At least one good thing may come out of this year’s investigation of the Trump campaign’s alleged Russian ties and last year’s Panama Papers scandal. The public may learn how oodles of money is stashed in offshore tax and secrecy havens — those funny little places with names such as Mauritius, Brunei, Niue, and Vanuatu.
Don’t laugh. Various scholars figure that anywhere from $7.6 trillion to $32 trillion is stashed in offshore tax and secrecy havens. A trillion dollars is a lot of bucks. Last year, the United States’ total output of goods and services was $18.6 trillion.
More than 70 percent of big American companies have subsidiaries in offshore havens. Shady individuals use these havens to launder their proceeds from illegal drug and arms trafficking, stock fraud, embezzlement, and other crimes. The late gangster and financial genius Meyer Lansky was a pioneer in juggling ill-gotten gains around offshore havens. And, of course, both companies and individuals use the havens to dodge or sharply reduce taxes and regulation.
One major focus of the Trump team investigations will probably be the island of Cyprus, a secrecy haven for Russian oligarch money. For a while it wasn’t even considered a haven because its sinking banks loaned too much money to crumbling Greece. But dirty Russian money didn’t stop flowing to the island nation.
Cyprus is so cozy with Russia that it is the only European Union country that has allowed the Russian military to use its bases for operations. According to the Democratic Coalition, as related by the Huffington Post, president Donald Trump has two companies registered in Cyprus. “Trump worked with a notoriously corrupt Cypriot company to bid for [a] casino… during the Republican presidential primary,” says the publication, quoting Hong Kong’s Global Sources and Israel’s Haaretz.
Wilbur Ross, Trump’s secretary of commerce, was vice chairman of Cyprus’s largest institution, the Bank of Cyprus. He has invested $500 million in the bank, which failed once, and which has had a top officer who was an ex-KGB friend of Vladimir Putin. But since Ross made his $2.5 billion in assets by investing in troubled businesses, his Cyprus adventure may not get him in trouble. Trump, who doesn’t do much borrowing from American banks, may be able to explain any Cyprus borrowing he may have done.
Early this month, the Washington Post reported that Erik Prince, founder of the mercenary firm once named Blackwater, allegedly had a secret meeting with a Putin ally in an attempt to establish back-channel communications between Trump and Putin. The meeting was supposedly held in the Seychelles, an island country off East Africa. Tax Justice Network calls the Seychelles “a paradise for dirty money and corruption.” Former San Diego newscaster and unsuccessful mayoral candidate Dick Carlson was ambassador to the Seychelles in 1991–1992. And Erik Prince? A decade ago, the San Diego County hamlet of Potrero, near Tecate, thwarted Blackwater’s attempt to build an 824-acre training facility three miles from the town. In 2013, Prince, who is no longer with the firm, told the Daily Beast that Blackwater was “a virtual extension of the CIA.”
A year ago, investigative journalists released a trove of documents from a Panamanian law firm that specializes in setting up secret avenues for moving money around offshore havens. The resulting scandal became known as the Panama Papers. Dubious friends of Bill and Hillary Clinton were exposed as users of offshore institutions. The list included Frank Giustra, a Canadian mining magnate and crony of Bill Clinton; Marc Rich, the international fugitive pardoned by Bill Clinton; Ng Lap Seng, who was at the center of a Democratic fund-raising scandal during the Clinton years; and the Chagoury Group, a West African developer that pledged a billion dollars to the Clinton Global Initiative.
Transactions linked to that Clinton initiative occurred in havens such as the British Virgin Islands, Isle of Man, Anguilla, Cayman Islands, Bahamas, Hong Kong, Monaco, and Gibraltar.
Note the British accent. London is at the center of much offshore mischief. The Channel Islands — Jersey, Guernsey, and the Isle of Man — are havens, along with Bermuda, the Cayman Islands, British Virgin Islands, Turks and Caicos, Gibraltar, and former British colonies Hong Kong, Singapore, the Bahamas, Bahrain, and Dubai. But the United States is coming on strong — particularly Nevada, South Dakota, and Wyoming.
San Diego has had its share of offshore bank adventures. Last year, Harold Bailey (B.J.) Gallison of Valley Center got an 18-year sentence for running a pump-and-dump scheme through offshore entities. Eighteen years is a very long sentence for stock fraud, but Gallison had gone to prison before for a similar offense and had run a penny-stock brokerage house that went down ingloriously.
The most publicized offshore caper took place in the 1980s. The late J. David “Jerry” Dominelli and his lover (then named Nancy Hoover) headed a firm named J. David that supposedly specialized in foreign-currency trading. Somehow, Dominelli’s crew persuaded investors that he was a genius at trading currencies. Investors got statements indicating that they were making 40 to 50 percent a year. But, actually, he lost money when he traded currencies, so he did little of it. J. David was a Ponzi scheme. Early investors were paid off with funds from later investors. When the pyramid collapsed, Dominelli told investors and the bankruptcy trustee that he had funds in Switzerland, Austria, and the Bahamas. He didn’t. Then Dominelli went off to Montserrat in the Caribbean, promising to launch a currency-trading operation there. But he got arrested. The game was over. Investors lost $80 million. He was sentenced to 20 years in prison but got out in 10½. He died of a stroke in 2009. Hoover was sentenced to 10 years in prison but got out in 30 months. She then married two men who were genuinely rich (one died).
Former San Diego dentist L. Donald Guess had a tax-avoidance scheme for doctors and dentists. The tax havens he used were in Barbados and the British Virgin Islands. He beat the Internal Revenue Service in his first trial but got convicted later for filing false tax returns. He was sentenced to 18 months in prison.