New Zealand accountants backdated Malta trust documents during Panama Papers
New Zealand accountants were backdating documents during the publication of the Panama Papers in 2016 for trusts that had been set up seven months earlier by senior Maltese government figures, Maltese investigators say.
Emails quoted in a draft report by Malta’s anti-money laundering agency show that while The Australian Financial Review was putting questions in late March 2016 to then NZ prime minister John Key about offshore trusts set up by Malta’s Energy Minister Konrad Mizzi and the prime minister’s chief of staff, Keith Schembri, Dr Mizzi was giving instructions to backdate changes to his New Zealand holdings,Neil Chenoweth reported on The Australian Financial Review.
It is the first indication that records of New Zealand trusts were altered by clients, in a structure that Maltese investigators suspected could be used to channel funds from Azerbaijan to the Seychelles, to Dubai, to Panama and finally to Malta via NZ trusts. Mizzi and Schembri have denied this.
Dr Mizzi had claimed in Malta in March 2016 that his Panama company was never used and had assets of only €92, but in reality the company had issued $10,000 in shares to his New Zealand trust, reflecting a much greater scale of operation, until the records were backdated.
The move was described in emails as a “correction and clarification”.
At the time, Mr Key defended the NZ trust laws, claiming on April 4, 2016 that “New Zealand has full disclosure of information”.
In an about-face seven days later, he announced an inquiry into offshore trusts in response to the Financial Review coverage, and later changed reporting requirements for the trusts.
The latest revelations demonstrate how easy it is to alter trust documents, even after the changes. At a political level it is particularly sensitive because it was a senior cabinet minister in Malta seeking to alter records in New Zealand.
Online news service TheShiftNews.com in Malta first reported the backdating, quoting an unpublished draft report by the Financial Intelligence Analysis Unit.
The Mizzi and Schembri holdings were revealed in the Panama Papers, a leak of 11.5 million documents from Panama law firm Mossack Fonseca, which were obtained by German newspaper Süddeutsche Zeitung, and investigated in a collaboration led by the International Consortium of Investigative Journalists.
The files showed that Nexia BT, an accounting firm in Malta that acted for Schembri and Mizzi, ordered two Panama companies to be incorporated, Tillgate Inc and Hearnville Inc, that were transferred to the two men in 2015, each with one share with a nominal value of $100.
In July 2015 Mossack Fonseca settled two trusts in New Zealand for the two men, Rotorua Trust and the Haast Trust, which would be overseen by Bentley New Zealand’s trustee company, Orion Trust (New Zealand) Ltd.
The trusts were settled by issuing 100 of the $100 shares in each Panama company to the trustee company, which owned the assets for the trusts, giving each Panama company issued capital of $10,000.
At the time, the only government notification required was to notify New Zealand’s Internal Revenue that a new trust had been set up. However, the trustee company was required to maintain accurate records.
In February 2016, Maltese journalist Daphne Caruana Galizia revealed that Mizzi and Schembri had set up New Zealand trusts and Panama companies. But both men said they were shell structures that had never held assets.
In a television interview Dr Mizzi said the company was “empty” and he had invested only €92 in it.
The FIAU report, which deals only with Mr Mizzi’s company, Hearnville Inc, said that in a series of exchanges between March 28 and April 1, Mossack Fonseca’s nominee directors cancelled the original share certificate of 100 shares and issued a new share certificate of one share to Orion Trust (New Zealand).
It was during this period that the Financial Review was putting questions to Mr Mizzi and Mr Schembri about their New Zealand trusts, ahead of the first publication of Panama Paper stories on April 3.
The FIAU quoted an April 1 email from Juan Carlos Martinez of Mossack Fonseca (Panama) to Karl Cini of Nexia BT: “The reason for this replacement is the correction and clarification of the reference to the Paid Up share capital which, in the previous resolutions and certificates was wrongly stated as $10,000, when actually it was only $100.”
As a result of this email, the FIAU report says, “a new board resolution and share certificate were drawn up and backdated to 21st July 2015”.
The FIAU report described the change as “highly irregular” and noted that the backdated minutes did not actually authorise the issue of the new share certificate “while also raising suspicion given the ease with which such documentation was amended and backdated”.
“This document may have been fabricated to coincide and substantiate requests and claims following the revelations of the Panama Papers,” the FIAU draft report states.
While the FIAU report focuses on the change in the Panama company, it would have required a corresponding change in the Rotorua Trust administered by Bentleys New Zealand.
Rotorua Trust was settled in July 2015 with a single asset, 100 shares in Hearnville Inc, which after the changes seven months later was deemed not to exist, and replaced with a share certificate for one share.
Legal sources in New Zealand said it was permissible to alter trust assets retrospectively to correct genuine errors. However, if changes were made for other reasons, this became more problematic.
Accountants would rely upon information provided by clients.
Under the amendments to foreign trusts law introduced after the Panama Papers, details of the settlor and beneficiaries of a foreign trust must be provided to the government, but there is no continuous disclosure regime that would show changes to assets.
“Unfortunately I am unable to make any comment on any specific matters due to a duty of confidentiality under the accountant’s code of ethics,” Bentleys director Roger Thompson told the Financial Review.
Mr Cini also declined to comment, citing confidentiality obligations.
“Whilst I categorically deny any wrongdoing, I am precluded from commenting,” he said in an email on Sunday.
“I assure you that I have co-operated with the investigative authorities to the fullest extent and will continue to do so.”
The Daphne Project, a collaboration of 18 media groups organised by Paris-based group Forbidden Stories to investigate reports that Daphne Caruana Galizia was working on before her murder last October, revealed last month that in January 2016 Nexia BT had been attempting to set up bank accounts in the Bahamas for Hearnville and Tillgate.
The documents prepared for the bank by Nexia BT stated that 17 Black Ltd, a Dubai company which had received $1.4 million from a Seychelles company linked to Azerbaijan, would be one of two “main target clients” from which the two Panama companies expected to earn €150,000 a month.