[Marxism] How Business Titans, Pop Stars and Royals Hide Their Wealth

Louis Proyect lnp3 at panix.com
Wed Nov 8 08:52:04 MST 2017

NY Times, Nov. 8 2017
How Business Titans, Pop Stars and Royals Hide Their Wealth

James H. Simons, a reserved mathematician and hedge fund operator from 
Boston now approaching 80, is a big Democratic donor. Warren A. 
Stephens, a 60-year-old golf enthusiast once called the king of Little 
Rock, Ark., inherited a family investment bank and became a booster of 
conservative Republicans.

But Mr. Simons and Mr. Stephens are both billionaires who have used the 
services of offshore finance — the trusts and shell companies that the 
world’s wealthiest people use to park their money beyond the reach of 
tax collectors and out of the public eye.

Mr. Simons was the main beneficiary of a private trust, never previously 
described, that was one of the largest in the world. In response to 
recent questions about the trust, Mr. Simons said that he had 
transferred his share to a Bermuda-registered charitable foundation.

Mr. Stephens used an opaque holding company to own an approximately 40 
percent stake in a loan business accused by the federal Consumer 
Financial Protection Bureau of cheating working-class and poor 
Americans. While earning millions from the investment, Mr. Stephens 
helped finance a political onslaught against the bureau, never 
mentioning his personal connection to the fight.

The details of the two men’s hidden wealth come from the files of 
Appleby, founded in Bermuda more than a century ago and considered one 
of the world’s top offshore law firms. A collection of 6.8 million 
Appleby documents, obtained by the German newspaper Süddeutsche Zeitung 
and shared with media organizations through the International Consortium 
of Investigative Journalists, offers an inside look at the firm’s 
services and customers.

 From Utah, Secretive Help for a Russian Oligarch and His JetNOV. 6, 2017
How Business Titans, Pop Stars and Royals Hide Their WealthNOV. 7, 2017
Appleby operates in a rarefied universe of ultra-high-net-worth 
individuals, where yachts and private jets are preferred transport and 
mansions sit empty because their owner has several others. Some of 
Appleby’s customers are also P.E.P.’s — politically exposed persons — 
for whom avoiding unwanted attention is a crucial goal.

“The Right People. The Right Places,” reads the slogan on Appleby’s 

What offshore services offer to a diverse international elite is secrecy 
and discretion, along with the opportunity to minimize or defer taxes. 
Appleby appears to be more scrupulous than another offshore firm, 
Panama-based Mossack Fonseca, about shunning overtly corrupt and 
criminal clients, based on a comparison of the Appleby files with the 
leaked Panama Papers, which drew global coverage last year.

Appleby board minutes contain lists of “declined business,” including 
government officials suspected of corruption and millionaires linked to 
organized crime.

Still, some dubious clients slip through. A PowerPoint slide used by 
Appleby’s head of compliance discusses terrorist financing and refers to 
funds that were “definitely tainted.”

“Some of the crap we accept is amazing totally amazing,” say notes to a 
slide about sizing up potential customers.

Even with some potential customers turned away, business has rarely been 
better. The ranks of the superrich are growing fast, fueled by 
legitimate fortunes in finance, trade and technology — as well as drugs, 
embezzlement and bribery. And the offshore finance industry has grown 
alongside its customers’ accounts.

Big Names, Hidden Fortunes

The global number of wealthy people with more than $50 million in assets 
is about 140,900, half of them in the United States, according to a 
recent report from Credit Suisse.

A 2015 Appleby publication written for such clients, “Wealth Structuring 
20:20,” features photos of a handsome couple and their children hurrying 
to board a sleek personal jet. “Wealth seeks out safe harbours,” one 
article is titled. Another advises on “Motivating children of means.”

In emails, Appleby employees fret about how to pamper well-heeled clients.

“Our fees are around 40k and they are the sort of people who I think 
would appreciate popping a bottle on closing at Appleby this afternoon,” 
a lawyer in the firm’s Grand Cayman office wrote in 2008 of a particular 
deal. “Do you have the key to the booze vault? It would need to be 
decent stuff as they’ll know their champagne.”

The legal boilerplate in the leaked documents can be eye-glazing until, 
as in a 2015 financing agreement, you discover that the deal is for a 
spectacular $50 million yacht, the Galactica Star, that Jay-Z and 
Beyoncé once borrowed for a vacation.

Appleby had 31,000 American clients, the most common nationality by far. 
The firm’s files include a who’s who of the nation’s wealthiest 
citizens: prominent Democrats like George Soros, the financier and 
philanthropist, and Penny Pritzker, commerce secretary in the Obama 
administration; and high-profile Republican supporters of President 
Trump, including Sheldon Adelson, the casino magnate, and Carl Icahn, 
the private equity investor.

Queen Elizabeth II, according to Appleby documents, used a Cayman 
Islands fund to invest in a company that owned a share of a British 
rent-to-own company widely criticized for financing the sale of 
household items at interest rates as high as 99.9 percent. The leaked 
files reveal Madonna’s shares in a medical supplies firm, Bono’s 
investment in a Lithuanian shopping center and the Microsoft co-founder 
Paul G. Allen’s yacht and submarines.

Around the globe, the documents disclose the holdings of rulers and 
politicians. The list includes three former prime ministers of Canada, 
the queen dowager of Jordan and at least five members of the Qatari 
ruling family.

Another offshore firm, the family-owned Asiaciti of Singapore, whose 
files were obtained by Süddeutsche Zeitung, advertises that it helps 
clients “preserve wealth from the ravages of litigation,” political 
tumult and divorce. Its American customers include physicians, 
professional poker players and a Colorado alfalfa farmer. Asiaciti set 
up trusts in the Cook Islands for Kevin Trudeau, an infomercial pitchman 
in the United States with a trail of legal troubles who sold millions of 
copies of such self-help books as “The Weight-Loss Cure ‘They’ Don’t 
Want You to Know About.”

Serving a Growing Elite

Founded in 1898 by a British officer, Maj. Reginald Appleby — an avowed 
opponent of taxation — Appleby now has offices in nearly all the world’s 
tax havens: Bermuda, the British Virgin Islands, the Cayman Islands, 
Guernsey, Hong Kong, the Isle of Man, Jersey, Mauritius, the Seychelles 
and Shanghai.

Such locations offer low or zero tax rates, companies consisting only of 
a postbox, and accountants and lawyers skilled at hiding money.

In a statement, Appleby said the firm had done nothing wrong. “We are an 
offshore law firm who advises clients on legitimate and lawful ways to 
conduct their business,” the statement said. “We do not tolerate illegal 

In recent years, billionaires’ fortunes have grown by an average of 7 to 
8 percent a year, while total wealth has grown at just 3 percent 
annually, said Gabriel Zucman, an economist at the University of 
California, Berkeley. Globalization, deregulation and declining taxes 
have all been factors.

“The other important thing is the rise of the global, cross-border 
wealth management industry,” including Appleby, Mr. Zucman said.

The richest 1 percent of the world’s population now owns more than half 
of global wealth, and the top 10 percent owns about 90 percent.

“The data suggests that most of the gains at the top are coming at the 
expense of the rest of the population,” Mr. Zucman said. That conclusion 
is shared by many other scholars.

The wealthy use the power that accompanies their money, he said, to 
exert political influence, reduce taxes and regulation — and hire 
experts to keep their money safe.

Mr. Simons, the hedge fund billionaire, was a young math professor in 
1974 when a Colombian friend established a trust in Bermuda on his 
behalf using a gift of $100,000 to him, his parents and his descendants. 
American tax authorities would consider the Lord Jim Trust, as it was 
named, a foreign entity, limiting the visibility of the Internal Revenue 
Service into its holdings and its ability to tax its funds until it made 
distributions to the Simons family. (Appleby did not create the trust 
but later provided legal advice.)

In 1982, Mr. Simons founded Renaissance Technologies, a New York-based 
hedge fund whose secret trading algorithms soon generated rates of 
return that became storied on Wall Street. Over the next three decades, 
Renaissance became one of the most lucrative hedge funds on the planet, 
making Mr. Simons a billionaire many times over.

Mr. Simons, in response to questions, said that when he and his family 
received distributions from the Bermuda trust, they were reported to the 
I.R.S. But Mr. Simons said he and his relatives took out only limited 
amounts, mainly in the early years of the trust, whose main investments 
were Renaissance funds that enjoyed spectacular returns.

As Renaissance’s investments grew, so did its footprint in American 
life. Mr. Simons became one of the country’s top political donors. 
During the last election cycle, he was the sixth-largest contributor to 
political candidates and causes, giving more than $26 million, nearly 
all to Democrats, including $11 million to Priorities USA Action, a 
political action committee supporting Hillary Clinton.

Mr. Simons’s business partner and Renaissance’s departing co-chief 
executive, Robert Mercer, rose to the highest ranks of Republican donors 
and became an influential backer of Donald J. Trump’s presidential 
campaign, contributing more than $3 million. A major funder of Breitbart 
News, Mr. Mercer influenced critical decisions of Mr. Trump’s candidacy, 
such as the hiring of Stephen K. Bannon, then Breitbart’s executive 
chairman, as the campaign’s chief executive. Mr. Mercer has also been an 
Appleby client.

In 2014, a Senate committee accused Renaissance and another hedge fund 
of using a complex accounting maneuver to improperly avoid taxes. 
Renaissance is still fighting the resulting tax bill, estimated at $6.8 

As the tax dispute has proceeded, Mr. Simons is now estimated to be the 
25th-richest person in the United States, with a net worth estimated at 
$18.5 billion, according to the Forbes list of richest Americans. But 
such rankings, important yardsticks in the study of global development 
and inequality, often rely on incomplete public data.

Mr. Simons’s Lord Jim Trust offers one example. Though the trust has 
been listed in various filings, a 2010 document in Appleby’s files 
provides details for the first time. If it had been fully accounted for 
in calculating his net worth, he would have vaulted even higher in the 
ranks of the superrich.

Yet factoring the trust into his wealth isn’t so straightforward, 
because Mr. Simons says his share is now in an offshore charity, Simons 
Foundation International. In 2010, he and his wife, Marilyn, signed the 
“giving pledge” established by Bill Gates and Warren Buffett, vowing to 
give “the great majority” of their wealth to philanthropic purposes.

A person familiar with Simons Foundation International, who was not 
authorized to speak on the record about it, said it had $8 billion in 
assets. That is more than double the approximately $3 billion in Mr. 
Simons’s New York-based Simons Foundation, whose mission of funding 
scientific research and education is shared by the Bermuda foundation.

“So far it has not been very active,” Mr. Simons wrote in a response to 
questions from The Times. “In future years, as my income decreases and 
ultimately ceases, SFI will play an increasingly larger role in funding.”

But the Simons Foundation International operates in obscurity. Though it 
would easily rank in the top 10 foundations in the United States, it has 
no website.

Mr. Simons said that keeping the foundation in Bermuda made it easier to 
give to charities that weren’t American and also avoided the minimal 
annual giving requirements that foundations must follow in the United 

Ray D. Madoff, a professor of law at Boston College who focuses on 
philanthropies and taxes, said that in terms of oversight and 
transparency, “the first sin was whatever it was that allowed however 
many billions of dollars of a U.S. citizen to be growing tax free in 

But Michael G. Pfeifer, a Washington lawyer who specializes in estate 
planning for wealthy people and helped write the tax rules governing 
overseas trusts, said that Mr. Simons merely followed the rules.

“I would have told the guy, ‘You’ve got this money offshore — just leave 
it offshore,’” Mr. Pfeifer said. “And he did.”

If Mr. Simons’s motive for setting up offshore entities is complex, Mr. 
Stephens’s seems more obvious.

In late 2011, representatives of Mr. Stephens and his business partner, 
James R. Carnes, asked Appleby to incorporate two offshore companies as 
part of a plan to help Native American tribes set up lending operations, 
a common business tactic because such ventures can claim tribal immunity 
against outside legal challenges.

The new venture’s parent company, Hayfield Investment Partners, was 
incorporated in Delaware — considered a tax haven like a half-dozen 
other American states, underscoring that secrecy and tax advantages are 
not limited to palm-dotted tropical islands. Hayfield already had a 
separate subsidiary called Integrity Advance, an online payday loan 
company whose lending practices were coming into the cross hairs of 
regulators across the United States.

Documents in Appleby’s files show that Mr. Stephens and his funds owned 
40 percent of Hayfield, which received additional investments from 
executives of Stephens Inc., the family investment bank, and 
acquaintances like the golf star Phil Mickelson, who contributed $12,000.

It did not take long for Integrity Advance to generate complaints from 
borrowers and regulators. People short of cash who took out small loans 
would later see large withdrawals from their bank accounts for interest 
and services fees that often far exceeded the amount they originally 

By November 2012, Integrity Advance had received cease-and-desist 
letters from state regulators in Connecticut, Kentucky, Illinois, 
Mississippi and South Carolina. In May 2013, a Minnesota district court 
ordered the company to pay nearly $8 million in civil penalties and 
victim restitution, saying that the firm had targeted financially 
vulnerable citizens with interest rates as high as 1,369 percent.

One borrower, Nils Paul Warren, a broadcast audio technician for Nascar 
in Orlando, complained to Florida regulators that he’d had to shell out 
more than $1,300 to repay a short-term $500 online loan he got from 
Integrity Advance in 2009 — a sum far greater than what he had expected.

“I think the bulk of their clientele are people who are a paycheck away 
from being homeless,” Mr. Warren said in an interview.

As complaints mounted, Mr. Stephens and Mr. Carnes sold part of 
Integrity Advance to a pawnshop-style loan company, Ezcorp. Eventually 
the Consumer Financial Protection Bureau accused Integrity Advance of 
“false and deceptive” tactics, and last year, an administrative law 
judge recommended to the head of the bureau that the company and Mr. 
Carnes, its chief executive, pay more than $51 million in fines and 
restitution to borrowers. Integrity Advance and Mr. Carnes are appealing 
the ruling.

In its legal action against Integrity Advance, the bureau emphasized Mr. 
Carnes’s 52 percent ownership of Hayfield, the parent company. Neither 
regulators nor the news media has ever mentioned Mr. Stephens’s sizable 
stake. (Mr. Stephens declined to comment.)

If he kept quiet about his role in the embattled payday loan business, 
he showed no similar reticence in attacking the consumer bureau. In June 
2013, he told The Wall Street Journal that the bureau bore some blame 
for lagging business growth. “The stories we hear about that are pretty 
scary,” the billionaire said.

During last year’s campaign, Mr. Stephens contributed $3 million to Club 
for Growth, a conservative political action committee that has pushed 
Congress to strip the bureau’s enforcement powers.

Along with helping bankroll such Washington battles, Mr. Stephens has 
recently used his investment bank, Stephens Inc., to start an online 
video series called “This Is Capitalism” to improve millennials’ opinion 
of free-market economics.

In his introduction, Mr. Stephens wrote that he hoped the series would 
counter the notion that the free market is “a system that enriches a few 
at the expense of the many.”

Spencer Woodman is a reporter for the International Consortium of 
Investigative Journalists. Will Fitzgibbon of the International 
Consortium of Investigative Journalists contributed reporting.

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