Montreal

Quebec's Power Corporation had shares in Chinese company cited in Panama Papers

Until last year, Quebec’s Power Corporation owned stocks in a Chinese company that regularly used the services of Mossack Fonseca, the Panama-based law firm at the centre of the data leak scandal regarding offshore tax havens.

André Desmarais was member of Chinese company's board of directors for 16 years

Radio-Canada has learned André Desmarais sat on CITIC Pacific's board of directors for years. (Patrick Doyle/CP)

Until last year, Quebec's Power Corporation owned stocks in a Chinese company that regularly used the services of Mossack Fonseca, the Panama-based law firm at the centre of the data leak scandal that exposed the tax-avoidance practices of the rich and famous.

The Panama Papers — millions of leaked documents shared by the Washington-based International Consortium of Investigative Journalists with media partners including CBC News — reveal the company, CITIC Pacific, has incorporated dozens of subsidiaries in known tax havens, mainly in the British Virgin Islands.

Documents isolated by CBC's French-language service, Radio-Canada, show Mossack Fonseca helped CITIC Pacific with either managing or setting up more than 90 subsidiaries.

Since the massive leak first made headlines, the Panamanian law firm has maintained there is nothing illegal in setting up offshore shell companies, and said its practices meet the highest international standards.

None of the information compiled by Radio-Canada indicates any illegal activity concerning CITIC Pacific and its subsidiaries.

Links to Power Corporation

Annual reports reveal that André Desmarais, a director of Power Corporation, the international management company built by his father, was also a board member of CITIC Pacific from 1997 to 2014.

During Desmarais's tenure on the CITIC Pacific board, Power Corp. accumulated shares in the Hong Kong-based holding company, which works mainly in the steel, iron-ore mining and real estate sectors.

Conglomerate CITIC Pacific's headquarters are in the CITIC Tower in Hong Kong. (CHINAINABOX/POND5.COM)


Power Corp. remained a minority shareholder of CITIC Pacific, at one point holding seven per cent of the company's stocks, for a total of $855 million, according to Power Corp.'s 2007 annual report.

The Quebec corporation sold all of its shares in April 2015.

Use of tax havens raises questions

While setting up shell companies in tax havens is not illegal, it does raise questions for fiscal expert Marwah Rizqy, a professor of tax law at the Université de Sherbrooke.

"What's the purpose of creating subsidiaries in tax havens when the parent company generates profits in China?" Rizqy asked.

"Why would a Chinese company, which has the Chinese government as a majority shareholder, think it makes sense to become incorporated numerous times in the British Virgin Islands?"

Power Corp. redirects questions

When Radio-Canada tried to contact André Desmarais, it was told in an email to direct all questions to the Chinese company, since Power Corp. no longer holds any shares in CITIC Pacific.

Radio-Canada's questions "are related to operational matters that should be directed to that company's management," the email reads.

The email goes on to reiterate that Power Corp. follows all the laws and regulations to which it is subject.

CITIC Pacific, which now goes by the name CITIC Limited, sent a written response stating: "As a conglomerate with a wide-reaching global presence, we have a variety of corporate entities in different jurisdictions. The activities of these entities are in full compliance with the law of these jurisdictions and subject to regular internal review."

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