The Dead

6

I never tire of Cafe 21, even with Baxter as a lunch companion. Maybe it’s because I don’t own the place, so I can relax there.

Baxter was characteristically verbose throughout our meal but he’d earned the right to be pleased with himself and regale us with tales of his life before joining our firm. He liked to tell the story of his difficult childhood; how he struggled to fit in as a boarder at his famous, old public school. The way Baxter told it, he was a precociously gifted child, a sensitive soul who was bullied relentlessly because of this obvious potential for greatness. From there it was an upward trajectory that took in Cambridge, then the City, where his genius for numbers was ruthlessly harnessed until he was deemed surplus to requirements and ‘cast adrift’ as he put it. He was actually arrested for embezzling millions of pounds of client money, in a fraud so Byzantine in its complexity it was only discovered at all because of the credit crunch. The old, long-established broking house he worked for was running out of cash. They had to resort to digging into their reserves to fund them through the crisis, which was when they realised there was a large black hole. Henry Baxter got six years and did three.

I’d read about the case in the papers but it was Amrein who really put me onto him, when Baxter was about to emerge from prison. The complex nature of Baxter’s fraudulent transactions, coupled with the extraordinary web of companies he managed to set up to launder his ill-gotten gains, making them virtually tax free, made him just the kind of man I was looking for. I needed someone who could move money around and Baxter could do it with not a little elan. Palmer called Baxter a math-magician, a phrase our accountant loathed, which is why Palmer kept on saying it to his face.

I doubt Baxter would have signed up with us at all if it wasn’t for the ARA. The Assets Recovery Agency took him apart and clawed back virtually everything he had stolen. He couldn’t have been more bitter about that.

‘So you know all about this smoke and mirrors, city-boy, swank-wank stuff then, do you Baxter?’ asked Kinane.

‘If you mean, can I explain the difference between a collateralised debt obligation and a credit default swap then yes, I can,’ he smiled, ‘whether you will be able to grasp that difference is another matter.’

I interrupted before things got more heated. ‘Perhaps, Baxter, your time would be better employed explaining to the boys exactly how you lifted five million of our ill-gotten pounds out of the country, cleaned it, laundered it and only paid three per cent tax.’

‘Three per cent?’ asked a baffled Palmer.

‘It’s very simple dear boy,’ explained Baxter, ‘I merely adapted a model already favoured by some of the super-rich in our country,’ and he waited till he was sure he had our full attention before continuing, ‘I set up a partnership trust and registered it in Jersey. The partners in the trust, who just happen to be us, meaning subsidiary companies we own that operate under a variety of names, all contribute sizeable sums of money, totalling five million pounds, which amounts to the combined profits of our legitimate businesses, with a very sizeable chunk of illegitimate takings thrown in.’

‘You mean the drug money,’ said Kinane.

‘We then take that five million and invest it into our partnership trust, which buys a dividend from an offshore company we already control. That dividend actually costs fifty million pounds because it is worth fifty million… only it isn’t, because it is entirely fictitious. That’s the bit of the scheme I adapted.’

‘Come again?’ asked Palmer.

‘You spent five million pounds on something with no profit?’ asked Kinane, who had already lost the thread completely.

‘It isn’t real,’ confirmed Baxter, ‘nor is the forty-five million pound loan we took out to buy that fake dividend.’

‘So it’s a fake loan, with fake interest and fake repayments to purchase an imaginary dividend.’ I explained.

‘I don’t get it,’ said Palmer, ‘if it’s all fake then what do we get out of it?’

‘Tax relief,’ I told him.

‘Is that all?’ asked Kinane.

‘Is that all?’ snorted Baxter, ‘we have just laundered five million pounds into an offshore account and it cost us just one hundred and fifty thousand pounds tax, plus transaction fees, meaning we keep four million, eight hundred and fifty thousand pounds, which is now nestling in a bank account in the Cayman Islands.’

‘If we’d paid Corporation Tax at twenty-four per cent, it would have cost us one-point-two mill.’

‘So Baxter just saved us over a million quid?’ asked Palmer.

I raised my champagne glass to Baxter, ‘hence lunch at 21.’

‘So how does that work then? Why would they let us get away with it?’ added my head of security.

‘Because we are claiming tax relief on the cost of buying the dividend,’ said Baxter, ‘exploiting a loop hole on the benefits from that dividend,’ he explained, as if it was obvious.

‘I don’t get it,’ said Kinane.

‘And there was I assuming you would,’ Baxter’s tone was dripping with sarcasm, ‘but this is my area Joe. Yours is breaking arms.’

‘And I’ll break yours if you talk to me like that again.’

‘Simmer down lads. This should be a day of celebration,’ I reminded them, ‘it doesn’t get much better than this. Baxter did a good thing for the business.’

‘Why don’t they clamp down on these tax dodges?’ asked Palmer, ‘you’re a clever man Baxter but you can’t be the only one who’s spotted this one.’

‘I’m sure I’m not but loopholes are like mole hills,’ explained Baxter, ‘you stamp on one and there’ll be another one on your lawn in the morning,’ he took a reflective sip of his wine, ‘besides no government really has the appetite to tread on the rich these days. Look how many millionaires are in the cabinet. They tend to hang out with other millionaires.’

‘Wait a minute though, who are we paying the fees to?’ asked Palmer.

‘To the company that oversees the tax avoidance scheme,’ I explained, ‘it’s their cut for sorting out the deal.’

‘But the deal is fake,’ said Palmer.

‘Then it was easy money, wasn’t it?’

Palmer and Kinane looked at me like I’d gone a bit nuts and was talking to an imaginary friend, so I put them out of their misery, ‘the two hundred thousand pounds in fees gets divided between the four main board directors of Barrack Road Investments, which means fifty grand each for Henry Baxter, David Blake, Nick Palmer and Joe Kinane. I mean to say, with a tax avoidance scheme of that complexity and cunning, I’d say they’ve earned it, wouldn’t you?’

There was silence for a moment and then Palmer chuckled and it turned into a laugh, ‘back of the net,’ he said.

I didn’t feel guilty about the money we’d shoved away. There were a lot of people on my payroll and I had to stump up the cash for them week in, week out. There were also the ‘drops’ to various fixers, problem-solvers and intelligence-gatherers, not least Amrein and his highly shady and very expensive organisation, who effectively legitimised us in the criminal world. Amrein’s outfit gave us permission to control the city and, in theory at least, ensured no one else could take it away from us. All of this was a form of tax and I didn’t want to be shelling out millions more for the government to waste it on Enterprise Zones or the Big Society. Magicians use distraction, misdirection and sleight of hand to make people look the other way while they get away with their trick. We are just like magicians, only on a much larger scale.

Some of our legitimate businesses still paid tax of course. It was great cover and we are not entirely hard hearted. Besides, we weren’t the worst offenders. The biggest money launderers are the banks. Standard Chartered, a noble old British bank, was forced to pay a fine of $340 million to the US government because it laundered two hundred and fifty billion dollars of dirty Iranian money through its marbled corridors. That pales compared to the $1.9 billion dollars HSBC was fined for laundering drug money for criminal cartels. I don’t see Britain’s biggest bank mentioning that on any of their uplifting TV commercials.

Big corporations have been moving profits abroad for years. In their world it’s simply clever accounting. The billionaire retailer Philip Green avoided a?285 million pound tax bill by making himself an offshore resident of Monaco, then putting his company in his wife’s name. The government came after him straight away but only to seek his advice. The Prime Minister got him to conduct a review of government spending. You honestly couldn’t make that shit up.

We talked all afternoon, until Baxter inadvertently stumbled on a thorny topic. It was strange that among the millions we’d laundered it was a few grand that caused the falling out.

‘Three per cent tax?’ Palmer said, as if he still couldn’t get his head around it, ‘normal people pay way more than that.’

‘And there’ll be plenty left over for a sizeable donation to the Conservative party,’ Baxter told him.

‘A donation?’ Kinane was incredulous, ‘to the fucking Tories? Are you having a laugh?’

‘If we drop fifty grand into Tory coffers they’ll leave us alone,’ explained Baxter, ‘they’ll be too embarrassed to catch us, if they’ve got to admit they took money from us. It’s a self-fulfilling prophesy; they only take money from legitimate businessmen therefore, in taking our money, we must be legitimate businessmen.’

‘But we’re not legitimate, we’re bent and everybody knows it. SOCA will warn them off us,’ said Palmer.

SOCA or the Serious Organised Crime Agency was tasked with bringing down drug smugglers, money launderers, armed, violent criminals and people traffickers. We’d never trafficked human beings but we ticked every other box on their wish list and always had to assume they were keeping an eye on us.

‘SOCA would warn them about taking money from Gallowgate Holdings, but they know nothing about Barrack Road Investments.’ I informed him, ‘and our real names aren’t on the founding papers.’

‘But are there not rules about political parties taking money from offshore companies?’ Palmer asked.

‘Barrack Road Investments has a UK-based sister company, for want of a better phrase, with a discreet, private little office in London from which we can donate to whoever we please. In reality it’s little more than a PO box.’

‘I don’t like it,’ Kinane’s mood had soured, ‘giving money to the Tories? Might as well give it to the IRA or the Taliban.’

‘Oh don’t be ridiculous Joe!’ mocked Baxter.

‘Why not?’ Kinane protested, ‘they’ve both done less damage to the north-east than the fucking Tory party,’ and he folded his arms defiantly.

‘Let’s talk about it later, eh?’ I suggested. ‘Nothing’s been decided.’ I had been hoping for a calm and pleasant day for once, but this wasn’t going to be it. What should have been a celebratory lunch ended on a tense note.