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Tax haven company owns £27m of Manchester property, but who owns the company?

One company registered in the British Virgin Islands tax haven owns property in Manchester with a value of around £27 million. The company name is Wisdom Max Group Limited, but who is the ultimate owner of this company and how did they make their money? These are questions that commonly go unanswered due to the secrecy shrouding tax havens which allows the ultimate beneficial owner of a company to remain anonymous. But The Meteor can cast some light on the mysterious Wisdom Max.

In the last article in the ‘Selling Manchester by the Offshore Pound’ series, we reported on the rapid rate of increase of overseas company owned property (OCOP) in Manchester. A list of the 5 companies owning the most Land Registry property titles in Manchester showed Wisdom Max at the top. Further analysis of the Land Registry data shows that 133 properties are owned by the company: 127 apartments at 1 Regent Rd Manchester and 6 houses in Water St M3 4AU. Of these homes, the Land Registry data attached a price to 130 of to them which added up to £26,841,811. An estimate* for the three remaining properties came to £589,605, giving an estimated total of £27,431,416 for the residential property in Manchester owned by Wisdom Max.

Meteor graphic: Sum of the prices paid listed on the Land Registry titles in Manchester taken from July 2018 dataset. Land Registry titles without a price were estimated*

All of the Land Registry titles belonging to the five companies were leaseholds. Some of the titles were for parking spaces (see table below, difference between No. of titles and No. of homes equals No. of parking spaces), and these were not included in the cost estimates as most did not have a price attached to them.

Out of the 337 properties owned by the five companies, 218 had a price attached to them which totalled £45,769,811. Estimates for the remaining homes were generated using the Zoopla online house prices tool, using the average price given for a home at a specific postcode address. The estimated price for the remaining 119 homes came to £23,116,028. This gives the total estimated price for all 337 Manchester properties belonging to the top 5 overseas companies as £68,885,839.

Table: All companies above are limited companies incorporated in tax havens. Great Eastern in Hong Kong, Ofy in BVI, Emerati Holdings in Guernsey and Zagora in Gibraltar

The only information contained in the Land Registry data on Wisdom Max Group Limited is that it is registered in the British Virgin Islands (BVI) and has contact addresses in the BVI and Hong Kong. There is little information available publicly on Wisdom Max itself but the Company Search website records Wisdom Max as being the 100% owner of shares in another company called Ricah Investment Ltd, which was registered in the UK in February 2017 as a real estate management company with an address in Salford.

The one named director of Ricah Investments at Companies House is Frank Fung Kuen Leung, a 42-year-old Canadian national living in Hong Kong. Leung is also listed as a director of three other companies with office addresses in Manchester: Champion Investment Ltd, Fulcrum Global (UK) Ltd and Viva Property Investment Ltd.

1 Regent Rd Manchester, development where Wisdom Max owns most properties

Champion Investment Limited is another real estate management company and Viva Property Ltd’s nature of business is “buying and selling of own real estate”. Both companies, which list Leung as the person of significant control, are bankrolled by The Bank of East Asia Limited. The BEA is incorporated in Hong Kong but is also listed in the UK due to having a branch in London. It’s Companies House entry shows it to be extremely tardy in submitting its yearly accounts, with the last ones received dating back to 2005.

So Wisdom Max is the 100% owner of Ricah Investment, which has one officer – Frank Fung Kuen Leung. However the address in Hong Kong given on the Land registry data for Wisdom Max:

‘1505 & 1507, 15/F, Leighton Centre, 77 Leighton Rd, Causeway Bay, Hong Kong’

Also matches the contact address given on a Fulcrum Global Properties website, of which Frank Leung is also the managing director. The same Hong Kong address is also listed on Fulcrum Global UK’s incorporation document, Leung is also the only named director of the UK company on the incorporation doc and the Open Corporates database states Leung controls the company. This strongly suggests that Frank Leung is also an officer of Wisdom Max or has some involvement in or control of the company.

The Meteor asked Frank Leung, via contact details (phone and email) provided on Fulcrum Global’s website, to confirm or deny involvement with Wisdom Max Group Limited, but reply came there none.

It should be noted that The Meteor has no information to indicate that any of the companies owning property in Manchester mentioned in this article, or any person associated with them, are evading their tax responsibilities or breaking the law in any way.

London: a bad example for Manchester to follow

The Tax Justice Network (TJN) was set up in 2003 to combat the tax dodging and corruption endemic in the offshore world. John Christensen is a forensic auditor and economist who is co-founder and chair of the TJN. The Meteor asked Christensen what increasing levels of overseas ownership of property in tax havens and the increasing financialisation of housing would mean for the people of Manchester:

“Well if we look at other cities particularly London what you see is large numbers of properties that are essentially being bought as investments rather than as places where either the investors or tenants live because they simply hold them off the market, huge numbers, talking about thousands of properties in London that are unoccupied, because they are not interested in leasing them, they are expecting large capital gains, all they want is another investment class…

“Its going to impact on the people of Manchester, it going to push up property prices, there is no question about that, often beyond the reach of ordinary mortals. It means that developers tend to focus more on the top end luxury end of the market where they can sell to such investors rather than building affordable housing.

“That obviously has an impact on younger people and people on more modest salaries without huge wealth behind them. I think it contributes to making the city less affordable. It creates areas entire blocks which are largely uninhabited as we see in London, it contributes to enabling very rich people to avoid paying tax and evade paying taxes, that obviously feeds through to cut backs in health services and cut backs in education services.”

The Bank of East Asia

The bank underpinning two of Frank Leung’s companies has a dubious past. The Bank of East Asia Limited (BEA) was investigated by the Chinese anti-money laundering unit in 2016 due to the suspicious transfer of 70 million yuan (£7.9 million) to the executives of the Yantai city government controlled Evergrowing Bank (AKA Hengfeng Bank) in China. Luan Yongtai, then head of the bank, was eventually found guilty of embezzlement of 21 million yuan (£2.4 million), and the chairman of the Evergrowing Bank in 2017, Cai Guoha, was under investigation for illegally moving 43 billion yuan (£4.9 billion) of the banks trust funds to offshore shell companies.

In February 2017 former Hong Kong chief executive Donald Tsang Yam-kuen was jailed for 20 months for misconduct in public office, which involved a penthouse in Shenzen. During the trial it was alleged that the BAE chairman David Li Kwok-po had paid Tsang’s wife HK$350,000 (£33,866) towards the rent for the Shenzen penthouse. Hong Kong’s Independent Commission Against Corruption failed to question Li Kwok-po over the alleged transfers, which drew criticism from former corruption investigators and legal experts.

Selling Manchester by the Offshore Pound

Read our previous story: Dramatic rise in tax haven companies owning property in Manchester mimics the city’s growing skyline

An offshore company called Long Beach Ltd, registered in the British tax haven of Anguila, had bank accounts opened in its name with The Bank of East Asia. The ultimate beneficial owner of Long Beach was Denis Christel Sassou Nguesso, son of the president of the Republic of Congo, and hundreds of thousands of dollars from the Congolese oil trade were pouring into the accounts. It was pouring out of the account just as fast with Nguesso going on lavish spending sprees and buying luxury items in Paris, Monaco, Marbella and Hong Kong; in just one month (June 2005) his spending amounted to $32,000, (£18,073 in 2005) on the credit card attached to the Bank of East Asia account.

An investigation by Global Witness provided evidence that the Bank of East Asia should have known that they were opening an account for a politically exposed person in a country which ranked highly In Transparency Internationals Corruption Perception Index (113 out of 133), and that the money going into the account was from the Congolese oil trade. The Bank of East Asia refused to answer the questions Global Witness put to them regarding due diligence checks on the accounts owner.

Due dilligence and tax haven transparency

Due diligence is a business/legal term that refers to checks made by one company or individual on another during a business transaction. Discovery of criminal activity, corruption terrorist activity or human rights abuses linked to the company or individual concerned should, by convention, prevent the business transaction taking place. The introduction of the Criminal Finances Act 2017 has also introduced a greater pressure for due diligence checks on companies operating in offshore tax havens, by introducing a new corporate offence for failing to prevent the facilitation of tax evasion in the UK or abroad. However, how much use this will be, with law enforcement agencies in the UK crippled by austerity, remains to be seen.

Parliament’s vote in May to force Britain’s Overseas Territories to publish public registers of beneficial owners of companies incorporated there may also turn out to be another false start, according to Private Eye. If so, this will be the second time government has failed to act on its promises, as David Cameron when PM also promised public registers of beneficial owners in overseas territories and then failed to deliver.

Christensen also thinks the latest measures will be virtually useless as they only cover companies not trusts, and sophisticated users of tax havens will transfer ownership of the company to a trust. He pulls no punches when it comes to the UK governments record in preventing tax dodging and corruption in tax havens, saying:

“They really do not want to take action against tax havens, because the City of London benefits  enormously. The powerful elites in this country are up to their eyeballs in this stuff and they are not going to allow any measures which will undermine their ability to use tax havens. We have a government which will talk the talk about trying to tackle these things but…in March this year the UK government went to great lengths to get Bermuda and other tax havens of the European union black list, that I think signifies that this is a government that is very deeply committed to supporting tax haven activity.”

Hong Kong’s influence in Manchester grows

Previously The Meteor reported that Hong Kong was the country of incorporation for 10% of overseas companies owning property in Manchester (see graph below), which was five times higher than the 2% average across England and Wales. If Wisdom Max’s ultimate beneficial owner is resident in Hong Kong, it raises Hong Kong’s influence in OCOP in Manchester significantly.

Hong Kong comes fourth out of 112 entries in the Tax Justice Network’s Financial Secrecy Index, and is one of the worlds fasted growing secrecy jurisdiction/tax havens with $2.2 trillion in managed funds and over $470 billion in private banking assets at the end of 2015. An expose in 2014 revealed elites in China, including numerous people from the ruling Communist Party, were using secretive offshore companies – many in Hong Kong – to help shroud their wealth in secrecy, aided and abetted by western accountancy firms and banks.

Christensen says of the Easts premier secrecy jurisdiction. “Hong Kong was a very very dirty tax haven through the 1950’s onwards to the end of it [British rule ended in 1997] …the Chinese have not taken any strong action’s to curtail its secrecy and tax issues, so it remains a huge centre for money laundering, used extensively by Brits”.

Selling Manchester by the Offshore Pound

Meteor graphic: Companies country of incorporation for all land registry titles in Manchester in July 2018 (total = 1,736). Source: Land Registry

The ultimate control of Wisdom Max possibly lying in Hong Kong via a route through a British Overseas Territory tax haven, follows a similar pattern to another overseas company heavily invested in Manchester. The Far Eastern Consortium is registered offshore in the Cayman Islands and has a headquarters in Hong Kong. It is Manchester City Council’s preferred developer for 10,000 housing units on public land in the £1 billion Northern Gateway development. The first tranche of that development, consisting of 756 private rented sector apartments in Angel Meadows, saw homeless charity Lifeshare turfed out of their home for the past 30 years – the Charter St Ragged School.

And where the concept of due diligence is concerned, evidence from the Panama Papers reveals it is given scant regard in Hong Kong. The Panama Papers were leaked from Mossack Fonseca, the Panama based legal firm specialising in offshore work. Nearly a third of the legal firm’s business came through its offices in Hong Kong.

These legal firms are expected to do due diligence checks on the companies they help to set up in secrecy jurisdictions, and therefore should know who the ultimate beneficial owner is. But more revelations from the Panama Papers revealed that Mossack Fonseca did not know who the ultimate beneficial owner was for over 70% of its clients, two months after the papers were leaked.

Local authorities role

Due to the failures internationally and nationally of the UK government to curb the dark side of offshore finance Christensen says local authorities, who are also increasingly doing outsourcing deals with offshore companies, should step up to the plate:

“At a local level I think it’s perfectly possible and indeed desirable and necessary for local authorities to say we want full disclosure of who are the real owners of these properties, and also if they are contracting. Because local authorities are major contractors they buy in a lot of services from private companies, they should require full disclosure of the identities of the owners of the companies they need to know who they are dealing with, and I would like to see local authorities, Manchester and other major conurbations taking the lead and pushing for full disclosure when it comes to public procurement.”

The overseas company ownership of property in Manchester may just be the tip of a very large iceberg. The Land Registry data released does not include property in Manchester owned by individuals from overseas, and our next story will indicate the extent of this hidden ownership. It will also shift focus from the Far East to the Middle East, and investigate the increasing investment coming into Manchester from the United Arab Emirates, a sovereign state with an appalling human rights record.

 

Conrad Bower

Feature Image: The Meteor

Second article in the series called ‘Selling Manchester by the Offshore Pound

For more information on the murky offshore world visit the Tax Justice Network website – click here

* As all three flats without a price for Wisdom Max Group Limited were in the same block, 1 Regent Rd, as the other flats owned there, the average of the price for the flats with a price paid was used to calculate an estimated price for the three flats. All other estimates were calculated using the Zoopla house price online tool.

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