Since the previous post the foreign trust industry, that was being reviewed for its disclosure regime, as been put on notice. The review by John Shewan, previously the chairman of PWC in New Zealand, has been accepted as putting the writing on the wall for the dodgy end of the foreign trusts. Not because Shewan believes that New Zealand has been operating a tax haven based on trusts, but because he noticed some of the trust firm websites that gave the game away. I want to look at a very revealing one of these below, and the details provided by Palladium Trust Services, but it is not just the trusts operating that is a problem. Palladium’s analysis of limited liability partnerships is also a revelation, at least to non-lawyers, and allows me to consider the role of ‘general partner’ companies.
But first to the Greenock Trust Company, another one of Cone Marshall’s creations. Greenock is owned by their regular vehicle, New Zealand Trustees Ltd, but it also owns a number of other companies. These companies mostly have one common director, other than Karen Marshall, a Mariana Mercedes Devoto of Geneva. She was the shareholder in Nidum Holdings Ltd, with Hector Carlos McEwan of Argentina, and they were directors of Nidum Trust Company as well, but both have been removed. She remains a director of Greenock Trust Co, High Tower Business Ltd, and Pasofino Investment Ltd. And Devoto appears in the Panama Papers database, with her Geneva address, and also with the Greenock Group being located in the British Virgin Islands, as one might have expected.
There is one company owned by Greenock Trust that Devoto is not a director of, Verdoak Company, and then there is Greenock General Partner Ltd. I have come across the phrase ‘general partner’ a few times in the course of this exercise, and didn’t know what it meant, as a non-lawyer. Then the Palladium Trust Services website gave me some insight. Palladium is based in London, and it seems to be named in the Panama Papers, but it has literature on the New Zealand that is really insightful. One document explains how the New Zealand Limited Partnerships Act 2008 works, and for a legitimate venture capital investment vehicle. So it seems a NZ Limited Partnership is a separate legal ‘person’, and it has at least one ‘General Partner’ and it can have any number of limited partners. The GP is the administrator of the limited partnership, in the form of a limited liability company, but not to utilise its own capital. While the limited partnership is registered with the Companies Office, only the GP company is on the public register, the limited partners are not, and this apparently makes it a good vehicle for actual investment.
But Palladium have an even longer document on trusts in New Zealand, and the tax advantage which it calls a “deliberate tax concession”, rather than a being the legal framework for a tax haven. There is also another short paper on how the 1956 Trustee Act ca be worked, due to a separation of trustee functions. In other words there can be 3 trustees: an advisory trustee, a managing trustee, and a custodian trustee. So to make a trust structure really work, Palladium show how the New Zealand resident trustee is only the custodian for the foreign trust; meanwhile the managing trustee function can operate from a tax haven like Jersey, and the settlor is referred to as an advisory trustee. They also have a Singapore investment in their diagram, but the telling point is the New Zealand law and absence of tax: i.e. no tax on the transfer of assets, nor any withholding tax for trusts.
The key person in Palladium is Stephen Abletshauser, who made a brief appearance on the New Zealand register as the director of Palladium Trust Company (Brasil) Ltd, which was removed on 23 June 2016. The Palladium Trust Company (NZ) Ltd was set up in 2009, by John Nicholas Greenwood of the British Virgin Islands, and the shareholder was the BVI-registered Palladium Corporate Services Ltd. The local administrator at the time was the Helmore Ayers firm in Christchurch, now known as Helmore Wealth Management, but in 2012 the group of companies was passed on to the Bentleys accountancy firm in Auckland. Of these, only Regent Victoria Holdings and Deedum Ltd still remain on ‘active’ status.
Now I will make a quick comment on a number of ‘general partner’ firms that Cone Marshall have set up. A number are for residents of Caracas, Venezuela, and have names like ‘Cara, ‘Keri’, or Fenix General Partner Ltd. All of these companies have directors with a variation on their surnames of Meyer, Meyer Gathmann, or Meyer von Lucken. Based on the Palladium material we know that New Zealand Family Limited Partnerships are being sold as a good vehicle; and in this Venezuelan case the patriarch, Klaus Meyer Gathmann, is about 96 years old. This is no doubt ‘perfectly legal’, but it just looks dodgy.