David Scheldt, who set up a network of offshore accounts for wealthy clients and consultants, ran a criminal organization that laundered more than $4 million in assets, according to a Canadian court ruling. He pleaded guilty to a number of charges, including mail fraud and breaching trust.
Scheldt played a key role in the Pembroke Group, a network of offshore trusts based in Pembroke, Ontario, Canada.
The Canadian tax code allows trusts to hold assets outside of Canada, but not for tax purposes. That means trusts are only required to provide details of their operations to governments at home, which provides Canada with valuable information on tax evaders.
Scheldt’s first lawyer in Canada, Robert Polhill, said he advised Scheldt to seek advice from outside legal counsel before setting up the Pembroke Group. Polhill is now the chancellor of the University of Ottawa.
But despite such counsel, Scheldt set up the Pembroke Group in early 2012 and used these trust companies to process hundreds of payments from offshore accounts in Central and South America, the Middle East and Africa. The accountant, Donville Kent LLP’s Andrew Kelsey, estimated that 200 accounts were maintained by the Pembroke Group.
Scheldt, who was representing himself, brokered deals where wealthy individuals in Canada, the United States and other countries would wire hundreds of thousands of dollars or as much as $8 million in cash to corporations set up in British Virgin Islands and another offshore tax haven, the Bahamas.
Authorities say Scheldt would then travel to the tax havens to collect the cash and courier it back to the Pembroke Group in Canada.
Scheldt pleaded guilty in August to money laundering, forgery, defrauding the trust of more than $4 million and breaches of trust. By sending cash through other companies, Scheldt could earn more than two-thirds of the Pembroke Group’s operating profit, according to an email from the Canadian Revenue Agency.
“Scheldt actively sought out a tax shelter for clients in Canada and abroad,” said Roy McEnany, an assistant commissioner at the CRA. Scheldt “pursued a corporate structure that enabled him to keep his income abroad for tax purposes.”
Scheldt’s associates, like Edward Eagan, a broker, then would launder money through Pembroke Trust. In a court hearing in February, prosecutors said Eagan passed millions of dollars of the stolen money through his companies, called Genie Capital and HLA Valuations.
“Scheldt, who acted as a front, was not a competent trustee who worked within his powers,” said Steven Quercia, who was the assistant director of the CRA’s F.O.P. Enterprise Unit, which investigates criminal tax evasion.
Scheldt also created a series of international trusts in May 2012. One of these trusts is also associated with Scheldt and his Pembroke Group. The principal of this trust, Fred Curran, fled to the Bahamas in February to avoid prosecution.