Company used Caymen trusts as tax device

Ansbacher (Cayman) Ltd operated a systematic scheme to facilitate tax evasion by Irish residents through the use of Cayman Island discretionary trusts, the High Court heard yesterday when it appointed inspectors to investigate the company's affairs.

Outlining the likely structure of the trusts, Mr Paul Appleby, for the Department for Enterprise, Trade and Employment, told Mr Justice Johnson that a key feature of the structure was that the Irish client authorised the establishment in the Cayman Islands of a discretionary trust.

Monies, property, shares etc., would be transferred to the trust by the Irish resident who ceded legal control of the property to trustees. In practice, however, the trustees would fully accept the client's instructions in accordance with a "Letter of Wishes". Instructions would thereafter be given by phone. The only parties who would be aware of a trust arrangement would be Mr Des Traynor, Mr Padraig Collery and Mr John Furze.

The Minister's authorised officer was of the view that the Revenue authorities in Ireland were a primary motivation for the secretive arrangements.

In a "Note to John Furze" prepared in 1983 by a (unnamed) senior member of the financial services community in Dublin under the heading "Towards Minimising the Footprints", it was stated: "Although many of the footprints can be erased, it is still true that a number of individuals will know who the effective client is in the case of any trust. It is always possible the true client might be identified.

"On the other hand, if an Irish individual who held undisclosed funds were to hold them in his own account in an overseas bank, then it is much less likely that anybody would learn about the matter even though he would be in breach of various Irish laws."

Mr Gerard Ryan, the authorised officer, found the content of this note consistent with material from the 1987 audit report of the company which pointed out that "these clients" had a number of key characteristics.

They were generally undisclosed except to the most senior manager of the company; the principals would not sign any documentation; they would not receive statements of account on a regular basis; only occasionally (maybe once every two or three years) visiting the company to review their affairs and there would never be any direct written instructions from the principal.

Mr Appleby told the court the Tanaiste accepted there was evidence suggesting that the company's services were marketed in Ireland, that Cayman was held out as a location for the investment of undeclared funds for Irish tax purposes on the basis of its secrecy legislation, and that the system was designed to conceal the true source of monies invested in such trusts.