Bermuda: Perfect one day, a paradise the next

Shorts and socks in Bermuda. Where else?

The trove of 13 million financial and tax documents known as the Paradise Papers has been opened up, revealing far more Australians than the late INXS frontman Michael Hutchence used the creative services of the Bermuda-based offshore legal specialist Appleby.

A Margin Call investigation has found a host of Australia’s most respected business figures, some of its wealthiest bankers and members of local billionaire dynasties used, or were involved with, the tax-minimising Bermuda shorts brigade.

Take former ASIC chairman Tony D’Aloisio, the chairman of listed fund manager Perpetual.

The Paradise Papers show that before D’Aloisio was the ­nation’s corporate watchdog, he was a director from 1997 to 2004 of an Appleby-created, Bermuda-registered outfit called Flagstaff Insurance Company Limited. That was in turn owned by Flagstaff Australia Limited, a company created out of the offices of law firm Mallesons, of which D’Aloisio was chief executive partner in his life before ASIC.

ASIC chairman Tony D’Aloisio.

There’s no suggestion that Mallesons — now called King & Wood Mallesons, after a merger with two fictional partners — did anything wrong. There is nothing illegal about a company structure that includes entities set up in tax havens such as Bermuda.

Mallesons told us the ongoing Flagstaff vehicle is used for its professional indemnity insurance.

And if it gave D’Aloisio an insight into the ways of the pink sand-loving Bermudans before he was appointed by then treasurer Peter Costello to run ASIC in 2007, so much the better.

Shorts and long socks

Another Bermuda shorts-wearing Australian caught up in the Paradise Papers avalanche is Richard Goyder, one of the nation’s most respected business leaders.

Goyder, who last week ended his long reign as the managing director of blue-chip Perth conglomerate Wesfarmers and as a director on Grant King’s Business Council of Australia board, was a Bermudan of sorts.

From 2002 to 2005, back when he was Wesfarmers’ finance director, Goyder was a director of a Bermudan-based, Appleby-created outfit called Wesfarmers Risk Management.

Wesfarmers told us the outfit — an entirely legitimate company that was taxable in Australia at the Australian tax rate — was a “captive” company that was required to facilitate access to reinsurance. Nothing wrong with that, either.

A spokesperson for the conservative Wesfarmers said the company also noted the vehicle was being wound down. It has been replaced by a similar outfit based in Singapore.

Brothers in arms

The Millionaire’s Factory was also well represented in the British island territory, which has a population of about 65,000 that includes WIN billionaire Bruce Gordon (who is expected to arrive for his annual Australian pilgrimage any day now) and, presumably in between bunga bunga parties in Rome, Gordon’s neighbour and fellow media mogul Silvio Berlusconi, the fun-loving former Italian prime minister.

Wearing the shorts for Australia’s most entrepreneurial bank were its current boss Nicholas Moore (who has a $200 million-plus stake in Macquarie) and one of its former rainmakers, Michael Carapiet.

Macquarie CEO Nicholas Moore.

The pair were directors of an Appleby-created, Bermuda-based vehicle called Atlantic Pacific Infrastructure, which was created to house four toll roads and three other British projects that Macquarie Infrastructure Group and Macquarie bought in 1999 for $220.7m from Anglo-Norwegian company Kvaerner.

Also in the trove is Michael Triguboff, who is now Carapiet’s business partner at investment shop Adexum Capital.

Triguboff — the former head of Lazard Asset Management Pacific and nephew of Australia’s second-richest man, Harry Triguboff — made a Paradise cameo because from late 2000 to early 2002 he was a director of Sing Tao Holdings.

At the time, Sing Tao was a Hong Kong-listed, Bermuda-incorporated media and property company, which was part-owned by Lazard.

It has since been renamed Mingyuan Medicare Development Company Limited, has expanded its business in mainland China and, last month, was suspended on the Hong Kong stock exchange. Happily, all that stopped being Triguboff’s problem when he left Lazard in 2002.

Join the party

The ASX’s current boss, Dominic Stevens,also shuffled around in those funny shorts and knee socks — the anachronistic native dress of Bermudans — for a few years.

Before Stevens ran the local bourse, he worked at Zurich Capital Markets Asia, an arm of insurance giant Zurich Insurance Group.

That gig involved a directorship on the Appleby-created, Bermuda-based ZCM Australia Asset Holdings, which we understand was a holding company for the insurer’s operations Down Under.

There’s, of course, nothing wrong with that arrangement, which makes use of Bermuda’s pleasant tax-neutral climate.

It’s quite common. Indeed, back in his days at global insurer AXA, the now Telstra boss Andy Penn was the director of a similar Appleby-created, Bermudan-based outfit called AXA China Region Insurance Company. Penn was on the board of that outfit until 2011, which was created well before he joined in 2006.

Illustration by Rod Clement

Offshore romance

And which CEO of an ASX-listed giant had the most appearances in the Paradise Papers?

According to Margin Call’s investigation, that was Lendlease boss Stephen McCann.

In his role first as the CEO of Lendlease’s Investment Management and then, from 2008, as the CEO of the whole company, McCann was a director of six different Appleby-created, Bermuda-based vehicles: Lend Lease Asian Retail Fund, No 1 to No 6.

That half dozen tax-friendly vehicles were established in 2006 and were used to hold the construction giant’s Singapore and Malaysian real estate investments. They were closed in 2011.

Treasure trove

Meanwhile, and just like us, Chris Jordan’s Australian Taxation Office is poring over Appleby’s Paradise Papers to cross-check the trove of data with historic individual and corporate tax filings.

The tax office is no stranger to this type of data dump. Its investigation work to date on the Panama Papers, a similar leak in 2015 relating to Panamanian offshore specialists Mossack Fonseca, has raised more than $50m in liabilities, plus another $40m in omitted income.

The ATO stresses that most people do the right thing when it comes to their tax obligations, and that includes those individuals and companies named throughout the latest leaked trove.

But Jordan and his ATO minions say they “do investigate all leads and have the resources and expertise to take action against taxpayers or intermediaries found to be caught up in the illegal use of offshore structures or providers”.

It shouldn’t be too long until we hear if they find anything lucrative among the Bermuda shorts and socks.