Thread by @Heidi_Cuda

My latest story in the fiercely independent @BylineTimes gets down to brass “tax”.
bylinetimes.com/2020/12/01/the…

1/ Upon his retirement as Supervisory Special Agent in the IRS Criminal Investigation Division, Martin Sheil went fishing. For big fish.

2/ Sheil believes that the US Government might even be able to fill up coffers that have been devastated by the COVID-19 pandemic if it enforced its existing tax laws

3/ “The thing that struck me most in the run-up to the Democratic primaries was the discussion and the debate among the candidates with regard to the economic inequalities and inequities,” says Sheil, who spent 30 years as an investigator for the US Internal Revenue System (IRS).

4/ “I look at the Internal Revenue System and our tax system as the finest tax system in the world, one that is essential in terms of bringing in revenues. The key to that system is the sense of voluntary tax compliance. We pay our taxes because our neighbor pays their taxes...

5/ “And if we don’t pay our taxes, then we’re going to suffer the consequences,” Sheil told Byline Times.

6/  “I’m hopeful that with the new administration, they’ll bring in a new Secretary of Treasury, a new Attorney General, and that tax enforcement will become a key component,” he continued.

7/  “There’s really no downside there, other than to perhaps the corporate elites and the 1 percenters, who enjoyed the one Trump legislative triumph which was his giant corporate tax cut for the wealthy.”

8/ REVIVE THE YATES MEMORANDUM: Sheil argues that an early move by Biden would be to revive the Yates Memorandum, which directed all attorney generals across the United States to vigorously enforce individual accountability for corporate wrongdoing.

9/ “They were directed not just to settle with non-prosecution agreements or deferred prosecution agreements, but to hold corporate executives’ feet to the fire and actually and proactively explore prosecution incurring criminal sentences,” says Sheil. “Put folks in jail...

10/ “...hold them accountable, send a message across the corporate world that cheating on taxes, committing huge frauds, isn’t just the cost of doing business. There’s a real cost, a personal cost, and you’re gonna do jail time if you do that.”

11/ The impact of enforcing the memorandum would be immediate and visceral, according to Sheil.

12/ “First of all, it would address the social and economic inequities that these corporate executives are not invulnerable, that they’re just like everyone else: they do the crime, they gotta do the time,” he says.

13/ “That’s important because we have such a stratified society now, it seems like the only folks who go to jail are those who rob a 7-Eleven.”

14/ DORMANCY AND ROBERT MERCER’S TAX CASE:
It’s a civil rather than a criminal case and “no one’s ever going to go to jail on that,” Sheil observes that Robert Mercer’s estimated $6.8 billion unpaid tax debt is a crucial example of the problem of ‘dormancy’ and need for reform.

15/ Mercer, who helped finance Trump’s 2016 campaign, Cambridge Analytica, Breitbart, and the action group Citizens United, ran a hedge fund called Renaissance Technologies (RenTec), before stepping down in 2017.

16/ “Mercer purchased what’s known as a bunch of basket options from Deutsche Bank, which just magically converted about $14 billion dollars in profit,” Sheil told Byline Times.

17/ “They cut it in half by claiming it was long-term capital gains so it was taxed at a much lower rate, and he saved himself close to about $7 billion dollars.”

18/ “When you think about the transaction, a long-term capital gain, just to get in the weeds a little bit, requires that you hold the asset before you sell it, for at least one year and a day.”

19/ “Now, the transactions that RenTec was undergoing were high speed, buy-sell transactions where the stock or the instrument was held for not much more than nanoseconds as they tried to capture a few centime’s gap in time in those nanoseconds.”

20/ What happened next is potentially evidence that the rich really are different. 

“First of all, Deutsche Bank raked in a bunch of millions in terms of their fees for selling these options and they did this after they had signed a non-prosecution agreement not to engage in any

21/ ...tax shelter type instruments. You can’t get a more tax shelter instrument than this,” Sheil explained. “So RenTec gets caught, the IRS says, ‘That’s bogus, you owe more than $6 billion, $7 billion in taxes, pay up Mr. Mercer, pay up RenTec.’

22/ “And he says, ‘No, you’re gonna take me to court. We disagree. These basket options are legit and I can do this.’ So they go through all the different appeals, which drags out forever, and Mercer goes to tax court, which should be the endgame. It sits in tax court for years.”

23/ Normally, Sheil explained, the IRS is constantly trying to settle at each level of appeal, primarily due to limited resources and the pressure to get the most bang for its buck.

“Mercer and his attorneys and accountants know this so they drag it out, and drag it out...

24/ ...and figure they’re going to get a big settlement offer at some point. Well, the Service never does make that offer,” Sheil told Byline Times. “Probably one of the reasons is this whole thing became a cause célèbre.”

25/ “He brings in a past commissioner of the IRS and a past chief counsel for the IRS, figuring they can negotiate a big settlement,” Sheil notes of Mercer’s tactics, who did not reply to Byline Times requests for comment.

26/ In essence, the drag of dormancy has been part of Republican strategy: inaction as a modus operandi.

27/ CATERPILLAR AND ATTORNEY WILLIAM BARR:
Caterpillar, a Fortune 100 company and a previous client of the current Attorney General William Barr, has also been under investigation. Based in Peoria, Illinois, Caterpillar makes farm machinery, and one of the company’s big revenue..

28/ ...producers is manufacturing and selling equipment parts.

“If Caterpillar reports that income domestically, they’ve got to pay serious corporate taxes,” Sheil told Byline Times.

29/ According to Sheil, Caterpillar booked the domestic parts income to a small, Swiss-based subsidiary, reducing the tax obligation to single digits.

30/ “They book it as if all these sales are occurring in Switzerland, and then they bring all that money back,” Sheil claims. “That’s the key: repatriated corporate income is taxed when it comes back into the States...

31/ “Instead of labeling it for what it is, they’re bringing back billions of dollars, and they don’t pay corporate tax on it, and the reason why is they’ve rebranded this money coming back as ‘loans’, so they got billions of dollars of loans from their little dinky subsidiary.”

32/  “Barr becomes Attorney General. Suddenly, the investigation is stillborn,” Sheil claims.

33/  Sheil observed that if the Department of Justice (DOJ)  and the Treasury Department and the IRS would just actively enforce the laws already on the books, billions of much needed dollars would start flooding into the treasury.

34/ Call a spade a spade, these aren’t loans, this is repatriated income,” Sheil claims. “That means, you should not only pay all the taxes on that, but you may also well in fact owe civil fraud penalties which can be 50 percent or 75 percent which could increase the revenue.”

35/ Caterpillar did not respond to a request from the Byline Times for comment but a spokesperson for Caterpillar has previously denied any wrongdoing and noted the company is contesting the IRS findings. Neither Barr nor the DOJ responded to Byline Times’ request for comment.

36/ THE ILLICIT CASH ACT AND TRUMP’S CHINESE BANK ACCOUNT: Sheil points out that stories such as these are not one-offs. Entire industries have been built around the offshore banking world.

37/ And in yet another example of dormancy, congressional legislation to beat back offshore scheming has languished.

38/ “There was new updated anti-money laundering legislation that was proposed and supported in the summer of 2019, and it was bipartisan,” says Sheil. “They talked about compelling the identification of the ultimate beneficial owners of these offshore shell companies.

39/ “In other words, there’s no place to hide. So what’s happened? Elements of the American Bar Association opposed the passing of this legislation because that would hurt them economically. They saw that as revenue going down the toilet. So once again, clients before country.”

40/ As of this writing, lawmakers are renewing an attempt to slip the anti-money laundering legislation into a must-pass national defense spending bill. Mark Warner, a democratic Senator from Virginia who supports the reform, titled the ILLICIT CASH Act, issued this statement:

41/ “It is past time to put an end to the secrecy that allows drug cartels, human traffickers, arms dealers, terrorists and kleptocrats to exploit the United States’ banking system in order to carry out anti-American activities,” said @MarkWarner.

42/ “The current holes in our financial system pose a serious threat to national security,” Warner stated.

43/ Meanwhile, the New York Times recently reported that they had tracked down Trump’s heretofore undisclosed Chinese bank account.

44/ “That’s a big deal,” says Sheil. “Trump can receive monies from anywhere, and anyone, at and through either account. So now, flashback to the NYT and their other reports that there are all these consulting fees, millions of dollars, that are reported...

45/ “...but there’s no indication of what the source of the fees are or what Trump did for those fees or where they came from, nothing, nada, nunca...

46/ “So if a foreign dictator, who would be Russian or Chinese, wants to enter into a deal, get Trump to do whatever they want Trump to do, there is opportunity.”

47/ Trump is reported to have excluded Turkey from his Muslim ban because Recep Tayyip Erdogan publically threatened to take Trump’s name off of Istanbul’s twin towers.

48/ In addition, Trump apparently applied pressure to slow-walk a criminal investigation into Turkey’s Halkbank to also appease Erdogan.

49/ Byline Times contacted the White House for a comment on the Halkbank investigation and excluding Turkey from the Muslim travel ban but did not receive a response.

50/ “What it suggests is that these foreign leaders, tyrants, have financial leverage over Trump,” says Sheil. “According to the New York Times, he owes $421 million dollars, much of it is personally guaranteed...

51/ “He has very little actual income coming in because most of it is related to hotels, resorts, restaurants, golf, all of which have been negatively impacted by COVID, where is his cash flow? How’s he gonna pay the debts that are coming in in the short term?”

52/ “When you start looking at just that one isolated instance in Turkey, then you start saying, ‘Does Putin have the same thing? What about Xi over in China?’”, Sheil speculates.  “There are just so many issues. The way Trump has handled his finances in such a secretive fashion.

53/ “The way he monetizes everything. Yeah, you don’t want to jump to conclusions, but it’s hard not to sometimes. There are just so many things that get lost in the undertow of the ocean waves pounding, one after another…After a while, you get worn down. So much gets lost.”

54/ And yet, with new leaders on the horizon, and a female veteran prosecutor is the VP-elect, perhaps that uniquely American quality of optimism that has served us well is not lost, and that utopia which Sheil describes where tax laws are enforced is not completely out of reach.

55/ Heidi Siegmund Cuda is an Emmy award-winning investigative reporter based in California.

56/ My follow blog on Congress inserting anti-money laundering legislation into a must-pass defense bill.

https://twitter.com/Heidi_Cuda/status/1336337223797501954

57/ My original thread with IRS criminal investigator Martin Sheil.

https://twitter.com/heidi_cuda/status/1211481839602286592