Sunday, 17 April 2016

Council's link to "Panama Papers" law firm


The offshore investment fund selected by Borders councillors to finance their £21 million waste treatment facility at Galashiels is 50% owned by a company registered at the British Virgin Islands offices of Mossack Fonseca, the law firm at the very heart of the 'Panama Papers' tax dodging scandal.

Our revelations concerning New Earth Recycling & Renewables (Infrastructure) PLC [NERR] and its fund are the result of investigations following a previous disclosure that up to six banks were excluded from the role of lenders for the Scottish Borders Council/New Earth Solutions [NES] project at Easter Langlee before the original contract was signed in March 2011.

The council was told in a report from specialist financiers working for NES that the terms offered by the banks represented poor value for both the company and the local authority.

"We therefore concur with New Earth's proposal to initially source 100% of the funding from the highly successful infrastructure investment funds [NERR] ahead of targeting subsequent re-financings," the report concluded.

But four years after the council signed their disastrous deal with NES, NERR still could not come up with the money for the state of the art waste treatment plant and the contract had to be torn up. We decided to try and find out more about NERR, managed by the Premier Group in the Isle of Man, another tax haven.

The documentation was difficult to track down, but eventually copies of reports were located on the Channel Islands Securities Exchange website where the Premier Group funds were listed in yet another offshore location with tax advantages.

The aim of NERR and its fund was, according to the 2014 annual accounts - the most recent to be published - to provide long-term growth by investing indirectly in recycling facilities, primarily in the UK, in the development of such facilities and in the technology associated with them.

While the SBC/NES contract was active the NERR fund invested solely in the Infrastructure PLC which in turn held investments in New Earth Solution Group companies, among them New Earth Solutions (Scottish Borders) Ltd, the firm specially set up to deliver the Easter Langlee plant.

But the paperwork studied by our team shows that the Sterling cell of the fund applied to be voluntarily de-listed from the Channel Islands Securities Exchange barely a year after Borders councillors sanctioned a major alteration to their waste contract with NES after being told bank lending was not an option for the original deal.

The payment of redemptions from the company ceased on November 7th 2013 and the business was then closed to subscriptions on January 8th 2014.

Were council members made aware of these events? If so why was the plug not pulled on the entire project at the time of the suspension of its funder rather than allowing the failed venture to stumble on without a backer for a further 15 months? Those are questions SBC could answer, but no doubt it will shelter behind the curtain of commercial confidentiality unless an independent investigation is ordered into the catastrophe.

The suspension of trading was brought into effect because NERR was unable to calculate a reliable asset value as discussions progressed on restructuring. The suspension remains in force to this day with fund investors unable to access their frozen cash deposits.

Those 2014 accounts also confirm that while it was trading NERR also held equity in the New Earth Solutions Group Ltd as well as an equity interest in NEAT Technology, the business whose untried form of incineration proved to be 'not fit for purpose' in the Borders scheme.

The fund may have recorded a total loss of £30.3 million in the 12 months to June 2014, but the promoters and managers (Premier Group Isle of Man) still managed to run up fees and expenses totalling more than £6.7 million.

Promoters were paid £2.472 million (up from £1.965 million in 2013) while "sales and marketing" accounted for £3.937 million. In addition there was a management fee of £264,000.

At least one executive was a director of all of the companies and funds mentioned above from New Earth Solutions (Scottish Borders) Ltd. to Premier Group (Isle of Man) and beyond.

David Whitaker, the common denominator in all of the various businesses, and a colleague Michael Richardson also indirectly owned a company called Premier Group Distribution Inc (PGD) one of NERR's management shareholders. The records show 50% of the shares in NERR were held by PGD and a further 17% by B4 Sales Ltd, another firm indirectly owned by the two men.

PGD's registered address is the Akara Building in Wickham's Cay, British Virgin Islands, a property occupied by Mossack Fonseca & Co (BVI) Ltd, a branch of the law practice from which 11 million confidential documents related to offshore businesses and trusts were recently leaked into the public domain.

The "Panama Papers" contain details of thousands of offshore companies and secret transactions by individuals with allegations of tax avoidance and evasion on an industrial scale. The Mossack Fonseca operation in BVI is described as a holding company provider while B4 Sales is based in the offices of a similar provider called Newhaven Corporate Services.

Newhaven's website declares: "The nature of our business means that many of our clients prefer to remain anonymous".

Meanwhile Mossack Fonseca's BVI website lists the many advantages of registering a company in their jurisdiction. These include no requirement to file annual returns or financial statements; no requirement to hold annual general meetings of shareholders or directors; the company's accounting books, records and minutes may be kept in any place or country chosen by the director; no tax levied on international and banking transactions; and no capital gains tax, income or other kinds of taxes.

An attempt has already been made to force Scottish Borders Council to make available copies of risk assessments carried out by officials or by lawyers and specialists on their behalf to assemble background on New Earth Solutions and the Easter Langlee project lender based on the Isle of Man.

The council has refused to release any information, claiming there are over 3,000 relevant documents which renders the Freedom of Information request manifestly unreasonable. But these latest disclosures with links to the shady business world that is the British Virgin Islands surely means all of the paperwork associated with the disastrous New Earth Solutions contract MUST be opened up for public scrutiny.

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