New Zealand accountants use creative methods to backdate documents on Maltese accounts implicated in Panama Papers

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http://maltawinds.com/2018/05/09/new-zealand-accountants-use-creative-methods-to-backdate-documents-on-maltese-accounts-implicated-in-panama-papers/

It seems that New Zealand accountants were using creative methods to backdate accounts and documents when the Panama papers were published in 2016, Maltawinds can reveal. This was also revealed in a  report published in the Australian Financial Review. where it was claimed that trusts set up around seven months before the scandal broke were being backdated. This came out during an investigation by the Maltese Financial Intelligence Unit.

Emails quoted in a draft report by Malta’s anti-money laundering agency show that while The Australian Financial Review was putting questions in late March 2016 to NZ prime minister John Key about offshore trusts set up by Malta’s Energy Minister Konrad Mizzi and the prime minister’s chief of staff, Keith Schembri, Mr Mizzi was giving instructions to backdate changes to his New Zealand holdings.

It is the first indication that records of New Zealand trusts were altered by clients, in a structure that Maltese investigators suspected could be used to channel funds from Azerbaijan to the Seychelles, to Dubai, to Panama and finally to Malta via NZ trusts. Mizzi and Schembri have denied this.

Mr Mizzi had claimed in Malta in March 2016 that his Panama company was never used and had assets of only €92 ($146), but in reality the company had issued $US10,000 in shares to his New Zealand trust, reflecting a much greater scale of operation, until the records were backdated.

New Zealand accountants were backdating documents during the publication of the Panama Papers in 2016 for trusts that had been set up seven months earlier by senior Maltese government figures, Maltese investigators say.

Emails quoted in a draft report by Malta’s anti-money laundering agency show that while The Australian Financial Review was putting questions in late March 2016 to NZ prime minister John Key about offshore trusts set up by Malta’s Energy Minister Konrad Mizzi and the prime minister’s chief of staff, Keith Schembri, Mr Mizzi was giving instructions to backdate changes to his New Zealand holdings.

It is the first indication that records of New Zealand trusts were altered by clients, in a structure that Maltese investigators suspected could be used to channel funds from Azerbaijan to the Seychelles, to Dubai, to Panama and finally to Malta via NZ trusts. Mizzi and Schembri have denied this.

Mr Mizzi had claimed in Malta in March 2016 that his Panama company was never used and had assets of only €92 ($146), but in reality the company had issued $US10,000 in shares to his New Zealand trust, reflecting a much greater scale of operation, until the records were backdated.

At the time, Mr Key defended the NZ trust laws, claiming on April 4, 2016 that “New Zealand has full disclosure of information”.

In an about-face seven days later, he announced an inquiry into offshore trusts in response to the Financial Review coverage, and later changed reporting requirements for the trusts.

The latest revelations demonstrate how easy it is to alter trust documents, even after the changes. At a political level it is particularly sensitive because it was a senior cabinet minister in Malta seeking to alter records in New Zealand.

The Mizzi and Schembri holdings were revealed in the Panama Papers, a leak of 11.5 million documents from Panama law firm Mossack Fonseca, which were obtained by German newspaper Süddeutsche Zeitung, and investigated in a collaboration led by the International Consortium of Investigative Journalists.

The files showed that Nexia BT, an accounting firm in Malta that acted for Schembri and Mizzi, ordered two Panama companies to be incorporated, Tillgate Inc and Hearnville Inc, that were transferred to the two men in 2015, each with one share with a nominal value of $US100.

In July 2015 Mossack Fonseca settled two trusts in New Zealand for the two men, Rotorua Trust and the Haast Trust, which would be overseen by Bentley New Zealand’s trustee company, Orion Trust (New Zealand) Ltd.

The FIAU report, which deals only with Mr Mizzi’s company, Hearnville Inc, said that in a series of exchanges between March 28 and April 1, Mossack Fonseca’s nominee directors cancelled the original share certificate of 100 shares and issued a new share certificate of one share to Orion Trust (New Zealand).

It was during this period that the Financial Review was putting questions to Mr Mizzi and Mr Schembri about their New Zealand trusts, ahead of the first publication of Panama Paper stories on April 3.

The FIAU quoted an April 1 email from Juan Carlos Martinez of Mossack Fonseca (Panama) to Karl Cini of Nexia BT: “The reason for this replacement is the correction and clarification of the reference to the Paid Up share capital which, in the previous resolutions and certificates was wrongly stated as $US10,000, when actually it was only $US100.”

As a result of this email, the FIAU report says, “a new board resolution and share certificate were drawn up and backdated to 21st July 2015”.

The FIAU report described the change as “highly irregular” and noted that the backdated minutes did not actually authorise the issue of the new share certificate “while also raising suspicion given the ease with which such documentation was amended and backdated”.

“This document may have been fabricated to coincide and substantiate requests and claims following the revelations of the Panama Papers,” the FIAU draft report states.

While the FIAU report focuses on the change in the Panama company, it would have required a corresponding change in the Rotorua Trust administered by Bentleys New Zealand.

Rotorua Trust was settled in July 2015 with a single asset, 100 shares in Hearnville Inc, which after the changes seven months later was deemed not to exist, and replaced with a share certificate for one share.

Legal sources in New Zealand said it was permissible to alter trust assets retrospectively to correct genuine errors. However, if changes were made for other reasons, this became more problematic.

Accountants would rely upon information provided by clients.

Under the amendments to foreign trusts law introduced after the Panama Papers, details of the settlor and beneficiaries of a foreign trust must be provided to the government, but there is no continuous disclosure regime that would show changes to assets.