The Legal and the Contested: How Canadian Fortunes Went...

Offshore is not a synonym for illegal, and getting that distinction right is the entire point of this piece. When the Paradise Papers leak spilled the files of the offshore law firm Appleby in 2017, they revealed how some of Canada's wealthiest families structured their money abroad. Two cases from that world sit on opposite sides of a bright line. One, New Brunswick's Irving family, used a Bermuda insurance company to move profits out of Canada without paying Canadian tax, an arrangement the reporting itself called legal. The other, a wealthy family caught up in a KPMG structure on the Isle of Man, was accused by the Canada Revenue Agency of running an outright sham. Both are offshore. Only one was contested. Understanding why is the most useful thing an ordinary person can take from the whole affair, and this piece is careful to keep the two apart. Nothing here is tax advice, and none of it is a how-to.

The Irvings, and a Bermuda insurer

Before the offshore question, there is the fortune. K.C. Irving, born in 1899, built one of the largest family-controlled conglomerates in Canada out of New Brunswick, spanning Irving Oil, the forestry and industrial group J.D. Irving, shipbuilding, media, food processing, and transportation (Wikipedia, "K. C. Irving"). The Saint John refinery is Canada's largest (Wikipedia, "Irving Oil Refinery"). The family's grip on its home province is so complete that a Canadian Senate committee once described it as an industrial and media complex that dominates New Brunswick, unique in the developed world (National Observer). Estimates of the family's wealth run into many billions, though they vary widely by source (Forbes).

The Paradise Papers finding, reported by CBC and Radio-Canada in 2022 from the leaked Appleby files, concerned a Bermuda company called F.M.A. Ltd. It was a "captive insurance" company, an insurer with the same owner as the assets it insures (CBC). The mechanism was straightforward once you see it. F.M.A. sold insurance on Irving marine vessels to Irving companies in Canada, then reinsured the major risks by paying smaller premiums to a genuine, non-Irving reinsurer in Bermuda, and kept the difference. Because the premiums were a deductible business expense in Canada and the profit landed in Bermuda, where there is no corporate income tax, the arrangement accumulated almost $13.4 million in untaxed income between 1973 and 2001, the last year for which figures were available, before the company was dissolved in 2014 (CBC). A tax-law professor summarized it as "an easy way for a Canadian-based multinational to save some Canadian tax."

Here is the part that matters most: CBC stated flatly that "the practice is legal," noting that major oil companies use offshore captive insurers the same way, and the Irving companies defended the captive as sound risk management (CBC). No CRA challenge to F.M.A. was reported. The family's one genuinely litigated offshore arrangement was a different, earlier one, an oil-trading structure through a Bermuda company called IrvCal, which a Federal Court of Appeal judge in 1991 called "artificial" and "a tax avoidance scheme, pure and simple," and then ruled had nonetheless not broken the Income Tax Act (CBC). Artificial, aggressive, and legal: that combination is exactly what sits on the lawful side of the line.

The Coopers, and a scheme the tax agency called a sham

The other case looks superficially similar and is legally its opposite. It centers on the Isle of Man, and on a much smaller fortune. Peter Cooper, a Victoria, British Columbia businessman who had built a scrap-metal fortune of some tens of millions, and his adult sons Marshall and Richard, were the family at the heart of CBC's 2015 investigation into a tax structure sold by the accounting firm KPMG (CBC). These were multimillionaires, not billionaires, and the distinction from the Irvings matters. The KPMG structure, devised out of the firm's Vancouver office and requiring at least $5 million to enter, worked by having a client purport to give their wealth to an Isle of Man shell company and then receive it back as regular, tax-free "gifts" (CBC). The Coopers' vehicle was an Isle of Man company called Ogral, into which they moved more than $26 million in 2002 and 2003. According to CBC, one of the sons paid just $3,049 in total income tax across an eight-year span while living in a substantial Victoria home, with the family receiving millions of dollars back from Ogral as non-taxable gifts that were never reported.

What separates this from the Irving captive is what the tax authority said about it. In Vancouver tax-court filings, the Canada Revenue Agency alleged that the structure "is a sham" that "intended to deceive" the taxman, and that the parties "willfully presented its transactions as being different from what they knew them to be" (CBC). Those are the words of alleged fraud, not lawful planning. But, crucially, the allegation was never tested to a verdict. The CRA first offered KPMG clients a secret amnesty, letting them pay back taxes with no penalties under an agreement that carried a capitalized confidentiality clause, and later settled out of court in 2019 on undisclosed terms (CBC). So the KPMG structure was labeled a sham by the government but never ruled one by a court, and Parliament voted in 2021 to relaunch its stalled inquiry (CBC). That is the contested side of the line: an arrangement the authorities believed rested on deception rather than substance.

What actually separates the two

Set the cases together and the difference is not the offshore jurisdiction. Both used a zero-tax island. The difference is substance and honesty. The Irving captive insured real vessels against real risk, laid that risk off to a genuine outside reinsurer, and was disclosed and defended as ordinary business. The KPMG structure, in the CRA's telling, moved money in a circle, a purported gift out and tax-free gifts back, with no economic substance other than escaping tax, and misrepresented what the transactions really were. That is the distinction the law draws. The foundational principle, often called the Duke of Westminster rule, is that anyone may arrange their affairs to pay the least tax the law allows (TaxPage). Legal tax avoidance uses lawful methods with honest disclosure and no deceit. Aggressive or abusive avoidance follows the letter of the law but breaches its spirit, and Canada's General Anti-Avoidance Rule lets the CRA deny the benefit of such transactions (Justice Laws). Illegal evasion is deliberate deceit to escape tax owed. Offshore accounts, trusts, and shell companies are not inherently any of these; they become evasion only when paired with concealment, which is why the OECD built a global system of automatic information exchange to strip away the secrecy (OECD).

What an ordinary person can actually take from this

The tools in these stories are not exotic, and their lawful, scaled-down versions are used by ordinary businesses every day, which is the honest and useful lesson here. This is background, not advice, and the caveats are the point. Captive insurance is a legitimate way for a business to insure its own risks, regulated by insurance and tax authorities, and it is legal when it involves genuine risk transfer and sound premiums; it becomes an abusive shelter when the "insurance" is a paper arrangement built mainly to strip deductions, which is why tax authorities keep abusive micro-captives on their enforcement lists (CPA Journal). A holding company is a standard, lawful way to organize businesses and defer tax on retained earnings, not to make tax disappear (Avalon Accounting). A family trust is a normal succession and planning tool, hemmed in by rules like the deemed-disposition clock and income-attribution provisions that exist precisely to prevent abuse (ClearEstate). The line an individual should care about is the same one that separated the Irvings from the KPMG clients: real economic substance and honest disclosure sit on the legal side; concealment and circular, substanceless transactions do not. Appearing in a leak like the Paradise Papers is not itself proof of wrongdoing, a caveat the journalists who published it stated explicitly (ICIJ). The wealthy have better access to these structures because they can afford the advice to build them properly, but the structures themselves are lawful tools that turn abusive only when substance and honesty drop away.

Fact-check notes and sources

The Irvings (K.C. Irving building a New Brunswick conglomerate spanning Irving Oil, J.D. Irving, shipbuilding, media, and food; the Saint John refinery as Canada's largest; the family's dominance of the province and its multibillion-dollar but variously estimated wealth; and the Paradise Papers finding, reported by CBC in 2022 from the Appleby files, that the Bermuda captive insurer F.M.A. Ltd. accumulated almost $13.4 million in untaxed income between 1973 and 2001 through a premium-and-reinsurance structure, which CBC described as legal and the family defended as sound risk management, with the distinct, earlier IrvCal oil arrangement ruled artificial but lawful in 1991): Wikipedia, "K. C. Irving", Wikipedia, "Irving Oil Refinery", National Observer, Forbes, and CBC's 2022 investigation. Note that the general CBC "Paradise Papers Canada connection" overview is a separate article; the Irving-specific finding is the 2022 investigation cited here. No CRA challenge to F.M.A. was reported.
The Coopers and KPMG (Peter Cooper of Victoria, British Columbia, and his sons Marshall and Richard, a family of multimillionaires, at the center of CBC's 2015 investigation into KPMG's Isle of Man structure; the mechanism of purporting to gift wealth to a shell company and receiving tax-free "gifts" back; the Coopers' company Ogral and the more than $26 million moved through it; the CRA's tax-court allegation that the structure "is a sham" that "intended to deceive," which was never adjudicated because the CRA offered a confidential amnesty and settled in 2019; and Parliament's 2021 vote to relaunch its inquiry): CBC on the sham allegation, CBC on the secret amnesty, and CBC on the parliamentary inquiry. The "sham" and "deceive" language comprises CRA allegations in court filings that were settled rather than proven; the number of participating families is best described as roughly two dozen clients rather than a precise count.
The legal distinction and the lawful tools (the Duke of Westminster principle that one may arrange affairs to minimize tax; the difference between legal avoidance, abusive avoidance policed by the General Anti-Avoidance Rule, and illegal evasion; the legitimate uses and abusive limits of captive insurance, holding companies, and family trusts; and the ICIJ caveat that appearing in the leak is not proof of wrongdoing): TaxPage, Justice Laws (GAAR), CPA Journal on captive insurance, Avalon Accounting on holding companies, ClearEstate on family trusts, OECD on tax transparency, and the ICIJ Offshore Leaks caveat. The CBC pages return errors to automated fetching and were verified against archived copies; the canonical URLs are cited.

This post is informational, not tax or legal advice, and contains no instructions for avoiding or evading tax. Figures and quotations are reproduced from the cited public reporting and court records, with allegations flagged as allegations and legal arrangements distinguished from contested ones. Individuals and companies are discussed as nominative fair use from the public record, with no wrongdoing implied beyond what the cited sources state.

The Legal and the Contested: How Canadian Fortunes Went Offshore