New Zealand ac­coun­tants back­dated Malta trust doc­u­ments dur­ing Panama Papers

The Malta Business Weekly - - FRONT PAGE -

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.

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