Sigrún Davíðsdóttir's Icelog

Special-interest billionaire-funded organisations have for years been a common feature in US politics but less prominent in the UK. The UK Legatum Institute, now influential in pro-Brexit government quarters, seems to fit the US formula. It played a curious role in an Icelandic dispute in 2016 with some US funds holding offshore króna. That story throws an unflattering light on Legatum’s research and exposes intriguing US connections. In a wider context it is a cause for concern that sponsors of British charities can hide behind the offshore veil.

In October 2016 the Icelandic government suddenly found itself the target of an international ad campaign. With a photo of Central Bank governor Már Guðmundsson the Icelandic Central Bank was accused of corruption. The government was said to follow “protectionist economic policies” discriminating against offshore króna investors, in reality four American funds. Not a word on the fact that the policy of the Icelandic government was formed in close cooperation with the International Monetary Fund.

The ads ran in international media like the Financial Times, WSJ and Danish media, in addition to Icelandic media. The ads were signed by “Iceland Watch,” run by Institute for Liberty, which claimed to be a think tank.

One of the ads cited “a research team in Britain” that claimed the action against the offshore króna investors cost each Icelander between $15,000 and $27,000 a year, causing the loss of 30,000 jobs, quite fantastical figures in the context of the Icelandic economy. These findings were taken from a report, Frozen Capital: a Case Study of Icelandic Distortions by Shanker A. Singham and A. Molly Kiniry at the Legatum Institute.

Now that Legatum’s staff is publishing Brexit reports and popping up as Brexit-advisers in Whitehall Legatum’s Icelandic report and the ties it shows throws an interesting light on the Institute’s operations.

Iceland Watch and “Dark Money”

Until the ads appeared, Institute of Liberty and its Iceland Watch had been wholly unknown in Iceland. Institute of Liberty was however a familiar name in US politics. In her book, Dark Money; The Hidden History of the Billionaires Behind the Rise of the Radical Right, the American journalist Jane Mayer recounts how billionaires like David, Charles and Bill Koch, Peter Singer and lately Richard Mercer, much strengthened by the 2010 Citizens United ruling, have poured money into politics for decades, inter alia advocating in favour of tobacco and petro-interests and against Barack Obama’s healthcare.

Part of the funds to fight Obamacare flowed into a tiny organisation called Institute for Liberty. In 2008 its budget had been $52,000. The following year, it got $1.5m from the DCI Group, a Washington PR company, used for “a five-state advertising blitz targeting Obama’s health-care plan;” $400,000 were channelled back to DCI Group for “consulting.” (Mayer, p.192)

DCI turned out to be instrumental in spreading funds to groups fighting Obamacare, some of which, according to Mayer, “appeared to be shell organizations fronting for DCI Group.” One of them was Institute for Liberty. As a recent Bloomberg story (with a link to Icelog) shows the DCI Group’s operations are essentially lobbying in disguise, greased by ample funds from opaque sources.

The “dark art” of the DCI Group and Legatum Institute

At the end of October 2016 the following ad ran in Icelandic and international media, under a photo of Central Bank governor Már Guðmundsson:

“Who is paying for public corruption and discriminating rules in Iceland? You do!

The decision taken by the Central Bank of Iceland to discriminate between investors so that only those of domestic origin can invest there has been criticised internationally.

According to a new study done by a research team in Britain the discriminatory policy of the Icelandic capital control hinders the creation of 30.000 new jobs and costs the nation between 5.000.000.000 and 9.000.000.000 US dollars in GDP annually.

This costs each Icelandic citizen between 15.000 and 27.000 US dollars annually.”

In the context of the Icelandic economy these figures are rather implausible. How could offshore króna controls hinder the creation of 30.000 jobs in an economy with close to full employment in a country of 332.000? The stated cost of $5bn to $9bn amounted at the time to 25 to 40% of Icelandic GDP. – In short, the figures were outrageously unintelligent.

The figures came from a Legatum report, Frozen Capital: a Case Study of Icelandic Distortions by Shanker Singham and Molly Kiniry, published in autumn 2016. At the same time, the Legatum Institute held a debate on Iceland and the capital controls (which by then had been lifted except for the offshore króna controls), Post-Brexit Briefing: Frozen Capital – A Case Study of Iceland. Judging from the recording, using Iceland as an example of harmful trade distortions was greatly undermined by the fact that the speakers, Singham and Iain Martin former editor of the Scotsman were rather uninformed on Iceland, in line with the report.*

My own inquiry at the time showed that the DCI Group orchestrated the Iceland Watch ad campaign in autumn 2016 on behalf of three of the four American funds that held Icelandic offshore króna – Autonomy Capital, Eaton Vance and Discovery Capital Management. My understanding was that DCI, on behalf of the funds, had turned to the Institute of Liberty, i.e. the initiative came from the DCI, just as it had used Institute of Liberty and other organisations in fighting Obamacare.

Legatum’s Brexit reports

The Legatum report on the Icelandic offshore króna was remarkably unenlightened but had, for obvious reasons, a rather limited effect.

A Legatum report in November last year on Brexit, The Brexit Inflection Point; the Pathway to Prosperity, by Singham, Radomir Tylecote and Victoria Hewson is a different matter, dealing not with a minor matter in a liliputian nation but the a vital issue for a rather bigger nation and 27 other European countries.

The November report was not the first Brexit report from Legatum but it caught much greater attention than the earlier ones because by November, the British media had become aware of Legatum’s role in Westminster. Some journalists who gave it a close reading were less than impressed. FT’s Martin Sandbu wrote of “Beware the global Britain con trick.” In the same paper, Martin Wolf wrote on “Six impossible notions about “Global Britain” referring to the White Queen in C.L. Lewis book Through the Looking Glass who claimed to believe six impossible things before breakfast. Singham published an answer to Wolf’s article on CapX and a shorter version in The Telegraph, £) but ignored other critics.

Earlier Brexit-related reports were Mutual Interests: How the UK and EU can resolve the Irish border issue after Brexit published in September 2017. The point that caught media attention was that the border issue could be solved by technology; a claim that proved short-lived. In April there was a report on A new UK/EU relationship in financial services – A bilateral regulatory partnership. Two reports papers in February dealt with the negotiations and trade, Brexit: World Trade Organisation Process and Negotiation of Free Trade Agreements and Brexit, Movement of Goods and the Supply Chain. In November 2016 a report dealt with the Cost of EEA Membership for UK Briefing.

All reports were written by Singham, mostly in cooperation with other Legatum staff. The general tone is the one of the same kind of impossibility that Martin Wolf pointed out.

Legatum’s “Brexiteering”

At the Legatum Institute its main Brexit expert, Shanker Singham has the titles Chair, Special Trade Commission and Director of Economic Policy and Prosperity Studies.

Singham has two LinkedIn profiles; one states he is managing director for Competitiveness and Enterprise Development Project at Babson Global, the other that he is the Director of Economic policy and prosperity studies at Legatum and the CEO and Chair of Competere Group, operating all over the world. There is little information on Competere but according to the Legatum website it is an “Enterprise City development company incubated at Babson College.”

On the latter LinkedIn profile Singham states that Competere was set up in 1997 but later rebranded and has “successfully engaged governments around the world who seek to harness the power of the market economy through a comprehensive pro-competitive regulatory framework. Our economic reform practice is based on the use of our econometric modelling to help (23) countries successfully realize their own reform efforts.”

In the summer of 2015, Singham incorporated Competere Limited with 1,000 GBP in the UK. A year later the company was in deficit of just over £17,000.

Together with a Washington lobby group, Transnational Strategy Group and EPPA Brussel, Competere has set up a Brexit “practice group.” TSG claims to be a “boutique international business and foreign policy consultancy focused exclusively on achieving real results for clients.” EPPA claims to be a consultancy for “creating a constructive dialogue with policy-makers” elaborated with a quote from FT’s Martin Wolf: “We need a balance between markets and governments.” EPPA does not seem to flag the cooperation with TSG and Competere on its website (at least not within easy sight).

Singham, who has a dual UK US citizenship, worked at Squire Sanders, a US law firm from 1995 to 2013. Since April last year Michael Cohen, president Donald Trump’s personal lawyer has had a strategic alliance with Squire Sanders, now Squire Patton Bogs. Cohen is one of many in Trump’s inner circle with alleged ties to Russia and Russia’s president Vladimir Putin.

Singham’s co-author on the Brexit report in November, Radomir Tylecote, was active on the Vote Leave campaign before the 2016 referendum as was Victoria Hewson, the third author of the report.

Molly Kiniry, Singham’s co-author on the Icelandic report and other Legatum publications, is also listed as a consultant with Competere since 2016, earlier at Babson Global. She writes regularly for Daily Telegraph, where two of her recent columns dealt with “The virtue-signalling British Politicians snubbing Trump are embarrassing themselves” and “Americans are sick of sending money to other countries for no discernible benefit.” – The connection with Daily Telegraph is interesting given that the paper is owned by the Barclay brothers, two Brexiters with their wealth firmly offshore.

Former Chief Executive of the Vote Leave campaign Matthew Elliott, now a frequent voice in the British media, is a Legatum senior fellow. Georgiana Bristol, Legatum’s Corporate Membership Director, ran fundraising for Vote Leave. Two well-known names from UK politics have recently joined the Institute as Fellows: the fervent Brexiter ex-MP for Labour Gisela Stuart and Sir Oliver Letwin and MP. He voted remain, was briefly in charge of Brexit after the 2016 referendum before being replaced by David Davis by Theresa May and has been seen as a Tory intellectual close to libertarian ideas.

An ex-Legatum employee is already a Whitehall Brexit-insider: Crawford Falconer, who was on Singham’s trade commission at the Legatum Institute, is working as a Brexit negotiator under International Trade Secretary Liam Fox.

Legatum’s CEO Baroness Stroud has in the past made some unsuccessful attempts to be chosen as a Conservative Party candidate. She set up the Centre for Social Justice in 2004 with Ian Duncan Smith for whom she acted as a specialist adviser 2010 to 2015 at the Department for Work and Pensions. Stephen Brien, who leads Centre for Metrics at the Legatum is on the board of CSJ and was also Duncan Smith’s adviser, 2011 to 2013. Legatum and CSJ have had some collaboration.

From corruption to Brexit

In 2015 the Legatum Institute organised some events on corruption chaired by Anne Applebaum, i.a. one where she interviewed Sarah Chayes on her book Thieves of State: Why Corruption Threatens Global Security. It was at that time I first noticed Legatum. I welcomed Legatum’s focus and the clout and eminent experience that Anne Applebaum brought to the Institute as its director of Transitions Forum 2011 to 2015, focusing on new threats to democracy.

Judging from Legatum’s website the Transitions Forum no longer exists. Applebaum is now Professor in Practice at LSE’s Institute of Global Affairs where she leads Arena, a programme on the challenges of disinformation.

Legatum’s expanding role in Westminster has drawn media attention. A whole-page FT article in December 2017 on “Legatum: the think tank at intellectual heart of “hard” Brexit” claims the focus of Legatum shifted in autumn of 2016 when Baroness Stroud became a director and a trustee.

Former employees, said to be worried about the direction taken by the Baroness talked of purges. According to them, the organisation seemed to use its influence in Westminster “to push for a libertarian and socially conservative agenda that goes beyond its educational remit as a charity emphasising “prosperity and human flourishing”.” The question posed was if Legatum’s activities were compatible with its status as a charity.

FT mentions that Brexit minister David Davis has taken fees from Legatum. That was however in 2009 and 2010, according to They Work For You: £5000 for a speech and, interestingly, unspecified travel expenses to attend a conference at the Milken Institute that attracts those with libertarian leaning. According to information on They Work for You neither Michael Gove, Boris Johnson nor Liam Fox have accepted funds from Legatum. Davis gave however a talk at a Legatum Brexit event in January 2017, Gove was a guest speaker at the Legatum’s summer party in 2016 (according to Legatum’s 2016 annual accounts); neither seems to have been paid for their input according to the They Work For You data.

In late November Daily Mail published an article on Legatum’s political connections, ‘Putin’s Link to Boris and Gove’s Brexit Coup’. According to the paper, Singham had helped two Cabinet members, Boris Johnson and Michael Gove, to pen a letter to Prime Minister Theresa May. In the letter, not meant for publication, the duo called on May to put pressure on Chancellor Philip Hammond to prepare for “hard” Brexit, to use Brexit to scrap EU rules and regulations and to appoint a new “Brexit Tsar.” No Tsar has officially been appointed but the tabloid maintains that Singham effectively has that role.

Daily Mail pointed out that Legatum’s founder Christopher Chandler and his brother Richard got rich in Russia following the collapse of the Soviet Union. The tabloid tells the story of the brothers taking part in a boardroom coup in Gazprom in 2000, installing Alexey Miller, close ally of Vladimir Putin from their St Petersburg years. This enabled Putin getting a share in Gazprom’s profit.

Chandler and the Legatum Institute deny all allegations of Russian ties and also denied allegations made by The Sunday Times and Sunday Mail in early December regarding its status as a charity.

Legatum, on- and offshore

Legatum Group (legatum.com) is based in Dubai where it was set up in 2006 by Christopher Chandler. It describes him as former President of Sovereign Asset Management he set up in 1986 with no mention of his earlier Russian activities. Its website lists a whole raft of philanthropic organisations under its umbrella, the Legatum Institute being one of them.

The Legatum Institute’s own website is somewhat vague on the Institute’s funding. Under the heading “How we are funded” there is a list of four other philanthropic enterprises, funded by the Legatum Foundation (legatum.org), also listed under Legatum.com, but the link attached leads only to a website with the four enterprises.

There are two relevant Legatum entities listed with Companies House, The Legatum Institute Foundation, which is the registered limited company operating in London and the Legatum Institute, a fund registered in the Cayman Islands.

The Foundation is registered with the Charity Commission. Out of the £4.4m of its total income in 2016, £3.9m came from Legatum Foundation Limited, according to the Legatum Institute Foundation’s 2016 full accounts at Companies House. That year the Foundation received £437K from other sponsors than its “lead sponsor, Legatum Foundation ltd … demonstrating its continued journey towards financial independence.”

The accounts do not hold any information on the real sponsor, Legatum Foundation Limited nor is it registered in the UK, judging from Companies House. The Legatum Institute Foundation has confirmed it will fund the Institute until end of 2019. As can be seen from the above figures there is still some funding to cover to match the Foundation’s funding.

According to the FT the charity has 40 donors in addition to its lead sponsors, but interestingly the charity is unwilling to disclose who these donors are – a peculiar situation for a charity.

The Legatum Institute fund was registered in the Cayman Islands in 2008. Its objective is “Philanthropic development.” The three present directors, Alan McCormick, Mark Stoleson and Philip Vassiliou, are all registered at Legatum Group’s address in Dubai. According to the 2016 full accounts of the Cayman fund at Companies House, its assets in 2016 were $8,9m, $24m in 2015.**

Christopher Chandler and Mark Stoleson have recently obtained EU passports through the widely criticised Maltese passport-for-investment scheme.

Legatum fits the “Dark Money” format of billionaire-funded partisan US think tanks

Intriguingly, Legatum’s founder and main sponsor fits the model of the American billionaires who for decades have been funding make-believe institutions to influence politics and confuse public debate. Christopher Chandler keeps firmly out of the limelight and his name off documents: people working from him are directors of his companies. The array of Legatum entities, on- and offshore, is rather bewildering and runs contrary to the transparency that charities could be expected to adhere to.

There are indications that some of those fighting for Brexit are inspired by Russian and American ideas of how to gain power by dividing and ruling, by sowing disharmony. The Kremlin propaganda machine is inspired by Vladimir Putin’s longtime political technologist Vladimir Surkov and his ideas of “non-linear wars” and other means of profiting from confusion and shifting alliances.

Paul Manafort, Trump’s campaign manager, has been indicted with conspiracy against the US, tax evasion and money laundering, as part of the investigations into Russian collusion in the US presidential elections. The Ukrainian journalist and politician Serhiy Leshchenko has explained how Manafort operated in Ukraine by putting into practice the politics of division and social polarisation.

There is of course nothing wrong with airing one’s views. But airing it on false premises is insidious and undermines public debate. And false or biased information is one way of playing the politics of division.

As Jane Mayer describes so well in her book, key strategy of billionaires is to fund organisations that produce something that looks like “research” but is indeed propaganda. This has been an effective strategy in fighting for the interests of the tobacco industry and the petro-industry, not to mention Obamacare. The damage is done when the media embraces this research as equally valid to thoroughly researched material. The danger is media unwilling to or uninterested in distinguishing between the propaganda and carefully researched studies.

Another aspect of the propaganda-driven organisations is the opacity of their sponsors, normally offshored and out of sight. The offshoring should indeed be a sure sign of warning.

These propaganda organisations have so far not been prominent in the UK. Legatum Institute, funded by Christopher Chandler, seems to fit the US model of a propaganda-driven “think tank.” Thus, their reports should be read with that in mind. The two reports, on Iceland and Brexit, certainly seem a poor addition to an enlightened discourse on these two topics.

* I pointed these figures out to a Legatum employee who forwarded them to Singham. His response was that the data was “based on the application of our ACMD productivity simulator (for more information, please see the attached link).” He agreed I made a valid points regarding the employment effects and Iceland’s small size. Consequently, they would “probably … not focus on employment effects too much in the deeper analysis.  While capital controls are generally distortionary from the perspective of an open and liberalized trading environment, the precise manner of their amendment or repeal also can have distortionary effects. The data is picking up the implicit national treatment violation as a function of the key variables on property rights and foreign investment in our simulator.” – The analysis on the website is still as it originally was, with the implausible figures.

**According to Companies House records 8 March 2018, the Cayman fund is now in administration.

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