This story is part of a CBC News collaboration with the Washington-based International Consortium of Investigative Journalists examining the Pandora Papers, a leak of 11.9 million files from 14 firms that provide offshore services, including emails, bank statements, incorporation documents and shareholder registries.
As he sped around race car tracks, Jacques Villeneuve’s money was zooming around the world.
There was prize money from winning the Indianapolis 500 and the IndyCar championship in the mid-1990s, a Formula 1 contract with the Williams team from 1996 to 1998 and a lucrative $100-million deal to drive for British American Racing for five years after that.
Add in image rights, a chic Montreal resto-bar and a number of luxury Quebec properties, and the sums could get dizzying.
Yet somehow, when he lived in Quebec in 2010, he declared just $6,431 in personal income — and claimed a tax credit for low-income families. The next two years, he declared $3,224 and $5,782 in income.
Much of Villeneuve’s money, it turns out, was banked in offshore havens, mostly using tax avoidance strategies. Villeneuve also didn’t live in Canada for most of his life and so didn’t owe tax here for those years.
However, he was a Quebec resident from 1993 to 1996 and 2007 to 2013, and tax authorities are now accusing him of not reporting his full income and assets — including a Swiss bank account.
Tax experts consulted by Radio-Canada also said that the tax avoidance strategies he used, like shifting his image rights offshore, point to major problems with the law.
Villeneuve’s dealings in tax havens are revealed in the Pandora Papers, a huge leak of 11.9 million confidential files from numerous offshore jurisdictions. The records were leaked by a confidential source to the Washington-based International Consortium of Investigative Journalists, which shared the information with its partner news organizations around the world, including CBC/Radio-Canada and the Toronto Star.
The records show that Villeneuve’s first offshore company goes back to the early years of his career. He had been racing in Japan in 1992. But he came back to Quebec, where he was born, for a Formula Atlantic race that summer in Trois-Rivières, where he placed third. One month later, an entity called Goldstar Holdings Corp. was incorporated in the Bahamas as a holding company for the driver’s race winnings and sponsorship money.
At the time, Villeneuve and his manager, Craig Pollock, were in negotiations with Imperial Tobacco for him to return to Quebec and join the Formula Atlantic series full-time. Having a company in the Caribbean could have permitted the racer to avoid income tax in Canada on revenues booked by his company in the Bahamas, where the corporate tax rate is zero.
Such tax tactics are not inherently illegal but they do deprive government coffers of huge amounts of revenue every year that could otherwise pay for schools, health care and social services.
Then, in January 1994, while he was still living in Canada, Villeneuve and his manager Pollock set up a trust in the British Virgin Islands, another offshore haven with a zero income tax rate.
A document in the Pandora Papers leak shows the “Moritz Settlement,” as the trust was known, was established “to preserve, manage and protect the family assets of Mr. John Craig Pollock and Mr. Jacques Villeneuve.”
The trust became the shareholder of Goldstar Holdings, Villeneuve’s Bahamas company. But there was no paper trail. The shares of Goldstar were changed into so-called bearer shares, whereby whoever possesses the actual stock certificates is the owner of the equity in the company. The owners’ names don’t appear in any register, which allows for complete opacity.
“The only reason to use bearer shares is to keep things secret and not let anyone else, tax authorities or others, know who the shareholder is,” said André Lareau, an associate professor of tax law at Laval University in Quebec City.
The Bahamas abolished the use of bearer shares in 2000.
After Villeneuve won the Indianapolis 500 and the IndyCar season championship in 1995, he graduated to the summit of car-racing glory: Formula 1. He joined the Williams F1 team, moved to zero-tax Monaco in 1996 and entered a world where tax dodging was the norm.
“He was surrounded by people who sheltered income in tax havens, whether it was [F1 boss] Bernie Ecclestone or the team owners,” said sports columnist Martin Leclerc, who followed Villeneuve’s career for the Journal de Montréal newspaper.
As he rocketed to the heights of the F1 standings, taking the championship in 1997 ahead of the legendary Michael Schumacher, his fortunes rose hand-in-hand. Leclerc estimates Villeneuve would have earned north of $15 million a season in those years from his contract with Williams.
Another major source of income for sports stars, beyond salary and prize winnings, are image rights for things like advertisements, sponsorships and video games. It’s common practice for image rights to be held by shell companies in tax havens.
In 1998, a new company called Villeneuve Multi-Media was incorporated in the Bahamas, with Goldstar Holdings as its main shareholder, to book revenues from Villeneuve’s videogame image rights. A few years later, Ubisoft created the game Speed Challenge: Jacques Villeneuve’s Racing Vision for PlayStation 2, GameCube and Windows computers, under license from Goldstar Holdings.
Tax law professor Lareau said that while legal, these kinds of arrangements are “so artificial.”
“My image rights belong to me, and I am able, by a legal fiction, to transfer the income that comes from my name and image to a foreign company,” he said. “It’s like if I say, ‘I’m a good baseball player. I will cut off my arm, send my arm elsewhere and my arm will then become the property of an offshore company.’ “
Then in 1999, Villeneuve signed with a new F1 team, British American Racing, for $100 million over five years.
“He was one of the best paid athletes in his field,” Leclerc said.
Return to Canada
The move to BAR didn’t pan out — Villeneuve never won another F1 race — but his lack of success on the track belied a life of luxury: a 40-metre yacht, the Bliss, in Monaco and a chalet in Switzerland.
The Pandora Papers show that another British Virgin Islands trust, the Glion Trust, was set up in 2002 “to preserve, manage and protect the family assets of Mr. Jacques Villeneuve.”
Finally, in 2007, after quitting F1 for good, Villeneuve returned to Quebec to try his hand at NASCAR racing. He moved into a two-storey penthouse in Old Montreal with a private terrace and wide sight lines of the city’s downtown.
Around that time, he divested his interest in Goldstar Holdings. And in the following years, some of his other Caribbean companies became inactive or dissolved.
But his Old Montreal condo was owned by a company based in the British Virgin Islands, Sapphire Blue Holdings. When the condo sold in 2009, Villeneuve signed some of the papers on behalf of Sapphire.
The former F1 champ also purchased a 340-hectare estate in the Laurentians, where he built a large log cabin. That property, too, traced back to an offshore company, this time one called Classes Etoile SA in Luxembourg.
And Villeneuve ran a resto-bar, called Newtown, on Crescent Street in Montreal. That, too, was officially owned by an offshore company, Fairstar Investments in the Bahamas.
Troubles with the tax authorities
Villeneuve and his former manager Pollock didn’t answer questions put to them by Radio-Canada.
In an interview with the Montreal daily La Presse in 2013, the race-car driver said he followed the tax laws of every country he lived in. He also told the Journal de Montréal newspaper that year that he had always paid his taxes during his time living in Quebec.
Revenu Québec doesn’t agree. After Villeneuve moved abroad, the provincial tax agency began auditing him to verify that he had declared all his worldwide income while living in Quebec. Villeneuve was required to hand over a list of all his foreign assets, according to court filings as part of a tax dispute between him and the agency.
Revenu Québec alleges Villeneuve delayed in responding and then failed to declare a Swiss bank account. It also claims he hasn’t provided a satisfactory explanation for the source of multiple deposits to his HSBC bank account in Montreal. And the agency is contesting a $300,000 “loan” from Goldstar Holdings, his Bahamas holding company.
Villeneuve’s lawyers are fighting back in court, saying he didn’t have to declare those amounts because they weren’t taxable.
Documents filed as part of the court case show the former F1 champ declared personal income of $6,431 in 2010 and claimed a tax credit for low-income families. Revenu Québec’s filings say he declared just $3,224 in personal income the following year, and $5,782 in 2012. Those amounts are below the minimum threshold to pay any income tax.
Notably, in 2012, Villeneuve made controversial comments about Quebec students protesting against tuition hikes, saying their demands weren’t fiscally realistic. “Where does the government get the money? From taxes, from selling stuff. The next thing they will say is, ‘Well, take it from the rich,’ ” he said. “And that’s when you have the rich moving to another country.”
Villeneuve’s racing income from those years was routed to a Quebec corporation, Newtown Racing Inc. Its financial statements, filed in court, show it had total revenues of more than $1 million between 2011 and 2013. But losses booked in 2010 and 2012 largely offset that income, and the company paid a total of just $27,000 in tax over those years.
A Montreal lawyer for Villeneuve, Martin Delisle, said he wouldn’t comment while the case is before the court.
Widespread tax dodging by sports stars poses an ethical problem around the world, said Edoardo Traversa, a professor of tax law at Louvain University in Belgium who has written about the tax tactics of professional athletes.
“We are witnessing a problem which is the equivalent of doping, but from a tax point of view,” he said. States should tackle this problem as they’ve done recently with tax dodging by multinational corporations, he said.
In 2013, Villeneuve left Quebec for Andorra, a tiny tax haven between France and Spain. He then moved back to the Swiss Alps, and finally took up residence in Italy — a country that offers a special €100,000-a-year ($143,000 Cdn) flat tax to new residents on their foreign wealth.