‘Sham trusts’ used charities to reap millions
April 4, 2013 Leave a comment
AIDS organisations unwittingly listed as beneficiaries, write Duncan Campbell, Craig Shaw and Linton Besser.
Two of Australia’s top AIDS charities have been unwittingly exploited by a discredited former American doctor in a complex offshore scheme designed to conceal millions of dollars from US tax authorities.
Since 1997, Potts Point resident Thomas Ziolkowski has been operating trading accounts in the Cayman Islands, Switzerland and the US through companies based in the British Virgin Islands, using a “sham” trust set up in Bermuda to evade the US tax office. His accounts have been worth at least $3.5 million.
Now, a joint investigation between the Herald and the International Consortium of Investigative Journalists has discovered that Dr Ziolkowski kept his ownership of the trading accounts secret by listing the AIDS Council of NSW and the AIDS Trust of Australia as the main beneficiaries of an offshore trust set up in 1997.
Since 2002, Dr Ziolkowski has claimed the charities were beneficiaries of the ”Voyager Trust” and would share 94 per cent of its funds. Neither charity has seen a single dollar. Until contacted by the Herald, they were unaware of how their names had been used. One is now considering whether to launch a claim for millions of dollars to which it may technically be entitled. Agents for Dr Ziolkowski used copies of the charities’ financial statements – which are public – to pass US anti-money-laundering checks.
The revelations come as the ICIJ continues to unveil the secretive world of offshore tax havens in a groundbreaking global investigation. To date, it has exposed a Paraguay presidential candidate, the daughter of the Philippines’ former president Ferdinand Marcos, and the campaign treasurer to French President Francois Hollande as having benefited from the use of secret offshore companies.
The AIDS Council of NSW had been approached before 2008 by Dr Ziolkowski to be a beneficiary. But ”to date, ACON has not received any donations from the Voyager Trust, nor does ACON have any other connection to or knowledge of the financial activities of Mr Ziolkowski or any of his associates”, a spokesman Michael Badorrek said.
Map of where Portcullis operated.
Greg Gahl, the chief executive of the AIDS Trust of Australia, said ”this would appear to be yet another instance of a third party abusing the notions of charity for their own enrichment”.
”We would like to pursue any funds or distributions,” he said. ”Much good would come from such money. However the very nature and intent of the suggested scheme makes such action challenging and very costly.”
Using charities to conceal ownership and evade taxes is a vintage scam called a “Red Cross trust”, according to experienced US offshore tax expert and fraud investigator Burke Files. “These are sham trusts,” he said. ”Claiming that [percentage] of the funds will go to charities also means that the owners of the remaining 10 per cent do not have to be disclosed.”
Dr Ziolkowski took Australian citizenship in 2006. But almost two decades ago, he was accused by Colorado health authorities of “unacceptable behaviour” by charging Medicare and insurance companies for unnecessary work. When Colorado’s medical board warned he was to be prosecuted in December 1997, Dr Ziolkowski surrendered his licence to practise medicine, citing poor health.
Within two years, he had turned to share trading, managing millions of dollars of investments through two offshore companies registered in the British Virgin Islands and controlled through Australian and BVI agents.
Despite the complex structure and the use of the charities’ names, emails seen during the investigation show that all decisions regarding the trust and the two companies, and especially the stock-trading activity, were taken directly by Dr Ziolkowski.
The nominee company controlling the Voyager trust was a subsidiary of the Portcullis TrustNet Group – a global “wealth administration” outfit.
In February 2009, a Denver lawyer who had advised Dr Ziolkowski, Alan Jahde, explained in an email to Portcullis how the structure benefited his client. “Dr. Z,” Mr Jahde wrote, “funded the Trust … via transfers into the 2 corps the Trust owns in return receiving a Private Annuity payment obligation back from each corp.”
Dr Ziolkowski did not respond to Herald messages.
In July 2009, Portcullis assisted Dr Ziolkowski in opening an account for one of the BVI-registered companies with Lombard Odier, a private Swiss bank. Portcullis signed and stamped registration forms on behalf of the two Australian charities, declaring their interest in the trust – and implying that funds and profits were guaranteed to them.
By 2010, Dr Ziolkowski had more than $US1.1 million banked in Zurich.
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