[Lead Image: Courtesy of Astrid Harrison]
thePipeLine can reveal that through a combination of alleged underpayments on a Government salvage contract and £7 million in fees paid for services provided to a series of treasure hunting investment schemes set up by City firm Robert Fraser & Partners, allegedly to facilitate tax avoidance, the Florida based commercial treasure hunting company Odyssey Marine Exploration may have cost the UK taxpayer more than £10 million in lost revenue.
In 2012 Chancellor of the Exchequer George Osborne told the UK Parliament that Tax Avoidance was “morally repugnant”. However, thePipeLine can reveal that Odyssey Marine Exploration, the Florida based treasure hunting company, benefited to the tune of over £7 million through acting as a service provider to a series of underwater treasure hunting schemes operated as an alleged tax avoidance scheme. The schemes were operated by Robert Fraser Marine, an arm of City firm Robert Fraser & Partners LLP and thePipeLine understands Robert Fraser Marine projects have now been closed down by Her Majesty’s Revenue and Customs [HMRC]. Given the Conservative Party’s public stance on Tax Avoidance during the UK General Election, the revelation will cause acute embarrassment to the Conservative Secretary of State for Defence Michael Fallon, Health Secretary Jeremy Hunt, and Transport Secretary Patrick McLoughlin who have all been associated with awarding or overseeing Odyssey’s Government contracts and permissions. However, most embarrassed of all will be Mr Fallon’s close political associate and advisor on education to David Cameron and other senior Conservatives, Sir Robert Balchin, Lord Lingfield. Lord Lingfield is Chair of the charity, the Maritime Heritage Foundation, which employs Odyssey for the controversial salvage of HMS Victory, lost in the English Channel in 1744.
Documents obtained by thePipeLine show that Lord Lingfield lobbied a succession of Conservative Defence and Culture Ministers on behalf of the Florida based company on the grounds that allowing Odyssey to undertake the salvage HMS Victory on a commercial basis meant that the work could be done in line with the Government’s ideological stance and would come at no risk or cost to the Government or UK taxpayer. Mr Fallon ignored the advice of numerous experts and heritage bodies and gave permission for the controversial salvage plan to go ahead in October 2014, only to have to withdraw the permit in March this year when faced with a Judicial Review which would have revealed details of the circumstances under which Lord Lingfield’s charity and the American company, gained control of the wrecksite which is known to contain human remains as well as a large number of valuable bronze cannon. The wreck of HMS Victory is the grave and memorial to the 1100 Royal Navy personnel who were lost with the ship. Meanwhile Mr McLoughlin’s Department for Transport stands accused of ignoring an alleged underpayment by Odyssey of a further $4.9 million [£3.2 million]. Money from the UK Government’s share of proceeds from the sale of silver bullion salvaged from the torpedoed cargo steamer SS Gairsoppa.
The relationship between Odyssey and Robert Fraser Marine dates back to November 2009 when Odyssey announced it would take part in a Robert Fraser Marine project code named “Enigma”. In 2010 Odyssey announced it had reached further agreements with clients of Robert Fraser & Partners LLP (RFP) for a total of three additional shipwreck research projects code named “Firebrand,” “Shantaram” and “Enigma II.” Two further projects followed, “Stanton A” and an offshore mining project, “Dorado Resources”. However, all the projects seem to have failed and cooperation between Odyssey and Robert Fraser Marine apparently came to an abrupt halt in late 2012, soon after the story of alleged tax avoidance through investing in marine treasure hunting became public in “The Times” newspaper and Mr Colin Empson of Robert Fraser & Partners admitted that HMRC were investigating the schemes.
At this time press releases relating to the partnership stopped, associated web sites were no longer updated and Odyssey even returned $440,054 of its initial payment from the Dorado mining project. Sources in the marine salvage industry have now confirmed that the schemes have indeed been shut down by HMRC and Odyssey confirms it has not actively worked on Robert Fraser & Partners projects since 2012, although as of the start of 2015 the Florida company was still paying back over $1 million in cash accrued under the terms of the various schemes.
This exclusive investigation by thePipeLine was conducted using documents and other sources in the public domain as well as Freedom of Information Act requests and other standard journalistic means. The origins of this story date back to 2009 when Robert Fraser & Partners LLP described the business model for their maritime projects company, Robert Fraser Marine on the company website and the senior management of Odyssey Marine exploration introduced a new business model to the company shareholders…
“Effectively Odyssey had become a one stop, marine salvage, shop for Robert Fraser Marine and would be reimbursed accordingly.”
On 27 October 2009 Odyssey Marine Exploration’s co-founder and then Chief Executive Officer [CEO] Gregory Stemm described a new partnership with UK based Robert Fraser Marine to the company’s share holders in a press release
“Our first project with Robert Fraser & Partners LLP has been funded, and I believe it will be the first of many. This model allows us to generate recurring revenue from our marine operations while retaining a large portion of the project’s potential upside. This first venture is built around the “Enigma” project, which will be starting shortly. The “Enigma” project shows great potential, and our team can’t wait to get started on it…”
The business model Mr Stemm was referring to was described like this on Robert Fraser & Partners website dedicated to the new marine salvage projects.
The Robert Fraser Marine Ltd business model
Marine Research Background & History
Over the past 500 years there have been tens of thousands of merchant ships which have perished in the oceans of the world, many laden with valuable cargoes, documented in research files assembled by marine specialists. Technological advances in deep water research, oceanography and cargo recovery have provided increasing opportunities to identify individual shipwrecks, and assess and realise value from recovered cargoes, including valuable artefacts, gold and silver bullion, coins and contraband treasure.
History and Today
Treasure ship recovery has been around for over 100 years, but with advances in technology it has become a highly technical business, focusing on individual wrecks and cargoes, invariably after years of research by dedicated academic researchers. Nevertheless it is a high risk, high return business, resulting in very material profits on successful finds, against often total loss if the Research Files do not lead to the anticipated recovery.
Can we find it? Can we keep it?
Unquestionably there is a huge volume of bullion and treasure on the seabed. The challenge is to find it and then keep sufficient of it to make fortunes for the search and recovery teams and their investors.
Decision-making to search for a particular wreck
This is based upon the content of the Research File, which will indicate the depth, search box area cost of the search, current day value of the cargo, estimated cost of recovery, plus an assessment of the judicial procedure in the country concerned of establishing ownership and the minimum value likely to be retained by the search company. The decision guideline is that the anticipated profit to the company should be ten times the total costs of the operation, but not less than five times after payment and recovery of all costs.
This description of the business model was repeated in the scheme’s glossy brochure. The brochure was short on detail, but big on reassurances, images of photogenic treasure and the final page included an unattributed copy of Odyssey’s impressive photo mosaic of the wreck of the paddle steamer SS Republic lost in a hurricane off the coast of Georgia in 1865. Because the wreck was not identified what was not made clear to would be investors was the fact that the Republic was one of just two recoveries of a shipwreck in Odyssey’s entire twenty year history which was both financially successful and did not end up mired in the courts. Even so, most of the profits went to service the company’s considerable accumulated debts.
The Robert Fraser brochure also outlined the kind of services Odyssey and other service providers might be expected to provide under contract.
In assembling individual wreck search projects, individual partnerships are established between the different parties, such as the owner of the Research File, the owner of the Search Vessel, the owner or the grantee of the Search Licence, bringing together a comprehensive team of specialists, many of whom will have worked together successfully on previous projects.
Anatomy of a successful find
Upon the target ship being located and its cargo confirmed, a specialist archaeological recovery ship and team will be commissioned to lift the cargo, catalogue, clean, insure and store it, working in conjunction with the government of the country granting the licence, while the destination of the bullion and artefacts is agreed under judicial procedure between potential claimants”
This mode of working was confirmed in a letter of intent announced by Odyssey in a press release dated 27 October 2009.
“Under the proposed structure, Odyssey will be compensated for search, survey and archaeological excavation as well as development of research files on specific shipwreck and other deep-ocean projects. Odyssey will also have a substantial interest in the back-end of the projects and will be paid for providing other services including conservation, documentation, marketing and sales of recovered cargoes and commodities.”
Effectively Odyssey had become a one stop, marine salvage, shop for these Robert Fraser Marine schemes and would be handsomely reimbursed accordingly. The terms were particularly attractive because, as we shall see, Odyssey would be employing its own bespoke commercial contracts and not the marine salvage industry standard “No Cure Nor Pay” form, where the salvage company takes the risk of absorbing search and recovery costs, in the expectation of a big pay out for a successful salvage.
“Odyssey’s senior management was effectively trying to rewrite the business model for the marine salvage industry”
For several years the financial side of the projects appeared to be progressing smoothly with regular press releases announcing further cooperative projects and financial reporting in Odyssey’s quarterly and end of year filings to US Financial regulator, the Securities and Exchange Commission [SEC]. Then in On 7 January 2011 Odyssey announced that the company and its subsidiary OVH Inc. had undertaken to provide archaeological services “on an existing project to certain client companies of Robert Fraser & Partners LLP (RFP).” The Odyssey Press Release continued “The work will be conducted on a shipwreck site that Odyssey discovered and inspected during a recently completed survey carried out under contract with the RFP client companies.”
As before, instead of the traditional salvage industry contract, an equivalent of the legal profession’s “No Win No Fee”, called “No Cure, No Pay”, Odyssey would be paid twice. First the company would be reimbursed all its recovery costs and then would accrue additional revenues derived from the project. Odyssey and OVH would receive “…$2.3 million cash plus costs in full and 50% of net revenue up to the value of $3 million and 50% of additional net revenue.”
Odyssey’s senior management was effectively trying to rewrite the business model for the marine salvage industry in a way which would cost Robert Fraser Marine’s investors more than would have been the case had they engaged a more traditional salvage company on standard “No Cure No Pay” terms. But then, as it transpired, keeping down the costs may not have been a priority of the scheme. Certainly Colin Empson of Robert Fraser & Partners LLP was delighted with his contractor, being quoted as telling Odyssey
“Our client companies are very excited by the results of this search and Odyssey’s efficiency and performance on this project…In the coming months, we look forward to our clients completing further contracts with Odyssey.”
However, this would be the last such press release Odyssey would publish regarding a Robert Fraser Marine shipwreck project.
Even so, there would be one further known contract between the two companies and it related to Odyssey’s new venture into deep sea mining and dredging for minerals. On 1 April 2011, by a complete coincidence April Fools Day, Odyssey published another press release announcing a mining scheme in the South Pacific
“TAMPA, Fla., April 1, 2011 – Odyssey Marine Exploration, Inc. (Nasdaq:OMEX), a pioneer in the field of deep-ocean exploration, has executed an agreement to provide marine services including mining exploration and drilling operations to client companies of Robert Fraser & Partners LLP (RFP) in a tenement area controlled by Dorado Ocean Resources. The drilling will be conducted on a Seafloor Massive Sulfide (SMS) deposit that was surveyed by the Odyssey and Dorado teams during the first 100 days of exploration in Dorado’s South Pacific concession areas in 2010.”
Odyssey held a 41% stake in Dorado and once again, the company would be reimbursed for providing the technical support to the project. Colin Empson of RFP was again delighted saying
“We are pleased to have introduced clients who have executed the first of several planned mining exploration and drilling contracts with Odyssey and Dorado for our client companies,”
“The deep-ocean mining exploration business holds great promise and we are happy to be able to introduce our clients into this opportunity at an early stage.”
“…in 2012 the whole house of cards supporting investment in hunting valuable shipwrecks had began to collapse”
One reason for this diversification into off shore minerals is the fact that in 2012 the whole house of cards supporting investment in hunting valuable shipwrecks had began to collapse. On February 16 2012 Odyssey had finally been forced to return 17 tons of silver coins and other objects, salvaged unlawfully from the wreck of the Spanish frigate Nuestra Senora de las Mercedes, sunk in 1804. This was the result of a long running court case in Florida during the course of which US Judge Steven R Merryday castigated Odyssey’s approach to the case, its management style and the company’s sometimes strained relationship with the truth, as he effectively upheld the rights of flag states to prevent the unauthorised salvage of all historic wrecks which were lost on military duty. A category encompassing many known or suspected historical treasure wrecks which were Royal warships belonging to various nations, principally Spain and Portugal. Then on 8 October 2012 Alexi Mostrous of “The Times” newspaper reported that a leading donor to the Conservative Party was among the City Traders, Hedge Fund operators and celebrities being linked to a legal Tax Avoidance scheme which was under investigation by HM Revenue and Customs having allegedly cost the UK exchequer £110 million.
The Time’s detailed investigation, entitled “Tax breaks found at the bottom of the sea,” showed that the Tax Avoidance scheme concerned was that operated by Robert Fraser Marine, a part of long established City Firm, once closely associated with the late Robert Maxwell, Robert Fraser & Partners LLP. Among the 129 known participants in the scheme, investing in as many as 18 companies set up to undertake these underwater treasure hunts, were the highest earner in the City of London and leading donor to the ruling Conservative Party, David Harding; leading Liberal Democrat donor Paul Marshall and television personality and Chief Scout Bear Grylls. Once the client made an initial investment in the company set up for the specific project Robert Fraser Marine supplemented that investment with a further loan to the investor, provided by the Company’s own banking arm, the Sterling Credit Guarantee Company (SCGC). If the expedition turned a profit the loan was repaid and the investor took the profit. However, if, as happened in eleven of the eighteen projects “the Times” investigated, the company went bust, the investor was entitled to tax relief on the initial investment and on the loan, which could be transferred to a third party, such as a spouse and then returned the next day as a tax-free gift. For example, if the investor risked £250,000 and took an additional loan of £750,000, they would be entitled to claim tax relief on the entire sum of £1 million. Meanwhile Robert Fraser & Partners and its various service providers such as Odyssey took their payment for legitimate services provided.
It was all very neat and thePipeline has no evidence that Odyssey Marine has done anything illegal with regard to its business relationship with Robert Fraser Marine. Neither did “the Times”, which did not mention Odyssey in the body of an article which was principally focused on Robert Fraser Marine itself and that company’s clients who were alleged to be benefiting directly from the Tax Avoidance scheme. However the “The Times” did point out the narrow ledge of legality such schemes balance on when analyst Oliver Kamm commented to the newspaper
“Tax reliefs are not always bad. However, there needs to be an economic reason for them and the reliefs need to command popular support. That means the reliefs should be restricted to productive activities that create jobs and stimulate growth.
The highly speculative venture of searching for treasure would not meet that test.”
Mr Colin Emson the Chairman of Robert Fraser & Partners LLP seemed to agree that the scheme was operating at the very furthest edge of what was acceptable when he told “The Times” that he was expecting the HMRC to challenge the legality of the scheme and admitted
“More often than not HMRC wins their cases.”
It now appears that HMRC did indeed win and certainly as far as Odyssey is concerned, the Robert Fraser & Partners projects are now dead and have been for two and a half years, not that you would know it from any formal announcement made by the company.
“Regarding the Robert Frasier projects, we can confirm that Odyssey has not conducted any operations under contract to Robert Fraser & Partners or their clients since 2012.”
When “the Times” story first broke in 2012 the editor of thePipeLine asked Odyssey and the Maritime Heritage Foundation to comment. Odyssey replied through its then UK Public Relations Officer, Rebecca Blackwood of the high end public relations company the Brunswick Group, who offered the following statement.
“Odyssey was one of several contractors which provided deep ocean search and survey services to client companies of Robert Fraser & Partners. All contracts between the companies and Odyssey were reviewed by legal counsel. Odyssey has also worked under contracts with a variety of other entities including governments, mineral exploration companies and insurance investigators. Many entrepreneurial endeavours such as shipwreck exploration, mineral exploration and biotechnology research have the potential to contribute to scientific and historical research as well as to provide economic returns to governments both directly and through taxes paid by investors on profits. For instance, the UK Government will be receiving millions of pounds following the recovery of silver from SS Gairsoppa, which was accomplished at no risk to taxpayers. ”
Ms Blackwood also told us that if we wanted a comment from the Maritime Heritage Foundation we would have to approach Lord Lingfield directly. As a result she was then asked if she was no longer representing the Maritime Heritage Foundation because the Ministry of Defence had stated she was their media contact on the January 2012 press release about the gifting of HMS Victory to the Maritime Heritage Foundation. Ms Blackwood never responded.
Asked to update those comments and to confirm the Robert Fraser projects were no longer active in April 2015 a spokesperson for Odyssey Marine Exploration told thePipeLine
“Regarding the Robert Fraser projects, we can confirm that Odyssey has not conducted any operations under contract to Robert Fraser & Partners or their clients since 2012.”
We also asked if Odyssey regretted becoming involved in projects which seem to have been primarily configured as a tax avoidance scheme. Odyssey has, so far, chosen not to reply.
The statement that Odyssey has not conducted operations on behalf of Robert Fraser Marine since 2012, appears to be backed up by Odyssey’s filings to the US Securities and Investment Commission [SEC] which regulates financial transactions in the United States. Since 2012 the Robert Fraser projects have taken an ever lower profile until, in a final embarrassing acknowledgement of the demise of Gregory Stemm’s attempt to “generate recurring revenue” from maritime operations and retain more of the proceeds, Odyssey’s 10K filing for the fiscal year ended 31 December 2014 included the following statement.
“At December 31, 2013, we had a $1,840,404 service obligation on one service contract that was to be recognized as revenue over the period of time the contractual services are provided. The balance at December 31, 2014 is zero. During 2014, both parties agreed to cease the program related to the project. The parties have negotiated the return of the funds which is expected to be approximately $1.4 million. The return of these funds will occur in 2015. When these funds are remitted, the contract will terminate. The remaining balance of $1,840,404 is in our accounts payable at December 31, 2014.”
“Now the MoD finds itself deciding whether to reinstate that permission for the salvage when the chosen contractor, Odyssey, has been linked to one of the most toxic subjects in the UK General Election campaign, Tax Avoidance.”
According to calculations made by thePipeLine and checked by independent sources, during the course of its involvement with Robert Fraser Marine Odyssey Marine Exploration made over $10.5 million (£7 million) on six separate Robert Fraser projects, broken down as follows
Payments Received by Odyssey Marine Exploration from Robert Fraser Marine between 2009 and 2012 [Source: OME SEC Filings]
* “$9.0 million related to our syndicated projects with clients of Robert Fraser Partners LLP (RFP) that included four separate projects ( Enigma I and II , Firebrand and Shantaram ).” http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=7759916-97922-110795&type=sect&TabIndex=2&companyid=287&ppu=%252fdefault.aspx%253fcompanyid%253d287
** 4th quarter of 2012 additional work on two Robert Fraser shipwreck projects in the fourth quarter 10K http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9155111-84840-138755&type=sect&TabIndex=2&companyid=287&ppu=%252fdefault.aspx%253fcompanyid%253d287 .
*** $1.4 million made as initial payment $440.054 was subsequently refunded as part of the termination agreement between OME and RFM http://files.shareholder.com/downloads/OMEX/97049490x0xS1193125-14-101158/798528/filing.pdf
This clear linking of Odyssey to a scheme for the aggressive, albeit legal, avoidance of what the Times alleged was some £110 million of UK Tax could not come at a more embarrassing time for Secretary of State for Defence Michael Fallon and the Conservative Party of which Lord Lingfield is a leading and influential member. The HMS Victory 1744 Project was already stalled. Now the MoD finds itself deciding whether to reinstate permission for the salvage when the chosen contractor, Odyssey, has been linked to one of the most toxic subjects in the UK General Election campaign, Tax Avoidance. An area where all three main political parties appear to be trying to outbid each other to see who can bring about the biggest win for the Exchequer by clamping down on offshore Tax Havens and Tax Avoidance schemes by multinational companies and the super rich.
While there is no suggestion that HMS Victory is a Robert Fraser project, the accusations that Odyssey received income from aggressive, but technically legal, Tax Avoidance are perhaps even more embarrassing for the Chair of the Maritime Heritage Foundation Sir Robert Balchin Lord Lingfield. For thirty years Lord Lingfield, has been an advisor on education to a succession of senior Conservatives including John Major, Michael Gove and Prime Minister David Cameron himself. He is also a close political associate of both Health Secretary Jeremy Hunt and Defence Secretary Michael Fallon, having been a leading member of the south east region of the Conservative Party when both men were selected for their safe Parliamentary seats in that region. Such was his influence and importance to the Conservative Party’s controversial education strategy for “Academy” and “Free Schools,” independent of local authority control, that he was made a working Life Peer in David Cameron’s first honours list as Prime Minister in October 2010.
This is precisely the time when Lord Lingfield was most active in lobbying for Odyssey. Documents released under the Freedom of Information Act show Mr Hunt held an off the record meeting about HMS Victory 1744 with Lord Lingfield during the week commencing 5 July 2010 which led to his Civil Servants at the Department of Culture Media and Sport warning the Secretary of State about Lord Lingfield’s close association with Odyssey and the likelihood that those links would create problems for the Government.
“Given Sir Robert’s close links with the main commercial salvor with an interest in the site (much of the wording of both his letter and submission reflects that salvor’s views), any letter is likely to be shared with them, and create further issues for the handling of both this case and wider policy on the issue of how this Government deals with UCH issues. This has potential to damage both the Government’s relationship with the international community, and create further tension with our expert advisers in the Maritime team at English Heritage, at a time when the Government is under intense scrutiny for handling of the Victory case as a test case.”
Source: DCMS briefing note to Secretary of State Jeremy Hunt 17 August 2010 released under the Freedom of Information Act
As we now know, Mr Hunt ignored the advice of his civil service advisors and as a direct consequence of the resulting relationship with Lord Lingfield, and Odyssey, first brokered by Mr Hunt, the Cameron Government has been mired in accusations of incompetence and cronyism relating to the HMS Victory 1744 project ever since. Just as Mr Hunt’s civil service team predicted. The latest nadir in the Government’s handling of the HMS Victory project came in March 2015 when Defence Secretary Michael Fallon was forced to rescind permission for the salvage which he had granted just months earlier because the Government was faced with losing a Judicial Review into the process of awarding permission in the first place.
Further documents also released under the Freedom of Information Act also demonstrate conclusively that Lord Lingfield consistently lobbied the Ministry of Defence for Odyssey to be allowed to salvage HMS Victory on commercial terms dictated by the company arguing, as Odyssey does, that this solution would benefit the public purse. In June 2010 Lord Lingfield, then still plain Sir Robert Balchin, wrote a formal submission to the Department for Culture Media and Sport which was undertaking a consultation into the future management of HMS Victory saying
“I absolutely believe, therefore, that a commercial model featuring a public/private partnership will give currently the best opportunity to save this ship without cost to the treasury. It is my hope that officials will discuss a suitable arrangement with Odyssey Marine Exploration and other firms with the same expertise and equipment, should there be any. I suspect that, given the fact that Odyssey has done a considerable amount of the work already, they will be the best option.”
Source: Sir Robert Balchin, [now Lord Lingfield], formal submission to the DCMS HMS Victory 1744 Consultation June 2010 released under the Freedom of Information Act
Indeed, so involved in lobbying on behalf of Odyssey and its commercial business model was Lord Lingfield that between 2010 and 2015 he has conducted a regular correspondence with the Ministers and officials, lobbying for his contractor to be given access to the ship, often writing to Conservative Ministers on first name terms. For example, in the Spring of 2012 he wrote to the Ministry of Defence asking for a definition of certain artifacts from the HMS Victory wreck site which, had the Ministry of Defence adopted it, would have led to his own, supposedly independent, charity, the Maritime Heritage Foundation, not just paying salvage fees to Odyssey, but unnecessarily high salvage fees.
This came about because, as soon as the shipwreck was gifted the Maritime Heritage Foundation by the Ministry of Defence in January 2012, Odyssey announced that Lord Lingfield’s charity had awarded the Florida company a commercial salvage contract which would allow Odyssey to sell artifacts from the site in contravention of stated Government policy, as set out in the Annex to the UNESCO Convention for the Protection of the Underwater Cultural Heritage. The salvage contract was awarded without a competitive tender process, but apparently with the advice of the consultant to the Maritime Heritage Foundation, Dr Sean Kingsley of Wreck Watch International, who was named in a Parliamentary written answer by culture Minister Ed Vaizey, as being a consultant to both the Maritime Heritage Foundation and to Odyssey Marine Exploration. Dr Kingsley also appears in these roles in several TV documentaries recording Odyssey’s work. While there is no evidence the award of the contract was in any way illegal, in not putting the multi million pound contract out to tender the MHF certainly did not follow commercial and charitable best practice and the appearance that Dr Kingsley had a conflict of interest in appearing to work on both sides of the contract is inescapable.
“…it is entirely appropriate that Odyssey was benefiting indirectly from Robert Fraser & Partner’s interpretation of Section 113 of the Income Tax Act which allows entrepreneurs to benefit from investment in “worthless shares”
At the time of the first agreement with Robert Fraser Marine in 2009 Greg Stemm, Odyssey’s then Chief Executive Officer and now Chairman of the Board said
“We’re looking forward to beginning work on the ‘Enigma’ project and developing additional projects with Robert Fraser Marine Ltd,” adding “This presents an exciting opportunity to move Odyssey forward and generate current revenue from marine operations, research and expertise, while maintaining a significant interest in the projects.”
Unfortunately for Mr Stemm and Odyssey it now seems that the “current revenue” was derived, at least in part, from controversial legal tax avoidance by the super rich. Although cynics would claim that, given Odyssey’s track record in spending and losing other people’s money on most of its shipwreck projects and the fact that this Spring, 2015, the company reportedly came to within a few hundred thousand dollars of being forced to file for bankruptcy, it is entirely appropriate that Odyssey was benefiting indirectly from Robert Fraser & Partner’s interpretation of Section 113 of the UK Income Tax Act which allows entrepreneurs to benefit from investment in “worthless shares”.
Meanwhile that exciting partnership with Robert Fraser & Partners seems to have come to nothing. None of the shipwreck projects appears to have resulted in a find of the slightest commercial value [or even in locating the right shipwreck] and, as we report, Odyssey state they have not worked with Robert Fraser Marine since 2012. Meanwhile that “great promise” of sub sea minerals in the Pacific only lasted until February 2015 when the New Zealand Government’s Environmental Protection Authority denied permission for Chatham Rock Phosphate to extract minerals from the Chatham Rise concession surveyed by Odyssey’s chartered vessel, Dorado Discovery. saying in a press release
“… mining would cause significant and permanent adverse effects on the existing benthic environment on the Chatham Rise. This included communities dominated by protected stony corals which were potentially unique to the Chatham Rise and which the DMC concluded were rare and vulnerable ecosystems.”
The press release continued
“…the DMC found that the destructive effects of the extraction process, coupled with the potentially significant impact of the deposition of sediment on areas adjacent to the mining blocks and on the wider marine ecosystem, could not be mitigated by any set of conditions or adaptive management regime that might be reasonably imposed.
… the DMC had also concluded that the economic benefit to New Zealand of the proposal would be modest at best.”
An almost identical Odyssey seabed minerals project, “Oceanica” in Baja Mexico, is also mired in a protracted licencing process and is being vehemently opposed by fisherman and environmental groups.
Viewing the wreckage of the Odyssey Marine exploration/Robert Fraser Marine partnership, it is clear that whatever happens to the offshore minerals business, and for whatever reasons people invest deep sea mining and salvage. Either as a tax write off, or because they genuinely hope to make a legitimate profit. The fact remains that, like it or not and innocent party though the company may well be, Odyssey is now involved in the ongoing debate in the UK about Tax Avoidance. A practice which even Conservative Chancellor George Osborne described in his 2012 Budget speech as “morally repugnant”.
The debacle of the Robert Fraser Marine Projects also points up Odyssey’s biggest problem in the company’s continuing attempts to create a stable business model which generates a sustainable commercial income from salvaging historic shipwrecks. There are only so many ways to fund the phenomenally expensive and financially risky business of speculative marine salvage and it looks as if one of the most risk free of those ways, private investment by higher rate UK tax payers, has been closed off by Her Majesty’s Revenue and Customs because they found it to be so clearly a speculative venture, designed primarily as a tax avoidance scheme, with an artificially high chance of failure.
Of course this saga of the marine treasure hunts that never were is about far more than already rich people being prevented from avoiding paying a fair amount of tax. To the $10,659,946 Odyssey admits it earned for the Robert Fraser tax avoidance schemes can be added to the $4.9 million which several independent analysts allege was withheld from the UK Government by Odyssey from its sale of silver bullion salvaged from the SS Gairsoppa under a contract with the UK Department for Transport. That is a grand total of $15,559946 (£10,286,887), which arguably should have ended up in the UK Exchequer for the benefit of the population as a whole. By way of illustration the sum represents the annual salary of over 450 newly qualified nurses. A suggestion which makes Odyssey’s comment that all this was “accomplished at no risk to taxpayers. ” sound rather hollow.
thePipeLine emailed Lord Lingfield and asked him to comment on the accusations that his contractor, Odyssey, had pocketed over £7 million from its involvement legal tax avoidance schemes, condemned by his Conservative Party colleague the Chancellor of the Exchequer. However, up to the point of publication Lord Lingfield has chosen not to reply.