“Big Four” Accounting Firm Whistleblower Speaks Out.

(Cross-posted from The International Consortium of Investigative Journalists on January 16, 2015)

(For more information visit: icij.org)

‘I acted from conviction:’ PwC whistleblower speaks out

Whistleblower Antoine Deltour.

PwC whistleblower Antoine Deltour spoke with French newspaper Libération. Image: Libération   

A former PricewaterhouseCoopers employee has been charged by Luxembourg authorities following the leak of hundreds of confidential tax rulings that revealed large-scale tax avoidance by some of the world’s biggest multinational companies.

The whistleblower, 28-year-old French citizen Antoine Deltour, was indicted in the Grand Duchy on December 12 on multiple charges including theft, violation of trade secrecy, and fraudulent access to data.

On Monday he spoke out in an interview with French newspaper Libération, and revealed that he was motivated by his disillusionment with the tax system.

“Since the start, I have acted by conviction, for my ideas, not because I wanted to be in the media,” he said.

Deltour started as an intern at PwC, and then worked as an auditor from 2008 to 2010 – a job he thought meant “being on the side of the regulator.”

He quit after two years because, he said, he was feeling out of place.

“I progressively discovered the reality of the system is its radicalism: a massive practice of fiscal optimization. I didn’t want to contribute to that,” he told Libération.

“I can’t believe I could be convicted as an example,” he said. “My action is in the natural course of history, initiated by other whistleblowers and NGOs. I never asked for any compensation.”

He said he copied the documents before leaving the firm in 2010 but had no clear idea of what he might do with them.

“I copied training documents but, while I was looking into the PwC database, I found the famous tax rulings,” he said. “Without any particular project in mind, I copied those too because I was dismayed by their content.”

After unsuccessfully reaching out to NGOs, he says he was contacted by a French journalist, who was working on a documentary about tax avoidance for the France 2 TV program Cash Investigation.

The documentary, produced by journalist Edouard Perrin, aired in May 2012 and one month later, PwC submitted a complaint in the Luxembourg court.

In November and December this year the secret Luxembourg tax agreements were again brought to the world’s attention by a cross-border investigation coordinated by ICIJ in 26 countries, with more than 30 media partners. ICIJ’s Luxembourg Leaks project, based on leaked tax rulings, has since prompted widespread political debate and pressure for significant tax reform around the world.

Deltour said he has had no contact with ICIJ.

“In my mind, these documents didn’t have any other goal than being used for the preparation of that [Cash Investigation] program.”

He also pointed out that the ICIJ LuxLeaks investigation had revealed documents from dates after he had left PwC and in relation to the other Big 4 accounting firms, such as KPMG, Ernest & Young and Deloitte.

“I am just one element in a larger movement,” he said.

Deltour added that he regrets the focus on PwC or Luxembourg, since aggressive tax planning practices “on an industrial scale” are widespread and happen in several countries.

“Regulation will always be behind financial engineering, and the disappearance of those fiscal revenues becomes crucial in times of economic turmoil,” he said.

Yet he welcomed the results of the LuxLeaks revelations. “The political repercussions of LuxLeaks are beyond what I had hoped for: there will finally be talk of tax harmonization in Europe.”

ICIJ director Gerard Ryle says Luxembourg’s decision to indict the young man is a threat to transparency and accountability in the jurisdiction and elsewhere.

“ICIJ does not comment on sources. However, ICIJ does believe whistleblowers should be protected, not prosecuted,” he said in a statement.

“Protection of whistleblowers and sources is as important to society as the freedom of the press. Any prosecution against journalists or journalists’ sources has a dangerous chilling effect on the pivotal role these brave individuals play in ensuring the powerful are held accountable.”

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Unethical Practice Of Law And Global Tax Evasion.

Posted March 13, 2014

by Jerry Alatalo

“Laws can never be enforced unless fear supports them.”

– Sophocles (496-406 B.C.)

superior111-1Jack Blum is the founder and chair of Tax Justice Network USA. Mr. Blum is a lawyer who has led the charge on eradication of tax havens and evasion, speaking here in Norway at a 2012 conference on the continuing problems associated with tax evasion schemes. His focus is on the basic principle that lawyers always face when deciding where and how to conduct and go ahead in their legal work: ethics. He believes that university law schools have fallen short on meeting their first obligation – teaching ethical legal conduct.

“Adherence to the values of society is what makes a society work; non-adherence results in chaos and a society which isn’t pleasant to live in.”

If lawyers work trying to find ways out of an area of responsibility (obeying tax laws) for their clients, then lawyers are simply practicing law in unethical, illegal ways. Those highest paid lawyers represent the people from “The Republic of Richistan”, borrowing a term coined by a European politician. The people of “Richistan” ask those lawyers who decide to practice in an unethical manner, “what can I do to get around laws by gaming the international system, so that I don’t have responsibility for the society I live in?”, then the lawyer (or team of lawyers) go about devising very complicated corporate structures to escape detection by state taxing agencies.

Business history began with simple partnerships where people would join in ventures and were responsible for everything that occurred in the day-to-day operations of their work. Corporations evolved and expanded to separate individuals from responsibility for their actions, culminating hundreds of years later in the present examples during the financial crisis of 2007-8 where it is extremely difficult to track down transactions which took down the economy.

Banks, insurance companies, and virtually every corporation with enough money to hire unethical lawyers typically consist of hundreds of entities designed specifically to avoid tax responsibility. Responsibility disappears in those hundreds of abstract entities, lawyered up in far off islands thousands of miles away from the nation/region where firms conduct business.

Mr. Blum gives the example of Transocean, the corporation that owned the rig operated by British Petroleum that exploded in the Gulf of Mexico and led to the greatest environmental catastrophe in U.S. history. Some have the belief that event effectively killed the entire Gulf of Mexico. In 1999, Transocean had its headquarters in Houston, Texas but then arranged to move its profits and dividends, becoming a Cayman Islands corporation, where there are no taxes.

After the Gulf of Mexico oil-spill disaster, people looked at Transocean’s corporate structure and found nothing – it had disappeared. Mr. Blum point out that this kind of corporate arrangement is now commonplace for everything – every large bank, every large insurance company, every large enterprise on the planet. Every one has a team of lawyers whose objective is to minimize tax, minimize liability, and eliminate responsibility.

Jack Blum asks the question everyone has asked: “why hasn’t anyone gone to jail for fraudulent actions leading to the 2007-8 crisis?” When there are 100’s of obvious instances where fraudulent securities got sold in various secretive ways, according to Mr. Blum those “classic” frauds were transacted in the tangled, secretive webs of lawyered-up creations consisting of thousands of obscure, abstract entities. Law firms and accounting firms involved in financial engineered tax evasion schemes protect themselves with contract language containing non-liability clauses.

Mr. Blum share the example of a lawyer advising his client to “restructure” $2 billion worth of already transacted business to make those billions in sales “disappear”. He points out then his view that, “clearly, this was a lawyer that should be disbarred” for organizing and perpetrating an obvious criminal fraud.

The problem, Mr. Blum points out, is whose bar has that responsibility? Who is responsible for disciplining the lawyer and which set of laws/rules apply to the lawyer working for the residents of “Richistan”? This and similar examples find no responsibility on the part of the lawyer(s) or companies to the societies they reside in, while escaping tax payment and other negative outcomes clearly illustrate unethical and antithetical behavior regarding the role of a lawyer. Mr. Blum points out that this is totally damaging to nations/societies and wonders out loud, “why do we accept this?”

“This craziness”.

Criminal states

The argument used by those who accept and profit from financial engineers’ tax evasion schemes is that states (governments) are “confiscatory”. This view, which has gripped those with enough money to qualify for citizenship in “Richistan”, lines up almost perfectly with the philosophy of Ayn Rand – it could be said, because of the almost unanimous corporate participation in tax evasion schemes, that to a great extent this world is an Ayn Rand world.

The balance between greed and responsibility has swung nearly completely in the direction of economic destruction, a precarious balance that now severely undermines the ability of states to provide for the welfare of its citizens, and to protect their citizens through criminal law enforcement.

Unfortunately, Mr. Blum points out, unethical lawyers that keep such an unhealthy societal balance firmly in place through facilitation of responsibility/tax evasion, have become the most well-paid kind of lawyers. He notes that no tax authorities can catch every criminal if every criminal has to be prosecuted. The system depends on 50% of the people being honest, and the other 50% in fear of what will happen if they’re caught and punished because of wrongdoing.

He sums up his talk: “Today the fear is missing, the capacity to enforce is missing, the complexity of the world system is overwhelming, and as a result we have real financial catastrophe. I think we’re talking about time for change, and time for change now.”

Jack Blum said “time for change now” way back in 2012.

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(Thank you to PublishWhatYouPay Norway @ YouTube)

Worldwide Tax Evasion Plunders Democracy Everywhere.

Posted March 12, 2014

by Jerry Alatalo

“Hell is empty, and all the devils are here.”

– William Shakespeare

368-1Considering one’s perceptions about tax evasion will increase readers’ sense of contrast when hearing what Finance and Accounting Professor Prem Sikka has to say. Professor Sikka, with over 45 years of lecturing, study and research on accounting, has the knowledge and shares it here in a powerful, focused, and direct way.

In effect, Mr. Sikka’s lecture is an advanced accounting explanation of how the worldwide tax evasion industry really operates. His description of the so-called Big Four accounting firms as the “pinstripe mafia” hits the proverbial “nail on the head”; he goes on to thoroughly explain a “very lucrative global industry” that is not as many perceive – an anomalous few island paradises having little consequence on the world’s economy and overall conditions – but an extremely consequential industry having locations in major first-world capitals including New York, London, Geneva, Frankfurt and Singapore.

Surrounded by complete secrecy.

The tax evasion industry is subverting democracy. Men and women run for political office, speaking about the need for better health care, education, security, and so on, people vote them into office, then the world’s largest transnational corporations, because of their tax evasion schemes, blow the promise of the elected politicians and citizen’s hopes for “real change this time” completely out of the water.

Professor Sikka points out that there are 2.5 million professionally qualified accountants in the world, of which 330 thousand reside in the United Kingdom; the UK is a nation of accountants. “Financial engineering” is not taught at universities anywhere, but is the first item on the agenda for newly hired, freshly pressed accounting graduates at the Big Four – Ernst and Young, KPMG, Deloitte, and Price Waterhouse Cooper. Financial engineering is the focus of new hires’ initial training workshops, and is all about creating, selling, and implementing off-the-shelf tax avoidance evasion schemes for, and to, high net worth clients.

It is important to note that there is absolutely no difference between tax “avoidance” and tax “evasion”. Perhaps the accounting, legal, and banking firms that facilitate non-payment of taxes have the idea that using the term “avoidance” instead of “evasion” will prevent ordinary citizens’ associating today’s tax cheats with Al Capone, the infamous mob boss who was nearly impossible to put behind bars until his conviction on tax “evasion”.

The Big Four accounting firms

Price Waterhouse Cooper: $31.5 billion income/sales, 169,000 employees, operations in 150 nations, 766 offices

Deloitte: $31.3 billion income/sales, 170,000 employees, operations in 150 nations, 670 offices

Ernst and Young: $24.4 billion income/sales, 152,000 employees, operations in 140 nations, 700 offices

KPMG: $22.7 billion income/sales, 138,000 employees, operations in 150 nations, 770 offices

In addition to tax evasion the Big Four accounting firms – colluding with the largest legal and banking corporations – enable bribery, corruption, drug cartels, and money laundering.

The Big Four has come to control a vast amount of political power and resources. They have a principal role in suggesting and approving international accounting standards of organizations such as the International Accounting Standards Board, as well as other accounting rules groups. Big Four accounting firms send former employees to run national taxing authorities like the Internal Revenue Service in America.

Very little is known about the Big Four as the same tax evasion schemes they sell to customers come to be implemented in their own corporate accounting frameworks. How much do they earn through tax avoidance evasion services? Nobody knows. How much do they earn from sales of tax avoidance evasion schemes? Nobody knows.

“Cost minimization”

Professor Sikka holds the idea that taxes, from the vantage point of everyone paying their fair share, are not a “cost” like raw materials used in the manufacturing process, wages paid to employees, office supplies, etc. He points out that “bending the rules at any cost to increase profits is now seen as an entrepreneurial skill”. He shares some statements by one of the Big Four, “our profitability rests on the ability of our employees to serve clients well”. There is no mention at all about the public interest. The professor recounts a debate he had with a manager from Price Waterhouse Cooper where his debate opponent finally says, “..we create tremendous revenues for the state, and we have very many satisfied clients. Professor, what is your problem?”

The professor responded with, “..that is the language of drug pushers and pimps.”

The United Kingdom could be losing 30-150 billion, the European Union one trillion, and the U.S. Treasury 345-500 billion, maybe more. Developing countries’ revenue losses from tax evasion could be in the range of 500 billion per year – while total foreign aid is around 120 billion dollars.

Some tools to reduce tax havens and tax evasion have been proposed. Among those are legal agreements/treaties with the world’s over 70 tax haven jurisdictions to allow automatic sharing of tax crime related client/account information, in essence ending secrecy and bringing forth total transparency. Tax haven jurisdictions have thus far stalled and dragged their heels by asserting they will not sign any such agreement(s) until all of their competitor tax havens sign on.

Some have suggested sanctions against those tax haven jurisdictions who do not want to play ball.

Other proposals include laws which prevent any entity which has sold tax evasion schemes from entering into public contracts, establishing licensing requirements for tax advisers/consultants (and license revocation if found implementing or selling tax evasion schemes), elimination of limited liability partnerships because partners are damaging society, and disclosure of income made from sales of tax schemes with file availability (as opposed to years and years of litigation).

Individuals and corporations convicted of tax evasion have thus far “evaded” any penalties for the public’s (taxpayers) very real (and very large) litigations costs. Convicted tax cheats should become required to pay full restitution for taxpayers’ legal costs to the last penny, as well as more in punitive fines.

As Professor Sikka points out, tax cheats’ accounting firms have gone so far as to create “cost-benefit analyses” comparing the amounts of tax “savings” to potential fines from getting caught.

Another proposal is for banking regulatory agencies to conduct audits in tax evasion cases instead of the same accounting firms which have “engineered” the tax evasion schemes in the first place. Professor Sikka considers auditing by the Big Four in tax crime cases, instead of by an independent public regulatory body, as one of the biggest frauds of all time.

If you are interested and upset by a still operational, hugely undemocratic, extremely consequential financial industry focused entirely on tax evasion, Professor Sikka delivers all you need to know to begin taking action. Mr. Sikka has over 45 years experience, study, and research in the field of finance/accounting. If you are not interested – even though every year trillions of dollars in revenues are criminally taken from nations and their citizens the world over – please take a few moments to think about family, friends, acquaintances, journalists, local, state, or national representatives, etc. who may want awareness of the explosive information in this lecture.

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(Thank you to Publish What You Pay Norway PWYP Norway @ YouTube)

The Magical Tax Free Tour.

Posted February 27, 2014

by Jerry Alatalo

“Our Constitution is in actual operation; everything appears to promise it will last; but nothing in this world is certain but death and taxes.”

– Benjamin Franklin (1706-1790)

oneness1-1Have you ever heard of the phrase “neutral taxation”? How about “tax optimization”?  Well, these are terms used by the largest accounting firms in the world to describe, frankly: “tax evasion“. And just who are these large accounting firms – these companies that most people believe are the ones making sure every document adds up to the last penny; that the tax filings of their customers are 100% accurate? And why is it that most people are unaware that the massive tax haven/evasion industry has operated for decades, and that real estate multi-millionairess Leona Helmsley’s viral pre-internet remark made over 20 years ago – “Only the little people pay taxes” – remains true in the year 2014?

The “Big Four” accounting firms responsible for the global tax haven industry:

Price Waterhouse Cooper

KPMG

Ernst & Young

Deloitte

Most people are unaware of the fact that a massive tax avoidance industry has operated with impunity for decades around the world because no government officials have had the courage to expose the industry or take any action whatsoever to shut it down. Because no media corporations, owned by tax haven users and receiving multi-billions of dollars from corporations using tax havens, have had the incentive to tell the truth.

Because virtually any corporations with the resources to advertise on mainstream media outlets are using the “Big Four” accounting firms to escape payment of taxes, owners of those media corporations would, if their news divisions reported what was truly occurring regarding massive tax evasion by transnational corporations, lose almost all of their best, highest paying advertisers.

Because virtually every member of the United States Congress and Senate depends on campaign contributions from the major facilitators of tax schemes – the finance sector/banking corporations, as well as corporations/wealthy individuals who employ tax schemes – and many politicians use tax avoidance schemes themselves, no laws have been passed to close down tax evasion estimated in the hundreds of billions and trillions of dollars through recent decades.

If not for an explosive expose and release of banking records from the British Virgin Islands (BVI) a few years ago by the International Consortium of Investigative Journalists (ICIJ – icij.org), comparable to recent leaks of “inconvenient” information from Chelsea Manning, Edward Snowden and others, the tax haven industry would have kept humming along as it has for decades. Seeing that ICIJ released their explosive, avalanche of records around three years ago, and that tax havens continue to operate in dozens of locations around the world, it would seem that the industry is for the most part still humming along.

It is of no small interest to note that the government in the BVI has considered creating laws which result in prison sentences up to 20 years for persons leaking financial records after ICIJ’s massive release of records.

“Tax Free Tour” is a film which delves directly into the secretive world of tax havens and tax avoidance schemes facilitated by the previously mentioned “Big Four” global accounting corporations, the largest banks operating on every continent in the world, the highest priced law firms, and, frankly, elected political officials from low, medium, high, and highest levels of power.

These political “leaders”, when pressed to comment on the huge amounts of revenues being squirreled away and out of the public’s notice (remember, this industry has hummed along for decades), respond with empty words while feigning outrage. Statements to the effect of “this is intolerable…” and “we will put a stop to this…” and “steps must be taken..” etc., have not been met with the actions required to match the empty words. The hypocrisy displayed by politicians on this enormously important matter, the lying expressed by “I am just learning about this secretive practice” – while every politician has been fully aware of tax havens all along – is profoundly stunning.

Like all true criminals, corporations and ultra-wealthy individuals utilize deception, trickery, and disguise to carry out their crimes of tax evasion. One of the most damaging results of this worldwide practice is the aiding and abetting being done by the elected representatives of many nations around the Earth. The worst consequences have been felt by what has become known as the “99%” of the human race, now enduring depression-like conditions in nations around the Earth.

Most men and women remember the enormous media reporting that occurred surrounding the Bill Clinton impeachment proceedings. The issue was whether or not the President of the United States had, or did not have, “sex with that woman”. Across America (and around the world) citizens endured bombardment with news reports about Clinton’s impeachment day after day after day, night after night after night, week after week after week, and month after month after month.

And how many reports on tax havens – a worldwide trillion-dollar tax evasion scheme that has been secretly running entire nations and populations into the economic ground for decades? That has resulted in the greatest level of wealth inequality in the history of mankind here in the year 2014?

How many reports?…

ZERO.

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(Thank you to VPROinternational at YouTube)