This story is part of a CBC News collaboration with the Washington-based International Consortium of Investigative Journalists examining the Pandora Papers, a leak of 11.9 million files from 14 companies that provide offshore services, including emails, bank statements, incorporation documents and shareholder records.
As US and Canadian authorities stepped up their investigations into Montreal-based money transfer tycoon Firoz Patel in April 2017, he boarded a flight to the United Arab Emirates.
A stamp in Patel’s passport shows he entered the United Arab Emirates on April 8, 2017.
Ten days later, he became the sole shareholder of Argus Ltd., a secretive offshore company he set up with an office in a building owned by a senior member of the Emirates royal family.
The trail to Patel’s offshore account is revealed in leaked documents obtained by the International Consortium of Investigative Journalists (ICIJ) as part of the global investigation into the Pandora Papers and shared exclusively with its Canadian partners, CBC and The Toronto Star
The Pandora Papers are the largest journalistic collaboration in history. More than 600 journalists in 117 countries and territories worked together to research and analyze millions of documents leaked from tax havens.
Publicly available US court records show that Patel and his younger brother Ferhan ran Payza and several other unlicensed online money transfer services that processed more than US$250 million in illicit transactions that facilitated activities criminal activities, including the distribution of child pornography, Ponzi schemes, gambling and drugs. from 2004 until their indictment in 2018.
WATCH | Pandora Papers leak reveals offshore tax havens for the rich and famous:
US court documents show that in April 2017, investigators in the United States were preparing money laundering charges against the Patel brothers while Quebec tax authorities investigated tax evasion.
Both men pleaded guilty in Washington, DC, in July 2020, after accepting a negotiated plea deal in which they admitted to conspiring to launder money.
Firoz Patel was sentenced to a three-year sentence in a Connecticut prison he is still serving, while his brother, Ferhan, was sentenced to 18 months.
Firoz Patel faces an $18.4 million Quebec tax bill that he has yet to pay and is contesting.
Retired FBI agent Gregory Coleman spent 25 years investigating financial crimes, a high-flying career that included his portrayal in film the wolf of Wall Street for his key role in the conviction of stockbroker-turned-fraudster Jordan Belfort.
“I am on [investigators] would have liked to know during their investigation of this [Argus] account and what was in it, how it was used, who created it, why it’s there and so on,” Coleman told CBC News in an interview.
The documents leaked to the ICIJ do not reveal how Patel used Argus or whether he smuggled money through it.
The US Department of Justice declined to answer questions from the ICIJ about whether Patel disclosed the existence of Argus Ltd. prior to his plea deal or if he subsequently sought financial information from UAE authorities about the offshore company.
Coleman said US investigators will likely want to determine if Patel’s UAE company is connected to his past lawsuits, if it served a separate fraud, or if it was just a defunct front company.
“Every investigator wants to have as much information as possible and track as many dollars as possible,” he said.
‘A wake up call’
Coleman said the United States does not have a mutual legal assistance treaty in criminal matters with the United Arab Emirates. If US authorities make a request for assistance to their UAE counterparts, “it will be entirely up to the UAE whether or not to respond.”
Coleman said the Patel case “is your stereotypical case of excessive money laundering.”
But he said it shows the Panama Papers, a previous ICIJ project that uncovered billions of dollars stashed in offshore accounts, has yet to get governments to impose regulations on money transfers. and banking industries that facilitate tax evasion and crime around the world. .
“I think it’s a wake-up call to a lot of people around the world that this industry is still used the same way.”
WATCH | Inside the massive offshore financial document leak:
Patel used a corporate service provider called SFM Corporate Services to register his shell company in the UAE.
ICIJ reports revealed that SFM was founded in Switzerland in 2006. It now operates in more than two dozen countries, including Canada, the Bahamas, Hong Kong, the United States, the Netherlands, the Panama and the United Kingdom.
On its website in 2010, SFM said it served clients “looking to minimize taxes, protect assets, and limit liabilities.”
The company provides nominee shareholders and nominee directors. These are people paid to register on public forms but have no real responsibility with the company they represent only on paper.
160 companies registered at the same address
SFM guarantees that its nominee shareholders “work with the highest level of integrity and confidentiality”.
The ICIJ discovered that SFM had registered 160 companies at the same address in the UAE as Patel’s Argus Ltd.
Coleman said mass registration of shell companies is both commonplace and legal, and companies like SFM often do little or no due diligence on clients like Patel.
“I guess you’re not going to find much [offshore registry service providers] who dig very deep to find out who they are creating accounts and companies for,” he said.
The documents leaked to the ICIJ, however, include a background check which shows that SFM learned on May 16, 2018 that Patel had been charged in the United States. Eight days later, SFM severed its relationship with Argus and Patel.
In a statement emailed to ICIJ, a lawyer for SFM said he could not confirm any business relationship due to contractual secrecy. He stressed that all of his activities are legal and insisted that he carried out due diligence before taking on a client.
Patel says he has no intention of laundering money
Quebec court documents obtained by the Toronto Star show a judge ruled in 2017 that Patel had “systematically neglected” to report his actual earnings. It was the same year that Patel flew to the United Arab Emirates to set up his offshore company.
“The sums at stake are so considerable that these omissions can only be part of a planned process with a single objective, namely to try to evade the tax obligations imposed by law”, wrote the judge of the Court of Quebec Gilles Lareau.
Quebec tax authorities say armored vans transported $45 million in cash for Payza between 2012 and 2018. Millions of dollars were also transferred from Payza to the Patels’ personal bank accounts in the United States and Canada. .
In response to written questions from The Star, Patel from jail said Argus was created legitimately to do business in Asia and had nothing to do with Payza. He said it had never been used and had no associated bank account.
Patel also said the charges he and his brother pleaded guilty to in the United States would not be considered money laundering in Canada.
“There must be an intention to launder funds, and there was no intention to launch a [money transfer] company without the required licenses, therefore the basis for the money laundering allegation is false,” Patel said in an emailed statement.
But US court documents show many states warned the Patels they were operating illegally without a license and a consultant they hired told them they would have to shut down because they were operating illegally, two facts cited by the judge during the brothers’ sentencing hearing in July 2020.
During the hearing, the Patels called their criminal financial clearance errors and suggested they were unwitting pawns in criminal enterprises.
U.S. District Judge Ketanji Brown Jackson flatly rejected that explanation.
“When you play with fire, you end up getting burned and that’s where we are right now,” Judge said.
“This court does not believe that any of you, frankly, had a reasonable defense to your knowledge or guilt of the seriousness of these offences.”
Brown Jackson told the Patels that illegal businesses “can only work if they have the ability to raise money, and that was your job.”
“You have helped schemers”
She wondered if they had ever thought of the drug addicts created by their money laundering or the elderly who had lost their savings and would have to give up their retirement ‘because you helped schemers who intended to scam them’ .
Meanwhile, Revenu Québec told the Star that it could neither confirm nor deny that it was investigating Argus. But he said he had not taken any legal action to seize the assets of a company with that name.
He did, however, file a $2 million lien against the Montreal home of Firoz Patel.
Patel has filed a lawsuit in England against crypto firm Blockchain.com, claiming the London-based company holds US$20 million worth of his bitcoin, which it refuses to transfer to him.
In a statement to The Star, Patel’s London lawyer Leo Nabarro said he “will continue to rigorously protect and pursue the recovery of our client’s assets”.
Blockchain.com did not respond to a query from CBC News.