Paradise Papers: Two families tried to take offshore route to Nepal, Appleby said no

Appleby was also told to open a bank account for the proposed company in Isle of Man, which would receive a $8-million loan from a yet-to-be-formed company in British Virgin Islands and finance the cement plant in Nepal through “on-lending”.

Appleby records show Anil Gupta was to be the 70 per cent stakeholder in the proposed company in the Isle of Man while the remaining 30 per cent would be with Vinod Poddar. Anil Gupta is the owner of agrochemical major Ambey Group. Vinod Poddar inherited Govind Rubber Ltd after ownership of the family-owned Siyaram Group was restructured.

Anil Gupta’s son Archit Gupta was to be the sole Indian director and Appleby was asked to provide two local directors for the proposed company to be regarded as a tax resident of Isle of Man. Appleby applied for incorporating ‘Plutus International Limited’ and named the two director companies, Pokhara Controllers Ltd and Kathmandu Managers Ltd.

However, records show that in early reviews Appleby’s compliance department flagged several issues, including ownership of the Nepal company.

Vaibhav Gupta — records show he introduced himself as a member of Anil Gupta’s family — informed Appleby that the shares of LCUPL were allocated “in favour of Nepalese people” because a Nepal company required at least 20 per cent local shareholding to be financed by a Nepal bank.

“Once the IOM company is incorporated, this company would engage into a share purchase agreement with our people back in Nepal in order to make LCUPL a fully owned subsidiary of the IOM company,” Vaibhav Gupta said, adding that the clients had general power of attorney from the Nepal shareholders.

On the rationale for setting up an offshore holding company, Vaibhav Gupta said there was no income and withholding tax at the IOM level. “However, there is a withholding tax of 15% at the Nepal level which we need to pay as dead loss on remitting the interest and principal payment to the IOM company in respect of the debenture issued by LCUPL to IOM company. We are only concerned about the tax implications at the IOM level as the rest would be taken care by our Indian and UK solicitors,” he wrote.

Records show that Appleby’s compliance team and the Royal Bank of Scotland (RBS), which agreed in principle to open an account for Plutus International, sought details on the sourcing of wealth to be channelled through the proposed BVI and IOM companies.

Vaibhav Gupta said the investor was “company/group managing HNI (high net worth individual) money” and the loan would be preconditioned on receipt of a proper Source of Funds document from the investor’s bank. He said the clients were unable to provide any document before incorporation of the Isle of Man company since the loan agreement would be “between the Investor’s BVI SPV (special purpose vehicle) and our IOM company specifically incorporated to execute the loan arrangement and act as the holding company for our Nepalese Company.”
But Appleby and RBS were not convinced. Among Appleby’s concerns were:

“We will also need to consider the regulatory issues around the on-lending.”

“We will need full info on the individual(s) behind the funding corporate – interesting that this has yet to be incorporated.”

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“There are obvious jurisdictional issues in respect of the underlying Nepal entity. In addition the location of the Shareholders is High Risk and we will require details of their source of funds/wealth.”

“Seems that lime mining/concrete making in a country like Nepal might include all sorts of bribery issues.”

The RBS was more worried about the Indian clients and their funding. “Nepal is not an issue. The gentlemen, being Indian, will ensure that the entity is considered high risk. You would need to evidence an understanding of the SOF (source of fund) within the bank account application form,” RBS told Appleby.

As Appleby waited for details from the client, a ‘world check’ threw up a few ‘negative hits’ that could not be ruled out “as they didn’t include DoB”. This prompted a note from a staff: “What would you suggest I do on these? Can’t really go out and ask are you this guy because we know what the answer will be ‘No’. Then what do we do?”

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The solution offered was to check the clients’ passports for middle names. But no middle names were included.
After three months, in February 2013, Appleby decided to close and archive the case for six years, serve a disengagement notice, keeping in record that the relationship did not proceed due to “non-provision of CDD” (customer due diligence).

“We are writing to you after noting that as it has been some time since we last corresponded. It would appear from our records that the information and documentation requested was not forthcoming and as such we never performed any of the agreed services. We therefore consider our Letter of Engagement… terminated,” Appleby wrote to Vaibhav Gupta and Vinod Poddar on February 27, 2013.

However, a month later, Gupta and Poddar were back as Appleby clients. On March 27, 2013, Appleby (Seychelles) wrote to Appleby (Isle of Man) “regarding hits obtained in our conflict check” among existing clients. It was advised that “the instruction was allowed to lapse” because “the client was unable to provide documentation and information to satisfy our due diligence requirements”.

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Appleby (Seychelles) recorded: “Preparing legal opinion on Ananta International Limited in relation to entry into facility agreement with Virgin Infraa Investments Inc.” Few details are provided on this in available Appleby records but it drafted share-pledge documents and provided legal opinion to Gupta and Poddar in May 2013.

RESPONSE

Anil Gupta and Vinod Poddar did not respond to multiple emails and phone calls from The Indian Express seeking comment. Responding to an emailed questionnaire from The Indian Express, Archit Gupta wrote that he would “provide all information”. In a subsequent email, he wrote that he was “not in town” and would “revert by next to next week”.

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