A Pig Story, Belize Banks and Questions About U.S. Tax Evaders

By Jesse Drucker

It’s not just about the pig’s head.

Britain’s headline writers went into high porcine pun mode last month over a suggestion that Prime Minister David Cameron, while still in university, had taken part in a club-initiation ritual that bizarrely incorporated part of a pig carcass. The second-hand allegation appears in a take-down book about Britain’s Conservative party leader that will arrive early next week, co-written by a U.K. billionaire who helped fuel Cameron’s rise to power.

Now comes a development with the potential to turn the spotlight back on Cameron’s accuser, Lord Michael Anthony Ashcroft. A longtime party donor, Ashcroft once drew criticism in the U.K. for exerting full-press political influence while enjoying part-time tax status. Now, he has emerged as the controlling shareholder of a pair of offshore banks with American clients who are under suspicion of tax evasion.

In a filing in Miami two weeks ago, a U.S. federal judge authorized the Internal Revenue Service to seek the names of Americans using accounts at two Belize banks. It’s the latest twist in a years-long U.S. campaign to root out Americans attempting to stash money beyond the IRS’s reach, an effort that has held banks responsible in some cases for enabling tax evasion. 

The two Belize banks belong to a holding company controlled by Ashcroft, who in earlier decades served as its chief executive and chairman. The U.S. court documents didn’t fault the Belize banks or anyone involved in running them. Alan Kilkenny, an Ashcroft spokesman, declined to respond in detail to questions about the U.S. investigation into account-holders, saying Ashcroft has no operational role in the banks.

Multifaceted Profile

The 69-year-old Ashcroft’s Belize banking connection adds to the multifaceted profile of the man who co-wrote “Call Me Dave,” due to be published Oct. 5, which details the author’s high-profile falling out with the Conservative prime minister.

Cameron, in brief comments last month to reporters, dismissed the book and said he had specifically denied the pig allegation. “Everyone can see why the book was written and I think everyone can see straight through it,” he told them.

Before his emergence as an author, Ashcroft had been known to Britons as a political pollster, a Conservative party rainmaker and one of the country’s highest-profile “non-doms.” British law allows for people living in the country to declare non-domiciled status if their “permanent home” is regarded as being elsewhere, which can shield them from paying U.K. taxes on some of their income.

Ashcroft wrote that Cameron had been aware of his major donor’s non-dom status in 2009. The two men had discussed how to delay revealing Ashcroft’s arrangements until after the 2010 election, Ashcroft wrote, according to a pre-publication excerpt. Cameron’s office has declined to comment about any of the book’s assertions, including any discussions about Ashcroft’s tax status.

When Ashcroft’s non-dom tax status became public in 2010, Cameron’s Conservative Party faced outrage from critics who argued that the donor was seeking political influence without paying his share of the costs of government. At the time, Cameron said the full details of Ashcroft’s tax status were known only to Ashcroft and the U.K.’s tax service, according to U.K. press reports, while Ashcroft said he would abandon his non-dom status. 

Non-Dom Rules

Since then, there’s been an upwelling of U.K. protests and parliamentary hearings over whether wealthy individuals, as well as the likes of Google Inc., Starbucks Corp. and Vodafone Group Plc, have taken unfair steps to avoid taxes. Cameron’s government has said it wants to tighten the country’s non-dom rules.

Kilkenny, the Ashcroft spokesman, declined to comment on Ashcroft’s U.K. tax status, adding it has no bearing on issues surrounding the Belize banks’ clients. He declined to provide an advance copy of the book. He referred further questions about the Belize banks to their holding company, which didn’t respond to requests for comment.

Kilkenny also forwarded a statement that a Belize banker’s group issued last month in response to reports on the U.S. inquiry. The country’s banks comply with local laws and international banking standards, it said, adding that it’s the responsibility of account-holders to tell the appropriate tax authorities about their holdings.

“The Internal Revenue Service is not suggesting that the Belize Banks, referenced in the articles, have done anything improper,” according to the release from the Bankers Association of Belize. “They are trying to find out if any U.S. person (whose identity they don’t have) has violated the U.S. Internal Revenue Laws by having monies kept outside the U.S. to avoid reporting income.”

Ashcroft’s relationship with Cameron became strained after the 2010 election, he wrote in the preface to his book posted on lordashcroft.com. The government job Cameron offered him then didn’t adequately reflect Ashcroft’s contributions to the party, he wrote, adding that his book wasn’t a bid to settle scores.

Cameron’s office has declined to comment on any discussions about government posts for Ashcroft.

Ashcroft -- a self-described "lifelong supporter" of the Conservative Party -- earned his fortune through a series of ventures. He was the chief executive and largest individual shareholder in home-security behemoth ADT when he sold the company in 1997 for more than $6.7 billion to Tyco International Ltd. He joined the House of Lords in 2000 and rose to become the Conservative Party’s deputy chairman from 2005 to 2010.

Ashcroft was the “most important non-politician in the U.K.” in the years before the Conservatives regained power, said Alex Cobham, director of research at the Tax Justice Network, in London. “Ashcroft was the one thing that stood between the Conservative Party and annihilation, because he was willing to put in money when no one else would.”

Belize Youth

Ashcroft grew up in Belize, the son of a U.K. diplomat. He once served as the small Central American nation’s permanent representative to the United Nations. 

He is the controlling shareholder of a Belize company called BCB Holdings Ltd., which in turn owns Belize Bank International Ltd. and Belize Bank Ltd., according to BCB’s latest annual report. Lord Ashcroft was BCB’s executive chairman for more than 20 years beginning in 1987, according to earlier annual reports, one of which listed him as the CEO in 2005.

U.S. scrutiny of account-holders at those banks emerged in mid-September, when a federal judge in Miami authorized the IRS to issue summons to two U.S. banks for information related to the Belize banks’ account-holders. U.S. taxpayers have revealed at least 23 previously undisclosed accounts at the two Belize banks as part of a voluntary disclosure program, according to the IRS, whose efforts are focused on learning the identities of more such U.S. clients.

“The IRS knows -- from interviews, voluntary disclosures, and records of criminal prosecutions -- that U.S. taxpayers have used the Belize entities to set up and maintain undisclosed accounts to evade their U.S. tax obligations,” U.S. prosecutors wrote in support of the IRS’s request.

Court filings in the Belize matter are signed by Caroline D. Ciraolo, the Justice Department’s top tax prosecutor, who is overseeing its Swiss bank tax investigations and prosecutions. That seven-year effort, which initially focused on Swiss banks that provided secret offshore accounts for Americans, has expanded into a search for undeclared cash around the world.

Swiss Probe

As part of that probe, Credit Suisse Group AG’s main subsidiary pleaded guilty last year to conspiracy to help Americans file false income tax returns. In the past six months, 40 Swiss banks have agreed to non-prosecution agreements with the Justice Department. In all, foreign banks have agreed to pay more than $4 billion in fines, penalties and restitution.

One of the Belize banks advertised its ability to provide undisclosed accounts to non-Belize residents, according to court filings by the Department of Justice. Belize Corporate Services, a non-bank entity owned by Ashcroft’s holding company, has advertised the sale of "Belize Ready Made Companies" as well as “virtual office” services, including the ability of mail and telephone calls to be forwarded to Belize. 

It’s not illegal to offer those services. They can be used, for example, by people in unstable parts of the world who want to protect their wealth, or by those who want to shield assets from creditors.

People seeking to avoid their U.S. tax obligations often use such “shelf” companies to help conceal their ownership, the IRS says. Some of the bank’s American account-holders requested that their statements not be mailed to their U.S. addresses, according to the Justice Department filing.

“Selling ‘off the shelf’ companies that will help conceal the individual beneficial owner of the account, and not sending account statements to the U.S. –- that could lead a bank to suspect that someone is not reporting in the U.S.,” said Bryan Skarlatos, a tax litigation lawyer at Kostelanetz & Fink LLP, who has represented hundreds of U.S. taxpayers with undeclared accounts. “If the bank knew or was willfully blind to the fact that the U.S. customers were not reporting or paying U.S. tax, then the Department of Justice may be interested.”

The Belize bankers’ association, in its release, said the country’s banks comply with international standards on anti-money laundering and is fully compliant with the U.S. Foreign Account Tax Compliance Act. There is no law in Belize prohibiting U.S. citizens from establishing accounts there, it said, adding that account-holders must comply with rules of their own tax authorities.

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