In the tradition of naming any government related scandal as being something-gate, we know have Jowellgate, a bribery and corruption scandal involving the British politician Tessa Jowell.
Since 2001 Ms Jowell has been a cabinet minister known formally as the
Secretary of State for Culture, Media and Sport, more simply as the Culture Secretary. Although born Tessa Palmer and married for the past twenty-seven years to a Mr Mills, she still bears the surname of her first husband Roger Jowell whom she divorced in 1978.
What's it all about?
Tessa Jowell's second husband David Mills, whom she met whilst they were both sitting on Camden Council in the 1970s, is a corporate tax lawyer. Specifically he is corporate tax lawyer who has specialised in setting up offshore tax-mitigation schemes for Italian companies. One of his clients in this regard being Fininvest, a corporate vehicle for Silvio Berlusconi, Italian media mogul and sometime politician and Prime Minister of that country. Mr Mills set up a number of offshore companies for Fininvest which were designed to reduce its tax bills as well as to sidestep various restrictions placed on the ownership of TV stations by the governments of Italy and Spain.
It has been known for some time that Mr Mills has had, how should we put it, certain difficulties regarding his relationship with Signor Berlusconi. These arise largely because there exist some doubts as to whether certain of Berlusconi's business activities were quite legal,
including those arrangements put in place by Mr Mills. It was in regard to these arrangements that Mr Mills gave evidence at two trials in 1997 and 1998 where Signor Berlusconi faced various charges of corruption and tax evasion. Berlusconi was subsequently acquitted and Mr Mills's evidence was regarded as being extremely helpful in achieving this objective.
Now Mr Mills carried out these activities through a corporate management named CMM Management Services, and his difficulties really began when he sold this company to Edasco in 1994. The new owners appear to have adopted a slightly different ethical approach to the business. When they came across an offshore company named Horizon and established that its owner, one David Mills, had not been quite as forthcoming as he should have been to the British tax authorities regarding its income, they forced him to come clean to the Inland Revenue who handed him a bill for £987,000.
In 1996 this Horizon vehicle was in receipt of further sums of money believed to have come from Berlusconi's companies. Mr Mills appears to have taken the view that all this money was his, however his fellow and former partners at his legal practice of Mackenzie Mills took a different view, and considered these sums to be partnership income. Thus Mills ended up with "just under £500,000 out of what was then getting on for £2m", a dissatisfactory result from his point of view which led him to complain that he had undertaken "all that risk and cost for not very much".
His unhappiness was made known to "the B people" (as Mills termed them) and in 1999 they decided to compensate him by paying him a further $600,000 - an amount which is variously referred to in the British press as being £350,000 or £344,000. This payment was later explained as being a reward for the helpful evidence he had earlier given at Berlusconi's trials, as they "knew quite how much the way in which I had been able to give my evidence (I told no lies, but I turned some very tricky corners, to put it mildly) had kept Mr B out of a great deal of trouble that I would have landed him in if I had said all I knew." Thus as Mills was later to explain, "around the end of 1999, I was told I would receive money, which I could treat as a long-term loan or a gift. $600,000 was put in a hedge fund and I was told it would be there if I needed it. For obvious reasons of their own (I was at that stage still a prosecution witness, but my evidence had been given) it needed to be done discreetly. And this was a roundabout way."
The British tax authorities became interested in the matter as Mr Mills, believing that this sum was a "long-term loan or a gift", had thus neglected to make any reference to its receipt on his Income Tax return. This prompted the Inland Revenue to begin making inquiries into his affairs once more, and when, early in 2004 David Mills discovered this he handed a letter dated 2nd February 2004 to his accountant Bob Drennan explaining the "relevant facts", and from which much of the above account is derived. On receipt of said facts Mr Drennam promptly reported the matter to the National Criminal Intelligence Service.
What does all this mean?
The Italian authorities now appear convinced that this $600,000 was simply a bribe paid to Mr Mills for giving misleading evidence that helped secure Berlusconi's acquital. The public prosecutors in Milan therefore interviewed Mills in the July of last year. He gave a statement admitting that $600,000 had been a payment from Mr Berlusconi which he explained was "a debt of gratitude for the way I had managed to protect him". However the very next day he claimed that this was in fact a false statement which had been forced out of him by the "very, very harsh tactics" of the prosecutors.
Mr Mills has subsequently denied receiving money from Signor Berlusconi. He has claimed that his letter of February 2004, whilst genuine, was "hypothetical" and simply a ploy he had adopted in order to obtain tax advice for a client whom he did not wish to identify. (And therefore presumably, that any resemblance to any actual persons or events was entirely coincidental.) He admits receipt of the $600,000 but claims that it came from another client of his, a Neapolitan shipping tycoon by the name of Diego Attanasio. Signor Attanasio, who has served a three-year custodial sentence for corruption on unrelated charges, denies that he paid Mr Mills any such amount. Although it seems that the money in question can be traced back to a $1m transfer made from Attanasio's Guernsey based Hadrian Trust, such is the manner in which David Mills is believed to have intermingled his clients' affairs.
We therefore find ourselves in the strange situation where although David Mills has twice admitted in writing that he received $600,000 from Signor Berlusconi as a quid pro quo for his favourable testimony, he neverthless denies that he did so.
What has this to do with Ms Jowell?
Nothing really apart from the fact that she is married to Mr Mills and therefore might be presumed to have known what he was up to. Ms Jowell has however challenged this presumption and protested her ignorance of her husband's business affairs.
The $600,000 gift/fee/bribe received by her husband was placed in the Torrey Global hedge fund based in New York. Mr Mills later decided that the this particular fund was underperforming and that he would be better off investing in the Guernsey based Centurion fund. But rather than cash in his investment in Torrey Global, he borrowed the sum of £408,000 from Hambros Bank, by way of a mortgage secured on the couple's North London home, to invest in the Centurion fund. Then a few weeks later he cashed in the Torrey Global investment and paid off the mortgage.
No sane person would of course go to the trouble and expense of doing this and, as pointed out by The Sunday Times who originally broke this part of the story, it appears to be an attempt to confuse the audit trail and disguise the source of money. They also noted the frequency with which the pair have taken out and redeemed a series of mortgages over the years, all of which appear to be connected to various investments made by Mr Mills, none of which seem to been as lucrative as originally anticipated.
The point being that Ms Jowell signed off on all these mortgage applications and thus many find it difficult to accept her assurances that she was completely ignorant of the circumstances in which they were taken out. Her position is that she left such matters entirely in her husband's hands and that whilst she might therefore have signed her name to some documents she placed her trust in her spouse and asked no questions.
What happens now?
The Cabinet Secretary Gus O'Donnell has investigated the matter to see whether there has been any breach of the ministerial code of conduct. Having concluded that Tessa Jowell followed the required procedures, Tony Blair has therefore concluded that she did not in fact breach the code. Similarly the Parliamentary Commissioner for Standards, Philip Mawer has also ruled that her entry in the register of members interests does not need revising. He also cleared her of
any wrongdoing as a result of a £67,000 profit her husband alleghedly made in 1998 on shares in the Old Monk pub chain, when she was a public health minister, despite her claim that her husband had "never owned" such shares.
On Saturday, 4th March 2006 Ms Jowell announced that she was separating from her husband, whilst expressing the hope that the relationship "can be restored" sometime in the future. This has been dubbed the 'separation of convenience' and nothing more than a cynical ploy to save her career. Naturally Ms Jowell has hotly denied such Machiavellian motivations and has roundly dismissed the "idea that people could decide on a separation for contrived reasons - it's just not how human beings behave."
Tony Blair believes that she is doing "an excellent job" and Ms Jowell seems to have survived her appearance before the House of Commons on Monday the 6th March 2006 and has so far managed to her retain her position in government despite the many calls for her resignation. The outlook is not so rosy as far as David Mills is concerned as on the 10th March it was reported that Italian prosecutors have applied to a Judge Fabio Paparella in Milan to have him indicted.
Whilst the Blair government has so far weathered the minor storm it has still left the damaging impression given that the country is being led by the sort of people who habitually take out six figure mortgages without giving the matter any thought whatsoever. This is not quite the image the People's party wishes to present to the voters and may well be the most lasting legacy of the affair.
SOURCES
- Various reports in The Mail on Sunday March 5, 2006
particularly
Offshore web hid cash from Taxman by Michael Gillard and Ben Laurence
- Numerous reports from the BBC at http://news.bbc.co.uk
- Adrian Michaels and Jimmy Burns, Seized material likely to be sent to Milan The Financial Times, March 6 2006
http://news.ft.com/cms/s/0ef59144-acb6-11da-8226-0000779e2340.html