There’s been a lot of news this week—so much news, in fact, that one of the biggest global stories in recent memory has seemingly gotten buried under the deluge of headlines. Just days ago, as Brett Wilkins writes, “what’s being called the ‘biggest-ever leak of offshore data’” involved the publication of “a cache of nearly 12 million documents” exposing “the hidden wealth, secret dealings, and corruption of hundreds of world leaders, billionaires, public officials, celebrities, and others.” Like the Panama Papers (2016) and the Paradise Papers (2017), the Pandora Papers leak provides definitive evidence that the super-rich are ripping all of us off, siphoning inordinate amounts of wealth away from our societies, stashing it for themselves, and using their power and influence to rig political and economic systems in their favor.
In the second segment of this week’s Marc Steiner Show, Marc and Chuck Collins from the Institute for Policy Studies walk listeners through the importance of the Pandora Papers leak, what the documents reveal, and what we can do to stop the pillaging of our societies by the super-rich. Chuck Collins is the director of the Program on Inequality and the Common Good at the Institute for Policy Studies, where he co-edits the IPS website Inequality.org. He is also the author of Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good.
Tune in for new segments of The Marc Steiner Show every Tuesday and Friday on TRNN.
Pre-Production/Studio/Post-Production: Stephen Frank
Marc Steiner: Welcome to the Marc Steiner Show here on The Real News, I’m Marc Steiner. And as usual, it’s great to have you all with this.
All of us by now are aware of this series of articles being put out by hundreds of newspapers across the globe about the Pandora Papers, and opening Pandora’s box, as it would. And this is an amazing moment, actually. This was created by the International Consortium of Investigative Journalists. It involves 600 journalists from around the globe. And they looked through 11.9 million documents that look at the flow of money and assets, how we obscure things and hide things, conceal things, through an offshore financial system. The Washington Post was part of this. The Guardian was part of this.
And it involves the US, probably not as much as I would like to have seen, I’ll talk to our guest about that, but it examined the industry within the United States, looked at what happens in places like South Dakota, and looks internationally at how people hide their billions of dollars from taxes. And some of the sleaziest people on the planet are involved in this. And we’re going to look at all that and what it means. Does this have legs in terms of creating change? Are people interested in this because it doesn’t affect the US directly, but it does in some ways?
So, we’re joined by a man who was actually involved in this project. And we’ve talked to him many times before. His name is Chuck Collins. He’s director of the Program on Inequality and the Common Good at the Industry for Policy Studies, where he co-heads inequality.org, and author of numerous books, including Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Home Wealth, and Committing to the Common Good. And his most recent book, The Wealth Hoarders: How Billionaires Spend Millions to Hide Trillions. And Chuck, welcome, good to have you back with us.
Chuck Collins: Thanks for having me, Marc.
Marc Steiner: So, let’s just talk about this investigation on its own first, and what you think the importance of this is for the audience. Our audience is international, but what is the importance here?
Chuck Collins: Well, I think part of it is just the scale of the findings, the number of people caught in the web, the number of wealthy elites and politicians around the world who are using this. I call it the hidden wealth system. And I think from a global point of view and from a US point of view, it’s very important that people understand the US has now become one of the biggest tax havens in the world. So, some of the shady characters and billionaires are bringing their money to the US to take advantage of our shell companies, our trusts, our other places to park their wealth and avoid accountability and taxes in their home countries.
Marc Steiner: So one of the things that struck me about this, that even though it affects… It brought into the picture King Abdullah from Jordan, other international leaders like in Czechoslovakia, who actually ran the platform to wipe this kind of thing out. And then it looks as if the president himself lied and is actually doing it himself, creating his own wealth that way. And it seems that they really honed in on some of the sleaziest human beings among the billionaire class. What is that dynamic, do you think?
Chuck Collins: Well, I think what this really shows is that the political elites are using the same system, so they don’t have a lot of motivation to change it. Some of the wealthiest people in the world are clearly avoiding taxes. I think that the impact is some of these heads of state, they won’t be here for long. President of Cypress, the president of the Czech Republic, and some of these other countries, they will be removed. I worked a lot with journalists from Mexico, and they have 3,000 people from the wealthy political elite in Mexico who have been unmasked in these leaks as taking money out of the public works projects that they’re supposed to supervise and funneling it offshore, and then funneling it to apartments in Miami. So it’s going to have a huge impact, particularly in other parts of the world.
Marc Steiner: So let me digress a moment. You said you worked with the folks in Mexico, and I introduced you to someone who was actually involved in this project, so what was your role here? What did you do in this project?
Chuck Collins: Yeah. Because I wrote this book, The Wealth Hoarders, and I know people from the International Consortium of Investigative Journalists, I was basically a resource, primarily to foreign journalists just trying to understand the US system. Why is it that the States are so different? What is it about US trust law that allows certain things to happen? I was in the know, I didn’t have access to the raw data, but I knew that this was happening. I have to say, I talked to the most impressive journalists in the world, from Brazil, and Argentina, and Mexico, and all these European publications, because they were digging up dirt. They were using this data to understand what the elites in their country were doing.
Marc Steiner: That is interesting. I mean, I think that we could have a whole other conversation just about the power of the independent media, especially outside the United States, and the role they play in countries like Brazil, where they’re being threatened daily with death by Bolsonaro and his thugs. But let’s bring it home here for what you were just describing, because I think one thing that is shocking to many people looking at this report is that how… Well, couple of things, one is how the United States is deeply involved in this in terms of people hiding their money in this country, as opposed to people in this country hiding their money in other countries. That’s A. And B is also the lack of involvement of American billionaires in this process. We’ll come to that next.
But let’s just talk about people hiding their money in the United States. I mean, you look at the states that were listed in this document: South Dakota, Florida, Delaware, Texas, Nevada, all really dominated by the right wing in their politics. And they become tax havens with a thing called dynasty trust and other things. So parse that out for us. What the hell is a dynasty trust, and how does this function in a place like South Dakota?
Chuck Collins: Yeah. What’s important to hear is to understand that in these small states, the wealth defense industry, the wealth managers, and tax attorneys, and accountants who serve the ultra wealthy, basically lobbied, or, probably more accurately, wrote the laws that these states have implemented. So in the area of trust law, which is a deathly boring topic, but fascinating to me now, because trusts… That these folks have manipulated the form of the trust. And in the simplest terms, what South Dakota did, their secret sauce, is trusts used to have to terminate within a short period of time. Within a lifetime or within a lifetime and a half, the trust would dissolve.
And for a larger political context, this was a response to feudalism where the aristocrats would tie up the wealth and land of, say, England in perpetuity. And so, when they reformed their law system, they changed it so that, in the colorful language, the hands of the dead did not rule the lives of the living. And so, you terminate a trust because a trust shouldn’t live forever. It shouldn’t lord over people. It shouldn’t put conditions on my great-great-great-great grandchildren can never have this wealth unless they marry these folks, whatever. Just like, it should end.
And what they did in South Dakota was they suspended and eliminated that so that trusts can exist in perpetuity. So if you’re a billionaire and you want to create a wealth dynasty so that your great-great-grandchildren never have to work, you will move your money to South Dakota. But now, it’s not just South Dakota, because other states are competing with them to attract the same big piles of money.
Marc Steiner: Right. [inaudible], places like Delaware that have always been a haven for the corporate banking world to hide their stuff is in this list, along with Texas, which is really, even though it’s a very divided state, is really controlled by the right. But let’s go to South Dakota again for a moment. I mean, this is a state that’s not known for its wealth, but clearly is the center of all of this. So what does that mean? I mean, what does that mean in terms of what we can do in this country to address that, A, and, B, which you can start with, what does it mean about South Dakota, the intricacies there?
Chuck Collins: Yeah. Well, the trust industry in South Dakota is small, it’s maybe 500 people, but those are pretty high paying jobs. And so, in the South Dakota economy, they are a political force. They actually get what they want done. And because they’ve had these conservative governors and legislatures, they basically get to write the laws and write the rules. What can be done about that? Well, we certainly can’t wait for anybody in South Dakota to change the system. They have no incentive to do that. So it’s going to have to be…
The rest of the neighborhood is going to have to force the change, if you will. And it’s going to have to be federal. We’re going to have to reassert and redesign trust law at the national level to basically restore this idea that trusts can’t exist forever, trusts over a certain size should be publicly registered, and probably should be taxed. Just as an ownership form, they are just weapons of mass destruction. People are using them to cause all kinds of harms. And that’s going to be a hard lift, because obviously in the United States, we have this federalist system where these states are so independent and have different laws and independence. But there’s lots of examples where a federal statute can override states, especially when states are causing harms.
Marc Steiner: So, I mean, before I read this article, I’ve been looking at other articles about how American billionaires and corporate interests are hiding assets overseas, which is where you think they’re going to do it. Nobody would expect it to be in Delaware, Texas, and South Dakota, and Nevada. Can an American billionaire do the same thing in South Dakota?
Chuck Collins: Yeah. First, there’s an important point here. The reason we don’t see a lot of US names on this list is because the leaks came from 14 different wealth advisory firms located in Singapore, and Cypress, and places where US wealthy people don’t go for their financial services. None of the leaks came from firms in the United States. But I can assure you, US billionaires are using the same toolbox: offshore bank accounts, anonymous shell companies, opaque trusts. They’re using the same tools.
What’s changed, Marc, is wealthy people in the US don’t need to go offshore as much. They might go offshore to add another layer of protection, if you will, of secrecy. But most of what they need to do can be done here in the United States using the existing tools. And because the US, while Europe kind of started to clean up its act and a lot of tax havens have shut down, the United States has been a laggard and we haven’t updated our laws, we haven’t changed the transparency regime. And so, the hidden wealth is coming here to the United States.
Marc Steiner: That’s really kind of interesting, the dynamic here. We used to talk, when I was younger, people used the term ‘banana republic’ referring to places in Latin America, especially, that were run by dictators who were propped up by the United States. That last sentence they didn’t usually include, but that’s what it was. It’s the same dynamic, though. We’re talking about places like South Dakota becoming those same banana republics, hiding people’s wealth.
Chuck Collins: Yeah. I mean, remember we used to talk about the Swiss bank account.
Marc Steiner: Yes, exactly. Right.
Chuck Collins: You’re going to get a million dollars, you’re going to open a Swiss bank account. Well, in 2009, the US, under Obama, entered into a treaty with the Swiss government and the Swiss banks that if US nationals open up accounts, they have to report that data to US tax authorities. We shut down the Swiss bank account as an escape hatch for US wealth. And Europe started to form treaties between countries, also disclosing banking information. The laggard is the US, we didn’t reciprocate. If a wealthy Swiss billionaire brings their wealth to South Dakota, our folks aren’t obliged to share that information. So we’ve become the weak link in the global system of wealth hiding.
Marc Steiner: Before we come back to what we can do, and another question about South Dakota, one of the things which I think was interesting, something you said before we went on the air together that I want people to hear, is that it appeared as if, from reading all the articles, that the only Americans caught up in this are the sleaziest billionaires you can find, pedophiles and, I mean, just a plethora of unsavory human beings, who’ve been sent to court, some sent to jail, some hiding overseas so they can’t be found, but the sleaziest among the wealthiest. Why is that? There was no Elon Musk in there. There weren’t any folks from Facebook in there. I mean, what is that about and why is that?
Chuck Collins: I have a simple answer. It’s that the British Virgin Islands, which did have two of the companies that leaked information for the Pandora Papers, is the place where… Think about this. This is where Jeffrey Epstein was living. This is where he was advising his wealthy friends on how to do tax dodging. He lived in a little island off Tortola and he took advantage of the British Virgin Island corporate system and anonymous shell companies. So some of that just happens to be, there are a few billionaires who use the BVI trusts and banking system. But most of them, again, ProPublica did this report last week where the hundred richest people in the United States, out of those hundred, half of them use these trusts called GRATs, grantor retained annuity trusts, to avoid estate taxes. They don’t have to go offshore to do that, they just do that here.
Marc Steiner: What do you mean they do that here? How they do it here?
Chuck Collins: Well, they just create these trusts and they create these transactions between themselves and different parties. And basically, it’s a way to kind of obfuscate whose wealth is where, and it’s a way to pass money onto children, circumventing our federal estate tax. So that’s what the super-rich and their enablers, this wealth defense industry, they’ve figured out how to pretty much do this on-shore.
Marc Steiner: So let’s get down to, for a few minutes here, on what the United States can do and what can be done, both in terms of not allowing people to use these tax havens, but B, what we do in our own country to control the banking un-regulations of places like South Dakota and Delaware, Nevada, [Minnesota]. What could be proposed that would, A, interest the American people in listening to it and, B, actually control this crap?
Chuck Collins: Yeah. I mean, I think before that we have to convince people that this harms people in the United States. I mean, I can tell you how this system is plundering countries in the global South, because the dictators and autocrats and elites are taking money out of their home countries and taking it to the US and how that undermines the rule of law. But frankly, people in the US are like, yeah, okay. So that’s too bad. But here’s the problem. It’s the same system that’s causing you and I to pay higher taxes, or it’s the same system that failed to build that hospital that should have been there during the pandemic. So when the rich don’t pay taxes, everybody else has to pick up the slack. And secondly, it fuels growing inequality in the racial wealth divide. I mean, we are seeing the creation of wealth dynasties in the United States.
So if we can educate the public that this is really harming, this really harms us, even here in the United States, in addition to harming millions and people around the world. The things that we can do, one, is require disclosure. And here’s some good news, Marc. At the end of last year, Congress passed something called the Corporate Transparency Act. It’s kind of overrode Delaware, and basically said if you have a limited liability company, you have to tell us who you are, who the real beneficial owner is, who’s the real owner. And you have to report that to the Treasury Department Police, FinCEN. So that’s a great precedent, because now we can go back and say, okay, trusts need to be brought under scrutiny. We need to require trusts over a certain size to be registered. There has to be disclosure of who the owners are, and probably we should tax assets in trusts over a certain size. Oh yeah, and by the way, trusts can’t live forever. Let’s reinstitute the rules around trusts that say they have to terminate at some point.
Basically, there goes South Dakota’s secret sauce. What they have to market is no taxes, no disclosure, and permanent trusts. And if you require them to disclose, and you require them to terminate after a certain period of time, let’s say in 90 years, their competitive advantage is gone. Basically, that race to the bottom between these states ends. Anyway, I should say, sorry. The first most important thing is to rebuild the IRS’s ability to follow the shell games of the super-rich. And President Biden has said, I want to invest $40 or $80 billion over the next 10 years to watch the tax activities of the super-rich and make sure they’re paying their fair share. That’s a really important first step in this process.
Marc Steiner: Yeah. Because they’ve done really well at making us all think the IRS is the boogeyman against us, as opposed to being what it’s supposed to be, which is the watchdog on wealthy cheating in terms of bringing money to our own country for what we need.
Chuck Collins: Exactly.
Marc Steiner: Yeah, that’s important. So last two things here. So, A, talk to me about, for just a second, what you think about is the importance of these revelations and why they should be important to people like us to want to read and understand?
Chuck Collins: Well, I mean, I think the Pandora Papers, and the Panama Papers before that, have kind of opened the window and given us an insight into this secret system of the super wealthy. We know now what that system looks like, but what’s great about these disclosures is it names names, it holds people to account. We could use a couple of good leaks here in the United States, Marc. If anyone is listening, they can contact me at the Institute for Policy Studies, and I will put you in touch with the good people at the Consortium who will confidentially and securely handle those disclosures. Because it will make a huge difference to see the real… I should say, ProPublica did get access to tax returns and has showed us a fairly big picture of how the super rich avoid taxes, but a few more leaks like that would help us make the case that this really does matter, it really causes tremendous harms.
I mean, here’s one other harm. Where does this money go? Well, it isn’t sitting in South Dakota, it’s invested in the market, it’s invested in various assets, and it’s in real estate, it’s in land and real estate. And so, this wealth from around the world and from our own billionaires is disrupting our housing markets. It’s driving up the cost of land. All the building resources are going toward building luxury housing for people who don’t even live in them. Just luxury towers that are like wealth storage units, that are vacant. This is where the treasure of our economy is going, and it’s wrecking lives in cities and communities across the country. So this stuff really matters. It’s really in our interest to basically shut this hidden wealth system down.
Marc Steiner: So let’s close here with the story that you shared with me, your thoughts you shared with me about South Dakota and some of the glaring contradictions and connections historically. Leave our listeners with that.
Chuck Collins: Well, here’s just what’s broken in South Dakota’s story. In the 1980s, a lawyer representing a super rich family from Wisconsin went to Gov. Bill Janklow, while Bill Janklow was a legal services attorney who got involved in prosecuting and setting up Leonard Peltier and cracking down on the American Indian movement. He was a self-proclaimed Indian fighter. So he’s a bad guy in a lot of ways.
And then, he did two other things. He basically opened South Dakota up to the trust industry, and he opened it up to the credit card industry. And he did it by changing the laws of the state. States used to have laws, anti-usury laws, that would limit how high interest rates could be charged. South Dakota eliminated their anti-usury law, that’s why Citigroup and the Citi credit card is based in South Dakota. They changed the laws around trusts, and that’s why billionaire kleptocrats from around the world are taking their money to South Dakota. So it all goes back to a corrupt leader and a state legislature that went along with it.
Marc Steiner: Actually, in many ways, what you’re describing also goes to the heart of the political divide in America. The idea of states’ rights and individual rights is, really in many ways, a scam for the wealthy to control the country. And people have to understand that as part of a battle that the federal government has to intervene and say, no, we need a really equitable America, and this is how we’re going to do it. And this can’t continue. I mean, that is what I think is part of it as well.
Chuck, I want to thank you for all the work you do, and I appreciate you taking time with us today. And you said earlier, people should contact you if they have ideas they want to share, how would they do that?
Chuck Collins: Well, even more important… Well, that’s important, but check out the work that we do at inequality.org. That’s the website I co-edit. And if you want to track these events and track the journalism that’s rocking the world, you can visit us at inequality.org. You can find me there and write to me there. If you’re a young person and you’re working inside one of those big wealth management firms and you’ve got a thumb drive, I’ll provide the information where you can send it.
Marc Steiner: Perfect. Chuck Collins, thank you so much for joining us today on the Marc Steiner Show. Good to have you with us.
Chuck Collins: Thanks, Marc.