Tom Klinger forced out of retirement to answer tax evasion charges
The Sydney Morning Herald this morning reports:
In the name of the father or the son?
Life in paradise has been interrupted for former Melbourne stockbroker Tom Klinger, now in the sights of the NSW Crime Commission over an alleged tax conspiracy. Vanda Carson reports.
FORMER Melbourne stockbroker Tom Klinger was one of Christopher Skase's biggest backers through the 1980s and reportedly lost an eight-figure sum in the crash of Skase's Qintex empire, halving his net worth.
He has stayed out of the limelight for the past two decades since leaving the Melbourne stockbroking firm McIntosh.
Now worth an estimated $40 million, the 73-year-old's retirement in Port Douglas has been interrupted.
With his 45-year-old son, David, - one of Macquarie Bank's top Hong Kong executives - he has been accused of conspiring with four others to pervert the course of justice in a multimillion-dollar tax fraud case.
The so-called conspirators are alleged to include Tom Klinger's close friend James Darroch Wallace, who runs a thriving Port Douglas reef-tour business; their Port Douglas accountant, George Palmer; and their Vanuatu-based tax advisers, Allan McLeish and Andrew Neill.
BusinessDay has obtained a 40-page investigation report filed in the NSW Supreme Court by the NSW Crime Commission. The report contains details of the background to the tax evasion and criminal conspiracy allegations and forms the basis for claims aired that the group lied to the state's crime-fighting body.
In the report, the commission says the group lied by pretending that about $5.7 million in cash and shares held in a New Zealand bank account and a CommSec share trading account belonged to Hong Kong-based David Klinger, when they did not belong to him.
The commission says the alleged conspirators continued this ruse to ensure cash and shares ''frozen'' under proceeds-of-crime laws in May and October 2008 could be "thawed".
By claiming the shares and cash were held by non-Australian residents - such as David Klinger - they believed the commission would have been forced to dissolve the freezing orders.
The commission alleges in the investigation report that the $1.5 million in shares and $4.2 million in cash really belong to David Klinger's father, Tom, and Tom's former stockbroking client and long-time friend James Darroch Wallace.
Both are Australian residents for tax purposes, with Klinger snr having lived in Port Douglas for the past 17 years. At the time, his mate Wallace lived in Christopher Skase's former Port Douglas abode, just down the road from Klinger's oceanfront pad near the lighthouse, in the town's millionaire's row.
The Supreme Court has read in the report that the cash and shares are the proceeds of trading in Australian shares by a Vanuatu company owned by Tom Klinger and Wallace, on recommendations made by Klinger over 10 years.
Klinger allegedly instructed accountant Palmer on which shares to buy and sell.
Palmer then allegedly passed on the instructions to the Vanuatu-registered International Finance Trust Company, which then bought them through Cheviot Holdings.
Australian residents are allowed to trade shares using overseas companies, but they must declare the profits to the Tax Office.
The commission has not charged the men with any offences, and is still seeking to formally interview them.
The dispute over who owns the shares and cash arises because Vanuatu-registered companies do not have to reveal their owners.
Only the owners, and their Vanuatu advisers - in this case the accounting firm PKF - know who owns the companies.
The cash and shares in BHP, Challenger Financial Services and small mining companies, will remain frozen until the dispute is sorted out.
The investigation into the Klingers remained a secret until last December, when Tom Klinger's lawyers appeared in the Federal Court. David Klinger's involvement did not come to light until last month.
Both men jealously guard their privacy. David, who lives in the exclusive Peak district in Hong Kong, insisted that his lawyer contact him only on his mobile phone, because his calls at his Hong Kong office were recorded, and "this is a private matter".
Neither father nor son would comment to BusinessDay about the case.
The Klingers' family friend Wallace is also embroiled in the saga.
Wallace made his fortune in Port Douglas reef-ferry company Quicksilver Connections.
Klinger's firm McIntosh was the sponsoring broker in the float of the ferry business.
The Wallaces used the $8.5 million proceeds of a 1989 takeover to sail their yacht Monsoon II around the world for 11 years and to live
in Monaco and Malta, the report says.
The Crime Commission's case against the group relies on a letter sent to the commission on 21 November, 2008, by law firm Atanaskovic Hartnell, which was representing International Finance Trust Company - a PKF company.
The letter claimed that the frozen shares and cash held by the Vanuatu-registered company Cheviot Holdings belonged to David Klinger.
The letter was sent just weeks after a second order was made freezing the shares and cash.
David Klinger's advisers stated in emails that he had invested money with Wallace's Vanuatu-registered company Cheviot Holdings while Wallace and his wife were living in Monaco.
The commission's barrister, Ian Temby, QC, told a court hearing that Tom Klinger and Wallace were the true owners of Cheviot Holdings and that the six men "were involved in seeking to pull the wool over the eyes of the [NSW Crime] Commission".
"The letter was the result of conspiratorial activity involving [the group of six]."
"They got their heads together to try and get … variation of the restraining orders so as to exclude property from it."
The report also says the commission is examining the Wallaces' "purported gift" of $1.3 million in cash and 200,000 shares in Sydney-based gold and copper mining company Traiko Resources to Mr Klinger's Atlas Trust.
The commission alleges it was not a gift from the Wallaces, rather it was payment from Tom Klinger's Vanuatu company Whitetree Holdings to his own Australian-based trust.
The Klingers and the Wallaces used the same tax adviser, Allan McLeish from PKF Vanuatu.
PKF was run by Robert Agius, who is the central target of the joint Australian Federal Police and Australian Taxation Office probe dubbed Project Wickenby.
Mr Agius has been charged with criminal tax evasion. He will be arraigned in the NSW Supreme Court on September 3, and face trial next year.
The commission's report says PKF promoted its "imaginative" financial advice.
The commission alleges David Klinger said he would attend its Sydney offices in October 2008 to prove that he was the owner of the shares and cash.
But David Klinger did not attend the commission at that time.
The Crime Commission says in the report that even if David Klinger owned the shares, he failed to declare his ownership of the shares and cash in the Vanuatu company to the Australian Taxation Office.
It also says he failed to declare the $1.65 million profit on his share trading in the 2007 and 2008 financial years.
In addition, it says he failed to declare the shares and cash to St George Bank when he obtained a loan to buy his $5.7 million home in Woollahra's exclusive embassy district in March 2007.
An email from accountant George Palmer said that David Klinger wanted anonymity in his share trading because "if the Klinger name had appeared on registers it would have raised questions and maybe affected prices''.
In another email, Mr Palmer said that both Klinger snr and jnr did not want people in the finance industry to know that their Vanuatu company was investing in various Australian-listed companies.
The commission's report also alleges that the Wallaces and Tom Klinger had been trading through their Vanuatu company since 1993.
One portfolio of shares grew from $300,000 to $2.8 million in this time, on share advice given by Klinger.
A second portfolio grew from $1 million to $6.5 million.
The solicitor for Mr Wallace, John Valmas, said his client was "co-operating with the NSW Crime Commission" but declined to comment further.
Atanaskovic Hartnell, McLeish and Neill did not respond to requests for comment.
The case continues.