May 9 2016
Chinese billionaires dominate the top ranks of Australian clients of Panama law firm Mossack Fonseca, and new documents show the lengths to which the Panama law firm would go to protect them, as reported by The Australian Financial Review
Mossack Fonseca’s Australian client list can be searched on the Australian Financial Review’s website from Tuesday morning as part of a release by the International Consortium of Investigative Journalists, with Chinese investors comprising more than a fifth of the total identifiable Australian-based names, as reported by The Australian Financial Review.
The client list includes Li Ka Shing, whose $US31.1 billion fortune was not troubled by his $396 million fight with the Australian Tax Office; Thomas and Raymond Kwok, whose Hong Kong property empire (which includes Wilson Parking and Wilson Security in Australia) is valued at $US14.7 billion; Hui Ka Yan, whose Evergrande Real Estate group is worth $US9.8 billion; and Chinese billionaire Liang Guangwei, a former People’s Liberation Army soldier and head of a state-backed technology conglomerate who recently bought a $64 million block of land next to the new headquarters of the Australian spy agency.
It’s important to recognise that merely appearing on the list does not necessarily indicate improper conduct or tax avoidance. The list includes many who are legitimate businessmen.
The files, originally obtained by German newspaper Süddeutsche Zeitung, show in 2014, when Thomas Kwok was sentenced to five years prison for bribery, Mossack Fonseca’s compliance division ordered British Virgin Islands staff to put “special instructions” in the records of new BVI holding companies the Kwoks had set up to hide their continuing control of their empire.
The note instructed staff not to ask for passport or other details to identify the owners of the new companies, which included Thomas Kwok’s Winsome Sky Limited, despite staff pointing out that BVI law required them to do so.
“We will NOT ask the certified ID or CI copy of the directors unless asked by special investigation [by BVI regulators]”, the special instruction said.
Hui Ka Yan was forced to sell Sydney harbourside mansion Villa Del Mare in 2015. Photo: Bloomberg
“Once we received a special investigation we are not allow to inform the client since it is absolutely no ‘tipping off’,“.Compliance emailed in a heavily underlined passage.
When staff pointed out that asking belatedly for passport ID would itself tell the Kwoks’ companies that an investigation was under way, Compliance merely repeated the special instruction.
It wasn’t the only case where Mossack Fonseca Compliance was tardy. On March 3 last year, Treasurer Joe Hockey revealed the Australian government was considering laying criminal charges against Hui Ka Yan over his illegal acquisition of Sydney harbourside mansion Villa Del Mare in 2014 for $39 million, giving him 90 days to sell.
It was not until March 27 that Mossack Compliance noted that Hui Ka Yan had been a member of the National Committee of the Chinese People’s Political Consultative Conferences (CPPCC) from 2008 to 2013 and thus was a Politically Exposed Person, which required Enhanced Due Diligence.
Hui Ka Yan provided two organisational charts of his offshore empire to Mossack Fonseca. A simple version showed he owned 100 per cent of it. But a more detailed second chart showed the Point Piper house was bought ultimately by his Hong Kong listed company, Evergrande Real Estate Group Ltd which is 61.8 per cent owned by Hui Ka Yan, with 21.27 per cent oned by public investors and 5.95 per cent owned by a Merrill Lynch affiliate.
It raises questions of where the money to buy Villa Del Mare came from. Did it include money from the public company?
Liang Guangwei, who is chairman of Shenzhen Huaqiang Holdings, which produces digital products, is linked to the company that bought a large parcel of land in Canberra next to the new headquarters for the Australian Security Intelligence Organisation.
The strange case of the Pty Ltd company
Guangwei also has links with his wife Jia Ling to a network of Chinese investors who have bought into Australia IT companies and mining stocks.
In 2013, former Young Rich Lister Mark McConnell told The Sydney Morning Herald he had assisted “a number of Chinese high-net-worth individuals … that introduced me into a number of government departments in China”.
The investments he introduced to the Chinese included Uber Global, Citadel Group and Mungana Gold Mines.
“My firm, First Bridge Capital, raised approximately half of the IPO funds for Mungana in 2010 and I am now executive director,” Mr McConnell said.
The timing is curious. Mungana Gold Mines was listed on June 10, 2010. First Bridge Capital Pty Ltd was not incorporated in Australia two months later, on August 21, 2013 and deregistered on October 22, 2013. It was a 100-per-cent-owned subsidiary of Ocean Fortune Management Limited of Hong Kong.
However, Mossack Fonseca’s files show it incorporated a British Virgin Islands company, which was also called First Bridge Capital Pty Ltd, on June 10, 2009, and McConnell held 50 per cent of the shares until November 5, 2010, when the shares were transferred to Ocean Fortune Management Limited of Hong Kong.
Mr McConnell did not reply to questions from the Financial Review about the company. BVI companies are not Pty Ltd. One possible effect of the choice of name was that outsiders could have assumed that this was an Australian company.
ASIC banning order
Mossack Fonseca’s other Australian clients include Murray Priestly, who in June 2013 was banned for three years by the Australian Securities and Investments Commission from acting as a financial advisor.
On April 16, 2012 ASIC had obtained winding up orders in the Supreme Court of Queensland for his Lifestyle Investor Services company, but that does not seem to have stopped Prestley’s commercial aspirations.
Just over two weeks later, on May 3, 2012, Mossack Fonseca was instructed to set up a British Virgin Islands company, Alpha Holdings Management Limited, which would carry on work in Singapore and Hong Kong, though Priestley lives in Queensland.
It was not until three years later that Mossack Fonseca’s Compliance division raised questions about Priestley’s banning order. He told Mossack Fonseca that Alpha Holdings was not a financial services company, according to the regulators’ definition in Singapore or Hong Kong, and that the cause of the banning order was a single magazine advertisement that ASIC deemed was misleading, the Mossack emails show.
Compliance ordered an Enhanced Due Diligence process, but gave no indication that Mossack Fonseca would stop acting for the company.