his money. He no longer “owns” this money—and therefore his creditors cannot come after it if he, say, defaults on massive loans.
  • Offshore trusts are governed by strict privacy laws. So it is hard for tax officials to find the money stashed in them. Although the Indian government has treaties that enable exchange of information—they rarely work well in practice.
  • Also this: “High-profile people can set up trusts to own shell companies in tax havens, obscuring the true extent of their property from tax authorities, criminal investigators and the public.”
  • Trusts also offer a tax-free way to transfer assets to children—who are named as beneficiaries. And as non-resident beneficiaries, they don’t owe any taxes on their income from the trust. 


Big point to note: As the Washington Post underlines:


“One key feature is that assets held in a trust exist in a kind of limbo. The settlor has given them away. The trustee may own them under the law but has no right to use them. And the beneficiary has yet to receive them. If someone owes a debt, each of the three parties can argue that they do not control the assets.”


The NRI card: These trusts are most useful when accompanied by a foreign passport. This works in two ways:


  • If the ‘settlor’ is a non-resident, he can transfer a great amount of his wealth abroad: $1 million/year—over and above his income—compared to the $250,000-limit for Indians.
  • According to the law, the trustee is the actual owner of the assets of the trust. If that person is an NRI then they don’t owe any taxes on these assets held abroad.


Ok, any big names or companies?

Headlines that matter

A new pill to treat Covid

Trial data for Molnupiravir show that it can cut hospitalisations and deaths by 50%. It works well if taken within days of developing an infection. But it won’t help those who have already contracted a severe form of the disease. The results are so good, the maker Merck plans to apply for approval without conducting further late-stage trials. FYI: 12 Indian companies are running trials for the drugand three pharmaceutical companies plan to seek approval to sell it in India. The Hindu has a good explainer on the pill and how it works. (NPR)


Marie Antoinette’s secret love letters

France’s most infamous queen—wrongly slandered for her generosity with cake—wrote tender letters at the height of the French Revolution. Of course, the recipient wasn’t hubby Louis XVI—but BFF and rumored lover Swedish count Axel von Fersen. The affectionate communication was, however, blacked out with dark ink by Fersen himself. Now, modern technology has restored her immortal words as, for example: “I will finish not without telling you my dear and loving friend that I love you madly and that I can never be a moment without adoring you.” As to why her likely lover blotted them out:


“I bet he was trying to protect her virtue. To throw out her letters would be like throwing out a lock of her hair. He wants two incompatible things: He wants to keep the letters, but he also wants to change them.”


Smithsonian magazine has more on the letters and this ill-fated love affair.


An avocado a day…

Keeps the pot belly away. Or so claims a recent study which looked the effect of eating one avocado a day on abdominal fat and blood sugar:


“The goal wasn't weight loss. We were interested in understanding what eating an avocado does to the way individuals store their body fat. The location of fat in the body plays an important role in health.”


The result: women in the avocado group saw a reduction in visceral fat—the dangerous kind that accumulates deep inside the abdomen. But here’s the catch: The improvement only occurred among women, not men. (The Beet)


A gender-related story

As many as 80 Spanish women were recorded secretly on camera while they urinated in public—in a side street because there were no proper toilets. The footage was uploaded on to porn sites—and monetised—all without their consent. It included shots of their bodies and their faces. So the women took the perpetrator to court—but the judge threw out the case “on the grounds that because the videos were recorded in a public place they cannot be deemed criminal.” Women rights groups are understandably furious. (BBC News)


In today’s edition

Sanity Break

  • A delightful sequence of photos of the moon being packed into a car's boot


Smart & Curious

  • Are cold showers really good for you?
  • The ‘liking gap’: the difference between how you think people see you and how they actually do
  • The ‘BuzzFeedification of mental health’.
  • Why is the prefix ‘Ever’ so popular as a name for Chinese companies?

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