Irish Section 110 SPV, Vultures, Tax Haven, Orphaning Scam

Coverage of the Section 110 scandal in Irish Media

By far, the best material written on the vultures use of Section 110s to avoid all Irish taxes, are from Stephen Donnelly (in the Dail and in the Independent), and the Sunday Business Post.

Stephen Donnelly

Stephen Donnelly: Why Noonan’s Section 110 Amendment won’t work, Sunday Independent Sept 2016
independent.ie/business/why-i-had-no-option-but-to-leave-the-social-democrats-35039074.html

Stephen Donnelly: Tax avoidance anomaly means pain for taxpayers, Sunday Independent July 2016
independent.ie/business/stephen-donnelly-tax-avoidance-anomaly-means-pain-for-taxpayers-34906487.html

Stephen Donnelly: How did the Government shaft mortgage holders and taxpayers in one fell swoop, Sunday Independent July 2016
independent.ie/opinion/comment/how-did-the-government-shaft-mortgage-holders-and-taxpayers-in-one-fell-swoop-34870748.html

Stephen Donnelly: Dail Eireann July 14th 2016
facebook.com/DonnellyforWicklow/videos/vb.178881055485251/1318934644813214/?type=3&theater

Stephen Donnelly: Dail Eireann July 8th 2016
facebook.com/socialdemocratsireland/videos/vb.1012851375393300/1219390961406006/?type=2&theater

Sunday Business Post

Jack Horgan Jones: What did Noonan know about vultures’ tax? Sunday Business Post
businesspost.ie/what-did-noonan-know-about-vultures-tax/

David McWilliams: Vulture funds rub salt into the carcass of this country, Sunday Business Post
davidmcwilliams.ie/2016/08/01/vulture-funds-rub-salt-into-the-carcass-of-this-country

Probe into vulture fund tax avoidance following Sunday Business Post investigation, Sunday Business Post
businesspost.ie/probe-into-vulture-fund-tax-avoidance-following-sunday-business-post-investigation/

Various Experts

It is impossible to get major Dublin law and/or accounting partners to come out and speak about what this small group of vultures have done (for obvious reasons). Instead, they have been using John McManus and Cliff Taylor in the Irish Times to try and “deflect” the scandal (covered above). We even had Professor Eamonn Walsh of UCD do a “Comical Ali” impersonation (shown above) on this scandal for RTE prime time (covered earlier).

We are therefore left with smaller accountants to highlight this scandal (it is also obvious to them):

Sunday Independent: A rallying cry to claw back some of the vultures’ massive gains in Ireland, Paul Wyse, Smith & Williamson
independent.ie/business/irish/a-rallying-cry-to-claw-back-some-of-the-vultures-massive-gains-in-ireland-34936222.html

Irish Times: Revenue warns firms over sale of loans to vulture funds (quoting Aisling Donohue, MG Partners)
irishtimes.com/business/financial-services/revenue-warns-firms-over-sale-of-loans-to-vulture-funds-1.2587382

(the above Irish Times article is perhaps the greatest “smoking gun” of this scandal (covered in detail earlier) as it shows the Irish Revenue’s full awareness of what the vultures were doing, and that it was going to solve it for them. For anybody with a basic understand of taxation in Ireland, this Irish Times article, and Revenue’s quotes, was shocking.)

Other Irish Papers

It is hard for the Irish media. They can’t get a major expert to go “on-record” and they are fed the lines of the Dept. of Finance (i.e. we are very concerned, broad Revenue investigation, checking QIFs, ICAVs, more of a “loophole issue” that needs to be closed etc.), who are paddling like mad to deflect the attention from the c 10 vulture funds who are going to do +90% of the billions in Irish taxes avoided and violate several Irish anti-avoidance rules.

Vulture Funds are feasting tax-free on carcass of our property crash, Independent
independent.ie/opinion/columnists/colette-browne/vulture-funds-are-feasting-taxfree-on-carcass-of-our-property-crash-35005936.html

Vulture Funds minimise tax bills as State now appears to have given “Sale of the Century”’ Independent
independent.ie/business/irish/vultures-minimise-their-tax-bills-as-state-now-appears-to-have-delivered-the-sale-of-the-century-34981270.html

Vulture funds using charitable status for tax avoidance being investigated, Journal.ie
thejournal.ie/vulture-funds-revenue-investigation-2893698-Jul2016/

Revenue takes aim at opaque financial special purpose vehicles, Irish Times
irishtimes.com/business/financial-services/revenue-takes-aim-at-opaque-financial-special-purpose-vehicles-1.2732859?mode=sample&auth-failed=1&pw-origin=http%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Frevenue-takes-aim-at-opaque-financial-special-purpose-vehicles-1.2732859

Revenue investigating firms’ misuse of charity tax scheme, Irish Examiner
irishexaminer.com/ireland/revenue-investigating-firms-misuse-of-charity-tax-scheme-412343.html

Dearbhail McDonald: Revenue probes 40 ‘tax-neutral’ companies for suspected abuse, Irish Independent
independent.ie/business/irish/revenue-probes-40-taxneutral-companies-for-suspected-abuse-34906490.html

International Papers

It was funny to see the surprise when they realised what was going on.

BBC: Irish Government to close Vulture Fund “loophole”
bbc.com/news/world-europe-37292224

BBC: Apple Tax Case, Ireland’s other taxing issue
bbc.com/news/world-europe-37287182

EU Anti-Competition Angle - the Government’s (and Vulture’s) Sum of All Fears

As with Apple, the ultimate resolver of this scandal might end up being the EU.

  1. The EU Commission is already taking a case against Ireland regarding the fact that US MNCs like Apple and Google, despite running up to 50% of their business through Ireland, pay total Irish tax rates of near 1%. Because the Irish Revenue won’t enforce its own Irish anti-avoidance laws against US MNCs (and charge the full treaty rate of 12.5%), the EU Commission is charging that situation is really an illegal state subsidy to US MNCs in Ireland by the Irish State.

  2. In addition, the US IRS is currently investigating some of them for their “quasi-stateless” situation (despite being technically “resident in Ireland”), and are looking to use US anti-avoidance law to show that payment of such tiny Irish taxes proves that they are not “effectively” Irish resident (i.e. the US IRS can read Irish tax law and see that what US MNCs are doing runs foul of Irish anti-avoidance law, and because the fine upstanding Irish Revenue does not prosecute, it must be because these MNCs are not “really” resident in Ireland).

These two factors is why you have seen Irish GDP (and corporate tax take), skyrocket lately, as the US MNCs are “forced” to more fully commit to Ireland, and pay proper Irish taxes, to shield themselves from the EU and US IRS.

The EU has incredibly strong powers under Anti-Competition law, and a ruling against the US MNCs will see billions (literally) in Irish back taxes refunded to Ireland (hard to believe we need the EU to force this), however it will come with major fines to Ireland (also in the level of billions). It is not clear how these two amounts will balance out.

I believe that Sinn Fein have asked the EU Commission to investigate the zero-tax status of the ten vultures in Ireland under the same Anti-Competition laws (i.e. unfair subsidy vs. say Bank of Ireland).

What is interesting here, is that if the EU make a ruling that they will take the case (they already have a full legal team in Ireland on the US MNCs case, especially Apple), then it will take years. Unlike a US MNC, which carries on in perpetuity, the vultures will have to inform their investors (the Limited Partners, or L.P.s) in the relevant funds that invested in Ireland, of this contingent liability, and that they should reserve up to 30% of their cash returned, in case the EU demand repayment of unpaid Irish taxes in the future.

This will be a problem for the L.P.s, and particularly when they get their own lawyers to investigate and realilse that their gains were made avoiding all Irish taxes. These L.P.s are major US teachers and fireman pension funds. Such a situation is not going to look good for the vultures, and will leave them in a very tricky position.

Irish Times: Ireland awaits Apple ruling as Brussels tightens tax screw
irishtimes.com/business/economy/ireland-awaits-apple-ruling-as-brussels-tightens-tax-screw-1.2662370?mode=sample&auth-failed=1&pw-origin=http%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Feconomy%2Fireland-awaits-apple-ruling-as-brussels-tightens-tax-screw-1.2662370

Sinn Fein: Carthy questions ECB on tax avoidance by vulture funds
sinnfein.ie/contents/40209


Of course if Margrethe Vestager wants to knock off some “low-hanging fruit”’ then taking a look at the tax-free Section 110 quasi-banks, like Cardinal Capital, is a good start:

Cardinal Capital Group - clear case of illegal state aid to a domestic Irish lender
thepropertypin.com/viewtopic.php?p=890888#p890888

Thanks for these posts, lots of reading over the next week. I suppose it should all come with a blood pressure warning, but to be honest there isn’t much that can surprise me in this great little country of ours.

Imagine if there was a forced IREXIT and Ireland was forced to negotiate tax treaties with all the Countries where they have eroded the tax base for the last twenty five years both within the EU and beyond.

If you want to complain to the EU Commission then the e-mail address for direct taxation complaints is TAXUD-UNIT-D3@ec.europa.eu

The Politics of the Vultures Section 110 Scandal - FF as the game changer

https://www.irishexaminer.com/remote/media.central.ie/media/images/m/MichaelMartinMichaelMcGrath_large.jpg?width=648&s=ie-319640

Everything in Ireland is politics.

In other countries, when rules are broken, the law is applied and things get sorted.

Not in Ireland.

Lets run through the politics so far:

1. FG’s Mistake. To make NAMA and IBRC Wind-Up a success, Noonan, granted the requests of a core group of Dublin professional partners, who lobbied in 2012 to get their vulture clients tax-free status in the domestic economy. They proposed the existing Section 110 route, as they had used for IFSC securitization clients. They feared that it would run foul of the Revenue’s domestic anti-avoidance laws. The Dept of Finance consulted with Revenue, and Revenue announced that it was “comfortable” that a corporate could suck profits, gross, out of the Irish domestic economy, and export to the Cayman Islands (or other). Revenue’s “comfort” would be tested over the next 4 years, as it found itself caught in a web of its own domestic anti-avoidance rules, requiring ruling after ruling to protect these vultures (and damage its own tax code).

2. Sinn Fein Gets Nowhere. The great thing about having the US IRS as your home tax authority, is that you have to operate your tax avoidance schemes in a very open and transparent way, or the US IRS will label them “sham structures” and prosecute. The Section 110s, as Irish Resident Trading Companies, file full accounts, which anybody could download for €5 euro. Sinn Fein were one of the first to start downloading these accounts and finding almost no Irish taxes being paid. Pearse Doherty started asking questions in the Dail and Matt Carthy in the EU. Of course, Sinn Fein is like the “antichrist” to FG, FF, Labour (and many others), and their questions were given no merit in the media, and Noonan dismissed them in the Dail. That is where it would probably have died.

14th March 2016: Tax regimes for vulture funds need to be examined – Pearse Doherty TD
sinnfein.ie/contents/39018

16th June 2016: Carthy questions ECB on tax avoidance by vulture funds - Matt Carthy MEP
sinnfein.ie/contents/40209

Stephen Donnelly, Social Democrats. Donnelly began to raise the same issues in the Dail in June via the plight of one of his constituents (Dominic and Sarah), who were about to be evicted by Mars Capital Ireland (one of Oaktree’s Section 110s in Ireland). Donnelly is smart (MIT / Harvard smart). He downloaded Mars Capital Ireland’s accounts and started connecting the dots. Donnelly was able to see the scale of the avoidance was into the €bns, that it needed Irish Charities, that NAMA was active in it, and finally, that the Irish Government must be driving it (or otherwise Revenue would have shut it down). Donnelly was the first person to publically cut through the rhetoric of “spokesmen” like Professor Eamonn Walsh, and point out that sucking domestic profits - gross - out of the Irish Economy, and exporting to Cayman, is avoidance.

Stephen Donnelly: How did the Government shaft mortgage holders and taxpayers in one fell swoop?
The State may well have missed out on huge tax profits through its sale of distressed home loans
independent.ie/opinion/comment/how-did-the-government-shaft-mortgage-holders-and-taxpayers-in-one-fell-swoop-34870748.html

Stephen Donnelly: Tax avoidance anomaly means pain for taxpayers
independent.ie/business/stephen-donnelly-tax-avoidance-anomaly-means-pain-for-taxpayers-34906487.html

You know when the Sunday Independent puts a picture of Michael Noonan at the top of every Stephen Donnelly article, that the “dogs on the street” have connected the dots of what is going on here.

Michael McGrath, Fianna Fail. Despite the elegance of Donnelly’s script and his ability to reveal the fuller nature of the scandal, it still would have been dead-in-the-water, until we had the RTE prime time review. RTE opened up with a set-piece from Professor Brendan Walsh of UCD trying to defend the vultures (discussed on other posts in this thread). It was really miserable stuff. However, once Walsh had departed, Donnelly was joined by Michael McGrath. It was clear that McGrath understood the issue in detail (actually sounded clearer than Donnelly). McGrath is an accountant himself. And while nobody from the big Dublin account firms are going to opine on this scandal, accountants all over Ireland, who deal with domestic Irish tax (and Revenue) on a daily basis, know that what the vultures have is wrong. FF would also have a big network in the Dublin professional firms who could brief FF fully “behind closed doors” on this scandal.

RTE Primetime Extra: Section 110.
rte.ie/player/ie/show/prime-time-extras-30003379/10603680/

This was the eureka moment.

Here we have FF putting its political weight behind an issue. A major Irish scandal, that for once in Irish political history, FF was not involved in. Smelling blood in the water, and the chance to even the score with FG (years of listening to “you bankrupt the country” speeches; correctness aside), McGrath made it clear on RTE that this was a problem. After McGrath’s RTE prime time appearance, we had a furry of Irish Times articles from John McManus and Cliff Talyor (also profiled in earlier posts), obviously “guided” by some Dublin professional firms exposed to this scandal (if the vultures loose their €20bn of Irish tax avoidance, they are going to want to sue somebody very badly for this).

And that is the politics of it … so far.

Why do the Vultures Section 110 (all equity owned by Irish Charity) often declare exactly €250 in Irish tax?

When the Sunday Business Post did some investigative work (unlike many others), on the vultures Section 110 (all equity owned by an Irish Charity), tax avoidance schemes, they discovered something odd.

Almost all of them declared exactly €250 in annual tax?

REVEALED: the vulture funds that paid just €250 in tax, Jack Horgan Jones, Sunday Business Post
businesspost.ie/revealed-the-vulture-funds-that-paid-just-e250-in-tax/

i.e.

Launceston Property Finance (“effectively” owned by CarVal) … €250 tax
Stapleford Finance (“effectively” owned by CarVal) … €250 tax
Beltany Property Finance (“effectively” owned by Goldman Sachs) … €250 tax
Mars Capital Ireland (“effectively” owned by OakTree) … €250 tax
Promontoria Eagle (“effectively” owned by Cerberus) … €1,947 tax (somebody will get their ass kicked for overpaying tax).

A few others picked up this €250 quirk as well:
BROADSHEET.IE: Mars Capital, Matheson And The €250 Tax Bill
broadsheet.ie/2016/07/14/mars-capital-matheson-and-the-e250-tax-bill/

The reason why they usually pay €250 is because of a quirk in Irish tax case law, where an annual settlement of €0 tax, can be legally confused with not making any tax settlement. i.e. the courts could rule that you have not made your return (despite filing €0), and that your tax year is still open (or, worse still, late).

Your €50 an hour local Irish solicitor, is going to tell you not to bother, and just file €0.

Your €1,000 an hour major Dublin law tax partner, will tell you that €250 is established in Irish tax case law, as an Irish filed and completed tax payment, and given that you are hoping to avoid €1bn in Irish taxes in your Section 110 (all its equity owned by an Irish Charity), you should pay it (I don’t know what happened in the Cerberus case, but I would assume it is duties - you can be sure that their Dublin law and accounting partners sweated forensically over their return to ensure that, the €1bn of tax avoidance aside, anything else that had to be paid, no matter how small, was paid).

On behalf of the Irish nation, thank you Mr / Ms Dublin tax law partner for that.

This should be you … but it is really … us
https://cdn.inquisitr.com/wp-content/uploads/2015/06/Lena-Headey-stars-as-Cersei-Lannister-in-HBOs-Game-of-Thrones-1.png

Why to the Vultures pay no Irish tax, when the Section 110 tax rate is 25% (under TCA 1997)?

Every time Michael Noonan refers to Section 110s in the Dail (chamber or questions), he will almost always use language like this (provided by the Dept. of Finance, who get it from a Dublin law firm), which refers to a 25% tax rate:

From: Dail Eireann Written answers, Thursday, 23 June 2016
kildarestreet.com/wrans/?id=2016-06-23a.262

In fact, many journalists also end up re-quoting this when referring to Section 110s tax avoidance.

thejournal.ie/vulture-funds-revenue-investigation-2893698-Jul2016/

businesspost.ie/speedy-probe-into-vulture-funds-tax-urged/

The reason why you see a 25% tax rate quoted is because Irish anti-avoidance tax law is so robust (having been written over centuries and heavily copied from UK tax law), that where a structure is not subject to normal Irish taxes (i.e. corporation rate of 12.5%), it will be subject to a “default” rate. This “backstop” default Irish tax rate is currently 25%.

Irish Section 110s are fully Irish Resident Trading companies (as we saw earlier, this is critical to fully shield them from the US IRS, the home country of most vultures). However, Section 110s are exempt from all Irish taxes (corporation tax, withholding tax and even stamp duties). Therefore, as a default, they are subject to this 25% tax rate.


Fear not Vulture, don’t cough your cornflakes up just yet. Your €1bn in avoided Irish taxes is still safe (for now). Section 110 leglislation is so vague and broad (per my earlier post on structuring, instead of spending a decade drafting legislation for Section 110s, Revenue wrote very simple conditions, designed to by-pass this 25% rate in all cases) that only a fool would end up structuring a Section 110 that declared any taxable profits (outside the recommended €250 per earlier).

The many brochures that Dublin law and accounting firms offer will confirm this:

GRANT THORNTON (OakTree’s Accountant): SPV Taxation in Ireland
grantthornton.ie/globalassets/1.-member-firms/ireland/insights/publications/grant-thornton—spv-taxation.pdf

DILLON EUSTACE (LoneStar’s Lawyer): Ireland as a Domicile for SPVs
hb.betterregulation.com/external/Ireland%20as%20a%20Domicile%20for%20Special%20Purpose%20Vehicles%20-%2011%20Oct%2012.pdf

MATHESON (Oaktree, CarVal, Cerberus Lawyer): SPV Jurisdiction of Choice for Structured Finance Transactions
matheson.com/images/uploads/documents/Matheson2__Ireland_-_The_SPV_Jurisdiction_of_Choice_for_Structured_Finance_Transactions.pdf


So, why doesn’t Revenue just “waive” the 25% Irish default tax rate for Section 110s?

The reason is that vultures (almost all US based), are more terrified of the US IRS. The US tax code allows US companies to maintain foreign subsidiaries free of US taxation (the “check the box rule”) as long as they are genuine. It must clearly show that it is a real “company” (not a pension fund, or other). The test of “genuine” is really critical here.

The Irish Section 110 legislation is already very basic and crude (Irish Revenue could not be bothered spending the ten yeas writing it up properly). It is critical that when a vulture gets audited by the US IRS, that the vulture can show the US IRS that it’s Irish Section 110 “company” is a “real” commercial entity, living properly “inside” the Irish tax system (for which the US and Ireland have a Double Tax Treaty under EU Law, and for which the vulture can file under to shield from US taxes). It must not look like a Dublin IFSC tax lawyer tool, for tax avoidance, which can be set up for €40.

This is why Noonan (and Dept. of Finance) have a “mantra” of mentioning 25% tax rate, every time they utter the words Section 110 (Taxes Consolidation Act 1997).

Noonan is terrified that the US IRS (and EU Commission) will realise that while Section 110s are “tax-neutral” to global securitization firms (which is fine), Section 110s are “tax-free” for other US firms operating in the Irish domestic economy (not fine). This would be in violation of US-Ireland Tax Treaty (for which the EU negotiated and also remains the Treaty’s overseer and policing authority), as well as other agreements within the EU regarding national taxation.

Can the Vultures Section 110 schemes survive without the help of Irish Charities?

All the “equity” of the Vulture Fund Section 110 tax avoidance schemes are all “owned” by Irish Charities

IRISH TIMES: Vulture funds using charities to avoid paying tax, says Donnelly
irishtimes.com/news/politics/oireachtas/vulture-funds-using-charities-to-avoid-paying-tax-says-donnelly-1.2722370

IRISH EXAMINER: Vulture funds ‘use charity to avoid tax’
irishexaminer.com/ireland/vulture-funds-use-charity-to-avoid-tax-410426.html

JOURNAL.IE: Vulture funds using charitable status for tax avoidance being investigated
thejournal.ie/vulture-funds-revenue-investigation-2893698-Jul2016/

SUNDAY BUSINESS POST: Stephen Kinsella: Charity status for vulture funds – someone shout stop!
businesspost.ie/stephen-kinsella-charity-status-for-vulture-funds-someone-shout-stop/

NEWSTALK: Tánaiste promises probe into vulture funds posing as charities
newstalk.com/Tnaiste-promises-probe-into-vulture-funds-posing-as-charities


Why do the Vultures need Irish Charities to “own” their Section 110 Irish tax avoidance companies?

1. A Vulture cannot “own” its Section 110 company. If the vulture owned the actual shares (or equity) of its Section 110 company, then the US IRS (most vultures are US based), could challenge the Section 110 as being a US Group Subsidiary of the Vultures US Company, and apply US taxation to Section 110 profits (starts at 35% Federal plus c 5% State).

2. In fact no non-Irish resident can “own” the Section 110 company. If any non-Irish resident (Irish passport not enough, must be fully Irish tax resident), owned the Section 110 company, then the US IRS could challenge the Section 110 as not being resident under the Irish US Tax Treaty and sue for US taxes. Also why Directors of the Section 110s are also all Irish resident people (and not the Vulture partners, who control it).

**3. No Irish resident “person” (or “company”) can “own” the Section 110 company. ** If an Irish resident person (or “company”) “owned” the equity of the Section 110 then we have two different types of problems:

**3.1 Irish anti-avoidance laws. ** Even though Irish Revenue protect the vultures Section 110 schemes from their anti-avoidance laws (i.e. here thepropertypin.com/viewtopic.php?p=886771#p886771), having an Irish resident “person” (or “company”) own the equity of this Section 110 company would be, even for Revenue, too big a breech of their Irish anti-avoidance laws to overcome.

3.2 Bankruptcy laws. All vultures use lots of bank debt in their Section 110s (i.e. Oaktree had a €75m non-recourse loan from Citibank in their Mars Capital Ireland Section 110). Banks will not lend into a structure where a 3rd party “owns” it as the 3rd party could put itself into bankruptcy (be in limbo for years, and re-classed as an NPL).

**An Irish Resident Charity solves all the above. ** It is Irish Resident (making the Section 110 as an Irish Trading Business under the US Ireland Tax Treaty). It is separate from the Vulture Fund (shields the Section 110 from being taken as a US Group Subsidiary by the US IRS). And, a unique quirk in law, an Irish Charity cannot go bankrupt. That is why almost all Irish Section 110s (Vulture owned, and even IFSC ones) are “owned” by Irish Charities. They are an integral part of the tax avoidance mechanism.

Of course, why would an Irish Charity get involved with this. It is complicated, doesn’t sound right (i.e. you granny would know something is up here), and involves institutions that are doing unpalatable things. There is also potential liability if the US IRS really went after the Irish Section 110s (might do in the future) and joined the Irish Charity “owner” into their litigation (and looked to extradite Charity executives to face charges in the US under the tax code, which means jail).

Therefore, we have seen some major Dublin law firms set up their own in-house Charities:

IRISH INDEPENDENT: Cluster bomb firm BAe uses Irish charity in $2bn tax scheme, with A&L Goodbody Solicitors
ARBUTUS HOMELESS PEOPLE’S TRUST, the A&L Goodbody private charity that nobody has ever heard of in Ireland
independent.ie/business/irish/cluster-bomb-firm-uses-irish-charity-in-2bn-tax-scheme-26543627.html
Arbutus Homeless Persons Trust charitiesregulatoryauthority.ie/en/CRA/Charity/2AED749293E339588025800B003B0E4F

IRISH TIMES: Law firm Matheson defends use of MEDB, BADB and EURYDICE charities to help hedge funds cut tax bills
irishtimes.com/business/financial-services/law-firm-defends-use-of-charities-to-help-hedge-funds-cut-tax-bills-1.2329919
Medb Charitable Trust Limited charitiesregulatoryauthority.ie/en/CRA/Charity/B45964DE6F89C3978025800B003B200B
Badb Charitable Trust Limited charitiesregulatoryauthority.ie/en/CRA/Charity/08C86BAF5F92D88C8025800B003B0F08
Eurydice Charitable Trust Limited
charitiesregulatoryauthority.ie/en/CRA/Charity/A8B6354A805B39518025800B003B1817

Even the IFSC trade journals are beginning to wonder how sustainable this con is?

IFC Review: Irish tax lawyers’ charity may not pass public opinion test (Matheson’s Medb, Badb and Eurydice).
ifcreview.com/viewarticle.aspx?articleId=7321&areaId=40


Regardless of what “comfort letters” the Revenue / State has given Vultures for their Section 110 Irish tax avoidance vehicles, direct the Irish Charity Regulator to ban ownership of Section 110s that are active in the domestic Irish economy, and you take away the Vultures tax avoidance “shell”.

https://f.tqn.com/y/exoticpets/1/W/D/X/1/GettyImages-83290906-1-.jpg

Some Irish Section 110 Brochures that overstep things

MASON HAYES + CURRAN: Silver Linings from Ireland’s Financial Clouds
mhc.ie/uploads/Silver_Linings_Daragh_Bohan.pdf

What a title to give a document in which you are going to explain to a foreign vulture how to avoid all Irish taxes (with the help of the Irish Revenue), on your distressed debt investment via Section 110 structures.


Bank Deleveraging in Ireland – Where to from here? A&L Goodbody
algoodbody.com/media/Bank1.pdf

A simple guide for prospective vultures, from Ireland’s 3rd biggest corporate law firm, on dealing with NAMA (like Matheson, A&L have their own In-house Charity). The Section 110 structure is high on the list, with appropriate language:


Some other “honourable” mentions…

SPV Taxation, Grant Thornton
grantthornton.ie/globalassets/1.-member-firms/ireland/insights/publications/grant-thornton—spv-taxation.pdf

Ireland as a location for Distressed Debt Funds, Davy Stockbrokers
davy.ie/binaries/content/assets/davypublic/fund-services/briefings/ireland-as-a-location-for-distressed-debt-funds-web.pdf

Irish Structures for investing in Distressed Assets, Dillon Eustace
dilloneustace.ie/download/1/Irish%20Structures%20for%20investing%20in%20Distressed%20Assets.pdf

Ireland as a domicile for SPVs, Dillon Eustace
hb.betterregulation.com/external/Ireland%20as%20a%20Domicile%20for%20Special%20Purpose%20Vehicles%20-%2011%20Oct%2012.pdf

Ireland’s “Super QIF”, Mason Hayes & Curran
mhc.ie/uploads/mhc277-update-financial-funds-email.pdf

Ireland: An Easy Choice, McCann Fitzgerald
hb.betterregulation.com/external/Choosing%20an%20SPV%20jurisdiction%20for%20a%20Structured%20Finance%20Transaction%20-%20Ireland%20An%20Easy%20Choice.pdf

That’s some really insightful stuff Observer. Don’t be surprised if you get a call from Noonan :open_mouth:

Frank Daly, Chairman of NAMA, explaining to London Vultures. how to avoid all Irish Taxes at Section 110 Presentation.

As posted earlier, if NAMA took Irish taxes avoided into account by Vultures using Section 110 (all equity owned by Irish Charities), then it would sell all loans to BOI (or better still, AIB, which we own all of) for €1 (who pay full Irish taxes).

The normal Irish corporate taxes that AIB would pay over the next ten years would more than make up for the loss of the vultures cheque. In addition, AIB would earn the State the further upside from the return on this investment.

This is how dumb NAMA (and IBRC) has been in selling constantly to vultures with Section 110s (equity owned by Irish Charities)

Here is a presentation from Mason Hayes Curran (MHC) at the London Banking Seminar, on May 10, 2016.
London Banking Seminar Presentation Slides - Mason Hayes & Curran
mhc.ie/latest/events/london-banking-seminar-publications
SCRIBD COPY: scribd.com/presentation/321040857/Mason-Hayes-Curran-London-Banking-Seminar-Section-110s-10-05-16

Page 3 of the MHC presentation is the “Unregulated Section 110 Company” which is described as:

We know from our other MHC brochure post, that this is code for … tax-free.
See this link for the MHC post. thepropertypin.com/viewtopic.php?p=886966#p886966

And who do we have on Page 4, but a speech from none other than … Frank Daly:
Chairman of NAMA.
Ex. Head of the Irish Revenue Commissioners (i.e. don’t tell us Frank, you don’t know what MHC mean).

PS if MHC take this down, I have it cached and will find out how to upload to SCRIBD.


POSTSCRIPT - and of course, as with many Irish scandals, we find that NAMA was not only lying about its knowledge of Section 110 SPVs, it was invested in them all along.

SUNDAY BUSINESS POST: Nama set to be caught in new tax avoidance net
businesspost.ie/news/nama-set-caught-new-tax-avoidance-net-controversial-property-vehicles-main-target-372679

Do AIB and BOI’s legacy losses not provide them with a Tax shelter for the next decade or so though?

it only gives them some (but not complete) relief on the 12.5% but not the bigger 20% withholding (i.e. AIB and BOI would have to deduct withholding tax paid on all dividends to investors). In addition, a lower effective rate of corporate tax means a higher withholding tax take, so again, more clawback for the State.

Also, the State will get credit for AIB’s large def tax asset if it ever gets floated (i.e. investors will price that AIB will not be paying corporate tax for a few more years.). So it can assume that marginal deals are done at the 12.5% rate if you follow.

(Now that Irish bonds yields are going to zero, it limits effects of time discounting).

Looking at the companies involved is a bit fucking irritating, for various reasons…

Take for instance one of the Vampire Squid’s SPVs Beltany Property Finance Limited (Thank you OB35)

The accounts are here to Dec 2014

scribd.com/document/320677696/Beltany-Property-Finance-Limited-Accounts-2014

Assets less current liabilities 521,365,419

Interest Income 43,965,924

Income before tax 1,000

Tax 250

So ok, usual shite.

The auditors are PwC and they are signed off as being in accordance with FRS 102. Signed off by Ronan Doyle no less

https://www.pwc.ie/about/assets/images/partners/ronan-doyle.png

Image and text taken from here:

pwc.ie/about-us/our-people-1.html

So the accounts should be right, right?

So, read them to see who the parent is, it is after all a required disclosure in FRS 102

That’s on page 233 of the FRS

frc.org.uk/Our-Work/Publications/Accounting-and-Reporting-Policy/FRS-102-The-Financial-Reporting-Standard-applicab.pdf

So, I have a look at the notes. GS disclosed as the ultimate controlling party, but who is the parent? From Note 14 of the financials:

So who is this entity? Well here are the accounts to Dec 14.

scribd.com/document/320677684/Structured-Finance-Management-Corporate-Services-Ireland-Limited-Dec-2014

It is merely a share trustee and has no beneficial interest in the GS vehicle (or the GS vehicle would be disclosed as a subsidiary entity). (For people with real lives FRS 102 is the biggest change to Irish GAAP since the 1986 Companies Act. You’d think they’d pay attention to the detail).

So, the financials are wrong, whether purposefully or not. And no one really gives a shit. Pwc get 50k for the audit and 5k for other services.

How to find the vultures Section 110 vehicles on a Company Search - their Company Secretarial Firms

Vultures don’t call their Irish Section 110 vehicles Goldman, Cerberus, Apollo, Oaktree, Carval, Lone Star etc (although smaller vulture Canyon Capital does use its own name, yikes). Instead they give them a range of unusual names, from the exotic (Cerberus uses “Promontoria” at the root in its names), to the universal (Oaktree uses derivations of Mars), to coded (Lone Star calls them LSREF iii and LSREF ii after their main fund), to romantic (CarVal uses names like Vanguard, Launceston and Stapleford), to even something homely (Goldman Sachs’ Beltany, Kenmare and Liffey Property).

Finding the Vulture’s Section 110s is like looking for a needle in a haystack. However, a quick way on a Company Search site is to search by their “Irish Director” names. Here you will find the same small pool of Dublin Company Secretarial Firms that act as the “Irish Directors” for most of these Section 110s, and do the company secretarial work.

Per past posts, Goldman’s partners cannot be the “Directors” of their Beltany Property Finance, or they risk compromising it’s “Irish Residence”. If the Directors of Beltany where Goldman partners, the US IRS would have a stronger claim that as all the decisions are being made by Goldman partners (which they are in effect), and Beltany is really a US Group Subsidiary, and tax Beltany in the US (rate starts at 35%).

I often wonder how long the “thin veil” of Dublin professional company secretaries (with +100 directorships), will work in this regard. If the US IRS really challenged Section 110s like Beltany Property Finance, I think they might find from the e-mail and paper trails, that the decisions were made by Goldman partners in the US (and nothing by its “Irish Directors”).

Structured Finance Management (SFM) are a specialist Dublin company secretarial firm. SFM provide the “Irish Directors” to Cerberus (all the Promontoria Section 110s), CarVal (the Launceston, Vanguard and Stapleford Section 110s), Goldman Sachs (Beltany, Kenmare and Liffey Property Finance Section 110s).

Karen McCrave (one of the Directors of SFM) appears as a Director of +150 other vehicles in Ireland. She describes herself and ex-banker (but was never involved in any distressed debt investing like the vultures do, she mostly worked in Bank of Ireland Private Banking on structured products). The “ex-banker” term helps with the “thin veil” that Karen is “taking the decisions” for her +150 Irish resident distressed debt SPVs in Ireland (they key). Other SFM “Directors” are: Jonathan Hanly, Fiona de Lacy Murphy and Rachel Martin (these 4 will route to most of the vulture fund Section 110 vehicles with SFM).

The B1 returns of their vultures list out all SFM “Directorships”, here is one stuck to back of Carval’s Vanguard Auto Finance.
scribd.com/document/321036888/Vanguard-Auto-Finance-Limited-Carval-Annual-Returns-2014

https://www.ireland.doingbusinessguide.co.uk/media/949597/tmf-group-large-crop-logo_299x115.jpg

The other big rivals in this space would be TMF International (who are the administrators for OakTree’s Mars Capital Section 110s Series). You will see TMF’s Directors like Ronan Reilly, Kevin Butler, Morgan Sheey and John Hackett appear as Directors for many of the vulture’s Section 110s with TMF.

There is a third specialist in-house administration firm - MFD Secretarial Limited. These are the in-house company secretarial firms of Maples and Calder (Maples Financing Services owns MFD Secretarial Limited). MFD appears for smaller vultures, Sankaty / Broadhaven / Bain Capital, and for Canyon Capital Partners.

Knowing the main Directors of the Administration Companies (i.e. Karen McCrave in SFM, Ronan Reilly in TMF) is a great way to “reverse search” for most of the Vultures Section 110s on Solocheck.ie (or other company search sites) in Ireland. It is really only Lone Star who use different dedicated “Irish Directors” for their entire IFSC business.

Lone Star LSREF III 2015 B1 Return listing John Hennessy, Jeffrey Johnston, Thomas Bather.
scribd.com/document/321039870/LSREF-III-Stone-Investments-Limited-Lone-Star-Form-B1-2015

There have been times when these “shell” Directors hit the mainstream media, and are mistaken for being the local “enforcers” of the vulture funds. They are not. They are just providing a secretarial services to help the vulture’s Section 110 cement its “Irish Residency” test, and help the vulture to avoid any “legal” contact with owning their Section 110, which is critical to protecting themselves from any challenges by the US IRS.

Ironically, as I have posted above, as with Apple, if the US IRS began to challenge these Vulture Section 110 zero-tax structures (and as you can see with these “Irish Directors” and ownership by “Irish Charities”, they might not survive such a challenge), we would probably find that that, as with Apple, the vultures would suddenly develop a strong desire to pay fuller Irish taxes, to protect themselves for the US 35% rate.

IRISH TIMES: March 26th 2016, SFM: the vulture funds’ enforcer that calls in Irish property debts
irishtimes.com/business/commercial-property/sfm-the-vulture-funds-enforcer-that-calls-in-irish-property-debts-1.2587200

IRISH TIMES: March 26th 2016, Special companies used by vulture funds to hold Irish loans
irishtimes.com/business/commercial-property/special-companies-used-by-vulture-funds-to-hold-irish-loans-1.2587428

SMF Europe Web-Site sfmeurope.com/

TMF Group Web-Site tmf-group.com/en/where-we-are/europe-middle-east-and-africa/ireland

Strange - works now.

Nope, gone again.

I feel paranoid enough as it is :smiley:

docdroid.net/PQFilLM/structured-finance-management-corporate-services-ireland-limited-account-details-30-09-2015.pdf.html

Thanks for the detailed research folks. I have been lurking for a good while now but felt the need to log on to voice my support. Hopefully this builds up a head of steam and we get results.

I get the general gist of the machinations, but a few things are still a little blurry for me, so maybe you could provide a little context for the lay people among us.

  1. Is there any suggestion anywhere that any of the “traditional” charities are involved in this or is it just the “in-house” ones owned by the law firms? I have to say that even writing about a charity being owned by a firm is enough to make me puke, let alone the rest of the goings on.

  2. Given that these “charities” are in place so that the line to the US authorities is that “we don’t own this, the charity does and we don’t control the charity” is there any scope for some unscrupulous* individual on the charity side to walk away with a lot of money in his or her pocket and tell the vultures “this is MY money, you don’t own this, remember”?

  3. How in the name of God can the law firms have this concept of a tame charity? As if recent events hadn’t debased the value of the term charity in Ireland enough, we have this now. I know anyone can set up a charity, but I would have thought that to get any of the normal breaks from Revenue you would have to satisfy at least some basic criteria other than saying “we want to help the children reach their potential” and then sending millions out of the country while not actually doing anything for the children. What’s to stop me setting up “Help the Antos” as a charity instead of a limited company and getting whatever reliefs Revenue offer on my income from my plumbing (or solicitoring) day job, while having a sideline in vulture facilitation?

Anto,
CEO of “Save the Antos”
Please send money NOW.

(*) technically everyone involved in this picture is unscrupulous so this word may be redundant