Super-Rich tax cheats
REPORTER: Mr. Lowy, are you going to plead the Fifth today?
PETER LOWY, WESTFIELD SHOPPING MALLS: Come in and have a look.
Super-Rich Tax Cheats
By Nick Penniman, Harry Hanbury, & Lagan Sebert
WITNESS: I swear that the testimony I am about to give will be the truth, the whole truth, and nothing but the truth, so help me God.
NARRATOR: It’s a story that has all the elements of a great movie: greed, secrecy, crime, arrogant billionaires, a government investigation, and even a witness who’s in hiding. Amazingly, though, this drama is unfolding not at a Hollywood studio but in a Senate hearing room.
SEN. NORM COLEMAN (R-MN): The problem we are confronting today is simple: tens of thousands of America’s citizens are using offshore secrecy jurisdictions to hide trillions of dollars and avoid paying their fair share of taxes.
SEN. CARL LEVIN (D-MI): Tax havens are engaged in economic warfare against the United States.
NARRATOR: Senators Levin and Coleman are the heads of the Senate Subcommittee on Investigations. In the last two weeks, they’ve held a series of hearings about tax cheats—thousands of wealthy Americans who hide their assets in foreign banks to avoid the IRS.
COLEMAN: These tax havens hold an estimated $1.5 trillion in American assets, resulting in lost taxes of roughly $100 billion.
NARRATOR: To give you a sense of how much $100 billion means to our government, it’s more than the federal government spends on education and training, triple what we spend on the environment and natural resources, and nearly five times what we spend on temporary assistance to needy families.
LEVIN: Tax evasion eats at the fabric of society not only by starving health care and education and other needed government services of resources, but also by undermining trust, making honest folks feel that they’re being taken advantage of when they pay their fair share.
NARRATOR: Here’s how that $100 billion is kept away from government coffers.
COLEMAN: The evidence revealed that the banks engaged in highly suspicious activities designed to hide the identities of their clients, including, as the chairman noted, using code words, encrypted computers designed to thwart US customs officials, shell companies and trusts strewn around the world, and techniques to avoid surveillance by law enforcement.
NARRATOR: The deep historical irony that looms above this story is that the wealthy in America are doing better than ever. The income tax rate for the wealthiest Americans is at its lowest level since the Great Depression. Warren Buffet, one of the world’s richest men, has famously spoken out for tax fairness, offering any of his fellow corporate execs a million-dollar prize if they can prove that their tax rate is lower than the rate paid by their secretaries.
WARREN BUFFET, CEO, BERKSHIRE HATHAWAY: In our office, 15 people cooperated in a survey out of 18. I didn’t make anybody do it. And my total taxes paid—payroll taxes plus income tax—mine came to 17.7 percent. The average for the office was 32.9 percent. There wasn’t anybody in the office from the receptionist on that paid as low a tax rate, and I have no tax planning. I don’t have an accountant. I don’t have tax shelters. I just follow what the US Congress tells me to do.
NARRATOR: A result of our skewed tax policies is that the United States is the most stratified developed nation in the world. And as the Congressional Budget Office points out, the rich have experienced extraordinary gains in the last three decades, with the richest 1 percent enjoying a 228 percent boost in their average income. As The Wall Street Journal has reported, the top one-tenth of 1 percent, or 14,000 of American families, hold 22 percent of America’s wealth. The bottom 90 percent, or over 133 million families, hold just 4 percent of the wealth.
COLEMAN: The tax-cheating schemes we’ve uncovered by the subcommittee’s investigation demonstrates one simple, undeniable fact: the actions of the few to scam their way out of tax obligations hurt all Americans. The privileged few believe they’re entitled to shirk their obligations and heap their tax liability on the shoulders of other Americans to make up for what they avoid.
NARRATOR: Two foreign banks that were targeted by the Senate committee are UBS of Switzerland, which is the largest privately held bank in the world, and LGT, a bank owned by the royal family of the tiny European country Lichtenstein. One of the witnesses used to work for LGT, but then blew the whistle on their practices and handed thousands of pages of secret information over to government authorities. His name used to be Heinrich Kieber, but no one knows what it is today because he’s now in hiding with a fake name and a $10 million bounty on his head. In his videotaped testimony, he revealed what happened when he tried to alert LGT officials of what he considered to be the bank’s shady practices.
WITNESS: All these discussions were about files with strong indications of corruption, links to dictators, or business deals to avoid a US embargo, for example. The answer was always the same: none of your business; just stick to your designated job.
NARRATOR: Beyond the banks, who benefits from these schemes? Who are the thousands of Americans who are trying to dodge the IRS?
LEVIN: The Greenfield and Lowy case histories unfold like spy novels, with secret meetings, hidden funds, shell corporations, captive foundations, and complex offshore transactions spanning the globe.
STEVEN GREENFIELD, COMMONWEALTH TOY & NOVELTY: Mr. Chairman, I respectfully assert my rights under the Fifth Amendment to the United States Constitution and decline to answer.
NARRATOR: Greenfield owns the Commonwealth Toy & Novelty Company, which among other things manufactures stuffed animals called Beverley Hills Pups. Peter Lowy’s family owns Westfield Holding, the largest publicly held real estate company in the world. Anyone who’s ever shopped at a Westfield Mall has walked through part of the Lowy empire. Senator Levin’s committee alleges that Lowy has funneled $68 million into foreign accounts to evade taxation. Although Peter Lowy’s not used to appearing as a witness on Capital Hill, he’s no stranger to Congress. Just in the last four years, he’s donated nearly $60,000 to politicians, including Senators Harry Reid, Dick Durbin, and Chris Dodd. And as it is with anyone who wants to maintain access to both sides of the political aisle, he’s also given to President Bush and Senator McCain.
LEVIN: Mr. Lowy, have you ever spoken to anyone at LGT Bank in Lichtenstein?
NARRATOR: Like the others, Lowy plead the Fifth. But then something unexpected happened: his lawyer grabbed the spotlight.
LEVIN: We all agree we should be accurate. And if there’s any inaccuracies, that should be under oath by your client and not by his lawyer—
ROBERT BENNETT, SAKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP: You make [inaudible] is made by committee.
LEVIN: —not by his lawyer trying to testify [inaudible].
BENNETT: The [inaudible] is made by a committee now.
BENNETT: How they drag a citizen, an American citizen, into this [inaudible].
NARRATOR: Even after leaving the hearing room, he still wasn’t finished. He held an impromptu press conference in the hall, claiming that the Senate committee had falsely claimed that Lowy had evaded a subpoena.
BENNETT: —false, and that is an irresponsible statement coming from the United States Senate.
REPORTER: Why wasn’t Mr. Lowy willing to make that statement under oath?
BENNETT: I have advised Mr. Lowy to assert his constitutional rights.
NARRATOR: Anyone who might be wondering if Lowy’s lawyer was attempting to pull press attention away from his client can ponder this moment that we caught inside the elevator.
BENNETT: This will be the story.
REPORTER: Sir, did you just say, "This will be the story?"
REPORTER: Your denial of—.
BENNETT: No, I didn’t—this will be that people will focus on this statement that’s false is what I’m talking about.
REPORTER: Uh-huh. So it definitely wasn’t an attempt to dodge a subpoena.
BENNETT: No, of course not.
REPORTER: Did you know a subpoena was coming?
BENNETT: After the fact, after he was out of the country. I’ve been in constant communication with them.
NARRATOR: Senator Levin seemed to realize that the lawyer’s theatrics were a public relations ploy.
LEVIN: He knows whether he was dodging a subpoena or not. So does the lawyer. My hunch is they were. But that’s not what I got into. I got in and stayed on the substance of what we’re trying to do, ’cause I think it’s so important, what we’re trying to do here, that I don’t want any distraction to take away from the importance of it.
NARRATOR: Senators Levin, Coleman, and Obama have sponsored a bill that would close a major loophole exploited by super-rich tax dodgers.
Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.