Technicians working on a production line at Spanghero Castelnaudary in France. Photograph: Abaca/Barcroft Media
Europe’s unfolding horsemeat scandal took a new twist on Saturday when it emerged that key intermediaries involved in the trade appeared to be using a similar secretive network of companies to the convicted arms trafficker Viktor Bout.
The Organised Crime and Corruption Reporting Project (OCCRP)identified an intermediary firm, Draap Trading, based in Limassol, Cyprus, as playing a pivotal role in shipping horsemeat across Europe.
Draap has confirmed that it bought horsemeat from two Romanian abattoirs. The company sold the meat to French food processors including Spanghero, which supplied another French company, Comigel, that turned it into frozen meals for the likes of food firm Findus, some of which had a meat content that was almost 100% horse.
Draap, which is owned by a trust in the British Virgin Islands tax haven, insists the meat it sold into France was labelled as horse. Spanghero says the meat arrived labelled « beef ». Jan Fasen, who runs Draap and has denied any wrongdoing, was convicted last year of selling South American horsemeat as German and Dutch beef.
In a development that sheds light on the mysterious networks operating in the European food chain, it has emerged that Draap’s sole director is an anonymous corporate services company called Guardstand, set up in 1996 and based in Limassol.
A 2011 joint report by the International Peace Information Service and TransArms, an organisation which researches arms shipments, produced evidence that Guardstand also owned a share in a business called Ilex Ventures, a connection that links the company to the global arms trade and Viktor Bout.
Documents filed in a New York court by US prosecutors allege that in 2007 Bout and an associate transferred almost $750,000 (£483,000) to Ilex for the purchase of aircraft to fly arms and ammunition around Africa’s trouble spots in breach of embargos.
The prosecutors said Ilex was owned and controlled by Bout, an international weapons dealer known as the « merchant of death », who last April was sentenced to 25 years in jail for arms smuggling.
But who owns Guardstand and why Draap employs it as a director is a mystery that is likely to be studied closely by fraud investigators. Guardstand’s sole shareholder is Trident Trust, a business based in Cyprus that specialises in establishing companies in tax havens chiefly for Russian and Ukrainian clients and which helped set up Ilex.
Petros Livanios, who runs Trident and was once a director of Ilex, declined the Observer’s requests for an interview.
While there is no suggestion anyone at Trident was aware Guardstand may have been exploited by criminal networks, the opaque nature of its ownership will be a concern for investigators trying to unpick the web of interests that facilitate Europe’s meat trade.
« This illustrates why hidden company ownership is such a problem, » said Rosie Sharpe, of the campaign group Global Witness. « It could be all too easy for crooks passing horsemeat off as beef, arms dealers fuelling wars or corrupt dictators nicking their country’s wealth to set up a company if they so wished. The ownership or control of European companies can be hidden perfectly legally by using nominees or companies incorporated in secrecy jurisdictions. »
Cyprus has been a favourite place through which former Soviet bloc oligarchs and military chiefs have laundered cash plundered from the privatisation programme of state assets that followed the end of the cold war. The island is seeking an EU bailout, but Germany is known to be balking at the prospect unless it reforms its offshore services industry.
« Cypriot companies frequently turn up in criminal investigations, » Sharpe said. « They have been used by the Iranian government to evade sanctions, by Slobodan Milosevic to provide arms for the wars in Bosnia and Kosovo, and by Russian officials who used them to steal hundreds of millions of pounds. » Last week the French authorities claimed the scandal had spread to 13 countries and 28 companies. Sorin Minea, head of Romalimenta, the Romanian food industry federation, blamed the crisis on « an international mafia ring ».
Christos Christou, Cyprus’s public health services deputy director, said investigators had seized a « variety of documents » from Draap’s Limassol office which it would share with the European commission.
The scandal, which started in January when authorities in the UK and Ireland found traces of equine DNA in supermarket burgers, has raised concerns that criminal networks may be playing a role in the food chain. What seemed a UK and Ireland problem is becoming a major concern for many EU member states as they conduct tests to establish the security of their food chains.
Several slaughtermen in the UK have been arrested in connection with the UK arm of the scandal. On Thursday the Food Standards Agency raided three more meat processing plants and removed samples for testing, computers and documents.
The FSA said it had passed on evidence to Europol, the European Union’s law enforcement agency, as well as authorities in dozens of countries, suggesting at least part of the fraud has an international dimension.
As the scandal spread to school dinners and some of the UK’s largest catering firms and restaurants, Catherine Brown, chief executive of the FSA, said it was unlikely that the exact number of people in the UK who had unwittingly eaten horsemeat would ever be known.
Her comments came as the FSA released test results for possible horsemeat contamination.
The watchdog said 2,501 tests were conducted on beef products, with 29 results positive for undeclared horsemeat at or above 1%. The results related to seven different products, which have been withdrawn from sale. The products linked to the positive results were confirmed as Aldi’s special frozen beef lasagne and special frozen spaghetti bolognese, the Co-op’s frozen quarter-pounder burgers, Findus beef lasagne, Rangeland’s catering burger products, and Tesco value frozen burgers and value spaghetti bolognese.
Pub and hotel group Whitbread said its meat lasagnes and beefburgers had been affected. The firm, which owns Premier Inn, Beefeater Grill and Brewers Fayre, said the products had been removed from menus and would not be replaced until after further testing.
Tesco chief executive Philip Clarke yesterday emailed customers to tell them the supermarket was introducing « a new benchmark for the testing of products, to give you confidence that if it isn’t on the label, it isn’t in the product. »Figures released today by market analysts, Nielsen, show retail sales of frozen burgers are down 40% year-on-year in the wake of the horsemeat revelations.
Own-brand 16 frozen British beef meatballs (withdrawn from sale when tests found small quantity of pork)
• This article was amended on Sunday 17 February 2013 to say that Waitrose’s burgers were temporarily suspended from sale when Dalepak Foods’s Hambleton site had its British Retail Consortium accreditation removed. They have been tested and meat content was 100 per cent beef. Its frozen meat balls were withdrawn from sale when tests found a small quantity of pork. All products tested at Waitrose have tested negative for horsemeat.