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Does Eric Watson Have Russell McVeagh & Others In His Netflix Sights?

A recent Stuff article on former high flyer Eric Watson and his move from Pentonville Prison to some sunny place in Europe has him now planning his revenge, it would see, with a tell-all book and television series on his various grudges.

Just how these tales will unfold and via what format in the Netflix age is uncertain, but one group who will be either holding their breath or rolling their eyes are Russell McVeagh, the firm who helped structure part of Watson’s empire in a deal struck down by the courts.

According to the article he has a deal with a major streaming service, named by one online source as Netflix, and a book in the works which, he says, will make some powerful people in New Zealand very uncomfortable.

“There’ll be some interesting stories in the book. There’ll be some really interesting stories in the book.”

So far as the Russell McVeagh involvement is concerned,

While Glenn was pursuing Watson overseas Inland Revenue were going after Watson’s NZ-based investment vehicle Cullen Investments.

Watson’s company Cullen had engaged in tax avoidance by making loans to Watson-controlled entities in the Cayman Islands, minimizing tax liability by around 12 per cent.

The Watson-controlled Cayman Island-based trusts had paid only 2 percent in tax under the Approved Issuer Levy, which is a tax regime aimed at encouraging foreigners to lend more to New Zealand investors and businesses.

When Watson decided to move to Britain in 2002, he and Campbell Rose, then a tax partner at Russell McVeagh and a tax partner at Deloittes since 2012 , set up a web of entities including the Cayman Islands-registered trusts.

Campbell Rose LawFuel

Campbell Rose (left) is a highly regarded tax lawyer who has handled an array of major tax related affairs for major businesses and organisations for many years.

Using these entities, Watson’s equity in Cullen Investments was converted into debt of $291 million loaned to Cullen Group which was then charged 16 percent interest on those loans by the Modena and Mayfair Trusts.

In 2019 Cullen Investments was ordered to pay the difference in tax back, plus interest, a decision that saw various assets taken by liquidators KPMG in part settlement of the tax bill.

In his decision on the application for a stay on costs in late 2019 Justice Matthew Palmer noted that while Cullen Group had negative equity in its accounts of $203.4 million, its subsidiary Cullen Investments had assets of more than $148 million in its 2017 financial statements.

Justice Palmer ruled in March that Watson had used “a web of entities” designed to avoid paying non-resident withholding tax of 15 per cent on loans to Cullen Investments between 2002 and 2010.

Watson pointed the figure then – and now – at former tax advisers Russell McVeagh which the article says KPMG devoted ‘considerable resources’ towards exploring liability issues without finding anything actionable against the firm.

Does Eric Watson Have Russell McVeagh & Others In His Netflix Sights? 4

Read: ‘The QCs Who Handed Eric Watson His Head’

Matthew Hayes

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