Oilman from B.C. target of tax probe
Businessman’s homes raided, computers and papers seized in year-long CRA investigation
Only days after the Panama Papers were made public, Prime Minister Justin Trudeau pledged to root out Canadians using offshore havens to evade taxes.
More than two years later, the first glimpse of that Canada Revenue Agency crackdown has been revealed through documents filed in a Calgary courthouse.
The 40-page “information to obtain search warrant” — made available to the public Wednesday — led to Valentine’s Day raids in Vancouver, Calgary and Richmond Hill.
One of those raids took place at 2703 Willoughby Rd. in West Vancouver, a sprawling $4.6-million mansion with a swimming pool overlooking English Bay where Chinese-Canadian businessman Wentao Yang lived with his wife Rong Catherine Lu.
CRA investigators allege Yang evaded more than $850,000 in income tax and HST in 2016.
No charges have been laid and the CRA allegations have not been proven in a court of law.
In response to an interview request Thursday, Yang sent an email statement: “As a Canadian and a member of the community, I take these allegations very seriously and intend to address them in the fullness of time.”
The CRA documents allege Yang committed three offences: “acquiescing in the making of false or deceptive statements” on his T1 tax form; “wilfully evading the payment of taxes” in 2016; “wilfully evading remittance” of GST/HST.
The CRA investigation was prompted by the Panama Papers leak of 11.7 million documents from the offshore law firm Mossack Fonseca. A collaboration of hundreds of journalists, working through the International Consortium of Investigative Journalists, published thousands of reports revealing the inner workings of the shady world of tax havens, which cost government coffers billions of dollars each year.
“The case was developed after a review of the (ICIJ) website showed that Wen Tao (sic) Yang owns shares in foreign companies listed on the ‘Panama Papers,’” wrote CRA investigator Jason Shephard, who prepared the summary of his investigation into the couple.
According to the CRA allegations, Yang purchased oil and gas companies in Canada “us- ing capital pooled through his investor contacts in China.”
The CRA zeroed in on the purchase of Calgary-based Long Run Exploration Ltd. by Yang’s company Calgary Sinoenergy Oil Investment Corp. Investigators allege that Yang was paid more than $2.6 million in “consulting fees” that he did not declare on his tax return.
“As a result, (he) evaded income tax totalling $736,562,” wrote Shephard. “In addition, Wen Tao Yang failed to report and remit $126,993 in (GST/HST).”
Yang declared $502,143 in total income in 2016 — $314,006 of which was capital gains — according to the CRA court filing. Lu claimed $130,435 in total income that year.
Besides his West Vancouver mansion, the CRA also raided his $1.13-million house in Calgary and his accountant’s office in Richmond Hill, seeking banking records, cheques, mortgage documents, contracts and business documents, according to the search warrant request. The CRA also asked to seize com- puters, hard drives and SIM cards.
The ITO makes reference to a year-long investigation that began in January 2017 and involved extensive document searches as well as surveillance of Yang, his wife and their businesses.
The document follows hundreds of millions of dollars in international wire transfers — between Hong Kong, the British Virgin Islands and Canada — to isolate the payments to Yang and his wife.
“The source of these funds was obscured because there were several transfers through foreign bank accounts prior to the funds being deposited to the Canadian bank accounts held by Wen Tao Yang and Rong Catherine Lu,” Shephard wrote.
Yang’s company in the BVI, Sinoenergy Oil Investment, made eight electronic transfers during the month of June 2016 for $305 million to his company in Calgary, Calgary Sinoenergy Oil Investment Corp, the documents allege. The Calgary company then transfered $11.5 million to a Hong Kong bank account controlled by Marquee Financial Services Inc. — a Cay- man Islands-based company with a defunct website and no other presence — which then paid out $2.6 million to Yang and Lu in Canada.
The couple owned a house in Markham, which they sold for $1.76 million in 2016.
Yang is linked to three offshore corporations in the Panama Papers, all in the British Virgin Islands.
His Canadian passport, issued in Calgary in 2006, is included in due diligence documents sent to the Mossack Fonseca office in the BVI in 2010.
Yang is also connected to four other BVI companies contained in a 2013 leak to the ICIJ.
Another oil company Yang is affiliated with, Sequoia Resources Corp, declared bankruptcy in March with debts of over $21.3 million, according to bankruptcy documents.
Reports at the time stated the company owned 2,300 wells, almost 200 facilities and nearly 700 pipeline segments in Alberta, and the bankruptcy might result in almost 4,000 orphaned wells the government would have to pay to clean up.