SIGNATURES FOR SALE
Nominee directors are paid to put their name on corporate documents so the real owners don’t have to
In reality, Karen McIntyre lives on the third floor of a red-brick apartment block in Scarborough where cases of empty beer bottles pile up beneath the cab of an abandoned pickup truck out front.
On paper over the past two decades, she was one of the country’s busiest corporate officers, having simultaneously served on the board of directors for almost 200 Quebec companies.
Unlike many corporate directors whose salaries have ballooned into the millions, McIntyre, a former legal secretary, was only paid $100 per company each year.
McIntyre is what the international tax avoidance industry calls a “nominee director:” someone who agrees to put their name on public documents so that the real owners don’t have to. She is a signature for sale. “To be an officer and director on 200 companies is craziness,” said Toronto tax lawyer Jonathan Garbutt. “There’s no way that’s legit. There’s no way you could possibly keep track of all that.”
A Toronto Star/CBC/Radio-Canada investigation has uncovered records from the Panama Papers leak showing how Canadian nominee directors have provided anonymity to tax evaders who hide behind the shroud of corporate secrecy.
McIntyre provided a front for companies involved in massive tax evasion in the United States, an alleged “blood diamond” deal in Congo and alleged violations of international law related to the construction of Israeli condos on occupied Palestinian land.
Everything about her corporate directorships was a fiction. The companies she ran on paper had no assets or business in Canada. She had no knowledge of their business activities. She took instructions from lawyers, signing on dotted lines in exchange for money. No questions asked.
McIntyre declined to be interviewed for this article, telling the Star: “It goes way, way, back years and years ago.” She was more candid when she was subpoenaed as part of an ongoing $186million (U.S.) civil action in New York involving allegations of fraud against one of her companies.
“I was a Canadian director to incorporate holding companies for tax purposes or companies for trust purposes in Canada, which I was paid a nominal amount for each company that I would have signed for. And that’s what I did,” McIntyre said in a sworn deposition on Nov. 3, 2011.
She also testified that she had no knowledge of the activities of the companies she fronted.
Although nominee directors are not illegal in Canada, the secrecy they provide facilitates abuse.
The tax haven industry relies on nominee directors to put a legitimate face on companies, to mask their real owners and allow them to evade tax, launder ill-gotten money or bribe corrupt officials.
In the Panama Papers, a massive database of 11.5 million internal documents from leading offshore incorporator Mossack Fonseca leaked to the International Consortium of Investigative Journalists and the newspaper Suddeutsche Zeitung, nominees are everywhere.
There are nominee directors to sign corporate documents, nominee shareholders to appoint directors and even nominee beneficial owners, used to mask the real owners of a company should Mossack Fonseca ever be compelled to divulge that information.
“The use of nominee directors is a key channel of tax evasion,” said Gabriel Zucman, a professor at the University of California, Berkeley, and an expert on offshore tax evasion. “It makes shell companies effectively anonymous, which in turn enables tax evaders to disconnect themselves from their assets and makes it easier for them to dodge taxes and regulations.”
Leticia Montoya, a low-level administrator at Mossack Fonseca, is one of the world’s most prolific nominee directors, serving on the boards of more than 10,000 offshore corporations. When French journalists working on the Panama Papers investigation paid a visit to her house in Panama City, she brushed by them, claiming to be her sister, and refused to answer questions.
In Canada, the use of nominees seems to be less widespread. But this scarcity makes companies that use nominees all the more noteworthy.
The job was simple, McIntyre said in this exchange during the New York deposition: Q: It was just somebody paid you to use your signature and nothing more? A: That is correct. Q: Is it literally nothing more? A: It’s literally nothing more. Q: That you did nothing other than sign papers? A: Nothing other than signed papers. Q: So you were just a name to put on documents? A: A Canadian director. Q: Did you ever have any concern about the legality of the documents you were signing? A: No. Q: Why was that? A: I was receiving them from lawyers. Q: You felt that because you were getting something from the lawyer, that that was enough to protect you personally? A: Yes.
McIntyre first got into this sidebusiness when she was working as a secretary for a Toronto lawyer in the early 1990s. Her boss approached her and asked her if she wanted to make extra money by signing documents, and introduced her to a Swiss lawyer named André Zolty, she said in her deposition.
Zolty would send documents for McIntyre’s signature and she would return them. Zolty has come up repeatedly in the nine-month-long Panama Papers investigation for having registered 895 offshore corporations through Mossack Fonseca.
De Grandpré Chait, the Montreal law firm that represented Zolty in Canada, told the Star it made verifications over the years and determined Zolty “had an irreproachable reputation.”
Yet in 2010, Zolty was identified by name as “the primary source of the nominee entities and false documents” by U.S. federal attorney Wifredo Ferrer during a criminal trial for massive tax evasion.
Two years later, The Associated Press reported that Zolty was under “investigation in Switzerland and other countries for the alleged laundering of money from illicit drug sales.” He was subsequently cleared by Swiss and New York police.
Zolty did not respond to a request for comment for this story.
De Grandpré Chait, for its part, says it has recently reinforced internal controls.
“Nowadays, when we incorporate in Canada . . . we ensure that we know the identity of the beneficial and real owners of the shares, the legality of their business ventures and the source of the funds transferred to Canada,” wrote Eric Lalanne, president of the firm. “Consequently, the mere use of Canadian corporations solely to act as nominee for non-resident entities is no longer accepted.”
But for 15 years, McIntyre’s business with De Grandpré Chait and Zolty was lucrative. For her name and signature, Zolty paid McIntyre up to $20,000 per year, McIntyre said in the deposition. For more than a decade, she continued to sign documents, often 20 or 50 at a time, even signing blank power-of-attorney forms that grant legal decision-making powers so that names and dates could be added later.
De Grandpré Chait said it was unable to find any traces of blank power-of-attorney forms in their files.
McIntyre used various different addresses on company forms, including one where her grandmother lived, she said.
Then, as quickly as it began, McIntyre’s career as a paper corporate director came to an abrupt end. The Toronto lawyer — by this time, her former boss — called her in May 2007 and told her to resign from all the companies so a former employee of De Grandpré Chait, Annette Laroche, could take over.
“In 2007, they just kind of said we don’t need you anymore and they flipped” to Laroche, McIntyre told the Star in a phone call.
Since May, she has been selling motorcycle parts out of her home after being evicted from the garage she was renting, according to posts she made on social media.
After months of trying to arrange an interview, CBC and Star journalists visited her apartment two weeks ago.
Her partner angrily dismissed reporters, saying McIntyre has already testified in court and would not agree to be interviewed.
“She doesn’t know s--t,” he said. “She’s not talking to you people.”
Corporate records confirm that after McIntyre resigned, she was replaced on each company by Laroche, who lives in the Montreal suburb of Deux-Montagnes.
Together, McIntyre and Laroche were the faces of almost 200 Canadian companies, corporate records show.
They probably never realized that lending their names to anonymous corporations would ultimately tie them to international scandals and include them as parties to multimillion-dollar lawsuits.
From 1999 to 2008, McIntyre was listed as president of a Quebec shell company — First Hotels & Resorts Investments Inc. — that was part of a complex corporate web linked to a $49-million (U.S.) tax evasion scheme that landed a Miami-based father-and-son property development team in prison in 2011.
Mauricio Cohen borrowed approximately $90 million (U.S) from a French bank in the early 1990s to develop a hotel in Manhattan. But according to court findings in four different jurisdictions, he and his son, Leon Levy-Cohen, fraudulently diverted a significant amount of that money into personal accounts through a web of offshore corporations, including the Quebec company.
They are serving 10-year federal prison sentences in the U.S. for tax evasion.
Laroche, who was listed as president of the company between 2008 and 2010, was subpoenaed to provide evidence in a subsequent civil lawsuit in 2011, and explained her job: Q: And at the time you signed this document, what did you understand your duties would be as president and secretary of the company? A: So that my name would show as president and secretary of this company. Q: And was that the only purpose? A: Yes. Q: Just to be a name? A: Yes. Q: That you would have no responsibilities or decision-making authority in the company? A: That’s right. Q: And that you would have no control over any of the assets of the company? A: That’s right.
Asked whether the purpose of the companies was to conceal its real owner, Laroche said, “Maybe.” When asked to elaborate, she said: “It’s not my business to know the purpose.”
In an interview last month, Laroche denied any responsibility for any of the company’s actions.
“It’s just a service,” Laroche said. “Companies are incorporated every day. Some companies do things right. Some companies do things that may be reprehensible, or become so. You can’t judge in advance.”
While employed as a paralegal in 2008, Laroche took over from McIntyre as the listed president of Emaxon Inc., a company involved in the diamond trade in the war-torn Democratic Republic of Congo (DRC).
Records in the Panama Papers show Emaxon is ultimately owned by an Israeli diamond dealer, Dan Gertler. When Mossack Fonseca discovered his identity in 2011, it severed ties with him because of what a senior director believed was “involvement in the ‘blood diamond’ business,” according to internal email correspondence.
In 2002, Emaxon signed a secret $15-million (U.S.) deal for diamond mining rights in the DRC during the country’s bloody civil war — a conflict in which an estimated 5 million people died.
“Gertler has always vigorously denied any wrongdoing in his dealings in the DRC,” his representative Peter Ogden wrote in an email to the Star. Emaxon made an investment in a government-owned diamond mine, Ogden wrote. “It’s as far removed from ‘blood diamonds’. . . as it can be.”
“It is fact that he has invested hundreds of millions of his own money into a war-torn country while no one else would,” Ogden wrote.
Now, Laroche remains Emaxon’s sole director, corporate records show.
McIntyre and Laroche also served as corporate officers of Green Mount International Inc. and Green Park International Inc. — companies sued by a Palestinian-rights group in Quebec Superior Court alleging the firms violated Canadian and international law.
Their claim: Laroche’s companies were building Israeli condominiums on Palestinian land for sale to Israelis. The cases were dismissed on a jurisdictional issue, with judges concluding that Israel would be a more appropriate location.
Laroche had “no personal involvement” in the firms’ business, nor did she have “any actual knowledge of same,” according to a 2010 Quebec Court of Appeal decision.
A panel of three judges concluded the firms were set up as “alter egos for and on behalf of a corporation that is not a resident of Canada, which corporation has no assets in Canada.”
While the judges concluded that the firms were incorporated on the instructions of Israeli businessman Gideon Badt “for domestic Israel tax reasons only,” Badt’s name did not appear on Quebec corporate filings.
“The principle reason a (nominee) like that will be used is because someone for some probably legitimate reasons — because I know a lot of legitimate reasons — wants to be incognito,” Laroche said in an interview. “When it’s legitimate, you don’t hear about it, because that’s the whole purpose. (The public) hear only about bad cases. So people are under the impression that this is a misuse, but not necessarily.”
Even though Laroche had no real control over the companies, a judge in the Quebec Superior Court ruled that she could be held personally liable for the company’s conduct in Israel and Palestine.
“Her personal liability cannot be excluded,” wrote Justice Louis-Paul Cullen in 2009.
“If proven, these allegations and inferences are sufficiently serious, precise and concordant to allow the trial judge to conclude that Defendant Laroche knowingly directed the Corporations to participate in the commission of a grave illegality by Israel — an extracontractual fault — and, that in so doing, she also personally committed an extracontractual fault pursuant to Quebec law.”
While Cullen dismissed the case, his decision points to the danger courted by nominee directors who blindly sign documents. It’s a point reinforced by the Quebec Court of Appeal when it too dismissed the case on appeal:
“It must be said first that in (Laroche’s) present capacity she cannot claim to be a mere front. If she chooses to be an officer and director of these corporations, she becomes bound by the duties arising from her status.”