Revealed: Conservative peer Lord Blencathra’s lobbying contract for tax haven Cayman Islands
By Melanie Newman, Oliver Wright From Independent UK
Former Tory Chief Whip signed document to ‘make representations’ on behalf of Cayman Islands and details of £12,000-a-month role emerge after denials of wrongdoing to standards watchdog
A senior Conservative peer, who denied that he ever lobbied MPs and peers on behalf of a Caribbean tax haven, had signed a £12,000-a-month contract that stated he would do so, an investigation for The Independent has revealed.
Lord Blencathra has previously been investigated by the Lords Commissioner for Standards for his work on behalf of the Cayman Islands government and insisted in written evidence that none of his work involved lobbying Parliament. The peer told the commissioner, Paul Kernaghan, that he would not have agreed to do this. Yet a copy of a contract signed by the former Conservative Party Chief Whip and passed to the Bureau of Investigative Journalism reveals that the services stipulated included “making representations to … members of Parliament” in the Commons and Lords.
Lord Blencathra insisted that the lobbying clause was one of several which were never acted upon, that he had not carried out any lobbying on behalf of the government, and that what he told the commissioner was correct.
“My compliance with the law or Lords Rules takes precedence over anything which was in my contract,” he said. “I made clear that I would not be lobbying Parliament or MPs. Indeed, even that initial contract made no mention of lobbying. That was firmly understood between us.”
Lord Blencathra also said he had the contract amended in 2012 “to remove all reference to lobbying UK MPs and Parliament”. But the Labour MP Paul Flynn, who raised the original allegations with the Lords standards authorities, said he did not see how Lord Blencathra could “reconcile his defence against that complaint with this contract”.
“I will be contacting the Lords authorities and asking them to look again at this. It is intolerable that he is acting as both a legislator and lobbying on behalf of a country that makes income from the tax avoidance industry.”
MPs and peers are prevented from using their positions to lobby the Government and fellow parliamentarians on behalf of paying clients. However, despite a string of recent lobbying controversies, the Government has been widely criticised for failing to tackle wider problems in the industry. Critics have warned that the recent lobbying Bill will make very little difference in increasing transparency.
The Independent reported in April 2012 that Lord Blencathra’s work for the Cayman Islands government included lobbying and that he had written to the Chancellor, George Osborne, to complain about air passenger taxes on flights to the Caymans as well as approaching MPs who had criticised the islands.
Lord Blencathra told the commissioner he did not lobby Parliament and would not do so. “None of my work involves lobbying Parliament or seeking to influence either House. I made that clear when I took on the role,” he said.
He also told the Bureau in an email, which was part of evidence sent to Mr Kernaghan: “You have confused lobbying Parliament, which I do not do, with lobbying the Government which I do.”
The commissioner subsequently concluded in November 2012 that there was “no evidence that Lord Blencathra exercised parliamentary influence on behalf of the Cayman Islands Government Office in the UK”. He added: “Equally, no evidence has been presented that he provided parliamentary advice.”
But a copy of the contract between Lord Blencathra’s company, Two Lions Consultancy Ltd, and the Finance Ministry of the Cayman Islands government, signed in November 2011, shows that lobbying Parliament was part of the job description.
The contract says the company’s responsibilities include: “Promoting the Cayman Islands’ interests in the UK and Europe by liaising with and making representations to UK ministers, the FCO [Foreign and Commonwealth Office], members of Parliament and members of the House of Lords.”
Lord Blencathra said his contract required him to provide 14 services but several of them were never acted upon. “This was the first time a contract of this nature was drawn up and the [then] Premier wanted every possible item included. I made clear that I would not be lobbying Parliament or MPs – that was firmly understood between us,”
Following the standards commissioner’s decision, his contract was amended. “I had it amended back to 2012 to remove all reference to lobbying,” he explained.
He was still responsible for “promoting the Cayman Islands” interests by liaising with and making representations to key governmental stakeholders.
Other duties common to both contracts include:
* “Supervision of the advance arrangements for representatives of the CIG [Cayman Islands government] and various departments of CIG on official visits to the UK and arranging meetings with important persons in the UK Government.”
* Presenting the Premier of the Caymans and other ministers to the UK Government “in the best possible light”.
* “Assisting in enhancing relations” between Cayman’s ministers and the FCO.
* “Provision to the CIG of information and advice which will enable them to formulate policy approaches to the UK Government.”
Lord Blencathra also told Mr Kernaghan in 2012 that his “ambassadorial” role involved liaising with ministers and passing messages. But he stressed: “The Premier can write or contact UK ministers at any time and does not need me to act as interlocutor or get him access to ministers.” The Bureau has also obtained copies of private emails sent by Lord Blencathra about his contract prior to its signing. They include discussion of how he might “guarantee access” to the FCO.
In one message to Dax Basdeo, chief officer in the Cayman Ministry of Finance, Lord Blencathra said: “The only way I can guarantee access to all the key people in the FCO is to be designated ‘official’ Cayman Islands government ‘Political Director’. No matter how good I may be and even with the title ‘Lord’, I need that endorsement.”
Following the standards commissioner’s report on Lord Blencathra, the sub-committee on Lords conduct noted that part of the Lords Code of Conduct might need clarifying. The sub-committee pointed out the Code “does not say in terms whether members may lobby ministers or officials in return for payment or other incentive”.
This year, the Committee for Privileges and Conduct recommended the rules be changed to stop peers from lobbying for gain.
Last night a spokesman for the commissioner said: “[These] documents have not previously been received by the commissioner at the time of or since his investigation into Lord Blencathra. If a complaint is received with new evidence… the commissioner will consider whether to open a new investigation.”
Small islands, big earnings
Despite having a population of just 56,700 – slightly more than Macclesfield in Cheshire – the Cayman Islands is the registered home of in excess of 93,000 companies. The attraction for all these corporations – hundreds of banks and insurers and thousands of mutual funds – is that the islands’ government does not impose direct taxation on companies or individuals.
Instead, heavy taxes are imposed on imported goods and companies operating there have to pay a licence fee, while foreign workers must buy a permit. The mainstay of the economy is luxury tourism, mainly catering for wealthy North Americans. According to the CIA Factbook, the islanders do pretty well. “The Caymanians enjoy a standard of living comparable to that of Switzerland,” it says.
The islands’ status as a tax haven has turned it into one of the most controversial of Britain’s 14 overseas territories.
Multinational corporations can use the Caymans, and other places like it, to avoid paying tax in other countries. They do this by registering intellectual property at their subsidiary based there, then charging their subsidiary in a country with a big market, such as the UK, a massive fee to use the drug patent, search engine algorithm or other clever invention. This means the UK company pays little tax as its profits are wiped out by the fee, but the subsidiary in the Caymans makes a fortune.
Ian Johnston
For more on this story go to: http://www.independent.co.uk/news/uk/politics/revealed-conservative-peer-lord-blencathraslobbying-contract-for-tax-haven-cayman-islands-9211092.html
Related story:
Peer’s contract with Caribbean tax haven stated he would lobby MPs and Lords
By Melanie Newman From The Bureau of Investigative Journalism
A senior Conservative who denied he had ever lobbied MPs and peers on behalf of a Caribbean tax haven had signed a £12,000 per month contract that stated he would do so.
Lord Blencathra had previously been investigated by the Lords Commissioner for Standards for his work on behalf of the Cayman Islands and had insisted in written evidence to the inquiry that none of his work involved lobbying Parliament. He told the Commissioner he would not have agreed to do this.
But a copy of a contract signed by the former Conservative Party Chief Whip and passed to the Bureau of Investigative Journalism lists ‘making representations to … Members of Parliament’ amongst services to be provided.
Lord Blencathra insisted the clause was one of several which were never acted upon, that he had not carried out any lobbying on behalf of the Cayman Government and that what he had told the Commissioner was correct.
‘My compliance with the law or Lords Rules takes precedence over anything which was in my contract,’ he said.
‘I made clear that I would not be lobbying Parliament or MPs. Indeed even that initial contract made no mention of lobbying. That was firmly understood between us.’
Lord Blencathra also said that he had the contract amended in 2012 to ‘remove all reference to lobbying UK MPs and Parliament.’
But the Labour MP Paul Flynn, who put in the original complaint to the Lords standards authorities, said he did not see how Lord Blencathra could ‘reconcile his defence with this contract’.
‘I will be contacting the Lords authorities and asking them to look again at this. It is intolerable that he is acting as both a legislator and lobbying on behalf of a country that makes income from the tax avoidance industry.’
Peer told Commissioner ‘none of my work involves lobbying Parliament’
The Bureau revealed in April 2012 that Lord Blencathra’s role as director of the Cayman Islands Government Office in the UK included lobbying and that he had written to the Chancellor George Osborne to complain about air passenger taxes on flights to the Cayman.
He had also approached MPs who had criticised the Islands.
Mr Flynn asked the Commissioner to consider whether Lord Blencathra had broken the Lords Code of Conduct, which bans peers from ‘paid advocacy’ [see box] and offering Parliamentary services for gain.
Lord Blencathra responded to the Commissioner’s inquiry by insisting he did not lobby Parliament and would not do so.
‘None of my work involves lobbying Parliament or seeking to influence either House. I made that clear when I took on the role that I would not do that,’ he said. He added that his job did not involve ‘using my position to influence Parliament’.
He added: ‘I have never sought to gain advantage for the Cayman Islands Government in Parliament nor with MPs nor peers.’
The Commissioner for Standards subsequently concluded, in November 2012, that there was ‘no evidence that Lord Blencathra exercised parliamentary influence on behalf of the Cayman Islands Government Office in the UK.’
The Commissioner added: ‘Equally, no evidence has been presented that he provided parliamentary advice or services.’
Peer’s contract was not examined as part of the Standards Commissioner’s investigation
The evidence scrutinised by the Commissioner as part of this investigation did not include Lord Blencathra’s contract with the Cayman Islands Government, even though the Commissioner had the power to request a copy.
Since then a copy of the contract, signed in November 2011, between Lord Blencathra’s company, Two Lions Consultancy Ltd, and the Finance Ministry of the Cayman Islands Government, has come to light.
Under the contract, the company’s responsibilities included: ‘Promoting the Cayman Islands’ interests in the UK and Europe by liaising with and making representations to UK ministers, the FCO (Foreign and Commonwealth Office), Members of Parliament in the House of Commons and Members of the House of Lords.’
Lord Blencathra said his contract required him to provide 14 services but several of them were never acted upon.
‘This was the first time a contract of this nature was drawn up and the [then] Premier wanted every possible item included. I made clear that I would not be lobbying Parliament or MPs…that was firmly understood between us.’
Following the Standards Commissioner’s decision in November 2012 the contract was amended.
‘I had it amended back in 2012 to remove all reference to lobbying UK MPs and Parliament,’ he explained. ‘The only mention of lobbying is in relation to the EU.’
Under the changed contract he was still responsible for ‘promoting the Cayman Islands’ interests with respect to financial services in the UK and Europe by liaising with and making representations to key governmental stakeholders’.
A second new clause required him to ‘assist with lobbying efforts on financial services arising out of EU directives’.
Other duties common to both contracts included:
*’supervision of the advance arrangements for representatives of the CIG (Cayman Islands Government) and various departments of CIG on official visits to the UK and arranging meetings with important persons in the UK government”.
*presenting the Premier of the Cayman Islands and other ministers to the British government ‘in the best possible light’
* ‘assisting in enhancing relations’ between Cayman’s ministers and the FCO.
*’provision to the CIG of information and advice which will enable them to formulate policy approaches to the UK government.’
Related story: Conservative peer hired as tax haven lobbyist
Peer discussed guaranteeing access to Foreign Office
Lord Blencathra also told the Standards Commissioner in 2012 that his ‘ambassadorial’ role involved liaising with ministers and passing messages.
But he stressed that ’the Premier can write or contact UK ministers at any time and does not need me to act as interlocutor or get him access to ministers’.
‘I do not need to fix a meeting so that the Premier of the Cayman Islands can get access to lobby a minister. He can get access practically any time he wants,’ he said.
The Bureau has seen copies of private emails sent by Lord Blencathra about his contract prior to its signing. The emails, which were obtained by the Cayman press, include discussions about how the peer might ‘guarantee access’ to the FCO.
In one message to Dax Basdeo, chief officer in the Cayman Ministry of Finance, sent during contract negotiations Lord Blencathra says: ‘The only way I can guarantee access to all the key people in the FCO and elsewhere is to be designated as the “official” Cayman Islands Government “Political Director”.
No matter how good I may be and even with the title “Lord” I need that endorsement.’
The Lords Code of Conduct
The Code states: ‘The prohibition from accepting payment in return for parliamentary services means that Members may not, in return for payment or other incentive or reward, assist outside organisations or persons in influencing Parliament.
This includes seeking by means of participation in proceedings of the House to confer exclusive benefit upon the organisation (the ‘no paid advocacy rule’); or making use of their position to arrange meetings with a view to any person lobbying Members of either House, ministers or officials.
A Member may never provide parliamentary services in return for payment or other incentive or reward.’
The no-paid advocacy rule
Under this rule, a distinction is drawn between advocacy and advice. Advocacy in return for payment is prohibited. Giving advice in return for payment is permitted.
When ruling on Lord Blencathra’s case, the Standards Commissoner referred to examples of what is permitted and what is prohibited under the rule given to the Committee on Standards in Public Life by a previous Clerk of the Parliaments in November 1995 and re-iterated in 2009. The Clerk said peers were barred from providing the following services for gain:
speaking in debates
tabling, supporting and moving amendments
asking Parliamentary Questions
lobbying Ministers and other members of the House
acting as host at functions in the Palace of Westminster
The Commissioner said there was no evidence Lord Blencathra had engaged in any of these activities although he acknowledged the letter to George Osborne was ‘was clearly an attempt to lobby the Chancellor’.
The letter was not a breach of the Code, the Commissioner ruled, because the letter was ‘clearly sent in Lord Blencathra’s role as Director of the CIG Office’, he had been ‘open and transparent and his position was self-evident to the Chancellor’.
Following the Standards Commissioner’s report on Lord Blencathra, the sub-committee on Lords conduct noted that part of the Lords Code of Conduct might need clarifying.
The Code bans a peer from ‘making use of [his or her] position to arrange meetings with a view to any person lobbying Members of either House, ministers or officials.’
But the sub-committee pointed out that the Code ‘does not say in terms whether or not members may themselves lobby ministers or officials in return for payment or other incentive or reward.’
This year, the Committee for Privileges and Conduct recommended that the rules be changed to stop peers from lobbying Parliament or government for gain.
The Committee, which referenced Lord Blencathra, added: ‘We do not believe this loophole was intended when the prohibition on providing parliamentary services in return for payment was introduced in the 2010 Code.
In addition, recent cases on which we have reported indicate that some members seemed to believe that providing parliamentary services in return for payment is within the rules so long as it is registered and, where appropriate, declared.
‘That is evidently not the case.’
Lord Blencathra told the Bureau he had asked for his contract to be amended further to reflect the new rule.
A spokesman for the Standards Commissioner said he could consider whether to investigate, should any new complaint be made against Lord Blencathra.
‘(These) documents have not previously been received by the Commissioner at the time of or since his investigation into Lord Blencathra,’ he said.
‘Evidence he received during his investigation into Lord Blencathra was published with the report on that case.
‘If a complaint is received with new evidence about Lord Blencathra and his work for the Cayman Islands Government Office in the UK, the Commissioner will consider whether it is appropriate to open a new investigation.’
Related story: Peers to be banned from lobbying for gain
Lord Blencathra ‘opens doors’
In January 2013, the then Premier of Cayman Julianna O’Connor-Connelly defended Lord Blencathra’s £12,000-pcm (plus VAT) contract in a news conference.
‘He has that capacity to open doors which I haven’t seen anyone, perhaps since [former Cayman Islands] Governor [Thomas] Russell, able to open in the UK,’ she said.
Lord Blencathra’s activities last year included contributing to a Lords debate in which he called for air passenger duty on flights to the Overseas Territories to be scrapped.
This is the same topic on which he had previously written to the Chancellor George Osborne on behalf of the Cayman Islands Government.
In the Lords debate he also said: ‘I worry at times that the UK government may foist too many regulatory burdens on them [the Overseas Territories] which may make them uncompetitive.’
He prefaced his speech by declaring that he was a remunerated representative of the Cayman Islands Government in the UK but was not speaking on behalf of the Islands.
The peer had told the Bureau in 2012 there was no possibility of a conflict of interest between his role as director of the Cayman Islands Government Office in London and his standing as a peer able to voting on and debating legislation affecting the Islands.
He said: ‘I have been meticulous in ensuring that I have no conflict of interest between that role and my duties in the Lords.’
In January this year the peer turned his attention to promoting Cayman Enterprise City (CEC), a special economic area in which no income tax, corporation tax or capital gains tax is payable.
He assisted at an event held at his office in London which aimed at persuading UK technology and media firms to set up shop in the new zone.
The Cayman Islands Government has been heavily marketing the tax-free zone to international biotech, new media, outsourcing, commodities and IT start-ups and medium-sized companies it hopes will re-locate there.
If the London drive was successful it could mean jobs and taxable income moving from the UK to Cayman.
‘Those who attended were genuinely interested and saw the benefits of both Cayman as a pro-business jurisdiction and the CEC zone as a mechanism to easily establish a presence there,” said Lord Blencathra in a press release about the London event.
‘We look forward to working with CEC on promoting the benefits of this jurisdiction to the UK market.’
Cayman Enterprise City poster girl accused of tax evasion
A Cayman Enterprise City press release about the zone’s first anniversary quoted US businesswoman Cheryl Womack.
‘This island has given permission for this entrepreneurial community to grow businesses,’ said Ms Womack in the release. ‘If a business owner wants to be global and be global quickly, it can happen here.’
Several months later in December 2013 Ms Womack was indicted by a grand jury for alleged tax evasion involving the use of at least 19 Cayman bank accounts and a series of nominee companies and trusts that she was said to have kept secret from US tax authorities.
In a press release, the FBI said the indictment was in relation to ‘numerous foreign trusts and secret Cayman Island bank accounts’ which it alleged were ‘part of a scheme to avoid paying more than $7 million in income taxes’.
The FBI also claimed that Ms Womack had lied to federal authorities concerning her Cayman Island interests.
The charges have not been tested in court and are denied by Ms Womack.
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