What does it take to stop a tax cheat using offshore companies to bilk investors of hundreds of thousands of dollars?
At 121 Glenforest Road in Teddington Park, Toronto Alex Elin and Richard Mellon ran several shell companies including Crown Capital Partners, Legacy Mining Corp, Karp Mineral Resources and JEJE investments among others.
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Between 1998 and 2006, Crown Capital sold shares in the others, mostly junior mining companies. All of them were registered offshore by Commonwealth Trust Limited.
As reported previously in the CBC and this series, Commonwealth Trust Limited (CTL) was "founded in the mid-1990s by Toronto millionaire Tom Ward." CTL set up and administered thousands of British Virgin Island corporations on behalf of foreigners basically allowing them to set up a company offshore. Ward and CTL did not respond to email requests for comment on this and other stories.
The only problem is that according to the Ontario Securities Commission (OSC) these companies either didn't exist or were sold using "prohibited representations" by employees of Crown Capital.
Elin and Mellon were the brainchild behind the Crown Capital and received over $500,000 in funds through TD Bank accounts, from the sale of shares in Karp and Legacy Mining. According to a statement of allegations by the OSC, Mellon and Elin traded shares without being registered to be able to do so in Ontario. Selling shares of Karp and Legacy through Crown Capital staff was "an illegal distribution of securities".
If you've seen the Wolf of Wall Street, this might sound eerily familar.
Most of the investors were from Europe and most of the companies were set up in the British Virgin Islands by Unitrust Capital Corp. Unitrust is a "Master Client" company based out of Concord, Ontario. A Master Client is an intermediary or go-between who helps investors, like Elin and Mellon, set up offshore companies. Unitrust has helped set up literally hundreds of companies in the British Virgin Islands. They would contact CTL on behalf of a client in Ontario or elsewhere asking for registration; CTL makes it offical and encorporates the company.
When contacted by the Toronto Media Co-op Unitrust declined comment and stated that they "do not do interviews" with the media.
Though these allegations were made in 2006 by the OSC, the saga with Elin and Mellon was far from over. Sources have informed the TMC that documents exist showing Unitrust was trying to help Elin set up CR Development with a man named Dimitry James Salganov in 2008 and make it look like they were operating from the British Virgin Islands even though they were actually in Ontario. Unitrust asked if Elin would be able to bring down a client to the British Virgin Islands for a meeting in CTL offices. All of this was while Elin was engaged with hearings with the OSC.
And CTL knew! The documents also show that CTL had concerns about the company due to the OSC notice of hearing against Elin at the time. Still, CTL did kept the comapny on the books at least 2010.
Sadly, the OSC was not able to conclude their hearings with Elin and Mellon for another six years, partially because of OSC staff delays. In the meantime they were able to keep selling stocks. The OSC did not respond to repeated requests for comment in this case.
Eventually, both Elin and Mellom were banned from trading in Ontario in 2012 and are not able to sit as a director of a company. Both were fined hundreds of thousands of dollars and were found to have "engaged in fraudulent activity" bilking 34 investors.
Though Elin had been registered as a trader legally for 13 years in Ontario from 1987 - 2000, he was able to operate as an unregistered trader engaging in fraudulent activity for an additional 12 years, in plain sight of Unitrust, Commonwealth Trust and the Ontario Securities Commission. For 6 of those years he was under an active open investigation by the OSC
About 6 months later, the Manitoba Securities Commission also banned Mellon and Elin from trading. According to Kevan Hannah, Communication Coordinator for the Manitoba Securities Commission, the MSC issued a 'reciprocal order', "which permits the MSC to issue its own order based on an order in another jurisdiction."
Although they couldn't speak to why it took so long for the OSC to finish its hearing against Elin and Mellon, Hannah did note that "Generally speaking, there can be delays or difficulty gathering evidence when a matter involves offshore activity or when investors are reluctant to come forward to provide information."
As has been recently noted by the TMC, the Canadian government previously has had no system to go after tax cheats when they receive a major leak of information about them from an outside source.
This story is part of TMC's coverage of offshore finances in Toronto.
