7SCL influence in foreign elections
Introduction
274.Data analytics firms have played a key role in elections around the world. Strategic communications companies frequently run campaigns internationally, which are financed by less than transparent means and employ legally dubious methods. As we wrote in our Interim Report, we raised concerns about the complex web of relationships between the SCL (Strategic Communications Laboratories) group of companies, and “these concerns have been heightened by Alexander Nix and SCL’s own links with organisations involved in the military, defence, intelligence and security realms”.310
275.We highlighted the following election and referendum campaigns that SCL Elections and associated companies had been involved in: Australia; Brazil; Czech Republic; France; Gambia; Germany; Ghana (2013); Guyana; India; Indonesia; Italy; Kenya (Kenyatta campaigns of 2013 and 2017); Kosovo; Malaysia; Mexico; Mongolia; Niger; Nigeria; Pakistan; Peru; Philippines; Slovakia; St Kitts and Nevis; St Lucia; St Vincent and the Grenadines; Thailand; Trinidad and Tobago; and the UK. We also received testimony that SCL may also have worked on the Mayoral election campaign in Buenos Aires in 2015 for Mauricio Macri.311
276.Following publication of our Interim Report, both the High Commissioner of Malta and the Chelgate PR company wrote to the Committee, denying statements in the Interim Report that the Malta Labour Party had had dealings with the SCL Group “for several years before the 2013 elections”. We understand, however, that SCL certainly had meetings in Malta, that Christian Kalin of Henley & Partners was introduced by SCL to Joseph Muscat in 2011, and that Christian Kalin met with both political parties before 2013.312
Further information regarding the work of SCL
277.As we said in our Interim Report, SCL Elections and its associated companies, including Cambridge Analytica, worked on campaigns that were not financed in a transparent way, overstepping legal and ethical boundaries.
278.Our Interim Report described the relationship between SCL Elections’ campaigning work and Christian Kalin, Chairman of Henley & Partners:
We were told that, behind much of SCL Elections’ campaigning work was the hidden hand of Christian Kalin, Chairman of Henley & Partners, who arranged for investors to supply the funding to pay for campaigns, and then organised SCL to write their manifesto and oversee the whole campaign process. In exchange, Alexander Nix told us, Henley & Partners would gain exclusive passport rights for that country, under a citizenship-by-investment (CBI) programme. Alexander Nix and Christian Kalin have been described as having a ‘Faustian pact’. With the exclusive passport rights came a government that would be conducive to Mr. Kalin and his clients.313
Citizenship-by-investment schemes
279.Henley & Partners currently manages ‘citizenship-by-investment’ schemes in Several countries, including Malta, Moldova, St Lucia, St Kitts and Nevis, and Grenada. Caribbean passports allow visa-free access travel to 130 countries, including the UK and many European states. Passports issued from Malta allow access to all European countries—Malta’s Individual Investor Programme (IIP) was introduced at the beginning of 2014, the first of its kind to be recognised by the European Commission.314 Many such passports are issued to residents from Russia, China and the Middle East. A recent Guardian article described the work of Henley & Partners, describing the way in which foreign nationals can become citizens of a country in which they have never lived, in exchange for donations to a national trust fund:
Henley has made tens of millions of dollars from this trade, and its first big client was the government of St Kitts. And while Nix’s star has fallen, Kalin and his industry are on the up—and finding themselves increasingly under scrutiny. […] For a few hundred thousand dollars, the right passport, from the right place, can get its owner into almost any country. A sum worth paying for legitimate traders. But also, police fear, for criminals and sanctions-busting businessmen.315
280.There has been renewed pressure from the European Union to regulate the schemes of residence-by-investment (described as ‘golden visas’) and citizenship-by-investment (described as ‘golden passports’). The granting of residence rights to foreign investors, in return for passports, is open to “security risks, risks of money laundering and corruption and tax evasion. Such risks are exacerbated by the cross-border rights associated with citizenship of the Union”.316 In January 2019, the European Commission published a report, “Investor Citizenship and Residence Schemes in the European Union”, raising such concerns.317
281.In our Interim Report, we highlighted the work carried out by SCL to win the 2010 general election in St Kitts and Nevis, which included a sting operation, with the Opposition Leader, Lindsay Grant, being offered a bribe by an undercover operative posing as a real-estate investor. Alexander Nix told us that Christian Kalin was also running a citizenship-by-investment programme in St Kitts and Nevis at the time.318
282.In 2014, the UK issued a warning that ‘illicit actors’ were buying passports “for the purposes of evading US or international sanctions or engaging in other financial crime”.319 This was, in part, due to the fact that St Kitts and Nevis had removed ‘Place of Birth’ on its passport, and the US was concerned about the scheme. The following people are among those who have acquired St Kitts and Nevis passports:
- Ali Sadr Hasheminejad: Iranian, acquired SKN passport via application managed by Henley & Partners in 2009; arrested by the US in March 2017 for money laundering sanctions violations and was bailed in May; currently subject to electronic monitoring and curfew; his Maltese bank, Pilatus, had its licence withdrawn in October 2018, for money laundering;320
- Houshang Hosseinpour, Houshang Farsoudeh and Pourya Nayebi: Iranian, acquired SKN passports in November 2011, December 2011, and November 2012 respectively; they used their SKN passports to acquire a bank in Georgia; all three men were sanctioned in 2014 by the US;321
- Ren Biao: a Chinese national, who obtained his SKN passport in September 2013; he moved to SKN with his family in 2014, after China issued an Interpol red notice. He was wanted for allegedly acquiring $100m by defrauding state institutions;322
- John Babikian, fled Canada in 2012 in the wake of tax evasion charges, holder of an SKN passport, prosecuted by the US Securities and Exchange Commission (SEC) in 2014 for stock fraud, and fined $3m.323
283.Henley & Partners was involved in both helping to finance elections in St Kitts and Nevis, by offering and paying for SCL’s services and in running that Government’s economic citizenship partnership.324 SCL was part of the package, which was being offered by Henley & Partners, which calls into question whether the UK Bribery Act is enough of a regulatory brake on bad behaviour abroad. According to a senior source from the St Kitts and Nevis Labour Party, Mr. Nix has claimed that, although the company SCL has gone into administration, the people who work there are the same and so they were available to provide services to campaign management.325
284.Henley & Partners denies directly funding any election campaigns in the Caribbean on citizenship-by-investment at the same time that SCL was active in the region. A letter from Global Citizens, on behalf of Henley & Partners, was sent to the Committee in December 2018, stating: “It is natural that there would have been a certain amount of interaction among the numerous advisors and consultants. It is entirely incorrect, however, to suggest that Henley & Partners was a formal partner to SCL in any way”.326
285.As of the end of July, 2018 when we published our Interim Report, Alexander Nix had resigned as a director within the SCL/Cambridge Analytica group of companies, which themselves had gone into administration in the UK and Chapter 7 bankruptcy in the US.
286.Alexander Nix remains, however, a shareholder of their UK parent Emerdata—formed in August, 2017, as part of a group re-organisation. Emerdata did not go into administration, continues to be an active company and has a wide shareholder base. According to the latest records, it is in turn majority owned by Cambridge Analytica Holdings LLC, a Delaware-based company.327
287.Little substantial new information has emerged from the insolvency process, save that—following the scandal—the administrators have been unable to rescue the UK companies as going concerns. Emerdata remains by far the largest creditor, sits in pole position on the official creditors committee and has been paying the substantial administration costs.328
288.Similarly, little new information has surfaced from the Chapter 7 proceedings involving the former US operating companies. A group of Facebook users have since taken legal action in a putative class action suit over privacy breaches and, in January this year, a New York court ordered Julian Wheatland—the SCL group’s former Chairman and Emerdata’s current Chief Operating Officer—to hand over corporate documents that they had requested in their case.329
289.As well as Emerdata (and its Delaware parent), one former SCL group company in the UK—SCL Insight Limited—also remains active. Based in London, it is owned by the group’s co-founder Nigel Oakes and was spun off separately during the re-organisation in 2017.
290.Following the instruction by the Secretary of State for Business, Energy and Industrial Strategy (BEIS), the Insolvency Service is currently investigating the conduct of the directors of SCL Elections Ltd, SCL Group Ltd, SCL Analytics Ltd, SCL Commercial Ltd, SCL Social Ltd and Cambridge Analytica (UK) Ltd under the provisions of the 1986 Company Directors Disqualification Act.
Conflicts of interest
291.The problem with many strategic communication companies is the fact that they work on campaigns that are not only unethical and possibly illegal, but also that they work against the national and security interests of the UK with campaigns for private or hostile state actors, which are at odds with UK foreign policy. Evidence in the AIQ data submitted by Chris Vickery suggests that AIQ was either working with, or planning to work on a political campaign for the Osnova party in Ukraine. The Osnova Party was created by politician and businessman Serhiy Taruta. According to an Atlantic Council article, Mr Taruta has claimed that the majority of Ukrainians do not support NATO, contrary to other polling. The same article says that Osnova argues for making ‘compromises’ with Ukraine’s neighbours.330
292.When we asked Jeff Silvester, CEO of AIQ, about Osnova and whether AIQ was working on the Ukrainian elections in 2019, Mr Silvester replied: “Osnova is a political party in the Ukraine. We have a client that we created an Android and IOS app for, and they are working with Osnova”.331 Ukraine is a country where the UK Ministry of Defence and the Foreign and Commonwealth Office have a deep intereste in safeguarding its national security in the face of Russian aggression.
293.In our Interim Report, we stated:
Equally worrying is the fact that the SCL Group carried out work “for the British Government, the US Government and other allied Governments”, which meant that Mr. Nix and the SCL Group and associated companies were working for the UK Government, alongside working on campaigning work for other countries. Mr. Nix also told us that Christian Kalin was working for the UK Government at the same time. We published a Ministry of Defence approbation of SCL, after SCL provided psychological operations training for MOD staff, which revealed that SCL was given classified information about operations in Helmand, Afghanistan, as a result of their security clearances. Alexander Nix explained that SCL “is a company that operates in the government and defence space, it acts as a company that has secret clearance”.332
This raises the profound issue of whether companies working on election campaigns overseas in this way should also be winning projects from the UK Ministry of Defence and the Foreign and Commonwealth Office.
294.When Brittany Kaiser gave evidence to us in the spring of 2018, she discussed the porous nature between the commercial, the political and defence work of SCL, and that prior to 2015, the ‘target audience analysis’ (TAA) methodology was considered a weapon—”weapons grade communications tactics”—and the UK Government had to be told if it was going to be deployed in another country.333
295.Emma Briant, Senior Lecturer at the University of Essex, supports stricter regulation of strategic communications companies, with the establishment of professional licensing that can be revoked if necessary. Such licensing “would commercially protect the industry itself, creating a resulting ‘soft power’ economic benefit for industry and Western governments”.334 She gave two examples of Cambridge Analytica’s perceived conflicts of interests: Cambridge Analytica’s pitches to Lukoil, a Russian oil company with ubiquitous political connections, while at the same time the SCL Group was delivering counter-Russian propaganda training for NATO; and that “around the same time, Alexander Nix from Cambridge Analytica contacted Julian Assange at Wikileaks amplifying the release of damaging emails; Russia has been accused of the hacking of these, which it denies”.335
296.As we have stated, Emerdata is the major creditor of SCL Elections Ltd and has been paying the substantial administration costs.336 Given the fact that many senior personnel of SCL Elections Ltd/Cambridge Analytica are prominent in Emerdata, there is concern that the work of Cambridge Analytica is continuing, albeit under a different name. We stated in our Interim Report that “SCL Group and associated companies have gone into administration, but other companies are carrying out similar work. Senior individuals involved in SCL and Cambridge Analytica appear to have moved onto new corporate vehicles.”337 We recommended that “the National Crime Agency, if it is not already, should investigate the connections between the company SCL Elections Ltd and Emerdata Ltd.”338 We repeat those recommendations in this Report.
297.In October 2018, the Secretary of State for DCMS, Rt Hon Jeremy Wright MP, was asked by the Committee whether the current law in the UK relating to lobbying companies such as SCL was fit for purpose. He was not forthcoming in his response, stating that the ICO should investigate the work of the SCL “that will, I think, give us an indication of whether, first something has gone wrong in this case and, secondly, if it has, whether that indicates a structural weakness that we need to address”.339 He did not respond to the specific question about whether the law relating to lobbying companies such as SCL was fit for purpose. We believe that it is not fit for purpose; the current self-regulation of lobbying companies is not working.
298.We recommend that the Government looks into ways that PR and strategic communications companies are audited, possibly by an independent body, to ensure that their campaigns do not conflict with the UK national interest and security concerns and do not obstruct the imposition of legitimate sanctions, as is the case currently with the legal selling of passports. Barriers need to be put in place to ensure that such companies cannot work on both sensitive UK Government projects and with clients whose intention might be to undermine those interests.
299.The transformation of Cambridge Analytica into Emerdata illustrates how easy it is for discredited companies to reinvent themselves and potentially use the same data and the same tactics to undermine governments, including in the UK. The industry needs cleaning up. As the SCL/Cambridge Analytica scandal shows, the sort of bad practices indulged in abroad or for foreign clients, risk making their way into UK politics. Currently the strategic communications industry is largely self-regulated. The UK Government should consider new regulations that curb bad behaviour in this industry.
300.There needs to be transparency in these strategic communications companies, with a public record of all campaigns that they work on, both at home and abroad. They need to be held accountable for breaking laws during campaigns anywhere in the world, or working for financially non-transparent campaigns. We recommend that the Government addresses this issue, when it responds to its consultation, ‘Protecting the Debate: Intimidating, Influence and Information’.
301.We recommend that the Government revisits the UK Bribery Act, to gauge whether the legislation is enough of a regulatory brake on bad behaviour abroad. We also look to the Government to explore the feasibility of adopting a UK version of the US Foreign Agents and Registration Act (FARA), which requires “persons acting as agents of foreign principals in a political or quasi-political capacity to make periodic public disclosure of their relationships with the foreign principal, as well as activities, receipts and disbursements in support of those activities”.
310 Disinformation and ‘fake news’: Interim Report, DCMS Committee, Fifth Report of Session 2017–19, HC 363, 29 July 2018, para 123.
311 Disinformation and ‘fake news’: Interim Report, DCMS Committee, Fifth Report of Session 2017–19, HC 363, 29 July 2018, para 210; Leopoldo Moreau, Chair, Freedom of Expression Commission, Chamber of Deputies, Argentina (FNW0117).
312 Confidential evidence shown to the Committee.
313 Disinformation and ‘fake news’: Interim Report, DCMS Committee, Fifth Report of Session 2017–19, HC 363, 29 July 2018, para 211.
314 Citizenship by Investment Malta, MaltaImmigration.com, accessed 3 February 2019.
315 The passport king who markets citizenship for cash, Juliette Garside and Hilary Osborne, The Guardian, 16 October 2018.
316 EU fact sheet, questions and answers on the report on investor citizenship and residence schemes in the EU, Brussels, 23 January 2019.
317 Investor Citizenship and Residence Schemes in the European Union, Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, 23 January 2019.
318 Disinformation and ‘fake news’: Interim Report, DCMS Committee, Fifth Report of Session 2017–19, HC 363, 29 July 2018, para 214.
319 Abuse of the Citizenship-by-Investment Program Sponsored by the Federation of St. Kitts and Nevis, Financial Crimes Enforcement Network, 20 May 2014.
320 Malta’s Pilatus Bank had European licence withdrawn, Hilary Osborne, The Guardian, 5 November 2018; US arrests Iranian over alleged $115 million sanctions evasion scheme, Nate Raymond, Reuters, 20 March 2018.
321 Case study: US man indicted in larger Iranian financial sanctions busting scheme, Andrea Stricker, Institute for science and international security, 3 May 2017.
322 https://www.stabroeknews.com/2017/news/regional/05/12/controversy-rocks-st-kitts-chinese-citizen-wanted-beijing-fraud/
323 US Securities and Exchange Commission, SEC v John Babikian, 20 September 2018.
325 Former Cambridge Analytica used N-word to describe Barbados PM, Juliette Garside and Hilary Osborne, The Guardian, 8 October 2018.
326 Letter from Dr Juerg Steffen CEO, The Firm of Global Citizens to Damian Collins MP, 20 December 2018.
327 Filings at Companies House for Emerdata Limited. The company’s current directors are US-based Jennifer and Rebekah Mercer (daughters of financier Robert Mercer, who is active in conservative US political circles), Hong-Kong based Gary Ka Chun Tiu and UK-based Julian Wheatland. As of 10th August, 2018, the shareholders were Cambridge Analytica Holding LLC; Alexander Tayler; Julian Wheatley; trusts for the benefit of Rebekah, Jennifer and Heather Mercer; Alexander and Catherine Nix; Jonathan, Domenica, Allegra, Marcus and Hugo Marland; JP Marland & Sons Ltd; Henry and Roger Gabb; Nigel and Alexander Oakes; Reza Saddlou-Bundy; The Glendower Trust; Trinity Gate Ltd; Ample Victory Asia Ltd; Wealth Harvest Global Ltd; Metro Luck Ltd; Knight Glory Global Ltd; and Picton Properties Ltd.
328 Filings at Companies House for SCL Group Limited, SCL Elections Limited, SCL Social Limited, SCL Analysis Limited, SCL Commercial Limited and Cambridge Analytica (UK) Limited.
329 Court reports by legal news service, Law360. The US operating companies were SCL USA Inc. and Cambridge Analytica LLC (a different entity from the Delaware holding company, Cambridge Analytica Holdings LLC) and the class action also names Facebook, Aleksandr Kogan and his company Global Science Research Ltd (GSR).
330 Serhiy Taruta: yet another champion of ‘painful compromises’, Vitali Rybak, Atlantic Council, 25 September 2018.
332 Disinformation and ‘fake news’: Interim Report, DCMS Committee, Fifth Report of Session 2017–19, HC 363, 29 July 2018, para 228.
335 As above.
336 Filings at Companies House for SCL Group Limited, SCL Elections Limited, SCL Social Limited, SCL Analysis Limited, SCL Commercial Limited and Cambridge Analytica (UK) Limited.
337 Disinformation and ‘fake news’: Interim Report, DCMS Committee, Fifth Report of Session 2017–19, HC 363, 29 July 2018, para 135.
338 Disinformation and ‘fake news’: Interim Report, DCMS Committee, Fifth Report of Session 2017–19, HC 363, 29 July 2018, para 134.
Published: 18 February 2019