Years before Deepak Jaikishan admitted to tax fraud in Canada, he was working to set up hundreds of offshore corporations for wealthy individuals and companies.
For clients who wanted to hide millions of dollars from the Canadian taxman, Mr. Jaikishan used a specialized website, an offshore bank account in Panama and a former English lit professor to help them keep their wealth hidden. Now, Mr. Jaikishan has pleaded guilty to 13 counts of tax fraud related to offshore corporations.
His scheme exploited loopholes in Canadian tax laws that allow for a variety of “don’t ask, don’t tell” reporting requirements for companies and their foreign owners. By using a website that allows individuals to write their own personal income statements and banking information, he was able to create companies for foreign clients without asking them. When he moved on to a Panama bank account, he used it to pay for Canadian customers’ offshore corporations that he created.
During the trial, prosecutors revealed that Mr. Jaikishan used a former English teacher to help him set up offshore corporations. It is believed that the doctor was the first Indian to obtain a Canadian medical degree.
For the cheating scheme, Mr. Jaikishan received millions of dollars in commissions from the offshore corporations, paying kickbacks through the salaries of employees working for the corporations.
Speaking in court, Mr. Jaikishan described how he created anonymous bank accounts in the Middle East and used them to hide income earned by clients in Canada. He told the court how he took an account in the name of a well-known professional as a second set of bank statements, so that he would “obtain 100 percent of the money in a format that would be accepted by authorities as truthful.” In reality, he received an undisclosed amount of money from offshore clients, his criminal defense lawyers have told reporters.
Mr. Jaikishan’s efforts have inspired other Canadian companies to police themselves. Canada’s Revenue Agency announced in August that it has added approximately 58 million Canadian dollars ($44 million) to its total annual deposits from high-risk offshore accounts in an effort to strengthen enforcement. The Canadian government has also partnered with the Organisation for Economic Co-operation and Development (OECD) to crack down on tax evasion schemes and is reporting major tax settlements related to misconduct.
But, the investigation could still be effective. During the trial, Judge Jeffery MacKay cited several instances in which Canadian officials told him that they were unaware of the extent of the offshore work, failing to notify the department of external affairs. Judge MacKay also said that several clients were unaware of the activities carried out by their offshore corporations.
“I think we have turned a blind eye to this,” Mr. MacKay said. “And it’s a long, long blind eye.”