VANCOUVER – Wealthy South Asian business family – the Laljis and their company Larco Investments Inc. are accused of stashing money in offshore tax havens.
To make matters worse, they are also the landlords of the federal government agency tasked with cracking down on offshore tax avoidance – the Canada Revenue Agency (CRA) which rents its offices from Larco which, according to a story in the Toronto Star, has moved hundreds of millions of dollars into tax havens.
Three Canada Revenue Agency offices — in Calgary, Edmonton and Montreal — were sold in 2007 in a controversial sale and leaseback arrangement to Larco Investments Inc., a company privately held by Vancouver-based reclusive Lalji family, reported the Star.
Larco was described as a “100 per cent Canadian company” when the sales were announced, but records found in the Panama Papers leak and at the Nevada State Gaming Control Board show the three Lalji brothers, who are worth an estimated $3 billion, routed profits from their business interests through the British Virgin Islands (B.V.I.) before parking them in private foundations in Liechtenstein.
In a legal operation to reduce their tax bill, the brothers moved somewhere between $300 million and $500 million offshore before 2003. It is not possible to determine if the Lalji’s Canadian profits — some come from rent paid by the taxpayer — still flow offshore, although the most recent public filings indicate that their U.K. profits still route to the B.V.I.
“It raises questions about where those government payments go. We don’t know. It is deliberately opaque,” said Michelle Travis, a researcher with Unite Here Canada, a union that represents hospitality workers, some of whom are employed by the Lalji family’s companies.
“We think it’s fair game for the government to require Larco to explain how they are using tax havens and why that should be allowed to continue,” said Travis who spent months researching the Lalji family’s assets and first uncovered their offshore links.
Heather McCutcheon, a representative of Larco Investments, declined to comment for this report.
The CRA referred questions to the Public Services and Procurement Canada, which arranges all federal government leases.
“We are committed to doing business with suppliers who respect the law and act with integrity, while obtaining the best possible value for Canadians,” wrote spokesperson Nicolas Boucher in an email, without referring specifically to the Lalji case. The agency exercises “oversight to protect the integrity of its contracts and real property agreements,” Boucher wrote.
After receiving a $444-million boost to its enforcement budget earlier this year, the CRA has targeted offshore tax evasion and avoidance.
Records show that money flowing from Canada to offshore tax havens has skyrocketed in the last few years, more than quadrupling since 2014. The amount of tax revenue lost to offshore tax havens is pegged at $6 billion to $7.8 billon every year.
In addition to government buildings, Larco Investments Inc. has vast real-estate holdings in Canada, including Vancouver’s Park Royal mall.
Because it is not publicly traded, Larco doesn’t disclose its ownership structure or shareholders. According to 2016 inter-corporate ownership records compiled by Statistics Canada, it is part of of 35 Canadian corporations owned by the Lalji Family Trust.
The Lalji Family Trust also doesn’t publicly disclose information. But when the Laljis decided to purchase JW Marriot and Rampart Casino in Las Vegas in 2003, they were obliged to reveal their business structures in order to obtain a gaming licence.
At a hearing held in Carson City, Nev., on December 3, 2003, Thad Alston, who according to his LinkedIn profile was Larco’s executive director from 1995 to 2010, revealed that the Laljis had moved much of their wealth offshore to insulate it from Canadian taxes.
“This structure was created really with legal, tax and estate-planning considerations for the Lalji family,” Alston said.
Because Canadian law requires trusts to pay tax on their assets every 21 years, Alston said the Laljis decided to move their money offshore before their 2005 deadline in order to pay a lower rate of tax.
“The idea was to take offshore — to actually cause a disposition of those assets before 2005, and pay the tax in Canada that was payable on those assets and move it offshore — with the idea that you’d end up with a sum of funds offshore in a tax-free jurisdiction,” he said.
Alston did not respond to requests for comment.
During the hearing, Alston said he and Shiraz Lalji met with HSBC bankers in Switzerland to discuss their options and chose to put between $300 million and $500 million in a private foundation in Lichtenstein.
In order to insulate the foundation, called Hilfreich Stiftung, from Canadian taxes, the Laljis put provisions into place to cut off the family’s access to the money as long as they remained in Canada, Alston said.
“The beneficiaries under the foundation are Shiraz Lalji and . . . Shiraz’s brothers, should they ever be nonresident in Canada . . . . There are restrictions in the (foundation) that prevent any money from this system getting to Canada,” he said.
“It’s not money that’s going to be (sent back to) Canada, because you can’t without subjecting the whole system to tax in Canada — which you won’t (do).”
Alston described how brothers Mansoor and Amin Lalji operated one structure in Canada, which is kept separate from a second operated by Shiraz Lalji in London. Both have end points in Lichtenstein foundations.
Further details of the Lalji’s offshore structures show up in the Panama Papers, a giant database of 11.5 million internal documents from the Panamanian law firm Mossack Fonseca that was leaked to the German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists and the Star.
In the U.K., Shiraz Lalji is a director of Access Self Storage Limited and its 25 affiliated companies. Public filings identify Oakdene Finance Ltd., a holding company in the British Virgin Islands, as the corporate group’s ultimate parent company.
According to the Panama Papers, Oakdene was registered by Mossack Fonseca in 2004 and the firm remained its agent in the B.V.I. until 2007.
Over that time, more than £100 million ($166 million) in loans were arranged through Oakdene, from banks in the U.K. and Ireland.
While the Lalji name doesn’t appear anywhere in the Panama Papers, details in the internal correspondence support Alston’s testimony at the Nevada State Gaming Control Board.
In August 2004, Mossack Fonseca was approached by the Royal Bank of Canada’s office on the Isle of Jersey to register Oakdene on behalf of an unidentified client.
The company was given nominee directors, that is, people who provide their names to mask the true owners of the company. Andrew Mark de la Haye is a corporate director whose name appears on 230 other companies in Mossack Fonseca’s records. Hilary Madeline May appears as the director of five companies registered by the firm.
In 2007, the company’s sole shareholder was The Alamut Foundation, which provides RBC’s address in the Isle of Jersey on the shareholder registry.
Because Lichtenstein doesn’t have a publicly accessibly corporate registry, it is impossible to confirm whether this structure is still in place.
But in 2003, Alston told the Nevada State Gaming Control Board that Shiraz Lalji’s U.K. assets were moved offshore in a way that mirrored the Canadian structure.
“I believe that he doesn’t really have significant assets in his own name,” Alston said. “In other words, his wealth is, again, controlled by another foundation.”
“It’s a (foundation) again, but the managers are residing in the Isle of Jersey . . . . It is Royal Bank of Canada Jersey,” Alston said. “It’s the same kind of structure, a few more companies, but it amounts to the same thing.”
Courtesy Toronto Star
