KPMG disputes leaked emails linking firm to offshore companies suspected in massive Ponzi scheme

KPMG is disputing confidential emails from a leak of offshore financial data that show the Canadian accounting firm helped set up four shell companies in the Isle of Man that experts believe were later involved with a massive investor fraud that ran for years out of Montreal

More than half a billion dollars disappeared offshore in the mid 2000s in what has been called one of the largest investor frauds in Canadian history. 

Three men were eventually convicted in 2016 for their roles in what is known as the Cinar/Norshield/Mount Real fraud, but most of the misappropriated money that went missing offshore has not been recovered.

The Fifth Estate and Radio-Canada's Enquête reported earlier this year that four shell companies in the Isle Man appear to be connected to the missing millions.

KPMG's external legal counsel, Mark Gelowitz, denied any links between the accounting firm and those Isle of Man shell companies, calling the allegations "false and defamatory."

At issue are four companies discovered by CBC/Radio-Canada named after ancient swords. Shashqua, Katar, Sceax and Spatha were established in the Isle of Man, a Crown dependency in the Irish Sea between Ireland and England that is known for keeping offshore secrets and helping the wealthy dodge taxes.  

The sword companies were all set up in December 2001, the same time as financiers were beginning to hide millions offshore.

Records obtained by The Fifth Estate/Enquête using the Isle of Man's public registry also show that three of the sword companies were shut down at the time the Montreal-based fraud was exposed in 2005.

"The timing is too coincidental to be just a coincidence," said Toronto lawyer Wes Voorheis, a professional asset tracer who spent years looking for some of the missing offshore money.

"If I had got this information ... while we were still on the scene, we would have tried to get to the bottom of this," Voorheis said, referring to the apparent links between the fraud and the sword companies.

Identifying who is behind those companies, and who helped set them up, could be key to finding out where the missing Cinar/Norshield/Mount Real money ended up.

KPMG denies any links to Sword companies 

KPMG acknowledges it set up a confidential tax and asset protection scheme for ultra-wealthy Canadian clients in the Isle of Man starting in the late 1990s. 

However, the accounting firm, also known for providing advisory and auditing services to federal and provincial governments, denies that it had anything to do with helping set up the four sword companies in the Isle of Man.

"KPMG Canada has thoroughly considered and refuted any connection between KPMG Canada and the sword companies," Gelowitz, KPMG's lawyer, said in a recent letter to CBC.

KPMG said it has searched its internal records and found no references to any involvement in the sword companies.

"Unless CBC has additional evidence of KPMG Canada's involvement with the sword companies that it has not shared with KPMG Canada, the proposed allegations are demonstrably unsubstantiated, false and defamatory."

Confidential emails link KPMG to sword companies 

One of the links between KPMG and the sword companies comes from the Paradise Papers, a massive leak of confidential financial offshore records obtained by German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ) and its media partners, including CBC/Radio-Canada.

Confidential emails written by Sandra Georgeson, an Isle of Man "offshore service" provider and administrator of several companies involved with KPMG's offshore scheme, name the sword companies as being among the group of companies set up by the Canadian accounting firm.

In an email dated Dec. 16, 2015, with the subject line "Canadian Tax Investigations," a manager asked Georgeson "who was [the] promoter of the scheme/product"?

She answered that it was "KPMG in Canada" and then said, in writing, how the KPMG Canada scheme worked.

Georgeson attached a spreadsheet of all the companies KPMG Canada helped set up in the Isle of Man, a document that included the sword companies, Shashqua, Sceax, Katar and Spatha.

KPMG said it was unable to reach Georgeson, but concludes that she must have included the names of the sword companies by mistake.

The accounting firm argues Georgeson did not have direct knowledge of their operations in order to link KPMG to the sword companies.

Georgeson, KPMG's lawyer said, was only "expressing a belief" that the sword companies were part of the accounting firm's Isle of Man scheme.

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Gelowitz said the companies were incorporated 14 years before that email was written and that there is "no basis to suggest" that Georgeson had an "ongoing role with them."

University of Sherbrooke tax law professor Marwah Rizqy has reviewed documentation obtained by CBC/Radio-Canada, including the emails from the ICIJ's offshore leak. 

Rizqy, who is also a Liberal member of Quebec's National Assembly, said she believes the documents clearly show that Georgeson was involved for years as an administrator with the KPMG scheme and would have known first-hand that the sword companies were linked to the Canadian accounting firm.

"I don't believe [Georgeson] made a mistake. She states that she was involved from the very beginning of this scheme."

Isle of Man corporate documents show that Georgeson was appointed a director of Shashqua, one of the sword companies, in October 2002 and stayed in that role for more than seven years, until November 2009.

Georgeson, who is now the managing director of Acclaim Limited, an Isle of Man trust service provider, did not respond to recent phone calls about her 2015 email connecting the sword companies to KPMG. 

At the time she wrote the emails, Georgeson was a client director at Appleby Trust Limited, a global offshore service provider.

In 2015, Georgeson told CBC/Radio-Canada that KPMG Canada's Isle of Man scheme used "nominees" to provide confidentiality to wealthy clients of the accounting firm. 

Sword companies similar to KPMG companies 

Rizqy said additional documentation obtained by CBC/Radio-Canada from the Isle of Man's public registry also shows numerous other similarities between the KPMG Canada's scheme and the sword companies.

Documents obtained by CBC/Radio-Canada show that the sword companies were set up at the same time as some of the KPMG Isle of Man companies, that they used the same local nominee directors and shareholders and that they listed the same Isle of Man address as many of the KPMG companies.

"There are too many similar or even identical elements," Rizqy said. "In my personal opinion they are linked."

KPMG also said there are key differences in the articles of association between the sword companies and the "Offshore Company Structure" it set up in the Isle of Man that would have defeated the tax advantages of their product. 

However, KPMG's own internal documents say it was selling its Isle of Man product to wealthy clients for "asset protection" and estate planning, and not only to avoid paying taxes in Canada.

KPMG said that anyone could have copied their offshore structure by accessing corporate records in the Isle of Man's public registry and then used that information without their permission. 

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Still, public records also show that three of the sword companies were registered in the Isle of Man on Dec. 17, 2001, at exactly the same time that KPMG Canada helped set up a company called Parrhesia.

The Isle of Man registry documents show that Parrhesia was set up by the accounting giant's Montreal office, and has the same Isle of Man address, shareholders and signatories as the sword companies.

KPMG said all the "alleged connections" between the accounting firm and the sword companies have been "systematically refuted."

Rizqy said that in her opinion it is "highly unlikely" that the sword companies were not connected in any way to KPMG.

"You have to be blind to not see the connection," she said. "It has to be linked." 

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