BVI Offshore Business: Grey Area

Two children of ex-Prime Minister of Thailand Thaksin Shinawatra have been ordered by anti-graft authorities to pay US$616 million (20 billion baht) in outstanding taxes and fines, from the last year sale of Thaksin’s telecom giant Shin Corp. to Singapore’s government’s Temasek Holdings, for 73.3. billion baht (US$2.3 billion).

The transactions of BVI-owned Shin Corp. have been traced starting from November 2006, when lawyers and taxmen insisted on the taxation of capital gains realized from the sale of company’s shares. These deals connected with Temasek Holdings-Shin Corporation and British Virgin Islands-registered Ample Rich Investments Co Ltd. evoked sharp reaction of the public and investigators.

The sale of Shin Corp. to Temasek, on which the family earned 1.9 billion dollars, was structured to avoid paying any taxes; the ex-Prime minister claimed that the sale was completely legal. However, the corruption investigators ruled that Thaksin’s two children had avoided paying taxes owed by their holding company, BVI-domiciled Ample Rich.

According to the current information provided by the Assets Examination Committee, Pintongta and Phantongtae Shinawatra set up a BVI company as part of the scheme to avoid paying taxes on the sale. They sold the shares of Shin Corp., owned by Ample Rich, to themselves at a price of 1 baht each, before selling their controlling stake in Shin Corp. to Temasek at 49 baht a share.

Actually, only after the deal was finished it was discovered that they were the owners of Ample Rich. AEC decided they should pay the tax because Ample Rich is a foreign company operating in Thailand.

When the U.S. Security and Exchange Commission started a usual investment check of Battery Wealth Management, there was no information found on the investments of Al Parish – the part-owner and vice president of the company. The hidden business activities of Parish were discovered in February 2007. Now, according to a civil case initiated by SEC on April 5 2007, Al Parish is accused of security fraud; he could be responsible for the disappearance of US $134 million. Steve Grimaldi, Supervisory Special Agent of the Federal Bureau of Investigation, confirmed there could be several criminal charges including mail fraud, wire fraud, money laundering and conspiracy.

The investigators who were tracking Al Parish’s finances say the missing amount of money could be located in an offshore account in the British Virgin Islands. His passport confirms that the popular economist traveled to the BVI.

Currently Parish is charged of lying and providing false documentation to the U.S. Securities and Exchange Commission. Last week, at a federal court hearing, a chart was sketched to illustrate how investors’ money could go into several different ‘buckets’, including real estate, lifestyle and hard assets. Those amounts are only part of the hundreds of millions of dollars that were claimed to be in Parish’s investment accounts.

Parish and two of his companies, Parish Economics LLC and Summerville Hard Assets LLC have invested on behalf of at least 300 individuals and business entities. The suit filed by SEC in the US District Court of South Carolina alleges that Parish provided fraudulent statements to his investors, saying that the investments in his four managed accounts were growing and totaled more than $314 million, while in reality those accounts held less than $230,000 total.

The SEC’s complaint includes the specific allegations that at least since January 2005 Parish provided investors with quarterly statements which showed the wrong picture of the investors’ returns and assets, and misrepresented the rate of return of investment vehicles. It is asserted in the court documents that his wife instructed their administrative assistant to begin transferring cash into the names of family members.

David Dantzler, an attorney with Hays Financial Consulting, said that Parish’s assets would be moved to a storage facility pending the outcome of the civil complaints. When the investigation is complete, whatever case is built against Parish or his wife will be presented to a grand jury, which will decide whether criminal charges are to be brought.

Last week the US Securities and Exchange Commission started proceedings against the Park Financial Group, Inc., a registered broker-dealer with a disciplinary history, and its principal Gordon Cantley. The company is alleged of creating and using a fraudulent scheme involving the securities of Spear & Jackson, Inc., and additionally in failing to file Suspicious Activity Reports, in violation of the firm’s record-keeping obligations.

The Commission’s Division of Enforcement has already obtained injunctive relief against Dennis P. Crowley, the former chief executive officer of Spear & Jackson, for violation of several provisions of the federal securities laws when taking part in the pump-and-dump scheme. The SEC Order revealed that between February 2002 and July 2003, Park and Cantley executed numerous trades in Spear & Jackson stock for three companies registered in the British Virgin Islands and secretly controlled by Crowley.

Crowley specifically gave Park and Cantley sell orders for the BVI Companies’ accounts; they filled these orders although any transactions on these accounts required the written approval of at least two authorized individuals, and Crowley was not an authorized signatory. Park and Cantley also executed Crowley’s trades knowing that he was the chief executive officer of Spear & Jackson, and that the accounts of the above-mentioned BVI companies traded exclusively in Spear & Jackson stock, buying and selling shares.

Park and Cantley also knew that the BVI Companies were transferring large amounts of Spear & Jackson stock to a stock promoter, and company’s stock price was increasing. During the relevant time period, Park and Cantley generated approximately $2.5 million by executing more than 200 trades in Spear & Jackson stock for the BVI Companies’ accounts.

Walter Anderson was the biggest convicted tax cheat in the history of United States. Some months ago he was pleaded guilty to two counts of federal tax evasion, and one count of defrauding the District of Columbia for failing to report about $365 million of personal income on his 1998 and 1999 federal returns.

Another $100 million he earned from other business projects during the 1990s. Anderson avoided paying taxes by using aliases, shell companies and offshore tax jurisdictions, one of them was British Virgin Islands. Walter Anderson started a long-distance telecommunications business in the 1980s. The prosecutors alleged him of registering corporations in BVI to hide the income, when his first company, Mid-Atlantic Telecom, merged with another company in 1992.

In the period of 1992-1996, through several transactions he transferred his ownership interests in three telecommunications companies to other companies, of which he was the main owner. After these transactions the value of each of those corporations increased very much.

After seven years of prosecutorial pursuit, Walter Anderson was sentenced to spend nine years in prison for failing to pay more than $200 million in taxes. He was also ordered to pay about $23 million to District of Columbia tax collectors, but a federal judge ruled that he won’t have to pay the Internal Revenue Service restitution ranging from $100 million to $175 million, because prosecutors listed the wrong statute in Anderson’s plea agreement.

Recently the Times informed that Nigerian Government is seeking to seize control of bank accounts and properties of Chief Diepreye Alamieyeseigha, which was the elected governor of one of the richest oil states of Nigeria. During his being in this post, Alamieyeseigha promised to eliminate the corruption in the country, however his political career ended by the arrest in London on money-laundering charges.

Later on, the information appeared on the enormous scales of his alleged corruption, and the details of how he used London’s banks and property market, to get his assets out of West Africa.

Chief Diepreye Alamieyeseigha was elected in May 1999; in that period his disclosed assets were about £286,000, and his income was £6,000. Four months later, he opened an account at UBS Warburg in London and deposited $35,000 there. He credited these accounts with $1 million and $500,000 in April and May 2001. These amounts were used for purchasing financial bonds. Also, in 2002 Chief Alamieyeseigha acquired a Seychelles-incorporated Santolina Investment Corporation, and opened several bank accounts on its name. One of them, opened with the Royal Bank of Scotland, received 26 deposits between January 2004 and March 2005, with the total amount of £2.7 million.

Chief Alamieyeseigha also registered a company in the British Virgin islands, named Solomon & Peters. This BVI company was used by the governor to form his portfolio of British properties, in such a way:

In late 1999 BVI-based S & P paid £241,000 for the lease of a flat in Kilburn. In July 2001 the company bought a large property in the Brondes-bury conservation area, also in northwest London, for £1.4 million.

Next year, BVI company paid £1.4 million for two properties in Finchley. Part of this amount was funded by a £693,500 mortgage. In August 2003, it paid £1.75 million for a flat close to Marble Arch.

Chief Alamieyeseigha was arrested in 2005 at Heathrow, after Nigerian authorities asked Scotland Yard to intervene in the case. However, before standing trial at Southwark Crown Court, Chief Alamieyeseigha escaped to Nigeria using a fake passport.

The High Court in London stated the matter should go to trial. Now the chief is on trial in Nigeria for corruption. The court has been told that he obtained 18 property units in different countries, six companies, more than $6 million in bank accounts in four countries, and even a share in an oil refinery in Ecuador.

The former governor denies most of the charges and is unrepetant about the money in the frozen British bank accounts; by his words, these were unused campaign funds from elections in 2003.

The Tokyo Regional Taxation Bureau has filed a tax evasion compaint with the Tokyo District Public Prosecutors Office against the retired employee in Toshima Ward company. He is accused of stashing cash in Singapore and British Virgin Islands for over two years period, and having evaded about 270 million yen in taxes through his concealment of 760 million yen in income, through his overseas bank account.  The name of the suspected man is not proclaimed to the public.

According to the accused man and other sources, in 2004 he opened an account in a Singapore bank, under his own name. Then he deposited there about 200 million yen he had inherited from his father. Through the bank he set up a paper company in the British Virgin Islands, and opened bank account with this paper company. To this account he wired additional assets of several hundred million yen, that was also part of his inheritance.

The money in the BVI paper company bank account, as well as 200 million yen in Singapore, were invested in various financial products. In the period from 2004 to 2005, the man earned about 270 million yen in his name and about 500 million yen through the BVI paper company. He himself commented on this fact, “As I conducted the trades overseas, I thought the tax authorities would not notice the profits I made. So I didn’t declare them. I regret I failed to declare the profits. As for the profits I made under my own name, I’ve already submitted a revised declaration.”

Concerning the profits made via the British Virgin Islands paper company, he said: “The company is owned by an acquaintance. I only gave advice to the firm. The profits made (through the company) are not mine.”