Panamanian law firm Mossack Fonseca developed an overseas company for notorious Vancouver billionaire David Ho, although he was dealing with criminal charges involving drugs, weapons and illegal confinement of a prostitute, stating “this is not a criminal case related to financial criminal activities,” the Panama Papers expose.
The incorporation of Ho’s company is among a number of that raise questions about the firm’s determination to ignore warnings for its most affluent consumers, according to a joint investigation by the CBC and the Toronto Star, who have exclusive Canadian access to files in the Panama Papers.
Emails and documents about Ho are among the 11.5 million files leaked from the global law firm, triggering a worldwide argument over the secretive world of offshore tax havens.
Charges made headlines
Ho made global headlines in 2009 when he was charged with unlawfully restricting a woman of the street in his Vancouver mansion where authorities found a loaded, unregistered pistol and 13 grams of drug.
Three years later Mossack Fonseca needed to decide whether to do business with Ho, who wanted to integrate Harmonyworld Investment Co. Ltd. in an offshore tax sanctuary.
Ho, grandson of a Chinese tobacco magnate ended up being a Canadian citizen in 1986. He founded the now-defunct Harmony Airways, was named “Businessman of the Year” by the Vancouver Junior Board of Trade, and has comprehensive company holdings in Asia, the United States and Canada, consisting of the University Golf Club at the University of British Columbia.
Firm knew Ho faced charges
Mossack Fonseca has actually specified that it will “regularly deny services to people who are compromised or when we recognize other warnings.”
Yet, David Ho made it through the screening procedure.
In July 2011, four days after lawyers in Panama had actually registered his company naming Ho and his spouse as directors, an internal background check revealed Ho’s criminal charges and Mossack Fonseca’s Panama team alerted its Hong Kong office.
‘Politically exposed person’
Mossack Fonseca’s correspondence also reveals that Ho was considered a “politically exposed individual” (PEP) because he was listed as honorary consul for Seychelles and was from a popular household in China.
The company has actually mentioned, “As per our risk-based technique, PEPs are thought about to be high-risk individuals. PEPs do not have to be declined simply for being so; it is just a matter of appropriate danger analysis and administration to perform improved due diligence on them.”
However Mossack Fonseca’s Shanghai promoter, Jenna Qiu, who represented Ho, appears to have actually minimized the significance of his classification as PEP to her Panama bosses.
“This company director is a blue blood. He was born PEP. But he currently immigrated to Canada, not associated with politics in addition, my client does not understand why we are raising these concerns,” she composed in an email equated from Chinese.
Financial success highlighted
Staff at Mossack Fonseca’s Hong Kong office continued to pursue approval for Ho’s venture, highlighting Ho’s monetary success in an email to headquarters.
“Mr. David Ting Kwok Ho was Mr. Ho Ying Chie’s grandson and wish to do numerous cases quickly” stated an August 3, 2011 e-mail.
The next day emails indicate they were preparing to refund Ho’s charge, must he be turned down.
Qiu then made an urgent plea to Panama on behalf of her well-connected Canadian customer.
“Mr. Ho now is simply an entrepreneur and owns a Canadian company Mr. Ho and his other half have big advancement in Shanghai and China, which is authorized and encouraged by Chinese government. Mr. Ho is presented to us by an old customer who has great credit,” Qiu composed in an email.
She downplayed the significance of his legal troubles.
“Mr. Ho has not committed any cost-effective criminal offenses Pls. be the representative and process the incorporation as Mr. Ho has many jobs in Shanghai and is awaiting the SEY one to be the parent company,” she wrote, warning Ho was losing patience.
“The client is much irritated by concern after concern from us,” she composed.
That exact same day, Mossack Fonseca’s due diligence group verified Ho “was indeed involved in criminal charges” and asked “whether we must not select Mr. David as director or whether we should resign as agent,” stated the email.
The response came just a few hours later.
Firm’s concerns unanswered
Regardless of Mossack Fonseca’s head office not having actually received answers to repeated concerns about Ho’s criminal charges and consular status, he was accepted as a customer.
“Taking into factor to consider that this is not a criminal case connected to financial criminal activities, money laundering and/or traffic of weapons or related, and also taking into account the referrals that we have of the customer, we confirm that we will continue,” wrote Josette Roquebert, one of Mossack Fonseca’s legal representatives in Panama.
“For future cases, please ensure to provide us total and clear answers to the questions asked,” Roquebert instructed her coworkers in Asia.
Mossack Fonseca has actually mentioned it drops customers who “who fail to supply info we need in order to abide by ‘know-your-client’ obligations.”
The Panama Papers reveal that Mossack Fonseca requested details about Ho’s criminal case in 6 separate emails to its legal representatives in Asia.
According to Ho’s file, it appears Mossack Fonseca stopped asking after he was authorized.
In February 2012, Ho pleaded guilty to unlawful confinement of the sex trade employee and possession of an unregistered weapon.
The other charges were dropped, and Ho was sentenced to a suspended sentence, one year of probation, a $5,000 fine, 45 hours of community service and drug counseling.
Mossack ‘regularly’ drops clients
There are lots of examples of Mossack Fonseca “regularly” dumping customers when they contravene of the law.
Mossack Fonseca, however, continues to work with Harmonyworld Investment.
When gotten in touch with by the CBC, the firm declined to address particular concerns about David Ho.
David Ho responds
David Ho declined CBC’s demand for an interview, but issued a statement through his lawyer.
“There was no relationship or connection between the offences with which Mr. Ho was charged and the possible misuse of an overseas company to hide or help with criminal activities of tax evasion,” composes William Smart, of Hunter Litigation Chambers.
“Mr. Ho has actually been in complete compliance with CRA requirements Harmonyworld Investment is a genuine holding company with a genuine foreign investment operating in the farming industry in China,” writes Smart on behalf of Ho. He confirmed that Mossack Fonseca still does business with Harmonyworld Investment.
He states there is “no evidence that Mossack did not perform its due diligence with respect to Mr. Ho. It was (and is) clear that Mr. Ho is a highly respected business person from an appreciated family who was seeking to integrate a holding company to hold the investment in a bona fide farming business that had the backing of the Chinese federal government.”
The statement says the company “effectively concluded that it was suitable to help with the incorporation.”
With regard to due diligence, Smart states, “Information regarding those charges and their ultimate disposition in 2012 was, of course, quickly available online.”
‘Narrow meaning’ used, state specialists
Professionals contacted by CBC News agree that no laws were contravened when Mossack Fonaseca signed up Ho’s company in Seychelles, however raise questions about the decision.
“He wasn’t charged with financial criminal activities that’s a really slim definition of threat” said Richard Leblanc, who teaches law at York University and Harvard Law School.
“It’s surprising that a client likes this or a customer of a comparable nature would be handled by an expert service firm. That recommends the culture of the professional service firm is among money and among pushing the envelope. As an outcome you’ve got reputational contagion,” he continued.
It’s not prohibited however will be, states professor
Leblanc says purposefully accepting a customer waiting for trial was not illegal, however anticipates it will be soon.
“It might be legitimately appropriate to proceed in this fashion. But what are the reputational drawbacks? I still believe the firm made the wrong decision,” stated Leblanc.
Don Coker, an Atlanta-based banking consultant who is frequently called as an expert witness on threat management, agrees.
He believes Ho’s net worth might have clouded the law practices due diligence examination of Ho.
“He has a huge fat chequebook and they can make some money off of him.”
“It seems like the collection of warnings was neglected in favor of getting this offer done,” stated Trevor Farrow, a law professor at Osgoode Hall Law School in Toronto.