Offshore ‘mastermind’ ran $300M ‘shadow bank’ for clients’ tax-haven money, draft CRA report says

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According to a confidential draft report from the Canada Revenue Agency, hundreds of millions of wealthy Canadians had access to a Vancouver-based “shadow bank” that they could use to buy homes, vacation property, cars and plane tickets with money deposited in tax havens. used to do for

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The organization reportedly operated covertly for years and was designed to hide money from authorities.

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The entities at the center of the operation, known as the Corporate House Group, opened dozens of shell companies and accounts in tax havens around the world, paying people thousands of dollars in front of the companies and signing checks without knowing what they were for. , and even bought untraceable gold coins worth more than $8 million in a seven-month period in 2013, the draft report said.

Bank records show that more than $338 million flowed through the organization’s Canadian accounts between 2010 and 2016 alone, much of it coming directly from accounts in the Caribbean and Switzerland, according to a December 2018 document, which The copy was obtained by businesshala News.

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The document reads, “The corporate house can be described as a shadow bank as it provides bank-like services to its customers, such as receiving and remitting money, making bill payments and providing loans.” “The corporate house has been structured in such a way as to conceal the real ownership, to hide its activities and to confuse those trying to understand the relationships.”

The corporate house no longer operates under that name, and it is not clear whether a successor entity is still operating the business.

But while it was active, “the mastermind behind the corporate house operation,” says the CRA, was a West Vancouver millionaire and former attorney named Fred Sharp.

CRA Draft Report Details Conclusion

businesshala/Radio-Canada first reported in 2016 that Sharp was the top Canadian offshore middleman The Panama Papers leaked and was known as the “go-to” investment firm for wealthy Canadians seeking privacy, and minimal taxes, for their assets. He too In recent Pandora Papers leaks and it was last summer charged in the United States With the establishment of offshore shell companies for a huge pump and dump stock fraud.

But the extent of his behavior in Canada – and what the Canada Revenue Agency (CRA) knew about his organization and what he was doing – has never been revealed with more detail.

Among the details in the CRA’s draft findings:

  • The CEO of a publicly traded mining company used the services of a corporate house to hide his income. Starting in 2011, instead of the mining company paying his salary directly, it was routed through a shell corporation registered in the Caribbean island of Nevis, which billed the CEO $20,000 per month for “consulting services”. . The executive declared only the minimum income on his tax return for the next four years, but received $807,500 from an alleged line of credit with a succession of corporate house companies. The report calls the loans a “sham” that is “designed to give the impression to a third party, the CRA, that a credit facility exists between”. [Sharp] And the taxpayer, while … all parties to the arrangement knew that the source of funds did not come from the debt but from the taxpayer’s unreported income.”
  • Charterhouse Capital Inc. The company, a corporate house called, invested $26 million through a Vancouver attorney’s trust account over a seven-month period in 2013 and millions of dollars in earlier years. Most of the money came from tax havens such as Belize, Nevis and the Marshall Islands. In one transaction, $2 million from a Samoa-registered company was used to pay off a corporate house client’s line of credit at TD Bank and a mortgage at the Bank of Montreal. The report said the corporate house made “extensive use” of the trust accounts of several lawyers. “Trust accounts are open to abuse as a claim of solicitor-client privilege has been used to shield them from CRA scrutiny,” the report said. Lawyers’ trust accounts were “merely a convenient conduit for money providing a veil of legitimacy.”
  • One of the people at the front, also known as the “nominees,” was hired by the corporate house, paid to serve on paper as a director of a Delaware company. He told the auditors that he signed the checks without knowing what they were for. “There was never any source document in support of the check. All [he] There was no need to sign checks and ask questions,” the draft report says.[His] Payment for this service was to be based on 1/8 or 1/4 per cent of the amount flowing through the account. This usually equates to one payment [him] $3,000 to $4,000 a month.” His signature was also on some authorizations to transfer money from a bank account, but he told auditors he never signed them, the report says. The auditors determined that The signatures were identical and they just had to be copied on each authority, whoever was arranging the transfers.
  • In his one-on-one conversation with the CRA auditor, Sharp claimed that “Corporate House does not operate a business in Vancouver,” the report says. Instead, its various Canadian-registered corporations are just “agents” of foreign entities, he reportedly said. As a result, most of those Canadian entities will either file a tax return claiming no revenue – known as a “void return” – or not file a tax return at all. “Given the fact that millions of dollars flowed through their Canadian bank accounts, zero returns are highly doubtful,” the report said.

Sharp’s lawyers did not respond to a request for comment. Last month, when businesshala News and the Toronto Star sent a list of questions about his role in the Pandora Papers and the US allegations against him, a lawyer replied that Sharp had no comment.

In 2016, Sharp said that offshore shelters “help protect people’s privacy from journalists who will stop at nothing to publish a good story.”

Associates failed to report nearly $5M in earnings: CRA

The corporate house had over the years had a roster of employees, agents and associates, many of whom the CRA is now trying to audit.

The report said Richard Heathe and his late wife, Mary Heathe, were both accountants who “appear to be close associates … playing a swift and active role in setting up offshore structures on behalf of corporate house clients.”

But separate court filings show that he also benefited from the services of the corporate house. (Mary Heathe died Sunday, according to one of her attorneys.)

“You are receiving wire transfers to your domestic bank accounts from various offshore entities located in Barbados, St. Kitts and Nevis, Belize, Bahamas, Samoa and the Marshall Islands. The reference field on some wire transfer documents indicates that these are consultation fees. ,” says a December 2017 letter from a CRA auditor to Richard Heathe, filed in the Federal Court of Canada. The letter also mentions wire transfers and checks worth thousands of dollars from various corporate house entities.

The court filing notes that Hethe’s explanation for the payments is that they are a line of credit with Fred Sharp, but the auditor rejected this, stating that they are not an actual debt, but “offshore money and There is a way to repatriate the income you earn. Offshore.”

In total, the CRA claims that Richard Heathe reported no more than $2.8 million in income from offshore sources between 2007 and 2015.

A similar letter to Mary Heathe calculated her offshore earnings between 2009 and 2015 at a little over $2 million.

A lawyer for Hethys said Monday that it would not be appropriate to comment, citing an ongoing court case between the federal government and Sharp and several of his associates and clients, which will be heard Wednesday in the Federal Court of Appeals.

In addition to Sharpe and the Heathys, the CRA is also auditing Sharpe’s wife and at least nine other people or companies linked to the corporate house.

Audit hurdles encountered in Canada

America criminal case against sharpe Two others associated with the corporate house and a US lawyer based in Mexico are accused of orchestrating the long-running penny stock pump-and-dump scheme. The FBI alleges that Sharp and the corporate house set up shell companies to hide ownership of the shares as part of the plan.

a parallel civil fraud case His assets have been frozen around the world because of five people linked to the corporate house, brought against Sharp by the US Securities and Exchange Commission.

While those cases proceed in the courts in the US, CRA’s efforts to audit Sharp and those same associates are facing hurdles.

Since 2016, they have filed more than 80 court challenges against auditors’ attempts to obtain their bank, credit card and other financial records.

Sharp and others claim that the CRA is using its audit powers—whereby it can force them to illegally forward documents from them and their financial institutions—in what is actually a criminal investigation.

The CRA’s internal draft report states, “Many clients have also hired criminal attorneys under the audit. Legal bills submitted by Fred Sharp for GST purposes show that these criminal attorneys are involved in these civil audits.” There has been close coordination between states.

look | ‘Pandora Papers’ leak reveals offshore tax haven:

Discussing the matter, a senior CRA official told businesshala News in a background briefing that three…

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