Canada: Ponzi scheme victims call for reopening of probe of transfers in Isle of Man
29 Apr 2021

Victims of a massive investment fraud that operated for years out of Montreal and siphoned more than $500 million offshore are calling on federal politicians to resume an inquiry into Canadian shell companies set up in the Isle of Man, a popular tax haven used by global accounting firms.

“On behalf of the victims, I am asking that the federal government reopen this file,” Janet Watson wrote last month to her local MP, Marie-Claude Bibeau, the federal Liberal minister of agriculture.

Watson lost her retirement savings in a fraud engulfing three Montreal companies — Cinar, Norshield and Mount Real — that bilked thousands of average Canadian investors.

The Isle of Man previously attracted attention from parliamentarians after revelations that the accounting firm KPMG had helped set up offshore shell companies for unknown wealthy Canadian clients.

In 2016, the House of Commons finance committee abruptly shut down questioning into offshore shell companies in the Isle of Man after objections were raised by KPMG about the potential impact on ongoing court cases.

The Canada Revenue Agency eventually settled three of the tax cases out of court, but the committee never resumed its inquiry.

Now, documents suggest some of the monies that disappeared offshore may be connected to four shell companies in the Isle of Man that were used to hide money from creditors.

In her email to Bibeau in early March that was copied to hundreds of fellow investors, Watson said it is time for politicians to probe what happened to their money lost offshore in a Ponzi scheme, a fraud in which the apparent returns are actually paid out using money from new investors.

Watson also wants MPs to hold financial institutions accountable for not properly auditing investment funds as money was disappearing offshore.

“The RCMP is not equipped to handle this kind of investigation,” she said, noting that the Mounties previously turned down a request to look into the missing money.

Watson said federal politicians not only have an opportunity to help the victims find their money, but also to address how offshore secrecy affects all Canadians.

“Millions and millions and millions of dollars was lost. How did [the fraudsters] do it and get away with it?”

Watson was reacting to recent investigative reports by CBC’s The Fifth Estate and Radio-Canada’s Enquête that revealed suspected links between their missing investments and financial transactions in the Isle of Man, a British Crown dependency in the Irish Sea between England and Ireland known for offering offshore secrecy and being a tax haven.

The documentaries also revealed that confidential emails obtained from an offshore leak of financial records link KPMG to four shell companies now believed by some financial experts to be connected to the fraud.

The companies, Shashqua, Katar, Spatha and Sceax, are named after ancient swords and were set up in the Isle of Man nearly two decades ago.

In a letter to CBC/Radio-Canada, KPMG’s external counsel said the author of those emails is mistaken and that any suggestion KPMG helped set up those companies is “false and defamatory.”

Opposition parties support finance committee probe

Before they halted their Isle of Man probe in 2016, members of Parliament on the finance committee learned the KPMG scheme was not only marketed to ultra-rich Canadians as a way to dodge taxes, but also as a way to keep money from potential creditors.

An internal KPMG document, obtained by the finance committee, showed that the accounting firm promoted their scheme as a way for their wealthy clients to “protect” their assets offshore. There was “nothing [a] creditor/ex-spouse etc. can claim,” KPMG said in its marketing pitch.

KPMG said it would charge its clients a minimum of $100,000 to buy into the scheme, including factoring in a percentage of the amount of taxes “saved” by the wealthy Canadians.

Documents filed in the Tax Court of Canada show that after auditors for the Canada Revenue Agency discovered the existence of the KPMG scheme, they concluded that the accounting firm’s “Offshore Company Structure” in the Isle of Man was a “sham” that “intended to deceive” federal regulators.

In Ottawa, NDP MP Peter Julian put forward a motion last month calling on the finance committee to once again probe tax havens, including the Isle of Man and the sword companies, following the CBC/Radio-Canada revelations.

“People have been cheated, they have lost their savings. The federal government should do more than pay lip service in the fight against tax evasion and international tax evaders,” said Julian.

By Harvey Cashore, Frédéric Zalac, Paul Émile d’Entremont, Mark Kelley, Sannah Choi and Lynette Fortune, CBC News, 28 April 2021

Read more at CBC News

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