1MDB scandal in court today

An international scandal involving trusts goes to court in New Zealand today. Matt Nippert has been covering this.

NZ Herald: Jet, mansions figure in $232 million foreign trust case to be heard in Auckland court

Auckland court to become scene of battle to prevent US seizure of assets, writes Matt Nippert.

An Auckland courtroom will on Friday become a battleground over Manhattan penthouses and a private jet amid allegations that they are the proceeds of a globe-spanning mega-fraud.

The High Court at Auckland is set down to hear a request from relatives of controversial Malaysian financier Jho Low who oppose the seizure of assets worth $230 million alleged by the United States Department of Justice to be the proceeds of crime.

US court filings said the relatives are beneficiaries of a number of New Zealand trusts that are claimed to directly own a number assets caught up the probe of a Malaysian sovereign wealth fund known as 1MDB.



New Zealand trust involvement:

The High Court at Auckland confirmed a defended hearing involving the parties was set down for Friday morning.

The filings claim a number of New Zealand trusts, with names as varied as Elephant Sun and Stars Tower, were the direct owners of assets including a Bombardier private jet, a hotel in Beverly Hills and a $55m Los Angeles mansion formerly owned by Fantasy Island actor Ricardo Montalban.

New York real estate owned by the New Zealand trusts includes two Manhattan apartments, including a $43m penthouse in the Time Warner Centre formerly owned by celebrity couple Beyonce and Jay-Z.

The DoJ have claimed these assets are collectively worth more than $230m.

According to Companies Office filings, the New Zealand trusts in question were established and directed by staff of Auckland law firm Cone Marshall, and also used the local trust specialists’ Stanley Street office as a mailing address.

Cone Marshall principal Geoffrey Cone declined to comment on the case outside of noting his firm acted on behalf of a Swiss-based trust group and that he had no direct contact with beneficiaries.

“This is a matter concerning the Rothschild Group and Rothschild Trust New Zealand for which we provide local director and office services,” he said.

Expect New Zealand politicians to get involved.

New Zealand’s reputation at stake

Today’s ODT editorial says that “New Zealand is not a tax haven in the way many countries in the world operate” but the country’s reputation is at stake over the Panama papers revelations.

NZ’s reputation at stake

Prime Minister John Key is moving to protect the international reputation of New Zealand as a place to do business, with the release of the Panama Papers forcing his hand.

The Panama Papers have proved to Kiwis that this country is being used by foreign business people and global leaders as a way to pervert the tax laws of their home countries.

Let’s be clear, however. New Zealand is not a tax haven in the way many countries in the world operate. Our foreign tax laws may be used by overseas people to defraud their own countries of tax, but our tax base is not being exploited. Nothing about those trusts is illegal in this country with most apparently meeting our tax laws.

Nothing relating to new Zealand has been found to be illegal – yet – but if overseas people can use New Zealand’s trust laws to hide illegal activity or avoid tax illegally then it looks bad for New Zealand.

However it should be noted that if New Zealand wasn’t being used for questionable trusts other countries would be used – as they are, far more than New Zealand is.

What is at stake is New Zealand’s reputation which is seen around the world transparent and stable. We are consistently at the top of tables about the ease of doing business, the least corrupt country and one of the most transparent.

Mr Key is indicating a second phase of anti-money laundering measures may be brought forward in the wake of the Panama Papers. He denies the papers are evidence New Zealand is a tax haven, in line with tax experts. Here the foreign trusts need to provide information to Inland Revenue and the trustee fills out an annual return. In tax havens, little or no information is supplied to authorities.

If there is potential reputational damage then something needs to be seen to being done about it.

There has been no indication any of the people named were acting illegally, just that they were involved in some way or another. The tall-poppy syndrome is never far from sight in this country. The latest name dump is guilt by association, without context.

That is also a major issue that could affect reputations of those implicating named people in shady dealings.

Labour leader Andrew Little is saying Mr Key has damaged New Zealand’s reputation by siding with those people keen to limit their tax obligations. Labour will abolish foreign trusts but it needs to be said the current regime was put in place by former Labour finance minister Sir Michael Cullen in 2005.

Sir Michael required foreign trusts with New Zealand resident trustees to provide some tax information to Inland Revenue – exactly what is currently happening.

Thanks to the past Labour led government and the current National led government New Zealand’s tax and trust laws are (or have been) highly regarded. That is apparently a part of the problem, our reputation is being exploited by some people who want to use trusts.

The Government has appointed well-regarded accountant John Shewan to undertake an independent review of disclosure rules covering the foreign trusts in New Zealand. Mr Key indicated the Government is open to any changes Mr Shewan may suggest.

So far, New Zealand has complied with every information request from its treaty partners to the standard set by the OECD and $205 million has been invested since Budget 2012 to strengthen compliance work by Inland Revenue.

Reputational damage is hard to repair and Mr Key will be wise to act quickly on recommendations coming from both Mr Shewan and Inland Revenue.

The spotlight will be on Shewan’s report in particular. Somethig needs to be seen to being done.

For the good of New Zealand’s reputation Labour need to work positively with this with the Government to ensure our good tax and trust laws are improved.

Wake up call for well-regarded tax system

Peter Dunne knows the new Zealand tax system well, having been an MP for three decades and Minister of Revenue for a number of years.

On his blog this week he says that while New Zealand’s system is generally well regarded the Panama papers trust/tax issue is a wake-up call from complacency.

New Zealand’s tax system is generally well-regarded. In part that is because of our focus on a broad base, low rate approach to personal and corporate taxation, and in part it is because our system is relatively easy to comply with as a consequence.

However, there are now clear signs that the comparative simplicity and transparency of the New Zealand tax system, under which we have basked for so long, may not be the advantage we once thought it was.

Recent events like the global revelations about the tax paid by certain multinationals who are everywhere when it comes to their operations, but seemingly nowhere when it comes to their tax liabilities, and the release of the Panama Papers make it clear that New Zealand’s tax system with its emphasis on self-assessment, is being used in a way that was never intended to shelter various forms of international income.

For the first time, we are having to confront the label of “tax haven”, and it is uncomfortable.

Now, the solutions to these issues are not easy, nor limited to any one country, and it would be the height of idiocy to believe that New Zealand can simply draw up its ramparts, and all the problems will go away.

In a global environment, with capital flows occurring in the twinkling of an eye, it is just not that simple, and any politician who suggests otherwise is simply a liar.

Some opposition politicians are at least implying that New Zealand should just ‘fix’ the problems. They are either ignorant, or lying.

Any lasting solution has to be an international one, which it is why it is important we continue to work alongside the OECD and like-minded countries to achieve a viable outcome.

Our self-assessment system has generally worked well as far as local taxpayers go, but we may be a little naïve in assuming that large, foreign investors seeking a tax bolt-hole will be just as genuine in playing by our existing rules.

Tax is essentially the price we pay to belong to civil society. Implicit is the assumption that we pay our share, according to our means. In return, the state provides certain key services from which we all benefit: health, education and welfare services; public security and national defence, for example.

Any perception that some are not paying their share, or worse, are actively subverting the system to their advantage, which may have nothing to do with New Zealand, other than we are a convenient shelter for income, starts to tear at that implicit national contract.

And it appears that some politicians are prepared to try to build perceptions for political advantage – perceptions that could be damaging to the country if they get some legs.

I still believe in the basis of our broad base, low rate tax system, with its relatively easy levels of compliance.

Our challenge now is to ensure that in a rapidly changing set of international circumstances our ability to enforce our tax rules and ensure compliance; gather all the tax revenue properly due; and, ensure everyone pays their fair share, is not compromised.

The Panama Papers’ disclosures are a sobering and timely wake-up call in that regard.

Hopefully the John Shewan inquiry will either assure us our tax system is about as good as it could be, give or take a few tweaks.

Or it will highlight actual deficiencies that can practically be addressed.

Full post here.


Panama papers: more on NZ to come

Peter Bale, head of the Center for Public Integrity involved with the investigation of and release of the Panama papers, says that it will take time to analyse the huge amount of data but is certain there will be New Zealand information revealed.

“You can be absolutely certain, I think, or as near to certain that there will be significant numbers of New Zealanders and of New Zealand entities, certainly New Zealand entities, within this data set.”

Bale was interviewed on The Nation this morning. This will be repeated tomorrow morning, or you can see the interview here.

Interview transcript relevant to New Zealand:

Lisa Owen: And turning to New Zealand, then, when will New Zealand be available? Have you looked at any New Zealand data yet? Will you look at it? What’s happening with the New Zealand side of things?

Peter Bale: I haven’t personally looked at New Zealand data. I haven’t personally been a journalist working on the project. I’m responsible for them, but I’ve left that very much to them. But I discussed it with them today. We have not had a media partner in New Zealand particularly on this project. There’s a number of countries where we just were unable to stretch fully to covering every country.

You can be absolutely certain, I think, or as near to certain that there will be significant numbers of New Zealanders and of New Zealand entities, certainly New Zealand entities, within this data set.

The history of New Zealand’s position on offshore companies, people registering trusts there from offshore and also things like New Zealand’s relationship with Niue and some of the other places that we know Mossack Fonseca has used, means that you should assume that there is a very strong New Zealand connection, and certainly with New Zealand-registered companies there.

Lisa Owen:  Sure. And will there be New Zealand names as well? Will there be New Zealand people as well?

Peter Bale: You can assume that too, I think, based on a discussion I had with my team today about this. And going back to some of the history that there’s been over the last four years and beyond with New Zealand companies and New Zealand individuals who have been active in this area of offshore companies and perhaps working with Mossack Fonseca, we’re pretty certain that there will be New Zealand names in there.

I just can’t go into more detail than that at the moment, purely because I haven’t looked at the data myself and we need to go deeper on it. But it is one of the countries that we… We now have many, many requests from media organisations who were not part of the wider team and from countries where we were unable to get to, or even whole industries that we were unable to analyse.

And so there’s still much more to come, I’m afraid. Actually, I’m not afraid of that; I’m quite excited by that. Still much more to come.

Lisa Owen: Okay. Some people will be afraid and others obviously excited. 12,000 trusts are here in New Zealand all because of this kind of tax avoidance. Does that make New Zealand a tax haven in your view, these 12,000 trusts?

Peter Bale: So, I’ve discussed this with my colleagues. I am not an expert, personally, in this area. Gerard Ryle, the director of the ICIJ, certainly believes that New Zealand is a favourable country for this kind of activity.

And I think New Zealand too knows that it has some issues with the ease of setting up trusts and the way trusts are identified. I think even the prime minister there has talked about this and noted that your trust law was last revised in 1988. So I think New Zealand recognises that there are issues there itself.

And I did note before I came here, New Zealand rates number four on the Transparency International Corruption Index, just under most of the Scandinavian countries, and Australia is number 13, so we all have issues in this area. But I am told that New Zealand does have some issues in this trust area, but I wouldn’t pretend to be an expert.

Report and full transcript at NBR: Kiwi at heart of Panama Papers leak ‘certain’ New Zealanders will be named


Cunliffe: from Saviour to Martyr – Crucifixion next?

After being on the defensive for a week trying to deal with gaffe after gaffe David Cunliffe changed tack yesterday and tried playing the embattled martyr card – but his claims are contradicted by some obvious facts.

He started early on Newstalk ZB yesterday, responding to questions by Rachel Smalley:

Smalley: Do you accept though that it looks shonkey.

Cunliffe: I accept that there is a full scale assault against me and the Labour Party, and I would respectfully suggest that has something to do with what we stand for, which is a program of change that will bring a fairer better New Zealand.

Smalley: Where’s that assault coming from?

Cunliffe: I think that assault is coming from obviously from the National Party and no doubt from some people that support the National Party.


Smalley: There are stronger calls…there are strong calls now for you from some quarters to resign. Under what circumstances would you relinquish the leadership?

Cunliffe: Um I think that is a very very silly suggestion and I have had absolutely no conversations to that effect within the caucus I can assure you. This is a sustained assault on a political party by their political opponents, and I’m sure people can see it for what it is.

In Bruised Cunliffe bounces back on Stuff:

“Mate, that is just Wellington beltway politics,” he said yesterday. “Government has been trying to throw the kitchen sink at me in the last couple of weeks just to discredit me.”


Earlier in the week the Labour leader admitted the late disclosure was a lapse of judgment but yesterday he said: “They are threatened by the ideas that we are bringing to New Zealanders. Everybody gets a chance, not just the few at the top. I guess the guys at the top, they don’t like that because they think they are going to pay for it and so they are really trying to take me out.

“Well, they can try but I am tougher than that.”

There’s a problem with this approach – it doesn’t stack up with all the facts. “A sustained assault on a political party by their political opponents”?  “Government has been trying to throw the kitchen sink at me”?

Over the last week there have been four significant embarrassments for Cunliffe.

  1. Criticising Key for living in a flash house in a leafy suburb when Cunliffe lives similarly. And claiming to have a middle income when his own household income is estimated at $700k.

This was initiated by Cunliffe attacking John Key, not the Government attacking Cunliffe. Journalists seem to have spotted glaring hypocrisy for themselves.

  1. The revelation that Cunliffe used a secret donations trust for the Labour leadership contest.

Where did this story originate? Claire Trevett seems to have been first in NZ Herald on Monday – Cunliffe used agent to take donations for campaign – and appears to have been promoted by the deadline for filing pecuniary interests on Friday.

There is no evidence and no specific claims that National started this story. That seems unlikely. There have been claims it came from information from inside Labour.

  1. The news that Cunliffe failed to disclose a savings trust in his statement of pecuniary interests on time last year, and made a late disclosure at the time David Sheare’s non-disclosure of a bank account was in the news.

This is the least serious – several other MPs were also prompted by Shearer’s embarrassment to improve their disclosures. Patrick Gower says he initiated this story, with colleague Tova O’Brien checking the register. Journalists doing what journalists do.

  1. The sending of an IT policy document and notes of a Cunliffe speech to IT minister Amy Adams.

This was initially misreported. Clare Curran took the blame and later claimed media “had not listened to what she had said” but her story didn’t stack up.

Bizarrely the following day Curran said that while the email was sent from Cunliffe’s office she decided she should take responsibility. “I think a member of Parliament or minister or whatever should take responsibility. Nobody forced me to do it.” There’s been credible claims Curran was thrown under a bus by Cunliffe (or Matt McCarten) and she stoicly copped one for the team.

Curran also said “We stuffed up yesterday. Let’s hope today’s better.”

It’s easy to label opposing parties as the culprits – and there has also been a lot of blaming of the media. But when it’s pretty obvious these are mostly own goals by Cunliffe and Labour trying to divert the blame lacks credibility, adding to rather than detracting from their embarrassments.

Cunliffe seems to find it difficult to say “We stuffed up”, or his political advisers are telling him it wouldn’t be a good look. But making hollow accusations isn’t a good look either.

Cunliffe started by presenting himself as Saviour. He has moved on to Martyr. Is the next step Crucifixion?

And will his own party be his Judas, or will the condemnation come from the voters?