With the recent hosting by British Prime Minister David Cameron of an anti-corruption conference at Lancaster House, perhaps he should take a look closer to home before lecturing everyone else on accountability. No, I am not referring to the controversy regarding Tory funding expenses during the 2015 elections; I am referring the tax affairs of David Cameron's lifelong friend Andrew Feldman, who of course is also the current chairman of the Conservative Party.
Feldman was exposed by the Guardian news paper in 2013 for paying thousands to the Conservative Partywhile happily avoiding corporation tax in his company Jayroma (London) Ltd. What wasn't revealed in the article was how he was avoiding paying corporation tax: his company was filing “estimated losses”.
After the fact that he was avoiding corporation tax was revealed these “estimated losses” suddenly started disappearing and his company paid around £35k CT in the 2013 accounts. Although being familiar with accumulated losses while preparing company accounts, this was the first time I had come across “estimated losses”.
The issue arose again recently when I was looking at another set of company accounts. With the announcement by Freeport that it is planning a 20 million euro “investment” in the Alcochete outlet I decided to take another look at this operation. Regular readers will know that this shopping centre was sold by Freeport's owners, The Carlyle Group, to a four-party joint venture operation (VIA Outlets) involving Hammerson, Value Retail, Dutch pension company APG and Meyer Bergman, a property development specialists based in London.
The latest accounts for Hammerson and Value Retail are not due until June, so I decided to investigate at Meyer Bergman. The website states, “Meyer Bergman is a privately held specialist real estate investment management firm headquartered in London, England with a highly experienced, entrepreneurial team dedicated to the acquisition and active management of retail anchored throughout Europe.”
The description continues with the usual business and financial clichés that we have now become so familiar, “The firm's primary objective is value creation through the active development, repositioning and asset management of under-utilised or under-managed retail assets including shopping centres and high street shops in downtown and out-of-town locations, as well as corporate opportunities with a significant retail angle.”
Given that The Carlyle Group seemed so keen to get rid of the Alcochete after appearing so positive back in2011 we can definitely agree that it was “under-utilised” and “under-managed”. Or maybe people could just see that it is an insidious method to dump over-produced and under-priced semi-luxury goods on vulnerable local markets. Or maybe there is just too much competition with other outlets like Campera Outlet Shopping (Só boa marcas – only top brands) in Carregado offering similar services, though it's a long way from Lisbon airport, unlike the Alcochete.
Whatever the reasons for the under-utilisation and under-management of Alcochete outlet, it clear that Meyer Bergman (along with its partners) can still see some potential in the business, “With its specialist retail focus, extensive experience, compelling investment strategy and integrated platform, Meyer Bergman is uniquely positioned maximise value and generate superior returns for investors.”
Very reassuring. We'll see.
The point is, why does Meyer Bergman (along with its partners in VIA Outlets) think it will succeed where Carlyle failed? Carlyle's website boasts virtually the same things albeit in slightly different wording: “Our firm is global. Our expertise is deep. Our products are diverse. We work for our investors. We form partnerships [so do Meyer Bergman]. We invest wisely. We create value.”
Ah, yes, that familiar term “creating value”! Carlyle created so much “value” and invested so wisely that Freeport was forced to go into administration owing the HMRC some £27 million. That's what I call creating value.
Further, we must not forget that in December 2015 it was announced that 200 employees would lose their jobs or have their contracts renegotiated at Alcochete.
In my previous article on VIA Outlets' takeover of the Alcochete I focused on Hammerson's virtually obsession with “sustainability”, which was mentioned almost ad nauseum in its 2014 annual report. Is this David Atkin's (CEO of Hammerson) idea of “sustainability”, people losing their jobs?
Meyer Bergman's last accounts were filed at Companies House on the 16 February 2016, over four months overdue. Not very impressive. The whole point of having a due date is to comply with it. After all, companies get nine months to prepare and then file their accounts. How much longer do they want? For Meyer Bergman and its accountants, Simmons Gainsford LLP of Chandos Street, London, another sixteen weeks.
We should remind ourselves that company law requires that a director “is responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company.” As there is only one director, Marcus Sebastianus Meijer one has to ask why he failed in this duty. Or perhaps it was the accountants' fault. Perhaps they took too long. Perhaps they need to employ more staff. Who knows…
Simmons Gainsford are members of the Institute of Chartered Accountants of England and Wales (ICAEW). The current president of ICAEW, Andrew Ratcliffe, declared when he took that over the position that accountants (especially those that belong to esteemed institutions like the ICAEW) must champion the concept of professionalism: “The word 'profession' derives from concepts of belief, commitment and making a promise, about what we do and how we do it. In our Royal Charter, ICAEW, took on the responsibility to act in the public interest and our members embody that by acting in accordance with our code of ethics.”
Like delivering accounts four months late: highly “professional”. Further there, are irregularities in the accounts that suggest that these accountants are not that professional and seem unconcerned about acting in the public interest. We should remember that previous ICAEW presidents like Martyn Jones (2013-14) waxed lyrical about ensuring that accountants should behave in the interests of the public, and how they should not get involved with artificial methods to help clients avoid tax. Seems like nobody was listening to Martyn Jones, at least not the partners at Simmons Gainsford.
Despite increasing its net profit margin to 6.1% (up from 3.4% the previous year, 2013) Meyer Bergman managed to pay no corporation tax on its£10.4 million turnover. The corporation tax of £146,637 (which included £19,524 of capital allowances) was completely offset by “estimated losses”. In fact, the notes to the accounts state that no corporation tax is likely to be paid in the foreseeable future because “estimated tax losses” continue to be around £0.8m.Unless the company posts a profit greater than £800,000 in 2015 it won't pay any tax at all. And after that, maybe we'll have more “estimated losses” just appearing out of nowhere!
However, in all this, Marcus Meijer did manage to pay a dividend of £150,000to himself in the 2013 accounts. Actually, the dividend was issued to Neilarm Limited, a company incorporated in the British Virgin Islands. However, as stated in the controlling party notes, "M S Meijer is considered to be the ultimate controlling party by virtue of his shareholding in Neilarm Ltd in both the current and prior year - 2014 & 2013." So Meijer was just making a payment to himself.
So while it's possible to cancel out your corporation tax liability using “estimated losses”, clearly this does not affect the possibility of a dividend payment to the only director and shareholder. No dividend was paid in 2014, however M S Meiyer's debt to the company increased to £297,299 from £128,119 in 2013 – so he is still taking money out of the company by other means.
The annoying thing about all this is that the whole process is completely artificial. Nobody minds people making money (honestly), and nobody minds if people legitimately lower their tax liabilities But the whole concept of filing “estimated losses” is almost insulting. And then we have people like the former president of the ICAEW, Martyn Jones apparently advising the Institute's members to avoid artificial methods to help individuals and companies avoid tax. That's almost like asking Cristiano Ronaldo to stop kicking a football.
To make matters worse with regards to Meyer Bergman, virtually all the revenue generated by the company is raised by charging fees to companies which are owned (or significantly influenced) by Marcus S. Meijer! Of the £10,453,702 turnover in the latest accounts,£9,088,675 were fees payable to Meyer Bergman (Guernsey) Limited, “a company incorporated in Guernsey in which M S Meijer, the director, has a material interest.”
On top of this, during the year Meyer Bergman Limited charged “investment advisory fees” of £1,107,500 to Via Manco (UK) Ltd, “a company in which M S Meijer, the director, has a material interest”. That's virtually all the turnover except for less than £260,000 – and that's probably payable to M S Meijer, too. Via Manco (UK) Ltd is the link to Value Retail as one of its directors is Duncan F. Agar who is Chief Operating Officer (COO) at Value Retail PLC. Also, and this is supposition, it seems to be linked to the Freeport operations in Portugal as another director is Portuguese(though he is stated as residing in the UK), Paulo Miguel Sarmento. His occupation is described as “principal”. He signed the last accounts. However, given that he was appointed on the 9 June 2015, just after VIA Outlets purchased Freeport, then we are probably safe to assume that he may be involved in the Portuguese operations of VIA Outlets.
Marcus Meijer's “material interest” in Via Manco (UK) Ltd is that he was owed £578,750 by this company at the year end (31 December2014).Although he is not a stated as a director of the company, we do read this in the related parted transactions: Meyer Bergman Limited is a “related entity by virtue of significant influence”. Meyer Bergman Limited shares the same address as Via Manco, 20 Air Street, London - and the same company secretary, Sanjiv Raykundalia. And in case you were wondering, no payments for corporation tax have been made by Via Manco Ltd. But I am sure you weren't holding your breath on that one.
As an interesting aside, with all the fuss relating to the so-called Panama Papers, is that in 2013 Meyer Bergman Limited charged fees of £238,189 to L'Oiseau Bleu Investment SA, a company incorporated in Panama, “in which, M S Meijer, the director, has a material interest”. No fees were charged to this company in 2014. Art lovers will recognise the company's name as being the same as the 1913painting by Jean Metzinger (The Blue Bird). Maybe there is a reason for this (look at the painting).
Another intriguing fact is that Meyer Bergman's associated companies, like Meyer Bergman European Retail Partners III UG GP LLP (OC400751),started raising significant amounts of capital from Sumitomo Mitsui Banking Corporation. Two mortgages were raised in December 2015 (both containing fixed charges). It is not clear whether these mortgages are being used for the purposes of the “investment” at Freeport, but given the dates it seems like a good bet. The two partners in Meyer Bergman Retail Partners III UG GP LLP are Meyer Bergman European Retail Partners III GP Ltd, registered in Guernsey (at a PO Box), and Pallaton Ltd, registered in the British Virgin Islands. Now that’s what I call transparency.
To be honest, if I had to recommend a formula for both avoiding tax and laundering money, I couldn't think of a better one than the one employed by Meyer Bergman Ltd. Borrowing significant amounts from financial institutions and then laundering the proceeds through millions of pounds of “advisory fees”. Nobody's accusing Meyer Bergman of being an illegal money-laundering operation, but why all the secrecy and artificial methods?
The sheer hypocrisy of all this is that when Hammerson's annual report finally comes out it will no doubt contain numerous paragraphs about good corporate governance and endless sermons on sustainability. All the while, it is in business with a company that happily avoids corporation tax while the main director takes out thousands for himself and gives a very good impression of being a money-lauder. Hammerson's last report (2014) was just over 19 pages long. Here's some advice for its main CEO (David Atkins), reduce it by 90% leaving just what is needed for legal purposes and one solitary sentence in the directors' report: This is how much money we made and that's all we care about.
