Thread by @doctorow

Some things are hard to understand because they're complicated, but when it comes to finance - and finance crimes - we enter the real of things that are complicated so they'll be hard to understand.

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(If you'd like an unrolled version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:)

pluralistic.net/2021/06/20/la-…

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The @Propublica #SecretIRSFiles leaks reveal the wealthy pay infinitesimal amounts of tax and the ultra-rich often pay no tax at all.

Propublica is careful to note that all of this is legal - that it's how the system is supposed to work.

pluralistic.net/2021/06/15/gui…

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But that's not the whole story. A string of leaks from high-powered tax-evasion specialists have revealed that the richest people of every nation, up to prime ministers and "national treasures" avail themselves of fraudulent accounting to duck tax.

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From the #ParadisePapers to the #PanamaPapers to #LuxLeaks to #Swissleaks and beyond, we have a wealth of evidence that many of the "legal" deductions the super-rich deploy are actually grounded in accounting frauds.

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Even when there's no fraud, some tactics are in such bad faith, reliant on such absurd readings of the law that they're outlawed once they're discoveredThis comes in up Disney heiress @AbigailDisney's frank account of the workings of dynastic wealth.

pluralistic.net/2021/06/19/dyn…

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"My grandfather Roy O. Disney...was so determined to prevent the government from taking any of the money he wanted to leave to his family that...what he did back then was so effective that most of it is illegal today."

theatlantic.com/ideas/archive/…

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In the fall of 2020, a consortium of journalists reported out the #JerseyOffshore leaks, a collection of 350,000 docs from an especially dirty trust company called La Hougue, on the British Channel Isle of Jersey, a notorious tax-haven.

globalreportingcentre.org/jersey-offshor…

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The Jersey Offshore leaks had the misfortune to be published amid a pandemic, a once-in-a-generation antiracist uprising, a string of armed far-right assaults on US state-houses and a critical election, so the reporting barely registered, despite its significance.

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But it's worth revisiting those leaks, especially in light of the debate that the Secret IRS Files has provoked about the morality and legality of dynastic wealth preservation and the bizarre, complicated and hard-to-understand tactics deployed by tax evasion experts.

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Last January, @MotherJones published an analysis of a key memo from La Hougue, in which @CalynShaw and @SamEifling worked with tax experts to analyze 11 tactics La Hougue advised their clients to employ.

motherjones.com/politics/2021/…

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These "11 ways" are definitely in the "complicated so they'll be hard to understand" category, but at root, they all have a simple, common mechanism: La Hougue opens a secret account in a tax-haven for you and funnels money into it.

That's it.

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But like the conjuror who has 11 tricks that all rely on the same sleight, La Hogue has 11 different pretenses that are used to obscure the fraud and slide it under the noses of underfunded, overworked tax officials.

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I. Consultancy: secretly incorporate a fake offshore "consultancy." Bill your onshore business for "consulting" and write it off as a "business expense." The money goes into your consultancy's offshore, tax-free bank account, which you secretly control.

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II. Expenses: Secretly create an offshore account. Pay money into it that you record as a "travel expense" or "gift" or "misc expense." Keep the payments under the $10,000 threshold for formal reporting.

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III. Metrocab: Buy stock options in a money-losing British taxi company called Metrocab that La Hougue secretly controls. La Hougue secretly funnels the money into your secret offshore account.

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IV. Los Cabos: Fake an investment in a 65-acre property in Baja California that La Hougue secretly owns. They send you fake docs claiming you lost all your money. The money you send them actually goes into your secret offshore account.

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V. Danehill Currency Fund: Borrow money from a company that La Hougue secretly owns and invest it in a "currency fund" La Hougue secretly runs. They fix it so your "investment" loses money (on paper) but actually all the money goes into your secret offshore account.

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VI. Bad loans: Make "loans" to businesses secretly controlled by La Hougue. These loans are not repaid so you can write them off, but actually La Hougue just shovels the money into your offshore account.

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VII. Mortgage default: Remortgage a property you own to a lender secretly controlled by La Hougue, then default and let La Hougue foreclose. La Hougue secretly transfers title to your offshore company.

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VIII. Offshore property: Sell a property at a discount to an offshore buyer (really your offshore company). The discount is due to a contract that requires you be allowed to occupy the property for a month/year. You pay lower tax on the sale and the title is moved offshore.

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IX. Redirecting money: If someone owes you money, get them to send it to your offshore company and just don't declare the income.

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X. Made-up penalty: When you sell a property, La Hougue forges a contract with your offshore company giving it the right to buy the property, with a penalty if you don't sell it to them. You send some of the sale money to your company as a penalty and don't pay taxes on it.

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XI. Fake offshore investment: Sell 49% of your onshore business to an offshore company you secretly own or control. You don't pay taxes on 49% of your onshore earnings or the eventual sale of the business.

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Those are the 11 ways, and as you can see, once you cut through all the performative complexity, they're all just obvious frauds. In fact, it seems the La Hougue partner who came up with these got bored and started repeating themself.

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Parts of this read like a lazy D&D module, where you enter a series of nearly identical rooms and fight nearly identical monsters for nearly identical rewards - it's a kind of soporific wickedness, what @MizDanaClaire calls the "shield of boringness."

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La Hougue was never prosecuted for any of this and never will be. They shut down in 2007.

But that doesn't mean that these scams were consigned to the dustbin of fraud history - far from it! La Hougue's principles decamped to Panama and formed a new "consultancy" there.

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The tissue-thin lies of the tax fraud and money-laundering industries are themselves very dull, but what is incredibly interesting is how hard it seems to be for the world's tax authorities to pierce them.

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The amount of political pressure not to look to hard at this stuff must be prodigious indeed.

Image:
Neil Milne
flickr.com/photos/borispu…

CC BY-SA:
creativecommons.org/licenses/by-sa…

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