Bono's Lithuania shopping mall investment draws flak from local tax authority
Leaked documents reveal rock star's piece of companies with changing identities, now Nude Estates I Ltd.
In four decades of touring the world, the Irish rock band U2 has never played in Utena, a sleepy place in northeast Lithuania.
With just 26,000 people, Utena's population could fit into one of U2's stadium concerts twice over. But unbeknownst to the locals, the band's front man, Bono, has long had a stake in their town.
Leaked documents reveal that for more than a decade, Bono, whose real name is Paul David Hewson, has secretly been a part-owner of a shopping mall in Utena. After receiving reporters' questions, local officials launched a probe into the mall for tax arrangements that one expert described as "a crude violation of the tax code."
Evidence of Bono's stake in the mall is found in the Paradise Papers, a set of leaked documents obtained by Süddeutsche Zeitung and the International Consortium of Investigative Journalists (ICIJ) and shared with an international team of investigative reporters, including the Organized Crime and Corruption Reporting Project (OCCRP).Documents from Malta's business registry spell out Bono's hidden stake in Utena's Ausra (Dawn) shopping mall.
The 3,700-square-metre mall, which opened in 2006, was built by Eika, one of Lithuania's leading developers. In April 2007, the developer announced that it had sold the mall to an unnamed "foreign investor."
The buyer was UAB Nude Estates 2, a Lithuanian company. Records show that the company was ultimately part-owned by Bono, via a series of confusingly named offshore companies.
Between 2007 and 2012, UAB Nude Estates 2 was owned by a similarly named Maltese offshore company, Nude Estates Malta Ltd. Leaked registry documents show that Bono is listed as one of three owners of Nude Estates Malta, along with a man named Robin Andrew Barnes and Patrick Gerard McKillen.
McKillen is an Irish businessman who also co-owns a luxury Dublin hotel with Bono and U2 guitarist David Howell Evans, also known as The Edge.
In 2012, ownership of the Lithuanian company was transferred to another offshore, this time in the British Crown Dependency of Guernsey, called Nude Estates I Ltd.
In a written response to questions from ICIJ, Bono spokeswoman Kathy McKiernan said the U2 frontman is "a passive, minority investor" in the Guernsey company, Nude Estates I. McKiernan also confirmed that Bono had held a minority stake in Nude Estates Malta, which has since been wound up.
"Malta is a well-established holding company jurisdiction within the EU," McKiernan said.
It is unclear how large Bono's investment in the Utena mall is, or how much it has earned him. In its 2007 financial records, the Lithuanian company, Nude Estates 2, stated that its fixed assets were valued at 19.6 million Lithuanian Litas, then worth about $7.7 million US.
Robertas Dargis, the founder and former CEO of developer Eika, said he had no idea he had sold the mall to a Bono-linked company back in 2007.
"No way!" Dargis exclaimed when told of the connection.
"Nobody told us anything about [Bono] back then," he said. "I knew it was some Irish investors. Or maybe it was Great Britain, something like that."
Nude Estates 2, which is under Lithuanian management, may have dodged tens of thousands of euros in tax, according to an independent analysis of its financial records.
In 2010, the company declared a loss of more than €3 million (then about $4.1 million Cdn), while booking less than €500,000 in revenue ($685,000 Cdn). The loss was achieved via a revaluation of the company's fixed assets, the largest of which was the mall itself.
Records show the company then carried that loss forward, paying no tax on profits until the end of 2016 — despite booking profits for five of those six years.
In a statement sent to the Lithuanian news website 15min.lt, the Lithuanian tax office confirmed the company had not paid tax on its profits since at least 2011.
Rūta Bilkštytė, a Lithuanian tax expert and the director of Lithuanian consultancy company Fidexperta, was shown Nude Estates 2's records by 15min.lt.
She said the company's financial disclosures appeared to show "a crude violation of the tax code."
Bilkštytė said the company appears to have improperly marked down the revalued mall as a multi-million euro loss. She estimated the company likely dodged about €47,000 in tax so far. Its current paper losses would allow it to avoid about another €400,000, she said.
"In my point of view, this is neither a mistake, nor tax planning, nor tax minimization. It seems to be a crude violation of the tax code," Bilkštytė said.
Reporters for 15min.lt sent the same documents to the Lithuanian State Tax Inspectorate with a request for comment. In reply, the agency said it was launching "control procedures" into the company.
"The revaluation of the fixed assets indicated in your case doesn't permit taxpayer to not pay future tax on profits," the agency said in a written statement.
Neither the tax office nor Bilkštytė were told by 15min.lt of Bono's link to the mall.
While there is no evidence Bono directly engaged in any tax shenanigans, the revelations carry uncomfortable echoes of previous criticism of the outspoken singer's tax arrangements.
Trying to be sensible
Bono, a vocal campaigner for relieving the debt of the world's poorest countries, faced a protest at the U.K.'s Glastonbury festival in 2011 over U2's decision to move its operations from Ireland to the Netherlands, where music royalties incur minimal tax.
In 2015, he responded to renewed criticism of the band's tax strategy by saying his arrangements were "just some smart people we have … trying to be sensible about the way we're taxed."
In comments sent just before the publication deadline, Bono's spokeswoman McKiernan said information provided to her by 15min.lt about tax issues at the mall was "categorically incorrect."
"I am being told preliminarily that the information you have provided is categorically incorrect. I am further advised that UAB Nude Estates 2 hasn't had any contact from the Lithuanian tax authorities about purported irregularities or the commencement of any so-called 'control procedures'," she said, adding that she expected further information on Monday.
In a statement to the BBC on Monday, the U2 frontman said he is as eager as anyone to clear up any misunderstandings about his tax situation.
"I would be extremely distressed if, even as a passive minority investor in UAB2 in Lithuania, anything less than exemplary was done with my name anywhere near it.
"I've been assured by those running the company that it is fully tax compliant, but if that is not the case I want to know as much as the tax office does, and so I also welcome the audit they have said they will undertake," Bono said.
"I take this stuff very seriously. I have campaigned for the beneficial ownership of offshore companies to be made transparent," he told the BBC.
Bono's spokeswoman McKiernan statement added that "given Bono is a passive, minority investor in the Nude Estates companies, I have forwarded your questions to entrepreneur Bryan Meehan, who runs the Nude Estates companies and is best placed to answer any questions regarding the companies' investments and financials."
Meehan had not responded to the forwarded questions as of press time.
Sigitas Jautakis, the Lithuanian director of Nude Estates 2, said he was unaware that Bono was an owner of the mall.
Jautakis denied there was anything improper about the mall's tax arrangements. But when told the tax office had informed 15min.lt that the deduction was inappropriate, he said the company would comply if asked to pay more tax.
"If it is … determined [by the tax office] that we have to pay some profit tax, without accounting for the [mall] revaluation, OK. The tax inspectorate hasn't carried out any inspections or anything," he said.
"But they should, first of all, delve deeply into the entire situation."
CBC is part of the International Consortium of Investigative Journalists, which produced this story, but did not independently verify the specific allegations.
With files from Hilary Osborne at The Guardian, and Will Fitzgibbon at ICIJ