Senator reports herself to ethics czar over tax-haven revelations

A Conservative senator is taking the unusual step of reporting herself to a parliamentary ethics czar after a joint CBC/Radio-Canada/Toronto Star investigation into leaked tax-haven records found she was a director of an offshore corporation for 12 years — without, she says, ever knowing about it.

As a result, Senator Nicole Eaton failed to disclose the position, as required, to the Senate's ethics officer, which would normally be a violation of the upper chamber's conflict-of-interest rules.

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But both she and a longtime friend, who acknowledges installing Eaton as a director of the Bahamas-based company, say Eaton didn't know about it, and only learned the news when reporters made inquiries this week.

"I knew nothing of this and… never served on this company's board of directors," Eaton said in a statement to CBC News and the Star. "This clearly occurred without my knowledge or consent."

Beyond the odd circumstances, experts say the revelation points to a glaring gap in the regulation of offshore companies in the Bahamas, a tax haven that vows it is "largely compliant" with international standards on anti-money-laundering measures and know-your-client rules.

Wealthy families

The bizarre tale embroils not only Senator Eaton, who married into the Eaton's department store dynasty, but the heirs of another prominent Canadian business family, the Bassetts, who at one point controlled CTV, the Toronto Argonauts football team and a stake in the Toronto Maple Leafs.

The story begins in 1999 when Eaton was appointed as a founding director of a corporation called Mount Bodun Ltd., according to some of the leaked Bahamian corporate records made public on Wednesday by the Washington-based International Consortium of Investigative Journalists. 

Mount Bodun Ltd. belonged to Eaton's friend Marian Bassett, daughter-in-law of John W.H. Bassett, the late media mogul who once owned the Toronto Telegram newspaper and stakes in the Leafs and Argos.

Marian Bassett said in interviews this week that the company was incorporated at a time when her husband was in deteriorating health, as a way to split their assets and for her to safeguard her and her children's share. She wanted a reliable, familiar face to serve as a director.     

"I put Nicky [Eaton] down as a director because she is a very, very old family friend," said Bassett, who has lived in the Bahamas for most of the last 36 years. "I knew that the kids, the estate would be in good hands."

But, Bassett said, she didn't tell Eaton. "I know you would under normal circumstances," but amid the stress of her husband's illness and treatments, she said, "it just fell through the cracks."

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Remarkably, there was nothing Eaton had to sign, no paperwork to fill out, and no documentation she had to submit, Bassett said.

"There's so many compliance rules now I'm sure it's no longer possible, but back then it was," she said, adding, "Only in the Bahamas, right?"

Fast-forward 10 years, and Prime Minister Stephen Harper named Eaton, a former director of the Conservative Party's fundraising wing, to the Senate. That obliged her to file annual disclosures, under the Conflict of Interest Code for Senators, setting out any corporate directorships that she held.

She has declared none since taking office.

Finally, Bassett said, she switched to a new lawyer in the Bahamas in 2011 and decided to rearrange the officers and directors of her holding company. Eaton was dropped and two of Bassett's children were added.

A register of Mount Bodun Ltd.'s directors and officers is among the leaked documents from the Bahamas. It shows Eaton's occupation as "senator" and her date of resignation as Oct. 6, 2011. 

But that step, too, apparently didn't require an official resignation letter from Eaton. "I don't even know if there was a signature attached to it," Bassett said.

'Prepared to swear an affidavit'

Eaton said she only found about her role in Mount Bodun Ltd. on Monday thanks to inquiries from a reporter.

An adviser to Senate ethics officer Lyse Ricard confirmed Thursday afternoon that Eaton has since reported the matter and that Ricard is looking into it. In her statement earlier this week, Eaton promised "full co-operation."

"I am prepared to swear an affidavit attesting that I had no knowledge of, or participation in, any part of the listing of my name as a director of Mount Bodun Ltd. in any way," the statement says.

Duff Conacher, co-founder of government watchdog group Democracy Watch, said any investigation must go deeper than that.

"The ethics officer should not accept the story without evidence," he said. "It's up to Ms. Bassett and Ms. Eaton to prove this is the case by showing incorporation documents and other filings that would have had to have been made." 

CBC and the Star also reached out to Bassett's current and former lawyers in the Bahamas to try to understand how someone could be officially installed as a corporate director without knowing it — and without signing any acknowledgments or submitting any proof of identity. Neither of them returned calls or emails.

Because directors typically have the power to sign documents, open bank accounts, approve payments and make other significant financial decisions on behalf of companies, anti-money-laundering rules in many countries require that corporate directors at the very least file a copy of an ID document, and sometimes a utility bill, with their company's bank or registration agent.

The lack of such checks is precisely what draws people in other cases to offshore jurisdictions like the Bahamas, said Richard Powers, an expert on corporate governance and professor at the University of Toronto's business school.

"It's not Canada. It's not the United States. They have not gone through and tightened up a lot of these things," he said. "That someone could perpetrate this without someone knowing about it, it goes to the lax compliance regime that goes on there. That's what attracts people." 

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Send tips on this or any other tax haven story to zach.dubinsky@cbc.ca or send us files securely and anonymously using SecureDrop.