Liberal fundraisers held millions in offshore trust: report
It was Labour Day weekend in 2012.
Canada’s future prime minister, Justin Trudeau, was vacationing with his family in the picturesque mountain village of Mont-Tremblant, Que., with a lot on his mind. After years of speculation, he had decided to make a play for the country’s top political office.
With him that weekend was longtime family friend Stephen Bronfman, 53, a third-generation descendant of one of Canada’s wealthiest families that had founded iconic brands such as Seagram, the Montreal Expos and the Eaton Centre.
“(Trudeau) came to me and said, ‘You know, I’ve made a decision. I’m going to run for the leadership,’” Bronfman recalled in a 2013 interview. “I’d always told him, especially since he’d gotten in politics and was first elected, ‘Justin, anything I can do to help, just let me know.’”
The well-connected Bronfman, a known philanthropist and environmentalist, took the reins of the party fundraising machine in late 2013, significantly boosting annual donations.
“The goal is to raise a lot of money and to help Justin become the next prime minister. Simple, simple goal,” said Bronfman.
Two years later, Trudeau and the Liberals swept into power, in part, on a promise to fight for the little guy, lower taxes on the middle class and raise them on the rich — a populist plank that remains a central theme for his government today.
“Our government has long known — indeed, we got elected — on a promise to make sure that people were paying their fair share of taxes,” Trudeau said shortly after his election victory. “Tax avoidance, tax evasion is something we take very seriously.”
Two generations of Liberal fundraisers — Stephen Bronfman and his godfather, 88-year-old retired senator
Leo Kolber — are tied together in a complex offshore structure that amassed $60 million US in a tax haven beyond the reach of tax collectors in Canada, Israel and the United States, a newly leaked trove of documents reveals.
Buried in the Paradise Papers, a massive leak to the German newspaper Süddeutsche Zeitung and the International Consortium of Investigative Journalists, which includes the Toronto Star and CBC/RadioCanada, are more than 5,000 pages of internal records detailing how the Bronfmans and Kolbers invested in Israel through two offshore trust funds in the Cayman Islands.
It was a two-family affair: Stephen Bronfman personally lent millions to the Cayman trust that handled his family’s investments in Israel, run by Leo Kolber’s son, Jonathan, 55.
Offshore trusts are perfectly legal. Wealthy Canadians have long used them as estate-planning tools for moving wealth that has already been taxed in Canada to offshore jurisdictions with far lower, or no taxation. If that wealth were left in Canada, tax would have to be paid on its investment returns yearly.
Internal email correspondence and financial records in the Kolber trusts appear to show evidence of bogus records to hide payments, false invoicing and six-figure gifts to avoid paying tax, raising red flags for experts consulted by the Star and CBC/Radio-Canada.
To remedy tax concerns over the years, the Bronfman and Kolber advisers kept two sets of books, opened shell companies in tax havens including Nevada and the British Virgin Islands and created other offshore trusts, working the laws of three different countries to circumvent taxes, the records appear to show.
“This definitely merits an audit by the Canada Revenue Agency,” says Denis Meunier, former director general of compliance at the CRA.
The allegations are vigorously denied by Montreal lawyer William Brock, representing the Kolber and Bronfman families.
“My clients have always acted properly and ethically, including fully complying with all applicable laws and requirements,” he wrote in a statement to the Star and the CBC. “Suggestion of false documentation, fraud, ‘disguised’ conduct, tax evasion or similar conduct is false and a distortion of the facts.”
Jonathan Kolber established the trust in 1991 because he was leaving Canada permanently for Israel and the country recommended new residents establish trusts to hold assets amid Middle East volatility, reads Brock’s written statement to the Star and CBC.
Brock’s statement says the Kolber trusts were never subject to Canadian taxation because they were always managed and controlled in the Cayman Islands — beyond the reach of Canadian tax law.
The Toronto Star and CBC/Radio-Canada took the documents to three leading tax experts in Canada and the United States who each spent days reviewing them before offering their assessments.
Grayson McCouch, a trust expert at the University of Florida, said managers of the Kolber trusts attempted to “circumvent” tax liability and entered into “abusive transactions” that appear to have violated U.S. tax law.
“When you see a pattern of intentional recharacterizations or mischaracterizations, or intentional concealments of where funds are coming from or where they’re going to … there are lots of red flags and I would expect tax authorities specifically to be very interested in following up,” he said in an interview.
The documents were leaked from the internal records of Appleby, a law firm founded in Bermuda that specializes in facilitating offshore incorporation, and corporate services provider Estera, which operated as part of Appleby until 2016.
In a written statement, Appleby said it “has thoroughly and vigorously investigated the allegations and we are satisfied there is no evidence of any wrongdoing, either on the part of ourselves or our clients.”