Tory funding scandal explodes in the UK: The ethnic angle

It is not very surprising that rich people use secret Swiss bank accounts to hide their fortunes from the taxman.  Nevertheless the political implications of the biggest bank leak in history at HSBC ensure that it will ricochet around the world for some time to come.

The accounts of over 100,000 wealthy clients have been opened to scrutiny by a whistle blower and show that the Swiss branch of Britain’s biggest bank was dealing not only in industrial-scale tax evasion but, apparently, money laundering as well. While holding a Swiss bank account is not illegal, hiding income from the taxman is, and traditionally that is the only reason someone would have a Swiss account  — unless they worked in that country.

All kinds of wealthy flotsam have bobbed up — Middle Eastern royalty, hedge fund owners, politicians, industrialists, Belgian blood diamond smugglers, Israeli arms dealers, African dictators, fashion designers, international models, entertainers and many more. Fresh revelations are revealed practically every day.

The fallout has been biggest in Britain where the ruling Conservative elite has ended up with egg on its face after seven of its largest donors were exposed as beneficiaries of HSBC’s Swiss tax arrangements. The Tories received £5 million from those HSBC Suisse account holders.

Typical was Lord Stanley Fink, godfather of the hedge fund industry, who himself gave £3 million to the party of which he once was treasurer. Lord Spink insists his affairs are all above board.

Nevertheless, the leaked files seem to show how HSBC’s Swiss private bank colluded with clients to conceal billions of dollars worth of assets and circumvent domestic tax authorities, and there are strong suggestions that the British tax authorities deliberately turned a blind eye to what was going on.  Most of the really incriminating evidence for this is contained in notes written by bank staff and filed with the accounts

Since the story broke a week ago there has been angry scenes in the House of Commons, allegations of media corruption (The Telegraph is accused of not printing negative stories over the HSBC scandal because HSBC is a major advertiser), a parliamentary committee roasting for the tax inspectors. Abd finally a raid by the Swiss tax inspectors on the Geneva branch of HSBC.

All the angles have been covered. Except one — the ethnic angle.  For one of the most conspicuous aspects of the story is that in country after country it is wealthy Jewish individuals who are among those most determined to keep their fortunes away from the taxman in their native jurisdiction.

This was a pattern that emerged in many countries but particularly so in Britain where it has a political sensitivity.  For Jewish businessmen like Lord Fink, who have been generous donors to the Conservative Party, are also amongst those who are most politically active on behalf of Israel or the wider Jewish community.  Fink himself is a leading light of the Conservative Friends of Israel as well as the influential Jewish Leadership Council.

Given that 80 per cent of Conservative MPs are Conservative Friends of Israel, you would think that this would merit some comment or at least raise a journalistic eyebrow. But no, the rule of kosher omerta prevails when it comes to the uncomfortable ethnic dimension.

It takes a Monty Pythonesque sense of the absurd not to see what is a glaring ethnic pattern. One of Britain’s favourite comic creations was John Cleese as demented hotelier Basil Fawlty. He used to shout at his long-suffering staff “Don’t mention the War” lest they offend German hotel guests. Today the media cry seems to be “Don’t mention the Jews.”

Apart from Lord Fink, Jewish donors in the HSBC files include Lord James Sterling of Plaistow, a shipping entrepreneur who was ennobled by Margaret Thatcher and is still active in Jewish political circles. Sterling was linked to three HSBC accounts totalling £7.8m.

Another big Tory donor named is that of high street retail king Lord Philip Green who as well as being a huge benefactor to the Tories has also donated at least £4.25 million to Jewish charities. He says there is nothing unusual about the movement of vast sums between his Monaco-based wife’s HSBC Suisse accounts and that of a close business associate and another generous Jewish donor, flamboyant businessman Richard Caring who lives life of luxury that would do justice to Louis XIV.

Caring, has donated six figure sums to both Labour and Conservatives at various times. He banked up to £100m in HSBC Suisse. He too insists he has paid everything he owes. Caring is a good example of those who have advantage of a peculiarly British tax dodge favoured by the wealthy — the non-domicile status. This is a tax loophole which dates back to colonial times and allows individuals to keep their assets offshore if they can persuade tax inspectors that they intend to eventually leave the country for good. It is a much abused tax break that has allowed generations of the wealthy to avoid paying tax. It helps if you have foreign parentage like Caring who had an American father.

One family which may have taken advantage of this arrangement are the inheritors of the fortune of the Anglo-French financier Sir James Goldsmith. Fashionable Tory MP Zac Goldsmith speaks about Israel at Jewish leadership groups.  He has, with his brother Ben and their mother Lady Annabel, donated over £500,000 in cash and in kind to the Conservatives. It seems the family have very tangled Swiss accounts, according to the leaks, with connections to various tax jurisdictions in the Cayman Islands and elsewhere.

Edward Lee, who is on the board of Conservative Friends of Israel, has given some £85,000 to the Tories. Lee and his brother were sons of a prominent London property developer, who set up offshore trusts for them in the seventies. Their Swiss accounts had a value up to £2m. Lee says all his tax affairs have been correctly declared and reported: “I have paid all tax as and when due.”

Not even the management of HSBC itself has been spared by the revelations.  Rona Fairhead, who is Jewish, is one of the most well connected women in Britain. Today she is chair of the BBC Trust, the corporation’s governing body, but before this she was on the HSBC’s Audit and Risk Committee.  She has refused to answer the Guardian’s questions about what she did or didn’t know.

The family tax arrangements of another Jewish member of HSBC management have been revealed as a result of the leaks. The Lewisohn banking family of London have been caught up in this scandal, again, through their use of the hereditary non-domicile tax loophole.

According to the Guardian, Oscar Lewisohn was himself a director of HSBC’s Swiss bank until 2006 and had the equivalent of more than £9 million in HSBC accounts that year. Because he had a Danish passport he was able to pass on this hereditary perk to his two UK-born sons. The Lewisohns’ lawyers said: “Both children were at the same time Danish under Danish law and British under British law.”

According to Haaretz,  an estimated 6,500 Israelis held about $10 billion in secret bank accounts at the Geneva branch of HSBC between 1988 and 2007; this ranked Israel as sixth in the list of countries with the most money hidden in the Swiss accounts.

No matter where you turn in this story or which country you look at, Jewish businessman proliferate. Again there is a repeated pattern.  Dual citizenship with Israel is common as is elaborate corporate structures involving business associates or relatives.

For a blue chip bank, HSBC has always sailed close to the wind. While British regulators have turned a blind eye U.S authorities have not afforded it the same toleration.  In the US, not only have individual HSBC tax evaders been prosecuted, but in a separate investigation, the bank narrowly avoided the loss of its licence in 2012 for allowing drug cartels to launder millions of dollars through the group’s Mexican division.

HSBC Swiss account details were leaked by the bank’s IT specialist Hervé Falciani, a public spirited gent who is now living in police protection in France and cooperating with law and tax authorities all over Europe. This is a real coup for the EU in Brussels which has long complained about London being a tax avoidance centre.  It is rebuff for Britain.

So can we expect the same in Britain? Don’t hold your breath.  We live in a closed political system where the financial elite and their political servants scratch each others’ backs. In the meantime we can all sit back and enjoy the discomfiture of those who are so used to arrange things for their own convenience.

Never has the accusation that the Conservative Party was no more than the political wing of the City of London financial services industry looked more soundly based.  And the final irony?  The entire journalistic investigation that paid for this inquiry was run by an outfit called the International Consortium of Investigative Journalists — part of George Soros’s network.