Ruling Exposes Guidebook to Secret Billions

A group of asset managers and lawyers who helped rich French families hide billions of dollars in Canadian trusts referred to their clients as “the old lady” or “the painter.”

They periodically destroyed office computers to leave “no traces” of their activities. But relationships soured and spilled into court, and now their methods have been exposed in a ruling that reads as a guidebook to tax avoidance tricks.

‍
The case revolves around a dispute over the control of trusts between a Montreal-based wealth management company, Blue Bridge Wealth Management Inc., and a law firm owned by two Paris-based lawyers. While neither side prevailed in the litigation, Quebec Superior Court Judge Bernard Synnott took great care in detailing the dueling allegations of dubious management strategies, conflicts of interest and dishonesty.

‍
According to a ruling published last week, both sides were involved in managing tens of billions of euros spread throughout at least 300 trusts. As regulatory regimes and international cooperation agreements evolved, they shifted the funds around from Bermuda to Canada, which they identified as particularly protective of the beneficiaries’ identities, the court documents say.

‍
In his ruling, Synnott asked whether Canada is a tax haven. He noted that the parties in the case seem to think that it is. The court said that rich families were able to avoid France's wealth tax for years by using the Canadian trust.

‍
Despite years of legal infighting, the secrecy of the group's system ensured that no names leaked out for years. But in 2021, Canadian courts dealt them a blow by ruling that they could no longer hold back information about the beneficiaries from French authorities. Press reports started coming out, mentioning a few artists, aristocratic families and some industrialists. Several beneficiaries, Liberation wrote, were descendants of the Schlumberger family, and the most prominent were the Seydoux brothers, cinema moguls in France.

‍
"In general, we try to leave no trace of anything related to trusts, as they are currently considered as tax evasion or even tax fraud under French law," attorney Delphine Doron is quoted as saying. "The less trace there is, the better." Doron described during the Quebec trial how her law firm would regularly destroy and throw out computers to "protect" the identity of the beneficiaries of the trust. The group avoided using their clients' names, referring to them with acronyms such as BE or SC or nicknames such as "the fishers" or "our friend." They preferred sending faxes rather than emails to avoid any digital fingerprints on servers.

‍
Jacques Le Blevennec, a retired Paris lawyer and former official at France's finance ministry, was the mastermind behind the operation, according to court papers. He worked closely with Alain E. Roch, founder of Blue Bridge, after a career at UBS Group AG and Julius Baer Group Ltd. in Switzerland and Canada. After Roch meets Le Blevennec in 2005, rich families flock to Blue Bridge with hundreds of millions, even billions. By 2011, Blue Bridge had more than $4 billion (2.8 billion euros) under management.

‍
At first, the billions were "hidden" in Bermuda, the judge said. However, most of the money was eventually transferred to Singapore after the Caribbean archipelago signed a tax treaty with France in 2009. Just two years later, the assets were moved to Canada out of concern that Singapore would no longer protect the identity of the beneficiaries. Trusts were established in Ontario rather than in Quebec - where Blue Bridge is located - because the province is said to provide better protection for the beneficiaries' identity.

‍
According to Synnott, the firm was seeking to launder millions of dollars belonging to certain trusts by making donations to foundations in the name of Blue Bridge. This was done especially for an unknown prominent family. In an email statement sent on Friday, Blue Bridge said that its donations are intended to enable foundations to carry out their missions, contrary to what the court claims. The company argues that all of its operations are subject to regulatory obligations. The firm disagreed with the characterization of Canada as a tax haven. They argued that Canada is a well-regulated jurisdiction with a strong commitment to tax transparency.

‍
The Court ruled on the application and interpretation of national and international tax rules related to trusts, complex issues which were not before the Court. The Court noted that these questions are the subject of legal debates in France, and that the parties to the dispute have had the opportunity to make neither evidence nor representations on these issues.

‍
Doron and Le Blevennec did not respond to requests for comment. The Autorité des Marchés Financiers, Quebec’s financial regulator, said in an email that it could not provide any detail on the matter at this time.

‍
The business was successful for many years, with Le Blevennec charging Blue Bridge around €1 million annually between 2008 and 2013, according to the ruling.
But shortly after, the group ran into trouble, with banks such as HSBC Holdings Plc and Royal Bank of Canada closing all of Blue Bridge's accounts by 2014.
The relationships between the main protagonists started deteriorating, leading to court litigation in April 2015. Since then, both parties have multiplied procedures and spent millions in legal fees, according to the judge.

‍
"Both the parties involved in this dispute and the families behind the trusts are fully aware of the facts," Synnott said.
Blue Bridge said in its statement that a judicial ruling on a dispute with the French tax authorities regarding the legality of the taxation on the capital of Canadian trusts is expected in France early February. The firm has refused for years to transmit information about some trusts' beneficiaries to the authorities, and has brought the matter as far as the Supreme Court of Canada.

‍
Judge Synnott was clear in his ruling: without beneficiary anonymity, the whole system would collapse, taking with it the income of Roch and Blue Bridge.