BVI Offshore Business: Grey Area

Businessman Dave King failed to postpone a case brought by the South African Revenue Service (SARS), for the right to sell shares in a British Virgin Island company. SARS is trying to receive back taxes allegedly owed by King, and to sell the BVI company shares that are said to be transferred to hide King’s wealth.

It is the last episode in a seven-year war between SARS and King, for tax debts owed by King and his offshore trust Ben Nevis Holdings (also registered in BVI). SARS alleges that Ben Nevis in 2002 transferred all of its South African assets to the offshore company Metlika Trading (BVI), to disturb authorities from looking into BVI trust’s assets. BVI-registered Metlika is the major shareholder in South African companies that own wine farms, game farms and King’s homes.

It is claimed by SARS that Ben Nevis Holdings owes R1,4 billion in debts and penalties, for non-declaring income from the sale of shares in King’s company. SARS says that the money made by Ben Nevis from the sale of shares from Specialised Outsourcing of this company was revenue, so Ben Nevis and Kings are liable to taxes on it. King argues the proceeds have capital nature, so they are not taxable in South Africa.

It was ruled by the court that the case against Ben Nevis and King are to be separated, and the King case would be heard at a later date. This is because King is also facing a criminal case, and any testimony he gives in the tax trial might incriminate him. Also, by the order of the court, King must pay the costs of the two-week application.

King is personally believed to owe SARS R900mln for false declarations in his tax returns for the years 1990-2001. In March of this year, King lost a bid against the UK Fraud Office, to retain all his foreign assets, which probably make the most substantial part of his wealth. It was ruled by the UK court that the restraint order remained in place, but limited it to the UK, Guernsey and Scotland, not extending it worldwide as SARS had hoped.

Property magnate Robert Tchenguiz, whose business empire is ultimately controlled by family trusts registered in the British Virgin Islands and Cayman Islands, has got in trouble over the past six months. He has lost hundreds of millions of pounds on the positions in quoted companies, including supermarket chain J Sainsbury and pubs group Mitchells & Butlers.

The result of recent run of stock market losses was speculation about the financial health of the Iranian tycoon who made £850m fortune from the 1990s property boom. However, Tchenguiz denies all the rumours saying he is a long-term holder, and the companies his family invested in have shown “robust growth om tough trading conditions”. Also, his friends note that while the critics focus on Tchenguiz’s positions in Sainsbury’s and M&B, they ignore his successes.

Actually, it seems quite easy for the hedge funds and traders to spread rumours about his financial position, - as a private entrepreneur, it is impossible for Tchenguiz to assemble an accurate picture of  his business empire, which ranges from a stake in supermarket chain Somerfield to a chain of Polish petrol stations.

Tchenguiz is a director of more than 300 UK-registered companies, many of which are used to hold just a single asset. These companies are controlled by BVI- and Cayman Islands-domiciled trusts. The main UK investment vehicle of the entrepreneur, R20 Limited, holds no investments but simply “provides corporate finance and consultancy services”; it employs 16 people, according to the 2006 accounts. R20 Limited is owned by Balmain Properties Limited, registered in the British Virgin Islands, and the ultimate control of the company belongs to the Tchenguiz Discretionary Trust.

Tchenguiz’s investments in quoted companies are publicly disclosed; when shares in Sainsbury’s fell, it was easy for hedge funds and traders to estimate his losses. Thenguiz insists that he is a long-term holder of Sainsbury’s stock, prepared to wait until the market sees the same intrinsic  value that he does.

Some months ago, we have discussed the case of bankruptcy of deceased stockbroker Rene Rivkin, which was connected with his affairs in the UK and in the British Virgin Islands. The BVI company called Derata was named as the sole director of Jersey-based Thameslink wholly owned by Rivkin. Rivkin’s bankruptcy trustee planned to recover millions of dollars from Jersey bank account. In case of success, the funds were to be distributed to the creditors, the largest of which was the Australian Taxation Office.

Last week, the Swiss lawyer Benno Hafner, who represented Rene Rivkin, launched a legal bid to stop the investigation into Rivkin’s assets. He is believed to have the purpose to prevent Rivkin’s bankruptcy trustee from gaining access to bank records held by a British financial institution and related to Rivkin’s business deals.

The bankruptcy trustee Anthony Warner from Sydney-based CRS Warner Kugel, in his turn, is attempting to obtain the documents concerning Rivkin’s business interests in the jurisdictions other than Australia and Switzerland – that is the UK and the British Virgin Islands. In Federal Court proceedings in Australia, Mr Warner has already uncovered $3 million probably hidden in a Virgin Islands trust linked to Rivkin.

Rivkin’s estate was placed into bankruptcy last year, with $29 million owed to the tax office (later on the bill educed to $20 million). His family co-operates with Mr Warner to recover funds believed to be held in offshore jurisdictions including BVI, by companies ultimately owned by Rivkin.

The legal action regarding a high-scale fraud case has been recently taken in the British Virgin Islands court.

The Serious Fraud Office (SFO) investigated the case and prepared it for the court in the British Virgin Islands.

The victims of this fraud case are about 200 workers of Lanarkshire plant whose pension fund was used by a Danish businessman Bjorn Stiedl.

After his finances were investigated, many facts were revealed. Assets connected to him were traced to a BVI offshore trust holding deposits in a bank in Jersey. The SFO did not accept Stiedl’s claim that his assets were worth just 300 000 GBP.

Stiedl bought the group’s pension fund in 1994 through his company Crisun and acted along with his lawyer stealing cash from the fund by means of transactions into bank accounts around the world. The lawyer was given 100 000 GBP, Stiedl’s secretary was given 10 000 GBP, 400 000 GBP was paid for mortgage taken by Stiedl’s wife.

As to workers, they were left without 2.1 million GBP in their 5-million fund. If counting the interest, about 4 million GBP are lost.

In August 2004, Stiedl was sentenced to 4.5 years in prison. Now he has refunded about 2.5 million GBP into the pension fund as well as compensate 200 000 GBP to the SFO for their higly successful investigator work. His lawyer Iversen was imprisoned for 2 years and had to return 100 000 GBP he received from Stiedl.

The legal action regarding a high-scale fraud case has been recently taken in the British Virgin Islands court.

The Serious Fraud Office (SFO) investigated the case and prepared it for the court in the British Virgin Islands.

The victims of this fraud case are about 200 workers of Lanarkshire plant whose pension fund was used by a Danish businessman Bjorn Stiedl.

After his finances were investigated, many facts were revealed. Assets connected to him were traced to a BVI offshore trust holding deposits in a bank in Jersey. The SFO did not accept Stiedl’s claim that his assets were worth just 300 000 GBP.

Stiedl bought the group’s pension fund in 1994 through his company Crisun and acted along with his lawyer stealing cash from the fund by means of transactions into bank accounts around the world. The lawyer was given 100 000 GBP, Stiedl’s secretary was given 10 000 GBP, 400 000 GBP was paid for mortgage taken by Stiedl’s wife.

As to workers, they were left without 2.1 million GBP in their 5-million fund. If counting the interest, about 4 million GBP are lost.

In August 2004, Stiedl was sentenced to 4.5 years in prison. Now he has refunded about 2.5 million GBP into the pension fund as well as compensate 200 000 GBP to the SFO for their higly successful investigator work. His lawyer Iversen was imprisoned for 2 years and had to return 100 000 GBP he received from Stiedl.