Uber’s Aggressive, Unrestrained Culture Destroys It’s Own Goals

How Corporate Culture Can Trump Strategy For the Worse

As Uber suffers blow after blow to its reputation, users are deleting the app. 

UPDATE: As if to underscore the point of this post, only days after the New York Times published the story below, Uber CEO Travis Kalanick was captured on an Uber driver’s dash cam, engaging in a heated argument with the Uber driver over lower pay that has driven the driver into bankruptcy. Kalanick has today issued a formal apology to all Uber employee’s saying that he needs to “grow up” and get “leadership” help.  

See the video here: Kalanick Loses It With Uber Driver

 

Suffice to say, people are angry with Uber, and things aren’t getting better. This is actually deja vu all over again. We have seen this before in Silicon Valley. The hubris of a company founders or founders creates an ugly overly aggressive and unrestrained culture in its employees and before long things begin to unravel.  This has been quietly observed at Uber for some time, and can be gleaned by its own actions as reported in the press.  Now, new self-inflicted cracks are appearing. More than 200,000 people have deleted the UBER app off their smart phones in the past month. After former employee Susan Fowler Rigetti published a detailed blog post about the sexual harassment and discrimination she allegedly experienced at the company, people began deleting the ride sharing-app again. As more and more employees have spoken out about the alleged poor working conditions, Uber’s customer base is dwindling … and the company is getting desperate.

A few weeks ago, people boycotted the company after Uber provided rides at New York’s JFK airport during a taxi strike over President Donald Trump’s immigration ban. More than 200,000 people got rid of the Uber app and the #DeleteUber hashtag began trending on Twitter. Then, anger boiled again over Uber CEO Travis Kalanick’s position on Trump’s advisory board. He eventually quit the board.

SAN FRANCISCO — When new employees join Uber, they are asked to subscribe to 14 core company values, including making bold bets, being “obsessed” with the customer, and “always be hustlin’.” The ride-hailing service particularly emphasizes “meritocracy,” the idea that the best and brightest will rise to the top based on their efforts, even if it means stepping on toes to get there.

Those values have helped propel Uber to one of Silicon Valley’s biggest success stories. The company is valued at close to $70 billion by private investors and now operates in more than 70 countries.

Yet the focus on pushing for the best result has also fueled what current and former Uber employees describe as a Hobbesian environment at the company, in which workers are sometimes pitted against one another and where a blind eye is turned to infractions from top performers.

Interviews with more than 30 current and former Uber employees, as well as reviews of internal emails, chat logs and tape-recorded meetings, paint a picture of an often unrestrained workplace culture. Among the most egregious accusations from employees, who either witnessed or were subject to incidents and who asked to remain anonymous because of confidentiality agreements and fear of retaliation: One Uber manager groped female co-workers’ breasts at a company retreat in Las Vegas. A director shouted a homophobic slur at a subordinate during a heated confrontation in a meeting. Another manager threatened to beat an underperforming employee’s head in with a baseball bat.

Until this week, this culture was only whispered about in Silicon Valley. Then on Sunday, Susan Fowler, an engineer who left Uber in December, published a blog post about her time at the company. She detailed a history of discrimination and sexual harassment by her managers, which she said was shrugged off by Uber’s human resources department. Ms. Fowler said the culture was stoked — and even fostered — by those at the top of the company.

“It seemed like every manager was fighting their peers and attempting to undermine their direct supervisor so that they could have their direct supervisor’s job,” Ms. Fowler wrote. “No attempts were made by these managers to hide what they were doing: They boasted about it in meetings, told their direct reports about it, and the like.”

Travis Kalanick, Uber’s chief executive, has taken several steps since a former employee’s accusations of discrimination and sexual harassment by managers. CreditMarlene Awaad/Bloomberg

Her revelations have spurred hand-wringing over how unfriendly Silicon Valley workplaces can be to women and provoked an internal crisis at Uber. The company’s chief executive, Travis Kalanick, has opened an internal investigation into the accusations and has brought in the board member Arianna Huffington and the former attorney general Eric H. Holder Jr. to look into harassment issues and the human resources department.

To contain the fallout, Mr. Kalanick also began more disclosure. On Monday, he said that 15.1 percent of Uber’s engineering, product management and scientist roles were filled by women, and that those numbers had not changed substantively over the past year.

Mr. Kalanick also held a 90-minute all-hands meeting on Tuesday, during which he and other executives were besieged with dozens of questions and pleas from employees who were aghast at — or strongly identified with — Ms. Fowler’s story and demanded change.

In what was described by five attendees as an emotional moment, and according to a video of the meeting reviewed by The New York Times, Mr. Kalanick apologized to employees for leading the company and the culture to this point. “What I can promise you is that I will get better every day,” he said. “I can tell you that I am authentically and fully dedicated to getting to the bottom of this.”

Some Uber employees said Mr. Kalanick’s speedy efforts were positive. “I am pleased with how quickly Travis has responded to this,” Aimee Lucido, an Uber software engineer, wrote in a blog post. “We are better situated to handle this sort of problem than we have ever been in the past.”

As chief executive, Mr. Kalanick has long set the tone for Uber. Under him, Uber has taken a pugnacious approach to business, flouting local laws and criticizing competitors in a race to expand as quickly as possible. Mr. Kalanick, 40, has made pointed displays of ego: In a GQ article in 2014, he referred to Uber as “Boob-er” because of how the company helped him attract women.

Document: Internal Memo From Uber’s Chief, Travis Kalanick

That tone has been echoed in Uber’s workplace. At least two former Uber workers said they had notified Thuan Pham, the company’s chief technical officer, of workplace harassment at the hands of managers and colleagues in 2016. One also emailed Mr. Kalanick.

Uber also faces at least three lawsuits in at least two countries from former employees alleging sexual harassment or verbal abuse at the hands of managers, according to legal documents reviewed by The Times. Other current and former employees said they were considering legal action against the company.

Liane Hornsey, Uber’s chief human resources officer, said in a statement, “We are totally committed to healing wounds of the past and building a better workplace culture for everyone.”

Uber’s aggressive culture began with its 2009 founding, when Mr. Kalanick and another founder, Garrett Camp, created a start-up that would let customers hail a cab with little more than a few taps of their smartphone — bypassing many of the headaches people had with the taxi industry. Mr. Kalanick also started putting into place what eventually became Uber’s 14 core values, inspired by the leadership principles at one of the biggest public tech companies, Amazon.

To grow quickly, Uber kept its structure decentralized, emphasizing autonomy among regional offices. General managers are encouraged to “be themselves,” another of Uber’s core values, and are empowered to make decisions without intense supervision from the company’s San Francisco headquarters. The top priority: Achieve growth and revenue targets.

While Uber is now the dominant ride-hailing company in the United States, and is rapidly growing in South America, India and other countries, its explosive growth has come at a cost internally. As Uber hired more employees, its internal politics became more convoluted. Getting ahead, employees said, often involved undermining departmental leaders or colleagues.

Arianna Huffington, an Uber board member, was brought in to look into harassment issues and the human resources department.

Workers like Ms. Fowler who went to human resources with their problems said they were often left stranded. She and a half-dozen others said human resources often made excuses for top performers because of their ability to improve the health of the business. Occasionally, problematic managers who were the subject of numerous complaints were shuffled around different regions; firings were less common.

One group appeared immune to internal scrutiny, the current and former employees said. Members of the group, called the A-Team and composed of executives who were personally close to Mr. Kalanick, were shielded from much accountability over their actions.

One member of the A-Team was Emil Michael, senior vice president for business, who was caught up in a public scandal over comments he made in 2014 about digging into the private lives of journalists who opposed the company. Mr. Kalanick defended Mr. Michael, saying he believed Mr. Michael could learn from his mistakes.

Uber’s aggressive workplace culture spilled out at a global all-hands meeting in late 2015 in Las Vegas, where the company hired Beyoncé to perform at the rooftop bar of the Palms Hotel. Between bouts of drinking and gambling, Uber employees used cocaine in the bathrooms at private parties, said three attendees, and a manager groped several female employees. (The manager was terminated within 12 hours.) One employee hijacked a private shuttle bus, filled it with friends and took it for a joy ride, the attendees said.

At the Las Vegas outing, Mr. Kalanick also held a companywide lecture reviewing Uber’s 14 core values, the attendees said. During the lecture, Mr. Kalanick pulled onstage employees who he believed exemplified each of the values. One of those was Mr. Michael.

Since Ms. Fowler’s blog post, several Uber employees have said they are considering leaving the company. Some are waiting until their equity compensation from Uber, which is restricted stock units, is vested. Others said they had started sending résumés to competitors.

Still other employees said they were hopeful that Uber could change. Mr. Kalanick has promised to deliver a diversity report to better detail the number of women and minorities who work at Uber, and the company is holding listening sessions with employees.

At the Tuesday all-hands meeting, Ms. Huffington, the Uber board member, also vowed that the company would make another change. According to attendees and video of the meeting, Ms. Huffington said there would no longer be hiring of “brilliant jerks.”

Canadian Startup Case Study Underscores Canada’s VC Challenges

UPDATE: It is worth noting that this 2012 case study on a company in British Columbia, Mobile Data International, and its CEO Barclay Isherwood, attracted the ire of followers of Werner Erhard, prominent San Francisco New Age cult leader, with similarities to L. Ron Hubbard, founder of Scientology.  It is a lens into New Age cults at that time.  In the same way that Scientology reacts to attacks on itself. Erhard’s followers attacked this post in a frenzy of irrational hatred. 

I can only hope that this is a serious effort to reverse this national problem of short-term thinking.

I have seen the problems with Canadian investors first hand, and have the following case study to share here.

Many light years ago, I worked for a pioneering wireless data company, Mobile Data International, in Richmond, BC.   I thought this company was so promising, I came from the UK to join it.  Regrettably, the Board of Directors and the Canadian investors were more interested in making a quick profit than in building the company to potentially be the company that established itself as a global leader in wireless data.  The CEO of MDI, Barclay Isherwood, was an avid follower of California new-age guru, Werner Erhard  aka Jack Rosenberg, of erhard seminars training, better known as “est”.  Erhard’s career has been marked by allegations, controversy, and legal disputes.  Leading academics have raised serious questions about Erhard’s qualifications, his businesses, and the highly authoritarian style of his organizations.

Finding that MDI was influenced by Erhard was a supreme irony. Years before, while in university, my housemate was also infatuated with Erhard.  My housemate eventually quit university and joined “est” as one of Erhard’s trusted senior lieutenants. I got to see “est” up close and very personally. I was brow beaten by my friend, who tried to convince me how important it was to take “the training” as they called it, at a price I could not afford. I was disturbed enough from what I saw from outside the cult, that nothing altered my view that est was extremely dangerous. Since that time, Erhard has run from his critics, and reincarnated himself and “est” into a new group called “The Forum” and another group called “Landmark.”

Isherwood was spending company money to have Erhard’s people “hang out”  at MDI, and he kept his girlfriend, Evi Truu on the payroll, supposedly reporting to me, but via “pillow talk” apparently also reporting to Isherwood himself. The Board took no action, employees were asking questions among themselves, and morale was suffering.  I brought Intel’s legendary Marketing VP, Bill Davidow to MDI for a speaking engagement.  I was flabbergasted to be told that no one liked Davidow, as he was too “arrogant.”  Ironically, they got their assessment backwards: they were too arrogant to get Davidow.   The company was floated on the Toronto exchange much too early, and as a consequence, MDI was eventually sold for a relative pittance to Motorola Canada in a hostile takeover. Isherwood has tried to take credit for selling out to Motorola, but the truth is otherwise.

The investors made a modest return, but Canadian investors don’t seem to think like Silicon Valley.  In a strikingly similar startup situation in Silicon Valley, the CEO, actually an Intel sales organization alumni, had become infatuated with the alleged “supernatural powers of crystals” and his belief system became part of the company culture. The investors quickly became deeply concerned about their investment and their fiduciary duty. The question was, “How could this have happened?” and “We need to move to fix this immediately or face consequences.” My former Intel boss, Barry Cox, was brought in by the Board of Directors to fire the CEO, take drastic action and turn the company around. Obviously, nothing like this happened with MDI.

In the years since, I have seen offers in California in the hundreds of millions turned down flat, and million dollar cheques thrown back across the table.   The MDI employees were mostly laid off and MDI’s doors were eventually shuttered.  The MDI building, an excessively elegant structure that would have raised eyebrows in California, sat idle in Richmond for 20 years, until it was finally leased again as the security headquarters, ringed in barbed wire, for the 2010 Olympics.

Let’s hope that this new realization of the need to build innovation in Canada strikes a chord, and that Canada doesn’t repeat the mistakes that occurred at Mobile Data International.

http://www.techvibes.com/global/category/start-up

British Columbia: The ‘Wild West’ of Canadian Political Cash – NYTimes.com

British Columbia has no limits on political donations, leading critics to say the provincial government has become a lucrative business dominated by special interests.

Source: British Columbia: The ‘Wild West’ of Canadian Political Cash – NYTimes.com

By DAN LEVIN

THE NEW YORK TIMES

JANUARY 13, 2017

VANCOUVER, British Columbia — As the premier of British Columbia, Christy Clark is on the public payroll, pulling down a salary of 195,000 Canadian dollars in taxpayer money. But if that were not enough, she also gets an annual stipend of up to 50,000 Canadian dollars — nearly $40,000 — from her party, financed by political contributions.

Personal enrichment from the handouts of wealthy donors, some of whom have paid tens of thousands of dollars to meet with her at private party fund-raisers? No conflict of interest here, according to a pair of rulings last year by the province’s conflict-of-interest commissioner — whose son works for Ms. Clark.

“B.C. is the wild west,” said Duff Conacher, a founder of Democracy Watch, a Canadian civic organization that has petitioned the Supreme Court of British Columbia to void the commissioner’s decision. The group argues that there is a “reasonable apprehension of bias” because the commissioner’s son is a deputy minister in Ms. Clark’s cabinet. The court heard arguments in the case on Friday.

Ethics in politics is a hot topic right now in Ottawa. Prime Minister Justin Trudeau has faced criticism for attending exclusive fund-raisers, and other Canadian provinces are tightening the reins on political contributions. Against that backdrop, the case in British Columbia stands out for the unabashedly cozy relationship between private interests and government officials in the province, a political state of affairs that will be tested at the ballot box in May.

Unlike many other provinces in Canada, British Columbia has no limits on political donations. Wealthy individuals, corporations, unions and even foreigners are allowed to donate large amounts to political parties there. Critics of the premier and her party, the conservative British Columbia Liberal Party, say the provincial government has been transformed into a lucrative business, dominated by special interests that trade donations for political favors, undermining Canada’s reputation for functional, consensus-driven democracy.

“What it says to people is money talks and votes don’t,” said Dermod Travis, the executive director of IntegrityBC, a nonpartisan political watchdog group based in Victoria, the provincial capital. “When anyone anywhere in the world can donate as much as they want to the system, you have an even bigger threat to the system.”

Much of what is considered business as usual in British Columbia is illegal elsewhere in Canada. The federal government bars unions, corporations and foreigners from donating to candidates for federal office, and donations by individual citizens are limited to 1,525 Canadian dollars, about $1,150, a year. Those limits were imposed after a fund-raising scandal in the 1990s.

Provincial ethics rules are a patchwork of restrictions and loopholes. Corporate and union donations are banned in Nova Scotia, Manitoba, Alberta and, since Jan. 1, in Ontario. Ontario provincial officials, their staff members and party leaders are also barred from attending fund-raisers. Quebec goes even further, limiting party donations to 100 Canadian dollars, roughly $76 a year, and only by individual citizens.

British Columbia is not the only province to refuse to impose such tight limits, but democracy advocates say the large amounts of money flowing there are a particular cause for concern.

Critics say that big donors to Ms. Clark’s party often appear to have benefited financially from their political generosity. These include banks, Chinese real estate developers, and companies like Imperial Metals, the owner of a mine tailings pond that spilled billions of gallons of toxic debris in 2014, and was then permitted to operate an even larger mine. Imperial Metals did not respond to a request for comment.

On Thursday, Ms. Clark’s government approved the Kinder Morgan Trans Mountain oil pipeline project, after opposing the proposal at hearings last January. Political donation records show that Kinder Morgan and other oil industry supporters of the project had donated more than 718,000 Canadian dollars, about $546,000, to the BC Liberal party through March 2016.

Some pooled donations have ended up in the pockets of the premier, following a longstanding practice by her political party. Ms. Clark has received more than 277,000 Canadian dollars, or $210,000, from the BC Liberal Party since 2011, according to Canadian news media reports. No other party in British Columbia pays its leader a stipend, and only one other Canadian premier, in Saskatchewan, receives such funds; the practice has largely vanished elsewhere as the provinces have tightened their political finance rules.

Ms. Clark’s office declined to answer specific questions about her conduct and her relationship with the conflict-of-interest commissioner and his son. Instead, British Columbia’s minister of justice, Suzanne Anton, who is also its attorney general, sent a statement saying that the province’s standards “should give the public confidence in the electoral system.”

In an email, the B.C. Liberal Party said its leader’s stipend was a longstanding tradition that previous conflict-of-interest commissioners had found acceptable.

Last April, Ms. Clark’s stipend was challenged by David Eby, a member of the provincial legislative assembly from the B.C. New Democratic Party. He filed complaints with the conflict-of-interest commissioner about the stipend and about Ms. Clark’s attendance at fund-raisers where donors paid thousands of dollars to meet with her privately.

“In practice, it means that if you’re part of a coterie of high-net-worth donors, your private interests get priority over what’s best for the province,” Mr. Eby said.

In nine years as British Columbia’s conflict of interest commissioner, Paul Fraser said he has never found any government official to be in violation of the province’s Conflict of Interest Act. Mr. Fraser has donated to Ms. Clark’s political party, and so has his son, John Paul Fraser, who worked on Ms. Clark’s election campaign and now serves in her cabinet as the deputy minister for government communications and public engagement.

The elder Mr. Fraser ruled in May that his son’s boss did not violate the act by accepting tens of thousands of dollars from her party while attending exclusive party fund-raisers, despite the law prohibiting actions by officials that may create even the “reasonable perception” that they might be affected by private interests.

Democracy Watch asked the provincial Supreme Court in October to overturn the ruling, arguing that the commissioner should have recused himself, as he did in a 2012 case against Ms. Clark.

In a telephone interview, Mr. Fraser rejected accusations of bias over his son’s job. “The issue, I guess, is, should people’s children and their career aspirations trump other considerations,” he said. He added that his 2012 recusal was a special case, because his son had been in business with the premier’s ex-husband.

Mr. Fraser’s lawyers have tried to get the case dismissed by arguing that the commissioner’s opinions are immune to judicial review.

Canada’s Open Door to Tax Fraud, Money Laundering

 

The Shell Game: Canada’s Lax Disclosure Laws Open Door to Tax Fraud, Money Laundering

Transparency International warns against country becoming a ‘haven for corrupt capital.’

Source: The Shell Game: Canada’s Lax Disclosure Laws Open Door to Tax Fraud, Money Laundering | The Tyee

Canada can avoid becoming a desirable destination for dubious global lucre if it acts soon.

How many shell companies exist in Canada? How many legal trusts? Who are the beneficial owners protected by such unnecessary veils of secrecy? No one knows because in most cases there is no legal requirement to disclose actual ownership even to regulators. In fact, more information is required to get a library card than to set up a company in most jurisdictions in Canada.

What we do know is that Canada ranks near the bottom among our OECD partners in terms of corporate disclosure requirements to fight money laundering and tax evasion. A recent report from Transparency International detailed the dismal situation and why our country has become a haven for dubious offshore property speculation.

“The Canadian government must take immediate steps to require all companies and trusts in the country to identify their beneficial owners to ensure Canada does not become a haven for corrupt capital,” warns Transparency International Canada executive director Alesia Nahirny.

Canada is one of the few developed countries that does not require the identities of company directors to be verified or any information on shareholders. In most provinces, it is legal to use “nominee” directors or shareholders without disclosing that they are acting on someone else’s behalf.

A nominee is essentially a sock puppet — the proverbial student or homemaker often listed as the title owner of some of Canada’s most expensive homes. Why would someone list a multi-million dollar property in someone else’s name? Some plausible reasons include to avoid taxes or to launder money. This practice remains completely and inexplicably legal in most parts of our painfully polite country.

Lawyers can also act as nominee directors, offering their clients an additional level of secrecy under solicitor-client privilege unavailable in most other countries. A ruling from the Supreme Court of Canada in 2015 exempted lawyers and their firms from important parts of the Proceeds of Crime and Terrorist Financing Act, further widening the yawning loopholes in our laws meant to fight money laundering. According to an international oversight body, the Financial Action Task Force of which Canada is a member, “the legal profession in Canada is especially vulnerable to misuse.”

Toronto lawyer Simon Rosenfeld was secretly taped in 2002 during a meeting in a Miami bar with an undercover RCMP officer, who was posing as a member of a Columbian drug cartel needing money-laundering services. According to the officer’s testimony, after exchanging a token dollar to cement solicitor-client secrecy, Rosenfeld bragged that moving illegal funds through Canada was “20 times” easier than the U.S., where arrest and convictions are much more likely. He described the Canadian enforcement regime as “la la land” and said that five other lawyers in Vancouver laundered $200,000 per month through trust accounts for a seven per cent commission.

The transcript of this conversation did not endear Rosenfeld to the jury during his prosecution and he was sentenced to three years in jail. He appealed the conviction and the higher court judge increased his sentence to five years. This rare successful enforcement provides some fleeting schadenfreude, but Rosenfeld’s seasoned and sad assessment of “la la land” continues to ring true.

Legal black boxes

Millions of legal trusts are estimated to exist in Canada, but there is no way of knowing since there is no requirement for them to be registered or file any record of their existence — again an outlier among other countries. They are supposed to file information on assets and trustees with the Canada Revenue Agency but only a small fraction actually do.

A trust is the consummate legal black box. Considered a mere private contract under Canadian law, trusts do not need to keep records on beneficial owners, let alone file such documents with the federal government. Trustees can conduct transactions without disclosing their role as go-betweens, making it difficult or impossible for financial institutions to comply with money laundering regulations. To our international embarrassment, the Financial Action Task Force found in 2016 that Canada was less than fully compliant in 29 out of 40 anti-money laundering measures and “non-compliant” regarding transparency and beneficial ownership of such legal arrangements.

Vancouver, Let’s Stand Up to Moneyed Interests of Real Estate

READ MORE

Real estate in Vancouver and Toronto is where the rubber really hits the road on these national regulatory failings. Transparency International looked at the title documents for the 100 most expensive homes in the Lower Mainland and unsurprisingly found a sampling of all these methods to conceal the beneficial owners. Twenty-nine properties were held by Canadian or offshore shell companies, 11 were owned by nominees with no obvious source of income, six more were held by trusts. In total, 49 of these luxury estates collectively worth more than $1 billion had opaque ownership.

Canada’s lax legal oversight coupled with a decades-long public policy effort to incentivize wealthy citizenship has turned Vancouver into a global hedge city. Like London, New York, and San Francisco, Vancouver’s luxury properties have become a favored place to stash cash for the world’s wealthiest.

According to professor David Ley at the University of British Columbia, Canada effectively sold Canadian citizenships to rich offshore investors through the now-cancelled Business Immigration Program. Ley described the scheme during a lecture last September, detailing how up to 200,000 of the world’s wealthiest may have arrived in the Lower Mainland as a result of these public policy efforts, inflating property values and contributing to our current housing woes.

According to Ley, Canada’s BIP was heavily oversubscribed because Canada was selling citizenships for far below the international market rate compared to other countries with similar citizenship-for-sale incentive programs. In the U.S., candidates had to invest $1,000,000 and employ up to 10 Americans before being granted citizenship. In Canada, investors only had to loan provincial governments $800,000 to be paid back in full after five years. This come-and-get-it attitude towards passports and global capital seems sadly similar to other national assets such as natural resources, but I digress.

Besides ballooning our housing prices, was there a net economic benefit to this citizenship fire sale? According to Ley, the federal immigration database showed that “of all immigration streams to Canada, the Business Immigration Program led to the lowest declared incomes, lower even than refugees.” This was in part because wealthy offshore investors are so skillful at avoiding taxation coupled with a shocking lack of enforcement from the CRA.

Defending against dubious lucre

What can Canada do to clean up this mess and avoid becoming an even more desirable destination for dubious global lucre? A low-cost first step would be to require all Canadian companies and trusts to declare beneficial owners and publish this information on a public searchable registry. The United Kingdom brought in such a system in 2016 to improve in law enforcement and tax collection, which will more than cover the cost of implementation.

Transparency International has several other practical suggestions that are also supported by the banking sector and law enforcement:

• Beneficial ownership should be listed on all land title documents, ideally retroactively.
• Corporate registries should have the resources and requirement to accurately identify directors and shareholders
• The federal government should require all sectors — including real estate agents — to identify beneficial owners before transactions are conducted.

Besides money launderers, tax evaders and criminals, who could possibly oppose these sensible and long overdue reforms? Is the Trudeau government going to act quickly to plug these gapping holes and bring our country in line with the global fight against illicit capital? The recent cash-for-access events with wealthy offshore investors provide a telling opportunity to see on whose behalf Trudeau is acting. The whole country is watching.

Uber Is Still Trump

Permits? We don’t need no stinkin’ permits!

UPDATE:  This February 3, 2016 post on Uber deserves an update. This week Uber announced that it lost $800 Million in its 3rd quarter. That’s correct, $800 Million in only three months. The Uber announcement tries to spin the loss as good news for Uber as ” increased by only 25% over the third quarter last year.  An $800 Million quarterly loss is right up there in the same league with Trump lost money. I guess we need to remember Trump’s admonition that debt is good, and it’s ok to lose other people’s money.  Uber’s announcement goes on to project continuing losses projected to be greater than $3 Billion next year, as Uber continues its plans for an apparent IPO for brain dead investors.

Then we have Uber’s new dispute with the California Department of Motor Vehicles and Attorney General’s office. Uber has begun operating self-driving vehicles in San Francisco without obtaining the necessary permits. Uber is claiming that they are exempt and don’t need permits to operate driverless cars. They “don’t need no stinkin’ permits,” though video posted on SFGate shows an Uber driverless vehicle running a red light on 3rd Street, right in front of SFMOMA.  Why do I feel like Uber and Trump are the same thing?

The Problem With Uber Has Absolutely Nothing To Do With Ride Sharing

Donald Trump, Travis Kalanick, and Uber

So Trump is Uber and conversely, Uber is Trump. This comparison has been made by both supporters and opponents, so as they say, there must be some truth in it. Both Uber and Trump have based their strategies on disrupting the status quo and the establishment with politically incorrect behavior.  My argument here is simply that while the disruption fostered by both Trump and Uber may appear attractive at first glance, and desirable to many, in both cases, there are much deeper ethical issues that are only now coming to the forefront.

Uber’s origins date back to a cold winter night in Paris in 2008, when founders Travis Kalanick and Garrett Camp were stranded without a cab.  Having personally also been stranded in Paris without a taxi on a cold and rainy night, I can commiserate.  But the real strategy behind the founding of Uber was to disrupt what they perceived to be an overregulated industry ripe for the picking, managed by municipalities and regional agencies ill-equipped to handle the kind of corporate pressure brought to bear by Uber.  The Uber strategy involves massive PR, faux negotiations with slow-moving regulatory bureaucracies, followed by defiantly ignoring the law, which Uber euphemistically describes as “principled confrontation.”  It is nothing less than blitzkrieg. Similarly, Donald Trump has crafted his strategy to disrupt politics as usual, with political incorrectness, bluster, and bombast.  Both Travis Kalanick of Uber and Donald Trump share the same odd appeal for their disruption, but both also have armies of critics who perceive much deeper and disturbing issues.  It all has an air faintly of Fredrick Nietzche’s Man and Superman and Ayn Rand’s philosophy of total self-interest.

Ayn Rand

I also ask rhetorically why and how Uber has managed to attract such a massive unprecedented pile of investment capital.  Uber is the current global symbol of defiant confrontation with any and all regulation of industries. Some are arguing convincingly that the huge pile of cash may have to do with sheer plutocratic greed, driven by Wall Street lobbyists, keen to roll back all regulation of capitalism everywhere.  There is no shortage of circumstantial evidence that this may be correct, from the ongoing global banking scandals to corporate tax evasion.

Both Trump and Uber also now appear to be hitting serious bumps in their strategies.  Trump ignominiously lost the Iowa Caucus and is facing a serious threat from a Republican establishment determined to stop his candidacy one way or another. Uber is facing its own disruption, a federal lawsuit by the California Public Utilities Commission, challenging Uber’s definition of their drivers as “contractors.” The California PUC lawsuit has spawned numerous other similar actions against Uber and is being closely watched by legal experts around the World, particularly in the European Union countries and India. A decision against Uber could have major global consequences for Uber’s business model.  Meanwhile, organized protests against Uber’s practices, policies, and contractor pay have also evolved and escalated.  The early protests were particularly unsuccessful and counter-productive, and which served only to aggravate the public. However, more recent protest strategies have been much more effective.  For whatever reason, Uber elected to announce its intent to reduce contract driver pay recently, which has provided a strategic opportunity for organized protests in many cities.

The core issue for me is the glaring distortion of Jeremy Rifkin’s Third Industrial Revolution into an unabashed corporate takeover of the sharing economy.  The capital feeding frenzy around Uber is disturbing, and still a potential bubble if things don’t go as planned. It also betrays myopia for Big Ideas in favor of the quick buck.

ANALYSIS

Uber discussions need to go beyond the fact it offers a cheaper ride

‘This isn’t just an Uber problem. If they get away with it, every company will do this.’

By Paul Haavardsrud, CBC News Posted: Jan 24, 2016 5:00 AM ET Last Updated: Jan 24, 2016 9:30 AM ET

A man rides his bicycle between taxis parked on the street during a protest against Uber in Rio de Janeiro, Brazil on July 24, 2015. A number of protests have cropped up the world over as the ride-hailing app grows in popularity. (Ricardo Moraes/Reuters)

This is part three of a three-part series on Uber. Read parts one and two.

Outraged taxi drivers the world over telling anyone who will listen that Uber is the devil in corporate form makes it tough, even for those so inclined, to blithely accept at face value the company’s argument that it’s just a technology firm disrupting a sheltered industry.

• Part 1: A look at Uber’s playbook
• Part 2: How Uber is waging its PR war

It would be nice if that were the case. Easier.

But nothing is ever that easy, is it? And neither is Uber.

In fairness, you could say there’s much to like about a company that can deliver a prompt ride at the push of a button, often at a cheaper price than cabs. So far, so good.

But that’s only the beginning of the Uber discussion. A closer look at the company’s particular brand of disobedience could quickly become unsettling.

Uber may like to cast itself as a harmless scofflaw that’s willing to bend a few rules for the greater good, but legal experts say its practices are hardly benign.

Uber’s confrontational approach to changing regulation is taking direct aim at the taxi industry. (Alistair Steele/CBC)

Working for its own narrow self-interest, the company’s systemic disregard for regulations — a stratagem termed “corporate nullification” — can undermine the laws of the land that everyone else follows.

“This isn’t just an Uber problem. If they get away with it, every company will do this; every company will become a platform and just say ‘oh, the laws don’t apply to us.’ If we enter into that stage, then it’s game over for vast swathes of business regulation: environmental, insurance, civil rights, worker protection, consumer protection, that’s all gone,” said Frank Pasquale, a law professor at the University of Maryland.

“People don’t see the stakes of it, they think ‘oh well, you know, we have to disrupt taxi cabs and we have to get this stuff done,’ but it doesn’t have to be done on Uber’s terms. The stakes couldn’t be higher in terms of the ability of these platforms to just get out of regulation.”

Gig economy

In the here and now, of course, warnings about the consequences of corporations flouting the rule of law can feel abstract compared to the immediate gratification of getting a cheaper ride to the airport.

That may soon change. While researchers haven’t yet reached a consensus on the number of workers participating in the so-called gig economy, most agree that new forms of contract employment made possible by companies like Airbnb, TaskRabbit and Uber are on the rise.

In the U.S., a recent poll suggests more than one in five Americans have participated in this type of on-demand contract employment. Part of the conversation now taking place there, which is beginning to migrate to Canada, involves asking what responsibilities 21st-century companies will have to workers, as well as the rest of society.

• Taxis likely hurting themselves, helping Uber with protests
• Uber debate overlooks taxi industry’s ‘silent victims’
• Uber’s NYE price surge meant painful bills for revellers

As it stands, employers and employees both pay to fund programs such as health care, employment insurance, Old Age Security and other parts of the social safety net. The question of who will cover those costs if the nature of work changes to include fewer traditional full-time positions — not to mention the fate of worker protections such as overtime and minimum wage — is still in search of an answer.

Indeed, the recent popularization of the term “gig economy” reflects thisevolution of the work world to include more part-time and contract employment and fewer of the full-time jobs that have traditionally been the bedrock of the middle class.

As for the more well-known term, “sharing economy,” it’s losing ground amidst a growing recognition that sharing isn’t really part of the equation. A transaction in which a passenger pays a driver wouldn’t seem to be any different from what happens with a taxi. Yet taking a cab isn’t known as sharing a ride.

Play Media

 Angry taxi driver confronts Uber driver1:13

Wrapping itself in the language of the sharing economy, however, allows Uber to align itself with values like co-operation, sustainability and community. It’s a smart play, if disingenuous, particularly insofar as it helps to bathe a business model that’s so nakedly commercial in a kinder, gentler light. Uber, as is often pointed out, is libertarian to its core, whether it’s the company’s attempts to dismantle regulation or its belief in the righteousness of the unfettered free market.

What happens to cabbies?

None of this, of course, makes Uber an evil corporation. At the same time, the speed at which the company, among the fastest-growing startups in the history of Silicon Valley, is crashing through the world puts it at the centre of any number of questions.

On the front lines of those looking for answers is the taxi industry. The existing system may be flawed, overregulated, and too costly, but that doesn’t mean cabbies should just be written off as collateral damage — the result of rule changes inspired by the financial ambitions of a single company.

Many taxi drivers say they can’t compete with a company that isn’t governed by the same strict, and costly, regulations. (John Rieti/CBC)

By pushing cities into making immediate changes, though, Uber is manufacturing a binary choice. To limit the decision to Uber or the current flawed system, however, is a false construct. The taxi system doesn’t need to be overhauled tomorrow and changes could come in many different ways that allow for ride-hailing services while also protecting existing taxi drivers.

“The main problem is it’s not an empty space,” said Mariana Valverde, a professor at the University of Toronto and an urban law expert. “Uber is coming in and they’re combining the power of a big, U.S.-based corporation with lots of lobbyists and lots of money, on the one hand, with a total disregard for regulations and rules. Taxi drivers have played by the rules and they’ve often followed really strict, often quite picky and annoying rules, and they’re seeing their livelihoods vanish.”

Big issues

The back-and-forth between Uber and the taxi industry opens up any number of considerations, ranging from practical to theoretical to troubling.

If Uber’s continued success pushes existing taxi fleets out of business, it’s worth wondering what happens to fares. The company’s introduction of surge pricing, which allows the price of rides to float when demand outstrips supply, points in a direction that may have customers yearning for the regulated days of yore. A market monopoly may never come to pass, but Uber’s success to date, combined with the controversies that surge pricing have already inspired, doesn’t make it a comforting thought.

Uber’s introduction of surge pricing, which allows the price of rides to float when demand outstrips supply, may one day have customers yearning for the regulated days of yore if a market monopoly is ever reached. (The Canadian Press)

The us-versus-them dynamic that’s developed between Uber and cab companies is also too often accompanied by an ugly undercurrent of racism that targets the ethnic makeup of the taxi industry. To be clear, this isn’t Uber’s fault per se, but it is an element of the ongoing confrontation that needs to be better recognized, understood and defused.

The many issues surrounding Uber can also become an issue in itself. As tales of Uber’s unsavoury tactics continue to circulate, how does someone who just wants to take an Uber across town reconcile the tension between wanting to be a good citizen, yet also a savvy consumer at the same time.

One theory, put forward by Robert Reich, suggests that no one can be blamed for seeking out a cheaper ride, regardless of how conflicted they may feel about the company offering the service. Our consumer selves, he says, are wired to look for the best deal possible and, on some level, we’ve made peace with what that entails. At the same time, he continues, serious thought must also be given to the responsibilities of citizenship.

As Uber inspires changes to the existing system, the idea of what our citizen selves might contribute to the discussion is worth considering. Yes, change is going to happen and outdated regulations need to be updated. How those changes happen, though, also matters a great deal. And not just to cabbies.

Nortel executives continue drawing bonuses years after bankruptcy – Ottawa

 

 

Former Nortel workers who are still owed money say they’re frustrated that executives with the now defunct company are still drawing retention bonuses, eight years after the company started bankruptcy proceedings.

Source: Nortel executives continue drawing bonuses years after bankruptcy – Ottawa – CBC News

Something Is Rotten In Canada: Chinese Real-Estate Fraud On A Global Scale

What Will We Do Now That Canada Has Been Ruined For Decades?

 In the last three days, both The Globe & Mail and CBC News have published disturbing stories about the scale of the Chinese infiltration of the Vancouver housing market that go well beyond anything understood or encompassed by BC government or federal government action on the problem.  The CBC reported that at least $13.5 Million in cash has been confiscated from Chinese recently entering Canada at Vancouver International Airport.  The following story, reblogged from The Globe & Mail, tells a tale of fraud, manipulation, and tax evasion on a massive scale. It also tells an embarrassing tale of gross incompetence by Canadian authorities. All of this is consistent with other investigative journalists reports from the United States on other similar fraudulent Chinese real-estate activities. Some of these reports go back years.  The original Mossack Fonseca “Panama Papers” revelations that indicated that many of the Chinese elite with family links to Li Xinping, and The People’s Liberation Army had Mossack Fonseca accounts should have been a red flag (pun intended) for Canada, but was not.  Added to that, we have the ongoing saga of KPMG Canada, currently involved in a tax evasion scheme under investigation by the CRA, but mysteriously stalled. We are living in an entirely new global economy manipulated by dark forces. What will we do now that Vancouver has been ruined for decades to come?

An embarrassing tale of gross incompetence by Canadian authorities

The Globe & Mail Encourages Those With Additional Information To Anonymously Come Forward via SecureDrop

 

 

Kenny Gu enters his car outside his home in West Vancouver, September 1, 2016

Documents shown to The Globe and Mail reveal that one-time developer Kenny Gu buys and flips homes in deals that are financed with investor money from China and mortgages issued to those investors by Canadian banks. His activities were brought to the attention of the Vancouver Police and Canada Revenue Agency who chose to do nothing.

BEN NELMS FOR THE GLOBE AND MAIL

Out of the shadows

Kathy Tomlinson reveals how loopholes and lax oversight are making it easy for a network of local and foreign speculators to play the system, and, in the process, fuel the steep rise in Vancouver home prices

KATHY TOMLINSON

The Globe and Mail Last updated: Saturday, Sep. 10, 2016 8:21PM EDT

Demetre Lazos says he couldn’t just stand by and watch real-estate speculation, as he puts it, destroy his city.

Convinced that his boss, a local speculator, was dodging taxes and misleading lenders, he decided to act, approaching both the police and the Canada Revenue Agency (CRA) to divulge what he knows. Mr. Lazos, who has built luxury homes in Vancouver for three decades, offered documented evidence of possible fraud and tax evasion.

And yet, as he tells it, both the cops and the tax men blew him off: A CRA official who met him in the lobby of the agency’s downtown office told him to write to Ottawa; at Vancouver police headquarters, he was advised to call the Crime Stoppers hotline. (He did, he says, and got no results.)

The Globe’s SecureDrop service provides a way to safely share information with our journalists. You can find it here.

“I am very angry at the system,” says Mr. Lazos, who has since quit his job. “I love this country – and it is my country – but I think we are Mickey Mouse.”

And so, next, he came to The Globe and Mail and, over the course of several months, delivered a large, and disturbing, cache of documents that expose how speculators can maximize – and conceal – their profits.

As a result of Globe investigations into Vancouver’s supercharged real-estate market, others have come forward, too, including a federal tax auditor, as well as an accountant who says he regularly files tax returns for wealthy clients who buy and sell houses – and appear to declare far less than they earn. “Canada,” he says, “is like a Swiss bank account” for his clients. (It is important to note that Swiss banking secrecy laws no longer exist due to aggressive enforcement by the EU and the United States)

Ottawa says it is “studying” the issue, and B.C. has brought in a tax on foreigners who buy residential real estate in Vancouver. But those who see firsthand how real estate is traded like stocks and bonds say this isn’t nearly enough. “We have governments that are not doing their job,” argues Mr. Lazos, who acquired his inside knowledge while working for Jun Gang Gu, also known as Kenny Gu, a former civil servant originally from Nanjing, near Shanghai.

Mr. Gu came to Canada in 2009 under Ottawa’s now-defunct immigrant-investor program, which gave permanent residency to applicants who agreed to lend a significant amount of money to the federal government. He started out here as a developer, but the documents show that his business evolved to buying homes – using other people’s money– and then flipping them. His deals are financed with investor money from China and mortgages issued to those investors by Canadian banks.

The papers that Mr. Lazos provided The Globe paint a fascinating picture, revealing a network of players – local and foreign – who are parking money in Canadian real estate. They also show how loopholes and lax oversight make it easy for the speculators to play the system – and profit tax-free – by obscuring their ownership and earnings, all the while treating the properties as commodities, not homes.

Hidden ownership

Many people assume that speculators flip homes very quickly, but Mr. Gu and others have created a unique market in which they hold properties long enough for them to rise significantly in value. The Globe has examined numerous transactions involving properties held for years while prices in the city rose as more investors bought in. Some properties were developed, some rented out, and others left vacant.

Mr. Gu did not respond to several requests for an interview, but Chinese-language contracts with his clients provide key insights into how his system works.

Translated for The Globe, they show that Mr. Gu, or his companies, are hidden – the legal term is “beneficial” – owners of certain properties, even though absentee foreign clients bankroll everything from the down payment and mortgage payments to property-related taxes and other expenses. The homes and mortgages are registered in the names of his clients, their companies or spouses.

The financing Mr. Gu’s companies receive from those clients comes in the form of loans that are not taxable, and that fall within what’s known as “shadow banking” – an unregulated system that has exploded in popularity in China, and now appears to be getting a toehold in Canada. Such “peer-to-peer” loans, as they are also called, sidestep banks entirely, and promise lenders significantly higher returns than they can get elsewhere.

Mr. Gu’s lender clients earn their wealth primarily in China, while coming and going from Vancouver, according to Mr. Lazos. Records show that they give Mr. Gu power of attorney to facilitate everything through his small, nondescript Vancouver office, but his stake in the properties remains hidden. And although he is not licensed to broker mortgages or manage investments, records suggest he does both.

Those records also link him and his clients to activity involving at least 36 properties over the past five years. Yet Mr. Gu, 45, paid next to nothing in taxes last year, while millions of dollars flowed through his business and personal accounts.

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‘Unless it changes, this will get worse’

An in-depth look at five of his deals this year reveals that he sold the properties for a cool $5-million more, in total, than he paid for them. One of those homes sat vacant for three years, in a city where many people can’t find a place to live. (The documents include two orders from the city to clean up the site.)

In addition, Mr. Gu has billed some clients up to $1.2-million, per property, for “management” and “commissions,” in the last two years. Over that same period, he and his wife have moved large sums of money between their bank accounts, up to $600,000 at a time. As well, Mr. Gu made credit-card payments totalling $310,000 in a brief period. The family’s vehicles include a BMW and a Mercedes.

Tax returns, among the documents, show that Mr. Gu, now a Canadian citizen, reported personal income of $45,865 last year. His wife, Min Tang, reported $23,612.

And yet, Ms. Tang recently bought a brand new house in West Vancouver – one of Canada’s richest municipalities, known for its mansions and stunning views – for $2.1-million. She listed her occupation on the title as “homemaker.” And she didn’t need a mortgage. Records show she bought the property from one of Mr. Gu’s clients – and for significantly less than the market value for other homes in the upscale area.

One of the Vancouver homes Mr. Gu flipped sat vacant for three years, in a city where many people can’t find a place to live. (The documents include two orders from the city to clean up the site.)

JOHN LEHMANN/THE GLOBE AND MAIL

‘Pervasive and systematic’

Mr. Gu’s three corporations all reported losses, in unaudited financial statements ending last year. Photocopies of some cheques made out to his companies – a fraction of the total – show that those companies received a minimum of $7.6-million in large payments between 2014 and 2016, many marked as “loans” from clients.

When Mr. Gu flips a property, his contracts stipulate that lender clients get back what they put in, plus a set return – 15 per cent in one instance. After the mortgage and the bills are paid, Mr. Gu keeps whatever is left, which, in some cases, appears to be hundreds of thousands of dollars.

According to legal and tax experts, this arrangement would allow him to avoid taxes, because the properties are not in his name. Mr. Gu can also maximize financing, because individual clients applying for mortgages, ostensibly to buy the homes, can borrow more money collectively than Mr. Gu could if he tried to finance properties on his own.

On the tax front, records suggest that the clients classify some of the properties as their principal residences, even though they do not live in them. That’s despite the fact that Canadian rules stipulate that a taxpayer cannot call a home a principal residence and sell it tax-free, unless they purchased it to live in it, and didn’t sell it within the same year.

“If you are buying and selling these homes as a business practice, that is business income and it’s taxable,” says Toronto-area accountant David Cramer, one of several experts The Globe consulted while reporting this story. He suggests that both Mr. Gu and his clients should be declaring that income. “If these guys paid proper taxes, these transactions would not go on as they do,” he explains. “It wouldn’t be nearly as profitable as it is.”

Tax lawyer Jonathan Garbutt estimates that the tax revenue lost through such activity is massive, particularly in pricey Toronto and Vancouver. “I think this is yet another example of non-enforcement of penalties under the law. It’s pervasive and it’s systematic,” Mr. Garbutt says. “Unless it changes, this will get worse. We will have a corrupt system.”

‘This has become a huge mess’

While many Canadians have come to resent the impact of foreign buyers on the real-estate market, the documents suggest that Mr. Gu pocketed much more than his clients did on some of his deals.

In one contract involving a rental property, his client was guaranteed a return of one per cent a month for paying the down payment and property-transfer tax upon purchase. Mr. Gu would collect the rent and pay the mortgage, then keep the rest of the profits when the duplex sold.

Mr. Gu sold the property two years later for $850,000 more than he paid for it, because the market price had jumped by that much. But according to the terms of the contract, his client stood to receive less than $90,000 of that windfall.

Documents show some of Mr. Gu’s clients also pay very little tax in Canada, despite having significant cash flow and assets. For example, in 2014, records show that client Shen Lin Zhang paid $2,594 in Canadian taxes on $59,711 in reported income, while his “homemaker” wife owned and lived in a Vancouver house worth $2-million.

Documents link Mr. Gu and his clients to activity involving at least 36 properties over the past five years.

JOHN LEHMANN/THE GLOBE AND MAIL

In the same period, Mr. Zhang sold another house worth $3-million and backed the purchase of two more, worth almost $4-million, in deals facilitated by Mr. Gu. Documents show that Mr. Zhang also owns foreign property and has almost $3-million in Canadian and Chinese banks.

Mr. Lazos says that Mr. Zhang earns his living in China. His CRA tax filing shows he is not a Canadian citizen, but he claims in it that he’s a B.C. resident. That allows him or his family members to classify any Canadian property as a principal residence and not report the profit when they sell.

Mr. Zhang declined The Globe’s request for an interview.

A Chinese-Canadian accountant in Vancouver estimates that he has filed tax returns for 1,000 clients just like Mr. Zhang in the past five years. He does not want to be named because he fears repercussions but says the CRA is partly to blame for lost revenue, because it doesn’t require taxpayers to report the sale of any principal residence.

“Every one of [those client families] has more than one house – two, three, four, sometimes more,” he says. “They don’t have to tell me. The CRA says they don’t have to tell anybody.”

The accountant says that people like Mr. Zhang who work abroad but declare on their Canadian tax returns that they are residents of Canada are legally required to report their worldwide income as well. He says that most, however, do not, and because those financial records are in China, they are impossible to check.

“They say, ‘I just want to pay around $5,000 in tax. How much does that work out to be in income?’ he says. “And then they say, ‘I have this much interest income from money I deposit with the Canadian bank or the company or whatever.’ That’s it.”

“I have in my hands people who claim to be residents. They never live here for more than a month of the year,” he says. “These people can be buying and selling homes and claiming to be a resident all the time without getting into any trouble. The CRA doesn’t look to find out.”

In fact, he believes the problem is so huge that the government should overhaul the tax code to get rid of the principal-residence exemption in its current form, which he acknowledges would be a very unpopular move. And one that would be a political non-starter: If the exemption were removed entirely, millions of Canadians would face the prospect of going deeply into debt – or, at minimum, forfeiting a major portion of their planned retirement incomes.

Another Vancouver accountant told The Globe that she and her colleagues see questionable real-estate transactions all the time, which they believe have contributed to skyrocketing prices. “This has become a huge mess. You have no idea how angry I am,” says Corina Ciortan. “A generation of people has been screwed. It’s so obvious. Everyone I work with is so angry because there is a select group of people who have profited from this.”

Federal figures reviewed by The Globe and confirmed by the tax agency show that auditors discovered $14.3-million in unpaid taxes from 339 individuals and companies last year through increased scrutiny of flips and other real-estate transactions in Vancouver.

A CRA auditor who came forward to The Globe with concerns about enforcement said that that is barely scratching the surface of the dodging going on. “CRA will catch very few people, because the [inexperienced] auditors … have no idea of foreign income and how individuals hide income,” says the auditor, who requested anonymity, for fear of being fired.

“Management has known of this issue for at least three years but did not want to pursue the real estate flips, because most of the auditees were Chinese in descent. They were scared of being racist … I can confirm this fact, based on meetings held.”

In a statement sent to The Globe, the CRA said that 2,203 files related to real estate were audited last year in Ontario and B.C., and that the agency plans to do “as many or more” next year. “The Canada Revenue Agency takes non-compliance very seriously, and is committed to protecting the fairness and integrity of the tax system,” it says.

Richer banks, poorer Canadians

In addition to holes in the tax system, speculators like Mr. Gu also rely heavily on Canadian financial institutions to give their clients multimillion-dollar loans. “They are using this money temporarily – to make more money – instead of using their own money,” Mr. Lazos says. “Then prices go up. We are making the bank richer and the Canadians poorer.”

Correspondence in the documents that Mr. Lazos supplied suggests that lenders think they are approving mortgages for his investor clients, not for Mr. Gu. If lenders are in the dark, experts say, they may be unwittingly violating anti-money-laundering laws, which require them to know detailed information about all their clients – which, in this instance, should include Mr. Gu.

 

The bank thinks it’s complying with anti-money-laundering laws in knowing its client, but it isn’t. No bank likes being lied to

Christine Duhaime an expert on anti-money-laundering laws

“If the client defaults, who are they going to collect from? Because they don’t know who the beneficial owner is of these properties,” says Christine Duhaime, an expert on anti-money-laundering laws. “The bank thinks it’s complying with anti-money-laundering laws in knowing its client, but it isn’t. No bank likes being lied to.”

E-mails in the records show that RBC questioned Mr. Gu when it realized mortgage payments from a bank client were coming from Mr. Gu’s business account, but let it continue after the client gave his permission for the payments to continue. The Globe asked RBC about this; it declined to comment.

Meanwhile, more recent documents show that Mr. Gu is moving into more sophisticated ventures. A recent business plan, written in Chinese, suggests he is crowdfunding to buy real estate, a practice that has been under scrutiny by regulators.

The plan states that Mr. Gu finds properties to buy, and his clients cover the down payments. The rest of the money comes from bank financing and money raised through “social finance.” Properties are then flipped, loans paid off, and profits shared by all.

Mr. Gu also persuaded investor clients to lend him a total of $1.4-million so that his company could invest in a B.C. jade-mining operation.

Contracts show that 28 clients were promised a 12-per-cent return if they each lent $50,000 to Mr. Gu’s company for less than a year. That amount is interesting: It matches, to the dollar, the maximum a citizen can take out of China in a year.

Mr. Gu solicited the deals without giving his investors a prospectus, which is required by law unless those investors are close associates or wealthy enough to bear the risk. Records show that Mr. Gu is now under investigation by B.C.’s securities regulator over this scheme.

As a result of The Globe’s inquiries, both B.C.’s Financial Institutions Commission, which regulates mortgage brokers, and the B.C. Securities Commission have expressed interest in the kind of real-estate activities Mr. Gu engages in.

Mr. Lazos says that his whistle-blowing will be worth it only if it jolts Ottawa and B.C. into action. And his reasons, at least in part, lie close to home: “I hate the fact that for my daughter and my grandchildren, there is no way they can own a house in this city.”

Kathy Tomlinson is a Globe and Mail reporter based in Vancouver. You can join her for a Facebook Live chat on Vancouver real estate on Sept. 13 at 11 a.m. PT/2 p.m. ET at facebook.com/theglobeandmail.

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Mysterious Chinese Firm On Real Estate Spending Spree A Cautionary Tale For Canada

A mysterious Chinese company, Anbang Insurance Group has attracted the attention of The New York Times, The Wall Street Journal, Forbes, Fortune Magazine, and government authorities in the United States and other countries.  The cause of the scrutiny has been Anbang’s sudden involvement in a number of massive multi-billion dollar real estate investments around the World. Formed in 2004, Anbang apparently holds assets worth at least $295 Billion, but a months-long investigation by the New York Times has revealed an extremely opaque structure, empty offices, obscure shareholders, and extensive political connections to the Chinese elite. Wu Xiaohui, Anbang’s Chairman, is married to Deng Xiaoping’s granddaughter  and involved with at least two others with family connections to the People’s Liberation Army. Both Wu and his wife, Zhuo Ran have disappeared from Anbang’s list of shareholders after the New York Times investigation began. Anbang has all the earmarks of a Panama Papers situation: Chinese money laundering, corruption at the highest levels, and mysterious shell companies. Analysis of Anbang and its operations is a cautionary tale for Canadian authorities fretting over foreign real-estate buyers and skyrocketing real-estate prices.

Last Spring, as B.C. Premier Christy Clark was preparing to announce new regulations to stem the flood of non-resident residential real-estate buyers, she simultaneously flew to China on a trade mission with a group of B.C. commercial real estate moguls, apparently to reassure the Chinese that B.C. was still interested in Chinese commercial real-estate investment. But by the time Clark made her trip to China, questions about the Anbang Insurance Group’s ownership had already been flying in the U.S. financial press for over two years. Whether it may have been more prudent for Clark to defer promoting Chinese commercial real estate investment in Vancouver, only time will tell. What does appear clear is that China is demonstrating a much more aggressive, arrogant and even hostile tone in its relations with both Canada and the United States. This is evidenced by this week’s G20 Summit in Hangzhou, beginning with the deliberate snubbing of Barak Obama on arrival in China, and a number of other incidents, including Trudeau’s inability to achieve an agreement with China on canola oil. Canada needs to be smarter about how it deals with these new realities.

Anbang Insurance Group Corporate Headquarters, Beijing 

The dingy fourth floor of this building in Beijing houses two companies that control assets of Anbang Insurance Group worth more than $15 billion.

Wu Xiaohui, Chairman of Anbang Insurance Group

Reblogged from The New York Times

A Chinese Mystery: Who Owns a Firm on a Global Shopping Spree?

Owners of Anbang, a Chinese insurer behind a wave of multibillion-dollar deals, include relatives and friends of its politically connected chairman.

By MICHAEL FORSYTHE and JONATHAN ANSFIELDSEPT. 1, 2016

Pingyang County’s verdant hills still hint at a long-lost China. Rice paddies and villages surround its bustling towns, and in the fields, farmers wade into the mud to plant seedlings as they have for thousands of years.

It is an odd place to find the people behind a Chinese corporate powerhouse that is turning heads on Wall Street with a global takeover binge. Yet the area is home to a tiny group of just such people — small-time merchants and villagers who happen to control multibillion-dollar stakes in the Anbang Insurance Group, which owns the Waldorf Astoria in New York and a portfolio of global names and properties.

American regulators are now asking who these shareholders are — and whether they are holding their stakes on behalf of others.

The questions add to the mystery surrounding a company that seemed to come out of nowhere, surprising deal makers with offers to pay more than $30 billion for assets around the world.

Anbang’s shopping spree is part of an outflow of money from China that has reshaped global markets but has often been shrouded in secrecy, sometimes by prominent Chinese looking to shift their wealth abroad without attracting attention at home. That poses a problem for international regulators trying to identify the buyers behind major acquisitions and to assess the riskiness of these deals.

The Anbang shareholders in the Pingyang County area hold their stakes through a byzantine collection of holding companies. But according to dozens of interviews and a review of thousands of pages of Anbang filings by The New York Times, many of them have something in common: They are family members and acquaintances of Wu Xiaohui, Anbang’s chairman, a native of the county who married into the family of Deng Xiaoping, China’s paramount leader in the 1980s and ’90s.

In many ways, Anbang and Mr. Wu appear to be archetypal products of China’s mix of freewheeling capitalism and Communist Party dominance, a formula that has fueled nearly four decades of untrammeled growth.

Anbang got its start as an auto insurance company in 2004 in the eastern Chinese city of Ningbo. For years it was only a minor player. But it took off as it became more aggressive with its finances, buying stakes in Chinese banks and bringing in money by selling high-risk, high-yield investment funds to ordinary Chinese.

Mr. Wu, 49, a former car salesman and low-level antismuggling official, led Anbang through this transformation and is now known as one of China’s most successful businessmen. He wears tailored suits and polished loafers,hobnobs with the likes of Stephen A. Schwarzman of Blackstone, and sometimes holds court at Harvard.

But he does not appear in Anbang’s filings as an owner.

It is common in China for the wealthy to have their shares in companies held in others’ names. Known in Chinese as baishoutao, or white gloves, these people are often trusted relatives or acquaintances. Many defend the practice as a way to protect their privacy in a nation where riches can be a political liability. But others say white gloves can be used to hide ill-gotten gains and thwart corruption investigators.

On the fourth floor of this shabby building in Beijing is an office that is home to two companies with a total stake of more than $15 billion in assets of one of China’s biggest financial conglomerates: the Anbang Insurance Group. CreditGilles Sabrie for The New York Times

Anbang did not respond when asked if Mr. Wu was a shareholder and declined to answer questions about its owners.

The company, a spokesman said, “has multiple shareholders who have made all required disclosures under Chinese law. They are a mix of individual and institutional shareholders who made a commercial decision to invest in the company. Anbang has now grown to be a global company thanks to the support of these long-term shareholders.”

For investors and regulators, white gloves can make it difficult to evaluate the financial health of a Chinese buyer. Ownership may be concentrated in the hands of a few people, posing hidden risks, and companies with government connections could be vulnerable to political shifts or become magnets for corruption.

“It is very important for businesses to know who they are ultimately doing business with, and for investors, what they are investing in,” said Keith Williamson, a managing director in Hong Kong at Alvarez & Marsal, a firm that carries out corporate fraud investigations.

It is not clear whether the shareholders in the Pingyang County region are holding large stakes on behalf of anyone else. But on May 27, Anbangwithdrew its application with New York State to buy an Iowa insurer, Fidelity & Guaranty Life, for $1.6 billion. Regulators had asked about ties between several shareholders with the same family names, said one person briefed on the matter who spoke on the condition of anonymity.

A $6.5 billion deal for a portfolio of hotels that includes the Essex House in New York and several Four Seasons locations is awaiting results from a security review by the American government. In March, Anbang withdrew a $14 billion bid for Starwood, the operator of Sheraton and Westin hotels, in a move that surprised Wall Street.

The company could come under greater scrutiny as it prepares to sell sharesin its life insurance business on the Hong Kong stock exchange next year. Already, at least one major New York-based investment bank has raised concerns about Anbang’s ownership after studying its shareholding structure to evaluate whether to help with its overseas deals, according to two people involved in the matter who asked not to be identified because the process was private. The bank did not participate in Anbang’s deals.

Separately, the Chinese magazine Caixin reported in May that Chinese regulators were examining Anbang’s riskier financial products. It is unclear where that inquiry stands or whether Anbang’s ownership structure is being investigated.

President Xi Jinping has waged a campaign against graft since taking office, and the use of white gloves has recently come under scrutiny. “White gloves are accompanied by power’s black hands,” the Communist Party’s disciplinary watchdog wrote in a report last year.

Questions about Anbang’s owners come as Chinese companies make deals around the world — sometimes representing efforts by China’s powerful to move money out of the country, as the economy slows and the party tightens its grip on everyday life.

Photo

Wu Xiaohui, chairman of Anbang, at a global insurance conference in 2015.CreditBen Asen/International Insurance Society

China has encouraged some capital outflow to improve the performance of its investments and expand its influence. But the subject of the elite moving money overseas is politically sensitive, raising questions about the source of their wealth and their confidence in the Chinese economy.

Luo Yu, the son of a former chief of staff of China’s military, said China’s most politically powerful families had been transferring money out of the country for some time.

“They don’t believe they will hold on to power long enough — sooner or later they would collapse,” said Mr. Luo, a former colonel in the Chinese Army whose younger brother was a business partner with one of Anbang’s founders. “So they transfer their money.”

At its founding in 2004, Anbang had an impressive list of politically connected directors. Records show early Anbang directors included Levin Zhu, son of a former prime minister, and Chen Xiaolu, the son of an army marshal who helped bring Communist rule to China.

Then there was Mr. Wu, who was born Wu Guanghui but was known as Wu Xiaohui from a young age. Relatives said he grew up in a Catholic family; a crucifix sat on his aunt’s dining room table, and she wears a necklace with a portrait of the Virgin Mary.

Mr. Wu married Zhuo Ran, a granddaughter of Deng, the Chinese leader who brought China out of the chaos of the Mao era. Together, Mr. Wu, Ms. Zhuo, Mr. Chen and their relatives owned or ran the companies that controlled Anbang, according to company filings.

Anbang leapt onto the global stage with last year’s purchase of the Waldorf Astoria and its aborted bid for the Starwood chain. By this year, Anbang’s assets had swelled to $295 billion.

It is not clear what prompted Anbang’s sudden interest in overseas assets. But the shift came after a reshuffling of its ownership structure that also led to the injection of more than $7.5 billion into the company.

Company documents filed with Chinese agencies show that the number of firms holding Anbang’s shares jumped to 39, from eight, over six months in 2014. Most of those firms received large injections of funds. At the same time, Anbang’s capital more than quintupled.

Ms. Zhuo disappeared from the ownership records by the end of that year. Many of Mr. Wu’s relatives did as well. Mr. Wu and Mr. Chen had disappeared earlier from the records.

Photo

The Anbang Insurance Group owns the Waldorf Astoria in New York, above, and a portfolio of global names and properties.CreditChang W. Lee/The New York Times

Mr. Zhu, who does not appear to have owned shares, disappeared in paper filings from Anbang’s roster of directors by 2009, though he was listed as a director on online government filings as late as 2014.

Mr. Wu, Mr. Chen and Mr. Zhu did not respond to requests for comment, and Ms. Zhuo could not be reached. In March, Mr. Zhu told Chinese reporters that he was not an Anbang director.

Anbang’s current shareholding firms are not well-known names in China, and some appear to have been set up just to hold Anbang shares. One lists its address as the empty 27th floor of a dusty Beijing office building. Two more list an address at a mail drop above a Beijing post office.

Using corporate filings, The Times compiled a list of nearly 100 people who own shares in the firms and traced about a dozen to Pingyang County or nearby. Reporters visited the area, in China’s eastern Zhejiang Province, and interviewed dozens of residents, including several whose names appeared on the list. They also interviewed an uncle, an aunt and a nephew of Mr. Wu.

The latter two, as well as others in the area, said one name matched that of his sister, Wu Xiaoxia. The family members said several other names matched those of Mr. Wu’s extended kin, including two cousins and others on his mother’s side of the family. Through their various stakes in Anbang shareholding companies, these people control a stake representing more than $17 billion in assets.

Other names matched local acquaintances of Mr. Wu, including Huang Maosheng, a local businessman who confirmed in a brief phone interview that he had a business relationship with Mr. Wu but declined to elaborate.

One village leader and neighbors identified the names of four of Mr. Huang’s relatives — including some whom they described as common workers — from among those on the list. Their Anbang holdings represent about $12 billion in assets.

Another resident, Mei Xiaojing, said two names on the list matched those of her relatives. Asked if she knew Mr. Wu, she said, “Well, yes,” then ended the phone conversation and did not respond to subsequent calls. Through multiple holding companies, those three people have a stake representing about $19 billion in Anbang assets.

As Anbang rose, so did Mr. Wu’s profile. In 2013 Mr. Wu secured a yearlong position as a visiting fellow at the Asia Center of Harvard, joining a growing list of politically connected Chinese billionaires with ties to Harvard.

Ezra F. Vogel, a professor emeritus at Harvard who wrote a biography of Deng, said he met Mr. Wu on several occasions.

“He had this staff of sharp people who were working for him,” Mr. Vogel said. “It seems that they were doing the detail work, and he was the friendly man supplying the connections.”

Apple €13 Billion Tax Bill Really A Fight Over Who Gets the Money: EU or US?

Apple is facing a major corporate crisis as public opinion is focused on corporate greed

Ireland operating like a “rogue state”

Today’s long-expected announcement that the European Union has assessed that Apple owes €13 Billion ($14.5 Billion) in back taxes to Ireland and the EU, is only one part of a much larger story of multinational corporations global tax jurisdiction and tax avoidance, and a looming fight between the EU and US over which one gets the €13 Billion. There is not much disagreement whether Apple actually owes the money. It also reopens the as yet unresolved matter of multinational corporate taxation, most recently exposed by Pfizer’s announcement that it would move its HQ to Ireland to avoid U.S. taxation, which was later blocked by the U.S. government.

In 1991, Apple struck a tax deal with Ireland that was aboveboard and legal. The Irish government provided Apple with a “comfort letter” that said the company would pay very low rates of tax if it based its European operations in Ireland. In the 25 years since that time, Apple has created thousands of jobs in Ireland. By 2015, it had 5,000 employees in the country. Another 1,000 jobs are planned for the headquarters in the Irish city of Cork. This year, Apple will open its site near the town of Athenry, with another 200 jobs in the making.The result of the deal between Apple and Ireland, intended or not, was pretty clear: Give us low taxes, and we will give you jobs.

The problem with this is that Ireland has become a focal point for global corporate tax evasion by numerous foreign corporations. Ireland has suffered through a cycle of boom and bust, culminating in the 2008 global financial meltdown, which left Ireland’s economy in shambles. The upshot is that since that time, Ireland has become the poster child for tax evasion schemes, which has led to numerous EU investigations of Ireland’s tax laws. Ironically, it also led KPMG Canada to establish its own similar scheme in The Isle of Man, now under investigation by the CRA.

The bottom line is that this could not be happening at a worse time for Apple. The company is very likely facing a major corporate black-eye, at a time when public opinion is focused on corporate greed, income inequality and the decline of the middle class.

The opening salvo in a much larger global issue

“U.S. companies are the grand-masters of tax avoidance. I see it (U.S. objections to the EU ruling) as the United States digging in its heels, that it is protecting its corporate champions when in fact it’s claim jumping on what is really European income,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.

Margrethe Vestager, European Union Commissioner on Competition

The EU charges against Apple:

• Apple’s effective European tax rate was 1% on sales of 16 billion euros or more per year.
• It sank as low as 0.005% in 2014.
• Apple created a head office that did not exist: “This ‘head office’ had no operating capacity to handle and manage the distribution business, or any other substantive business for that matter … The ‘head office’ did not have any employees or own premises.”
• The pact deprived other European countries of billions of euros in unpaid taxes.

 

Reblogged from The New York Times:

Apple Must Pay Billions for Tax Breaks in Ireland, E.U. Orders

By JAMES KANTER and MARK SCOTTAUG. 30, 2016

Europe’s antitrust enforcer ordered Ireland to collect billions in back taxes from Apple, a move that will ramp up trans-Atlantic tensions over what global companies pay in the countries where they do business.

The decision, part of a broader crackdown on tax avoidance by the European Union commissioner for competition, slammed Ireland for providing illegal incentives that allowed Apple to cut its tax bill in the region to virtually nothing some years. The clawback of taxes — 13 billion euros, or about $14.5 billion, plus interest — is a record penalty by the union for such activities.

The ruling adds to a strained relationship between the United States and the European Union over who has the right to regulate tax payments by some of the world’s largest companies.

The European Commission, under the leadership of Margrethe Vestager, the competition chief, has aggressively sought to stamp out sweetheart tax deals that countries strike with multinational companies. Along with Apple, the campaign has also ensnared Starbucks in the Netherlands, Amazon in Luxembourg and Anheuser-Busch InBev in Belgium.

But American officials have warned that the commission is overstepping its power given that taxes are typically left to national governments to oversee and that European officials should not retroactively issue penalties in past tax rulings. They also emphasized that such cases undermine continuing efforts to overhaul global policies and create measures to curtail tax avoidance.

“U.S. companies are the grandmasters of tax avoidance,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.

“Nevertheless, because of the nature of U.S. politics,” he said, the Apple case “will be framed by the U.S. as Europe overreaching and discriminating against ‘our team.’ ”

Since early this year, Ms. Vestager and Jacob J. Lew, the United States Treasury secretary, and their teams have met regularly to discuss Europe’s state-aid tax investigations. Mr. Lew visited Brussels in July to put forward the American perspective.

 

EUROPE By E.B.S. VIA ASSOCIATED PRESS 1:01

Apple to Pay $14.5 Billion in Back Taxes

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Apple to Pay $14.5 Billion in Back Taxes

On Tuesday, Europe’s antitrust enforcer ordered Ireland to claw back billions from Apple over illegal tax breaks.

By E.B.S. VIA ASSOCIATED PRESS on Publish DateAugust 30, 2016.Photo by Andrew Testa for The New York Times. Watch in Times Video »

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Just last week, the Treasury Department released a report criticizing any efforts to claw back taxes from American companies. The document repeatedly claimed that the European Commission did not have the right to undertake the clawbacks and that they could harm America’s efforts to collect taxes from domestic companies with vast international operations.

“That outcome is deeply troubling as it would effectively constitute a transfer of revenue to the E.U. from the U.S. government and its taxpayers,” Robert B. Stack, a senior Treasury official, said in the report.

The European Commission denies these claims, saying that it is relying on a history of using state-aid rules related to corporate tax issues. The Brussels-based agency also says that it has the right to act when certain companies are provided with an unfair advantage — either through tax breaks or other incentives — and that Apple’s operations are based in Ireland, therefore falling under its jurisdiction.

“No rules have been changed — not one rule,” Ms. Vestager said at a news conference in Brussels on Tuesday. “This is a question of paying unpaid taxes.”

In the Apple case, the antitrust commission said that the deals with Ireland allowed the company to allocate profits from two Irish subsidiaries to a “head office,” but that it could not have generated such profits since it had few operations and little distribution or substantive business.

By doing so, the commission said that Apple could effectively lower its tax rate on European profit to just 0.005 percent in 2014. Ms. Vestager said at a news conference on Tuesday that amounted to roughly €50 for every €1 million in Apple’s European profit.

“The so-called head office had no employees, no premises, no real activities,” Ms. Vestager said.

Apple defends its tax practices, saying it follows the law and pays all of its taxes.

“The commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money,” the company said in a statement. “It will have a profound and harmful effect on investment and job creation in Europe.”

Ireland has broadly faced scrutiny for its tax strategies to attract large multinationals.

Its corporate tax rate, at 12.5 percent, is one of the lowest in the developed world. Other incentives and breaks allow companies to cut their bill even further. While it is phasing out some of the more contentious loopholes, Ireland just introduced a new break for revenues on intellectual property, a potentially huge benefit to large technology companies with troves of patents.

How Europe Is Going After Apple, Google and Other U.S. Tech Giants

The biggest American tech companies face intensifying scrutiny by European regulators, with — pressure that could potentially curb their sizable profits in the region and affect how they operate around the world.

The United States has a complicated view on Apple’s dealings in Ireland. The European inquiry was spurred in 2013 when a United States Senate committee said that Apple had negotiated a special corporate tax rate of 2 percent or less in Ireland.

The Treasury has also taken steps to curtail so-called inversions, in which an American company buys an overseas counterpart and shifts its headquarters overseas to lower its taxes. Ireland, with its low corporate tax rate, has been an especially big beneficiary of such deals, which helpedplump up the country’s economy last year.

Ireland stands by its approach to taxes, saying it did not give preferential treatment to Apple or other companies. The country’s Finance Ministry, in a statement, said that the commission’s decision would undermine continuing global tax overhaul and create uncertainty for business in Europe.

The finance minister, Michael Noonan, said he would move to appeal the Apple decision, adding it was “necessary to defend the integrity of our tax system.”

“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for substantive investment,” he said.

Apple also said it would look to overturn the decision, although any appeals process could take years.

“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” the company said in a statement.

The commission said the amount due in Ireland could be lowered if the American authorities decided that Apple should have paid more tax in the United States.

The commission also said that other countries in the European Union could take a share of the money if Apple conducted more taxable business in those nations than the company had previously declared. That could reduce the amount Ireland collects and give additional revenue to other countries.

Apple is also expected to have to pay interest on the €13 billion, but the commission did not disclose how much that would be.

Joseph Stiglitz Resigns As Panamanian Government Advisor on Panama Papers Scandal

Panama Papers: Joseph Stiglitz quits as Panamanian Govt adviser

• From BBC News, August 5, 2016

 

Nobel Prize-winning economist, Joseph Stiglitz is one of two advisers to Panama’s government who have stood down

Stiglitz and Swiss Expert, Mark Peith Both Resign From Panamanian Government Investigation

Nobel Prize-winning economist Joseph Stiglitz has quit an advisory panel to Panama’s government set up after the Panama Papers scandal.

Some 11.5m documents, leaked from Panama law firm Mossack Fonseca, revealed huge offshore tax evasion.

The government appointed a panel to look at Panama’s financial practices.

But Mr Stiglitz and and Swiss anti-corruption expert Mark Pieth, who also quit, said government interference in their work amounted to “censorship”.

The seven-person panel also included Panamanian experts.

“I thought the government was more committed, but obviously they’re not,” Mr Stiglitz told Reuters news agency. “It’s amazing how they tried to undermine us.”

A statement by Panama’s Ministry of Foreign Affairs said “the Panamanian government understands both resignations and internal differences”, adding that it maintains a “real commitment to transparency and international co-operation”.

The ministry said it had already acted on some recommendations made in the panel’s preliminary report and was considering others, without specifying which measures had been taken.

But a statement by Mr Stiglitz and Mr Spieth to Reuters said they were concerned that the panel’s final report would not be published.

“We can only infer that the government is facing pressure from those who are making profits from the current non-transparent financial system in Panama,” Mr Stiglitz said.

The Panama Papers were investigated for months by hundreds of investigative journalists, including staff from the BBC.

The documents, which were first detailed in April, revealed the hidden assets of hundreds of politicians, officials, current and former national leaders, celebrities and sports stars.

They list more than 200,000 shell companies, foundations and trusts set up in tax havens around the world.

Mossack Fonseca said it had been hacked by servers based abroad and filed a complaint with the Panamanian attorney general’s office.

The company said it did not act illegally and that information was being misrepresented.

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