This man helped set up hundreds of offshore firms for rich clients. His case shows how Canada has ‘turned a blind eye’ to cracking down on offshore tax schemes

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When the 2016 Panama Papers investigation revealed how the powerful and wealthy hid their fortunes through shady offshore companies, the public uproar triggered a global crackdown.

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It was this leak that launched a hundred investigations, recovering more than $1 billion to the public exchequer, while removing prime ministers from office and jailing tax evaders.

but not here.


Not a single charge has been filed in Canada. And while the Canada Revenue Agency (CRA) estimated $29 million in taxes and penalties on 40 Canadians in the Panama Papers leak, the agency could not confirm whether any of that money was actually recovered. .

“There’s been a lot of talk, but not a lot of action,” said Toby Sanger, Canadian’s executive director for tax fairness.

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The evidence, he said, is that money continues to flood offshore tax havens, as detailed in a recent leak of confidential offshore information, the Pandora Papers, which Star is publishing this week as part of a global investigation with International. Association of Investigative Journalists (ICIJ).

Secret documents uncovered the offshore transactions of hundreds of Canadians, as well as former and current world leaders, including the King of Jordan, along with more than 330 politicians and public figures and more than 130 billionaires.

The CRA has calculated that offshore tax havens lose $15 billion in tax revenue annually.

“Every time we’ve seen some numbers, the amount lost adds up,” Sanger said.

Tax haven Canadians deserve huge amounts of money. Last year, Canadian investment dollars in the top 12 tax havens soared to a record high of nearly $400 billion, according to Statistics Canada.

Experts say Luxembourg is Canada’s third-largest destination for foreign investment after the US and UK. It is easily routed through tax havens on the way to other global investments to capitalize on the lower tax rate.

“Canada has been a facilitator and has helped create a tax haven. For many decades we essentially turned a blind eye to those things,” Sengar said.

If there was any face to the Canadian response to alleged offshore irregularities, it would be Fred Sharp.

For nearly 30 years, Vancouverite ran Corporate House, an offshore incorporation clearinghouse for wealthy clients, which put their money through shell companies in the British Virgin Islands and Belize.

Despite being exposed as the exclusive Canadian business partner of the Panama Papers law firm Mossack Fonseca – with whom he founded more than 1,100 offshore corporations – and being under CRA audit for nearly a decade, Sharp has not been able to handle any business in Canada. Avoiding serious consequences.

Ultimately a US investigation would be needed to make the allegation.

In August, US officials uncovered an indictment of fraud and conspiracy against Sharp and several co-conspirators, and issued warrants for their arrest.

The alleged scam relied on Sharp’s network of offshore shell companies.

For nearly a decade, Sharp and his associates allegedly ran a massive pump-and-dump scheme that manipulated investors to buy more than $1 billion worth of penny stocks, according to a joint FBI-SEC investigation. This pushed their prices up so that Sharp and his allies could sell their shares before the price fell. The sophisticated operation reportedly involved a boiler room of salespeople who sold shares to unsuspecting victims, and a network of offshore companies founded by Sharp to conceal ownership of the shares.

US investigators charged Fred Sharp, seen in this undated photo, and his associates running a giant pump-and-dump scheme that manipulated investors to buy more than $1 billion worth of penny stocks.

While a warrant for Sharpe’s arrest has been issued in the US, officials on either side of the border would not confirm whether the extradition process had begun. None of the charges have been proved in court.

The corporate house’s phones have been disconnected and Sharpe’s email sent a message from Star. Sharp’s attorney, Michael Klein, declined to comment.

That Sharp was publicly recognized as running a massive offshore operation in Canada for years without any results is not surprising to Chris Mathers, a former money laundering investigator at the RCMP.

“This is Canada. No one goes to jail. No one pays a fine. Nothing happens here. There are no consequences,” he said.

Mathers said that without the resources for organized crime on its own, Canada attracts law breakers and leaves victims unharmed.

“They don’t help the victims. There’s no help to get the money back.”

New Pandora Papers leak confirms Panama Papers revelations on Sharp’s offshore operations. The files show that Sharp Bond & Company established dozens of shell companies on behalf of clients, using nominee directors to conceal their identities.

Court records in British Columbia indicate that Sharpe has been under CRA scrutiny for at least eight years. In an unconventional move, lawyers for Sharp, his wife and colleagues did not wait for the results of the audit and filed dozens of applications for judicial review while the process continued. This had the effect of stopping many CRA audits in their tracks while the court process dragged on for years. And Sharp’s offshore business continued unabated.

The closure of Sharpe’s offshore empire required the intervention of American officials.

According to the FBI indictment, Sharp routed his business in an encrypted message to a potential customer via a dedicated network of modified BlackBerry phones called “xphones”:

“The service provided is comprehensive; It is not limited to trading. This includes payments, loans, private placements and keeping customers out of jail.”

Sharp remains wanted by US officials.

Toby Sanger, Canadian Executive Director for Tax Fairness.

After years of protest, it was only after the Panama Papers that the CRA began calculating the “tax gap” – the difference between taxes paid on paper and what the government actually received.

In 2018, it was found that $3 billion in tax revenue is lost annually to wealthy Canadians using offshore accounts. Add as much as $11.4 billion in lost tax from corporations with offshore subsidiaries, and the tax haven costs the Canadian public about $15 billion each year.

To offset some of this lost tax, in 2016, Prime Minister Justin Trudeau announced nearly $1 billion in additional funding for the Canada Revenue Agency, which increased audits of large corporations and wealthy individuals. The Panama Papers also gave rise to a new branch of the CRA, known as the International, Big Business and Criminal Investigation, which has 100 specialized auditors who take on the most complex, big-ticket cases that often involve an offshore component and involves sophisticated tax professionals.

The result: fewer prosecutions but bigger cases, with bigger tax assessments and more penalties. Yet, more than five years after the Panama Papers have elapsed, not a single charge has been filed. Of the five criminal investigations launched into Canadians in the leaks, three have been dropped and two are ongoing.

While the CRA has identified 900 Canadians in the leaks and completed 200 audits, as of this week only 40 audits have found anything wrong. This has resulted in $29 million in assessed taxes and fines, but the agency could not confirm who was defrauding their taxes and whether any of that money was actually recovered.

“Wealthy taxpayers often have complex tax regimes, resulting in a lengthy and time-consuming process of gathering information during audits,” CRA spokesperson Chantal Byudry wrote in an email. “It is important to emphasize that generally, less complex audits are at first conclusion and as such, additional federal taxes and penalties are anticipated in the future as more complex and challenging audits are completed.”

Meanwhile, the use of anonymous shell companies in the household has also become a problem.

Canada has been widely criticized As a tax haven because our provincial governments do not require residency or even basic identification to register a company.

Trudeau’s campaign promises during this fall’s election were to establish a for-profit ownership registry for all federal corporations, which would create a legal registry of corporations’ actual owners.

Gary Nichols, former head of the RCMP’s Toronto Integrated Crime Unit, said the problem with Canada’s lack of transparency around corporate ownership goes beyond tax evasion. Such anonymity also provides cover for the crime.

Billions of illicit cash are stashed in the booming real estate markets from Toronto to Vancouver, and some are held accountable. A 2019 Star investigation found that nearly 90 percent of money laundering charges in Canada were withdrawn or withheld.

Nichols laments that dirty money is no longer a priority for law enforcement.

“They don’t look for money. They don’t confiscate homes and they certainly don’t go offshore,” Nicole said.

“This is probably the biggest time in the history of criminality in this country.”

Robert Cribb and Sheila Wang, Torstar, and Zach Dubinsky, CBC. with files of
Marco Chown is a Toronto-based investigative reporter for Oved Star. Follow him on Twitter: @marcooved

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