(On screen text: Homeland Security and Governmental Affairs Sub. SD-106)

(Footage of Heinrich Kieber - seen only as a silhouette)

HEINRICH KIEBER: Good morning. I swear that the testimony I am about to give will be the truth, the whole truth and nothing but the truth so help me God.

LIZ JACKSON: The man in silhouette used to be known by the name, Heinrich Kieber.

For two years he worked for the Liechtenstein royal family’s very private bank, the LGT banking group.

HEINRICH KIEBER: I began to realise the very questionable business the LGT was often involved in and the dubious clients they were serving, the kind of business that goes beyond just facilitating massive tax evasion.

JOHN CHRISTENSEN, DIRECTOR OF TAX JUSTICE NETWORK: Liechtenstein is where Swiss bankers tended to shuffle the clients who they really wanted to keep secret, because very few people know where Liechtenstein is, let alone what it does and what services it provides.

LIZ JACKSON: In July this year Heinrich Kieber gave pre-recorded evidence from a secret location to the US Senate’s subcommittee on tax haven banks.

(Excerpt from footage of US Senate hearing)

CARL LEVIN, US SENATOR: His revelations are explosive,

(END OF EXCERPT)

LIZ JACKSON: Now, not even his lawyer knows where he is.

JACK BLUM, HEINRICH KIEBER’S LAWYER: He is in a witness protection program and ah the only way I can communicate with him is through authorities on very special connections. And I have no idea where he is or what’s going on. It’s a very difficult and unusual situation.

LIZ JACKSON: Because the people who protect him believe that he’s, he’s under threat.

JACK BLUM, HEINRICH KIEBER’S LAWYER: Yes, of course.

LIZ JACKSON: Heinrich Kieber had revealed too much about too many people, and he had effectively stolen the proof from LGT itself.

HEINRICH KIEBER: I obtained copies of the data of every legal entity and furthermore copies of vast internal documents before I left the company. All documents provided are authentic original copies and have not been in any way changed or manipulated.

LIZ JACKSON: The documents contained the names of 1,400 of LGT’s clients.

These included Peter Lowy, and his father Frank Lowy, one of the richest men in Australia.

LIZ JACKSON: What is the attraction of a foundation in Liechtenstein for an Australian?

JACK BLUM, HEINRICH KIEBER’S LAWYER: The only attraction is perfect secrecy. That’s what they’ve been selling

LIZ JACKSON: Tonight in a Four Corners exclusive the chief investigator for the Senate committee tells why its report focuses on Lowy’s accounts, and why Frank Lowy rejects it.

LIZ JACKSON: Were you aware that you were highlighting the tax affairs of the second richest man in Australia?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: (laughs) Absolutely no idea.

CHRIS BOWEN, ASSISTANT TREASURER: if you’re a average, ordinary everyday worker, can’t afford a fancy accountant, you’re not using generally tax havens and that’s what makes this such a social justice matter

LIZ JACKSON: its commonplace for the super rich to put their money in off shore accounts, and this can be legal.

But it’s rare that the ways and means they use to hide their assets are laid bare for the world to see.

(On screen text: "Tax Me If You Can: Reporter Liz Jackson")

LIZ JACKSON: Heinrich Kieber is native son of Liechtenstein, born here in 1965.

This tiny alpine country occupies a sliver of land just 25 kilometres long, sandwiched between Switzerland and Austria

It’s a constitutional monarchy with a total population of just 35,000 citizens, that’s roughly the same as Kalgoorlie.

It nevertheless has 15 banks, which together hold a staggering $200-billion in assets

The LGT Bank is the largest, and it’s owned by Liechtenstein’s Princely family.

Hereditary Prince Alois has recently assumed the role of head of state.

In the first 6 months of 2007 his family’s bank reported a profit of $125-million, much of it from LGT trust accounts, the so called foundations, in which overseas clients can discretely deposit their wealth, with no rude questions asked.

(Excerpt of footage from the BBC)

BBC INTERVIEWER: Some officials believe that your country is helping greedy German businessmen to stash their money here, to keep it hidden from the tax man back in Germany and break the law?

PRINCE ALOIS OF LIECHTENSTEIN: Well we’re not helping them. We just don’t ask, continuously questions like a nanny, well you have now certain funds with us since two or three years did you pay your taxes every year?

I think that can't be our role.

LIZ JACKSON: Liechtenstein’s princely family live here at Vaduz Castle. Hereditary Prince Alois has more power than any other monarch in Europe. He can sack the government, call fresh elections, veto any decision of parliament, and he appoints the judges.

So any decision to reform Liechtenstein's banking secrecy laws will only go ahead with his blessing, which makes for an interesting scenario. Because Prince Alois family also owns the LGT banking group, at the centre of tax haven scandal.

And it’s the secrecy that LGT offers its clients that makes the Royal Family a great deal of money.

JOHN CHRISTENSEN, DIRECTOR OF TAX JUSTICE NETWORK: It is their principal source of income and it’s the principal source of income for the entire principality. And let’s be blunt about it, I I’ve in 30 years research into the way these secrecy jurisdictions operate I haven’t found any legitimate way in which they earn their incomes other than through providing secrecy services to external clients.

That is the essential service they provide. They provide the secrecy which avoids disclosure to national authorities and encourages tax evasion. They know that. It’s the case, a fairly clear case of the opportunity creating the thief.

LIZ JACKSON: What LGT didn't know is that they had created the opportunity for someone to steal from them.

In October 2000 they employed Heinrich Kieber, a computer technician, to turn LGT into a paperless office.

HEINRICH KIEBER: I was in charge of the correct handling of all client, clients’ legal entities files to make sure that they are scanned properly and that not one of the very sensitive documents where all the data concerning the beneficial owners are recorded is lost in the process.

LIZ JACKSON: For two years Kieber was inside LGT’s secrecy walls, which tax authorities such as our own Australian Tax Office, are unable to pierce.

He saw the tricks LGT used to keep the tax man in the dark.

HEINRICH KIEBER: When calling the clients should always use the code words agreed and never state their own names or name of the legal entities. In addition, the LGT Group itself does not send any mail to the customers out of from Liechtenstein.

If at all, mail gets sent out via Swiss or Austrian Post Office to avoid the attention of any Tax Enforcement Agency around the world looking for mail coming from Liechtenstein.

LIZ JACKSON: Heinrich Kieber knew what secrecy was worth to LGT and its clients.

In 2003 he wrote to the then Head of State, Prince Hans-Adam, telling him he’d taken LGT’s client data, and seeking the Prince’s assistance with fraud charges from a real estate deal in Spain.

Liechtenstein’s prosecutor, Dr Robert Wallner, tells us the story.

DR ROBERT WALLNER, CHIEF PROSECUTOR, LICHTENSTEIN: He was threatening to release this data unless the Head of State was doing something about these unfair charges.

The Head of State never thought about it but sent on this letter the same day to the Police and to my office.

LIZ JACKSON: And what was your decision in relation to that?

DR ROBERT WALLNER, CHIEF PROSECUTOR, LICHTENSTEIN: We looked at it and we, we considered it ah attempted coercion and we prosecuted him on those charges as well.

LIZ JACKSON: Coercion or essentially blackmail?

DR ROBERT WALLNER, CHIEF PROSECUTOR, LICHTENSTEIN: Yes, yes.

LIZ JACKSON: Heinrich Kieber ended up here in court, facing not just the fraud charges from Spain, but attempted blackmail as well. He was sentenced to four years in jail. What happened next is intriguing. When Kieber appealed, the LGT banking group was paying for his defence, and the outcome was a win for both Kieber and LGT.

He agreed to give back the stolen client data, and walked from court a free man. LGT thought the case was closed, but Kieber had kept copies of their data.

LIZ JACKSON: When you say you thought that was the end of the matter. Did you, did you think that, and what did you think?

DR ROBERT WALLNER, CHIEF PROSECUTOR, LICHTENSTEIN: No I was, I was suspicious already at that time that there is a good risk that he would, we would hear from Mr Kieber again.

LIZ JACKSON: Just after dawn, on February 14th this year, LGT’s worst fears became a reality. German tax authorities began to raid their clients.

In this quiet exclusive suburb of Cologne, the high profile head of Deutsche Post, multi-millionaire Klaus Zumwinkel, was arrested at his home.

The cameras were there to record his public humiliation, he’s alleged to have evaded around one-million Euros in tax, that’s around $1.5-million.

Over 200 searches and seizures have now been conducted in homes and offices, in Germany’s biggest ever tax evasion crackdown.

EDUARD GUEROFF, SENIOR PROSECUTOR, FINANCIAL CRIMES UNIT: We have just found for instance some taxes evaded about 60,000 Euros, but we have on the other hand found two persons with more than 10-millions tax evaded in Euros.

LIZ JACKSON: 10-million Euros that they didn’t pay in tax?

EDUARD GUEROFF, SENIOR PROSECUTOR, FINANCIAL CRIMES UNIT: 10-million Euros yes and they have to pay it. Most probably those people will go to gaol.

LIZ JACKSON: Eduard Gueroff is leading the German prosecution team. It quickly emerged that his team knew where to raid, courtesy of information from Mr Heinrich Kieber.

Kieber had sold the documents he’d stolen from LGT to the German secret service for $6-million.

It’s reported he also demanded and was given a new identity and passport, as part of the deal.

LIZ JACKSON: How many criminal prosecutions do you expect that you will be mounting as a result of the documents provided by Heinrich Kieber?

EDUARD GUEROFF, SENIOR PROSECUTOR, FINANCIAL CRIMES UNIT: At the moment we have about 750 persons, suspected persons and we expect about 750 criminal investigations.

LIZ JACKSON: British tax authorities have now confirmed they too paid for the stolen client data, but they won’t say how much.

They’re now reportedly investigating 100 of Britain’s richest families and expecting to recoup least 100-million Pounds in unpaid tax

So too are France, Spain, Italy, Greece, Sweden, Austria, Canada, America, New Zealand, and Australia

The Australian Tax Office expects to recover $100-million, from 20 separate audits of LGT accounts.

CHRIS BOWEN, ASSISTANT TREASURER: We’re talking about often individuals of extreme high wealth who are able to put the money aside and not access it on a regular basis, but to have it stored away in a tax friendly environment in such a way that Australian Tax Authorities and other Tax Authorities around the world that may be interested are not able to access the information.

LIZ JACKSON: On the 17th July in Washington, bad news suddenly became much worse for Liechtenstein’s LGT bank.

The US Senate’s Subcommittee on Investigations held an all day special hearing on tax haven banks.

(Excerpt of footage of US Senate Hearing)

CARL LEVIN, US SENATOR: Good morning everybody. About 50 tax havens operate in the world today, their twin hallmarks are secrecy and tax avoidance.

LIZ JACKSON: It was chaired by Democrat Senator Carl Levin, who along with Senator Barack Obama, is seeking to enact a bill entitled the Stop Tax Haven Abuse Act.

CARL LEVIN, US SENATOR: Each year the United States treasury loses up to $100-billion in tax revenues from offshore tax abuses.

LIZ JACKSON: Today the focus for Senator Levin is the actions of the LGT Banking Group.

CARL LEVIN, US SENATOR: The actions they themselves took to facilitate US tax evasion.

LIZ JACKSON: Levin’s Committee had located Heinrich Kieber, and invited him to testify as to what LGT’s chief executives knew.

HEINRICH KIEBER: I confronted them about the LGT’s questionable practices that I have seen in many files. The answer was always the same, none of your business just stick to your designated job.

LIZ JACKSON: The Committee agreed to protect Kieber’s identity.

(END OF EXCERPT)

LIZ JACKSON: Why would you want to protect a thief?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Well one may consider him a thief. Another may consider him a whistleblower. The gentleman provided information which thus far has proved to be accurate and it’s proved to lead to the arrest and currently we, we’ll seek prosecutorial actions against many people who violated laws in the home countries.

LIZ JACKSON: Bob Roach is the chief investigator for The Senate Sub Committee’s tax haven work. For over 12 months he and his team have been interviewing witnesses, following up leads, and pouring through the 12,000 LGT documents that Kieber had copied.

It’s LGT’s internal correspondence, none of which was ever meant to see the light of day. This is the really valuable material even the long time tax haven experts rarely get to see.

LIZ JACKSON: Were LGT at all helpful in terms of providing any substantive.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: LGT was not helpful at all in this matter.

LIZ JACKSON: Nothing from them?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Nothing.

JACK BLUM, HEINRICH KIEBER’S LAWYER: These people always do it without any expectation of disclosure. And here we have a situation from the first time where the detailed memoranda of the meetings and the ideas behind what was going on are out in public.

So it’s no longer well I innocently came to Liechtenstein and, and opened these accounts, and you know why is anybody bothering us. It’s now all out on the table and a very specific motivation and here’s the machinery, and here’s the role the bank played.

(Excerpt of footage of US Senate Hearing)

CARL LEVIN, US SENATOR: I ask you both to now stand and raise your right hand.

LIZ JACKSON: The US Senate’s Report then did what no Australian equivalent would do.

It named seven clients of the LGT group, publicly exposing their use of its services.

CARL LEVIN, US SENATOR: Our Report presents seven case studies of US clients using LGT services, Due to time constraints we will discuss only four today.

LIZ JACKSON: It was bad news for one of the wealthiest and best connected business people in Australia, Westfield boss Frank Lowy.

The third case study was an LGT foundation set up by Frank Lowy, and involving his sons.

CARL LEVIN, US SENATOR: Peter Lowy will appear next week to answer questions about these matters.

(END OF EXCERPT)

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: With the Lowy case here there were a number of factors.

LIZ JACKSON: Bob Roach lays out what the Senate Report found in relation to the Lowy account, its complex.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: There was a tremendous amount of money. This was one of the largest cases we looked at. It was roughly six, a little over $60-million involved. There was a complex structure that was set up to keep the Lowy family away from association with the foundation as well as keep away other entities that were associated with the Lowys.

There was a transfer mechanism set up that really passed the money through so that again the trail would be lost, and the use of the Delaware Corporation to identify the ultimate beneficiaries of the funds, again another layer to try to hide this stuff. And we thought all of those aspects of the case, were really a good ah profile of the kind of things that LGT and some of its clients were engaged in.

LIZ JACKSON: Were you aware that you were highlighting the tax affairs of the second richest man in Australia?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: (Laughs) Absolutely no idea.

(Excerpt of footage of Peter Lowy arriving at US Senate Hearing)

LIZ JACKSON: The Senate was more concerned with Frank Lowy’s son, who runs Westfield’s business in the United States. Peter Lowy was asked to appear at the tax haven hearing.

He’s arriving here with his high profile lawyer Robert Bennett, who has also represented both Bill Clinton, and John McCain.

US REPORTER: Mr Lowy are you going to plead the 5th today?

PETER LOWY: You’ll come in and have a look.

(END OF EXCERPT)

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Understand that from our side the issue was not Mr Frank Lowy but his son Mr Peter Lowy who’s a US citizen, because what we were trying to profile were those individuals who were either residents or citizens of the United States and had a tax obligation to our country.

LIZ JACKSON: The Senate Committee team did not just rely on Kieber’s stolen documents but they formed the back-bone of the profiles they produced.

Including the case study of what was called the Luperla foundation, established by Frank Lowy in late 1990s.

(On screen graphics of documents)

Frank Lowy strongly rejects the Senate’s methodology.

He declined to speak with us, but four days ago gave “Four Corners” his first detailed response.

EXCERPT FROM FRANK LOWY STATEMENT: The stolen information. Frank Lowy, his family and family companies reject the authenticity, accuracy and completeness of the stolen information referred in the US subcommittee Report.

LIZ JACKSON: The earliest document the Senate relied on was written by a Mr Peter Widmar, a senior banker at the LGT Trust.

In November 1996 he flew from Liechtenstein to Sydney for a face to face meeting with Frank Lowy and his oldest son, David.

Lowy’s lawyer Joshua Gelbard had come over from Israel, and former Westfield director David Gonski was at the meeting too.

(On screen graphic of LGT memo)

LIZ JACKSON: The LGT memo records they discussed the establishment of a new foundation, with the transfer of funds to be carried out by a holding company.

The LGT banker notes.

EXCERPT FROM LGT MEMO: The Lowy’s have decided they never want to travel to Liechtenstein or Switzerland in connection with these companies again. Contact person will be in the future exclusively Joshua Gelbard.

LIZ JACKSON: The following month back in Liechtenstein, LGT’s Peter Widmer notes this phone conversation with Frank Lowy.

(On screen graphic of Phone Conversation Record)

EXCERPT FROM PHONE CONVERSATION TRANSCRIPT: Lowy insists on a meeting in Los Angeles, his sons David and Peter as well as possibly Steven should take part. He refused my suggestion for a video conference.

The reason for this is considerations of discretion.

LIZ JACKSON: While talking discretion the banker advises his colleagues.

EXCERPT FROM LGT DOCUMENT: Before the meeting in LA, we should prepare our first proposals in writing. These should be, on neutral paper and without reference to any person or corporation in the Lowy field.

(On screen text: January 1997)

LIZ JACKSON: The LGT bankers fly as planned to the meeting in LA, with Frank, David and Peter Lowy.

They discuss the investment strategy of the money that will go into the Luperla foundation, $54-million.

Let’s Peter Wider notes

EXCERPT FROM LGT DOCUMENT: The Lowy’s view these monies as insurance.

LIZ JACKSON: And he records discussing.

EXCERPT FROM LGT DOCUMENT: Financial beneficiaries are the father and the three sons David, Peter and Steven.

(On screen graphic of Frank Lowy Statement)

LIZ JACKSON: The Lowy response is emphatic on this.

EXCERPT FROM FRANK LOWY STATEMENT: Frank Lowy has never said that the financial beneficiaries of the Luperla Foundation were to be himself and his three sons, David, Peter and Steven. None of them ever became nor were intended to become financial or other beneficiaries of the foundation.

(One screen text: March 1997)

LIZ JACKSON: Two months later, and this time, the LGT bankers are flying from Liechtenstein to London, for what should be the last face to face meeting before Luperla is legally established.

The meeting takes place at the Connaught Hotel in Mayfair.

Frank Lowy is keen go ahead with Luperla, but is wanting LGT to use special caution.

(On screen graphic of LGT Document)

EXCERPT FROM LGT DOCUMENT: Frank Lowy is resolute about the establishment. Special caution is to be used, however, since he doesn’t believe the Australian tax authorities that the case with the payment of 25-million is settled for good.

The entire documentation is to be done in such a manner that Frank Lowy and his attorney’s can testify before court in Australia without hesitation.

LIZ JACKSON: The case of the payment of $25-million refers to a long and bruising battle that Frank Lowy had with the Australian tax office starting in the early 1990’s. It arose from the discovery in a Sydney city branch of the National Australia Bank of a mystery cash injection into a Lowy family company account, of $48-million. Bank records showed that the money came from Liechtenstein.

The ATO claimed it was taxable income, and assessed the Lowy family as owing around $50-million dollars, that’s unpaid tax, plus penalties and interest.

Frank Lowy disputed the claim, and the case was finally settled in mid 1995 with Lowy paying the $25-million that’s referred to in the memo.

Six weeks later Frank Lowy was appointed to the Reserve Bank Board.

No-one would have known about this earlier tax dispute, as tax matters are confidential, but journalist Alex Mitchell broke the story.

ALEX MITCHELL, JOURNALIST: I got information from a very reliable source, I mean a source that I regard as impeccable that Frank Lowy, one of Australia’s richest men, had received a tax bill from the Australian Tax Office for something like $20-million.

Now that was a big number and he was a big individual in the business community. So I immediately alerted to the fact I’ve got to research this, find out the truth of it.

And I went to work and of course in the end I got confirmation from the company, from Westfield itself, that this was correct that he had received the assessment and that negotiations, or there was going to be some conflict perhaps going on, but he was going to cop this bill and he would have to pay.

LIZ JACKSON: The Senate report cites the memo referring to the settlement, and urging special caution as evidence Frank Lowy intended to keep Luperla out of reach of the tax man.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: That’s the document it speaks for itself.

LIZ JACKSON: What do you think it’s essentially saying?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: I think it essentially says what we put in our report that Mr Lowy was very concerned that the Australian tax authorities, although they had reached a settlement with him perhaps were not done with their inquiries and he wanted to make sure that the, the funds in this account, the account structured in such a way that Mr Lowy and persons associated with him would be able to represent to Australia that these are not funds that are associated with him.

LIZ JACKSON: Frank Lowy agrees his special caution arose from the 1995 tax settlement, but he provides different explanation for urging it.

(On screen graphic of Frank Lowy Statement)

EXCERPT FROM FRANK LOWY STATEMENT: One or more investigating ATO officers might bear a grudge and wait for an opportunity to re-open the settlement.

LIZ JACKSON: So Lowy.

EXCERPT FROM FRANK LOWY STATEMENT: Sought in all matters, a greater attention to legal documentation should it be needed in any future court case.

LIZ JACKSON: The memo from the Connaught Hotel, also records the bankers and Frank Lowy discussed how to transfer the 54-million into the Luperla foundation. It's noted that.

EXCERPT FROM LGT DOCUMENT: The monies are to be transferred via a specially taken-over British Virgin Islands company, name Sewell.

LIZ JACKSON: Owned by LGT.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Anyone asking for the wire transfer records, the review, would only see money going from some unname, some unknown account in Switzerland to Sewell Services in some other country, to Sewell Services at LGT Bank. Nowhere does anyone have any idea who the real owners of these accounts are.

LIZ JACKSON: So the use of a British Virgin Island company which is owned by the LGT Bank.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: That’s correct.

LIZ JACKSON: Is a way of hiding the transfer so that occurs internal to the bank so that externally you can’t see it so easily.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Precisely

LIZ JACKSON: Frank Lowy’s response contradicts the memo, which records him being present when this process was discussed.

(On screen graphic of Frank Lowy Statement)

EXCERPT FROM FRANK LOWY STATEMENT: It was not known to Frank Lowy at the time that the Bank’s procedure involved complex steps, including the use of special purpose BVI (British Virgin Islands) companies.

LIZ JACKSON: A second memo from London, was sent to Liechtenstein’s Prince Philipp, Chairman of the Board of LGT Trust.

It records Frank Lowy’s appreciation.

(On screen graphic of LGT document)

EXCERPT FROM LGT DOCUMENT: Lowy seems to have been very pleased with our service and would like to invite Prince Philipp and Peter Widmer to London this summer for a special occasion.

(Excerpt of footage from US Senate Hearing)

LIZ JACKSON: There is one final aspect of Luperla that intrigued the US Senate.

The foundation’s legal documents don’t name the beneficiaries of the funds, instead they lay out a convoluted process for determining who they are.

CARL LEVIN, US SENATOR: The key to the plan was a Delaware corporation named Beverly Park Corporation which the Lowys control.

LIZ JACKSON: Peter Lowy was the president and director of Beverly Park, like a game of corporate musical chairs, the last company in which Beverly Park acquired an interest was given the authority to name the Luperla beneficiaries.

CARL LEVIN, US SENATOR: This ingenious set up allowed the Lowys to deny with a straight face that they were foundation beneficiaries, while controlling the Delaware Corporation that would eventually be used to name those beneficiaries.

(END OF EXCERPT)

LIZ JACKSON: Frank Lowy states.

(On screen graphic of Frank Lowy Statement)

EXCERPT FROM FRANK LOWY STATEMENT: In fact there was nothing sinister in having a corporation with the power to name potential beneficiaries because if an individual was named he or she might die before doing so, whereas a corporation can continue in perpetuity.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: You know you sort of wonder if, why people would go to that much trouble if it’s just a normal bank account (Laughs).

LIZ JACKSON: In 2001 the Luperla Foundation was dissolved, and all the money was transferred to the Bank Jacob Safra in Geneva.

LGT documents reveal that by then the funds had grown to $68-million, and record that Frank Lowy had intended that.

(On screen graphic of LGT document)

EXCERPT FROM LGT DOCUMENT: Frank Lowy and his three sons David Lowy, Peter Lowy and Steven Lowy are to be financial beneficiaries.

LIZ JACKSON: But once the money left LGT, the document trail abruptly ceased, and the Swiss have secrecy laws of their own.

LIZ JACKSON: Were you able to trace at all what happened to the money once it went to

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: No.

LIZ JACKSON: Bank Jacob Safra?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: No. We didn't.

LIZ JACKSON: In July this year Frank Lowy issued his first response to the Sub Committee Report. In it he states.

(On screen graphic of Frank Lowy July Statement)

EXCERPT FROM FRANK LOWY JULY STATEMENT: The report fails to mention the fact that all of the funds held in the structure were distributed for charitable purposes in Israel some years ago.

LIZ JACKSON: The Lowys are critical of your report precisely because they say that if fails to mention the fact, the fact that the funds from Luperla were distributed for charitable purposes in Israel.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Well if that’s a fact then let’s see the facts. Let’s see the evidence of the facts.

LIZ JACKSON: Did you ask for them?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Yes, we asked them, we asked them to supply us with any documentation and we specifically asked them for the names of the charities that were the recipients of the funds.

We specifically asked for that and we never received it.

(On screen graphic of Frank Lowy Statement to Four Corners)

EXCERPT FROM FRANK LOWY STATEMENT TO FOUR CORNERS: The audited financial statements of the private charitable fund have been provided to the ATO together with a copy of every receipt for every donation made by the fund.

(Excerpt of footage from US Senate Hearing)

CARL LEVIN, US SENATOR: Mr Lowy would you come forward please and raise your right hand.

Mr Lowy do you swear that any testimony you will give before this Sub Committee will be the truth the whole truth and nothing but the truth so help you god?

LIZ JACKSON: Peter Lowy followed his lawyer’s advice when he appeared before the Senate Hearing.

CARL LEVIN, US SENATOR: Mr Lowy have you ever spoken to anyone at LGT Bank in Liechtenstein?

PETER LOWY: Senator I’m sorry and mean no disrespect but on the advice of my counsel I assert my rights under the 5th amendment of the United States Constitution and decline to answer your question.

CARL LEVIN, US SENATOR: Mr Lowy do you have any corrections to the statement of facts in my opening statement or to the case history in the report released by the subcommittee last week?

PETER LOWY: Senator on the advice of my counsel I assert my 5th amendment rights and decline to answer the question.

CARL LEVIN, US SENATOR: Mr Lowy you’ve been asked specific questions about matters of interest to this Sub Committee and in response to each question you’ve asserted your 5th amendment privilege.

Is it your intention to assert your 5th amendment privilege to any question that might be directed to you by the subcommittee today?

PETER LOWY: Yes sir.

(END OF EXCERPT)

(Excerpt of footage of Peter Lowy and Lawyer Robert Bennett outside Hearing)

LIZ JACKSON: Outside the hearing Peter Lowy’s lawyer spoke for him.

US REPORTER 2: Why wasn't Mr Lowy willing to make that statement under oath?

ROBERT BENNETT, PETER LOWY’S LAWYER: I have advised Mr Lowy to assert his Constitutional rights because and it should be evident to all of you, this report was already written, there was no real interest in talking to Mr Lowy, they knew what all the facts were, they issued a report.

They never gave us an opportunity to give and put to this report.

Thank you very much.

(END OF EXCERPT)

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Well Mr Lowy’s son who is a US citizen, his representatives were contacted by us. We met with his representatives. We in fact identified to his representatives the matters that were of concern to us and the material that was available to us and we gave them an opportunity to respond.

They provided us with some limited data and told us that Mr Lowy was unaware of all these matters. Certainly Mr, Mr Frank Lowy was contacted by our Sub Committee as well and offered the opportunity to respond. We’ve received nothing back from either of them.

(Excerpt continued)

ROBERT BENNETT, PETER LOWY’S LAWYER: I'm not taking any further questions.

REPORTER 2: Mr Lowy do you have anything further to say?

PETER LOWY: No I don't thank you.

US REPORTER 2: If it wasn't a tax evasion why not deny it?

REPORTER 3: Is this a red herring what you're doing now?

LIZ JACKSON: The United States Inland Revenue Service has also been asking Mr Peter Lowy about his tax affairs, since the end of last year.

His father Frank Lowy says the Australian Tax Office has also been conducting a detailed audit to make sure no tax is payable on the Liechtenstein structure.

It is not yet resolved.

(END OF EXCERPT)

(On screen graphic of Frank Lowy Statement)

LIZ JACKSON: Frank Lowy states emphatically.

EXCERPT FROM FRANK LOWY STATEMENT: There is no truth in the assertion made by the Sub Committee that Frank Lowy hid assets in Liechtenstein from the ATO to evade tax.

LIZ JACKSON: But the Senate Report did not in fact assert that.

You pull back from going so far as to say that the purpose of this was to avoid tax.

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Hm mm (Nods).

LIZ JACKSON: Is that deliberate?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Yes, it is. And the reason is we’ve not seen your tax returns. It’s very possible that someone wants to hide these funds but is still going to pay taxes on them. Without seeing the ultimate reports you can’t draw that conclusion.

LIZ JACKSON: Frank Lowy states his legal advice is that the Liechtenstein structure was not subject to tax, and finally here’s why he used it.

(On screen graphic of Frank Lowy Statement)

EXCERPT FROM FRANK LOWY STATEMENT: The Liechtenstein structure provided flexibility if the need had arisen for attracting investors from different countries. It was not done to hide assets or income from the ATO nor to save tax.

(Excerpt of footage from US Senate Hearing)

LIZ JACKSON: The Senate Committee’s verdict on the LGT banking group, in general, is damning.

Heinrich’s Kieber’s evidence shows LGT did more than just turn a blind eye.

HEINRICH KIEBER: Any documents sent out are especially prepared in the way that the name of the Bank, the client’s name or the legal entity entity’s name is not revealed.

CARL LEVIN, US SENATOR: The documents and information that he provided depict a bank that is a willing partner, and an aider and abettor to clients trying to evade taxes, dodge creditors or defy court orders.

(END OF EXCERPT)

JACK BLUM, HEINRICH KIEBER’S LAWYER: This is active aggressive selling of tax cheating, to people around the world.

LIZ JACKSON: LGT declined to testify before the Senate Committee.

It declined to speak with Four Corners.

Its press release says the case studies cited are dated, and the LGT’s practices have changed.

JACK BLUM, HEINRICH KIEBER’S LAWYER: If they had come in, opened their books, testified, talked to people, maybe I’d believe some of what they were saying. Frankly I don’t believe a word of it.

LIZ JACKSON (to Bob Roach): What was the difference between Liechtenstein’s response and LGT’s response in terms of assisting the committee or?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: The government sent a few more high priced lawyers than LGT did.

LIZ JACKSON: That’s the main difference?

BOB ROACH, SENIOR INVESTIGATOR, PERMANENT SUB COMMITTEE ON INVESTIGATIONS: Yeah.

LIZ JACKSON: Gerlinde Manz-Christ is the spokesperson for the Liechtenstein government.

Do you accept that the client confidentiality that you say is so important, has been used to hide massive amounts of tax evasion?

DR GERLINDE MANZ-CHRIST, LICHTENSTEIN GOVERNMENT SPOKESPERSON: I cannot say anything about this, I’m sure that the foreign clients come to Liechtenstein because they receive excellent service and excellent products here and certainly a, the bank client secrecy might have been a reason.

Again Liechtenstein is not the only country that is offering this.

LIZ JACKSON: But Liechtenstein is only one of three countries that’s been named by the OECD (Organisation for Economic Co-operation and Development) as unco-operative in terms of dealing with harmful tax practices.

DR GERLINDE MANZ-CHRIST, LICHTENSTEIN GOVERNMENT SPOKESPERSON: That is true, but it, it is not on the list rightfully so this is the reason why OECD and Liechtenstein will take up another round of negotiations to see how this can be clarified.

LIZ JACKSON: What you think the OECD have got it wrong?

DR GERLINDE MANZ-CHRIST, LICHTENSTEIN GOVERNMENT SPOKESPERSON: If you want to put it that way, that’s right, yes.

(Excerpt of footage of marching band and National Day celebrants in Lichtenstein)

LIZ JACKSON: It’s the 15th August, that’s National Day in Liechtenstein, it should be a time for celebration.

But in the last 6 months, bank profits are down, new clients have been scared away, and the country’s reputation has taken a battering.

Prince Alois appreciates the time has come to flag the idea of reform.

PRINCE ALOIS OF LIECHTENSTEIN: Nat Sot Liebe Liechtensteinerinnen, liebe Lichestseine.

LIZ JACKSON: But the details of reform are vague.

(END OF EXCERPT)

DR GERLINDE MANZ-CHRIST, LICHTENSTEIN GOVERNMENT SPOKESPERSON: We are open we are ready and from our part there is no problem.

LIZ JACKSON: And there will be greater transparency and less secrecy?

DR GERLINDE MANZ-CHRIST, LICHTENSTEIN GOVERNMENT SPOKESPERSON: I cannot um tell you results now, that have to be negotiated with other countries but there will be more change and ah, we see.

LIZ JACKSON: But you can’t even guarantee less banking secrecy and more transparency?

DR GERLINDE MANZ-CHRIST, LICHTENSTEIN GOVERNMENT SPOKESPERSON: I um, just a second, um as I told you Lichenstein is ready to co-operate more and to go further and this is what I can tell you and um that will happen.

CHRIS BOWEN, ASSISTANT TREASURER: We would like to see reform from, from Liechtenstein but frankly I’ll believe it when I see it.

LIZ JACKSON: its two years since the Australian Tax Office received their stack of documents from Heinrich Kieber.

Of the expected $100-million, only 4.5-million has been recovered to date.

CHRIS BOWEN, ASSISTANT TREASURER: The information provided to the ATO provides very good leads to them as to where they should go but it doesn’t always provide enough for a successful prosecution. It provides alleys for them to go down but it requires a lot more work after that.

LIZ JACKSON: The Tax office have now told us that over the next three weeks they’ll be issuing assessment notices seeking $60-million from LGT clients.

But it’s highly unlikely the rest of Australia will ever know who these people are.

Whatever tax settlements they reach, will be kept confidential.

Unless the Tax Commissioner decides the time has come to name and shame.

JACK BLUM, HEINRICH KIEBER’S LAWYER: Settlements in these situations must be made public. And they must be made public for two reasons, first to ensure that there isn’t a cosy deal between the government and some very rich politically influential people, on one side.

And on the other side as a deterrent to anyone else who might be thinking of doing this. Because as you can imagine if someone is out there cheating on taxes and he’s been publicly exposed he won’t become a knight.

He won’t exactly be an honoured citizen who’s given awards. He won’t be appointed to State business and State Commissions. And that’s very important.

Shaming them in their own community. And that is how it should be, because paying taxes is an essential civic responsibility. And the rest of us are the ones who pay for what these people don’t pay.

CHRIS BOWEN, ASSISTANT TREASURER: The Tax Office used to do that. Around 1984 the Commissioner decided to discontinue that practice as I understand it, because the Commissioner then and Commissioners subsequently have felt that you need to provide incentives to people to settle and that you do need to protect privacy where sometimes the publication will be many years after the actual settlement or, or a substantial period after the settlement.

I can see the attraction of naming and shaming. If the Commissioner came to me and said he wanted to do it, it’s something I’d be open to but at the end of the day it’s a matter for the Tax Commissioner as to whether to do that. What goes in the Tax Commissioner’s annual report is up to the Tax Commissioner.

LIZ JACKSON: But you’re open.

CHRIS BOWEN, ASSISTANT TREASURER: If the Tax Commissioner came to me.

LIZ JACKSON: Shaming them.

CHRIS BOWEN, ASSISTANT TREASURER: And thought that it was a good idea I’d certainly be very interested to hear about it. But it is a matter for the Tax Commisioner.

LIZ JACKSON: At the end of the day however, the biggest disincentive to tax cheats, the banks and the havens that help them is the thought that somewhere out there, there could be another Heinrich Kieber.

This is what they really fear.

JACK BLUM, HEINRICH KIEBER’S LAWYER: Oh absolutely, they do not want another Heinrich Kieber, they do not want a repeat of this because another one or two or three episodes like this and their business model is completely permanently ruined.

US SENATOR: Thank you very much Sir, we appreciate your comments this concludes our questions.

US SENATOR 2: Thank you Sir.