The secret records obtained by the International Consortium of Investigative Journalists (ICIJ) recently laid bare the names behind shell companies and offshore tax havens such as the Cayman Islands.
They include American doctors and dentists, as well as families and associates of long-time despots --- and Wall Street swindlers --- European, Indonesian and Russian corporate executives --- and even international arms dealers.
Among the nearly 4,000 American names listed in ICIJ's files is Denise Rich, a Grammy-nominated songwriter whose ex-husband was at the center of an American pardon scandal that erupted as President Bill Clinton left office.
A Congressional investigation found that Rich, who raised millions of dollars for Democratic politicians, played a key role in the campaign that persuaded Bill Clinton to pardon her ex-spouse, Marc Rich, an oil trader who had been wanted in the U.S. on tax evasion and racketeering charges.
On Jan. 20, 2001, just hours before leaving office, Bill Clinton granted 140 pardons to a range of individuals accused or convicted of crimes. A number of the pardons were controversial, but none fueled such outrage as the one bestowed on billionaire commodities trader Marc Rich, Denise's ex-husband and perhaps the nation's most notorious white-collar fugitive.
Charged in 1983 with evading $48 million in taxes from his oil commodities firm and illegally trading with Iran during the hostage crisis, Rich took up residence in Switzerland along with Denise and his business partner Pincus Green. There Rich expanded his vast oil and metals business and became known as an art collector with a particular fondness for Israeli charities.
Divorced from Denise in 1996 after 30 years, he shares a sprawling villa with his second wife, Gisela, and their children in the Alpine town of Meggen.
Defying custom, Bill Clinton had pardoned Rich and Green without consulting Justice Department officials familiar with details of the case—a move that also neatly avoided preemptive questions about Denise's Democratic ties. The pardon drew bipartisan fire on Capitol Hill, incensing critics, including the Senate minority leader, Democrat Tom Daschle and House Republican Dan Burton.
"An absolute outrage," fumed then-New York City Mayor Rudy Giuliani, who, when he was a U.S. attorney in the early '80s, brought the indictment against Rich --- and who also had opposed Hillary Clinton in her Senate bid before leaving the race due to prostate cancer.
"This is clearly the selling of justice," added former New York City Police Commissioner Howard Safir, who, as a U.S. marshal in the mid-'80s, tried to arrest Rich in Switzerland but had been turned away by Swiss authorities.
In petitioning for the pardon, Rich's attorney, former Clinton White House counsel Jack Quinn, solicited the backing of many notables, including Israeli Prime Minister Ehud Barak, Spain's King Juan Carlos—and Denise Rich. Denise initially professed shock at the pardon and denied any role in securing it. Only later did she recant and acknowledge she had written the letter.
At the time the TV celebrity Geraldo Rivera had said, "She's one of the least manipulative people I've ever met." Geraldo had met Denise nine years prior when her then-boyfriend, Park Avenue "fertility doctor" Niels Lauersen, helped the TV host and his wife conceive their first child. (Niels Lauersen, who had split with Denise in 1999, was convicted in 2001 of insurance fraud.)
It was during the '70s and early '80s, prosecutors alleged, that Rich made $100 million illegally, skirting price controls by buying oil at bargain prices, then reselling it at huge markups and funneling the profits to Swiss banks. While living in Manhattan in 1983, she and the girls joined Rich in Zug, Switzerland.
In 1994 Denise bought a Fifth Avenue duplex and the hired self-styled "imagist" Brad Boles to lend her parties just the right note of, well, fabulous-ness. For a 1997 book party honoring photographer Francesco Scavullo, he decked out Denise's place in shocking pink and orange.
The rich and famous such as Martha Stewart, RuPaul and Bobby Kennedy Jr. schmoozed amid pink and orange feather bouquets, nude mannequins bathed in pink and orange light and a wait staff in pink and orange wigs. For Milton Berle's 90th birthday in 1998, Boles celebrated what he calls the comedian's "legendary sexual stamina" with Venus de Milos draped in pomegranates and grapes.
In 2001, after Marc Rich was suddenly pardoned by Bill Clinton and free to return to the U.S. from his secluded villa, his ex-wife had decided to keep a low-profile, so she canceled plans to host an elaborate party for outgoing HUD Secretary and New York State gubernatorial candidate Andrew Cuomo.
But that didn't stop her from partying like it was 1929. On Jan. 26, 2001 Denise had marked her 57th birthday at Manhattan's much-hailed restaurant Le Bernardin. In a plunging black dress, she danced with music mogul Give Davis and 30 other friends. Of the crush of reporters camped outside armed with questions about her ex-husband's pardon, Denise was heard to wail, "Oh, it's so annoying."
A guest shot back, "You know you love it!" Indeed, it had seemed unlikely that a little scandal would cramp Denise's style. Her pal, Russell Simmons, founder of Def Jam Records, had said, "She couldn't pay for this kind of publicity."
Records recently obtained by the ICIJ investigation shows that Denise had $144 million in April 2006 in a trust in the Cook Islands --- nearly 7,000 miles from her home at the time in Manhattan. The trust’s holdings included a yacht called the Lady Joy, where Rich often entertained celebrities.
Denise Rich, who gave up her U.S. citizenship in 2011 and now maintains citizenship in Austria, did not reply to questions about her offshore trust.
Another prominent American in the ICIJ files who gave up his citizenship is a member of the Mellon dynasty, which started landmark companies such as Gulf Oil and Mellon Bank.
In a post I wrote in 2011, "Mellon: The Banker Who Rigged the U.S. Tax Code", I explain how during the Roaring Twenties in 1921, then U.S. Secretary of the Treasury Andrew Mellon and the Republican banker of the Mellon Bank of New York was instrumental in pushing through a tax bill through Congress giving the very wealthy a very preferential tax called "capital gains". For the past 92 years, both major U.S. political parties have subjected the American people to this inequitable tax code, and has been the major driving force behind the wealth inequality that we now have in America today.
The recent ICIJ investigation shows that James R. Mellon – an author of a book about his family’s founding patriarch, Thomas Mellon – used four companies in the British Virgin Islands (BVI) and Lichtenstein to trade securities and transfer tens of millions of dollars among offshore bank accounts he controlled.
Like many offshore players, Mellon appears to have taken steps to distance himself from his offshore interests. He often used third parties’ names as directors and shareholders of his companies rather than his own, a legal tool that owners of offshore entities often use to preserve anonymity.
Reached in Italy where lives part of the year, Mellon told ICIJ that, in fact, he used to own “a whole bunch” of offshore companies but has disposed of all of them. He said he set up the firms as a “tax advantage” and for "liability" reasons, as advised by his lawyer, but denies he ever broke a tax law.
Of the use of nominees James Mellon said that "that’s the way these firms are set up,” and added that it’s useful for people like him who travel a lot to have somebody else in charge of his businesses.
Mellon, who is now a British national, and alluding to former U.S. presidential candidate Mitt Romney, added, “I just heard of a presidential candidate who had a lot of money in the Cayman Islands. Not everyone who owns offshores is a crook.”
And just like the American billionaire brothers, Sam and Charles Wyly of Aspen Colorado, who were also on ICIJ's list for offshore tax havens, Mellon also blamed their tax dodging on financial advisers --- just like Mitt Romney did last year and who once said, "The blind trust is an age-old ruse."
The anonymity of the offshore world makes it difficult to track the flow of money. A study by James S. Henry, former chief economist at McKinsey & Company, estimates that wealthy individuals have $21 trillion to $32 trillion in private financial wealth tucked away in offshore havens — roughly equivalent to the size of the U.S. and Japanese economies combined.
It's also worth noting that McKinsey is one of the market leading "Big Three" in management consulting services to the Fortune 500 set, along with Bain & Company and The Boston Consulting Group --- and Chief executives of Boeing, General Electric, Hewlett-Packard, Morgan Stanley and PepsiCo have all been alumni of either Bain, Boston Consulting Group or McKinsey & Company --- and Chelsea Clinton, daughter of former President Bill Clinton, was also an alumni of McKinsey & Company (It's a small world for the top 1%).
Even as the world economy has stumbled, the offshore world has continued to grow, said Henry, who is a board member of the Tax Justice Network, an international research and advocacy group that is critical of offshore havens. His research shows, for example, that assets managed by the world’s 50 largest “private banks” — which often use offshore havens to serve their “high net worth” customers — grew from $5.4 trillion in 2005 to more than $12 trillion in 2010.
Much of ICIJ’s reporting focused on the work of two offshore firms, Singapore-based Portcullis TrustNet and BVI-based Commonwealth Trust Limited (CTL), which have helped tens of thousands of people set up offshore companies and trusts and hard-to-trace bank accounts.
Regulators in the BVI found that Commonwealth Trust Limited had repeatedly violated the islands’ anti-money-laundering laws between 2003 and 2008 by failing to verify and record its clients’ identities and backgrounds.
ICIJ’s review of Portcullis TrustNet documents identified 30 American clients who were accused in lawsuits or convicted in criminal cases of fraud and sent to prison.
The records obtained by ICIJ expose how offshore operatives help their customers weave elaborate financial structures that span countries, continents and hemispheres. Offshore’s customers are served by a well-paid industry of middlemen, accountants, lawyers and banks that provide cover, set up financial structures and shuffle assets on their clients’ behalf.
Documents obtained by ICIJ show how Swiss banks such as UBS worked with Portcullis TrustNet to provide their customers with secrecy-shielded companies in offshore centers. The ex-U.S. Senator Phil Gramm, not only went to work at UBS as a vice-president after leaving office in 2001, but he was also the Chairman of the Senate Banking Committee who introduced the Gramm-Leach-Bliley Act that had deregulated banks...the bill that President Bill Clinton had signed into law in 1999 after lowering the capital gains tax rates from 28% to 20%..
Commonwealth Trust Limited describes itself as a “one-stop shop” — its staff includes lawyers, accountants and other experts who can shape secrecy packages to fit the needs and net worths of its clients. These packages can be simple and cheap, such as a company chartered in the BVI --- or they can be sophisticated structures that weave together multiple layers of trusts, companies, foundations, insurance products and so-called “nominee” directors and shareholders.
When they create companies for their clients, offshore services firms often appoint faux directors and shareholders — proxies who serve as stand-ins when the real owners of companies don’t want their identities known. Thanks to the proliferation of proxy directors and shareholders, investigators tracking money laundering and other crimes often hit dead ends when they try to uncover who is really behind offshore companies.
An analysis by ICIJ, the BBC and The Guardian identified a cluster of 28 “sham directors” who served as the on-paper representatives of more than 21,000 companies between them, with individual directors representing as many 4,000 companies each.
Remember, Mitt Romney once said, "The blind trust is an age-old ruse." And how does one have $100 million in an Roth IRA account? I'm still wondering about that one. Will our Department of Justice, the IRS, the Security and Exchange Commission, or Congress ever do anything about this?
Yeah, right. Keep holding your breath. If a tax dodger and draft dodger can run for President of the United States, and the bankers are "too bill to jail", what makes you think anything will ever be done about offshore shell companies with anonymous names?
This is Part II to my post: Tax Havens: Owners of Anonymous Companies Exposed