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Who Are The Non-Celebrities In The Panama Papers?

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In the first stories about the Panama Papers, we got the names of a bunch of politicians, a few criminals, sports and other celebrities and one or two names of rich people. But in focusing solely on this kind of person, we miss the major point about tax havens. They are used by hundreds of thousands of people, including many who are not billionaires and who are not famous or otherwise newsworthy. They are commonly used by doctors, lawyers, accountants, small business owners and those who inherited money from such people.

Here’s a chart from the New York Times showing the mix of people making up the top 1% in income in the US; the chart is from 2012 and uses 2007 data. The cut-off for this level is the Census Bureau figure of $380K, while other studies put it higher. The Fed Survey of Consumer Finances, a better survey, has it at $690K in 2007. The cut-off for the top 1% in wealth was estimated at nearly $8.4 million in 2007. Those numbers went down after the Great Crash, but recovered smartly. By 2013, the cut-off for the top 1% in wealth was back to nearly $8 million, and climbing.

Lisa Kiester of Duke University, a sociologist who has published on the 1% describes a group she calls the double rich in this article. These are people who are in the top 1% in both income and wealth. Their median wealth was about $12 million in 2010, and their median income was in the range of $1.2 million. Both have no doubt risen since then. Kiester does not give an estimate of the number of the double rich, but this New York Times article, using 2007 data, says that there is about a 50% overlap between the two groups. There were about 117 million households in 2010 according to the Census Bureau. From that we can estimate that there are about 560,000 households making up the double rich.

Kiester examines the lack of discontent with wealth and income inequality in this 2014 paper. She offers five explanations with supporting evidence from research:

!. Homophily, the tendency to hang out with people like us. We aren’t often exposed to the impact or the magnitude of wealth inequality.

2. People think things will get better because they always have.

3. There is some evidence of social mobility, and it’s even possible for people to think they could move into the top 1%.

4. People are too busy, distracted and stressed to care.

5. People focus on poverty, not inequality. Academics are concerned about inequality because they think huge wealth gaps lead to power imbalances that favor the rich at the expense of the rest of us. That’s completely outside the scope of most people’s worries about money.

Gabriel Zucman, one of Piketty’s collaborators, estimates that individuals have approximately $962 billion of unreported assets in tax havens. Source: Data figure 4 tab 1 from a spreadsheet found here; click on Tables and figures included in the book. The book is The Hidden Wealth of Nations. For a description of Zucman’s methodology see this by Cass Sunstein.

Kiester says that 56% of the top 1% by net worth were self-employed in 2010. These are people who have the means to move money into tax havens, as are the rest of the top 1%. There are hundreds of thousands of US citizens who would benefit from tax havens, and there is so much money out there by Zucman’s estimate that it must be that case that tens of thousands of them have done so.

The ICIJ and its participating groups name politicians, celebrities, and crooks who hide their wealth in tax havens, and who won’t be prosecuted, but at least are shamed. But what about the huge number of the 1% who hide their wealth abroad and are not even shamed for their corruption?

This kind of disclosure would help break through the mental barriers to making inequality itself a force in politics.

Update April 15, 2016 From ICIJ:

The law firm’s [Mossack Fonseca] leaked internal files contain information on 214,488 offshore entities connected to people in more than 200 countries and territories. ICIJ will release the full list of companies and people linked to them in early May.

Tuesday Morning: What’s News, Tiwes?

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[Screencap, Newsmap, 0815h EDT]

[Screencap, Newsmap, 0815h EDT]

It’s the day belonging to Tiwes, the Norse god of single combat. What will we engage in battle about today? Looks like sketchy news coverage is a good reason, after taking a peek at Newsmap this morning to check global media coverage of the Panama Papers.

Very thin reporting, according to the results. Canada, come on — Bill Cosby is bigger news than global corruption?

Ditto for India, which covered the HSBC money laundering scandal exhaustively last year. Very little coverage in that country’s English language outlets.

Don’t get all peeved off about the U.S. media, which hasn’t done a particularly good job over the last 24 hours. It’s not just us; the lack of coverage may say something about media ownership around the world.

One possible example on shore here: the acquisition of the Las Vegas-Review Journal last year. Nevada happens to be the eighth most popular tax haven in the world, and Las Vegas is its heart. Was this paper acquired in order to influence reporting in and about this topic?

Mossack Fonseca has a subsidiary in Las Vegas, by the way.

Let’s take a look at science and technology news…

  • No change yet to claims that Panama Papers were obtained by an attack on Mossack Fonseca’s email server (The Register-UK) — Of particular note, this observation by this tech news outlet:

    To date, The Register hasn’t seen a strong presence from the tech sector in the staged release of the documents, perhaps because the “Double Irish Dutch Sandwich” tactic favoured in this business works without hiding companies’ links to their international associates.

    The comments at that link are rather interesting, offering both a perspective from our overseas “cousins” as well as technical assessment about the leak.

  • Are you ready for some Thursday night Twitter streaming? (WaPo) — NFL’s awarded a deal to Twitter for streaming some of its games. This is an interesting development, given how much co-watching TV Twitter users do.
  • I’m afraid I can’t do THAT, Dave: humans aroused by touching robots special places (Phys.org) — Ewww. Don’t ask me to travel through the Uncanny Valley with you on this one.
  • Revolv’s home automation hub now a casualty in the Internet of Things universe (BoingBoing) — Device fell out of the product plans for Google’s home automation subsidiary, Nest. Unfortunately, Revolv was sold with a lifetime subscription which will be defunct in May.
  • “Routine management reshuffle” replaces three senior execs at China’s telecom manufacturer ZTE (Reuters) — coincidentally happens weeks after U.S. authorities revealed attempts by ZTE to circumvent sanctions against Iran.
  • Name a non-Zika disease also transmitted by Aedes aegypti mosquitoes, facing a drastic vaccine shortage (Science) — You win if you said yellow fever, which has no cure and can be deadly.
  • Article 27: Algorithmic Politics (Furtherfield) — Necrocapitalism. Wrap your head around that term. A thought-provoking essay about a world where algorithms are our political system.

That’s enough for your coffee break or lunch hour. Catch you here tomorrow morning!

Monday Morning: Welcome to BVI – Have a Tax-Free Day

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Aw, shucks. Spring Break is over just as I find another warm place to visit. The British Virgin Islands expect a balmy daytime high of 84F/29C degrees today with partly cloudy skies.

And a 100% chance of tax havens galore.

Blood’s in the water, though, stay ashore. You may hear a lot in the media today about the Panama Papers leak dump in which the BVI feature prominently. What you won’t hear much about: this is the second leak about tax havens in exactly three years.

Jack-doodly-squat happened after the first one in April 2013.

The UK’s PM David Cameron was pressed in 2013 to do something about BVI’s tax laws. He said he would work with the G8 to tackle tax evasion. Of course, we now know why he sat on his hands; he had highly-rewarding and substantial familial interest in doing nothing but continue his family’s tax avoidance scheme. And yet he still managed to get reelected last year, the corrupt pig fucker.

If governments had felt any pressure at all to do something corrective, there wouldn’t be a second wave of leaks, right? But the 1% have continued to milk profits from businesses, transfer the money offshore, and buy themselves enough politicians and corporate media to ensure things remained nice and cozy.

Color me skeptical that anything will come of investigations into tax shelters which are for the most part legal, thanks to pwned and compromised governance. But the unfolding story sheds new light on older ones.

Like the decade-plus work on tax havens and abusive tax schemes by the U.S. of Permanent Senate Committee on Investigations, which did not slow or stop the offshoring of capital. B-schools continue to teach offshore tax shelters as ‘A Good Thing’, right alongside ‘Taxes Are Bad’ — because the 1% have amassed enough money to make sure legislators and B-schools’ leadership stay bought.

How much do the Panama Papers leak materials overlap with the Swiss Leaks scandal, including India’s investigation into HSBC, money laundering and influence peddling, reaching into the UK and beyond?

Or a more recent story about hacked elections, including Argentina’s. Has laundered money acquired the services necessary to manipulate elections in order to ensure nothing would change in tax laws?

Perhaps the Panama Papers will offer a more cohesive picture of just how badly the 99% are being screwed, if nothing else.

Nothing else, that is, besides the No Confidence vote Iceland’s Prime Minister Sigmundur David Gunnlaugsson now faces after the Panama Papers revealed his financial interests in BVI.

It’s actually rather quiet on the technology front as I write this. I’ll add a few snippets later after caffeination.

More Evil in One Wyoming House than Dick Cheney?

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In Nicholas Shaxson’s book, Treasure Islands, he traces out a network of offshore locations, like Cayman Islands, where corporations and crooks hide their cash. But he also noted that the incorporation laws in various US states allows those same corporations and crooks to hide money right inside the United States.

Reuters has a superb article showing how one house in Wyoming serves just such a function. It focuses on a house at 2710 Thomes Avenue, Cheyenne, Wyoming that serves as the headquarters for 2,000 different corporations, some of them shell corporations, some of the shelf corporations waiting for someone to buy them. Among the corporations shacking up together at 2710 Thomes?

Among those registered at the little house in Cheyenne are two small companies formed through Wyoming Corporate Services that sold knock-off truck parts to the U.S. Department of Defense, according to a Reuters review of two federal contracting databases and findings from an investigation by the Pentagon’s Defense Logistics Agency. The owner of those firms, Atilla Kan, awaits sentencing on a 2007 conviction for wire fraud in a related matter.

Also linked to 2710 Thomes is former Ukrainian Prime Minister Pavlo Lazarenko, who was once ranked the eighth-most corrupt official in the world by watchdog group Transparency International. He is now serving an eight-year jail term in California for a 2004 conviction on money-laundering and extortion charges. According to court records, that scheme used shell companies and offshore bank accounts to hide stolen Ukrainian government funds.

Court records submitted in Lazarenko’s criminal case and documents from a separate civil lawsuit, as well as interviews with lawyers familiar with the matter, indicate Lazarenko controls a shelf company incorporated in Cheyenne that owns an estimated $72 million in real estate in Ukraine through other companies.

[snip]

Another man linked to 2710 Thomes is Ira N. Rubin. Prosecutors allege he created a Rube Goldberg-style network of shell and shelf corporations to further his scams.

In December 2006, the Federal Trade Commission sued Rubin for fraud in federal court in Tampa. Documents in the civil lawsuit allege Rubin used at least 18 different front companies to obscure his role as a credit-card processor for telemarketing scams.

These operations, the FTC alleged, offered subprime credit cards that charged an upfront fee debited from customers’ bank accounts, but the cards were never delivered.

True, this may not amount to more evil than Dick Cheney. But it shows how critical these secrecy jurisdictions are to making corporations a vehicle of crime and other abuse. And, as Shaxson has shown, secrecy jurisdictions are also a key tool for corporations to avoid paying their fair share and for dictators to loot their countries. These kinds of incorporation services are a key tool to sucking the money out of the legitimate economy.

At a time when SCOTUS is giving corporations–even flimsy entities like the scraps of paper at 2710 Thomes–more rights than actual citizens, it pays to understand how easy it is for people to avail themselves of corporate personhood.