Trusts use foreign Aids charities to hide from taxman

By Jon Ungoed-Thomas, Duncan Campbell and Craig Shaw Published in Sunday Times on 05 May 2013

Thomas Ziolkowski with Hillary Clinton

Trust investor Thomas Ziolkowski with Hillary Clinton (Facebook)  

CHARITIES around the world have emerged as the unwitting beneficiaries of offshore trusts that are sheltering funds from tax authorities.

The Sunday Times revealed last week how some of Britain’s charities — including Cancer Research UK, the NSPCC and the National Trust — were named as the beneficiaries of offshore trusts. Other foreign charities have now been told they, too, are named as tax haven beneficiaries.

Details of the trusts emerged in a cache of 2.5m leaked documents obtained by the International Consortium of Investigative Journalists (ICIJ) from the British Virgin Islands and the Cook Islands.

Trusts fronted by charities can conceal the ultimate beneficiaries or avoid scrutiny by the tax authorities without the charity receiving any benefit.

It emerged last week that two Australian Aids charities are named in a trust used by a doctor to shelter money from US tax authorities. Thomas Ziolkowski became a keen investor after being disciplined for “unacceptable behaviour” by Colorado health authorities.

An ICIJ investigation has found Ziolkowski claimed the Aids Trust of Australia and the Aids Council of New South Wales were beneficiaries of an offshore trust he set up in 1997. Copies of the charities’ published financial statements were used to pass anti-money laundering checks in America.

Ziolkowski used the charities’ names to open an account with Lombard Odier, a private Swiss bank. By 2010, Ziolkowski had more than $1.1m banked in Zurich.

Neither charity has received any money. Greg Gahl, the chief executive of the Aids Trust of Australia, said it appeared to be a case of a “third party abusing the notions of charity for their own enrichment”. Ziolkowski, who has been pictured with Hillary Clinton, has not commented.

Charities in Italy have also been told they have been the unwitting beneficiaries of charities. The Focolare Movement, the Catholic charitable organisation, was named as the beneficiary of Cosmo Trust, an offshore trust that the accountancy firm PwC helped administer from Hong Kong.

The Focolare Movement said it had never had any relationship with Cosmo Trust or PwC.

A PwC spokesman said there was no requirement to inform charities they were beneficiaries. He would not comment on specific trusts, but said charities could be used as a reserve or “long stop” in the event that other beneficiaries died.

Tax experts said that although it was legitimate to use charities as reserves, they were now being named as the exclusive beneficiaries of tax haven trusts without their knowledge. In reality, they can be removed from trusts before any money is distributed.