https://www.afr. com/policy/tax-and-super/the-accountant-who-lost-it-all-20190623-p520ih
The accountant who lost it all
At 48, Peter Moltoni had it all. He was an accountant with a billionaire client, the president of the Tax Institute and the go-to man in Perth for complicated tax strategies. Now his career is in tatters after a downfall of Shakespearean proportions.
Neil ChenowethSenior writer
Jun 28, 2019 – 11.20am
At 48 Peter Moltoni had it all. He was an accountant at the top of his profession, the president of the Tax Institute, the go-to man in Perth for international tax strategies who boasted a billionaire client with an epic
The bank paid the couple an estimated $200 million to settle the claim.
Not that that’s the end of the Oswals’ court cases. Pankaj and Radhitha are both separately suing Pankaj’s mother in a messy succession battle.
And as for Moltoni, while his career prospects may look dim, life in the offshore world is rarely clear cut.
On April 20, M Squared’s British subsidiary, M Squared & Associates UK, filed a notice that its shares had been acquired by Moltoni on November 20 last year.
Assets sold
M Squared liquidator Malcolm Field told
AFR Weekend he was unaware of the transaction, a week after his appointment, but his subsequent enquiries indicated the UK company had no value.
Three months earlier
, in August, a British company that had been indirectly owned by M Squared UK filed a notice that its shares had been transferred – more than two years before, in July 2016.
The company involved in this “backdated” change was Parifour Limited. Parifour's fixed assets of £599,000 had been sold by the time the company filed accounts last December.
Parifour’s change of ownership was filed on August 31, three days after the WA Supreme Court judgment that would result in Moltoni’s bankruptcy.
The offshore business is a small world. Parifour’s new owner, dated back to July 2016, is Mick Cahill.
project.
Over a decade later his career is in ruins. His accounting firm, M Squared & Associates, is being wound up and Moltoni is a bankrupt with a $36 million tax debt, triggered by sensational court allegations of blackmail and bribery.
The Tax Practitioners Board cancelled his registration as a tax agent last month. The TPB found that Moltoni “no longer meets registration requirements”, citing his bankruptcy, his unpaid tax bill and a failure to disclose his adverse circumstances.
Accountant Peter Moltoni . . . as president of the Taxation Institute of Australia he campaigned against the formation of the Tax Practitioners Board, which has just deregistered him. Supplied
It’s a downfall of Shakespearean proportions and one interwoven with the rise and fall of Moltoni's trophy client Pankaj Oswal who, with his equally flamboyant wife Radhika, blazed a trail through political and business power circles for the nine years they called Australia home.
Back in 2001 the Oswals announced plans to build a $600 million Burrup Fertiliser ammonia plant using gas from the North West Shelf.
Moltoni helped set up offshore companies that were key to those plans, plans which ANZ trusted enough to begin lending – it ultimately advanced the Oswals more than $900 million.
The plant was duly opened but just days after the ribbon was cut, Oswal's business partner accused him of skimming funds, setting off a furious legal battle.
Later, Oswal accused Moltonitini of blackmail.
That case collapsed, but not before evidence was heard that would eventually gain the attention of the tax man – ultimately bringing down the accountant whose knowledge of all matters tax had propelled him so far.
How to describe the Oswals? Pankaj was 27 and Radhika 22 when they moved to Perth in April 2001.
With their lavish spending and over-the-top parties, the pair made a splash, even in the freewheeling Perth of the early naughties. They dreamt big. There was their planned new home; a $70 million Taj on the Swan mansion, complete with seven spires. And then there was the ammonia plant on WA's Burrup Peninsula, touted as the largest of its kind in the world.
Planning for that venture had begun a year earlier, with Oswal lining up gas supplies and bank funding together with his 33-year-old partner, Vikas Rambal. Oswal was the talker, smooth and urbane. Rambal, an engineer who had previously worked for Oswal’s father, handled the details.
Radhika and Panjak Oswal outside the Victorian Supreme Court in 2016. ANZ Bank settled their case for an estimated $200 million. Jason South
One of the first decisions the two made was to appoint Moltoni as their Australian tax adviser. Moltoni, then a partner in the Perth office of Horwaths, specialised in tax work for resource companies which he had often represented before the Administrative Appeals Tribunal.
In the 1990s Moltoni had been state director of the Tax Institute, and he was a national director from 1997. He had gravitas. When the Institute of Accountants wanted to make a submission to a WA parliamentary committee, Moltoni spoke for them.
In 2001 Moltoni introduced Oswal and Rambal to Michael (“Mick”
Cahill, the affable Guernsey chief of the Intertrust Group, which operates shell companies with nominee directors.
Oswal’s Burrup plant would have three shareholders: Norway’s Yara International, which would take most of the plant’s product, would have 30 per cent of Burrup Holdings. Rambal had 15 per cent and the remaining 55 per cent was held by the Yurrup Trust, a discretionary trust that Moltoni set up for Oswal.
Most of the work – and almost all of the money – would go to two subcontractors that Moltoni and Cahill helped set up: Paramount (WA) Ltd, a Hong Kong company registered in the offices of Horwath HK; and a Dubai company, Galaxy Projects FZCO.
Rambal later testified that Paramount (WA) was owned by a British Virgin Islands company, Billon Limited, which was owned by Cahill on behalf of Oswal.
When it came to the money flow, Burrup Holdings signed a $US320 million fixed price contract with SNC-Lavalin, but that Canadian company kept only $US16 million of this.
The rest went to Paramount and Galaxy.
Oswal was building his own plant, but few people knew this.
So in 2001 Oswal could tell the ANZ Bank, which by then had committed to lend $US270 million for the project, that he had a fixed price contract with SNC-Lavalin
, but in reality there was no ceiling on costs, and he could determine where the money went.
As many of those involved would later find to their cost, Oswal’s ammonia plant ended up costing a lot more than $US320 million.
On April 19, 2006, the day the plant was opened, there were no outward signs of the storms to come. Then WA premier Alan Carpenter officiated, posing for photographs next to Oswal and Rambal.
The Burrup Fertilisers ammonia plant . . . Oswal claimed that if Peter Moltoni told NZ Bank of a $US491 million cost overrun it would be disastrous for him. AFR
But just six days later Rambal fell out with Oswal after concluding that more than $US15 million had been diverted from the jointly owned Burrup Holdings to the Oswal-controlled Paramount.
That set off a chain of events which ultimately landed Moltoni in court.
Oswal's first response to Rambal's accusation was to lock Rambal out of the company offices.
On May 31 Rambal began a furious series of legal actions seeking proof that Oswal was diverting project funds through Paramount and Galaxy for his personal use.
In a series of fiercely contested interlocutory applications through to December, Rambal pressed for discovery documents on Paramount, while he met with company executives and advisers in Paris, Singapore and Australia, desperate for information.
Vikas Rambal . . . he claimed that Panjak Oswal diverted more than $US15 million from the ammonium plant to his offshore companies. Tony Ashby
On December 22, 2006, Justice Rene LeMiere in the WA Supreme Court refused Rambal’s application to appoint receivers to Burrup Holdings.
A full hearing was scheduled for six weeks later, when Rambal was expected to produce evidence detailing inappropriate payments and irregularities in the Burrup project.
That hearing never took place, because Oswal settled with Rambal on January 12, agreeing to buy out his 15 per cent of Burrup Holdings for $US75 million.
Five years later, Oswal gave his own version of those frantic months in late 2006, when he launched an extraordinary legal action in the British Virgin Islands to recover $US21 million from Moltoni, Cahill and a British Virgin Islands company, Sinclair Strategies, that Oswal said was owned by Moltoni.
Justice Edward Bannister, QC, detailed Oswal’s claims in a 2013 judgment in the Commercial Division of the Eastern Caribbean High Court in Saint Lucia.
It's the superior court of record for the Organisation of Eastern Caribbean States that covers six independent states and three British Overseas Territories, including the British Virgin Islands.
Oswal claimed that in July 2006, just three months after the lavish opening ceremony, he met with Moltoni in Perth. Moltoni told him, Oswal claimed, that Rambal had approached Moltoni and offered “an unspecified but allegedly significant amount of money” if Moltoni would tell ANZ the cost of the ammonium project had secretly blown out by a massive $US491 million – a disclosure Oswal regarded as potentially disastrous economically.
Oswal claimed that Moltoni went to tell him that “he and Mr Cahill required $US50 million to keep their mouth shut”.
“Mr Moltoni gave Mr Oswal two days to think about it,” Justice Bannister said in the judgment handed down in the Saint Lucia court, roughly 18,000 kilometres from Perth.
Oswal subsequently phoned Cahill in Guernsey, who also “is alleged to have said that he would tell ANZ about the overruns unless Mr Oswal paid $US50 million”, Justice Bannister said.
'It is now far too late for rescission'
Oswal claimed he received “nearly daily contact from Mr Moltoni demanding payment”, repeating the threat to inform ANZ, Justice Bannister said.
This culminated in Oswal instructing a Singapore company he controlled, Maruti Holdings Pte Ltd, to transfer $US5 million on October 18, 2006, to a Moltoni Australian company, Roan Investments.
Oswal claims Moltoni made further demands for money in November, and he negotiated with Cahill to pay a further $US21 million, with the balance of the $US50 million to be paid after a successful IPO.
Maruti transferred the $US21 million to a Luxembourg account of Sinclair Strategies on December 22, 2006. This was the same day Justice LeMiere in the WA Supreme Court outlined Rambal’s claims of financial irregularities.
Two attempts by Oswal to float the Burrup project failed. He said this was the reason the rest of the $US50 million was never paid to Cahill and Moltoni.
Justice Bannister said Sinclair Strategies’ defence, which was signed by Moltoni, was that the $US21 million was received under a contract dated September 18, 2006.
“Sinclair’s defence does not specifically deny the allegations of blackmail,” Justice Bannister said. “It confines itself to saying only that the $US21 million was payment for the supply of consultancy services to a third party, Oswal Projects … regarding the construction of a fertiliser plant in Papua New Guinea and litigation being pursued in Australia by Mr Rambal.”
Cahill’s counsel, Richard Brown, had made a “bewildering” submission that an agreement procured under duress was voidable but that “it is now far too late for rescission”, Justice Bannister said.
“Granting an alleged submission to yield to demands by blackmailers contractual status at all seems to me decidedly odd.”
Lawsuit struck out
Christopher Parker, QC, counsel for Sinclair and Moltoni, said it was not credible that banks would be unaware of cost overruns, while the record showed “not only did ANZ know about the cost overruns, it was actually funding them”.
Oswal, meanwhile, continued to use Moltoni's services until 2011 and even invited him and his wife to a party in 2009, Justice Bannister said.
The judge ultimately struck out the lawsuit on the basis that while Oswal was able to direct Maruti Holdings, he claimed to have no beneficial interest in the Singapore company.
As a result Maruti had no standing on which to claim damages for blackmail against Oswal, and the case failed.
But the events of 2006 would come back to haunt Moltoni and Oswal.
Three weeks after the $US21 million payment to Sinclair Strategies, Oswal had settled with Rambal. From that date, Pankaj and Radhika dazzled Perth with conspicuous over-consumption.
In April 2007 WA Treasurer Eric Ripper was in the ballroom of Burswood Casino for the party to celebrate Burrup’s first year of operation, compered by television newsreader Sandra Sully.
Pankaj and Radhika Oswal . . . after buying out Vikas Rambal's share of the ammonia business it was time to party. Andrew H. Walker/Getty Images
Marcia Hines and her band had been flown in, and the Oswals’ daughter, Vasundhara, performed a piano piece dedicated to her father, with a melody line picked up by James Morrison on the trumpet.
Radhitha was the belle of the ball in a sheath dress with a gold mesh bodice and hanging gold chains designed by India’s couturier for the stars, Tarun Tahiliani.
It was the month that the Oswals paid Warren Anderson $22.7 million for adjoining blocks on the Swan River in Peppermint Grove, on which they planned a $50 million mansion.
It was in this moment of triumph that Pankaj took a step too far. As trustee of the Burrup Trust, he formally appointed that the 70 per cent of Burrup Holdings in the trust would be held in a new trust for himself and Radhika. He later resolved that all of the trust’s 2007 income was attributable to his wife.
It’s not clear if Oswal sought advice before doing this.
But it was a disaster. When the Tax Office began reviewing the trust in 2009 it decided that the allocation of the Burrup Holdings shares was a capital gains tax event.
And when looking for the market value of the Oswals’ shares, the ATO need look no further than the $US75 price that Rambal had wrestled from Pankaj to buy his 15 per cent in December 2006. The bottom line was that Radhika had made a taxable gain of $US350 million.
Together with penalties and interest, that gain would result in a tax bill of $186 million in 2011 for Radhika.
As far as ANZ was concerned, 2007 was the start of a slippery slope. It had increased its Burrup facility to $US350 million. It loaned Oswal $US75 million to buy out Rambal. Then there was the new house. And the $US27 million for Oswal to buy a Gulfstream IV in October 2007.
If bank facilities came with sound effects, Oswal’s ANZ drawdowns would just go continuously “ka-ching!”
On the up and up
Moltoni's career, meanwhile, was on the up and up. At the time Oswal claimed he was being blackmailed in 2006, Moltoni was deputy president of the Tax Institute, regularly sitting on the ATO’s
National Tax Liaison Group to advise on tax policy and
weighing in on government policy. In early 2007, Moltoni became president of the Tax Institute. He used his position to criticise anti-money-laundering laws, to complain to the Inspector-General of Tax about heavy-handed compliance action by the ATO, and to run a campaign to block the formation of the Tax Practitioners Board as the national register for tax agents.
That year, 2007, also saw Moltoni leave Horwath after it merged with BDO, and form his own firm, M Squared & Associates.
It was in 2012 that Oswal decided to revisit the events of 2006 with his British Virgin Islands lawsuit against Moltoni and Cahill. While Oswal lost the case, the revelations in Justice Bannister’s judgment led to a tax audit and a new assessment, based on the assumption that the $US21 million paid to Sinclair was undeclared income for Moltoni.
On August 28 last year the WA Supreme Court dismissed an application by Moltoni for a stay of recovery action by the Deputy Commissioner of Taxation over his tax debt of $35.96 million.
The TPB, the industry body whose formation Moltoni had so strenuously opposed, immediately began an investigation which has now led to his deregistration as a tax agent for five years.
This case is a call to action, for those practitioners involved in tax avoidance or evasion schemes to review their circumstances and those of their clients, and ensure full disclosure to the Tax Practitioners Board and to the ATO,” TPB chairman Ian Klug said.
Moltoni was declared bankrupt on October 11. On November 8, M Squared & Associates went into voluntary administration.
And what of the Oswals? As the years have gone on, more information has emerged about their dealings with ANZ
.
In 2016, ANZ chief Shayne Elliott told the House of Representatives that APRA told the bank in October 2008 about a whistleblower’s claim that Oswal had forged documents used to obtain his loans.
But the bank’s lawyers could find no evidence of this until December 2009 when bank officers asked Oswal and he confirmed it – only to withdraw his admission six days later.
Defraud creditors
It was another year before the bank appointed receivers to Burrup in December 2010, three days after the Oswals had left the country. The Oswals would later sue the bank for $2.5 billion damages for selling the plant too cheaply, while the ANZ made a counter claim that Oswal had diverted $150 million from Burrup into his private companies.
In June 2016 Justice Gilmour in the Federal Court found that Radhika Oswal had intended to defraud creditors when she lodged mortgages over the Oswals' two Perth homes in 2011 in favour of a Dubai company owned by her brother, Raghav Gupta.
But seven weeks later it was Radhika's testimony that helped convince the ANZ to settle the case the couple had brought against the bank.
Radhika testified that Pankaj had forged her signature on bank documents, but her account of an ANZ exec telling her that her children would be orphans after she and Pankaj were sent to prison unless they signed guarantees proved too much for the ANZ, which immediately began settlement proceedings.
The bank paid the couple an estimated $200 million to settle the claim.
Not that that’s the end of the Oswals’ court cases. Pankaj and Radhitha are both separately suing Pankaj’s mother in a messy succession battle.
And as for Moltoni, while his career prospects may look dim, life in the offshore world is rarely clear cut.
On April 20, M Squared’s British subsidiary, M Squared & Associates UK, filed a notice that its shares had been acquired by Moltoni on November 20 last year.
Assets sold
M Squared liquidator Malcolm Field told
AFR Weekend he was unaware of the transaction, a week after his appointment, but his subsequent enquiries indicated the UK company had no value.
Three months earlier
, in August, a British company that had been indirectly owned by M Squared UK filed a notice that its shares had been transferred – more than two years before, in July 2016.
The company involved in this “backdated” change was Parifour Limited. Parifour's fixed assets of £599,000 had been sold by the time the company filed accounts last December.
Parifour’s change of ownership was filed on August 31, three days after the WA Supreme Court judgment that would result in Moltoni’s bankruptcy.
The offshore business is a small world. Parifour’s new owner, dated back to July 2016, is Mick Cahill.
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