Dan Neidle, the former head of Clifford Chance's tax practice in London, queried the Chancellor of the Exchequer's tax affairs on his Tax Policy Associates blog.
When Zahawi set up YouGov in 2000, he gave his 42.5% shareholding in the polling company to a Gibraltar business secretly controlled by his parents. Neidle said that it looked a lot like a tax avoidance scheme to save Zahawi from having to pay £4m to HMRC. "I am a tax expert. And every other tax expert I've spoken to agrees - accountants, solicitors, QCs, and retired HMRC inspectors", said Neidle.
Zahawi's initial explanation for surrendering his entire shareholding to his parents was that his father had given him £7k as "start-up capital". But that didn't make sense to Neidle, who pointed out that at the same time another investor paid £285k for just 15% of YouGov shares.
Zahawi pivoted, adding that his father had given him a huge amount of advice in the venture's early days, and that it was this assistance which entitled his parents' company to his 42.5% shareholding.
"I couldn't understand why he provided the first explanation, and then dumped it and alighted on a new one (itself not very credible)", said Neidle. "I called it what I thought it was: a lie."
Zahawi's solicitors, Osborne Clarke, got in touch with Neidle via Twitter asking for a chat. When he refused, the firm sent him a letter marked "Confidential and Without Prejudice". The firm told him that OC would revert "should you not retract your allegation of lies" and suggested he seek advice from a libel lawyer. OC also warned Neidle that he was "not entitled to publish" its letter, "or refer to it other than for the purpose of seeking legal advice".
"The letter they sent me says, rather artfully, that it’s not actually a threat to sue for libel. But it comes from a libel lawyer, and tries to prevent me publishing it", said Neidle on his website.
Instead of retracting his commentary, Neidle posted Osborne Clarke's correspondence on his blog, generating press coverage of both Zahawi's tangled tax affairs and drawing attention to the tactics employed by litigation lawyers to prevent the publication of unflattering stories about their clients.
Neidle has now written to the SRA urging it to take action to stop lawyers claiming inaccurately that their letters asserting potential libel claims cannot be published.
"I spent almost 25 years as a lawyer. I’ve seen all kinds of behaviour by lawyers and clients", Neidle told RollOnFriday. "What’s completely new to me is a world where libel lawyers think they can send threatening letters to people full of factual errors, but those letters are confidential and can’t be published."
"I was amazed when I saw it, and thought it must have been a mistake. Or perhaps everything I knew about confidentiality was wrong, and you can unilaterally impose a duty of confidence just because it’s convenient for you. Turns out it wasn't", he said.
It was the realisation that such tactics were widespread and successful that prompted Neidle to call on the regulator "to specifically address the problem of bogus confidentiality claims", said the tax expert.
"If people freely published libel letters then much of the power would drain out of them", he said. "I’ll be happy if I can make some small progress in that direction. Then I can get back to what I really want to do: writing nerdy analyses of tax policy that 20 people will read".
Osborne Clarke declined to comment (and, for the record, didn't send any letters to ROF behind the scenes, either).
Zahawi did not respond to a request for comment.