CRA's Panama Papers raids targeted oilpatch fixer with half-dozen offshore companies

An Alberta businessman who has quietly been teeing up hundreds of millions of dollars in deals for Chinese investors to buy oilpatch assets is the first person known to be targeted by the Canada Revenue Agency's criminal investigations into the Panama Papers, court records reveal.

Wentao Yang's million-dollar Calgary home, a West Vancouver mansion used by him and his wife, and their accountant's office north of Toronto were the targets of headline-grabbing CRA raids last Valentine's Day, as agents sought evidence of tax evasion by Yang through a thicket of offshore companies he is involved in.

• CRA raids locations in GTA, Calgary and West Vancouver

• $500M recouped worldwide due to Panama Papers but zilch in Canada

The CRA alleges that the Shanghai-born financier evaded more than $860,000 in income tax and GST on nearly $2.7 million in income he pocketed from brokering one of the biggest Chinese purchases in the oilpatch in recent years.

"Yang has not personally reported any earnings derived from his involvement" in the deal, CRA criminal investigator Jason Shephard says in a court filing obtained by CBC News and the Toronto Star.

The allegations, first reported by the Globe and Mail, are contained in a sworn statement that Shephard filed to obtain authorization for the February raids. The filing was only made public Thursday, and it contains unproven allegations that have not been tested in court. Yang has not been charged with any offence.

Reached by email, he said: "I am aware of certain allegations made against me reported in the media today. As a Canadian and a member of the community, I take these allegations very seriously and intend to address them in the fullness of time."

$770M deal

The tax-evasion investigation into Yang stems from the Panama Papers, the huge leak of 11.7 million financial records in April 2016 that exposed how some of the world's richest and most powerful people use secretive offshore companies to hide their wealth. The records were leaked to German journalists and shared with global media partners, including CBC and the Star in Canada, through the Washington-based International Consortium of Investigative Journalists.

The ICIJ's website is what first alerted the CRA to Yang's offshore holdings, the agency says.

"This case was developed after a review of the International Consortium of Investigation Journalists website showed that Wentao Yang owns shares in foreign companies listed on the Panama Papers," the CRA's court filing reads.

• Most CRA convictions cited are not for offshore tax evasion

CRA agent Shephard says that upon further research, he came across a number of Caribbean corporations Yang held shares in or appeared to control one of which, called Marquee Financial Services Inc., was found to be registered in the Cayman Islands and played a key role in a huge oilpatch deal in 2016.

The $770-million deal, partly arranged by Yang, saw Chinese investors acquire struggling Calgary oil and gas producer Long Run Exploration. Shortly after, Shephard alleges, the acquiring company transferred $11.5 million to Caymans-based Marquee Financial. Marquee then wired the equivalent of $2.7 million to two TD Bank accounts belonging to Yang in two transfers, one of which was labelled "consulting fees."

But while Yang received the money, the CRA alleges,he never reported it as income on his 2016 tax return.

"As a result, [he] evaded income tax totalling $736,562," the court filing claims. "In addition, Wentao Yang failed to report and remit $126,993 in goods and services tax."

The CRA court filing also says agents conducted surveillance on Yang's homes and vehicles during their investigation, including a 5,600-square-foot West Vancouver mansion used by his wife in addition to the $1.1-million house registered in his name just west of Calgary. The couple's vehicles included a 2011 BMW X3 and a 2008 Acura MDX, the CRA says.

The filing says auditors are contemplating conducting a net worth analysis on Yang's wife, as well as her parents, to determine if any of them under-reported income.

Numerous British Virgin Islandscompanies

Yang is involved in a number of companies buying up resource assets in Western Canada. They include Calgary-based Sequoia Resources Corp., which acquired thousands of gas wells in Alberta but filed for bankruptcy in March, and Rockyview Resources Inc., which has stakes in oil and gas properties in B.C. and is proposing a liquefied natural gas terminal on Vancouver Island.

Records in the Panama Papers leak show he's also a shareholder of British Virgin Islands-registered companies called Eastpride Capital Ltd., Sinoenergy Holding Ltd. and China Freeze-Dry Inc. A previous leak of tax-haven financial data in 2013, called OffshoreLeaks, lists Yang as a director of four more BVI companies: Airchn Holdings Ltd., Younglee Capital (Asia) Ltd., Young-Lee Financial Ltd. and Kailas Partners Ltd.

Notably, while the CRA investigation into Yang was sparked by the Panama Papers, the agency's court filing released Thursday makes no mention of any documents in the leak itself even though the CRA obtained all the files through its global partner agencies in May 2016, about a month after the leak became public.

At the time, Revenue Minister Diane Lebouthillier vowed that auditors would be "looking into what's going on with a fine-toothed comb."

Later, the CRA trumpeted that it had executed a number of search warrants as part of criminal investigations into Canadians named in the Panama Papers. CBC News repeatedly pressed for the details of those warrants, which are public court documents, in order to verify the CRA'sclaims. But the agency, citing taxpayer privacy, previously refused to disclose anything about them.

• CBC audits just 5 Canadians out of hundreds of RBC Panama Papers accounts

The investigation of Yang is the first time the CRA has divulged the existence of public records on any particular Panama Papers probe.

"This investigation is one of the 42 international/offshore tax evasion cases that CRA is currently investigating which involve complex structures and potentially multimillion dollars in taxes evaded, which is consistent with our priority of focusing on sophisticated and well-organized tax evasion schemes," Jeremy Ghio, the revenue minister's press secretary, said in an email Thursday afternoon.

Read more about the recent ParadisePapers leak:

• CBC'sfull coverage
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• More than 3,000 Canadian names in the Paradise Papers
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