BVI Offshore Business: Grey Area

An Alberta oil and gas exploration and production company is claiming that 3 Quebec firms defrauded it of USD 11.9 millon via a Utah financial institution.

A temporary Quebec Superior Court injunction has been granted to Marble Point Energy Ltd. of Fort Saskatchewan, Alta. The injunction has frozen all the assets of two companies run by co-defendants Carole Regimbald and her husband, William Ballachey, Brossard-based Les Services Stonecroft Inc. and Stonecroft Resources Inc. A co-defendant is also Multiperils International Inc. of Entrelacs with Rheal Bougie, its signing manager.

The civil lawsuit states that the actions of the defendants reveal a voluntary illegal scheme designed to defraud Marble Point. In accordance with the suit, Marble Point was looking for financing to have capital for oil and gas development opportunities. To find it, Marble Point allegedly contacted a Montreal firm offering privileged investments and securities, Avro Capital Inc.

In the end of February, an agreement with Avro’s US partner, Majestic Capital LLC of Salt Lake City, Utah, was reached. The agreement provided Marble Point with a USD 45-million credit line. Marble Point, in its turn, provided a USD 15.4-million deposit, USD 15 million of which had to be used for initiating the purchase of a bond.

The suit states that on March 31 USD 11.9 million from a trust account of Majestic was sent to a bank account of Stonecroft Resources. Stonecroft Resources is a company incorporated in the British Virgin Islands, also called Stonecroft BVI, operating from Brossard. Carole Regimbald and William Ballachey are listed as signing officers of the bank account, with a previous balance of a bit more than USD 10,000.

In accordance with the suit, within one week, 5 payments totalling about USD 5.5 million were made from a BVI-registered Stonecroft BVI to a financial-services company in Thailand while 2 payments totalling nearly USD 6 million were transferred to Multiperils.

The alleged deposit and the payments were made short after William Ballachey pleaded guilty in Longueuil court to 297 of 592 counts of forging false contracts through a financing company in Montreal. Ballachey was given an 8-month house arrest. Both he and Services Stonecroft face 10 criminal charges of selling financial products in the USA within in April 2003-August 2004 period not being registered with the Autorité des Marchés Financiers (AMF).

An American couple is trying to receive back US$11 million that was given to Mr David Rasif to buy a District 10 bungalow in Singapore.

In June 2006, soon after Mr Rasif disappeared with more than $11 million of his clients’ money, the couple took out an injunction against a jewellery company, Jewels DeFred, and its director, Mr Ho Chi Kwong. The injunction froze the company’s assets which were worth up to $2million. This amount was allegedly paid by Mr Rasif by telegraphic transfers and cheques to buy diamonds and jewellery from several companies, including Jewels DeFred. However, Jewels DeFred contested the injunction and the High Court set it aside in July.

Also, in that period the couple also obtained an interim injunction in the Hong Kong High Court to freeze HK$20million (US$4million) deposited in a bank by Ingenious Ideas International – a company incorporated by Mr Rasif in the British Virgin Islands. The reason for this was information that in May the BVI company has deposited HK$20 million in the Hong Kong bank. Now the company cannot be found on the list of registered companies.

The couple also took an order to freeze assets belonging to six other defendants and totalling about $14 million. If it is proved that Mr Rasif transferred money to the six defendants, the couple can apply to the court to determine how the money can be recovered from the defendants.

The allegations that the UK Conservative party had an illegal property deal to raise money secretly from a foreign source using a complex real estate transaction connected with its former London headquarters have already been described  previously. By means of this transaction, the party avoided stamp duty of more than GBP 600 000. Before the deal, the property had belonged to a BVI company Platinum Overseas Holdings Ltd. Now, new data regarding this matter has emerged.

The Tory party chairman, Francis Maude, appears to be the senior figure authorising the Conservatives’ controversial deal in order to buy their former headquarters through an offshore company.

Christopher Moran, a businessman, admitted that in 2005 he worked for the Tories to negotiate the deal. The party expects to sell the properties for more than GBP 30 million and to use a profit for funding the party’s election campaign. However, Moran emphasized that there had been nothing improper in the deal.

In 2005, Moran approached the US financial institution Citigroup, which acted for foreign investors who owned the property’s freehold through a BVI-registered Platinum Overseas Holdings. Moran said he could not have known who controlled Platinum, and Citigroup had not disclosed the identities of the investors to him. To buy the freeholds, he had to buy the offshore company.

In 1982 Moran was expelled by Lloyd’s of London insurance market for discreditable conduct, in 1986 he was censured by the Stock Exchange, and in 1992 he made a USD 2 million settlement after which he was accused of insider trading in New York.

Liberal Democrats stick to the opinion that even if everything is legal, buying the offshore company id not the way political parties should behave.

Regarding the story about BVI companies connected to money laundering charges through Manhattan, the names of these 16 BVI-registered companies have been revealed to the public this week.

The New York District Attorney’s Office named the companies indicted in connection with money laundering activities that could have been tied to terrorist activities by means of illegal transfer of billions of USD from Brazil and other South American countries through New York banks to the Middle East.

The BVI-registered companies indicted in New York are:

• Avion Resources Ltd. (registered address: Tropic Isle Building, P.O. Box 438; seems to be registered by Integro International Incorporations);
• Bahia Blanca Ltd. (registered address: Sea Meadow House, Blackburne Highway, P.O. Box 116; seems to be registered by The AMS Group);
• Best Consulting Ltd. (registered address: Akara Bldg., 24 De Castro Street, Wickhams Cay 1; seems to be registered by Mossack Fonseca & Co (BVI) Ltd);
• Beverly Hills Group Inc. (registered address: The Creque Building, P.O. Box 116);
• Farswiss Asset Management Ltd.

as well as

• Braza Corporation;
• Chettiar Business Inc.;
• Gatex Corporation;
• Harber Corporation;
• Harborside Corporation;
• Mabon Coporation;
• Midland Financial Inc.;
• Phoenix Export Import S.A.;
• Safe Port Investments Corp.;
• Silver Commodities Ltd.;
• Tigrus Corporation,

all with registered address at Vanterpool Plaza, 2nd Floor, Wickhams Cay 1.

The Financial Services Commission is intending to get in touch with the BVI authorities to see if anti-money laundering laws were broken. A local investigation can be initiated as well.

The scandal around Thai Prime Minister and his family related to taxation and BVI-registered companies Ample Rich and Win Mark has already been discussed, but the story continues to develop.

The question where Thai Prime Minister Thaksin Shinawatra deposited his money intrigues the investigators and the public. His relatives earned USD 1.9 billion having sold their telecom empire in January 2006. The investigation of whether Thaksin’s family legitimately paid no tax on its USD 1.9 billion sale of Shin is being carried out.

Auditor-General Jaruwan Maintaka suggests the money is still inside the country. A week after the Prime Minister was ousted in a bloodless coup, he was living in a luxurious apartment in London, while army-appointed generals were conducting a probe regarding alleged corruption by his administration. Cabinet colleagues and their families purportedly abused power to benefit themselves or others.

In accordance with Forbes magazine, Thaksin and his family handle USD 2.2 billion. If they are found, the money could be frozen and ultimately seized. But where’s the finances, the question is.

A foreign news agency reported that 2 planes had carried more than 100 large suitcases when  Thaksin had been on trip from September 9 to Kazakhstan, Tajikistan and Finland for the Asia-Europe meeting before. So, this was before the September 19 coup. One of these was a government-owned plane and the other was chartered from Thai Airways. Air Force Colonel Montol Suchukorn claimed there was nothing unusual about the flight. Each representative of the government carried a few bags. Thai Airways reported that its plane also ferried Thaksin and his entourage to visit summits in Havana and New York from London.

Even if the suitcases on government flights were full of money, it is just impossible to walk into a bank to deposit millions in cash there nowadays.

In 1983, Thaksin and his wife set up a computer dealership that developed into Shin Corp dealing with mobile phones and satellites, media and the Internet. In 2001, he was elected, and after that the conflict of interest allegations persisted. He was claimed to tailor government policy to suit his businesses. In January, the Shinawatra and Damapong families made a the tax-free sale of their 49.6% stake in Shin to Singapore state investment firm Temasek Holdings for USD 1.9 billion in cash . This caused protests that led to Thaksin’s downfall.

Pridiyathorn Devakula, Bank of Thailand Governor, said that since the deal there had been no unusually large money movements out of Thailand. Under Thai rules, a physical person can transfer USD 1 million per year or USD 10 million a year for investment purposes, out of Thailand not notifying the central bank.

The investigation is going to be deepened including an international search for secret offshore bank accounts.

The Shin investigation revealed a complex web of share transactions between Thaksin’s children that involved holding the British Virgin Islands - registered companies.

On September 29, 2006, Chadbourne & Parke LLP has won dismissal of shareholder derivative claims submitted in federal court against the directors of a British Virgin Islands hedge fund, Integral Hedging Offshore, Ltd.

One of the investors of Komodo Holdings brought a derivative suit against Integral’s directors alleging corporate waste and breach of fiduciary duty. Despite the fact that the complaint was filed in New York and Integral purportedly was doing business in New York, BVI law dealt with the question whether a derivative suit could be prosecuted. So, the directors moved to dismiss.

In accordance with BVI law, shareholder derivative suits are not accepted (with the exception of narrow circumstances not applicable here).

On September 27, Judge Richard Berman of U.S. District Court for the Southern District of New York agreed to dismiss the derivative claims. The court indicated that, according to the law of the state of incorporation, which in that particular situation was the British Virgin Islands, a shareholder has right to object to conduct occurring in the operation of the corporate enterprise. Also, the court concluded that under English (unlike American) law, it is not permitted to maintain a derivative suit to remedy a breach of fiduciary duty that is not connected with self-dealing by those in control.

Chadbourne & Parke LLP is an international law firm with the headquartered in New York City that provides a variety of legal services. The services Chadbourne & Parke provides include mergers and acquisitions, corporate finance, project finance, securities, telecommunications, energy, commercial and products liability litigation, securities litigation and regulatory enforcement, special investigations and litigation, antitrust, intellectual property, insurance and reinsurance, domestic and international tax, environmental, bankruptcy and financial restructuring, employment law and ERISA, real estate, trusts and estates and government contract matters.

On September 27, 2006, Bank of America acknowledged that it allowed South American money launderers to illegally move USD 3 billion through a single Midtown Manhattan branch. Between May 2002 and April 2004, the money originating mostly from offshore shell companies went to Panama and the British Virgin Islands.

The Manhattan district attorney, Robert M. Morgenthau expressed his hope that this would make the federal government do more efforts to track illicit money transfers, including thosr related to terrorist financing.

Bank of America reported taking its anti-money laundering obligations seriously and never knowingly doing business with persons or businesses involved in illegal activities.

Most of the funds came from Brazil through a licensed money transmitter in Uruguay and then reached the branch of Bank of America. According to Morgenthau, the laundered USD 19 billion could not be directly tied to terrorists. He also said that, to escape detection, the launderers might have already shifted their money laundering operations outside Manhattan.

Over the last 3 years, Morgenthau’s office has shut down many illicit money transfer businesses, uncovered USD 19 billion of money laundering operations and returned USD 19 million.

Now, Bank of America is required to comply with any new anti-money laundering regulations proposed by regulators, without waiting for their enactment into law by Congress and President. Also, the bank agreed to pay USD 6 million to a district attorney’s office fund and USD 1.5 million to cover the costs of the 2-year investigation dealing with money laundering at the branch.

Bank of America is the largest commercial bank in the United States.

Another case is connected to Valley National Bank at 275 Madison Avenue in Manhattan. Robert M. Morgenthau announced the indictments of 34 people in Brazil and Uruguay and 16 companies in the British Virgin Islands on money laundering charges related to operations in Manhattan. All these charged cannot be extradited, but the charges are needed to help Mr. Morgenthau get a court order to seize USD 17.4 million now frozen at Valley National Bank.

Valley National Bank was not charged with any wrongdoings and cooperated with the investigation. The bank is one of the largest commercial banks headquartered in New Jersey.

2 years ago, the Bush administration dropped a proposal of increasing the Internal Revenue Service’s budget to pursue terrorist financing from USD 24 million to USD 36 million because it seemed too expensive to taxpayers. This year, USD 112 million has been budgeted to combat money laundering, which is an increase of 5.4% as compared to the last year. Mr. Morgenthau’s office carrying activity solely in Manhattan spent USD 1.5 million to investigate illegal money transfers at the Midtown Bank of America branch.

The Australian Crime Commission is investigating tax schemes, set up by Ross Seller – the top Sydney tax lawyer. Tax Office claims that making premium Scotch whisky was financed by fraudulent tax haven loans.

The Commission has found the evidence that the USD 70 million tax minimisation schemes are connected with a British Virgin Islands finance company. This BVI-registered company is run by Philip Egglishaw, a tax haven guru.

Pat McCarthy is the Sydney accountant who established the whisky schemes with Seller, who did not comment on the situation much.

About 80 businessmen have committed almost USD 1 million in 3 identical premium whisky schemes as the investors purportedly claimed tax deductions up to 400% of their actual outlays. It is alleged that in the 3rd of the 3 schemes, the Virgin Islands company Chambers Finance promised to lend USD 23 million to a Hong Kong entity in 2001.

The Tax Office claims that the cost of making and managing malt Scotch whisky at the Speyside Distillery in Scotland was awfully inflated. Just USD 5 million out of USD 31 million committed to the 3rd scheme was paid to Scotland.

Now, the investors are about to have their deductions disallowed and, possibly, face civil penalties.

McCarthy claims that the loans from Chambers Finance are not fictitious and that he did not know who stood behind the Hong Kong company.