The Panama Papers: Malcolm Turnbull's $3 million Siberian windfall
Australian Financial Review Jun 14 2016 12:19 AM
Neil Chenoweth
Prime Minister Malcolm Turnbull's merchant bank Turnbull & Partners received an estimated $3 million in 1995 and 1996 from the sales of shares held through offshore companies administered by notorious Panama law firm Mossack Fonseca.
Turnbull & Partners received up to $7 million from share sales and advisory fees from Mr Turnbull's time as a director of a listed mining company, Star Mining, which had an interest in a Siberian gold deposit.
Documents obtained by The Australian Financial Review, which first revealed Mr Turnbull's link to a Mossack Fonseca company last month, show heavy selling of Star Mining shares by offshore companies in 1995 after a series of favourable decisions by Russian politicians and bureaucrats boosted the Star Mining share price.
One of the key figures who helped obtain Star's Siberian mining leases, Ludmila Melnikoff, accuses Star director Ian MacNee, who died in 2008, of paying bribes of more than $US2 million to secure these decisions.
In an explosive unpublished memoir Ms Melnikoff describes one payment of $US70,000 on March 24, 1994, to the Minister of Natural Resources, Boris Yatskevich, for home renovations.
"I was right there in the office when the bags of money were passed over." Ms Melnikoff told the Financial Review.
Mr Turnbull has made it clear he was never aware of any bribery payments by Star Mining, and it is not suggested he was.
Kicked out for corruption
Mr Yatskevich was sacked by President Vladimir Putin in 2001 for corruption.
Another Star Mining director, Bill O'Neill, told the Financial Review that Mr MacNee had told him he spent $10 million on payments to officials in Russia.
The Financial Review reported on May 12 that Mr Turnbull and his partner, former NSW premier Neville Wran, were directors of a Star Mining subsidiary that owned a stake in the gold deposit. The subsidiary, Star Technology Systems, was administered by Mossack Fonseca in the British Virgin Islands.
"There is nothing new here," Mr Turnbull said after the article was published last month. "The company of which Neville Wran and I were directors was a wholly owned subsidiary of an Australian listed company and had it made any profits, which it did not, regrettably, it certainly would've paid tax in Australia.
"So the involvement is very, very well known and as the article acknowledges, there's no suggestion of any impropriety at all."
New documents show Turnbull & Partners received 6 million Star Mining shares in 1993 that were issued as part of a deal by Star Mining to acquire one third of a large Siberian gold deposit.
These Turnbull & Partners shares were held with a larger block of Star Mining shares issued in the deal to buy the stake in the deposit. The shares were held in Mossack Fonseca companies in the British Virgin Islands, the Bahamas and Hong Kong.
Mossack Fonseca documents, which triggered global outrage after they were obtained originally obtained by Süddeutsche Zeitung and the International Consortium of Investigative Journalists, show Mr MacNee controlled all of these companies.
Director unaware
Documents provided to shareholders of the Australian company at the time of the deal were not required to reveal that Mr Turnbull's company, which was advising Star Mining on share placements to fund the deal and for development costs for its Russian operations, was paid when Star Mining bought the stake in the deposit.
Independent director Bill O'Neill told the Financial Review he was unaware of the commission paid to Mr Turnbull's firm. The arrangement may have been disclosed after Mr O'Neill resigned from the Star Mining board on October 29 1993 after the purchase of Star Technology.
In early 1995, Turnbull & Partners acquired another 10 million Star Mining shares, which appear to have been held in the Mossack Fonseca companies.
By March 1995 he held 22.5 million Star Mining shares with a market value of more than $7 million. It is believed Turnbull had sold out by early 1996. At market prices this would have generated more than $5 million.
"The Prime Minister notes that Turnbull & Partners Ltd's interests were accounted for and disclosed in accordance with the relevant legal requirements," a spokesman for Mr Turnbull said last week. "He has nothing further to add to his earlier responses on this matter."
Ms Melnikoff's detailed account reveals the support Star Mining received from the Labor government in Australia.
In one year prime minister Paul Keating wrote three letters of support for Star, including two letters to Russian prime minister Viktor Chernomyrdin, documents show.