UK legal threat against MaltaToday over Azeri-Pilatus connection report

A business director named by The Daphne Project in connection to Azerbaijani oligarchs who hold Pilatus Bank accounts has threatened to take legal action against MaltaToday in the UK unless it takes down an article on the companies he is a director  of.

MaltaToday listed 18 companies Robert Baker is involved in – nine of which used a Pilatus company-in-formation bank account – after he was identified as one of the directors of a French company whose ultimate beneficial owners are Tale and Nijat Heydarov, sons of the all-powerful Azerbaijani minister for emergency situations Kamaladdin Heydarov.

All 18 companies were opened between July 2014 and December 2015 by Frendo Advisory, a corporate services firm headed by former Nationalist foreign minister Michael Frendo. Frendo is an agent for Malta’s sale of passports together with his son Luke Frendo, an IIP agent in his own right, who acted as company secretary for the companies before resigning from them en masse in late April 2017.

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The legal threat came from British law firm Mishcon de Reya, the same London firm used by IIP concessionaires Henley & Partners in connection with reports posted by the late journalist Daphne Caruana Galizia.

“Our client is entitled to an apology, an award of damages and his costs… our client’s attitude to these remedies will be determined by your response to this letter,” Baker’s lawyers said, demanding the take-down of the article in question and ‘instructing’ not to publish the legal threat.

MaltaToday is publishing details of the letter.

“British law firms have a reputation for muscling in on journalists and silencing critics with the threat of ruinous court action. The SLAPP threat has gone too far,” MaltaToday executive editor Matthew Vella said.

“SLAPPs are being used by financial elites and tax pirates to condition Maltese journalism. MaltaToday has in the past been threatened with UK court action by a Lebanese energy giant, a British biotech entrepreneur, and more recently a UK asset company with interests in football and shipping.

“If the Maltese courts uphold decisions delivered in a UK court on defamation actions, the consequences for the free press and Maltese democracy would be disastrous. The government has to send a clear message that all SLAPP actions emanating from EU courts are against Maltese public policy,” Vella said.

The government has insisted an anti-SLAPP provision moved by the Opposition for inclusion in Malta’s revamped media law would be contrary to EU rules that demand member states uphold foreign court decisions on matters of tort.

Maltese law and jurisprudence, however, provides that a foreign judgement is refused when it offends Maltese public policy.

“It is clear that with the Maltese government having set much store by the new media and defamation law, it now has to pronounce itself publicly: EU court judgements on defamation meant to debilitate Maltese newspapers are contrary to public policy,” managing editor Saviour Balzan said.

In the letter from Baker, Mishcon de Reya claimed that stating that Pilatus Bank was “at the centre” of the complex company structure of which Baker is a director, implicated him in the “well-publicised allegations” pursued by the Daphne Project.

But MaltaToday listed the companies that hold accounts with Pilatus Bank, without inferring anything unusual in those banking relationships.

Mishcon de Reya said using the word “flagged” – where MaltaToday referenced the reason Baker had been named in the Daphne Project – was aimed at linking Baker to suspicious transactions.

The firm also claimed that an infographic of Baker’s company directorships in Malta suggested “clandestine dealings”, but at no point was any wrongdoing suggested in the structure of companies it depicted.

An analysis by a financial services expert which suggested the company structure was aimed at achieving beneficial tax rates through profit-shifting – a form of tax avoidance that is not illegal – “imputed an innuendo of impropriety”.

“MaltaToday clearly stated in its article that there was no suggestion of wrongdoing or that those mentioned had acted illegally,” Matthew Vella said.

“The aim of the article was to expose the high concentration of companies linked to politically exposed persons from Azerbaijan – a country often criticised for alleged human rights abuses and violations of the rule of law – and which raise questions on the operations of Pilatus Bank, which has now passed under controllership since the arrest of its chairman and owner in the United States.”

Company registers are publicly accessible and information on ultimate beneficial owners is mandatorily communicated to the Malta Financial Services Authority under new anti-money laundering rules.

In April, Daphne Project journalists broke the news that Pilatus Bank held accounts for up to 50 companies linked to Azerbaijani oligarchs. Account-holders reportedly included companies owned by members of the Azerbaijani ruling family and its ministers as part of a structure used to hold European investments.

‘SLAPPs are being used by financial elites and tax pirates to condition Maltese journalism’

One such company, the French company Heritage Collection, was revealed to be the Heydarov brothers’. The company is owned by Heritage Collection SA, registered in Luxembourg, and in turn owned by the Maltese company Heritage Asset Holdings. Lawyers for the Heydarov brothers told the Daphne Project: “Our clients are the beneficial owners of companies which hold accounts at Pilatus Bank in Malta, which have entirely legitimate and lawful business.”

The Maltese company register lists Robert Baker as one of the three directors of Heritage Asset Holdings. So MaltaToday tracked all the companies set up by Baker, and analysed the financial statements filed with the MFSA: for example, in the case of Kimberly Holding, the company is seen to have borrowed money from an unknown entity at 6% interest, but then passed on that money to its subsidiaries without any interest and bearing the costs of its borrowing, while passing proceeds to its subsidiaries without interest. Another group of companies under the nomenclature Andalusia Property, appear to own over €25 million in property as well as a Bulgarian subsidiary.

Frendo Advisory role

All 18 companies were opened between July 2015 and December 2015 by Frendo Advisory, a firm headed by former Nationalist foreign minister Michael Frendo. His  son Luke Frendo, head of the advisory’s private client department, was company secretary for a number of the companies.

But he filed his resignation as secretary from the 14 companies he represented on 26 April 2017, soon after the first reports on Pilatus Bank and the mysterious Panama company Egrant were published by Daphne Caruana Galizia.

He told MaltaToday that he had chosen to resign all his positions with the entities upon finding out about the allegations. “As soon as I became aware of the problems of Pilatus bank through the media reports, not on the advice of anyone, I resigned from that position and we no longer provide services to these entities. Until that point, I was not aware of anything untoward about Pilatus bank.”

MaltaToday asked Frendo whether the necessary due diligence was carried out to be sufficiently aware of the UBOs of the companies were members or associates of the Azerbaijani ruling family, such as the Heydarovs.

“We always carry out our due diligence fully in line with our obligations. You can appreciate that I am not able to divulge any professionally confidential information.”

Both Michael and Luke Frendo are individual agents of the Individual Investor Programme, Malta’s citizenship-by-investment scheme.

Who are Mishcon de Reya?

Mishcon de Reya are the respectable lawyers who famously acted for Diana, Princess of Wales, in her divorce as well as for Sir Paul McCartney in his marital split. The law firm was employed by Henley & Partners in legal threats it made to the late Daphne Caruana Galizia.

Ironically, Mishcon de Reya’s deputy chairman, Prof. Anthony Julius, sits on the board of English PEN, the worldwide writers’ association which stepped into the fray to call for justice for murdered journalist Daphne Caruana Galizia and demand that “Maltese authorities respect and protect freedom of expression, journalists and whistleblowers in line with international standards.”

PEN bills itself as standing for the “unhampered transmission of thought” and members “pledge themselves to oppose any form of suppression of freedom of expression”.

In 2006, Mishcon de Reya was revealed as having employed private detectives to obtain information on certain data subjects. In one prosecution, private detectives Sharon and Stephen Anderson pleaded guilty to more than 50 charges of obtaining information contrary to the Data Protection Act. One of their victims was a businessman called David Hughes. The Andersons were working for a detective agency called Carratu, which had in turn been hired by Mishcon de Reya, to discover Hughes’s assets.

Mishcon de Reya was not found to be at fault but the case highlighted the dangers of hiring investigators to conduct clandestine intelligence-gathering.

The law firm defended itself from accusations, cutting ties with Carratu, and said that the corporate investigators it hired complied with the law “and prohibits any investigator from subcontracting any of those services to third parties”.