Canadian businessman, real estate firm implicated in Channel Islands tax scheme
Leaked documents show millions flowed to offshore accounts. Who was the guiding hand?
A Canadian millionaire linked to a complex web of offshore companies in Jersey and the British Virgin Islands.
Fraudulent loans, forged contracts and creative accounting designed to hide profits from tax authorities.
And a little-known Toronto real estate development firm in the background that played a key role in the decade-long flow of tens of millions of dollars through offshore tax havens.
A cache of nearly 350,000 documents leaked to international journalists, including at the Toronto Star, detail the corporate empire of Canadian-born businessman John W. Dick and an offshore trust company called La Hougue that pitched clients on investments with the promise of tax-free profits.
It moved tens of millions of dollars over decades with impunity using what Dick, some of his colleagues and financial experts agree were forged financial records, as well as corporate “layering,” commonly used to complicate money flows and shield profits from taxation.
The leak provides a rare, behind-thescenes look at the methods of offshore money movement during the 2000s that have triggered legal actions that continue today. And they reveal the sophistication and influence of an offshore industry that continues to divert millions of dollars from national tax coffers without criminal charges.
As with many previous Star investigations into the world of offshore money, many of the key players here are Canadians.
“Canadians have played a fabulously major, outstanding role in pioneering shady practices offshore,” said James S. Henry, an American economist and attorney who specializes in tax issues including the impacts of tax havens. “Lowand no-tax, low-regulation havens, we can no longer afford this as a world. We have deep fiscal crises all over the planet … It’s time to clean it up.”
The guiding hand behind the profitable money flow in the La Hougue story is a matter of fierce and ongoing allegations and counter-allegations contained in legal, police and regulatory complaints spanning Europe, Canada and the U.S. in which all the figures in this story point fingers at each other.
The cast of characters surrounding Dick include a senior executive whose financial management techniques triggered withering regulatory scrutiny in Jersey and Panama and a U.S. court sanction for perjury. His Canadian deputy was fined $58 million (U.S.) in 2017 by the U.S. Securities and Exchange Commission for “perpetrating (an unrelated) multimillion-dollar, international pump-and-dump scheme.” Responding to questions about what happened at La Hougue, Dick’s lawyers said he had no knowledge of any wrongdoing.
So far unnamed in the various court actions is Venterra Realty Inc. — a firm with apartment developments across the southern U.S. that are home to 33,000 people — and its Toronto principals John Foresi and Andrew Stewart who appear throughout the leaked documents.
Five leading financial experts reviewed documents from the leak as part of the Star’s investigation. All agree they trace the movement of tens of millions of dollars through a complex chain of firms to finance Venterra real estate developments and return profits without proper taxation.
In a written response to questions from the Star, Stewart, on behalf of himself and Foresi, denied any improprieties saying “we unreservedly reject the allegations that Venterra participated in, or had knowledge of, any investment strategies designed to avoid taxation through the use of fraudulent documents.”
The statement says Stewart and Foresi were at “arm’s length” from Dick, his colleagues and their companies and had no knowledge of their “tax practices, tax reporting, financial dealings, or relationships.”
An 11-page memo penned by La Hougue senior executive Richard Wigley in July 2000 details the “methods available to enable the movement of assets offshore.”
“Naturally, I have a concern that any of these papers should fall into the wrong hands, so please guard them carefully,” the letter begins.
The document details 11 techniques including a property investment in Mexico, deliberate foreclosure on a mortgage and being paid consultancy fees via separate businesses.
The message to prospective investors was reassuring.
Those investing in the Mexican property development would be protected if their national tax agency inquired about their investments for tax purposes.
“Suitable confirmations and assurances as to the non-profitability can be given to show that, to date, there had been no capital gain and no income distributions had occurred,” the memo says.
Because the transaction would be under the offshore control of La Hougue where financial secrecy offers protection from regulatory scrutiny, “no information could be obtained separately by any investigating party.”
Within a year of the memo being written, some of its techniques were showing up in money flows involving Venterra.
Until now, nothing has been publicly known or written about the Richmond Hill-based Venterra and its connections to the string of La Hougue-affiliated companies that provided tens of millions to its development projects in the 2000s.
La Hougue clients were promised annual returns of at least10 per cent — and up to 20 per cent — for investments they made in Venterra’s multi-residential developments in the U.S.
Here’s how the money typically flowed to and from Venterra, according to the leaked documents analyzed by the Star:
It started with Jersey-based La Hougue and moved through a British Virgin Islands firm called Michelin to a U.S. firm called Land Securities Investors (LSI) which transferred the money to Venterra in the form of a loan. The arrangement exploited a U.S. tax regulation to return investment money to La Hougue untaxed and with gains — a cycle that involved money moving through four companies in four jurisdictions using fabricated documents and complex structures to disguise the fraud.
One example of the chain is a 2004 investment in a Venterra project dubbed “Walden Portfolio.” A $100,000 investment went from La Hougue to Michelin and a day after that, the money went into the Colorado bank account of LSI before it flowed to Venterra.
Dozens more wire transfers from LSI to Venterra appear in the records — $21 million between 2003 and 2008.
The records also show Stewart and Foresi invested in their own projects through La Hougue where they are linked to several client accounts.
In the Walden project, for example, Foresi shows up as an investor through his La Hougue client account (F0088) making two loans starting in January 2004 — shortly after the deal was signed — totalling $117,500. Venterra’s developments in the U.S. were successful. Internal corporate documents show returns of 30 per cent for investors in one Venterra project.
But the burden of a 30-per-cent U.S. withholding tax levied on transfers to offshore jurisdictions such as Jersey threatened to eat away much of that profit.
The La Hougue solution to the tax problem employed a U.S. Internal Revenue Service tax regulation called portfolio debt.
In an attempt to combat offshore tax evasion, the U.S. generally imposes a 30-per-cent withholding tax on debt and interest payments made by U.S. companies to foreign lenders. But there is an exemption for portfolio debt that allows those loan repayments tax free if they meet requirements including the U.S. company being arm’s length from the foreign lender.
Dozens of records in the leaked documents reveal how the La Hougue chain of companies exploited the portfolio debt regulations to avoid taxation on interest.
An internal 2002 memo titled “Portfolio Debt” acknowledges that while a withholding tax would typically apply on interest paid from the U.S. to a nonU.S. lender, “this 30 per cent withholding tax is reduced to zero under Portfolio Debt and that is the benefit to the client.”
The memo uses the example of a $600,000 loan with an annual interest rate of 10 per cent.
The $60,000 in annual interest from the investment would generate $18,000 in withholding tax (30 per cent). But instead of paying tax into national tax coffers, the portfolio debt regulation eliminates tax and investors pay only $6,000 in a fee to La Hougue for its services — a savings of $12,000, the memo reads. Everyone wins, it says. “The effective fee to La Hougue equates to 10 per cent of the annual interest paid.”
The memo reassures investors that their money will remain “in a tax free environment,” and that the strategy can be “fully supported.” It worked, the records show. La Hougue’s Venterra investments returned along the same path they arrived.
In the Walden project, for example, a May14, 2004, payment of more than $350,000 left Venterra heading for LSI with a note reading, “return of Walden and Whispering Oaks advances.”
Twelve days later — on May 26 — LSI transferred $375,000 to BVI-based Michelin with no holding taxes collected, the documents show.
A day later, Michelin sent the full $375,000 back to La Hougue to complete the cycle.
Foresi’s La Hougue account statement shows his investment in his own company through an offshore intermediary was returned, with interest, the same week.
In response to questions about why they personally invested in their own projects through La Hougue accounts in Jersey, Foresi and Stewart declined to respond.
But while the strategy was effective in removing the tax hit, there is a caveat: for the IRS portfolio debt regulation to apply, the U.S. borrower must not be related to the foreign lender.
U.S.-based LSI, which received the loans from BVIbased Michelin, are intimately connected throughout the leaked records to La Hougue.
Michelin, which was established by La Hougue’s directors, including Wigley, is described by Wigley in one memo as a corporation “under the control of (La Hougue).”
Likewise, Alan Fishman, who led LSI at the time, signed a 1996 employment contract with La Hougue and repeatedly describes himself in court records as being under the control of Wigley and Dick.
That corporate intimacy between La Hougue, LSI and Michelin breaches the portfolio debt exemption, say financial experts who have reviewed the case for the Star.
“The portfolio debt exemption should not have been used by LSI,” says Toronto forensic accountant Charles Smedmor. “The LSI payments to Michelin and La Hougue should have had 30 per cent withholding tax applied and the withheld funds should have been remitted to the United States Treasury.”
Frank Casey, a U.S. financial expert who blew the whistle on the Bernie Madoff scandal and is a frequent expert witness in U.S. fraud cases, reviewed the records for the Star’s investigation.
“Their addition of Michelin and LSI intermediary investment transfer points appears to be designed to create complexity to effectively shield profits from taxation,” he said.
The portfolio debt tax exemption doesn’t apply here, he says.
“These guys seem to be in control of everyone in the funding loop.”
Retired FBI agent Gregory Coleman, who was depicted in the film “The Wolf of Wall Street” for his role in the arrest and conviction of Jordan Belfort, also reviewed portfolio debt documents from the leak on behalf of the Star.
“It seems to be a clear violation of IRS regulations. It’s pretty black-and-white to me,” he said. “The Venterra element has all the signs it was set up to make money and pay no taxes on it. The transactions were not arm’s length. They were between corporations set up to disguise ownership and control.”
A former Colorado judge also expressed deep concerns about the portfolio debt arrangement last year after ordering Wigley to produce corporate records to support it and receiving virtually no documentation.
In a 2019 Colorado arbitration case, arbiter William Meyer called it “inconceivable” and an act of “astonishing negligence,” noting that the IRS’s portfolio debt regulation requires regular reporting of interest payments.
“To the best of the arbiter’s knowledge, none of the required reporting IRS documents have been provided.”
“John Dick had no oversight or involvement in the day-to-day business of La Hougue.” STATEMENT FROM DICK’S LAWYERS
Identifying who orchestrated the portfolio debt scheme gets complicated.
Court records and thousands of pages of internal La Hougue documents provided to the German-based European Investigative Collaborations (EIC) by Dick’s daughter and shared with nine media outlets around the world (including the Star) paint two very different portraits of the prime mover behind the corporate veil.
And they reveal a cloak-anddagger world of corporate betrayal, secretive techniques and alleged criminality.
The narrative pivots around the 82-year-old Dick, whose Mennonite roots trace back to the Kitchener area.
After earning his fortune in U.S. real estate, Dick moved in the 1980s to Jersey, a Channel Island British Crown dependency located between England and France, where La Hougue was established and, for a time, run out of Dick’s lavish mansion called St. John’s Manor.
By the 1990s, Dick, Wigley and Fishman were linked through La Hougue, according to the leaked documents and public records.
Wigley and his colleague, Fishman, have told a U.S. court that Dick was the mastermind of La Hougue’s investment strategies which they say were driven by a desire to dodge U.S. taxes through sophisticated techniques they dutifully executed at his instruction.
Neither Wigley nor Fishman agreed to interviews or provided detailed written responses to questions posed by the Star.
Wigley provided a statement through his lawyers saying he would not address specific allegations due to ongoing legal proceedings.
The brief written response
“I followed (Dick’s) direction. I was a good employee and I did exactly what he wanted me to do.” ALAN FISHMAN IN 2017 DEPOSITION
After earning his fortune in U.S. real estate, John W. Dick, whose Mennonite roots trace back to the Kitchener area, moved in the 1980s to Jersey, a British Crown dependency in the Channel Islands, where La Hougue was established. In a statement from his lawyers, Dick said he was the unwitting victim of his longtime senior manager Richard Wigley, whose “repeated fraud” cost millions of dollars. .
Alan Fishman and his colleague Wigley, below, told a U.S. court Dick was the mastermind of La Hougue’s investment strategies, which they say were driven by a desire to dodge U.S. taxes through sophisticated techniques they dutifully executed at his instruction.
La Hougue senior executive Richard Wigley