Peru leader accused of taking bribes through company based at Scots law firm

Mr Toledo, his country's first indigenous president, denies any wrong-doing, but prosecutors allege he took around $10m in illicit payments from the Brazilian construction giant Odebrecht in return for lucrative contracts to build a major highway.

Authorities also say that the former president got nearly $6 million of that money – more than £4m – through an account in the name of a Scottish limited partnership or SLP registered at the Glasgow addresses of blue chip law firm Burness, which later merged with another firm to create today’s Burness Paull.

Campaigners are increasingly concerned about the role of opaquely owned British companies – and especially SLPs – as financial "getaway cars" for criminals, scammers and corrupt officials around the world.

Some fear Scotland's secretly owned companies – many registered at respectable white collar firms – will tarnish the nation's image in the same way as anonymous bank accounts did for Switzerland.

The latest revelations comes after The Herald revealed that three other SLPs – based at another respectable Scottish establishment firm, Jordans – were at the heart of the offshore finance system Odebrecht admits that it used to launder kickbacks.

Neither Burness, its successor firm Burness Paull or Jordans broke any law or regulation and there is no suggestion they were involved in the alleged bribery or knew how the SLPs registered with them were being used.

SNP MP Alison Thewliss has been campaigning for the UK Government – which controls Scots company law – to both tighten the rules on SLPs and beef up the ability of its corporate register, Companies House, to investigate shell firm abuse.

But she also signalled that the time had come for those hosting or creating secrecy vehicles to take action.

(Alison Thewliss MP)

Ms Thewliss said: "The more that we delve into the murky world of SLPs, the more evident it becomes that the rules are being flouted and those who ought to carry out due diligence are shirking their responsibility.

"When even respectable firms are being linked unwittingly to international corruption and criminality, alarm bells should be ringing in the UK Government.

"Ministers cannot continue to pretend that this is some niche matter - it is of fundamental importance to democracy.

"The UK must ensure that we are not facilitating the kinds of nefarious activity linked to the Odebrecht scandal, and Companies House must be funded properly to investigate and crack down on this behaviour."

Mr Toledo, meanwhile, denies taking any money from Odebrecht. His lawyer this week renewed an attempt to lift a preventative custody order imposed on the ex-president a year ago.

The 70-year-old former democracy activist - who rose to fame after leading street protests against authoritarian former president Alberto Fujimori in the 1990s - faces arrest if he returns to Peru.

He is accused of receiving money from shortly after he left office in 2006 until 2010. Prosecutors, citing admissions made by Odebrecht officials, say Mr Toledo was paid through intermediaries in return for contracts to build two stretches of the Ruta Interoceanica, a major highway designed to link the Pacific coast of Peru with the Atlantic shores of Brazil.

(Mr Toledo meets the former king and queen of Spain in Lima)

Prosecutors allege just 10 payments totalling just under $6m were made to Mr Toledo via an SLP called Warbury & Co. The now dissolved partnership was registered at 242 West George Street, now a block of luxury holiday apartments in the prestigious west end of Glasgow's city centre.

(The Glasgow 'HQ' of Warbury & Co)

However, when Warbury was operational the building was the Glasgow HQ of Burness Solicitors, which later merged with Aberdeen's Paull and Williamson to form Burness Paull, one of Scotland's biggest law firms.

Warbury dissolved in 2011, eighteen years after its creation, having never revealed its ownership.

In a statement, Burness Paull chairman Philip Rodney said: "Under an arrangement with a reputable third-party UK registration agent, Burness, (now known as Burness Paull) historically provided a registered office service to Warbury & Co for a nominal amount.

"The firm provided no advice to Warbury & Co, did not represent it, and did not provide any other services to it."

Burness Paull remains one of the biggest creators and hosts of SLPs, mostly for private equity funds.

(Philip Rodney, chairman of Burness Paull)

Warbury & Co is one of hundreds of SLPs identified by The Herald over the last three years as being involved or allegedly involved in criminal or unethical behaviour.

Such partnerships, referred to as "Britain's home-grown secrecy vehicle" by campaign group Transparency International, played a core role in some of the biggest and most elaborate money-laundering scandals ever uncovered, including the multi-billion-dollar Russian and Azerbaijan laundromats.

Our revelations of their involvement in Latin America's giant Odebrecht scandal last week prompted the UK Government to say it would announce reforms "soon".

Transparency International, however, wants to see a wider UK-wide crackdown on abuse of all shell firms, not just Scottish ones.

BACKGROUND: Scotland's role in the Odebrecht corruption mega-scandal 

The group's Rachel Davies Teka said: "The frequency with which fake UK-registered companies are involved in corruption is no coincidence. "There appears to be a money launderer's playbook and this case is straight out of that text.”

"Corruption robs the prosperity and safety of ordinary people. Whether it be a health budget looted by a corrupt official, or a defence budget so decimated it cannot protect its citizens, corruption is never without its victims.”

"What’s increasingly of concern is that this isn’t about shady criminals operating in far flung corners of the globe. This activity is happening right on our doorstep and we need stronger action from the UK government to end our reputation as a facilitator of global corruption."

(Rachel Davies Teka)

Background: Who makes, hosts and owns the alleged Toledo SLP?

by David Leask and Richard Smith

They are, say the reviews, "perfect for a romantic getaway". At the very heart of Glasgow there are six luxury holiday apartments. They take up three floors of a Georgian town house of blond sandstone. 

TripAdvisor, the review website, lifts the lid on what lies behind classic drapes pulled behind the building's sash windows.

"Absolutely stunning apartments in brilliant location," said one tourist. It was "finished to such a high standard me and my boyfriend couldn't believe it", added another.

This is 242 West George Street. The address last year cropped up in the prosecution of the fugitive former president of Peru, Alejandro Toledo. It was, according to prosecutors, the home of a business called Warbury & Co which paid the one time democracy activist nearly $6 million. This, they claim, was a kickback, a bribe, for Mr Toledo helping a Brazilian construction giant get lucrative highway contracts. Mr Toledo denies this.

(The West George Street property)

But how did Warbury come to be based right in the heart of Scotland's biggest city? Who hosted it? Who registered it? And, who, ultimately, takes responsibility for its actions? The first of these three questions are easy to answer. The fourth impossible.

Why 242 West George Street?  Well because this used to be the Glasgow base of Burness Solicitors, now part of the blue chip giant Burness Paull. Burness did not have any direct dealings with Warbury. The simply provided an address, a peg to hang the firm on, a maildrop, a kind of virtual brass plate. They did so in 1993, a quarter of a century ago.

We asked Philip Rodney, Burness Paull's chairman, about Warbury. He said the old Burness provided a registered office service to a "reputable third party agent" for a "nominal fee". We ask him to name that agent. He refused to do so.

Mr Rodney said: "The arrangement was put in place 25 years ago. Those involved at that time are no longer with the firm, but our records indicate that we acted in accordance with practices applicable at that time. 
"As you will understand, for reasons of client confidentiality, we cannot comment on the identity of our clients. 
"Burness Paull takes its duties seriously and at all times complies with good practice and all applicable rules and regulations."

BACKGROUND: Burness Paull linked to hundreds of secretive shell firms

Nobody has suggested Burness or later Burness Paull had any knowledge or involvement in the alleged bribery of Mr Toledo. Nor is there any evidence that the old Burness "reputable third party agent" did so either.
Warbury was first created in 1993. Documents for its creation were presented by a firm called Edsaco Limited. We asked Mr Rodney if this was his client. He would not say.

(Scotland, re-imagined as a tropical tax haven island)

Edsaco no longer exists. It was liquidated 15 years ago after a jury in San Francisco in 2002 awarded damages against it of $170m. The London-based firm had been sued by the shareholders in another company called Scorpion, which had been selling fictitious software. Jurors found that Edsaco aided Scorpion in setting up phony European companies. Edsaco said the claims against it were "without merit". 
The verdict came five years after the Serious Fraud Office in London raided Edsaco's London offices, just off Regent Street.

They seized 15 bags of evidence, all of which related to work carried out by one David Mills for Silvio Berlusconi, the Italian tycoon turned prime minister. Mr Mills, a corporate lawyer, was later convicted and then, on appeal, cleared of a tax fraud involving Mr Berlusconi. His story made headlines in the UK. Why? He was married to Tony Blair's first health minister, Tessa Jowell. 

But, again, there is no evidence that anyone at Edsaco then or now knew anything about the alleged corruption in Peru.

Warbury & Co, along with several other Edsaco SLPs with opaque ownership through offshore partners, remained registered at Burness until early this decade. So who owned it? That, thanks to what was effectively Scotland's de-facto secrecy regime, is impossible to say. Fugitive president Alejandro Toledo says it was not him.

(Founding document for Warbury & Co, presented by Edsaco Limited)

​(A world map of scandals involving Scottish shell firms)