Both points of view have been well articulated via this newspaper in recent weeks.
I’m inclined to think we should applaud the ICIJ for stimulating the conversation in the first place. We’re always hearing about the financial services industry comprising a lion’s share of our economy and about the accolades it earns at overseas conventions, but how well does the average person really understand it? My (fairly uneducated) guess is not very.
Now, though, the discussion has dawned. People are curious, insistent, angry, and looking for answers, and whether or not they’re well-informed, this is positive. This is democracy at work. This is the fourth estate doing its job.
And it was a big job indeed, involving dozens of journalists, huge volumes of information, and more people who declined to comment than agreed to speak.
Sifting through the database of recent stories written by ICIJ members is an eyebrow-raising endeavour.
There’s evidence that a member of the Rothschild banking dynasty built an “offshore empire” in the Cook Islands between 1996 and 2003; that a Paraguayan politician created a fake bank in the Cook Islands with no building and no staff, which was operational until 2000; that a woman with one of the world’s largest art collections purchased original Van Goghs through an operative in the Cook Islands to “gain tax benefits” (read: avoid paying them), in the words of her own attorney.
Still, to Financial Services Development Authority head Jenner Davis’ point, much of this predates marked legislative change in 2003.
That legislative shift does not, however, account for cases like Jamie Solow’s.
Indeed, his story speaks to a point raised by one anonymous person who wrote to Cook Islands News regarding the recent explosion of ICIJ stories: “Passing legislation is one thing and policing and ensuring compliance is another,” the person wrote in an email.
Jamie Solow was a US stockbroker indefinitely imprisoned for swindling hundreds of investors of their money and then hiding it in a Cook Islands trust created in his wife’s name.
A judge found Solow guilty of securities fraud in 2008 and ordered him to pay $6 million in compensation to the people he defrauded. That’s when Solow created the trust via a Southpac affiliate, in which his wife took out a $5.2 million certificate of deposit. He proceeded to then tell the court he had no assets, save for a truck and some furniture totaling $2369.
Two years later, Solow still hadn’t paid up and he was sent to jail.
The US government’s Securities and Exchange Commission applauded the court’s judgment, which sent fraudulent investors the message that they cannot hide their assets in order to avoid repaying their victims.
The New York Times article detailing the Solow case suggests that the danger inherent in the Cook Islands financial industry is that “under Cook Islands law, foreign court orders are generally disregarded, which is helpful for someone trying to keep assets away from creditors,” financial columnist Floyd Norris wrote.
“In fact, getting an American court order can make it harder to get money out of the Cook Islands. If someone who stashed funds in a Cook Islands trust asks for the money back because a court ordered him to do so, Cook Islands law says that person is acting under duress, and the local trustee can refuse to return the money.
“Over the years, a number of less-than-upstanding Americans have found the islands attractive for that reason, among them former corporate raiders, penny stock promoters and telemarketers who defrauded customers.”
The fact remains that there are legal loopholes and there are immoral people who are going to find them and jump through them. The focus should be on limiting their opportunities to do so.
One ICIJ article explains that many people use the “offshore world for legitimate purposes, for legal tax shelters or to smooth the way for international trade.”
They are not the concern. The concern, of course, is people who are relying on offshore trusts to store money illegally, unethically, and immorally. The ICIJ investigation has ruffled quite a few feathers and sparked an important debate. I encourage people on both sides of the fence to continue self-educating, asking questions, writing letters, and demanding answers.
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