Thursday, 7 April 2016
It is not just individual taxpayers who should be worried about being caught out using Panama-based firm Mossack Fonseca & Co to allegedly hide unexplained wealth or avoid/evade tax on income earned in this country.
The Turnbull Government should also be worried because this story is likely to run right through the federal election campaign this year and, it is not outside the realms of possibility that names will surface which include known Liberal Party political donors.
It is already a problem for the Prime Minister and Cabinet because along with many other federal government departments/agencies, the Australian Dept. of Defence and Department of Immigration and Border Protection have previous and current contracts with Wilson Security Pty Ltd, a client of Mossack Fonseca.
Neither Defence nor Immigration appear to have conducted genuine due diligence on this company during tender processes, as evidence by their response here and here.
On 4 April 2016 ABC News reported:
Leaked documents have revealed that two brothers embroiled in a massive Hong Kong corruption scandal were ultimately in control of an Australian security company that earned roughly half a billion dollars in lucrative government contracts.
The two billionaire brothers, Thomas and Raymond Kwok, were charged with bribing a Hong Kong government official in July 2012 in a case that shook the Hong Kong establishment.
Soon after their arrest, the leaked documents, obtained by the ABC's Four Corners, show the brothers covertly remained directors of the offshore company that ultimately controls Wilson's operations in Australia — Wilson Offshore Group Holdings (BVI) Limited…..
In December 2014, Thomas Kwok was convicted of the bribery offences and sentenced to five years in prison.
His brother Raymond Kwok was acquitted of all charges.
According to Jason Sharman, professor at the Centre of Governance and Public Policy at Griffith University, the "common sense" definition is that the company listed as the ultimate holding company is "not only the legal owner but the entity in control," he said.
"You would expect that if you've got a company at the top of the chain that is in control of a lot of assets, people would really want to know who they are working for, who they are owned by and who they are being directed by," said Professor Sharman…..
Since the arrest of the Kwok brothers in July 2012, Wilson Security secured a sub-contract to provide garrison services for Australia's offshore detention centres on Nauru and Manus Island as well as various other contracts with Defence, The Australian Tax Office and the Department of Prime Minister and Cabinet.
The Kwok brothers maintained effective control as directors via a covert manoeuvre facilitated by Mossack Fonseca.
Two weeks after the brothers were charged, both Thomas and Raymond Kwok removed themselves as directors from Wilson Offshore Group Holdings (BVI) Limited but replaced themselves with two mysterious new directors that were companies, Winsome Sky and Harmony Core.
The leaked files show the directors of those mystery companies were in fact the Kwok brothers themselves.
Thomas Kwok signed on as the director of Winsome Sky on July 30, 2012, and on the same day Raymond signed on as the director of Harmony Core……
Wilson Offshore Group Holdings (BVI) Limited was originally registered in 1991 under a different name, Covert Investments.
Thomas and Raymond Kwok, as well as their older brother Walter, were early directors of Covert Investments before it changed its name to Wilson Offshore Group Holdings (BVI) Limited in 2004.
The company founded by Jürgen Mossack and Ramón Fonseca says of itself:
Established in 1977, the Mossack Fonseca Group is a leading global company which provides comprehensive legal and trust services.
With over 500 staff members across every continent, the Mossack Fonseca Group provides excellent services based on more than 35 years of experience. As part of its added value, the Group offers personal advice and a world-class online experience through a virtual Client Portal which is available 24 hours a day. Our web-based Client Information Portal application allows clients to reserve companies online, verify the status of companies, and pay invoices, in addition to other transactions.
Our service and research-oriented professionals specialize in trust services, wealth management, international business structures, and commercial law, among other areas.
Our product and service portfolio is constantly updated and renewed, enabling the Group to find the appropriate solution for your business. We offer research, advice and services for the following jurisdictions: Belize, The Netherlands, Costa Rica, United Kingdom, Malta, Hong Kong, Cyprus, British Virgin Islands, Bahamas, Panama, British Anguilla, Seychelles, Samoa, Nevada, and Wyoming (USA).
Our law firm has specialized attorneys experienced in all areas of law such as shipping, immigration, contracts and intellectual property, as well as commercial law in general. We also assist clients in physically relocating to Panama and supporting them with regard to all of the steps required, from handling immigration matters and buying or renting property to establishing their business in Panama.
Australian Taxation Office media release 4 April 2016:
ATO statement regarding release of taxpayer data
Recently, the ATO received data in relation to a Panamanian law firm containing names of a significant number of Australian residents. Currently we have identified over 800 individual taxpayers and we have now linked over 120 of them to an associate offshore service provider located in Hong Kong.
These cases relate to the release of data by transparency or media organisations in Australia and overseas. ATO intelligence on tax evasion comes from a variety of sources, including from concerned citizens, advisers, partner agencies and international bodies. For example the ATO has raised tax liabilities of around $400 million from data supplied by confidential informants.
Deputy Commissioner Michael Cranston said that since the completion of the offshore disclosure initiative 'Project DO IT', the ATO has ramped up its compliance work to deal with those taxpayers who have failed to disclose offshore income and assets. Sharing information and coordinating action closely with other tax administrations is a large part of this work.
"We promised the community that following Project DO IT we would continue to build our intelligence base, undertake audits, apply significant penalties and refer the worst cases for criminal investigation" Mr Cranston said.
"We have been analysing the latest data against information these taxpayers had reported to the ATO and against the information we already have. We are also working closely with the AFP, Australian Crime Commission and AUSTRAC to further cross-check the data and strengthen our intelligence. Some cases may be referred to the Serious Financial Crime Taskforce.
This Taskforce builds on the success of Project Wickenby where we raised $2.29billion in tax liabilities and there were 46 criminal convictions.
"The information we have includes some taxpayers who we have previously investigated, as well as a small number who disclosed their arrangements with us under the Project DO IT initiative. It also includes a large number of taxpayers who haven't previously come forward, including high wealth individuals, and we are already taking action on those cases" Mr Cranston said.
"Through data analysis we have been able to identify patterns such as clusters of individual taxpayer and advisers for further investigation."
"The message is clear - taxpayers can't rely on these secret arrangements being kept secret and we will act on any information that is provided to us" Mr Cranston said.
The Sydney Morning Herald, 4 April 2016:
More than 11.5 million documents have been leaked from Mossack Fonseca's files, revealing the secrets of hundreds of thousands of clients – including several thousand Australians – covering a period over almost 40 years, from 1977 until as recently as last December.
The release of the documents on Monday follows a 12-month investigation by media groups including The Australian Financial Review, led by the International Consortium of Investigative Journalists (ICIJ) in Washington…..
The files show how Mossack Fonseca thwarted Australian regulators and police inquiries, continued to act for individuals accused of fraud and embezzlement, and lobbied actively to prevent Australia from signing agreements that would allow the exchange of tax information with Samoa, a key tax avoidance jurisdiction.
While most investors and corporations who use tax havens have legitimate reasons to use these structures, the leaked records also show some companies domiciled in tax havens were being used for suspected money laundering, arms and drug deals, and tax avoidance.
"Some cases may be referred to the Serious Financial Crime Taskforce," ATO deputy commissioner Michael Cranston told the Financial Review, confirming the Australian link with Mossack Fonseca.
The data includes high wealth individuals "and we are already taking action on those cases", Mr Cranston said.
"ATO intelligence on tax evasion comes from a variety of sources, including from concerned citizens, advisers, partner agencies and international bodies…..
Mr Cranston said some of the Australians under scrutiny had previously been investigated by the Tax Office but the probe included a "large number of taxpayers who haven't previously come forward".
The ATO investigation is based on a smaller set of files detailing Mossack Fonseca's Luxembourg operations, which were sold to the German government by a former employee, triggering scores of raids by tax investigators who targeted Commerzbank clients in Germany in February last year.
German newspaper Süddeutsche Zeitung, working with the ICIJ, subsequently obtained much more extensive files, with a total 2.6 terabytes of data for Mossack Fonseca's entire global operations, from an anonymous informant. No payment was made……
The Panamanian firm is one of the top five global groups providing corporate registry services in 21 low-tax jurisdictions around the world for more than 214,000 companies, trusts and foundations, providing an essential services for legitimate companies and investors, including BHP Billiton.
But the files show that the firm also protects its less reputable clients, keeping Swiss advisory firm Strachans on its books despite a decade of Project Wickenby investigations initially focused on Strachans that led to 46 criminal convictions, including a jail term for a Strachans partner, Philip de Figueiredo.
Another Wickenby target, Rockhampton-born lawyer Peter Borgas, based in Switzerland, remained a valued Mossack client even after he was arrested in Sydney in 2013 (the charge was dropped five months later).
Last December, Mossack decided it would not act on its probity concerns for a firm controlled by Tan Yixin, a Chinese executive jailed for 3½ years for bribes and leaking secrets to Australia's Rio Tinto, because "the client will destroy us with their comments" in the high-growth Chinese market.
When the Australian Federal Police wrote to Mossack Fonseca's British Virgin Islands office in July 2012 to enforce an Australian court order to sell a Perth apartment on which a BVI company, Anchorville Holdings Ltd, allegedly held a mortgage, Mossack replied that Anchorville had been struck off in 2007 and asked the AFP to stop sending letters.
Perth entrepreneur Roger Bryer had lived for a decade in the spectacular Perth penthouse, which was tied up in lengthy criminal trials over a $US15 million ($19.5 million) embezzlement case involving Commerzbank. Most of the proceeds had been transferred to Australian accounts controlled by Mr Bryer, to invest. Mr Bryer told police he had no knowledge the money was stolen. It was not suggested that he had acted improperly.
In 2012, the DPP applied to sell the penthouse as part of the proceeds of crime, but Anchorville had been set up as mortgagee on it.
Rebuffed by Mossack Fonseca, the AFP obtained a BVI search warrant in November 2012. A Mossack executive produced old documentation showing Anchorville was owned by yet another nominee company.
Meanwhile, Mossack had contacted the original registered owner of Anchorville and offered to reinstate the company, for $5487. As part of that reinstatement, new documents were registered in 2013 that showed that Bryer had owned Anchorville since 2001.
Mr Bryer told the Financial Review on Sunday that he had made it clear to the AFP that he controlled Anchorville and the matter had been completely resolved in a confidential settlement with the AFP and DPP on February 6, 2013.
While Anchorville was set up as a mortgagee company, its mortgage on the penthouse was not valid.
"I have very grave doubts as to whether they were acting legitimately," Mr Bryer said of Mossack Fonseca. "None of it was credible for that company."…..
In 2008, Sydney developer George Ghossayn, who at the time was a regular in the appointment diary of Labor powerbroker Eddie Obeid before later switching his support to the Liberal Party, was setting up an offshore partnership with fellow developer Fouad Deiri, in a BVI company, Fitall Development Limited.
In September 2013, convicted cocaine dealer-turned-Queensland property developer Joseph Frangieh took control of a Seychelles company, Silver Tiger Enterprises Limited.
In late 2011, sports promoter Dominic Galati was publicly challenging to replace Frank Lowy as chairman of Football Federation Australia, "because I believe that someone has to be a voice out there for the people that are passionate about this game".
Behind the scenes, Galati was involved in setting up half a dozen companies in Samoa, which were transferred to a new Hong Kong company, Global Wealth Group, controlled by Galati, William Aloisi, John McGeary and Roy Bijkerk.
William Aloisi's website describes him as an investment banker. Mr McGeary is a greyhound trainer, while Bijkerk is a convicted cocaine importer who has built a property empire through Guardian Care Properties.
A remarkable 269 shareholdings of companies in the British Virgin Islands, Samoa, the Seychelles and Panama, almost all of them holding bearer shares, are linked to just four addresses on the Gold Coast associated with family members of Ian Taylor, a New Zealand businessman who, with his father Geoffrey Taylor, has set up shell companies that have since been linked to arms deals, Mexican drug lords and Russia's largest tax fraud.
There has been no suggestion of illegality by the Taylors.
Ian Taylor has previously told Fairfax that "only a small handful" of their companies were misused.
"Clients of certain nationalities are discriminated against only due to their citizenship.
Read the full article here.
The Australian, 4 April 2016:
More than 1000 Australian links to companies have been found in a data leak of millions of documents from a Panama law firm…..
The passports of hundreds of Australian citizens connected to companies as directors, shareholders and beneficial owners, are included according to the ABC.