Tuesday, March 07, 2006

Giving credit where due, this does raise taxing questions

MY fellow-blogger Desert Peace took a break from the Middle East the other day to post an interesting report from the "Providence Journal", Rhode Island, about a retired Texas schoolteacher called Walter Soehnge who settled in New England.
Walter said he was "madder than a panther with kerosene on his tail" (a Texan expression, apparently) after he and his wife Deanna found the bank was doing something strange with their credit card. Those of us who have ever been refused money, or charged some exorbitant sum for a letter posted second-class to tell us what we already knew, just because our paycheck was a day late, may sympathise.

But this was worse.

The couple had thought they were behaving responsibly by cutting down their debt. The balance on their JCPenney Platinum MasterCard had grown too high, so they sent in a cheque for $6,522. A thankyou note would have been nice, but wasn't expected.

What did happen however, as the Soehnges found when they checked their account on line, was that though their cheque had arrived, the amount available to them for credit remained unaltered.

Deanna called the credit card company. Then Walter called them. "When you mess with my money, I want to know why," he said. What the couple eventually learned, after working their way up the call centre ladder, was that under America's new "anti-terror" measures, financial privacy has changed. Now any payment into your bank account or credit card that is over your normal monthly payment by a certain percentage triggers an alert. Homeland Security is notified. And the money stays frozen till the all-clear.

Walter, who thought of himself as a fairly regular, middle-of-the-road sort of guy, contacted the media and civil liberties people. "The more I'm on, the scarier it gets," he says "It's scary how easily someone in Homeland Security can get permission to spy."

The Soehnges were apparently found not to be promoting global terrorism under the guise of paying a credit-card bill. They never did learn how a large credit card payment can pose a security threat.

Desert Peace, who was born and raised in the United States though he now lives in Jerusalem, finds this a frightening tale of how "Big Brother" has invaded American life in the guise of the "War on Terror". I'm sure he's right. (Not that the huge increase in surveillance - including spying from Menwith Hill in Britain -seems to have brought them any closer catching Osama Bin Laden) At the same time, as a Brit I'm struck by the contrast between the way this New England couple were treated and the case of a couple living in north London.

We used to think everything was freer and easier in the 'States, providing you had money anyway. But when London solicitor David Mills and his busy working wife Tessa took a mortgage on their £700,000 home in Kentish Town, only to pay it off a month later, it seems to have escaped notice. It even escaped Culture Minister Tessa Jowell's notice, if we are to believe her and those who have come to her defence.

According to documents leaked from the Italian investigation into prime minister Sylvio Berlusconi, whom Mills helped move money through offshore accounts and conceal dealings, Mr Mills told his accountants that "the B organisation" had indirectly placed £350,000 in a hedge fund, which he could regard as a gift or a long-term loan. Mills has since said the money he received came from a Neapolitan shipowner, Diego Attanasio, who was also a client. However, Attanasio says he was in prison at the time and could not have ordered the transfer.

Under the rules, ministers are supposed to disclose transactions in their name.
Tessa Jowell was a co-signatory of the mortgage, and legally speaking a recipient. Mind you it must have been difficult keeping track of the moneys coming in and out of the Mills-Jowell household.

Here, courtesy of the Daily Mirror, is the full mortgage trail:

1979 - House in Kentish Town in north London bought without a mortgage.

July 15 1987 Kentish Town home mortgaged with Mortgage Fund Corp. Ltd later Nationwide Home Loans Ltd.

March 18 1991 Another mortgage loan taken out against Kentish Town house with Coutts & Co.

1993 - Weekend house in Warwickshire bought outright and registered in Mr Mills' name.

May 17 1996 - Kentish Town mortgage paid off.

October 25 1996 Warwickshire house mortgaged with Guinness Mahon & Co Ltd.

January 1998 Warwickshire mortgage paid off.

1999 - Alleged £350,000 gift from Berlusconi placed by Mr Mills in offshore hedge fund.

July 21 2000 Warwickshire house mortgaged with SG Hambros.

August 14 2000 Mortgage on Warwickshire property paid off.

September 27 2000 - Mortgage loan for £408,000 taken out on Kentish Town house with SG Hambros.

December 1 2000 - Kentish Town mortgage paid with alleged gift

February 28 2002 - Both houses mortgaged with Mortgage Express.

March 19 2002 - Mortgage on Kentish Town house paid off.

March 25 2002 - Warwickshire house mortgage paid off.

July 9 2002 - Mortgages taken out on Kentish Town and Warwickshire houses with Alliance & Leicester. Both still outstanding.

MR & MRS MORTGAGE (Daily Mirror, March 2, 2006)

All those people, many of them Labour voters, who have enough trouble finding somewhere to live and obtaining one mortgage, then working for years to pay it off, must be wondering whether the minister and her solicitor husband could not set up an advice bureau to give some tips on how its done; and where to go for such generous gifts.

In fact, those who are in the finance game say taking out such hefty mortgages is an "unusual" and normally expensive way of raising cash, especially that often. But it would be a way of laundering sums of money from overseas.

Those ministers and tame journalists who are telling us this affair just blew up in Italy because elections are near, or has been raised because they are coming in Britain, would be more honestly employed explaining why it has taken so long for the issues to reach the mainstream media here. What have the British authorities been doing? How much did the government know, but think it could get away with and suppress?

It is two years since Bob Drennan, a senior partner in accountancy firm Rawlinson & Hunter, went to see his firm's compliance officer at their offices in Jermyn Street. For more than 15 years Drennan had acted for David Mills, and they were on friendly terms, but Drennan was worried about what Mills had told him about the £350,000, apparently from an associate of Berlusconi, that had found its way around the world via a series of bank accounts to end up paying the Mills' mortgage.

Drennan already knew the Italian authorities were investigating Berlusconi's business affairs, and he also knew that a London company linked to Mills had been visited by the Serious Fraud Office (SFO) some years before. Although the SFO seem to have been persuaded to leave it, the Inland Revenue was now investigating Mills' tax affairs, including the undeclared Italian gift. The accountant was told to take his concerns to the police.

THE MINISTER AND THE £350,000 GIFT, Sunday Times, February 26

Now Tessa Jowell has separated from her husband. Did they try marriage guidance or just take their accountants' advice? I've heard of marriages of convenience, but could this be a divorce of the same kind? Will those commentators who have been telling us poor Signor Berlusconi just had a bad press (odd, considering he owns most of it) now just say its nothing to do with the Labour minister? Will Tony Blair disavow any knowledge of the benefactor who provided his family with a holiday home?

New Labour is not soft on people with shady finances. Nor are the Establishment media. Vast sums have been spent on advertising campaigns telling us to shop benefit cheats, and not give spare change to beggars, and the BBC has been running a daring series exposing the Big-time criminals who work while claiming benefits. The government says it is determined to get people off incapacity benefit and into jobs (The government will cut the payments but it will be up to the disabled to find the jobs).

By sheer coincidence, the Mills and Jowell affair has broken just as the government is launching a new campaign encouraging us to inform on tax dodgers. It started with an ad on peak-time television: "Pay tax? Nah," says the man, who is supping a pint. "Go in on the cheap. Get the job done quick. The best bit is, if I cut a few corners, I'm long gone. You're not going to get a receipt off me. And there's nothing you can do about it. Is there?"

Oddly, he looked quite rough, and did not speak like an educated business lawyer with wealthy international clients using offshore tax havens.

"The Inland Revenue wants to reduce the size of the "black economy", which is estimated to be worth £75bn a year. Individuals and small businesses who are paid cash in hand make up a large part of this total. The Revenue will have to overcome the fact that it suits many people to pay tradespeople in cash and thereby avoid having to pay VAT".
Shop your neighbour, tax-dodging ad urges
Whistleblowers' hotline set up to help curb fraud
Revenue says tip-offs are often from competitors

Rupert Jones, Tuesday February 28, 2006 The Guardian

But it may also have to overcome the fact that the "black economy" was encouraged under the Tories to break up working class traditions of solidarity, and give those who worked for themselves an illusory identity with the "freedom" enjoyed by the really rich. And the fact that popular resentment of tax-dodgers is limited when we see the way those shifting really large sums out of the taxman's reach are treated with respect and get away with it.


At 9:21 PM, Blogger DesertPeace said...

Thanks for this post... I didn't see it earlier as I had connection issues... my computer died! I had to have a new hard drive put in.. but now I'm back!


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