Secrecy World

by Jake Bernstein

  Wang and his men persecuted officials and policemen suspected of corruption, torturing the guilty and the innocent alike. They administered electric shock treatment, forced people to stay awake upright for days in a metal “tiger chair,” and stuffed wasabi into their noses and chili water down their throats. Bo trumpeted the campaign, appearing on television to declare that “Corruption is the Party’s mortal wound.” The anticorruption crusade was a big hit with the population, and China’s leaders took notice. Bo Xilai was elevated to the Politburo and regarded as a strong candidate to join the inner circle, the Politburo Standing Committee, one day.

  Meanwhile, secretly, he and his wife, Gu Kailai, had amassed a fortune in kickbacks. Estimates of their illicit wealth vary from $160 million to $1 billion. To get the money out of the country, Gu Kailai employed foreign middlemen known in China as “white gloves” because they allow one to keep clean hands. In 2000, Patrick Henri Devillers, a louche Frenchman, set up a shell company in the BVI called Russell Properties S.A. through the Saint Thomas–based provider Trident Trust. Xu Ming, a plastics billionaire, then paid Russell Properties $3.2 million to buy a steel shop overseas. The transaction was a farce. Xu received access to a land development deal. Gu Kailai pocketed the money and bought a six-bedroom mansion with a thirty-three-thousand-square-foot yard overlooking the French Riviera. The couple rented the estate to wealthy Russians to supplement their income.

  In 2007, they enlisted another white glove, Neil Heywood, a Harrow-educated British expat who drove around China in a secondhand Jaguar S-Type with a Union Jack on the bumper. He worked part-time at an Aston Martin dealership and also as an investigator for a private intelligence firm. Heywood helped Bo and Gu get their son Bo Guagua, nicknamed “Little Rabbit” (mom was “Big Rabbit”), into his English alma mater. The school cost about £30,000 a year, while Bo’s annual salary was at most the equivalent of £12,000.

  In August 2011, the registration for Russell Properties was transferred by Trident to Mossfon. By this time, the relationship had soured between Heywood and Gu Kailai, who was herself a lawyer, the author of a popular book called Winning a Lawsuit in the U.S., and the daughter of a famous People’s Liberation Army general. Gu and Heywood had gone in together on a $200 million state-backed real estate deal that Bo had quashed because he was worried it might threaten his political career. Heywood had already spent the money in his head and demanded that Gu pay him $20 million in recompense. When she refused, he allegedly threatened to expose the couple and harm Little Rabbit.

  On November 13, Gu lured Heywood to the Lucky Holiday Hotel in Chongqing. After getting drunk on Royal Salute whiskey, Heywood vomited and then asked for water. She served him up a glass mixed with rat poison and cyanide instead. She and an aide then sprinkled drugs around the room to make the death look like an overdose or drug-fueled heart attack. Chief Wang handled the investigation/cover-up. The body was quickly cremated without an autopsy. Wang reported the details to Gu the next day in a conversation he surreptitiously taped.

  Two weeks later, Russell Properties was transferred to an address connected to Gu. When Chief Wang informed Bo of what his wife had done at the hotel, the party boss did not take the news well, demoting the police chief to vice mayor in charge of sports, sanitation, and education. Fearful that he would meet a similar fate to Heywood, Wang sought asylum at the American consulate in Chengdu in February 2012. The Americans handed him over to the Chinese authorities.

  A month later, Bo Xilai was detained as he walked offstage in the Great Hall of the People after the closing ceremony of the National People’s Congress. He was tried, convicted, and sentenced to life in prison for bribery, embezzlement, and abuse of power. Gu was sentenced to death, which was reduced to life in prison.

  Shortly after Bo’s arrest, the registration for Russell Properties was transferred to another Panamanian law firm. The Chinese government is believed to have sold the mansion on the Riviera.

  * * *

  THE ICIJ STAFF noticed that, despite Mar Cabra’s instructions, the Caijing reporters were somewhat lax when it came to digital security. Sometimes they forgot to encrypt their emails. Yet they were doing good work, actively searching the database and contributing reporting to the project.

  Then someone found Wang Boming, Caijing’s owner, in the data. He was the director of two companies and the shareholder of another. The group queried him about his holdings, trying to pin down their purpose. He responded to all the questions. There was no apparent impropriety. Despite the revelation, the project continued.

  Two months before publication, Caijing’s deputy investigative editor, Luo Changping, the man who had defiantly published the corrupt official’s name, was moved to another department. Not long afterward, the magazine’s top editor sent an encrypted message to ICIJ’s Marina Walker in Washington. The message explained that the magazine had been visited by state security. The government had told Caijing to cease participation in the collaboration. Someone had leaked information about the project. Caijing cut off communication with the partners. ICIJ blocked further access to the data, but any damage likely had already been done.

  About a week before publication, staff from the Chinese embassy in Madrid requested a meeting with editors at El País, who had joined the collaboration after the first wave of stories. They told the editors that they knew about the project. They asked whether the El País China correspondent was involved and hinted his residency in the country might be in jeopardy. The lunch was tense and short. It was followed by a longer meal a few days later where the paper presented its findings and asked for comment. Despite the pressure, El País opted to publish anyway.

  The stories went live on the afternoon of Tuesday, January 21, 2014. In addition to the princelings and other relatives of officials, the data revealed tidbits on China’s richest woman, the founders of major Internet companies, the offshore activities of the country’s oil industry, and its biggest industrialists. The stories presented an unparalleled view into the country’s use of the offshore system.

  ICIJ called it China Leaks.

  In addition to Hong Kong’s Ming Pao and Taiwan’s CommonWealth Magazine, stories ran in El País, the Guardian, Süddeutsche Zeitung, and Switzerland’s Le Matin Dimanche, among others. In the end, Ming Pao’s editors didn’t fully embrace the project. Yuen-Ying Chan, the Hong Kong journalism professor who brought everyone together, speculates that in the end her hometown newspaper, focused on local news, did not fully recognize the value of the leak.

  “Editors or even readers would say, ‘We know this already,’” she says. “‘The top guys are corrupt, what’s the news?’”

  The difference was that for the first time, everybody could see how the system operated and who was involved. To ensure wide distribution, ICIJ translated the stories into Mandarin.

  The Chinese government recognized the danger almost instantly. Within hours of publication, Internet users in China were blocked from the ICIJ Web pages. The same happened to the Guardian and other partners in the project. The Great Firewall also removed mentions of the stories on Weibo.

  There were ways to get around the censorship for the truly committed. They could use a VPN service to hide their Internet point of origin. Readers also passed around PDFs of the story. For the vast majority of Chinese, though, the revelations never happened.

  13

  FOLLOW THE LEAKS

  Tax authorities and prosecutors around the world scrambled after the release of Offshore Leaks. Politicians whose names appeared in the data made excuses. Functionaries resigned. Governments promised more transparency. Luxembourg even announced that it would automatically share bank account information with U.S. tax authorities. Meanwhile offshore providers bemoaned a “crisis of confidence” gripping the industry as a result of the leak.

  Offshore Leaks proved that investigative reporters from different countries and different cultures could collaborate. ICIJ had built a new kind of journalism machine, though the structure w
as still rickety. Reporters working together across borders formed the gears, but the power came from information—in this case, leaked data. Only high-grade data worked. The material had to be extensive and cover multiple countries. ICIJ’s mandate required a strong public-interest rationale to publish—subject matter that involved the well-being of society. ICIJ director Gerard Ryle wanted stories that grabbed readers’ attention and provided a worthy challenge for a crackerjack group of international investigative reporters. For these last two points, the secrecy world was made to order.

  A chronic worrier, Ryle envisioned the momentum generated by Offshore Leaks slipping away. A single successful collaboration was more proof of concept than a machine firing on all cylinders. Without a new project, the partners would inevitably disperse. He needed new fuel for the machine, and quickly.

  Shortly after the publication of Offshore Leaks, Spain’s El País printed a list of Spanish HSBC account holders suspected of tax evasion. The names came from data stolen from HSBC’s Swiss private bank by a former employee, Hervé Falciani. The next day, ICIJ’s data researcher Mar Cabra wrote a story in El Confidencial noting overlaps between people found on “Falciani’s famous list” and Offshore Leaks.

  The Falciani files had been the talk of Europe for several years. The public did not know what Falciani’s data contained, but tax authorities around Europe were acting on it. The French had provided a handful of countries lists of their citizens who had Swiss accounts with HSBC. Some of those individual lists had leaked but no journalist had reviewed all the material. Cabra thought the HSBC files could be ICIJ’s next project. After conferring with Ryle, she obtained Falciani’s email address and sent him a note.

  The pitch was simple: We have data. You have data. Let’s put our data together.

  * * *

  HERVÉ FALCIANI’S PATH to government informant was a tortured one. Handsome, intelligent, and charming, as a youth he worked as a croupier at the Casino de Monte-Carlo while studying computer engineering. HSBC hired him in 2000. The Swiss private bank’s IT operation was a disaster, its compliance systems inoperable, its transactions monitored manually. The maintenance of client data was carried out by French employees working from home on their laptops, according to one bank executive.

  In 2006, Falciani was tapped to reorganize HSBC’s client database and reinforce its security. Instead, working on weekends over a five-month period, he downloaded the data for himself. HSBC failed to notice.

  Falciani covertly tried to sell the data in Beirut in 2008 with the help of his mistress, Georgina Mikhael, an attractive French-Lebanese computer scientist at the bank. He promised her that he would use the money to leave his wife and autistic daughter. He and Mikhael could not close the sale, but news of their trip eventually made it to the Swiss banking association, who alerted regulators.

  Falciani also contacted Germany’s foreign intelligence agency, the Bundesnachrichtendienst (BND), under a pseudonym. Earlier that year, the BND had purchased a DVD for almost €5 million containing the names of German citizens who used Liechtenstein’s LGT Bank to avoid paying their taxes. It began a trend of German tax officials buying purloined tax data on their citizens from neighboring countries.

  The subject line of Falciani’s email to the BND read, “tax evasion.” He wrote that he had a list of clients from one of the five largest private banks in the world, based in Switzerland, as well as access to its computer system. The Germans were interested. A meeting was arranged with a top official, who was multilingual and practiced at buying stolen data. At the last minute, though, the official broke his kneecap, and his replacement couldn’t speak English or French. Falciani did not speak German. In the ensuing confusion, he lost an opportunity for a big payday.

  Falciani also met with Inspector Jean-Patrick Martini of France’s National Directorate of Tax Investigation. Colleagues nicknamed Martini “the apéritif” for his surname, but also because the downfall of fraudsters followed his presence like a meal after a cocktail. But the French wouldn’t pay, and not even the persuasive Martini could dislodge the data from Falciani.

  In December 2008, after learning that Falciani was cheating on her and that the Swiss police had her under surveillance, Mikhael gave him up to Swiss law enforcement, who took Falciani into custody. He was interrogated for several hours but convinced a Swiss prosecutor to release him so he could check on his wife and daughter, promising to return the following day. Instead, he and his family fled Switzerland that evening for France, with a laptop brimming with more than one hundred gigabytes of information on more than one hundred thousand HSBC clients. The files contained not only the evidence for tax evasion on a global scale but also the secret financial details of criminal activity by a broad swath of individuals, from corrupt politicians to arms traffickers.

  Police in Nice soon arrested Falciani on a Swiss Interpol warrant. He called Martini, who arranged for his release from custody. The French refused to turn him over to the Swiss, and Martini took charge of the data. The French tax authorities dubbed it Operation Chocolate. Free on his own recognizance while he helped the French make sense of the information, Falciani traveled to Spain, where he was promptly arrested and held until he made a similar pact with the Spanish. Over the next few years, he would shuttle between both countries, offering his help to tax authorities sorting out the information.

  * * *

  IN OCTOBER 2013, on Mar Cabra’s second try, Falciani answered her email. He was in Madrid, where Cabra lived, and agreed to meet her. The Spanish government had enveloped him in security by this point. Cabra received a call to meet at a public place, where she encountered a plainclothes policeman. He reviewed her identification documents and phoned to someone watching nearby. They then took her to meet Falciani.

  Cabra was charmed, even smitten, with the fit and well-dressed Falciani. He demonstrated a deep knowledge of data technology as they discussed the tools of the trade. They met again three days later, and Falciani showed her a sample of the HSBC files. He proposed that ICIJ work in collaboration with the Spanish and French prosecutors. She was noncommittal on that point but suggested he meet with Ryle in Paris the following week.

  In Paris, Falciani and Ryle took a long walk along the bank of the Seine. They forged an immediate connection, waxing rhapsodically over the power of public-interest journalism to change the world. Ryle left the meeting with Falciani as Cabra had, entranced and convinced that Falciani’s data was the next ICIJ project.

  During the following months, every chance they could, Ryle and Cabra met separately with Falciani to strengthen the relationship. In March 2014, the three agreed to meet in Paris. In anticipation of receiving the data, ICIJ flew in Rigoberto Carvajal from Costa Rica.

  The month before, Carvajal’s boss, Giannina Segnini, had quit La Nación, the newspaper where she had worked for twenty years. She penned a farewell to readers that elided the real reason she had resigned. She and her team of data journalists had marshaled their expertise to create an app for the 2014 Costa Rican election that enabled voters to see each candidate’s voting history, business interests, and even scanned court documents. They called the app “Don’t Vote Blind.” At the last minute, her bosses, fearful that a leftist party might win the presidency for the first time, tried to disable the app. Segnini’s team followed her out the door and into the arms of ICIJ, which hired Carvajal and a Maltese software engineer named Matthew Caruana Galizia, who had left the Financial Times to work with the Costa Ricans. Segnini herself landed at Columbia University as a professor at the journalism school.

  Ryle, Cabra, Carvajal, and Falciani met for dinner in Paris. Ryle had chosen a pizza place, earning him gentle ribbing from his colleagues. At dinner, they discussed Falciani’s data and cybersecurity. It seemed that the transfer might have to occur through a third party, and Falciani told them he couldn’t do anything without his lawyer. They arranged to meet again the following day at the law offices of William Bourdon, an internationally recognized white-
collar defense attorney, who represented Falciani.

  Falciani arrived at the meeting with an Italian journalist in tow. Ryle and Cabra looked at each other in confusion. This was a secret meeting to exchange the data and yet here was another reporter. Falciani launched into a proposal to start an international organization for whistle-blowers. The ICIJ team thought, What is going on? We brought Carvajal all the way from Costa Rica for this? Ryle then asked the Italian journalist to leave so they could speak privately with Falciani and Bourdon. The reporter reacted angrily. He let them know he was a good friend of Falciani’s, with whom he had spent many an hour in deep conversation. It was like a horror movie where the plot comes into focus. Ryle suddenly realized he had been played. They had been courting Falciani for five months. They weren’t even the only journalists he had been stringing along.

  Falciani and the other reporter left the room. Ryle explained to Bourdon what had occurred. The lawyer said he understood. There was another possibility, though. Someone else, he said, had the data as well.

  Bourdon said he would be in touch.

  Cabra was crushed, and a little heartbroken. She, Ryle, and Carvajal met with Falciani later that day, explaining to him that theirs was a small organization. Time was of the essence. The team was on standby. A decision had to be made. Falciani would not budge.

  Then Bourdon texted Ryle. A reporter at Le Monde, Gérard Davet, had the data. This was perfect; Le Monde had been a partner on Offshore Leaks. Ryle excitedly texted Davet, telling him the team was leaving Paris the next day but they would happily meet with him at any time before then.

  The response was curt and brutal. Davet was very busy and would not be able to meet.

  Ryle flew back to Washington the next day, crushed but with a fallback project in mind.