Frank Lowy's Lichenstein

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Look who's the subject of a US offshore banking probe:

A US Senate probe into the use of off-shore tax havens will examine the banking strategies used by Australia's second richest man Frank Lowy and his sons.

The US Senate Committee is investigating the use by banks in Liechtenstein and Switzerland, and a report to be issued at a hearing in Washington on Wednesday notes the Lowys have "multiple Lichtenstein-related entities and transactions".

Peter Lowy, who heads the US offshoot of his father's global shopping mall chain Westfield, was called to give evidence on Wednesday but a spokesman has told News Ltd he is unable to attend due to a long-standing business engagement.

But but but...!!! What about Teh Soccer Hero?

The Murdoch WSJ describes Lowy Jnr as "Peter Lowy, of Beverly Hills, Calif." and has this background on the scandal for anyone playing catchup:

U.S. investigators have relied in part on information from former UBS banker Bradley Birkenfeld, who pleaded guilty June 19 to helping his U.S. clients evade taxes. He told U.S. prosecutors that the Swiss bank holds an estimated $20 billion in assets for U.S. clients in undeclared accounts. These accounts generate some $200 million a year in revenue for UBS, prosecutors say.

Investigators also have been aided by information from Heinrich Kieber, a former employee of Liechtenstein bank LGT Group, who has turned over account data to tax authorities in Germany, Australia, the U.S. and other nations.

And this is from the Murdoch press back home:

Just prior to being appointed to the RBA board in 1995, Frank Lowy paid $25million to settle a long-running tax dispute with the Australian Taxation Office.

That dispute related to a $48.3 million payment received by a Lowy family company, Cordera Holdings. Three days after a court hearing began, a settlement was reached. In mid-February this year, German tax authorities conducted raids on dozens of prominent businessman for allegedly using Liechtenstein bank accounts, and two weeks later the ATO announced there were 20 audit cases under way relating to funds in Liechtenstein ranging from $200,000 to millions of dollars.

Why hasn't the ATO done anything about this yet? Any reporters asking questions over here? Or is Lowy too powerful on his home pitch?

The Murdoch media repeatedly stresses that:

There is no suggestion the Lowys are the subject of the Australian or US investigations.

No, they are just being called to give evidence at a Senate inquiry about dodgy tax schemes, where they have previous form. I am sure they are just popping in for a little chat, that's all. Lowy was also linked to a corruption scandal involving Israeli Prime Minister Ehud Olmert, but I'm sure that Mr Olmert is just a very nice man too.

Here's a pic of the LGT bank in Liechtenstein:

The tourist blurb says LGT Bank is "a great sponsor of local sports and cultural activities"> I bet they are.

More on Lowy's 9-11 connections here.

UPDATE: Lowy responds with arguments that basically boil down to "I'll see you in court":

Frank Lowy's office said he totally rejected assertions in a report by the subcommittee that he or his family had used a US corporation, or taken other steps, to hide assets from Australian authorities so as to avoid paying tax.

"The report from the US subcommittee relies on certain documents originally stolen from a Liechtenstein bank," his office said in a statement.

"It draws inferences from the documents and states them as facts - without verifying their contents or inquiring into the real facts."

Under the Australian tax system, the use of Liechtenstein structures to hold assets is not illegal or improper, the statement said.

"Mr Lowy insists that neither he nor any member of his family has done anything improper.

"No attempt was made to save any Australian tax.

"Nor is it considered that any Australian tax was in fact saved.

"Frank Lowy has relied on professional advice that he and his family group have met all tax obligations in this matter both in Australia and the US."

I'm sure Australia's 2nd richest man has a good team of lawyers. But whoever gave him that "professional advice" might be feeling a little nervous.

UPDATE: It's not looking good for the Lowys, who have been revealed as one of LGT's biggest customers:

Lowy, worth more than US$6 billion according to BRW magazine's list of Australia's richest residents, wanted to hide money after paying US$25 million in a tax dispute with Australian authorities, the report said.

Concerned that the tax squabble wasn't "settled for good", Lowy met LGT officials in Sydney, Los Angeles and London in 1996 and 1997, the report said.

LGT helped Lowy transfer money through a British Virgin Islands corporation to an account in the name of a foundation set up to disguise the Lowy family's ownership, the report said. When the account was closed in 2001, it held more than US$68 million, the report said.

And how's this for a defence argument:

"This amounts to a denial of natural justice," Lowy said. "Assets from the LGT account were given to charities in Israel."

Oh, so you took Australian taxpayer's money and gave it to (probably Zionist) "charities" in Israel? Well, that's all right then! Case closed - NOT!

Lowy now reveals that the ATO has been auditing his family finances for the past year. Here are some more details:

The US Senate report claims to have uncovered links between LGT and Mr Lowy's private companies including one called Yelnarf based in Liechtenstein. Yelnarf was at the centre of a dispute between Mr Lowy and the Tax Office that was settled for $25 million in May 1995, a month before his appointment to the Reserve Bank board.

Mr Lowy retired from the board in December 2005.

The Herald reported at the time that Mr Lowy and his wife, Shirley, had a number of family companies containing the word Franley, a contraction of Frank and Shirley. Yelnarf is Franley spelt backwards.

According to The New York Times, the Senate report said that after the Yelnarf dispute was settled, Mr Lowy used LGT to set up foundations in Liechtenstein, including one, Luperla, which sought to funnel $100 million in assets back to the family through a company based in the US state of Delaware.

By 2001, Mr Lowy and his sons David, Peter and Steven had received $68 million via "a maze of foundations and Delaware corporations behind Luperla", it said. LGT had removed all traces of the family's LGT accounts and transactions when setting up Luperla.

But according to Lowy, those Israeli charities got ALL the money:

"The report fails to mention the fact that all of the funds held in the structure in the Liechtenstein bank were distributed for charitable purposes in Israel some years ago," he said.

And from the Guardian, which notes that LGT is owned by the Lichtenstein royal family:

Lowy was considered so valuable a client that unusually he was not required to visit Switzerland to sign off instructions. Instead LGT officials flew out to meet him in London.

Lastly, another one of those very strange hits my blogs get. Yesterday somebody from Westfield.com in Los Angeles was googling the words "wtc conspiracy lowy" and found this old post of mine. Hmmnn, do you think Frank might be getting a little nervous about all this attention?

UPDATE: Canada's Globe and Mail has more details:

Congressional aides said when they warned Peter Lowy, a California resident and Westfield executive, that he would be subpoenaed to appear today, he left the country and informed them that he wouldn't return until the day after the hearing...

The Senate report alleges that the family used an LGT foundation, disguised by myriad registered corporations in the British Virgin Islands, Australia and the U.S. State of Delaware, to conceal tens of millions of dollars from Australian tax authorities.

Not long after the Lowys began negotiations to establish a foundation in 1996, one LGT banker wrote in a memorandum that "special caution is to be used," because Frank Lowy believed that Australian investigators were not content with a tax settlement he had recently made with them, the report alleges.

Shortly before a meeting between LGT and the Lowy family in California, a banker wrote in another memorandum: "Before the meeting in L.A. we should prepare our first proposals in writing. These should be written ... without reference to any person or corporation in the Lowy field."

The ATO/Federal Government investigation is called the Project Wickenby tax-evasion task force. A spokeswoman for the Australian Tax Office yesterday confirmed it had been in possession of the stolen LGT bank records for more than a year, but refused to say if investigators had begun formal inquiries.

Interesting to see that Republican Senator Norm Coleman is a leading member of the Senate investigation. As I remember, he was also one of the guys making a lot of noises about the AWB sanctions-busting bribes to Saddam, only to let the matter quietly slip at a later date. Maybe if Frank Lowy just makes a nice big donation to the Republican party, this whole nasty business could go away?

Coleman reckons the tax havens under investigation hold an estimated 1.5 trillion dollars in American assets. Hmmn, that would just about pay for Bush's failed war in Iraq, wouldn't it?

There are also calls to close down UBS bank's US operations. Carl Levin says UBS "provided its Swiss private bankers with training on how to detect surveillance by US customs agents and law enforcement officers while traveling to the United States". UBS has now stopped providing offshore private banking services to US residents.

But I'm losing track of the subject here: our old friend Frank Lowy:

Murdoch and the Czechoslovakian-born Israeli commando Frank Lowy, a former fighter in Israel’s Golani Brigade, who emigrated to Australia in the 1950s, have had a long friendship, which Murdoch recounted during an American Australian Association fund-raising dinner in honor of Frank’s son, Peter S. Lowy, in New York on November 20, 2002. Larry Silverstein and his wife also attended the American Australian event.

Some reporters refer to the American Australian Association, whose membership includes James Wolfensohn, the president of the World Bank, who raised cash for Rupert Murdoch when he first expanded into the United States, as “the kangaroo mafia.”

“Frank was a brave and determined fighter,” Rafi Kocer, Lowy’s former commander, said. Lowy has donated some $350,000 to build a memorial museum in Israel for his former brigade.

Lowy emigrated to Israel after surviving the Holocaust: this story says his father died in Auschwitz and his brother was conscripted to a slave labour camp on the Russian front:

After surviving the Holocaust, Frank moved to Palestine where he joined the forces that were fighting to secure a Jewish homeland in Israel.

“Living in Israel was an important transitional step in my life,” he says. “It prepared me for the change from Eastern Europe to the western world.”

Frank completed that transition when he arrived in Sydney on Australia Day, 1952.

BRW last year confirmed his #2 status on Australia's rich list with another $1.1 billion in 2006-2007 alone.

And I can't help thinking this mid-2006 investment is going to come up in the investigation:

Ex-UBS analysts Jonathan Half and Stephen Levey succeeded in attracting the billionaire family to invest $30 million into ION Asset Management's first fund for passive investment in Israeli and foreign companies.

"We had been evaluating a number of opportunities in Israel," Lowy said. "I met Steven through UBS when we showed interest in acquiring the controlling interest IDB Holding Corp."

The two former UBS senior analysts are the joint owners, holding 49%, of ION Asset Management founded last month, while the Lowy family owns the remaining 51%. The former make the investment decisions, while the latter retains control.

"We bring our knowledge in investment management, which will begin in Israel. We will follow this by opening additional branches abroad for investments in other markets," said Levey, who began his career as a fund manager at Barclay's Global Investors with the $150m. Israel Fund.

And let's not forget Lowy's WTC real estate partner's famous comment about "pulling" Building Seven:

UPDATE: Here's a link to the Senate committee's web page, which includes lots of links to associated documents. Also interesting to note that Barack Obama is on the committee.

Bloomberg says Peter Lowy will appear next week.

Liechtenstein's ambassador to the U.S., Claudia Fritsche, said yesterday there is "great concern" that Senate proceedings will overshadow the 62-square-mile principality's recent efforts to better cooperate with other countries to combat financial crimes. Talks with the U.S. will likely lead to a tax-information exchange agreement this year, she said.

It would be ironic if new laws designed to stop terrorists moving money around the world actually ended up ensnaring the people who have made fortunes exploiting the fear of terrorism, wouldn't it?