Courtesy of Financial Post:
Montreal – Revenu Quebec has initiated a massive series of searches and seizures in the Montreal area, alleging that companies and individuals in the gold refining and trading industry engaged in widespread tax fraud on transactions worth $1.8-billion.
More than 175 government investigators conducted the sweep this week, targeting businesses, residences, accountant offices and bankruptcy trustees. Some 125 companies are complicit in the scheme that bilked the government of more than $150-million worth of taxes, Revenu Quebec asserts. No arrests have so far been announced.
The tax department has named only two companies publicly as being the subject of its investigations – Kitco Metals Inc. and Carmen International Inc. Privately-held Kitco, one of the largest retailers of precious metals in the world, denies the allegations against it.
The crackdown marks another major fraud concern for corporate Canada. It comes as the Ontario Securities Commission probes the activities of Sino-Forest Corp., the Toronto Stock Exchange-listed company whose operations in China came under intense scrutiny last week when a report claimed that its assets and revenues had been vastly overstated.
“Revenu Quebec has a duty to be intransigent with those who contravene financial rules and can begin legal proceedings against them,” the department said in a statement. The maximum prison term for anyone found guilty in relation to tax evasion is five years, it said.
Two separate networks of individuals and companies are at the heart of the false-billing scheme, Revenu Quebec said. The six-step fraud involved companies using artificial transactions to obtain refunds of taxes that were never actually paid as gold was turned into scrap and then refined back into its pure state.
“Contrary to Revenu Quebec’s allegations in a press release published [Thursday], Kitco Metals Inc. has never participated in any tax fraud, nor has it ever carried out any fictitious transactions,” the company said in a statement released late Thursday. “In all respects Kitco vigorously contests all aspects of Revenue Quebec’s investigation.”
The company won court approval to appoint an interim receiver, RSM Richter, to help it deal with the allegations. Its daily operations are continuing as they normally do, said company spokesperson Sharlene Dozois.
“[We appointed the receiver] to protect the interest of everyone and have someone work with us through the process,” Ms. Dozois said. “We did that voluntarily.”
Founded in 1977, Kitco is a well-known retailer of precious metals and it also supplies refining services. The company’s 200 employees buy and sell a wide range of precious metal products in gold, silver, platinum, palladium and rhodium from offices in Montreal, New York, Hong Kong and Shanghai. Its website, which carries live spot prices and expert market commentary, claims to attract nearly 1 million visits daily.
Addressing the allegations directly, Kitco says it is being held “unjustly” responsible for the actions of its suppliers.
The company explained in a statement that it buys precious metals scrap and pays its suppliers sales taxes on these purchases for which it receives a tax credit. “It is the responsibility of these suppliers to pay back the sales taxes to Revenu Quebec.
[The ministry] alleges that some of these suppliers have not remitted the taxes paid to them. Revenu Quebec is unjustly holding Kitco responsible for the unremitted taxes, which led to the issuance of the tax assessments.”
Revenue Quebec regularly conducts investigations into alleged fraud and tax evasion. But rarely do the results of the investigations result in sweeps of this size.
In addition to the two companies named, the department named five individuals it believes were involved in producing fake bills related to false tax declaration.
They are Viken Gebenlian, Haroutioun Dakessian, Oskan Hazarabedian, Benjamin Bensimon and Shadia Khatib. No further information was given about the individuals.