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Bye bye, Bermuda?

What we now know — and still don’t know — about the Irvings’ offshore holdings

A man wearing a business suit sits on an ornate bench in a legislature. He is looking down at a document that he is reading.
Green MLA Kevin Arseneau examines leaked documents about Irving offshore tax havens.Carl Mondello/Radio-Canada

When New Brunswick Green MLA Kevin Arseneau spoke out in spring 2020 about the billionaire Irving family’s use of offshore tax havens, he struck a nerve.

He was raising a subject that successive Liberal and Progressive Conservative governments had refused to broach.

“In 2016, Statistics Canada reported that the Irving companies were owned by eight offshore holding companies based in Bermuda, a known tax haven with a zero per cent corporate income tax rate,” Arseneau said in the New Brunswick Legislature.

His comments provoked a striking rebuttal from one branch of the Irving family — a seemingly blanket denial that they sheltered their wealth offshore to avoid Canadian taxes.

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“We are not owned and controlled from Bermuda, as incorrectly suggested by MLA Arseneau,” J.K. Irving, the owner of J.D. Irving Ltd. (JDI), wrote in a June 4, 2020, letter to Arseneau’s leader, David Coon.

He asked Coon to “speak with [Arseneau] about this.”

The Irvings are among Canada’s wealthiest families, and their companies are dominant economic players in New Brunswick and a ubiquitous presence for consumers. J.D. Irving Ltd. is the province’s biggest private-sector employer and the Irving Oil refinery in Saint John is the country’s largest.

As privately held companies, they are not required to publicly report on their financial affairs, making their offshore assets the subject of long-running speculation.

Irving’s assertion about not being “owned and controlled” from Bermuda seems clear and, on the surface, it appears the family may have pulled out of Bermuda after decades of using the island as a tax haven.

A close-up image of a man in a business suit speaking during an interview.
J.K. Irving wrote in 2020 that his company was 'not owned and controlled from Bermuda,' despite a federal lobbyist registry entry showing a parent company on the island. (CBC)

But it’s impossible to know for sure given the complexity of contradictory, publicly available evidence.

The day the letter was written, J.D. Irving Ltd.’s own filings with the federal lobbyist registry said it was a subsidiary of F.M.W. Co. Ltd. of Bermuda, an offshore Irving holding company.

JDI continued to list F.M.W. as its parent until October 2021 — 16 months after the letter — when it changed the registration to show JDI itself as the parent.

In an emailed statement, Anne McInerney, the company’s vice-president of communications, said, “the facts in Mr. Irving’s [June 2020] letter were accurate then and are accurate today.”

She said F.M.W. ceased being JDI’s parent company in 2012, and the company did not think to change the listing in the lobbyist registry for another nine years.

“We corrected that information in 2021 as soon as we identified that the registry had not been updated to reflect the change in our parent company that occurred in 2012,” McInerney wrote.

WATCH | What we learned about the Irvings in the Paradise Papers leak:

University of Victoria tax law professor Geoffrey Loomer said the claim in Irving’s letter of Canadian ownership and control was “carefully made, and it’s technically true.

“It is very likely that all of these foreign entities, trust companies, are somehow indirectly owned by Canadian family members. I’m sure that’s true.”

What matters, he said, is that companies registered in Bermuda that do not produce goods there pay no income tax there — regardless of where ultimate ownership and control reside.

The Irving letter “obscures the fact … that there are these various companies, or at least have been over the last 40 years, that are established in places like Bermuda,” Loomer said.

A bearded man with glasses sits against bright yellow scenery
University of Victoria tax law expert Geoffrey Loomer says Irving’s letter is ‘technically true’ but it obscures the company’s history offshore. (Frédéric Gagnon/Radio-Canada)

“That offers a lot of tax savings opportunities, or has offered a lot of tax savings opportunities in the past.”

Other public records raise the possibility that the Irvings have exited Bermuda altogether or have shifted to a different offshore strategy.

The island’s corporate registry says all known Irving companies on the island have been dissolved, including F.M.W., J.D. Irving Ltd.’s former parent company.

McInerney said the various “FM” companies identified by CBC News and Radio-Canada “have not been active in our organization for more than 10 years.”

If true, it could mark the end of more than four decades of controversial tax avoidance by New Brunswick’s wealthiest family.

But, if true, it’s something the Irvings are refusing to state explicitly.

McInerney said in her statement all JDI companies “are wholly owned and controlled by Canadians.”

She did not, however, respond to a question about whether JDI currently owns and controls any offshore companies in tax havens.

A half-century of offshore companies

K.C. Irving incorporated his first Bermuda holding company, F.M.O. Co. Ltd., in 1968. He created two more, Forest Mere Investments and F.M.P. Co. Ltd., in 1969, and moved to the island himself in 1972.

An elderly man in a business suit looks to his left.
K.C. Irving, seen in an undated CBC image, incorporated his first Bermuda company in 1968 and moved to the island in 1972. (CBC)

Irving established at least 11 more companies with the “F.M.” naming convention on the island, including F.M.A., an insurance company that allowed Irving companies to shift tax-free profits to Bermuda by paying large premiums to F.M.A.

F.M.A. and five other Irving companies in Bermuda were unknown to the public until CBC News and Radio-Canada’s Enquête revealed their existence this week based on documents leaked to German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists.

The documents known as the Paradise Papers come from Appleby, a global offshore services law firm founded in Bermuda that counted Irving companies as clients.

Based in Bermuda, controlled from Canada

Some of the Irving companies in Bermuda were holding companies that owned or co-owned the major Irving companies based in New Brunswick managed by K.C.’s three sons, J.K., Arthur and Jack.

Three standing men chat together in a hallway.
Brothers J.K., Arthur and Jack Irving are seen during a 2007 appearance. (CBC)

After K.C. Irving died in 1992, ownership of the holding companies passed to a trust established in his will and overseen by three trustees living in Bermuda and New York, including his widow, Winnifred.

The fact they did not live in Canada made the $3 billion trust non-taxable here, experts said at the time.

Even so, Statistics Canada’s inter-corporate ownership database has always listed the Bermuda holding companies as being under “effective control” from Canada.

In 2008, K.C. Irving’s three sons agreed on how to divide up the companies by disentangling their cross-ownership and splitting up the trust.

Bermuda records show companies dissolved

A Bermuda judge approved the split in 2010, and all known Irving companies on the island, including those later identified in the Paradise Papers leak, were later dissolved, according to a list provided to CBC News and Radio-Canada by Bermuda’s corporate registry.

F.M.O. Ltd., the holding company that owned Irving Oil, was first, dissolved in 2013. The process concluded in May 2021, when the last remaining company, F.M.K., was dissolved.

A list provided by the Bermuda corporate registry shows F.M.W., JDI’s parent on the lobbyist registry until 2021, among seven Irving companies dissolved on March 12, 2015, more than five years before the letter to David Coon.

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Yet Statistics Canada’s inter-corporate ownership database continues to list five Bermuda companies, including F.M.W., as of its annual update on June 17, 2022.

Jim Irving, JDI’s co-CEO, refused to explain the status of the Bermuda companies after a public event in May.

“I’m not talking about anything like that today,” he said.

A man in a business suit speaks into the microphone of a reporter walking along his side
In May, Jim Irving refused to talk about the status of the Bermuda companies. (Roger Cosman/CBC)

Records can lag by more than 5 years, Irving says

In an emailed statement in September, McInerney chalked up the differing records to official processes.

“Any changes you’re now seeing in the Bermuda companies’ registry are likely associated with legislated requirements in that country that prescribe the process and timelines for winding down of companies,” she wrote.

“In some cases we have seen this take 5+ years even though the entity has not been active for many, many years.”

McInerney repeated that “there is no offshore ownership or control of our organization.” She turned down an interview request.

Loomer doubts the Irvings have abandoned offshore tax havens.

“I think that’s highly unlikely, as in zero likelihood,” he said.

“The rules that apply to companies that are multinational in nature that have offshore activities … allow the avoidance of some Canadian corporate tax. They’ve been designed that way. Irving is not the only one.

“So I’d be very surprised if they’re completely out of the offshore world.”

Irving Oil still linked to Bermuda as of 2020

On the Irving Oil side of the family — a separate business entity from JDI for more than a decade — spokesperson Katherine d’Entremont said in an emailed statement that “we can confirm the full ownership structure of Irving Oil is fully taxable in Canada.”

But documents suggest a link to Bermuda still existed as recently as two years ago.

An array of large tanks feature the letters I-R-V-I-N-GAn array of large tanks feature the letters I-R-V-I-N-G
Documents in Ireland identify the Bermuda-based ALI Family No. 1 Trust as Irving Oil’s owner. (Carl Mondello/Radio-Canada)

A draft Bermuda court filing from May 2012 says Arthur Irving’s newly created “ALI Family No. 1 Trust,” created after the split of the conglomerate, was based on the island.

And a December 2012 Bermuda court ruling said new family holding companies Arthur was setting up under a new trust on the island would be “tax efficient vehicles for distributing the profits generated” by Irving Oil’s operations in Canada.

The ALI Family No. 1 Trust was still the ultimate parent of Irving Oil as of Dec. 31, 2020, according to financial statements of the Irish holding company Irving acquired when it bought the Whitegate oil refinery and a gas station chain in Ireland.

Arseneau said it’s easy to understand why the Irvings don’t want a public discussion of their offshore strategy.

“It goes against the image they’ve been trying to show New Brunswickers,” he said. “It goes against their integrity as a hard-working New Brunswick family who built everything right here for the people here.”

A culture of secrecy

Helping obscure the exact nature of Irving’s presence in Bermuda is the island’s longstanding culture of secrecy.

“If you are wealthy and you don’t want people prying into your affairs, it’s a good place to have a trust,” Loomer said.

In 2009, Bermuda judge Ian Kawaley wrote the island is “an offshore trust domicile,” so its courts were “bound not just to be sympathetic to the privacy needs of those who establish trusts here, but also to the need to promote the development of Bermuda trust law as well.”

That passage was quoted by Irving lawyer John Riihiluoma in a Dec. 3, 2009, Bermuda court filing during proceedings to divide the family’s corporate empire.

The filing is part of the Paradise Papers leak. Its contents would not be publicly known otherwise.

Riihiluoma, a lawyer at Appleby representing Arthur and Jack Irving, wanted the court file sealed.

The Bermuda constitution, he noted, allows a court to exclude the public to ensure “the protection of the private lives of persons concerned in the proceedings.”

The lawyers were also in “sensitive” negotiations with the Canada Revenue Agency, and it could be “damaging” if “tax advice or calculations” became public, Riihiluoma argued.

The judge sealed the file.

Alain Deneault, the author of several books on offshore tax havens, says this deference reveals something fundamental about such jurisdictions.

A bearded man with a burgundy-coloured sweater and grey jacket sits in his study with his hands in his lap.
‘A state isn’t supposed to be totally dedicated to private interests,’ says Alain Deneault. (Carl Mondello/Radio-Canada) (Carl Mondello/Radio-Canada)

“Bermuda is not a state, if we think of what a state is supposed to be,” he said. “A state isn’t supposed to be totally dedicated to private interests. … But this is what they do.”

‘Point is valid,’ Higgs said

The comments by Arseneau that prompted the Irving response were made in the legislature on May 27, 2020. He was pushing the New Brunswick government to outlaw provincial taxpayer-funded subsidies to companies using offshore tax havens.

“The point is valid, I understand it,” Premier Blaine Higgs responded. “Every company that is based in any province or in our country needs to pay their fair share of taxes.”

But he said offshore taxation is the federal government’s jurisdiction — a correct statement, but one that ignored Arseneau’s demand for a policy change on provincial subsidies.

Beyond Bermuda

It’s impossible to know from the Paradise Papers to what extent the Irvings may have shifted their assets to other tax havens.

There are only a few references to other jurisdictions.

The documents show that in September 2003, Arthur Irving and his wife Sandra became directors of a company called Bianca Ltd. in Barbados.

Records show all shares of its parent company, Allan Bay Holdings, were sold a year earlier for $17.5 million.

The company was incorporated in 1989 and in 2016 had assets of more than $4 million.

In May 2008, Arthur and Sandra Irving incorporated and became directors of Seagrape Holdings Ltd., another Barbados company, along with Trevor Carmichael, a Barbados lawyer practising international business law.

Seagrape also had assets of more than $4 million as of 2015.

In emailed statements, d’Entremont, the Irving Oil spokesperson, did not respond to questions about the Barbados companies and said Arthur Irving and his daughter Sarah, the company’s executive vice-president, were “not available for an interview.”

Arthur Irving’s son Kenneth, who was CEO of the company from 2005 to 2010, also refused an interview request about changes to the offshore holdings over the last decade.

“I’m not aware of the organizational changes you’ve mentioned and suspect I would not be in a position to comment even if I did,” he said in an email.

‘No way of finding that out’

Deneault said the secrecy surrounding the Irvings’ offshore assets is enabled in part by a lack of curiosity from New Brunswick government officials.

In April 2019, Arseneau asked Finance Minister Ernie Steeves in the legislature for any studies or reports his department had on any lost tax revenue resulting from the Irvings being in Bermuda.

“We do not know,” Steeves said. “We do not have a list of businesses who partake in any tax havens. … We would have no way of finding that out. I am sorry.”

The minister said it was up to Ottawa to track that information.

“It’s not that [Arseneau] didn’t get an answer,” Deneault said. “The answer was ‘We have nothing. We don’t care about this issue.’

“How spectacular that is!”

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