Back to the Winebox for a book!

This is the first post for a while because I have been writing a book. This is the first in the series which I have called Tax Haven New Zealand. It also features the close links with Australian finance and the Cook Islands tax haven during the late 1980s. For those reading in New Zealand, who are of a certain age, it draws on the Winebox documents. The Winebox was a collection of legal documents from an offshore company called European Pacific, set up in New Zealand, but based in the Cook Islands and Luxembourg.

Anyway, there are a number of reasons for going back to the Winebox era. The first is that the tax policy was changed in the late 1980s, and this included the trust law that created the New Zealand tax haven. I also look at the non-resident withholding tax arrangements, which were not changed in case it created a tax haven. This situation was completely contradictory, especially when the New Zealand Treasury encouraged, or turned a blind eye, when public sector agencies formed subsidiaries in tax havens, usually in the Cayman Islands. These state-owned organisations would often be closely involved with the merchant bankers Fay Richwhite, and their vehicle Capital Markets Ltd. And Fay Richwhite owned European Pacific, along with Brierley Investments Ltd (BIL), and the Bank of New Zealand (BNZ), which was also owned by the State until 1992.

So the book is a concise and very specific look at the offshore structures that Fay Richwhite, BIL, and the BNZ had in place during 1987 and early 1988. A lot of the structures and tax haven shelf companies that were in place had to be altered by 31 March 1988, due to the new international tax framework being introduced by the New Zealand Treasury, including a Controlled Foreign Company regime. This new regime seemed to be taken seriously by the merchant bankers, and it certainly provided a short term opportunity to reorganise their own, and their clients, offshore structures. The documents collected for the official inquiry into the Winebox saga include some intriguing information about the structure within the European Pacific group, known as the Hatteras structure, and the key Cook Islands company within it, Latimer Finance Ltd.

The particular new information in the book, captured in detail in chapter 5, indicates how Latimer Finance was used by Capital Markets to siphon off money from corporate deals brought forward to be effective on 31 March 1988. This involved defeasance operations conducted for the NZ forestry corporate Carter Holt Harvey, and a middling Australian company called Natcorp. The Natcorp deal was part of a loan package created by the BNZ in Australia for a company takeover. And the BNZ’s Singapore branch was also the host for a complex ‘tax efficient’ structure that Fay Richwhite put in place, which appears to have been a swindle. The actual loan facility was only worth A$16.7 million, but over $1.2 million was appropriated by Latimer Finance, and disappeared into the Hatteras structure, along with US$4.7 million from the operations for Carter Holt Harvey.

This scenario is a new revelation, involving information that was not really examined in the official inquiry in the mid 1990s, or by the journalists who followed the Winebox saga closely. The Natcorp deal was small beer, but because the documentation was provided by the BNZ to the commission of inquiry it is now possible to work out exactly what happened. Of course, Fay Richwhite may have included further parts to the deal, and returned some of their windfall to their client, but I doubt it. It appears that Fay Richwhite were prepared to deceive their clients, as well as the clueless tax authorities in New Zealand, if not in Australia. Other chapters on the BIL’s Australian company, IEL Ltd, indicate that lengthy litigation was necessary for the tax aspects of their offshore structures to be exposed. It appears that the New Zealand authorities were simply not up to it, partly through being quite clueless, but also because of the support for tax havens.

The blog has now been upgraded to a website, and in the new pages there are two diagrams which show the operations involving Latimer Finance Ltd. There is also a page with a link to the e-book version of Tax Haven New Zealand Part 1 (and it’s also on Amazon).

 

This entry was posted in public finance, tax havens, Uncategorized and tagged , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s