Of Ponzis and Financial crimes: A timely lesson from France

Two days ago a prominent headline in the British media read as follows: ‘Nina Ricci heiress jailed for hiding millions from tax authorities in Swiss bank.’

There was an accompanying photograph of the heiress, 73-year old Arlette Ricci.

This sentence, coming as it does at a time when we are right in the middle of the said ‘mother of financial/business scandals’ in Mauritius, should be a real eye-opener to all Mauritians, and more so perhaps to those whose investments in the BAI group have allegedly been siphoned off to related party businesses of the BAI group as well as abroad. The official figure regarding the alleged siphoning off of funds is quoted to be around Rs 8.5 billion – but one needs proof that all this is borne out in the facts.

The question on everyone’s mind is: what next? Will the culprits, if this allegation is firmly established through appropriate legal processes, go away scot free?

This is where the parallel French case shows the way, and the article, from the Independent Online UK of Tuesday 14 April 2015, is worth the attention of all Mauritian citizens, but especially that of the authorities which are having to face the acute crisis that has arisen. Here it is:

‘Britain has come under renewed criticism for its failure to prosecute tax evaders hiding cash at HSBC’s Swiss arm, as a French court handed down a jail sentence to the heiress of the Nina Ricci fashion and perfume fortune for the same crime.

Arlette Ricci, 73, was sentenced to a year in prison and two years suspended for “fraude fiscale” (hiding millions of euros to evade French taxes). She was also fined €1m (£720,000) and given a suspended sentence of a further two years. Her daughter, Margot Vignat, 51, was also convicted and given an eight-month suspended sentence.

Ms Ricci, who can appeal, was ordered to pay millions in back taxes – the precise amount will be set at a later date. The French court also confiscated two properties worth €4m.

Ms Ricci is the first of 50 French people facing trial over HSBC Switzerland accounts which were leaked to the authorities by whistleblower Hervé Falciani.

By contrast, in the UK, the HMRC has managed to prepare only three potential criminal cases from the 3,600 individuals, businesses and trusts on the British version of the “Falciani list”. Of that trio, the Crown Prosecution Service only chose to prosecute one case.

Margaret Hodge, who chaired the Public Accounts Committee investigation into the HSBC Swiss bank, told The Independent: “Britain has been pathetic… Yet again France has shown you can take people to court over tax evasion and win.

“The French are showing that you can defend the taxpayer’s interest much more aggressively by challenging rich individuals and multinationals. All we ask is that they pay a fair share of tax.” (bold added)

The French government handed British authorities the UK names on the list more than five years ago. While HMRC says it has collected £135m from those 3,600 individuals, companies and trusts, all but one have avoided criminal prosecution. Many did a deal with the British government, which gave them exemption if they fully disclosed all the information.

Transcripts of phone conversations between Ms Ricci and her daughter emerged in the financial newspaper Les Echos, in which she boasts about how she had changed banks to escape prosecution. Ms Ricci says: “I was never troubled. So I bought a chalet in Klosters, and now it’s fine.” ’

A few important points may be noted: Arlette Ricci has been sentenced to jail, ordered to pay a hefty fine and back taxes, two of her properties have been confiscated, and her daughter also has been sentenced.

The attrappe-nigaud tactics of some of the financial operators in this sector have been around for a long time indeed, and I was a target sometime in 2011. A very smart young salesman took an appointment and came to see me in my office, with the latest laptop that he flicked open and laid out the mouth-licking schemes available. When I told him that I would get back to him after he had made his presentation, he insisted on a timeline, and finally we agreed that he would come again in two weeks.

In the meantime, I checked with an economist friend of mine who moves about in the financial and business sectors quite a lot. I remember what he told me on the phone: Keep as far away from these people as you can! Naturally, when the salesman returned, I followed the advice that I was given.

By whatever name we call such schemes, Ponzi or whatever, it would appear that the government’s decision to make citizens pay taxes on interest earned gave a boost to savers seeking alternative tax-exempt investments to go for, such as insurance products which don’t pay taxable ‘interest’. This shows how government policy can be exploited by shrewd business people – not limited to the group currently under investigation –, and is a call to government to think carefully about the implications and impact of any public policy before it is implemented. There must always be a mechanism in place for policy review and mid-course correction, as is done by international organizations.


* Published in print edition on 17 April  2015

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