Public Prosecutor investigating 'missing €10 billion' in offshore transfers

22 September 2017

cayman After months of collecting information on ‘the case of the missing €10 billion,’ the total amount transferred offshore while the treasury was asleep at the wheel, the Public Prosecutor’s Office has opened a formal investigation and the Department of Investigation and Criminal Action in Lisbon is on the case.

The information gathering stage has been going on since February this year and by the summer, the Public Prosecutor's Office had collected enough evidence to open an investigation into the mysterious transfers of enormous sums to overseas accounts that strangely were not subject to inspection by the Tax Authority - a computer glitch was blamed.

The decision to open a formal investigation was taken in August but no defendants have yet been named as inquiries continue.

Between 2011 and 2015, while Paulo Núncio was Secretary of State for Tax Affairs, the statistics were not published on offshore transfers despite this having been required by law since 2010.

In June 2017, a Tax & Customs Authority audit and report on control system for transferring money from Portugal to overseas accounts, concluded that it is "extremely improbable" that the €10 billion, that left the country without the taxman knowing about it, was caused by human hand.

According to this report, the systems failure between 2011 and 2014, that let the billions slip overseas without a ripple, was not deliberate, despite it being very convenient for those who should have been investigated by the taxman to check that any tax due indeed had been paid.

As for finding out who owned the billions the left Portugal’s banking system, the report concludes that this is all covered by banking secrecy rules, so if we really want to know, the government will need to change the secrecy laws.

One of the concerns, and a situation that leaves a whiff of suspicion in the air, is that over half of these transfers were from wealthy account holders at Banco Espírito Santo who possessed the uncanny foresight to move their money overseas before the bank collapsed in August 2014.

It is open to criticism that the Tax and Customs Authority carried out this audit rather than a body perceived as having greater independence but now the Public Prosecutor has announced it has opened a formal investigation, the Tax Authority’s report will be looked at to see what strength of whitewash was used in its creation.

In March 2017, Paulo Núncio, was called to parliament to explain his role as a lawyer to the Venezuelan national oil company whose European branch, PDVSA Europe, transferred a significant part of the €7.8 billion that ended up in Panama, using BES as its bankers: Núncio was a Secretary of State at the time.

The row brought Núncio into the spotlight as he had failed to disclose his role as a lawyer, with the law firm Garrigues, which was advising the Venezuelan state oil company, nor did he disclose his involvement in suppressing data about capital outflows from the Madeira free zone.

Paulo Núncio assumed 'political responsibility,' for the €10 billion transferred and not reported, adding that he did not publish the transfer statistics for two reasons: first, he felt that "it could give some sort of advantage to tax evaders," and secondly, because the information sent was comprehensive and did not distinguish between company transfers and those made by individuals.

This is at odds with the findings of the report which exonerated Núncio:

June 2017, the audit report concluded that:

(i) "From the preliminary results of the IGF and the expert review carried out by IST it was concluded that the anomalies in the IT processing of the Model 38 declarations resulted from the combination of technological factors related to the application (workflow), the infrastructure (PowerCenter) and the configuration in the database (DB2).

(ii) "In the face of multiple tests and the intervention of a wide range of experts and the PowerCenter's own manufacturer, experts consider it extremely unlikely that the change in application behavior from 2013 onwards will result from deliberate human intervention for avoid full treatment of model declarations. "

"The findings of the report, which cleared the State Secretary for Fiscal Affairs Paulo Núncio from liability, were also confirmed by the last three General Directors of the Tax Authority which, in statements made in Parliament, rejected any intervention or political interference in this case, as well as by the Inspector General for Finance who, also in statements in Parliament, said there was no evidence of human intervention or political interference in this situation."

It is inconceivable that the lack of this key report was not notice by those charged with assessing that all taxes had been paid and that the transfers were legitimate.