September 2006 Top Story:
**MLI ARCHIVE***
Wickenby net descends upon the rich and famous
A scientist, a boxer, entertainers, lawyers and businessmen have all been linked to the Wickenby investigation, which continues to gather pace
The Project Wickenby tax investigation cast its net even wider last month as one of Australia’s most successful scientists joined the growing list of celebrities and wealthy individuals who have been named as alleged tax evaders using offshore structures.
The multi-agency tax evasion probe, which is jointly run by the Australian Crime Commission, the Australian Taxation Office and the Australian Federal Police, is said to have so far yielded $4m in extra tax from its early investigations.
It also announced last month that it had conducted a second round of raids at 27 sites in June.
Among those named last month were Dr Graham Kelly, who is being investigated in relation to possible tax and money laundering crimes linked to his listed drug company, Novogen.
The company, which has developed a revolutionary cancer drug, is being investigated for allegedly using offshore trusts to avoid paying tax on the sale of share options worth $13.8m.
Kelly resigned as an executive director of the Sydney-based company last September but remains the executive chair of the company’s US subsidiary. He is said to be the beneficial owner of two blind trusts based in Switzerland.
The authorities are understood to be investigating whether Kelly, through back-to-back loan arrangements worth $1.7m and $2.5m, tried to repatriate profits from the sale of $13m worth of share options without attracting Australian Taxation Office attention. It was allegedly organised through Strachans, the Swiss-based accounting firm at the centre of Operation Wickenby.
Dr Kelly and his son David, entertainers Paul Hogan and John Cornell as well as rock manager Glenn Wheatley and lawyer Paul Gregory have been named in the probe. The entertainment lawyer Michael Brereton and Gold Coast businessmen Daniel Stoten, Glenn Hargreaves and Adam Hargreaves have been charged with offences related to the investigation.
World boxing champion Kostya Tszyu was also cited in the press last month as being an “unwitting pawn” in an offshore trust structure allegedly used by Wheatley to create an illegitimate $400,000 tax deduction on the proceeds of one of Tszyu’s world title fights.
Mr Wheatley and his then solicitor Paul Gregory allegedly used Strachans to design a way to save on tax after Tszyu won a multi million-dollar fight in Melbourne’s Telstra Dome in January 2003.
Strachans is believed by investigators to have arranged for the repatriation of the funds based on false invoices.
Entertainer John Cornell hit back at the publication of allegations that he and Paul Hogan held $40m in Swiss-administered trusts and offshore companies without declaring it to the ATO. He said the charitable nature of the trusts never got a mention.
“Despite the fact that Australian citizens are protected by the Tax Office Secrecy Act, I am being subjected to trial by media leak,” Cornell said.
Deloitte forensic partner Chris Cass said last month he believed that as a result of the Wickenby probe “there’ll be many more institutions in Australia that will need to do the due diligence checks”.
“They need to make sure that they don’t end up with the proceeds of crime from people who perhaps get caught in one of these inter-agency sweeps,” he said.
He said that aside from the potential criminal and legal implications a situation like Wickenby could pose, institutions that were caught with these sorts of assets “would suffer financially once the new AML legislation is implemented”.
Cass said he expected a culture shift whereby federal agencies will monitor how sound each major financial company’s anti-money laundering procedures are in order to facilitate operations like Wickenby in the future.
“I think the police will get to know institutions that have very robust controls, and I think this will help the police and these other agencies do their investigations,” Cass said.
Meanwhile the federal government is also considering a sweeping overhaul of tax secrecy laws initially designed to aid the Wickenby probe but which could be expanded to help catch welfare cheats, rogue company directors, drug money launderers and terrorist financiers.
Treasurer Peter Costello, who said last month that the unchecked abuse of tax havens would threaten “revenue of billions of dollars” is proposing laws that could allow the use of ATO data to track down social security fraudsters, company directors who breach their duties and ATO employees who have not filed their tax returns.
At the moment, ATO information cannot be used as evidence in prosecuting non-tax offences and disclosure to law enforcement agencies is limited to indictable offences.
“This means that information cannot be disclosed in relation to serious but non-indictable crimes such as non-indictable social security fraud, or civil penalties for breach of directors’ duties, or insolvent trading in relation to phoenix companies,” a discussion paper released by the Treasury said.
The paper said the ability to use tax information as evidence in non-tax-related serious criminal investigations “would play an important role in combating a range of criminal activity, including money laundering, non-taxation fraud on the commonwealth, identity crime, corporate crime, national security and terrorist financing”.
DelMonte Publications Sep 2006
