Big business-backed charitable organisations that buy millions of dollars of Bermuda real estate are being looked at by Government.

Although the practice is permitted Shadow Immigration Minister Trevor Moniz has called for a clear separation of the charitable entities from their respective companies.

And he has also questioned how XL’s Harbour View Charitable Trust expects to generate charity revenue from the properties it has bought to rent to its executives and staff when it is paying interest of 6.9 percent and 3.5 percent on two XL loans of $3.25 million and $10.7m respectively.

“Any money raised goes to paying the interest never mind the debt,” he said.

There are differences in the charitable operations of two of Bermuda’s international financial heavyweights ACE and XL, which have both bought properties on the Island to rent with the intention that, once the initial loan money is paid, rental income from the properties sustains the future charitable donations of the respective entities. Executives and staff of the companies are allowed to rent the properties. ACE has been giving interest-free loans to ACE Foundation to buy property. XL is levying interest of 6.9 percent and 3.5 percent on loans it has given its Trust.

It is not known the value of property bought by ACE Foundation since it was set up in 1997, but the outstanding interest-free money loaned by ACE currently stands at $37m, with $2m paid back in the past year. Over the same 10 years the Foundation reportedly gave just under $17m in charitable donations in Bermuda.

Since it was set up five years ago XL’s Harbour View Charitable Trust has spent $13.95m on nine properties. In those five years the Trust has made donations to local charitable causes of $200,000.

Purchasing property in Bermuda through trusts has been put under the spotlight by current Labour and Immigration Minister Derrick Burgess, who has pledged Government’s intention to ensure the Island’s land bank is preserved for future generations of Bermudians.

While buying real estate by the charitable and not-for-profit entities created and funded by the offshore companies is permitted, the issue of trusts holding land, and for whom, is under review.

Minister Burgess is currently off the Island. A Ministry spokesman said the matter was being looked at and a comment would be made once all facts are known.

ACE describes the money it gives to the Foundation as being “used to finance investments in Bermuda real estate, some of which have been rented to ACE employees at rates established by independent, professional real estate appraisers, and intends to use income from the investments to both repay the note and fund future charitable activities.”

ACE confirmed its president Evan Greenberg pays rent of $22,000-a-month on one property and chief financial officer Philip Bancroft paid $18,000-a-month on another.

Amy Shillingford, ACE’s director of communications, said the properties had been bought as investments and as a long-term endowment to create funding for the Foundation’s charitable giving and in the long-term would be owned outright by the ACE Foundation, which would decide upon their future use.

She said the Foundation’s charities are heavily focused on educational programmes, scholarship and fellowship and up to 70 community and charitable organisations in Bermuda receive something from ACE Foundation each year.

XL did not respond to an enquiry from the Royal Gazette last Friday. An internal XL memo seen by this newspaper that appears to have been sent by XL’s interim chief of staff Fiona Luck to XL employees on Monday said the company was “not engaging in dialogue with the media at this point” but was communicating with the Labour and Home Affairs Ministry.

It is known that XL’s chief financial officer Jerry De St. Paer has been paying $18,000-a-month to stay at a $3.25m property owned by the Trust. The interest rate charged by XL to the Trust on the money it loaned to buy that property is 6.9 percent per annum.

Shadow Labour and Immigration Minister Trevor Moniz said: “If I was the minister I would look to resolve this matter on an urgent basis. I’d make these foundations true and free-standing with trustees unrelated to the companies. An alternative would be to sell the properties and shut down the foundations. Those are the two options. The whole field of charities has to be looked at.”