With real estate booming in 2006, Charlotte-based Wachovia bank teamed with a Bangkok-based resort company to explore issuing mortgages to wealthy individuals overseas.
To form the joint venture, the resort company turned to the Panamanian law firm Mossack Fonseca to set up an offshore shell company, a move that would allow the business to operate in secrecy. That law firm has come under scrutiny in recent weeks after a massive leak of its internal documents.
The venture, which a source said stalled out, is one of the more unusual examples of a U.S. bank’s involvement with an offshore company, according to a review of the law firm’s documents. It demonstrates the worldwide ambitions Wachovia had when the housing market was roaring – just two years before it nearly failed during the financial crisis and was sold to Wells Fargo.
According to the documents, Destination Properties, which operates Hilton, Doubletree and other resorts in Thailand, was the client that enlisted Mossack Fonseca to incorporate a company called National Home Finance Corp. in May 2006. It was formed in the British Virgin Islands, known as one of the world’s most secretive tax havens.
A Wachovia subsidiary called Wachovia Development Corp. was a shareholder of National Home Finance. Two directors came from the bank, and two from Destination Properties. Wachovia Development Corp., formed in 1988 as a N.C. company, holds real estate interests for the bank and remains a Wells Fargo subsidiary.
A source familiar with the situation said the purpose of National Home Finance was to originate mortgages to high net-worth individuals, typically Western expatriates living in Hong Kong and Singapore who were buying vacation homes in Thailand resort destinations. The business was shut down before it got started, however, because the bank determined that there would be a problem registering the mortgages in Thailand, said the source who spoke anonymously because he wasn’t authorized to speak publicly about the venture.
The documents indicate the company was “struck off” in October 2008, meaning it had been terminated. Wells Fargo agreed to buy Wachovia around the same time, rescuing the Charlotte bank as it neared failure at the peak of the financial crisis.
Wells Fargo declined to comment, and Destination Properties did not respond to requests for comment.
The venture wasn’t the last time Destination Properties went to Mossack Fonseca for an offshore company.
In September 2014, Destination Properties CEO Gary Murray contacted the law firm “to get a (British Virgin Islands) company off the shelf and have it renamed” Hooters Asia Pacific Ltd., according to an email in the documents. The company was formed in October, and in January 2015 Hooters of America, the Atlanta-based franchisor, announced an agreement with a Destination Properties affiliate to open 30 Hooters locations around Southeast Asia.
“We pride ourselves on introducing fresh, exciting concepts to our guests, and the unparalleled Hooters dining experience fits that profile,” Murray said in a statement at the time. Hooters of America did not respond to requests for comment.
Rick Rothacker: 704-358-5170, @rickrothacker