Stop the Untouchables. Justice for Sergei Magnitsky.

Piercing the secrecy of offshore tax havens

Washington Post

A New York hedge fund manager allegedly swindles $12 million from a prominent Baltimore family. An Indiana couple is accused of bilking hundreds of customers by charging for free trials of cosmetic products. A financial manager in Texas promises 23-percent returns but absconds with $33.5 million of his investors’ money in a classic Ponzi scheme.

All three cases have one thing in common: money that ended up in offshore accounts and trusts set up in tax havens around the world.

The existence of the trusts surfaced during a joint examination of the offshore world by The Washington Post and the International Consortium of Investigative Journalists, a D.C-based nonprofit news organization. ICIJ obtained 2.5 million records of more than 120,000 companies and trusts created by two offshore companies, Commonwealth Trust Ltd. (CTL) in the British Virgin Islands and Portcullis TrustNet, which operates mostly in Asia and the Cook Islands, a South Pacific nation. The records were obtained by Gerard Ryle, ICIJ’s director, as a result of an investigation he conducted in Australia.

Many people use the offshore world for legitimate purposes, for legal tax shelters or to smooth the way for international trade. Overseas havens vaulted into public consciousness last year with stories about Republican presidential nominee Mitt Romney’s accounts in the Cayman Islands. Recent coverage of the Cyprus banking crisis has thrust the issue back into the spotlight.

U.S. citizens are permitted to move money offshore as long as they report their account information to the Internal Revenue Service. But there have long been concerns that much of the money is not reported and bleeds tax revenue from governments worldwide. Recently, aspects of the offshore world came under assault after whistleblowers alerted the IRS to thousands of unreported U.S. accounts in Swiss banks, resulting in an amnesty offer to violators who paid billions in fines to the U.S. government.

The records reviewed by The Post and ICIJ expose how havens in the South Pacific and Caribbean in some cases have become sanctuaries for individuals seeking to conceal their activities from investigators and investors.

Among the 4,000 U.S. individuals listed in the records, at least 30 are American citizens accused in lawsuits or criminal cases of fraud, money laundering or other serious financial misconduct.

They include billionaire hedge fund manager Raj Rajaratnam, who was convicted in 2011 in one of the biggest insider trading scandals in U.S. history, and Paul A. Bilzerian, one of the most famed corporate raiders of the 1980s, who was convicted of securities fraud.