MPs urged to demand names of Canadians behind offshore tax shelters

Five years ago, tax law expert André Lareau was barred from testifying before the House of Commons Finance Committee by a last-minute gag order preventing witnesses from talking about a major tax evasion scheme. accounting firm.

Now he has a message for MPs who are today relaunching their investigation into Isle of Man registered offshore companies: If they are serious this time around, they should subpoena the Canadian accountants who helped put in place offshore tax evasion. – and demand that they give up the names of wealthy Canadians whose identities they have protected.

“If the committee is ready to open this up, well, maybe, maybe, that means it’s pretty serious about it,” said Lareau, associate professor at Laval University, on CBC News.

MPs re-launch inquiry Parliamentarians were suspended in June 2016 after accounting firm KPMG said witness testimony in Ottawa could undermine pending lawsuits.

CBC’s the Fifth Estate and Radio-Canada survey reported earlier this year that shell companies in the Isle of Man are suspected of being involved in a massive fraud that has cost investors their savings. Some experts believe that KPMG may have helped found these companies.

Documents obtained from the Isle of Man public register, as well as emails from an offshore financial data leak, show links between KPMG and four shell companies created in December 2001 and named after ancient swords.

KPMG acknowledges having put in place a tax avoidance and asset protection “structure” on the Isle of Man for high net worth Canadians from the late 1990s.

Tax law professor André Lareau says MPs should research the names of Canadians behind offshore tax shelters. (CBC)

But the accounting firm – also known for its advisory and auditing services to federal and provincial governments – denies helping to create the four shell companies later suspected of being involved in financial fraud that cost investors their savings. , and where over $ 500 million has gone overseas.

The revelation by CBC / Radio-Canada of a suspected link between these shell companies and the missing millions victims of fraud and opposition parties to call for a restart of the finance commission’s long-standing investigation of the Isle of Man and offshore shell companies.

“People were deceived, they lost their savings. The federal government should be doing more than lip service in the fight against tax evasion and international tax evaders, ”said NDP MP Peter Julian.

“Canadian offshore bank accounts… are hiding money from the government. Why wouldn’t a party want this revealed?” said Green Party MP Elizabeth May.

Call the accountants, says Lareau

MPs from all parties voted last week to resume committee hearings this afternoon on offshore tax shelters, including those on the Isle of Man.

Today’s witness list includes Lucy Iacovelli – KPMG Canada’s managing partner for taxes – and Janet Watson, who lost her savings in a fraud in Montreal known as the Cinar / Norshield / Mount Real scheme. .

Lareau said in order for the re-launched committee’s investigation to be effective, MPs must call the accountants and bankers who were involved in setting up various Isle of Man shell companies – and who know the names of wealthy Canadians. or the “beneficial owners” behind them. .

“Obviously, they will only speak to the committee if they are compelled to do so,” Lareau said, noting that Commons committees have the power to issue subpoenas.

In the past, KPMG has opposed the disclosure of the names of wealthy Canadians behind several shell companies it has helped set up on the Isle of Man, citing client privacy.

Lareau said he believed MPs were under pressure from the accounting industry to limit their investigation when they launched it five years ago.

Dennis Howlett: “It’s not fair that people can hide behind shell companies.” (CBC)

In 2016, the Liberal-dominated finance committee rejected an opposition motion to compel KPMG to provide the names of the “beneficial owners” of these shell companies. Dennis Howlett, the former Canadiens tax fairness leader, said it was high time the veil was lifted.

“It would be a good idea to force KPMG to disclose the beneficial owners,” Howlett said. “It’s not fair that people can hide behind shell companies.”

The Trudeau government said in its recent budget that, as part of a plan for crack down on tax evasion, it would introduce a registry to identify the beneficial owners of Canadian businesses.

While this measure does not affect the Canadians behind offshore corporations, it does indicate that the Liberal government is concerned about corporations created to protect the identity of their true owners, Howlett said.

Shortened committee

Howlett is one of the tax experts who was also barred from testifying before the House of Commons Finance Committee five years ago.

Howlett and Lareau were asked to testify about KPMG’s Isle of Man project – but they were not even allowed to mention the name of the accounting firm when they took the witness stand.

Lareau and Howlett were told that an attorney for KPMG wrote a letter to the committee warning that an ongoing investigation into the accounting firm could unduly affect pending cases in the tax courts.

Liberal MP Wayne Easter chaired the Commons committee hearings on offshore companies registered in the Isle of Man. (Wayne Easter / Zoom)

Liberal MP Wayne Easter, chairman of the finance committee, then told Lareau and Howlett that they could not testify on the tax treatment of the accounting firm on the Isle of Man.

“Why am I here?” Lareau said at the time. “They asked me to come here to talk about KPMG and I can’t talk about KPMG.”

“The particular case we’re not supposed to be referring to is just the tip of the iceberg,” Howlett told committee members in 2016.

The three court cases KPMG said it was concerned about were settled out of court two years ago – but the finance committee never resumed its investigation until reports earlier this year had revealed new information regarding KPMG’s potential link to companies later suspected of being involved in the fraud. .

Financial asset tracers said that identifying the real owners behind the so-called “sword companies” – Katar, Sceax, Spatha and Shashqua – could help governments understand how they may have been involved in the fraud and where the money is going. ‘is found. .

“If I had had this information … while we were still at the scene, we would have tried to shed some light on all of this,” said lawyer and asset tracer Wes Voorheis, who was hired to track down. some of the money missing in 2004.

KPMG insisted it did a thorough review of its records before concluding that it had no connection with the sword companies.

“KPMG Canada has carefully reviewed and refuted any connection between KPMG Canada and the sword companies,” said Mark Gelowitz, KPMG’s lawyer, in a recent letter to CBC.

“Unless CBC has further evidence of KPMG Canada’s involvement with the sword companies it has not shared with KPMG Canada, the proposed allegations are clearly unfounded, false and defamatory.

Retired Supreme Court of Canada Justice Ian Binnie (left) shakes hands with Governor General David Johnston after receiving the rank of Companion of the Order of Canada at Rideau Hall in Ottawa on November 23, 2012. (Chris Wattie / Reuters)

Gelowitz pointed out that KPMG had hired Ian Binnie, “a retired Supreme Court of Canada judge”, to conduct an independent review of its files.

Binnie’s review, based on documents and information provided to her by KPMG, concluded that the sword companies – along with more than a dozen other Isle of Man shell companies identified by journalists – were unrelated to the offshore tax structure of the accounting firm.

Binnie declined to speak directly to reporters about her report, preferring to communicate by email instead.

KPMG said leaked emails stating that the accounting firm had created the sword companies were unreliable. The emails were obtained by the International Consortium of Investigative Journalists and appeared after Binnie wrote his report. KPMG claims that their author was unaware of its operations at the time and that it was “wrong”.

Binnie rejected CBC’s request to discuss the leaked emails and whether they could influence the findings of his report.

After stating that he would speak with legal counsel for KPMG, Binnie emailed CBC / Radio-Canada: “I have no reason to doubt the due diligence undertaken by KPMG.

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