BVI Offshore Business: Grey Area

More than 11 years after starting of the Trinity tax avoidance case, the Supreme Court of New Zealand dismissed appeals that investors brought. The court upheld penalties which included repaying the tax, plus pay interest on that money and full amount of shortfall penalties.

Both the High Court and Court of Appeal had previously ruled the scheme was tax avoidance, which involved potential tax losses of about $3.7 billion, according to information provided by Inland Revenue.

Investors in Trinity bought a 50-year licence to grow Douglas fir trees on land, owned by the Trinity Foundation companies, and agreed to pay a fee of $2 mln a hectare in 2047, after the trees were harvested. However, investors depreciated the licence fee, and deducted the cost of an insurance policy with a British Virgin Islands-based company.

It was found by justices that, although the claimed deductions complied with the ordinary specific provisions in income tax legislation under which they were claimed, the Trinity scheme involved tax avoidance arrangements. By this reason, on the basis that the deductions were part of a wider tax avoidance arrangement, justices disallowed the claims.

Recently the Australian Securities and Investments Commission (ASIC) has published the fresh list of unlicensed overseas callers - overseas companies that have made unsolicited calls to Australians, and not currently holding their license. The new companies that appear and are functioning in Australia should be licensed by ASIC; without the Australian licence, their operations are unlawful. Among these businesses, there are 8 companies that are located, registered, or pretending to be registered in the British Virgin Islands. These are:

Capital Advisory Corporation, registered in Thailand but claiming to have offices (mail addresses) in Hong Kong and the British Virgin Islands; BVI-registered Global Trade and Transfer Ltd; International Currency Advisors, having one of its addresses in the BVI; PCA Management Trust LL, claiming to have alternate address in the BVI; Price Warner Company Ltd, based in the British Virgin Islands; Philippines-based Pryce Weston Incorporated, which indicates that it has other offices or mail addresses in Hong Kong, BVI and US; Uni World Global Management Limited having its registered office in the BVI; and Worldleader Investment Insider/Worldleader Investment Ltd., which also claims to have its office in the British Virgin Islands.

The companies that have come to the ASIC attention in recent times and have been added to the updated list are: Associated Financial Services, First Standard Consolidated, Pace Capital Corp, Rive Financial SA and Yutaka Commodities, Inc. (none of them is registered in the BVI). The Commission has noted however that this list is not comprehensive, because new company names are coming all the time which are to be added.

The Australian Securities and Investments Commission has published also the list of fake international regulators (overseas share market regulators) about which ASIC is aware; the Commission noticed that no genuine government regulators are existing under the names on the list. To see if a regulator really exists, or to check overseas scam warnings, it would be necessary to see the members list of the International Organisation of Securities Commissions.

Wealthy Australian-Romanian businessman Frank Timis said he would initiate free share issue to some investors of Firepower Operations, an Australian branch of the BVI-based Firepower Holdings Group Ltd. The businessman said that investors who had bought shares in a Cayman-based Firepower company would receive compensation by Christmas or after it. However, no compensations will be paid to the majority of investors, who had purchased shares in a separate Firepower firm listed in the British Virgin Islands.

In September, Mr Timis told that he would give Firepower investors free shares in a British company launched by him and named Greenpower – the company which was probably set up for transferring money from Firepower, and which was intended to build a new business with some of Firepower’s products. Now, his representative said that giving such promises Mr Timis did not realise the extent of the fraud within the Firepower group, major part of which was centred exactly in BVI.

The liquidator of the failed company Bryan Hughes does not believe that investors of either Cayman- or BVI-based Firepower would receive any sum of money from Mr Timis, provided that both the businessman and his new firm Greenpower had no financial or executive links with Firepower group, so they have no obligations to compensate its investors. Mr Hughes also estimated that there are just about 40 people who held shares in the Cayman firm and which would be compensated, while the BVI company had more than 1000 investors, which are now excluded by Mr Timis from the promised share issue.

Greenpower executives say that there are more than 100 people who held shares in the Cayman Islands firm, and that those investors who receive shares in Greenpower would be able to keep them or recoup the money they invested in Firepower by selling the shares to institutional investors who had been lined up by Greenpower.

Publisher of BVI News Online Merrick Andrews is going to file formal complaint to the British Virgin Islands governor and deputy governor. The subject of the complaint is the ban of one of the publication’s reporters from attending magistrate court proceedings.

Andrews said he had not received information from the magistrate, and he sought the assistance of police officers concerning court matter on November 21. After this case, he tried to contact the Governor and Deputy Governor of the BVI, but without success. Now, having not received any kind of verbal respond, he is preparing formal letter on the matter.

Magistrate Valerie Stephens banned the BVI News Online reporter from her court because of the report concerning burglary at the magistrate’s home; also, being requested to pull the story, the editor refused to do it. The magistrate is convinced that the story should not be published because it “compromised her security”, but Andrews said the report was in relation to a burglary, and not to the magistrate’s security.

By words of a reporter, that is a sad week for journalism and freedom of expression in the BVI, and another sad fact is that the territory has no media association. The publisher/editor said that they are going to continue to fight the injustice from the justice system.