Panama Papers | Schembri, Mizzi wanted offshore for recycling, remote gaming interests

New documents from the international Panama Papers leak reported by the Australian Financial Review show that the Prime Minister’s chief of staff Keith Schembri sought the use of a Panama offshore company in 2015, to channel profits from his business venture into their offshore trusts in New Zealand.

The money, in the case of Schembri, was to come from a paper recycling business which he allegedly already operates as part of the Kasco business group he ran before being appointed chief of staff of Prime Minister Joseph Muscat.

Energy minister Konrad Mizzi appears as having planned "a part stake" in either or both recycling and remote gaming businesses, to channel the profits through the Panama companies into the New Zealand trusts.

Both KS and KM will be involved as shareholders in a structure that is totally not related to their areas of work. Karl Cini, Nexia partner

Nexia BT, Schembri’s auditors, handled the contacts with Mossack Fonseca, the Panamanian law firm from which some 11.5 million documents pertaining to its offshore business were leaked by the International Consortium for Investigative Journalists.

Seven banks contacted for accounts

Nexia partner Karl Cini was seeking clearance from foreign banks to open an account for energy minister Konrad Mizzi’s offshore firm Hearnville, and Schembri’s Tillgate.

Bank accounts in Dubai and Panama were refused because of the two men being PEPs (politically exposed persons).

In a letter of reference for Mizzi and Schembri, Nexia told its contacts in New Zealand that both men would be “involved as shareholders in a structure that is totally not related to their areas of work. The underlying entities of the Trusts will hence act as a vehicle of extracting the profits from this venture, since from commercially sensitive perspective they cannot appear as direct shareholders, either personally or via holding entities.”

The underlying entities of the Trusts will hence act as a vehicle of extracting the profits from this venture, since from commercially sensitive perspective they cannot appear as direct shareholders, either personally or via holding entities. Karl Cini, Nexia partner

On 10 September, 2015, Mossack Fonseca told Cini that FPB Bank in Panama had refused to open an account for the two Panama companies because the ultimate owners were PEPs. But Mossack Fonseca found two banks in the Caribbean which had no similar restrictions: Bank of Saint Lucia International (BOSIL) and Winterbotham Trust in the Bahamas. By 15 September, three others banks were contacted: the Miami branch of Brazil’s Itaú Bank; (Miami): Brickell Bank, also in Miami; and BSI Bank in Panama. They also talked to Cidel Financial Group.

But they all required a $US1 million opening deposit.

On 17 September Cini wrote: “The account will be the operating accounts of the Panama companies. Estimated deposits over one year to be around €350,000.”

Recycling and remote gaming

On 17 October, Cini informed Mossack Fonseca that the Panama companies would be used as holding companies for operations that will be conducted in the sectors of: recycling and remote gaming.

“These underlying entities will be set up in other jurisdictions and the Panama companies will have a part stake in these entities. Recycling business will be undertaking in India, Dubai and other Gulf countries. I wish to bring to your attention that the UBO [Ultimate Beneficial Owner] was already involved in such activities before his political appointment.

“Funds for these operations will come from existing profits generated from the UBO’s business, to which I already referred to in my earlier explanations.”

Schembri, whose Kasco group specialises in paper and newsprint, has an existing recycling business in Malta.

Cini informed Mossack Fonseca that as Schembri’s auditors, they were were “confident that that the funds generated by Mr Schembri’s business and reflected in all tax declarations over the years are more than sufficient to substantiate the investment that is being purported to be made in the various activities indicated in our correspondence.”

In November 2015, Cini informed Mossack Fonseca that his client would put $1 million into the BSI Panama account through the year, starting with an initial $100,000 deposit.

Cini instructed Mossack Fonseca to open accounts for both Hearnville and Tillgate.

The AFR reports that an internal Mossack Fonseca email on 3 December 2015 shows the firm was beginning the steps to open the account.

Both Schembri and Mizzi have claimed that no account was ever opened.