A Turning Point for tax evaders in New Zealand?

The 3rd of March 2017 may well be remembered for the beginning of the end for corporate tax evasion in New Zealand, as the revenue minister announced proposals to mitigate the profit shifting practices of multinational corporations in New Zealand. In truth this is a grudging measure, and only involves a consultation proposal, timed to coincide with the OECD measures known as BEPS. Since there is an election here in September it is very unlikely that the current government will pass any legislation before then, and a new government might have more pressing matters. In any case, based on media reports of the proposal it seems that there will not an actual measure against profit-shifting itself.

These corporate tax avoidance proposals come soon after legislation was finally passed to change the trust law. It is getting on for a year since people in this country were finally informed that a tax haven operation was functioning here, designed for the ‘foreign settlors’ of New Zealand trusts. The category of a ‘foreign trust’ could have been removed overnight, after the Shewan review last year, if the National Government had been at all worried about the tax haven operation. But the then leader, John Key, had actually wanted to create a fully-fledged tax haven, only he called it an ‘international financial hub’. Key also had his own legal advisor, Ken Whitney, offering trust company services, and made the absurd claim that there was already full disclosure of trust information to the revenue department. The new legislation apparently does ensure that the New Zealand IRD, and foreign tax authorities, will now get all the information they need. But there is to be no public register of these foreign trusts when the other measures are to be introduced in June.

The news media like to take credit for exposing the trust law issues, that actually date back to the 1980s, and revealing that there was a tax haven here all along. In fact, the media utterly failed to inform the public of this, even though some of the business journalists knew well enough, as did many tax lawyers and legal academics. The media were also not interested when I showed them documents from the New Zealand Treasury, from their archived tax policy files, that indicated they knew that a tax haven operation could result from the trust law change but they went ahead anyway. If the Panama Papers had not been leaked nothing would have changed, and only a few journalists actually got to see the original Mossack Fonseca documents. Of those that did only the public broadcaster, RNZ, have kept tabs on the Panama Papers and the links with certain New Zealand players such as Bentleys. Indeed, RNZ led news bulletins this morning with a story about how Mossack Fonseca had severed its links with Bentleys, meaning the Orion Trust would no longer function. The story then went on to quote another trust industry player, Roger Taylor, with the usual line that most of the other foreign trusts were legitimate anyway. Yeah right, as we like to say here, but it was extraordinary to have two tax stories run at the same time.

Yet neither of these stories actually used the term tax haven, even though it was central to both, including the profit-shifting by multinational corporations to their subsidiaries in the Caribbean tax havens. As Richard Murphy has pointed out in his new book Dirty Secrets, first world countries don’t like to think that they have tax haven operations within their orbit, whether that includes the Channel Islands or states like Delaware. The fact that he refers to New Zealand as having a “thriving trust industry” is good, at least since writers in the northern hemisphere have not really noticed developments down here, despite the Pacific being fully integrated in the offshore world. Murphy is of course the founder of the Tax Justice Network, and an academic in London, with a quirky blog in which he now spends a lot of time attacking Jeremy Corbyn. Dirty Secrets is also a bit of a rush job, as it desperately needed more time with the editor given some obvious copy-editing errors.

Nonetheless, Murphy’s book ties together the aspects of the tax haven world, and those parts that are usually portrayed as legitimate, as well as the money launder structures that flourish in just the same way. As with other experts in the field, Murphy reminds us that the key part of the offshore world is secrecy and the use of shell companies, with nominee directors and shareholders, who have no idea what the real owners and beneficiaries are doing with the companies. These companies don’t usually prepare accounts, and, as I’ve noted before, in New Zealand they often file ‘non-activity’ declarations year after year. The key point is that the tax authorities and company office bureaucrats don’t ask questions, until some legal dispute occurs as in the Jho Low situation. I’ve found another interesting example of legal difficulties providing an insight into a shell company, this time created by the Taylor family, whose GT Group and ST Trading companies came to light in 2009 after some dodgy arms trading was linked to their shell companies.

Loan Consulting Ltd was a shell company set up by Michael Taylor (NZCI Ltd), who seems to have been the only Taylor actually resident in New Zealand. The only director of Loan Consulting Ltd was Nesita Manceau, a Philippino woman who worked for the Taylors in Vanuatu, and was perfect as a nominee director. She appears many times in the Panama Papers, and was then the unfortunate victim of media attention last year. Loan Consulting’s shareholder was Enviro (NZ) Ltd, which had been set by with a Vanuatu-based director, but became the Ukrainian Trust Ltd in 2014 (The Enviro name is now used by another group of ex-pats based in Hong Kong). But Loan Consulting Ltd did not last long, it was removed from the register in June 2011, as was Enviro (NZ) Ltd. Both were then restored to the Company Register in January 2014 due to the appointment of a liquidator (and while the liquidation process was underway Enviro became Ukrainian Trust Ltd). The first of the Insolvency Documents is interesting for Loan Consulting Ltd: “the Company is incorporated in New Zealand, managed from Vanuatu and operated in Europe as an offshore trust.” Now, in between 2011 and 2014 most of the Taylor Group companies had been struck off, but it seems these particular companies had held deposits with the Akcine Bendrove Bank Snoras, in Lithuania. This bank had been bankrupted, and was nationalised by the Lithuanian government. The bank’s chairman, a Russian, Vladimir Antonov, had once owned Portsmouth F.C., but then had to fight extradition from England to Lithuania.

Anyway, the point in highlighting Loan Consulting Ltd, and the Ukrainian Trust Ltd, was that the liquidator did actually get some funds back from Lithuania’s Deposit and Investment Insurance facility, via an ‘overseas based subsidiary’. There seems to have been an initial distribution to shareholders and creditors. But the liquidator’s report for the Ukrainian Trust states that the distribution to the shareholder (apparently named Charlie Kalopungi) was returned by the beneficiary bank, perhaps due to money laundering concerns. Further reports indicated that the shareholder was reluctant to provide company records to make the required tax returns, for both companies, and this comment has been repeated in 6-monthly reports to the Companies Office to this year, the latest one for Loan Consulting Ltd being listed as of yesterday. So it seems that the Taylors want to avoid the tax authorities even when the payment was in their favour, given the secrecy required by their clients. From the Panama Papers database we can see that these clients appear to be Russian, or East European, which seems to be fashionable at the moment in the West, especially with their links to Cyprus banks and trust companies.

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Jho Low, Rothschild Trustees, FFP, and the High Court in Auckland

I’ve noticed a spike in the page view statistics for this blog over the last couple of days. They are still modest, but yesterday was a new record, and mostly because of visitors within New Zealand. This is the first post for 2017, so it isn’t because of something new. I’m figuring it’s because of some journalism by Matt Nippert in the New Zealand Herald, which has revived interest in the foreign trust issue. It concerns a court case heard today in Auckland where Low Taek Jho (Jho Low) – part of the infamous 1MDB scandal – has been trying to regain control of a series of trusts that control assets which the U.S. authorities effectively want to get as forfeiture, given the allegations of money laundering at 1MDB.

Of course, the 1MDB scandal has been hitting the headlines overseas, as it includes Swiss banks and trust firms, the PetroSaudi firm and U.A.E.-based investment bankers, and the Prime Minister of Malaysia. The 1MDB saga has been written about extensively by the Sarawak Report, and the Ethical Alliance collates the many related stories about it. But it hasn’t really been covered at all in the New Zealand media, at least, until Mr Nippert found the New Zealand connection in the litigation currently taking place in California. It seems that the ownership by the Low family of various assets in the USA, mainly in property in New York and Los Angeles, was buried in a structure of companies with shares owned by various trusts. The trusts were controlled by two Swiss firms, Virtue Trustees (AG) and Rothschild Trust (Schweiz) AG, and the latter also used some of its New Zealand companies.

Now, the Swiss companies appear to have been reluctant to take part in any legal action concerning the Low family assets, apparently because of fear of the consequences from the U.S. authorities in regard to money laundering. So to prevent the forfeiture of these property assets worth over $US250 million, Jho Low got legal advice about changing the trustees in the structures, and asking the courts in the Cayman Islands and New Zealand to allow this change, so that the new trustees could contest the U.S. litigation. It seems that the two Swiss companies would only contest the legal action to remove them as trustees on the basis of being adequately compensated, given the tangled web they were part of. So the Cayman Islands authorities had already approved of the change, as far as Virtue Trustees (AG) are concerned; and the New Zealand case was in the Auckland High Court this week. Mr Nippert has also provided the legal papers on the Herald website.

Rather than get into the detail of the case I just want to touch on a few anomalies, and point to some facts that emerge from the company register in New Zealand. Firstly, I have referred to Virtue Trustees in an earlier post [Anchor and some Swiss Virtues], which had a New Zealand company being run by the Anchor Trustees firm. But it is Rothschild Trustees that have involved their New Zealand companies, these are administered by the Cone Marshall law firm, and one of their vehicles, Arrow Master Holdings Ltd. Now what Jho Low has done is to ask a trust firm based in the Cayman Islands, called FFP Trustees (Cayman) Ltd, to take over the trustee role from the Rothschild Trustees AG in the Caymans, and in New Zealand. The Rothschild companies in New Zealand included Elephant Sun Ltd, Star Towers Ltd, and, as it appears in the actual litigation, a company called Indigo Management Ltd. The former names also appear in overseas companies linked to Jho Low; while Indigo Management was set up by Cone Marshall in 2010. The original shareholder was a company called Great Wairua Ltd, before Arrow Master Holdings eventually took over the 100 shares. Great Wairua had a Swiss national, Peter Henggeler as an original director, and he was also involved in another company, Kaumatua Trustees Ltd. Henggeler had worked for the Rothschild Trustees until recently.

The legal brief for the litigation in the Auckland High Court was prepared by an American, Daniel A Zaheer, in San Francisco, California. In the affidavit by Zaheer, dated 5 December 2016, he states that Alix Partners LLP, and FFP Caymans, will take over the trustee roles; and FFP provide a detailed covering letter to the American court in support of the action. The FFP letter is signed by Michael Pearson, as a director; but Pearson also appears on the New Zealand register for companies that have been removed, and seems to have been a resident in Wellington (NZ), and later in Brisbane, Australia. In the letter Pearson talks about the experience of FFP as a replacement trustee, and its involvement in forfeiture actions related to the FIFA scandals. But the really interesting thing is the schedule of 17 trusts that FFP are to be the replacement for. In the actual litigation in Auckland there is a list of over 20 trusts that the plaintiff’s brief refer to, 23 of which involved the Rothschild Trust; and there was one controlled by Indigo Management Ltd called Avenue Raphael (Paris) Trust. So the interesting thing is that these schedules involve completely different sets of names: the only similar one is Global One Aviation (Global 5000) Trust in the FFP schedule, which in the second version is the Global One Aviation (Global G650) Trust.

The case in the New Zealand High Court (CIV-2016-404-3115 [2017] NZHC0025) is Low Hock Peng & ORS v Rothschild Trust (Schweiz) AG as first defendant. Low Hock Peng is Jho Low’s father. The other defendants include Rothschild’s three New Zealand companies, and two companies registered in the British Virgin Islands, Global One Real Estate Ltd and Boluo Investments (US) Ltd. To briefly summarise the judgement of Toogood J in the case: while he recognised that the US litigation involved a serious case of money laundering, as alleged in the 1 MDB scandal, he still had to allow for the defendants to use the legal process to prevent their assets from being forfeited without a fight. He also refers to a “waterfall effect” where, by allowing FFP to take over all the functions as replacement trustees, all of the official roles of each company are passed over to ‘professionals’ in the Cayman Islands. Of course, FFP did create a subsidiary company in New Zealand, and it was registered as FFP Trustee (NZ) Ltd on 12 January 2017. Its directors include Michael Pearson, Stephen Briscoe, Christopher Rowland, and Andrew Childe, all resident in the Caymans; along with Douglas Mark Andrew Burgess acting as the token local director.

Justice Toogood may have been only concerned with facilitating proper legal processes for the Low family in the USA. But, by effectively being a legal adjunct to the activity of the tax haven in the Cayman Islands, he also highlighted how New Zealand trusts and companies are used as part of money laundering structures; and he has ensured that the legal action proceeding in the USA will be far more complicated and expensive than it needed to be.

Addendum 20/6/17: On 15 June 2017 the US Justice Department filed the latest stage in their case against Jho Low for the money laundering involving 1MDB. The case is called U.S.A v. Certain rights to and interest in the Viceroy Hotel Group. On page 185, under section R, there are allegations that Jho Low used 1MDB proceeds to purchase the Stratton Penthouse and Stratton Flat in London, using the Good Star Account. In paragraph 689, sub-section c, there are the details about how Rothschilds indicated the use of Stratton Street (London) Trust and Seven Stratton Street (London) Trust, being New Zealand foreign trusts, to administer two of the three London properties held in trust for the Low family. The money was transferred from a company Low owned called Selune Ltd. The document then goes on to Section S, on page 187. This section details how Low purchased the Stratton Office using diverted 2013 bond purchases. This involved the former Rothschild administered trust, Eight Nine Stratton Street (London) Trust, being another New Zealand foreign trust. It was the third London property, linked with Park Lane Partnership, and Condor Acquisition (Cayman) Ltd, and an oil investment in the U.S.A. called Coastal Energy. The purchase was made from the One Universe Account.

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Orion Trust (New Zealand) Ltd: Auckland, Wellington and Las Vegas?

This is the 50th post on my blog, and to begin with I will follow up on the Orion Trust (NZ) that was highlighted in the previous post. Orion Trust is apparently run out of the Bentleys accountancy firm in Auckland, by Roger Thompson, on behalf of Mossack Fonseca. But there is an interest point about the addresses for Orion Trust listed in the Panama Papers, according to the ICIJ Offshore Leaks database. By entering Orion 13 addresses come up, two of which are for Orion Trust (New Zealand) Ltd. One is a New Zealand address, but not for Auckland, this one is in the capital city, Wellington; the other address is actually in Las Vegas, Nevada (USA), and that address also appears for a lot of other shell companies linked to South Americans. And the Las Vegas address strongly suggests a gambling link.

So the Wellington address for Orion Trust (NZ) is Level 5, 10 Customhouse Quay. There is a small possibility that there might be some confusion with the local branch of the Citco firm, which is at Level 5, 50 Customhouse Quay, and also appears once in the database. But I think that the first address is the correct, as it belongs to a firm called Trustees Executors Ltd, which has been around for a while. It is currently owned by a company called Sterling Grace (NZ) Ltd, which is the local vehicle for an expatriate New Zealand, John Sheffield Grace, who had previously used the name Sheffield Investments for a number of companies. John Grace lives in Switzerland, as does his offsider, David Neidhart, who is now a director of Trustees Executors Ltd. Sterling Grace (NZ) Ltd appears to be owned by a prominent local lawyer, Andrew Scott-Howman. But Trustees Executors Ltd had some media attention this year because of its chairman, former Prime Minister, Jim Bolger, who had recently resigned. A media report on TV3 around the time of the Panama Papers played on this aspect, although that report is now hard to find. In any case, Trustees Executors appears to be a legitimate financial company, and is involved in the Kiwisaver scheme, where it helps administrate for the Fisher Funds Kiwisaver operation, that is run for the Co-operative Bank in New Zealand. But there are other former Trustees Executors subsidiaries that have appeared in other blog posts, and are now run by other Trust industry players, such as Ross Hanning’s Craigellachie Fiduciaries (NZ) Ltd.

Now back to the address in the Panama Papers, it is linked to the Cabita Trust, which has a shareholding officer, Perval Holding Business Ltd, which is registered in the British Virgin Islands. The listed address for Perval Holding includes this phrase: “Melbury Investments CV/Stichting M.P. Melbury”; and the physical address is in Zug, Switzerland. The intermediary linked to Cabita and Perval Holding is listed as Doporto & Asociados, which has created 13 entities. The most interesting one of these is called World Tactic Limited, partly because it is the only one based in Hong Kong, and also because it then links up with the Orion Trust (NZ) Ltd. This produces two addresses both involving the firm Staples Rodway Ltd in Auckland (now Bentleys), with one entry linked to World Tactic Ltd, and the other to a firm called Wellington Minerals & Mining Ltd. Wellington Minerals was created by Roger Thompson when he was at Staples Rodway in 2013, and the original shareholder was the Orion Trust, but the shares are now owned by Beatriz Lorena Romero Alfaro of Panama. All of this would be very confusing if not for the Spanish language press, particularly Mexican publications, that are interested in the activities of Senor Doporto and family. To cut a long story short, Luis Alejandre Doporto and his in-laws, the Alcantara family, have used the Orion Trust to form the Cabita and Maximus Trusts. The Cabita Trust has been used in structures related to the Mexican pharmaceutical industry; and the Maximus Trust is part of a structure using Dutch companies, as well as the Hong Kong company (World Tactic), for a number of purposes, but included are the Alcantara’s children clothing brand Livanna. My summary here is limited by having to use Google translation, and still does not explain the role of Melbury Investments, but will do for now.

I now want to move on the the Las Vegas link to Orion Trust (NZ), and the gambling connection, which was much better documented even before the Panama Papers were released.  The Nevada address is “520 S. 7th Street Suite C Las Vegas”. This is also the listed address for an Edmund Ward, who is described in press reports as being English, and usually resident in Delaware. In the Panama Papers he shows up pretty much everywhere in South America, especially in Uruguay, but for our purposes here it is the Argentinian link which is the most important. This is because of Ward’s role in Mossack Fonseca’s operations in Nevada and the company known as Val de Loire LLC. Val de Loire appears twice in the Panama Papers, linked with Uruguay and Venezuela, but historically it was accused of money-laundering activities for the Kirchner regime in Argentina. This involved the gambling operations of two Kirchner associates, Lazaro Baez and Cristobal Lopez, who had used the Val de Loire company. The complication for them came with the Argentinian Government’s default in the early 2000s, and the role of what are called ‘vulture funds’, that try to purchase the bonds involved from creditors and then pursued the Argentinians in the US courts. This was successfully done by a company called NML Capital Ltd in 2014-15. So prior to the Panama Papers being leaked, NML took legal action for discovery of companies linked to Baez and Lopez’s gambling structures, beginning with Val de Loire. A whole lot of company names were then linked: Tornbell Associates Inc. (Panama), Gairns Ltd (Seychelles), Aldyne Ltd (Seychelles), Fintech Holdings Ltd (Nevada), Balmont Holdings Ltd (Nevada), Plascot Ltd (Seychelles), Forbest Ltd (British Anguilla), and Bugloss Holdings Ltd (British Virgin Islands). These are just the ones that also appear in the ICIJ database, but there were 253 overall. Mr Edmund Ward denied all knowledge of what these companies did, but since the release of the Panama Papers these kind of denials look very weak indeed.

Well, that is the 50th post on my blog, most of which have been written since May. It takes a lot of time, but has reached more readers than expected. It was designed to show the extent of the trust industry in New Zealand, and the publicly known links to the offshore world, most of which have gone unexamined in New Zealand. During the year there were meant to be law changes to curb the trust industry, even though the idea of being a tax haven was never accepted politically, but Parliament has closed down for the year with no change made at all. We will see what next year might bring.

 

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Blue Ridge Company: Jose Lopez Lombana & Ian van Stratum

This post is one of the more interesting to put together. It concerns the activities of a Dutchman, Ian Hugh William van Stratum, resident in London, and with various merchant banking interests around the world. Including in New Zealand, according to the ICIJ Offshore Leaks database, and the Panama Papers. But the companies that he was the beneficial owner for in New Zealand, until 15 October 2015, are actually administered by the Orion Trust out of Auckland. Now, the Orion Trust, run by Roger Thompson for Mossack Fonseca, is linked to five companies. But according to the local media reports on the Orion Trust, four of the companies were set up by a Spaniard, Jose Ramon Lopez Lombana. And the journalists who had access to the Mossack Fonseca documents didn’t even mention Ian van Stratum.

It gets rather complicated if one doesn’t also utilise the ICIJ database, and then do a lot of internet searching. Then there are still two interesting questions that we can’t find the answer to. Did van Stratum and Lopez Lombana ever meet, or is the latter simply one of the nominee directors that Mossack Fonseca, and other players in the offshore world, randomly put together? The second question is that we don’t know what these New Zealand companies (and the related trusts) actually did, but it soon becomes clear that something significant happened to them on 15 October 2015.

Using the now usual method, I have looked at New Zealand Companies Office records and matched them with names in the Panama Papers. Jose Lopez Lombana appears twice in the database: once as the shareholder of a BVI company called Lomasia S.A.; and the second entity is a New Zealand company called Blue Ridge Company Ltd, where Lopez Lombana is listed as a shareholder for a day (15 October 2015), in between stints by the Orion Trust. Both Lomasia S.A. and the Blue Ridge Company Ltd have a shared intermediary called Bald Eagle Services S.A. (BVI), and the database lists 187 other entities that it has created, and links the company to Malta. However, the reporting in New Zealand about the Orion Trust suggested that Bald Eagle Services was a Mexican company; and it was stated that Lopez Lombana had created four companies being used to funnel funds into the Czech Republic.

These reports linking Lopez Lombana with Mexican companies and the Czech Republic were in the main newspaper websites, along with public broadcaster RNZ, which did have access to the leaked documents. Apparently Lombana is also an electrical engineer who is fluent in Russian. But he is also the ultimate transitional figure, as his role in Blue Ridge Company ends at 16:46 pm on October 2015, perhaps part of the ownership changes in four companies owned by Ian van Stratum and administered by Roger Thompson. So following on the links to Blue Ridge Company, and clicking on Orion Trust (New Zealand) Ltd indicates the other four New Zealand companies: Panorama Ventures Ltd, Ultimate Resources Ltd, Founders Company Ltd, and Interactive Solutions Ltd. And between 16:18 pm and 16:40pm on 15 October 2015, they all had their shareholding change from Ian van Stratum to the Orion Trust. These four companies were first registered on 3 October 2013, and all have two Panamanian directors, who mostly do not appear as directors for any other New Zealand companies, except with Panorama Ventures, who has Giselle Ocampo Fonseca herself as a director. Roger Thompson of Bentleys Accountants is a director of all four and of the Blue Ridge Company Ltd.

So who is Ian Hugh William van Stratum? He is Dutch, a resident of Burpham, Arundel, in England, and he has had various merchant banking vehicles with partners. He has five entries in the Panama Papers, three of which involve the New Zealand companies. The other two involve two companies: Sedeco International Corporation, which is registered in the Seychelles; and Deerfield Investments Group Ltd, which is registered in the British Virgin Islands. Sedeco International had another shareholder named Joao Manuel Lagos Homem de Melo, who appears to be a Portugese aristocrat; while Deerfield Investments Group has another active shareholder in Nathaniel Edouard Glas, who appears to be a London banker. But Deerfield is more interesting, and is an example of when to do a separate search in the ICIJ database. Deerfield Investments Group appears as an ‘officer’ twice, and both entries link up with a shareholding company called Helios G20 Fund Ltd, which was incorporated in the British Virgin Islands in March 2012. Helios G20 has three officers besides Deerfield: N2 Investments Ltd, another New Zealand company, as a shareholder; and two beneficiaries, Monica Vidal of Spain, and ‘Paul Heathcote William Tatham’, resident in the United Arab Emirates.

I will now look at these officers in Deerfield and their possible links with Ian van Stratum. N2 Investments Ltd was a company set up by Gordon Ralph Stewart in Wellington, New Zealand in 2012, and has been removed in early 2016 presumably having served its purpose. Monica Vidal is possibly Monica E. Vidal Sanz, a merchant banker now resident in New York, but between 2002 and 2009 she was a director in Global Investment Strategy UK Ltd, along with Ian van Stratum. Meanwhile, the entry for Mr Tatham is scrambled and it should be William Paul Heathcote Tatham, a lawyer who had been with an outfit called Towry Law in London, but is now part of Towry Law (Asia) HK Ltd, which is an overseas company registered in Cyprus. We can also discover that van Stratum is involved in Helios Asset Management Ltd, and speculate that he is also involved in Helios Investment Partners, which is a company specialising in African investments.

Ian van Stratum has some previous form in Australasian and African investments. In the past decade he was involved in some contretemps over an Australian mining company called City View Corporation. City View’s share price collapsed in 2009 after some dodgy dealing in African mining, especially in Angola, came to light. Some of the small shareholders banded together to try to prevent a City View rights issue taking place which would leave most of the new shares with the underwriters, involving three firms being run by Ian van Stratum and John William Gunn. One of these was Global Investment Strategy UK Ltd, for which Monica Vidal was also a director. City View seems to have then changed its name, and traded on with a new ownership structure. But it would be interesting to speculate on whether Mr van Stratum’s interest in African mining is a more significant story than his fleeting link to the Spaniard, Lopez Lombana, and the payments made to some Czechs.

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Venezuelan Chocolates and New Zealand Trusts: Luis Aguilar’s legal labyrinth Part 2

This time we will look specifically at the Venezuelan chocolate business run by Jorge Redmond Schlageter, and its legal structure in the USA. Chocolate El Rey SA apparently dates back to the 1920s in Venezuela, but its presence in the US market took off in the mid 1990s, and is for all intents and purposes a successful business. Once Jorge Redmond took over in Caracas he met up with an old school friend, Randall M Turner, who is based in Fredericksburg, Texas. Rand Turner is the President of Chocolates El Rey Inc., which was set up as a Delaware company in 1993, with the Texas branch dating from 1995. Turner also set up a company called Aroa Fine Chocolates LLC, which is another Delaware company that was registered in Massachusetts between 2007 and 2013. This is, of course, the period in which Jorge Redmond was involved in his contretemps with compatriot Luis Aguilar.

Randall M Turner was the son of a Texas oil man who was transferred to Venezuela, and hence he was born in Maracaibo. According to a 1996 story in the Texas Monthly, Turner went back to the States to attend a prep school in Tennessee, and it was there that he met Jorge Redmond. Redmond’s father was a chemical engineer from Louisiana, and it was his mother’s side of the family that had an interest in the Venezuelan chocolate company. The article “Holy Cacao” raves about the quality of the El Rey chocolate, and Redmond hosting 30 chefs and journalists at his new facility in Venezuela. Chocolates El Rey also expanded into Japan, and their subsidiary there became known as Cacao Fino Ltd. Of course, there is no reference to the El Rey structure of ownership of trusts and companies in New Zealand.

Chocolates El Rey (New Zealand) Ltd was set up by the Cone Marshall firm in 2006, and had five directors, including Turner, Redmond, and Luis Aguilar. It was actually formally removed in 2008, presumably because of the dispute between Aguilar and Geoffrey Cone, as described in Part 1. But the key New Zealand company turns out to be Amix Harbour Chocolates Prima Ltd, that was set up by Aguilar in 2008, and had Turner and Redmond as directors until January 2012, when it appears that Aguilar forced the other two out. There are two other New Zealand companies that are relevant to the Chocolate El Rey structure, Antitox Ltd and Delmatter National and Provincial Ltd (the latter also had Turner and Redmond as directors). As explained in Aguilar’s affidavit, Amix Harbour Chocolates Prima Ltd was one of three owners of Chocolates El Rey Inc., the Delaware corporation; the other two are Randall Turner, and Jorge Redmond holding about 80% of El Rey through a limited partnership called Antitox CV. The Amix company acts as a trustee for a foreign trust in New Zealand, which was called the USA Matrix Trust; it also acted as trustee of the Premium Brands Trust, another foreign trust, which owned the El Rey trademarks. Amix was also the trustee for the foreign trust that owned shares in the Japanese subsidiary, the Japan Matrix Trust. It seems that Aguilar tried to oust Turner and Redmond from the Amix part of the structure after he claims to have discovered a fraud in 2011, and the specific claim involved the sum of US$500 000, though he claimed there were other irregularities.

Aguilar’s allegations were made in a complaint to the Consumer Protection Division of the State of Texas, and published on-line by Aguilar after reiterating the complaint in February 2013. This affidavit is based on a more chronological sequence of events, and includes emails from Turner, Redmond, and their accountant. The latter suggests getting that a trust company be approached to establish ‘tax-free corporations’, and it appears that the Citco (out of Curcao) firm was involved. But the basic claim by Aguilar was that funds from Chocolate El Rey were funneled into Turner’s Aroa company, in the form of unauthorised credit lines, and something similar happened in Redmond’s Antitox CV company structure. The latter is interesting because it seems to include New Zealand companies that Aguilar had set up: Antitox (NZ) Ltd, Delmatter National and Provincial Ltd, and Estimulo Foundation Ltd. Aguilar hints that Redmond’s attempt to change his structure “created a problem with AsiaCiti Trust New Zealand Ltd”, and was being pursued by the authorities, without any outcome. But the basic structure was for each of the New Zealand companies to act as the trustee for a NZ foreign trust, with Delmatter National as the trustee for the Morusso Trust, and Antitox (NZ) being the trustee for Maurois Trust. And, in turn, the trusts were part of a Dutch limited partnership: so the Maurois Trust was the effective owner of a company, Redko CV, through which Jorge Redmond owned some properties in New York; and the Maurois Trust was the ‘general partner’ for Antitox CV, which was the vehicle for controlling Chocolate El Rey. The complication was that these New Zealand companies were apparently under Aguilar’s control, until he gave up in 2015.

So, after all that legal action, Jorge Redmond still appears to be in the chocolate business, although Aguilar had suggested that he had tried to sell out to Nestle in 2011, until he realised that the due diligence might expose his financial shenanigans. And Luis Aguilar himself, has gone after bigger fish, writing open affidavits about the legal position of Nicholas Maduro’s nephews who seem to be now facing up to drugs charges in the USA.

 

 

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Venezuelan Chocolate and New Zealand Trusts: Luis Aguilar’s legal labyrinth Part 1

Luis Alejandro Aguilar Pardo is a Venezuelan lawyer who lives in Florida, USA, even though he apparently can’t practice law there. This hasn’t stopped him filing affidavits and putting them on-line, including for a case in the High Court in Auckland, New Zealand. For some years he has maintained an office in Auckland, as Aguilar & Aguilar Ltd, and created a number of companies for his South American associates. His American firm is listed as A H & A Associates LLC, based in Key Biscayne, Florida; but the ownership of many New Zealand companies has been through Arriapita LLC, which is based at his home address in Boca Raton, Florida. Luis Aguilar’s involvement in litigation is interesting, as it shows how New Zealand trusts are linked to local companies, as part of an offshore network, and how, when it all turns sour, it is difficult to disentangle, particularly when many jurisdictions are involved.

Luis Aguilar’s main litigation protagonist has been Jorge Mateo Redmond Schlageter, another Venezuelan who is well known for his role in the chocolate exporter, Chocolate El Rey Inc. More on that in Part 2, but the two were first linked with New Zealand companies in 2001, when Delmatter Provincial Ltd was set up by Gordon Ralph Stewart in Wellington. By 2003 this company was registered with Geoffrey Cone in Auckland, along with Carisma Ltd, also set up in 2001. In his 2013 affidavit, by responding to an application by Jorge Redmond Schlageter [CIV-2-13-404-1201], Aguilar also refers to two related companies set up later by Geoffrey Cone, Plaza Bandera Ltd, and Amix Harbour Chocolates Ltd (originally called Especial Ltd). It is also relevant to refer to A C & A Nominees Ltd, also set up by Cone at this time (2005). In his affidavit for the New Zealand High Court, Aguilar made a number of claims about the legal advice proffered by Cone, but is vague in the first instance, only saying that contradictory opinions led to the project going astray. But he also had another accusation to make about Cone.

Aguilar claimed that in mid 2007 he discovered that Geoffrey Cone had manipulated the shareholding of the four companies listed above, and made key changes before and then immediately after the end of the financial year in March, to reverse the listed shareholders. Aguilar suggested that this was to effect a “fraudulent avoidance” of the Financial Reporting Act 1993 that was in force at that time. This action could only have taken place in the preceding 2006/7 financial year. Certainly there is something odd in the records of Especial Ltd, which was only set up on March 29 2006, and has a change in shareholding the next day. The shareholding is transferred from Amicorp Trustees (NZ) Ltd to one of Cone’s companies on March 30; then the next change is a transfer to Aguilar & Aguilar Ltd on 1 April 2008. In the example of Carisma Ltd, there is a change in shareholding in January, from Luis Aguilar and Jorge Redmond to A C & A Nominees Ltd, which is then reversed in July 2006. It was Aguilar’s claim that this happened for 38 of his New Zealand companies, and so he decided to pursue the matter with the New Zealand Companies Office in late 2007. In 2008 Aguilar came to an understanding with the authorities by which all of his companies would be struck off in the following year, but then re-created by him and registered at his Auckland office, with the word ‘Prima’ added to the title of the former company name.

That is how Aguilar became the respondent to Jorge Redmond Schlageter’s claim against Carisma Prima Ltd in 2013, and why he thinks Geoffrey Cone was helping Redmond in the litigation. The original Carisma Ltd had a change of shareholding in March 2009, as it’s last act, but the directors had remained Aguilar and Jorge Redmond. According to Aguilar’s affidavit, Carisma Ltd was set up in 2001 to assist in the administration of what he called the ‘Pimjo organisation’, which involved the foundation for an ex-patriate Dutchman who had lived in Venezuela for many years. The Pimjo organisation included a Venezuelan foundation and a Panamanian company, and the New Zealand company was to act as an asset protector, or trustee, for two non-resident (ie foreign) New Zealand trusts. But the Panamanian company – Pimjo SA – had investment assets that were administered by a New York company called Fahnestock & Co. One of the directors of Pimjo SA, Rene Mendez de Leon, apparently did not like Aguilar’s plan. So it seems that he engaged Amicorp’s office in Curacao to come up with an alternative structure. Mendez de Leon was also involved with brokers in Fahnestock, a company which then became part of a larger one, the Oppenheimer Inc., which had an allegedly illegal operation in Caracas. This was based on circumventing the foreign exchange control policies of the Chavez regime.

So the new structure was based on having a Dutch civil law partnership, Pimjo Trust CV, which in turn had a Dutch foundation, Stichting Panthalassa, as a ‘general partner’. Now, Aguilar alleged that this structure was being used to control most of the Pimjo assets, and use the investments as the basis for illegal currency trading. Aguilar named two other parties to these illegal transactions: Russell M. Dallen, and John Gayle Pettus. Dallen’s reputation appears to have been unsullied, and he is now the managing partner at Caracas Capital Markets, and also owns his own publication (Latin American Herald Tribune). But Pettus was not so fortunate with his company: Brisbane, Mendez de Leon, Pettus & Associados. In April 2013 his home was raided by the Venezuelan authorities, due to the ‘irregularities’ in his currency trading activities.

In the meantime, Luis Aguilar had managed to get the Pimjo organisation back to the original intention, by using the new company, Carisma Prima Ltd, to act as trustee for the Pimjo organisation’s New Zealand trusts. However, he was still battling with Jorge Redmond for control of its activities, along with two other directors that he had appointed, German Toro Arevalo, and Jesus Rafael Alfonzo Hernandez. And the conflict with Redmond was further complicated by their contretemps over the Chocolate El Rey structure, and its use of New Zealand ‘foreign’ trusts, as we will see in Part 2 of this saga.

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J.A.F. Wadham and the Chelsea Man brand based in Hong Kong

In this post I look at a couple of expatriate Englishmen who are now based in Hong Kong. The interest here is partly with the link to New Zealand, with James Anthony Frank Wadham, and what appears to be his link with Christopher Kenneth Mayber George. It isn’t immediately obvious that they are associates, but they both appear to operate in the offshore space as well as in the conventional commercial world. And both are linked to a company called Intetrust Ltd. Intetrust is a Samoan-registered company that appears in the ICIJ database linked with Portcullis Trustnet, as a shareholder of 44 mostly Samoan companies, and as an intermediary for 8 entities which have been ‘transferred out’. But there was also a company called Intetrust New Zealand Ltd, for which Wadham was an ongoing director.

Intetrust New Zealand Ltd was registered in in 1996, and was removed from the New Zealand register in October 2007. The 1000 shares in the company were originally split between the Integroup Holdings Ltd of Western Samoa, and the Anchor Trust Group of Auckland. Intetrust NZ also owned two other trust companies, Ilton & Oxford Holdings Ltd, and Lovering Ltd, both now removed but which were administered by the Anchor Trustees in Auckland. I have looked at the Anchor Trust operation before, but have overlooked the link with James A.F. Wadham. He certainly appears to have had a key role in a number of their own companies, including eight with Anchor in the title, and has had 20 New Zealand company directorships overall. Only two of these appointments remain: International Finance (NZ) Ltd that was formed in 2004; and Ilton & Oxford Ltd, that was first registered in 2014. Wadham has added a Phillipino director, Armina Almonte la Torre, to both companies. Torre replaced Stuart Kinnear Robertson, an Australian based in Switzerland, in International Finance, in July this year. International Finance is now owned by EPI (NZ) Holdings Ltd, a Hong Kong company, having recently taken over from East Pacific Investments Ltd, another company registered in Hong Kong. The shareholding company up to September 2015 was International Recoveries (NZ) Ltd, which was also registered with Anchor Trustees. In 2010, June Jackson of Anchor Trustees asked the Companies Office to provide a ‘Certificate of Good Standing’ for both International Finance and International Recoveries (NZ) Ltd, but one of them appears to have been declined.

Another interesting aspect in the documentation for International Recoveries is a form filled out for James Wadham, a declaration of ‘non-activity’, in Montevideo, Uruguay in 2011. Wadham certainly seems to get around a bit in the offshore world, and the details can be found on the internet. But his own company, the Fiduciary and Consulting Group, only operates from Hong Kong, Samoa, and the Phillipines, according to its website. The Uruguay connection appears to be through the Winterbotham Trust’s operation there, which is linked with 7 entities in the Panama Papers. Wadham also appears to be part of the Hewanorra Fiduciary Services Group in St Lucia, with one Nicholas John & Co., which only appears once in the database. Nonetheless, Wadham is an interesting fellow who has published widely, but especially on offshoreinvestment.com, including an article on sham trusts and companies, based on a seminar at Oxford University in 2002. He was also a key guest at a conference in the Bahamas, in 2010, organised by the Southpac Trust Group for the Offshore Planning Institute, which seems to focus on the asset protection trust laws.

Now back to that other interesting fellow, C.K.M. George, who is also apparently based in Hong Kong. George’s name is mis-spelt in the ICIJ database, appearing as “Christopher Kenneth Mayber Goerge as trustee for the Legend Trust” in the Panama Papers, but with an address in Coventry, England. George is linked to a Samoan company set up in 2008 and called Genesis Global Ltd. And Genesis Global appears to have six shareholders: C.K.M. Goerge [sic]; Anthony Samuel George as trustee for the Bank Thai Trust; James Leigh Whittemore, who appears to be a retired American financier; Marc Haywood of Denmark (who is listed twice); and Intetrust Ltd, located in the Central Bank Building in Apia, Samoa.This is the address that also appears on the Fiduciary and Consulting Group’s website for Samoa, because it is actually the branch operation of Wadham’s company. Wadham himself appears in three separate listings in the ‘Offshore Leaks’ part of the ICIJ database, due to his links with Portcullis Trustnet; and one of these listings involves a link with 20 entities, but mostly involving companies in the Cook Islands and a few in Liberia. Samoa only comes up with a link to Magic Holdings Ltd, part of a group of companies set up for Ryan and Pina Hendricks, who appear to be based in Atlanta, Georgia (USA).

But just a footnote on C.K.M. George, who seems to have been a legitimate businessman in the rag trade, and who has had longstanding trademarks registered for brands like ‘Pilot’ and ‘Chelsea Man’. The latter brand was sold in a chain of menswear stores in the U.K., that appear to have dwindled over the years. Anyway, he has still tried to defend his trademark for the Chelsea Man brand, and twice taken on the mighty Chelsea F.C. over the use of their own name. The first test under the Trade Marks Act came in 2011, when Chelsea tried to register the trademark, and objection was taken by A.C.K. George, the son of C.K.M. George, on behalf of his company, called Retrofit Global Ltd. The elder George had listed all the different companies he had formed to sell the brand clothing in the chain of Nickleby’s menswear stores, mostly being variants on Morgan Samuel. Amazingly, the football club lost the case, and costs were awarded to Messrs George. Chelsea’s F.C.’s lawyer appeared to rely on the fact that Retrofit Global was operated from Hong Kong, and was registered in a tax haven, the British Virgin Islands. But the whole thing was repeated in 2015, when Chelsea again made a trademark application, and the Georges’ opposed it again, but this time for a company called Benetton Holdings, which was registered in St Lucia. It seems that the companies that had previously been operating the Chelsea Man brand had been liquidated, and as sales had by now collapsed to a few thousand pounds it could not really be argued that anybody would confuse the two brands, so football won.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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