Canadian businessman, Toronto real estate firm implicated in multi-million-dollar offshore tax scheme in Channel Islands | The Star

Canadian businessman, Toronto real estate firm implicated in multi-million-dollar offshore tax scheme in Channel Islands | The Star

A Canadian millionaire linked to a complex web of offshore companies in Jersey and the British Virgin Islands.

Fraudulent loans, forged contracts and creative accounting designed to hide profits from tax authorities.

And a little-known Toronto real estate development firm in the background that played a key role in the decade-long flow of tens of millions of dollars through offshore tax havens.

A cache of nearly 350,000 documents leaked to international journalists, including at the Toronto Star, detail the corporate empire of Canadian-born businessman John W. Dick and an offshore trust company called La Hougue that pitched clients on investments with the promise of tax-free profits.

It moved tens of millions of dollars over decades with impunity using what Dick, some of his colleagues and financial experts agree were forged financial records, as well as corporate “layering,” commonly used to complicate money flows and shield profits from taxation.

The leak provides a rare, behind-the-scenes look at the methods of offshore money movement during the 2000s that have triggered legal actions that continue today. And they reveal the sophistication and influence of an offshore industry that continues to divert millions of dollars from national tax coffers without criminal charges.

As with many previous Star investigations into the world of offshore money, many of the key players here are Canadians.

“Canadians have played a fabulously major, outstanding role in pioneering shady practices offshore,” says James S. Henry, an American economist and attorney who specializes in tax issues including the impacts of tax havens. “Low and no tax, low regulation havens, we can no longer afford this as a world. We have deep fiscal crises all over the planet…It’s time to clean it up.”

The guiding hand behind the profitable money flow in the La Hougue story is a matter of fierce and ongoing allegations and counter allegations contained in legal, police and regulatory complaints spanning Europe, Canada and the U.S. in which all the figures in this story point fingers at each other.

The cast of characters surrounding Dick include a senior executive whose financial management techniques triggered withering regulatory scrutiny in Jersey and Panama and a U.S. court sanction for perjury. His Canadian deputy was fined $58 million (USD) in 2017 by the U.S. Securities and Exchange Commission for “perpetrating (an unrelated ) multimillion-dollar, international pump-and-dump scheme.” Responding to questions about what happened at La Hougue, Dick’s lawyers said he had no knowledge of any wrongdoing.

So far unnamed in the various court actions is Venterra Realty Inc. — a firm with apartment developments across the southern U.S. that are home to 33,000 people — and its Toronto principals John Foresi and Andrew Stewart who appear throughout the leaked documents.

Five leading financial experts reviewed documents from the leak as part of the Star’s investigation. All agree they trace the movement of tens of millions of dollars through a complex chain of firms to finance Venterra real estate developments and return profits without proper taxation.

In a written response to questions from the Star, Stewart, on behalf of himself and Foresi, denied any improprieties saying “we unreservedly reject the allegations that Venterra participated in, or had knowledge of, any investment strategies designed to avoid taxation through the use of fraudulent documents.”

The statement says Stewart and Foresi were at “arm’s length” from Dick, his colleagues and their companies and had no knowledge of their “tax practices, tax reporting, financial dealings, or relationships.”

An 11-page memo penned by La Hougue senior executive Richard Wigley in July 2000 details the “methods available to enable the movement of assets offshore.”

“Naturally, I have a concern that any of these papers should fall into the wrong hands, so please guard them carefully,” the letter begins.

The document details 11 techniques including a property investment in Mexico, deliberate foreclosure on a mortgage and being paid consultancy fees via separate businesses.

The message to prospective investors was reassuring.

Those investing in the Mexican property development would be protected if their national tax agency enquired about their investments for tax purposes.

“Suitable confirmations and assurances as to the non-profitability can be given to show that, to date, there had been no capital gain and no income distributions had occurred,” the memo says.

Because the transaction would be under the offshore control of La Hougue where financial secrecy offers protection from regulatory scrutiny, “no information could be obtained separately by any investigating party.”

Within a year of the memo being written, some of its techniques were showing up in money flows involving Venterra.

Until now, nothing has been publicly known or written about the Richmond Hill-based Venterra and its connections to the string of La Hougue-affiliated companies that provided tens of millions to its development projects in the 2000s.

La Hougue clients were promised annual returns of at least 10 per cent — and up to 20 per cent — for investments they made in Venterra’s multi-residential developments in the U.S.

Here’s how the money typically flowed to and from Venterra, according to the leaked documents analyzed by the Star:

It started with Jersey-based La Houge and moved through a British Virgin Islands firm called Michelin to a U.S. firm called Land Securities Investors (LSI) which transferred the money to Venterra in the form of a loan.

The arrangement exploited a U.S. tax regulation to return investment money to La Hougue untaxed and with gains — a cycle that involved money moving through four companies in four jurisdictions using fabricated documents and complex structures to disguise the fraud.

One example of the chain is a 2004 investment in a Venterra project dubbed “Walden Portfolio.” A $100,000 investment went from La Hougue to Michelin and a day after that, the money went into the Colorado bank account of LSI before it flowed to Venterra.

Dozens more wire transfers from LSI to Venterra appear in the records — $21 million between 2003 and 2008.

The records also show Stewart and Foresi invested in their own projects through La Hougue where they are linked to several client accounts.

In the Walden project, for example, Foresi shows up as an investor through his La Hougue client account (F0088) making two loans starting in January 2004 — shortly after the deal was signed — totalling $117,500.

Venterra’s developments in the U.S. were successful. Internal corporate documents show returns of 30 per cent for investors in one Venterra project.

But the burden of a 30-per-cent U.S. withholding tax levied on transfers to offshore jurisdictions such as Jersey threatened to eat away much of that profit.

The La Hougue solution to the tax problem employed a U.S. Internal Revenue Service tax regulation called portfolio debt.

In an attempt to combat offshore tax evasion, the U.S. generally imposes a 30-per-cent withholding tax on debt and interest payments made by U.S. companies to foreign lenders. But there is an exemption for portfolio debt that allows those loan repayments tax free if they meet requirements including the U.S. company being arm’s length from the foreign lender.

Dozens of records in the leaked documents reveal how the La Hougue chain of companies exploited the portfolio debt regulations to avoid taxation on interest.

An internal 2002 memo titled “Portfolio Debt” acknowledges that while a withholding tax would typically apply on interest paid from the U.S. to a non-U.S. lender, “this 30 per cent withholding tax is reduced to zero under Portfolio Debt and that is the benefit to the client.”

The memo uses the example of a $600,000 loan with an annual interest rate of 10 per cent.

The $60,000 in annual interest from the investment would generate $18,000 in withholding tax (30 per cent). But instead of paying tax into national tax coffers, the portfolio debt regulation eliminates tax and investors pay only $6,000 in a fee to La Hougue for its services — a savings of $12,000, the memo reads.

Everyone wins, it says.

“The effective fee to La Hougue equates to 10 per cent of the annual interest paid.”

The memo reassures investors that their money will remain “in a tax free environment,” and that the strategy can be “fully supported.”

It worked, the records show.

La Hougue’s Venterra investments returned along the same path they arrived.

In the Walden project, for example, a May 14, 2004, payment of more than $350,000 left Venterra heading for LSI with a note reading, “return of Walden and Whispering Oaks advances.”

Twelve days later — on May 26 — LSI transferred $375,000 to BVI-based Michelin with no withholding taxes collected, the documents show.

A day later, Michelin sent the full $375,000 back to La Hougue to complete the cycle.

Foresi’s La Hougue account statement shows his investment in his own company through an offshore intermediary was returned, with interest, the same week.

In response to questions about why they personally invested in their own projects through La Hougue accounts in Jersey, Foresi and Stewart declined to respond.

But while the strategy was effective in removing the tax hit, there is a caveat: for the IRS portfolio debt regulation to apply, the U.S. borrower must not be related to the foreign lender.

U.S.-based LSI, which received the loans from BVI-based Michelin, are intimately connected throughout the leaked records to La Hougue.

Michelin, which was established by La Hougue’s directors, including Wigley, is described by Wigley in one memo as a corporation “under the control of (La Hougue).”

Likewise, Alan Fishman, who led LSI at the time, signed a 1996 employment contract with La Hougue and repeatedly describes himself in court records as being under the control of Wigley and Dick.

That corporate intimacy between La Hougue, LSI and Michelin breaches the portfolio debt exemption, say financial experts who have reviewed the case for the Star.

“The portfolio debt exemption should not have been used by LSI,” says Toronto forensic accountant Charles Smedmor. “The LSI payments to Michelin and La Hougue should have had 30 per cent withholding tax applied and the withheld funds should have been remitted to the United States Treasury.”

Frank Casey, a U.S. financial expert who blew the whistle on the Bernie Madoff scandal and is a frequent expert witness in U.S. fraud cases, reviewed the records for the Star’s investigation.

“Their addition of Michelin and LSI intermediary investment transfer points appears to be designed to create complexity to effectively shield profits from taxation,” he said.

The portfolio debt tax exemption doesn’t apply here, he says.

“These guys seem to be in control of everyone in the funding loop.”

Retired FBI agent Gregory Coleman, who was depicted in the film The Wolf of Wall Street for his role in the arrest and conviction of Jordan Belfort, also reviewed portfolio debt documents from the leak on behalf of the Star.

“It seems to be a clear violation of IRS regulations. It’s pretty black-and-white to me,” he said. “The Venterra element has all the signs it was set up to make money and pay no taxes on it. The transactions were not arm’s length. They were between corporations set up to disguise ownership and control.”

A former Colorado judge also expressed deep concerns about the portfolio debt arrangement last year after ordering Wigley to produce corporate records to support it and receiving virtually no documentation.

In a 2019 Colorado arbitration case, arbiter William Meyer called it “inconceivable” and an act of “astonishing negligence,” noting that the IRS’s portfolio debt regulation requires regular reporting of interest payments.

“To the best of the arbiter’s knowledge, none of the required reporting IRS documents have been provided.”

Identifying who orchestrated the portfolio debt scheme gets complicated.

Court records and thousands of pages of internal La Hougue documents provided to the German-based European Investigative Collaborations (EIC) by Dick’s daughter and shared with nine media outlets around the world (including the Star) paint two very different portraits of the prime mover behind the corporate veil.

And they reveal a cloak-and-dagger world of corporate betrayal, secretive techniques and alleged criminality.

The narrative pivots around the 82-year-old Dick, whose Mennonite roots trace back to the Kitchener area.

Born in a tiny farmhouse to a Russian father and Ukranian mother, Dick and his three sisters were raised as German-speaking Mennonites who lived a solitary, religious life of prayer, says his daughter, Tanya Dick-Stock.

One of Dick’s first summer jobs was at a local slaughterhouse working next to his father, she says. As hogs rolled off the slaughter line, Dick was responsible for singeing the hair with a blowtorch.

“He said it was the most disgusting, awful, horrible, smelly job and he decided right then and there he needed to find a job in life where he made a lot of money because he wasn’t going to do this. It stuck in my mind.”

After graduating from a Christian college in Illinois where he met his first wife, the couple moved to Toronto where Dick graduated from the University of Toronto Faculty of Law in 1962.

After earning his fortune in U.S. real estate, Dick moved in the 1980s to Jersey, a Channel Island British Crown dependency located between England and France, where La Hougue was established and, for a time, run out of Dick’s lavish mansion called St. John’s Manor.

“He was seen as a very successful U.S. property developer that you shouldn’t look closely at in terms of what he was up to,” recalls John Christensen, an economist and director of Tax Justice Network who is from Jersey and worked as a forensic accountant and government economic advisor there in the 1980s and 90s.



“(Dick) was immensely wealthy and projected that wealth. His clients would fly into the island on private jets and get driven to his private manor. He was certainly seen…as untouchable.”

Christensen, whose tax research organization ranks Jersey 16th on its global financial secrecy index, says he regularly attended meetings with government officials during his time on the island who raised concerns about Dick’s business activities and clientele.

“John Dick was one of those people who was regularly being cited as concerned about…but (they) didn’t know what to do about it,” he said. “There were some rocks you do not want to look underneath…That’s how I saw the regulators from Jersey throughout my tenure.”

Dick’s lawyers dispute the characterization of Jersey authorities taking a hands-off approach with their client.

After reviewing key documents in the leak on behalf of the Star, Christensen said the scheme resembles many others he’s seen in Jersey.

“What immediately jumps out at me is that it’s deliberately opaque, it’s deliberately complex. That complexity serves one purpose, which is to hide the links between the players.”

Those links emerge clearly in the leaked documents and public records.

Wigley and his colleague, Fishman, have told a U.S. court that Dick was the mastermind of La Hougue’s investment strategies which they say were driven by a desire to dodge U.S. taxes through sophisticated techniques they dutifully executed at his instruction.

Neither Wigley nor Fishman agreed to interviews or provided detailed written responses to questions posed by the Star.

Wigley provided a statement through his lawyers saying he would not address specific allegations due to ongoing legal proceedings.

The brief written response says “many of the statements made in the premises to your questions are just blatantly false…Most of what you have been told by the Dicks is just not true.”

The statement provided no specific examples of falsehoods in response to specific questions.

Fishman responded to questions through his Colorado lawyer, Cara Thornton, who said in a telephone interview: “Mr. Fishman has no comment at this time.”

Wigley, the public face of Michelin and La Hougue, says in a 2018 deposition that the portfolio debt scheme was “an arrangement which was put in place to assist Mr. Dick to minimize his U.S. tax fiscal liabilities,” he said. “All the monies relating to the whole transaction were Mr. Dick.”

While Dick owned no corporate shares of La Hougue in his own name, Wigley said he and other company directors served as “nominee” directors to obscure Dick’s beneficial ownership.

“We were registered holders of the stock because Mr. Dick spent his life hiding from his assets and using people and entities so that his name did not appear.”

Asked about La Hougue’s corporate decision making, Wigley said: “I was employed by (Dick). He determined what remuneration I had. And so, basically, if you want to keep your job, you do as you’re told.”

LSI’s Fishman told a Colorado court he was controlled by Dick and Wigley.

“I followed (Dick’s) direction. I was a good employee and I did exactly what he wanted me to do,” Fishman said later in a 2017 deposition in the Colorado proceedings. “That’s what I did for 15 years — followed his direction, under his control.”

Dick tells a different story.

While Dick declined an interview for this story, he sent a written statement.

There is clear evidence of fraud and forgery in La Hougue’s records, he says, but he is the unwitting victim of his long-time senior manager Richard Wigley whose “repeated fraud” cost millions of dollars, reads the written statement from his lawyers.

“John Dick had no knowledge of the fraudulent transactions mentioned given the business was conducted by Wigley for his own benefit,” it says. “John Dick had no oversight or involvement in the day-to-day business of La Hougue.”

A thick stack of leaked documents show Dick’s name appearing as “beneficial owner” of La Hougue dating back to the 1990s.

A 1992 Colorado court order as part of Dick’s divorce from his first wife says La Hougue was “beneficially owned and controlled by John W. Dick” and that it has “participated in John W. Dick’s ongoing plan, scheme or design to conceal his assets.” In 2014, Dick’s own Jersey lawyers called him the “beneficial owner of the La Hougue entities.” And a 2015 Jersey court ruling also says La Hougue was “beneficially owned” by Dick.

In a 2015 Jersey police report, Dick claimed no knowledge of Venterra or LSI’s relationship with Michelin until 2014.

“I was shocked to learn…that tens of millions of dollars had been transferred from LSI’s bank accounts to a company called Michelin,” he said. “I cannot come up with any legitimate reasons why LSI would be required or need to send any money, let alone tens of millions of dollars which was all done in a clandestine manner to a company I know nothing about.”

Dick also told Jersey police he didn’t learn of Venterra and the portfolio debt scheme until hearing it from a La Hougue manager named Wayne Weaver in a 2014 meeting.

Dick says Weaver told him that Fishman and Wigley “created their own portfolio debt ledger” to move money through Venterra using “two sets of books.”

Weaver, a Canadian who was fined nearly $60 million by the U.S. Securities and Exchange Commission in 2017 told Dick he had forged documents for Wigley, the police complaint reads. It is unclear whether Jersey police took any action based on Dick’s complaint.

Some evidence of Wigley’s document forging shows up in the leaked corporate records as well.

In a June 2006 memo titled “CONFIDENTIAL — NOT TO BE RETAINED,” Wigley writes to Fishman asking him to sign two documents “because I think it is important that we do not create difficulties for ourselves with the age of paper and the ink as it relates to signing documents in retrospect,” the memo reads.

The memo ends with the hand-written words: “P.S. Shred this after signing.”

Weaver and his U.S. lawyers did not respond to written requests for an interview for this story.

Until Dick’s conversation with Weaver in 2014, he had no knowledge of any forgery allegations involving La Hougue, he alleges in his 2015 police complaint.

“I had never heard of Venterra…Michelin…and all these entities that I have apparently been funding through forged trust documents,” Dick’s police report reads. The discoveries amounted to, “deception, dishonesty, trickery, fraud and the fact that the trust I have set up for my family has become a sham for a money laundering, asset draining venture predominantly by Richard Wigley.”

The available paper trail detailing the money flow to Venterra stopped in 2010. By that time, La Hougue — as intermediary between investors and Venterra — had already ceased to exist following a series of regulatory investigations and court hearings that have revealed serious questions about the company’s finances.

La Hougue had already come under scrutiny by Jersey regulators as early as 2002 when an investigation raised “serious” concerns about irregularities including improperly recorded loans, conflicts of interest and improper documentation.

The regulator eventually approved the company’s continued license with a warning that it remains on the commission’s “higher risk list.”

With a re-visit from regulators looming in 2007, Wigley pulled up stakes and moved the operation to Panama, re-establishing under the name Pantrust International.

It wasn’t long before Panamanian officials also became concerned about Wigley’s operation — concerns Wigley believes were triggered after his fallout with Dick.

“Mr. Dick went to the police with accusations that I had been stealing money from him,” Wigley later said in a 2018 deposition in which he alleged Dick threatened to put him out of business by complaining to the Panamanian officials. “Never at any stage has anybody ever come up with anything tangible.”

Panamanian financial regulators investigated and took action against Wigley.

In December 2014, the country’s superintendent of banking banned Pantrust.

The investigation found Pantrust provides “alleged loans” that feature “no documentation that supports the existence of the loan agreements.” The recipients of the loans “do not refund payments of interest, nor capital reimbursement,” the document reads. And a list of loans examined by investigators included payouts to four people who are related to the directors of Pantrust.

An examination of the company’s records showed financial reports named “Dummyfund” and “fictional due interests account/fictitious funds interest…where the interests of customer accounts are credited without any material evidence of actual payment of such interests to the creditor clients.”

Two decades after Wigley’s memo detailing the methods of offshore money movement — and tens of millions of dollars in offshore financial investments — what remains of Dick’s former La Hougue empire sits in boxes of court files in Denver.

Legal skirmishes place him on the opposite side of the courtroom aisle from his daughter and his former top executives, Wigley and Fishman.

In court documents, Dick alleges Wigley and Pantrust “fabricated, backdated and executed as trustee approximately 450 pages of loan documents for 25 separate ‘loans.’ ”

On the eve of trial in March 2016 — one of several ongoing civil suits involving La Houge associates and family members — Wigley’s lawyers told the court he surprised them with an admission: Wigley had provided loan documents to the court as evidence in his defence that he knew — but did not previously reveal to his lawyers — that he had backdated.

In a subsequent email disclosure to the court, Wigley’s lawyers provided copies of three loan agreements — dated 2003, 2010 and 2011 — that had all been backdated.

“Please be aware that all four documents were made and signed in 2013,” Wigley’s lawyer wrote.

In a May 2016 submission to the court, Wigley’s lawyers said their client agreed he should be “sanctioned by this court for the sanctionable conduct.”

A January 2020 Colorado court order confirms Wigley was sanctioned for committing perjury and “admitted to and was sanctioned for fabricating 24 loan notes representing over $15 million of alleged debt” related to two of Dick’s family trusts.

In a written response to this investigation, Wigley’s current lawyers deny that admission: “Your statement that Mr. Wigley admitted in Colorado legal proceedings to fabricating loans is once again false.”

Today, Venterra’s Foresi and Stewart control apartment complexes in 11 major U.S. cities housing more than 33,000 residents – real estate assets worth $2.8 billion (USD). Their written statement calls Venterra a “Canadian company that has built a very successful business over 19 years, with an excellent reputation, and over 90 employees in Canada.”

Wigley’s Panamanian operation was shut down. But a company called La Hougue Trustees Limited remains licensed in the British Virgin Islands. Its registered ownership is hidden by offshore secrecy.

None of the key players in this story have faced criminal actions.

With files from Sam Eifling and Katarina Sabados, Global Reporting Centre.
This story is part of the ongoing Jersey Offshore investigation by the Toronto Star, the Global Reporting Centre at the University of British Columbia, and European Investigative Collaborations.
Robert Cribb is a Toronto-based investigative reporter for the Star. Reach him at rcribb@thestar.ca

This content was originally published here.

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