The five Canadian dynasties at the center of a global tax scandal

Billionaire Raymond Chretien and his family have been central players in the Canadian business world for years. He has made millions in business ventures, opened a string of nightclubs in Montreal and Ottawa and is the founder of Club Océane, an upscale nightclub in Toronto with a “history as influential as the institution he has brought into the public consciousness,” according to The Globe and Mail, which has followed Chretien’s business activities over the years. But though Chretien has grown a multimillion-dollar empire in an era where no country is safe from allegations of corruption, Canada has largely looked the other way at allegations of financial wrongdoing.

That is until this week, when The Globe reported that he and five other members of his family allegedly had helped create offshore shell companies, millions of dollars in cash and sophisticated tax shelters for Canadian clients. The paper also detailed the last decade of emails and financial statements from Mr. Chretien’s office that outlined the ways his family and other family members allegedly misused Canadian tax dollars. The paper provided copies of a pair of business deals Mr. Chretien and others allegedly arranged with Chinese investors that included at least one tax avoidance scheme that meant the cost of the securities they sold to clients was never disclosed to the Canada Revenue Agency. In addition, the paper found that another million was deposited in bank accounts controlled by another Chretien family member — a move that tax experts said was precisely legal.

Together, The Globe and The Globe and Mail named at least five people associated with the Chretien family and also in businesses and institutions, as part of a broad investigation into offshore companies, called a “sophisticated tax avoidance scheme,” the newspaper reported. The paper also unearthed emails, payment invoices and cash deposits directly deposited into Canadian banking accounts, showing that the people who ran the accounts had family members who participated in the scheme to hide the details of their and the companies’ deals.

“In 2008, Canadian billionaire Raymond Chretien and his wife were introduced to an elderly widow who wanted to invest $300,000 in Chretien’s King’s Islands Group Ltd.,” The Globe and Mail wrote. “In return, the elder woman, who was from Kenya, received four corporate shares and $50,000 in cash. The Chretiens persuaded the woman to remove the cash from the bank and hold it in trust, leaving it at the Chretien family’s lawyer’s office. The arrangement, which took place in 2009, involved 13 trust accounts, bank certificates of deposit and other documents.”

The Chretiens are the latest in a string of influential figures from Canada to be scrutinized by authorities. In January, The New York Times reported that the Canadian Tax Court has singled out several leading government and business figures for questioning over large financial transactions they made in Hong Kong and Macau. Similarly, there have been widespread calls for Canadian authorities to be more aggressive about cracking down on activities such as offshore shell companies, which generate millions in profits for companies and governments around the world but do not directly come out of their pocketbooks.

In this climate, Canada appears to be doing its best to follow the model of Britain, a country that has taken a harder line on tax avoidance and has previously led the way in clamping down on financial wrongdoing. The British government last year finalized sweeping changes to its tax laws that included a 12 percent levy on income transferred offshore, a measure that raised more than $1 billion in two years alone. Canada, meanwhile, is now facing questions over a report that calls for the country to enact similar financial reporting standards for major corporations and high net worth individuals.

Commenting on the Chretien family’s use of offshore shell companies, The Globe and Mail’s John Ibbitson writes: “The records assembled by The Globe suggest he and his family never disclosed their ties to King’s Islands to Canada’s tax agency, though giving legitimate assurances that the overseas entities could not be linked to them. That is legal, but it has implications for Canada’s strategy in the global fight against tax dodging.”

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