Vijay Mallya's secrets buried in offshore tax havens

It's not just the Indian banks that business tycoon Vijay Mallya has taken for a ride. The chairman of United Breweries (UB) group and promoter of now defunct Kingfisher Airlines also concealed in his election affidavit, filed before the Rajya Sabha, his business interests in offshore tax havens elsewhere.

dna has accessed documents that show the existence of a Mallya family trust in Isle of Man, an offshore tax haven under the jurisdiction of the United Kingdom. It is believed that most of Mallya’s wealth and inheritance is parked here. His business interests also extend to Panama, yet another tax haven. And none of these secretive businesses find mention in his election affidavit filed before the Upper House.

The trust in Isle of Man, a small island located in the Irish Sea, is known as the Golden Eagle Trust. Named after one of the most popular beers from his erstwhile Indian liquor business, the trust was set up by Mallya’s father, Vittal Mallya in 1982. The Golden Eagle Trust was set up primarily as a family trust a year before Vittal Mallya died of a heart attack in 1983.

Mallya has used the trust to make several acquisitions, some of them going back as far back as 1980s. In 1984, a year after his father’s death, Mallya used the Golden Eagle Trust for an attempt to buy one of India’s largest liquor companies, Shaw Wallace. Had it not been for a bitter battle between Indian businessman late Manu Chabbria and Vijay Mallya over its acquisition, the existence of the trust would have been unknown.

The 20-year feud between Chabbria and Mallya was settled in a Hong Kong court in 2004. The Golden Eagle Trust was used by Mallya to finance the acquisition of Shaw Wallace because the payment for a part of the transaction was to be made in Sterling Pound. India’s laws at the time did not allow payments in foreign currency without seeking the government’s approval.

The Hong Kong court noted, “Obtaining permission from the Indian government would have been difficult. This however was not a problem for Vijay Mallya because the senior Mallya (Vittal) had set up a Mallya family trust sometime ago. This Golden Eagle Trust doesn't enjoy resident status in India. This Mallya family trust could therefore be behind the company which was to be a 50% joint venture (with Manu Chabbria) in the purchase of Shaw Wallace shares.”

In filings before the US Securities and Exchange Commission (SEC), the address of the Golden Eagle Trust is mentioned as Celtic House, Victoria Street, Douglas, Isle of Man, with CAS Nominees as its manager.

The money from the family trust was also used by Mallya to finance his business in the US Mallya is the owner of a California headquartered liquor company called Mendocino Brewing Company Inc. In 2000, Mendocino stated before the SEC that it wanted to acquire United Breweries International (UBI) UK Ltd from the Golden Eagle Trust. The deal also involved paying Golden Eagle Trust for the acquisition of distribution rights of Kingfisher Premium beer in US and Canada.

Given America’s tough laws on non-declaration of related party transactions (when a company has financial dealings with its own affiliates and subsidiaries), Mendocino’s financial adviser submitted its report before the SEC. The SEC then noted, “The principal trustee of Golden Eagle is CAS Nomines Ltd., a corporation organized under the laws of the Isle of Man (part of the United Kingdom). Because CAS Nominees Ltd. has the ability to act in favor of Dr. Vijay Mallya, Mendocino's Chairman of the Board and CEO Dr. Mallya may be deemed to have a beneficial ownership interest, and therefore a material financial interest, in Golden Eagle. Therefore, Golden Eagle owns or controls a majority of the voting stock of both of the principal parties to the Agreement.” 

Information obtained by dna with the help of international investigative journalists show that he is also part of businesses operating out of Panama, another offshore tax haven. While one of his Panama-based companies, Inversiones Mirabel SA (fully owned by the Golden Eagle Trust), is well known in India, little is known about two other entities linked to him.

One of them, Vee Tee International Inc – incorporated on August 22, 1992 in Panama – was involved in exporting liquor to the Middle East, especially the UAE and Bahrain. From the scant information available about this business, it is evident that the firm was selling liquor to Cee Cee Holdings, owned by a Keralite, and one of the biggest distributors of liquor in the Gulf region.

One of the directors of Vee Tee International is Chigurupati Ranga Rao, who is also related to another Panama-based company named Golden Eagle Trading International Inc. While both Mallya and Rao are on the board of Vee Tee International, Mallya is not on the board of Golden Eagle Trading International, a company named after his own Isle of Man-based family trust.

Detailed questionnaire to Mallya’s spokesperson did not elicit a response till the time of going to press.

People close to Mallya told dna that one of the reasons Mallya wants to move to London is to be able to manage his wealth accumulated in the Golden Eagle Trust, since Isle of Man is a tax-free jurisdiction. Surprisingly, both bank officials and Enforcement Directorate (ED) officials were unaware about the existence of Mallya’s Isle of Man trust and Panama entities.

ED officials say that the Golden Eagle Trust is not out of their bounds since India had signed a Tax Information Exchange Treaty with the Isle of Man on February 4, 2011. However, investigators would find it hard to obtain information about Mallya’s businesses in Panama since India does not have a similar treaty with the Central American nation, considered to be magnet for illicit money from across the world. Sleuths also maintain that Mallya has a host of businesses in other tax havens, most notably the British Virgin Islands and Jersey.