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Pegasus’ complex structure hinders EU spyware probe

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A probe in the European Parliament is struggling to get to the bottom of how the Israeli spyware firm NSO Group operates, documents shared by the company’s ownership with members of the chamber showed.

European lawmakers have launched an inquiry committee into the use of the intrusive spying tool Pegasus, sold to government authorities across the world by NSO Group. The inquiry followed revelations that the spyware is widespread in Europe and has been used against some of the bloc’s most prominent leaders, including Spain’s Prime Minister Pedro Sánchez, and political groups in Spain, Poland and Hungary.

But documents shared with members of the inquiry committee and seen by POLITICO show how NSO Group set up a sprawling corporate structure with obscure-sounding subsidiaries in multiple countries in Europe and beyond.

It is hurting lawmakers’ ability to get to the bottom of the spyware scandal, several inquiry members said.

“The ownership structure behind NSO seems to have been established with the aim of concealing the factual owners and responsibilities. One of the first tasks of the Parliament’s inquiry committee must be to unravel the past and current decision-making processes behind NSO,” said Moritz Körner, a German MEP from the liberal Renew Europe grouping.

NSO Group is made up of over 30 subsidiaries and units — with names like CS-Circles Solutions and Westbridge Technologies — across Israel, Luxembourg, Cyprus, Bulgaria, the United States, Hong Kong and the United Kingdom, according to a company structure shared with MEPs by investment firm Berkley Research Group (BRG), which took over management of NSO Group in the summer of 2021.

The “lack of transparency, complex corporate structures, shell companies and international shareholders” dilute responsibilities and make it harder to hold companies to account, said Belgian Greens politician Saskia Bricmont, another member of the Pegasus inquiry committee.

Bricmont added that governments had increasingly tapped the private surveillance market to procure hacking tools, which has contributed to “fundamental rights violations and act[s] outside of legal frameworks.”

NSO Group’s complex structure may already have stymied investigations into the company. 

In 2019, digital rights group Access Now wrote to Bulgarian and Cypriot authorities asking if they had granted NSO Group export licenses after the company’s then-owner Novalpina suggested the company was exporting from those countries. The authorities responded that they had not, but the new information on the company’s structure raises questions as to whether they granted licenses to one of NSO’s many subsidiaries instead. 

Bulgarian and Cypriot officials did not respond to POLITICO’s requests to clarify whether NSO subsidiaries were granted licenses. 

A spokesperson for NSO Group said the company’s corporate structure is “abundantly clear” and in compliance with all legal and regulatory requirements.

NSO infighting muddles picture

As regulators work to get a grip on the Israeli spyware vendor, the firm itself is undergoing a fierce internal power struggle.

In the inquiry documents, NSO Group’s new owners BRG told members of the European Parliament that their own efforts to investigate and reform the firm are being frustrated by NSO Group’s founders Shalev Hulio and Omri Lavie, as well as its former owner Novalpina.

However, ownership documents seen by POLITICO also indicate that BRG is in fact in control of NSO Group. It took over management of Novalpina in July 2021 and, through it, of NSO Group, Reuters earlier reported. The ownership documents showed it has made various appointments within the company structure since taking charge.

The founders, new owners and old owners have now turned to national courts in Europe to settle their disputes. 

BRG said in the documents that it is facing legal action in Luxembourg and London from ex-owner Novalpina claiming irregularities in its takeover of NSO Group. It claimed Novalpina is also seeking to take back ownership of NSO, which would be “once again effectively putting them in control of the NSO Group and any future sales of the Pegasus product,” a letter to MEPs read. 

A spokesperson for BRG said relations between the two sides broke down in November, when NSO Group management unilaterally withdrew from talks aimed at establishing proper corporate governance. 

Novalpina declined POLITICO’s request for comment.

Separately, BRG also claimed in its correspondence that NSO Group’s founders — Hulio and Lavie — have filed legal action in Luxembourg that could reverse their control of the board.

The NSO Group spokesperson said, “Efforts to pressure NSO through the media with unfounded and baseless claims continue to flail.”

This article is part of POLITICO Pro

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