Transactions involving the Bank of Bermuda?s Isle of Man branch came under scrutiny last week as US Senate investigators probed an offshore scheme that allegedly allowed the billionaire backers of Bermuda-based life reinsurer Scottish Re Group Ltd. to avoid tens of millions of dollars in taxes.

The review of the schemes by Texas-based brothers Sam and Charles Wyly, was published by the US Senate Permanent Subcommittee on Investigations last week as part of a larger probe into how super-rich US citizens used offshore entities to hide assets or income from the US government.

The Wyly transactions were one of six cases under the microscope, but were described as ?the most elaborate offshore operations? the subcommittee had reviewed.

The report alleges that while the offshore structures were held out as ?independent? of the Wyly family for tax and SEC filings, the Wylys actually controlled them from behind the scenes using compliant offshore nominees.

The Bank of Bermuda?s Isle of Man branch was named among a number of offshore service providers in the Cayman Islands and the Isle of Man which the report said helped set up legal structures and bank accounts that were used by the Wylys to conceal assets totalling at least $600 million from the IRS, the SEC, law enforcement and others in the US.

The report said Bank of Bermuda?s arm in the Isle of Man asked ?few questions? when it opened accounts and transferred funds across international lines for multiple Wyly-related offshore entities

It added that the Bank of Bermuda ?apparently continues to administer accounts for the Wyly-related offshore entities today?.

The Bank of Bermuda did not comment on the report by press time. The Wylys? relationship with Bermuda-based Scottish Re also came under scrutiny. The troubled reinsurer started in the Cayman Islands in 1994. Its parent company was primarily owned and financed ? through loans ? by offshore trusts, whose trustees acted on ?recommendations? from the Wyly family, the report said.

A Wyly-controlled trust also ?loaned? Scottish Re?s parent shares worth $23.5 million in a Wyly-controlled, hedge fund called Maverick Fund. These were then allegedly assigned to the group?s insurance subsidiary which ?apparently? included them on its balance sheet as part of its ?equity?

Scottish Re?s representatives told the subcommittee that they had never seen this type of ?loan? before, in which a hedge fund?s shares were ?lent? but not contributed to a company and listed as an equity asset,? said the report.

While Maverick?s representatives found the ?loan? unusual too, they told the subcommittee that hedge funds often allowed clients to assign their ownership interests in a hedge fund to a third party, such as, for example, a bank considering providing the client with financing. Former CFO of Scottish RE, Michelle Boucher came under significant scrutiny in the report, according to Offshore Alert. The Cayman-based chartered accountant became ?trust protector? for all Wyly-related offshore trusts in 2002 including the Maverick Fund and since 2004 has essentially, served as a conduit between the family and the trustees, making sure they carried out the Wylys? ?recommendations?, according to the report.

Trust protectors and other Wyly representatives generally worded decisions relating to trust assets as ?recommendations? to the offshore trustees to maintain the fiction that the offshore trustees were exercising independent judgement over the trusts? assets and investment activities, the report said. It cited a number of examples where a Wyly representative would slip up and simply direct a trust to take an action.

Besides tax evasion and money laundering concerns over the Wylys? offshore structures, the report also questioned whether U. S. securities laws were breached by an alleged failure to disclose the family?s control over large blocks of publicly-traded stock including Scottish Re Group Ltd. The report accused the Wylys of using offshore secrecy laws to circumvent basic US principles intended to ensure fair and transparent capital markets.

For most of the thirteen years probed by the committee, US securities regulators and investors were not informed of the extent of the Wyly-related offshore stock holdings and trading activity, the report said.

Scottish Re recently disclosed it had received an US Securities and Exchange Commission subpoena regarding transactions early in its history by the Wylys. It has not disclosed further details.