No wonder Clegg has gone quiet on tax dodging
His publicity-savvy wife – hailed as the Lib Dems’ secret weapon – earns a huge salary with a law firm that helps the rich avoid tax. His dad is chairman of a bank based in a tax haven . . .
Not long ago, a law firm called Dechert invited carefully selected guests to a special ‘ An Inspector Calls’ seminar at its vast, steel-and-glass- clad office in the City of london. It was organised by the firm’s tax Investigation team, which, among other things, acts for wealthy people and companies f acing unwanted scrutiny from Her Majesty’s Revenue and Customs (HMRC).
the key purpose of the seminar, according to the published agenda, was to offer advice on the topics of How to Respond to An HMRC Investigation and How to Deal With A Dawn Raid.
‘A challenge by HMRC on corporate or personal tax planning arrangements has never been more likely,’ read the invitation. ‘If HMRC inspectors believe there is an element of dishonesty in arrangements or disclosures, the risk is high that a criminal prosecution will result.’
With t his i n mind, t wo senior Dechert l awyers, neil gerrard and Jonathan Pickworth, promised to advise guests — who were largely the firm’s fee-paying clients — ‘how to respond’ to fraud inquiries.
they would also offer ‘tips on dealing with a dawn raid’, plus insight into ‘latest trends’ in tax enforcement, and how to tiptoe around regula- tions about ‘ what constitutes a cheat on the Revenue’ in order to avoid criminal convictions.
Sadly, such is the way of things these days in the lucrative tax-avoidance industry, where highly paid lawyers devise ever-more effective (and legitimate) ways both to keep money out of the government’s coffers and to prevent clients going to prison.
Yet Dechert is no ordinary City of london law firm. For the Anglo-American company which was touting its tax-dodging services so vigorously at that below-the-radar ‘ seminar’ just happens to employ Miriam gonzalez Durantez, a glamorous, high-flying lawyer who is rather better known as Mrs nick Clegg.
the 46-year- old joined the firm in 2011, just over a year after her husband became Deputy Prime Minister, and as a ‘partner’ — a sort of working co-owner — Miriam is not just one of Dechert’s most senior staff, she is also entitled to a cut of its profits, including those generated by its extremely successful tax department. this, in turn, helps her achieve an annual income which is reported to be £500,000 — a sum roughly three times that of her husband’s.
Dechert’s cash helps the lib Dem leader’s family to live in some style, at a nice home a stone’s throw f rom the thames in Putney, london, which they bought with a mortgage from TSB for £1,050,000 in 2006 and is now estimated to be worth £2.5 million.
It also pays the wages of the nanny who looks after their three young boys, and finances the expensive shopping habit (she was once, famously, photographed at upmarket underwear maker Rigby & Peller, which sells bras for £170 and thongs for £130) that has seen gonzalez repeatedly feted by fashion commentators.
All of which may — to those of a cynical disposition, at least — explain a big, unanswered question doing the rounds of Westminster: why has nick Clegg been so quiet about the HSBC scandal (over its Swiss private bank helping clients avoid tax), which has dominated the headlines in recent weeks?
While his lib Dem colleague Danny Alexander has declared it ‘outrageous that a few of the very richest and their expensive f i nancial advisers are devising ever more obscure and underhand ways of not paying their tax’, and Vince Cable has spoken about there being ‘one law for the rich and another for the poor’, nick Clegg has been more or less missing in action.
though his left-leaning party has traditionally made political hay over the issue of tax avoidance, the national Press has quoted Clegg talking about HSBC just once. those comments came from a Sky news interview on February 9, the day the scandal broke.
Clegg’s almost monk-like silence strikes many as very strange.
‘the liberal Democrats seldom miss an opportunity to be sanctimonious,’ comments Jolyon Maugham, a prominent tax QC. ‘So it’s surprising, to say the least, that nick Clegg hasn’t been shouting about this issue. His failure to make more noise is odd.’
or maybe it isn’t. For politics can be a crafty game. And by adopting a policy of relative silence, Clegg has managed — uniquely among party leaders — to avoid widespread scrutiny and criticism of his own family’s links to tax-avoidance schemes.
He has duly escaped the sort of negative media coverage directed at David Cameron over the disclosure that his wife Samantha’s employer, Smythson, is now based in the tax haven of guernsey, and at Ed Miliband, who was accused of hypocrisy for having previously used a ‘deed of variation’ to reduce the inheritance-tax liability on his mother and father’s £2.4 million house in north london.
one happy by-product of Clegg’s silence is that the spotlight has not so far been put on the affairs of his 79year-old father, nicholas, a successful financier who has for the past two decades been on the payroll of banks operating in, and owned from, a string of tax havens (of which more later).
the other, perhaps more important, by-product is that Miriam’s firm Dechert has also escaped scrutiny.
And t hat i s where some r eal awkwardness lies. For the firm (and by consequence the Clegg family) profits mightily from the controversial field of tax avoidance.
on its own website, for example, the law firm, which lists 40 UK partners and 150 ‘fee- earners’, publicly touts for business helping companies and wealthy people ‘maximise tax benefits and minimise tax liability’, providing them with ‘skilful representation in tax controversies and litigation’.
‘ We have represented f i nancial services f i rms . . . i n transactions involving the development of novel financial instruments and routinely advise fund managers . . . on matters such as developing tax- efficient structures for employee co-investment funds,’ the firm boasts.
Could sensitivity about this fact lie behind Clegg’s relative silence on HSBC? Who knows. What is undoubt- edly true is that some of Dechert’s lines of business are more than sufficient to make your everyday, working man or woman, paying their taxes through PAYE, seethe with rage.
take, for example, Mrs Clegg’s firm’s advertisement (again, on its website) of the fact it makes considerable sums from helping rich people avoid inheritance tax, saying that it offers ‘personal estate planning advice and financial and tax-planning services to high net worth individuals’.
‘We combine sophisticated estate planning skills with international resources . . . We help U.S. and non-U.S. trustees and beneficiaries transfer wealth efficiently through lifetime and testamentary trusts designed to minimise tax exposure.’
In a further aside that will raise blood pressure on the political left, it adds: ‘Dechert lawyers create offshore trusts.’
there is, it must be said, nothing explicitly wrong with such a line of work. It is not illegal. Highly educated and expensively trained lawyers are perfectly entitled to make a living helping wealthy people and companies minimise tax, which sometimes involves creating complex offshore trusts.
they are also not just entitled, but expected, to represent those accused of breaking the law.
In addition, Mrs Clegg’s ability to combine motherhood and t he demands of life as a Deputy Prime Minister’s wife with a high-flying career at a major law firm is, of course, entirely admirable.
She has drawn many admirers in recent months. Before Christmas, TV host lorraine Kelly dubbed Miriam ‘bright, beautiful, funny and effort- lessly elegant’ after interviewing her on a chatshow sofa while nick cooked ragu with a celebrity chef.
In october, she gave three major interviews — to the BBC, Sky news and the Evening Standard — in which she told ambitious girls to ‘fake it’ if they lack self-confidence.
And this week she drew plaudits with a speech to t he women’s magazine grazia, in london, where she argued that it was ‘very important that men feel included’ in the fight for gender equality.
the lib Dems are said to regard her as their ‘secret weapon’ in the forthcoming general Election campaign.
that, however, makes i t all the more important to highlight the fact that some of the more exotic services Dechert offers are exactly the sort of services which have, historically speaking, been fiercely criticised by the lib Dems.
the party manifesto in 2010, for example, promised, as one of its key pledges, ‘tax fairness for everyone’ and said they hoped to raise £12 billion by ‘tackling tax avoidance and evasion’, with new powers for HMRC.
two years l ater, when i t was politically expedient, nick Clegg c hose t o make an outspoken criticism of the excesses of the taxavoidance industry.
‘there are millions of people — and these are people who the liberal Democrats are in politics for — who pay their taxes, who work hard, who aspire to do the right things f or themselves and their families, and who are quite rightly angered that there is a wealthy elite of l arge businesses who can pay an army of tax accountants to get out of paying their fair share of tax,’ he thundered.
that comment came towards the start of Miriam’s involvement with Dechert. today, the nature of his public pronouncements on such matters appears to be strikingly different.
Asked about the HSBC affair on Sky news, Clegg chose to focus not on t he bank, it s senior staff or its l awyers, or indeed on the wider taxavoidance industry, but instead on the peripheral role of the labour Party in the scandal.
‘I think it would be great if Ed Balls, or indeed Ed Miliband, for once were just to get up and admit that they let the banks run riot on their watch,’ he said.
‘Ed Balls went on a prawn cocktail charm offensive to suck up to the banks, and [labour] now have the
The firm offers tips on ‘dealing with a dawn raid’ Miriam Clegg’s company creates
offshore trusts
brass neck to constantly accuse this Government of not doing enough when we’ve done considerably more to straighten out the banks than Labour ever did.’
That was the last — indeed the only — reported public comment he made on the affair, which has dominated politics for most of the month.
Did embarrassment over his wife’s job cause his views to evolve? Clegg’s office say otherwise.
In a statement yesterday, he claimed to have ‘repeatedly’ spoken out about HSBC in recent weeks. (We must therefore assume his comments went unreported.)
‘ The suggestion that there is any conflict between Liberal Democratic tax policy and Miriam’s work as a trade l awyer f or an i nternational l aw firm, or Nick Clegg’s father’s role as chairman of a UK bank which conducts all its business and pays all of its taxes in the UK, is both false and deliberately misleading.’
In fairness to Mr and Mrs Clegg, it should also be stressed that while she may profit from Dechert’s tax work, she is not directly involved in it. Her day job is co- chairing the firm’s International Trade & Government Regulation department.
Miriam does, however, have close ties to fellow Partners who work in politically controversial f i elds. Indeed, the two senior figures who led the Inspector Calls seminar, Neil Gerrard and Jonathan Pickworth, are both former colleagues from her previous law firm, DLA Piper.
Gerrard turns out to have been Miriam’s effective boss at that firm, where he worked as global head of litigation and regulation. He and Pickworth moved from DLA Piper to Dechert in March 2011, just a few months before Mrs Clegg.
‘You could fairly describe him as her mentor, whom she followed to the new company,’ says one insider.
On his CV, Gerrard states that the ‘confidential nature’ of his work prevents him comprehensively detailing his most notable previous cases. However, he states that highlights include: ‘ Defending a large multinational logistics company in HM Revenue & Customs’ largest ever tax fraud investigation, and liaising with the Serious Fraud Office i n relation to a defence contract corruption allegation.’
Other colleagues have pursued similarly colourful avenues during Miriam’s time at the firm.
Dechert, for example, recently represented former Barclays chief Bob Diamond when he successfully escaped prosecution over the scandal of inter-bank lending rates being manipulated.
It also was retained by Michael Cherney, a controversial Uzbekistan-born oligarch now based in Israel, in the most lucrative UK court case in history: a £1 billion claim against fellow oligarch Oleg Deripaska.
There is nothing wrong or illegal about Dechert taking such cases and clients, of course, but for Nick Clegg they have potential to be politically awkward.
And even without his wife’s career path, the issue of tax avoidance, particularly when it involves very wealthy individuals, raises another thorny issue.
Though he rarely mentions it, the Lib Dem leader’s father Nicholas is one of the most distinguished bankers in the City of London, who spent the Eighties and much of the Nineties working for Daiwa, a Japanese bank, and was given a CBE in 2009 for services to UK-Japanese relations.
His success afforded his children a boarding school education (Nick was educated at Westminster School, where fees are more than £ 30,000 a year and where the documentary-maker Louis Theroux was his ‘fag’), and a family property portfolio that includes a country home in Oxfordshire, a ten-bedroom chateau near Bordeaux, and a onethird share of a 20-room ski chalet between Davos and Klosters, which is worth a reported £7 million.
In recent years, however, that success has also left Nicholas Snr with ties to financial institutions which (in light of the HSBC scandal) make awkward reading.
Twenty years ago, for example, he joined the board of Insinger de Beaufort, a Dutch private bank whose parent company is based offshore in Luxembourg.
The firm specialised in private banking for wealthy people and had operations in low-tax domiciles such as Guernsey, Jersey, the British Virgin Islands, Switzerland, Singapore, the Isle of Man and Bermuda.
It was also highly tax efficient. In 2001, f or example, it s parent company, Insinger de Beaufort Holdings, reported i ncome of ¤ 125 million. While profits were ¤8,514,000, tax on those profits was a mere ¤74,000 — an effective rate of 0.86 per cent.
During Clegg Snr’s reign, the firm purchased a London institution called United Trust Bank, which it owned until a management buy-out in 2004. He remains chairman of UTB, which, according to Companies House documents, is somewhat awkwardly controlled from the tax haven of Jersey.
How does he square this work with the career of his son, to whom he is also a financial donor? Clegg Snr did not return calls this week.
Perhaps, for entirely understandable reasons, he takes the view that when it comes to the issue of tax avoidance, silence tends to sound better than hypocrisy.
The Lib Dems pledged to tackle
tax avoidance