Slightly more than $8 million was moved through offshore entities in Bermuda, Barbados and Antigua, later prompting allegations that the arrangement, if exposed, could lead to potentially hundreds of thousands of dollars in "taxes, interest and penalties." The documents show there were also concerns about secrecy and instructions to shred files.
The hundreds of records are part of a sprawling lawsuit against James Barton Love, a Toronto tax lawyer who chairs the mint's board of directors, and others by descendants of former prime minister Arthur Meighen. Quietly settled in 2011, the lawsuit saw family members allege that the offshore transactions, which began in 1996, were unlawful and negligent and that Love "breached his fiduciary duties and acted oppressively."
Love countered in sworn statements that the offshore manoeuvres "resulted in significant savings of Canadian tax" for Meighen's heirs — an amount he estimated at $1 million.
He also emphatically denied any breach of trust and said he had "specifically advised" there were risks to the offshore arrangement.
None of the allegations was ever tested in court.
'Complex transaction'
Love, a close friend of Finance Minister Jim Flaherty who was appointed to the Mint's board in 2006, was also a trustee for most of the last decade of the Arthur Meighen Trust, an entity set up by the former Conservative PM in 1949 to distribute his wealth to his family. Before taking on that formal role, documents show Love had been an adviser and "close" friend to several Meighen family members.
It was in that advisory role that Love, in the mid-1990s, informed the managers of the Meighen Trust that they could get "Canadian tax relief on the income from about 40 per cent of the [trust] assets" if they moved the money offshore, Meighen's great-granddaughters say in their statement of claim.
The use of secret accounts in offshore jurisdictions like Switzerland or the Cayman Islands has been thrust into the media limelight in recent years, following a spate of data leaks — including from several Swiss banks — that exposed account-holders’ identities and information. The most recent large leak was made public in April, when CBC News teamed up with the U.S.-based International Consortium of Investigative Journalists to report on secret accounts linked to 130,000 people worldwide.
But moving assets to offshore trusts, while not inherently illegal, was being targeted to some degree by Canadian tax authorities for decades before that. The federal government brought in its first legislation in the 1970s to tax offshore trusts, enacted further measures in the 80s and 90s, and as recently as June overhauled the applicable Income Tax Act sections.
The court records show tax lawyer Love himself acknowledged as much to one of the trustees of the Meighen money, explaining that "the Income Tax Act had strict rules to prevent transfers of assets from Canada to avoid Canadian taxation," according to an affidavit he filed.
But he nevertheless advised the trustee that "it might be possible to structure a transaction that would have the intended results…. Such a result might be obtained through a more complex transaction," the affidavit says.
At the time, the Meighen fortune was overseen by a troika consisting of family patriarch and Order of Canada recipient Donald Wright, a composer and philanthropist; Canada Trust, which later merged with TD Bank; and Meighen's grandson Michael Meighen, then a Conservative senator.
Canada Trust was won over by the proposed "tax-avoidance scheme," as it termed the offshore transaction in an internal memo filed in court. "We are certainly supportive of reducing tax on the income flow from the trust to the greatest extent possible," it wrote to Wright.
And Michael Meighen said he went along as well, hoping to help his cousins keep more money in their pockets.
"Jim Love made a proposal to place certain assets offshore. The purpose that was explained to me was that it was for tax planning," Meighen said in an interview earlier this month. "I acquiesced quite happily."
'House of cards'
The money was routed through a web of nearly two dozen transfers, involving numbered companies in Ontario, accounts in New York, international business corporations in Barbados, a new Bermuda-based trust called the Stratford Trust and, ultimately, holding companies in Antigua, with loans and share purchases between them. Eventually, the Antigua corporations were put under the control of an Antiguan lawyer named Septimus Rhudd — who is mentioned more than a thousand times on unrelated matters in the tax-haven data leak that emerged earlier this year, CBC News found.
"They had names for all kinds of things, for companies, for this and that. I didn't know what it was or what it represented," Michael Meighen recalled.
After being steered through the array of foreign corporations and accounts, it appears the money itself ended up back in Canada: The Antigua holding companies that absorbed the funds hired Love's Toronto-based financial firm, Legacy Private Trust, as an investment manager. Stock holdings and other assets were kept at an affiliate of National Bank of Canada.
Laval University professor of international tax law André Lareau, who CBC News asked to look over the transactions, called the operation a "house of cards."
"If I were the [Canada Revenue] Agency, I would like to have a look at that and analyze all of the transactions that were carried on here," he said.
Love says in his court filings, however, that the transfers were specifically designed "in a manner that would arguably result in no Canadian income tax being exigible on the income earned on the assets."
The money started to trickle back into Meighen family hands in 2004, when one of Arthur Meighen's grandsons received a payment of $2.3 million. The lawsuit alleges Love told the grandson he "would be free and clear" of any obligations to report it to tax authorities. "Relying on Love's advice, [the grandson] did not report these funds," the statement of claim says.
Love's statement of defence denies he made any such remarks.
'I don't recall it'
Reached by CBC News, Love wouldn't answer specific questions about the Arthur Meighen fortune, citing a confidentiality clause in the lawsuit settlement. But he denied Legacy Private Trust, where he is CEO and chairman, has any dealings in the offshore world.
"It doesn't do any," he said. "Legacy Private Trust would have no reason to be involved in any of that."
Numerous court documents suggest otherwise, including Legacy's own statement of defence, which explicitly states that the firm invested the Antigua holding companies' money.
Love also denied knowing anything about the Stratford Trust, the Bermuda entity set up to help shift Meighen family money offshore. "I don't know about a Stratford Trust…. I don't recall it," he said — at odds with the fact he mentions it 42 times in three sworn statements filed in court.
Still other court records contain a claim that Love gave instructions to shred the personal documents of a Meighen family member — but that instead, the documents ended up getting handed over to the lawyers who sued him. Love says he advised that only irrelevant files should be destroyed.
Another allegation repeated against him is that he sought to keep the offshore investments "absolutely secret" and withheld information from Meighen family members; Love says in his sworn statements that he was as transparent as could be.
Settled
The epic $15-million court fight between Love and the Meighen heirs was finally settled two years ago. The defendants — including Love, his law partner and their current and former firms, as well as Legacy Private Trust and Canada Trust — agreed to pony up $8.9 million, but without admitting fault.
It's not clear how much of that, if anything, Love or his companies had to pay, or whether Canada Trust, any other defendant or any of their insurers is footing the bill. The parties wouldn't talk due to their promise of confidentiality.
"I was disappointed that litigation grew up within, I guess you could say, my extended family," former senator Michael Meighen said when asked how the legal battle has affected the Meighen clan. "I was very sad about it. Why would I think that would happen? I had no reason to."
If you have more information on this story, or other investigative tips to pass on, please email investigations@cbc.ca.
Jim Love email
Canadian Mint chair and Toronto lawyer Jim Love sent the following as part of an email to CBC News on Tuesday afternoon:
"My law practice has, since 1975, involved International Tax Planning. Over the years I have been involved with literally hundreds of situations where International structures have formed a part of transactions structured for clients. This includes structures and transactions that have been undertaken in all of the law firms with which I have been associated. In each and every case these structures and related transactions are very carefully reviewed to ensure that they are in full compliance with all Canadian tax rules that are in force at the time the transactions are undertaken, that all anticipated changes to Canadian tax rules are taken into account and that the tax rules of all jurisdictions that are part of the structures and transactions are scrupulously followed. As I indicated to you, tax rules in various jurisdictions, including Canada, have changed over time. When an unanticipated change occurs that affects a structure or transaction that had been previously established, that structure or transaction must be amended or wound up depending upon the circumstances."
Source: CBC
Author: Zach Dubinsky, Nicole Reinert, Sophia Harris, and Harvey Cashore
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