Trevor Clarke, tax haven architect and current-day user

Details of over 100,000 tax haven clients around the world were made public over the weekend, including many clients of the Cook Islands offshore industry. The client lists, which were leaked and publicised earlier this year, also include Cook Islanders who use other countries as tax havens for their personal business.

A public website called the Offshore Leaks Database was launched that allows the public and journalists to search for names of people using secret trusts and companies. It can be found at http://offshoreleaks.icij.org. The website was created by the Washington DC-based International Consortium of Investigative journalists, which earlier this year began releasing stories based on the leaked tax haven information.

The most prominent Cook Islander revealed in the Offshore Leaks Database is businessman Trevor Clarke. He is listed with 30 companies and trusts. Most of these date from when Clarke worked in the offshore industry, acting as director or trustee for foreign people’s companies and trusts. But the list also reveals some of Clarke’s personal offshore activities.

Trevor Clarke’s offshore business is stretched across several countries. This starts with a company called Dalvivian Limited he registered in Samoa in 1991. There is no sign of this company ever being disclosed publicly. Dalvivian Limited is then owned by a trust that is located far away in the British Virgin Islands, the Caribbean tax haven. This is the Beaumaris Trust, set up by Clarke in 2004 with himself and his family as beneficiaries. There is no sign of this trust being disclosed publicly either. Prior to 2004, Dalvivian Limited was owned via a different Clarke trust called Classowa Trust.

His Samoan company’s money is then held in another tax haven, Singapore. Dalvivian Limited has its bank account at the Bank of New Zealand Singapore branch. All this has been set up and administered for him by the offshore company Portcullis TrustNet, a company first established in the Cook Islands in the 1980s that still has an office in Avarua.

Why does a prominent business person spread his business overseas in these ways? The usual reason is to reduce the tax they have to pay to their own government. This does not mean the activities are illegal, but it means at least that they are finding ways to pay less tax. This is a controversial issue around the world, where people are questioning why wealthy people and big corporations pay so little tax compared to ordinary people. Usually offshore companies and trusts are part of the story there as well.

Clarke’s use of his offshore company and trust are revealed in detail in leaked TrustNet files. They reveal a money-go-round, with money moving to and from Clarke’s business activities in the Cook Islands through the overseas tax havens.

In 2006, for example, Clarke’s Samoan company Dalvivian had NZ$4 million on loan to a Cook Islands company called Mainbrace Limited. The owner and director of Mainbrace is also Clarke. According to the leaked documents, Mainbrace in turn loaned this money to the Cook Islands Trading Company (CITC), Clarke’s main company. A document about the  loan explained that “CITC is presently engaged in a new project, the construction of a new Building Centre (cost approx $3m).”

Thus the money loaned for the building project in effect went from Clarke’s British Virgin Islands trust, which loaned $4m to Clarke’s Samoan company, which loaned $4m to Clarke’s Cook Islands company Mainbrace and it went from there to CITC.

Money moved in the other direction too. The documents show that in 2006 Mainbrace paid nearly $500,000 of interest on the loan back to Dalvivian (minus 15% withholding tax). This money added to Dalvivian’s funds which in most years were loaned straight back to Mainbrace again. In fact, in practice, most of the money didn’t move at all, as the Mainbrace interest was retained and became an even larger loan from Dalvivian. Again, in effect, Clarke was lending himself money which was cycled around through the offshore company.

The leaked documents include three sets of annual accounts for Dalvinian. There is no record of the company paying tax on its considerable annual profits. All the business activity and all the money actually remains in the Cook Islands, but the offshore structures mean that the Dalvinian company profits are made in a country where no tax needs to be paid.

The documents show other activities as well. Dalvivian Limited also made an NZ$800,000 loan to a Cook Islands company called Oronga Securities Limited. Clarke was owner and director of Oronga Securities as well. Oronga Securities is part owner of a New Zealand company called Samex Limited that is the New Zealand supplier for Clarke’s Cook Islands Trading Company. Oranga Securities also owns part of the building at 155 Nelson Street, Auckland, where Samex is based. Income from this New Zealand company was also ending up in tax-free offshore centres in Samoa and the British Virgin Islands.

Another year, 2005, Clarke arranged that some of the Beaumaris Trust money would be paid directly to him for another business project. Clarke wrote four pages of directions for the TrustNet staff on how to move that year’s Mainbrace and Oronga Securities interest payments to Dalvivian’s Singapore bank account, and for them to transfer NZ$450,000 from there to his personal ANZ account in the Cook Islands. He explained that “this will help me with a project I have on in Rarotonga for the benefit of my family”.

TrustNet staff were given special instructions about keeping Clarke’s offshore business secret. One document reads: “We are to contact Trevor by phone only unless otherwise instructed . . . No documents are to be kept here. All docs are to be held in our Hong Kong office.”

Each of these transactions shows how wealthy individuals can use the companies and  trusts located in faraway tax havens. Normally these companies and trusts remain secret year after year. But since this weekend’s launch of the Offshore Leaks Database, tens of thousands of clients will have their activities open for checking by other people, as happens routinely with the public company registers in non-tax haven countries.

There are suggestions that since the first publicity about the tax haven leaks in April, Clarke has been setting up new offshore entities to hold his millions, possibly replacing the ones described here. It is likely he already had other offshore structures as well. The Offshore Leaks Database only includes the business he happened to organise through TrustNet.

Clarke was chair of the Cook Islands’ Financial Supervisory Commission, which was set up to oversee the offshore industry, from 2003 until 2010. He was also reportedly a tax department advisor. During these years he was using the offshore trust and company. Clarke responded that he was not “a user of any Cook Islands [offshore] entities” and said his offshore companies and trusts were set up well before his role as FSC chair. However this is not correct in the case of the Beaumaris Trust, which was formed in 2005. He said there were lots of reasons for people to want to have assets outside the country where they live. He said he had not requested the special secrecy and had disclosed the offshore entities to a number of authorities.