They're the stories that tug at us when we read them.
Here's one from Waco, Texas: “My 86 year old mom...is losing her money to these people who promise her in order to accept her 'sweepstakes' she has to keep sending them money for processing fees. She suffers from dementia and this company is taking advantage of her. Someone needs to find this company and make them stop abusing and taking money from the elderly.”
Someone did, the U.S. Treasury Department.
They found the company—PacNet Services, a payment processor—on Howe Street in downtown Vancouver.
According to the department, it had “a nearly 20-year history of knowingly processing payments related to fraudulent solicitation schemes”.
The company continued to process transactions for the “Maria Duval” psychic scam for five years, despite warnings from the North Dakota attorney general in 2009.
It received subpoenas from the Iowa attorney general in 2014 “regarding the victimization of the elderly and other Iowans by fraudsters they identified as PacNet clients”.
U.S. law enforcement officials shut PacNet down last year.
Mistress Deelight—another client—wasn't so delighted at the news, based on a series of tweets between her and other online mistresses.
In an unusual plot twist, turns out the B.C. government was giving PacNet a 100 percent corporate tax break on its international financial transactions, through the little-known international business activity program at AdvantageBC.
The tax breaks kept coming and coming for PacNet too, going back to at least 2006.
Former finance minister and now AdvantageBC CEO Colin Hansen told New York Times reporter Dan Levin in April that PacNet and two associated companies were no longer members. Hansen later added—in an interview with CKNW—that it had failed to pay its membership fees in January.
The media reports on the company's activities seemed to be disconcerting to him as well.
The International Financial Centre BC (IFC)—as AdvantageBC was once known—and its Quebec counterpart, Finance Montréal, trace their origins back to 1986, when the federal government established the International Banking Centre designation “to encourage the repatriation of non-resident loans booked in low-tax jurisdictions”.
Unlike its Quebec counterpart, which stayed true to its financial-services industry roots, AdvantageBC has morphed into the Frankenstein of tax breaks.
Over the last decade the government extended the program into new industries, including the pharmaceuticals, film distribution, carbon-credit trading, green energy, wastewater treatment, and fuel-cell technology.
And, once again, the profits earned from certain of its transactions are fully exempt from B.C.'s corporate tax, except for international patent-related activities in life sciences and green technologies, which make do with a 75 percent exemption.
The added incentives kept getting sweeter and sweeter as well.
In 2004, the government repealed the interest adjustment “to limit interest expenses in the calculation of revenue from international loans” and did so retroactively to “the commencement of the Act”.
The program was expanded to include more employee classifications within the provincial income-tax exemption program for key employees. The break starts out at 100 percent for “eligible employees in the first two years of coming to B.C., with the exemption dropping to 25 percent over five years”.
Employees who qualify “must be paid wages of at least $100,000 annually".
Canadians need not apply. The incentive is only for foreign residents, a temporary foreign workers program for high-income earners, if you will.
In the 2008 B.C. budget, then-finance minister Carole Taylor announced that the government intended "to phase out the capital tax on financial institutions by 2010", noting: "Some obstacles are holding us back from becoming a more important centre for international finance."
Taylor credited Paul Fairweather, former head of the IFC, for the idea. Fairweather was looking to model Vancouver after Dublin, as the place “to do international financial business”.
Some also credit former New Brunswick premier Frank McKenna—deputy chair of TD Bank Group—for playing a role.
Taylor was appointed to the board of the TD Bank Financial Group in 2009, after stepping down as an MLA.
TD is a member of AdvantageBC. Its refund claim in 2012 was for $2.8 million. TD reported a profit of $6.4 billion that year.
The size of its claim is known only because the bank was a day late in getting its paperwork in and the claim was denied by the government, bringing new meaning to late fees.
TD Bank sued and, in April, the B.C. Court of Appeal ruled in its favour, ordering B.C.'s commissioner of income tax “to reconsider the bank's request for an extension to file its 2012 return”.
Along with the program's morphing, came a rapidly escalating cost.
In the nine years from 1999 to 2007, the province forewent $26 million in potential corporate tax revenue through the program.
In the nine years since, $176.3 million.
AdvantageBC boasts an interesting assortment of members.
In 2008, its website listed 61, but they were not all unique companies. Four were part of HSBC Bank.
Today, 66 members are listed.
There may be more, as there's no obligation on the part of AdvantageBC to identify companies that are in the program. Hansen told the New York Times: “Some companies are a little more sensitive about being included.”
Despite Hansen's claims that “the program focuses mostly on companies in China,” only four of the 66 are based in that country and three are state-owned enterprises of the Chinese government.
Four of Canada's five big banks are members.
Phillips, Hager & North Investment Management (before it was acquired by RBC in 2008) was a member. RBC is a member today.
Westminster Management Corporation (WMC)—part of Lord Robert Iliffe's UK-based Yattendon Group—joined AdvantageBC in 2016.
Founded in 1925, WMC is a private real estate development and investment company.
In 2014, it sold “surplus undeveloped land” in Richmond to the Pacific Autism Family Centre.
Lord Iliffe—an active member of the Rolls-Royce Enthusiasts' Club—does well for himself through tax breaks. In 2014, The Daily Mirror reported he was paid £195,000 “in benefits to meet housing costs for rented accommodation for tenants on low incomes”.
At the time Lord Iliffe ranked 333rd on The Sunday Times rich list with wealth of £245 million.
Footloose might aptly describe a few of the members of AdvantageBC. It's a business term for “an operation that can be placed and located at any location without effect from factors such as resources or transport”.
One moved from Bermuda to Burnaby to take advantage of the tax breaks, not the beaches.
Another, a U.S. hedge fund, used a shared office in Vancouver as its business address and a California business telephone number in a Securities and Exchange Commission filing.
Two class-action lawsuits have been filed in the United States against collection agency First Resolution Management, another member, alleging questionable business practices. None of these allegations have been proven in court.
Sister companies of some members have run afoul of regulators and litigators both in Canada and the United States.
Four other members were among the Top 25 banks implicated in what became known as the Global Laundromat, a four-year scheme to launder US$20.8 billion in organized crime proceeds from Russia. The four reportedly laundered more than US$1.5 billion.
And for three it wasn't the first time they'd been caught up in a global money laundering scheme.
Unlike Finance Montréal, not a single member of the board of directors of AdvantageBC represents the government, even though AdvantageBC is a compulsory conduit to be eligible for the tax breaks.
The organization takes a 0.45 percent cut of the “income earned by the international business in the preceding year” to help finance its operations.
In 2016, the cut accounted for $1,027,582 of the organization's funding. Membership fees brought in $78,845. Hansen is paid $189,000.
This information came to light after the New York Times sued AdvantageBC to get the numbers.
In the case of PacNet and its two associated companies, it does put the organization in a rather odd position in regards to the source of at least part of its funding.
Forty-six members have donated a total of $8.7 million to the B.C. Liberal party (2005 to 2016), not including donations from the organization itself.
At its 20th Annual Golf Tournament in 2015, the group raised $1,000 for the Canadian Red Cross.
Some of the companies in the roster of members does make one wonder about the extent of the government's due diligence before tax breaks were extended.
At the very least PacNet should have set off some red flags for someone years before it failed to pay its dues this past January. It would have only taken a Google search to find the flags.
After reading the New York Times article and learning more about AdvantageBC, one person posted online: “perhaps the group should be renamed Take Advantage of B.C.”
He might have a point there.