By NEIL HARTNELL
Tribune Business Editor
A business partner of Freeport-based investor, Preben Olesen, is one of two Grand Bahama residents charged by the US federal authorities with operating “a fraudulent offshore tax strategy”.
Duane Crithfield, who was a partner, director and investor in New Hope Holdings, the company that acquired the Port Lucaya Marina and Grand Bahama Yacht Club, has been accused of operating a scheme known as the Business Protection Plan (BPP).
The indictment against him and fellow part-time Freeport resident, Stephen Donaldson, alleges that BPP clients claimed business expense tax deductions in the US via “sham insurance premiums” paid to their scheme.
There is no suggestion, though, that Mr Olesen, New Hope Holdings or their Grand Bahama-based assets are involved in any way with Mr Crithfield or the alleged BPP scheme.
None have been referenced in the US indictment, nor is there any suggestion that the charges against Mr Crithfield will affect them. Tribune Business attempts to reach Mr Olesen at the weekend proved unsuccessful.
The indictment, filed in the Florida middle district court on May 13, alleged that Mr Crithfield “promoted himself as being experienced in investment banking, international financial services and international consulting involving banks, trust companies and insurance companies”.
He and Mr Donaldson, who “promoted himself as being one of the foremost experts in US compliant structures for offshore asset protection and tax planning”, allegedly operated the BPP scheme through Foster & Dunhill Ltd.
This was “held out to be an independently-owned and widely-respected international financial services firm headquartered in Freeport on Grand Bahama island”. Other key entities in the scheme were domiciled in Anguilla and Nevis.
Setting out the basis for the Internal Revenue Service’s (IRS) allegations against the two men, the indictment alleged: “The BPP strategy enabled the defendants’ affluent clients to claim business expense deductions based on sham ‘insurance premium’ payments made to offshore entities in amounts intended to substantially reduce the client’s taxable income for the year.
“The so-called insurance premiums were not based on actual business risks but rather on the client’s interest in reducing business income for tax purposes.
“After obtaining the benefit of a tax deduction on the client’s corporate income tax return, the client would later receive approximately 83-85 per cent of the premium back.”
The US government alleged that Messrs Crithfield and Donaldson promoted the BPP scheme both in the US and internationally, but “withheld and concealed” from clients that a law firm had withdrawn its positive opinion on the scheme after finding certain facts had been misrepresented.
Another law firm’s opinion letter was also allegedly ignored, and Mr Donaldson allegedly promoted the BPP scheme during an August 19, 2005, conference in the Bahamas.
And the indictment cited three occasions where BPP clients deducted a collective $685,000 in insurance premiums from their income tax returns.
In a statement, the US Justice Department said that if convicted, Messrs Crithfield and Donaldson each face a maximum penalty of five years in federal prison and a $250,000 fine.
It added that the scheme ran “from 2001 and up to at least March 2008”.