Making Sense of the Paradise Papers

All the leaked documents tell you is the name of the players, the rich folks who gather up their spare cash and stash it in offshore tax shelters. Names are splashed about - Justin's chief fundraiser whose family fortune is associated with prohibition era bootlegging, a couple of former prime ministers, that sort of thing.

In many cases, probably most, what they've done is entirely legal. It probably shouldn't be but it is. They probably resent being outed, feeling they're being smeared, but such are the deserts of those who let their money rub shoulders with the money of some very, very bad actors.

The International Consortium of Investigative Journalists, the muscle behind these kind of investigations, explains it best.

The promise of tax havens is secrecy – offshore locales create and oversee companies that often are difficult, or impossible, to trace back to their owners. While having an offshore entity is often legal, the built-in secrecy attracts money launderers, drug traffickers, kleptocrats and others who want to operate in the shadows. Offshore companies, often “shells” with no employees or office space, are also used in complex tax-avoidance structures that drain billions from national treasuries.

The offshore industry makes “the poor poorer” and is “deepening wealth inequality,” said Brooke Harrington, a certified wealth manager and Copenhagen Business School professor who is the author of ‘Capital without Borders: Wealth Managers and the One Percent.’

“There is this small group of people who are not equally subject to the laws as the rest of us, and that’s on purpose,” Harrington said. These people “live the dream” of enjoying “the benefits of society without being subject to any of its constraints.”

The records expand on the revelations from the leak of offshore documents that spawned the 2016 Panama Papers investigation by ICIJ and its media partners. The new files shine a light on a different cast of underexplored island havens, including some with cleaner reputations and higher price tags, such as the Cayman Islands and Bermuda.

The most detailed revelations emerge in decades of corporate records from the white-shoe offshore law firm Appleby and corporate services provider Estera, two businesses that operated together under the Appleby name until Estera became independent in 2016.

And then there's Justin's chief fundraiser, Bronfman.

Wealthy people across the political spectrum use the offshore system.

The files reveal that Stephen Bronfman, Canadian Prime Minister Trudeau’s adviser and close friend, teamed up with Liberal Party stalwart Leo Kolber and Kolber’s son to quietly move millions of dollars to a Cayman trust. The offshore maneuvers may have avoided taxes in Canada, the United States and Israel, according to experts who reviewed some of the 3,000-plus files detailing the trust’s activities.

As the offshore riches grew, lawyers for Bronfman, the Kolbers and other wealthy interests lobbied Canada’s Parliament to fight legislative proposals to tax income from offshore trusts.

Bronfman remains a key fundraiser for Trudeau, who has championed openness in government and promised a crackdown on offshore tax dodging. In September, Trudeau told the U.N. General Assembly: “Right now, we have a system that encourages wealthy Canadians to use private corporations to pay a lower tax rate than middle-class Canadians. That’s not fair and we’re going to fix it.”

Bill please.  Now, let's move on to FaceBook and Team Trump.

In 2011, the investment fund run by tech mogul Yuri Milner received $191 million from one of the Russian government firms, VTB Bank, and quietly invested that money in Twitter. Documents also show that a financial subsidiary of the Kremlin-controlled energy giant Gazprom funded a shell company that invested in a Milner-affiliated company that held roughly $1 billion in Facebook shares shortly before the social network’s 2012 initial public offering.

More recently, Milner invested $850,000 in Cadre, a real estate firm co-founded by Trump’s son-in-law and White House adviser, Jared Kushner.

Milner is a Russian citizen who lives in Silicon Valley. His ties to Twitter, Facebook and Kushner’s firm have been previously disclosed. But his links to the Kremlin financial institutions weren’t known.

VTB confirmed that it had used Milner’s fund to make an investment in Twitter. Facebook and Twitter said they had properly reviewed Milner’s investments.

...

Tax havens’ secrecy laws entice those who wish to place their wealth and dealings beyond the reach of regulators, investigators and the tax collectors.

Helping the rich get richer through offshore maneuvers is not a “benign benefit,” said Harrington, the Copenhagen Business School professor. “When the rich get richer, the poor get poorer, because individual wealthy people are not paying their fair share of taxes.”

“It won’t be lost on wealth managers and those in the offshore industry,” she said, “that we are reaching sort of French Revolution levels of inequality and injustice.”

Going back to the KPMG/Isle of Man/Canadian Revenue Agency scandal, Justin Trudeau has shown very little stomach for dealing with this. Maybe he thinks his hands are tied or that even the powers of a prime minister can't padlock this door. It's not just the United States that is losing "government of the people, by the people and for the people." Are we being turned into a kleptocracy?

We need to realize that the lines between what is legal and what is not are lines that we set, not the rich, not the privileged, not those with friends in high office.