Mayor Bloomberg's offshore millions

It's the New York City Mayor this time: Mayor Michael Bloomberg. Take a look at this excellent story by the New York Observer. The whole article is worth reading; we offer just a few highlights here.

"I’ve said this before, but the first rule of taxation is, you can’t tax too much those that can move,” Mr. Bloomberg intoned on a radio show late in the crisis. “You know, we’re yelling and screaming about the rich. We want the rich from around this county to move here. We love the rich people.”

And yet the richest New Yorker of them all—Mr. Bloomberg himself—had been ignoring his own advice."

What is the issue?

"By the end of 2008, the Bloomberg Family Foundation had transferred almost $300 million into various offshore destinations—some of them notorious tax-dodge hideouts. The Caymans and Cyprus. Bermuda and Brazil. Even Mauritius, a speck of an island in the Indian Ocean, off the coast of Madagascar. Other investments were spread around disparate locations, from Japan to Luxembourg to Romania."

Romania isn't on our list of secrecy jurisdictions, but the others all are. Cyprus, a particularly mucky bolt-hole (well, it's more of a conduit) for looted Russian billions; the Cayman Islands, one of the epicentres of the global economic crisis (or should we say the global economic fraud?) and Luxembourg, apparently the very special friend of North Korea's Kim Jong-Il.

This is a little reminiscent of (but far, far muckier-looking than) the recently publicised activities of a former British Prime Minister (who, it also has to be said, wasn't the first.)

Bloomberg's offshore games have attracted an interesting cast of characters, as the NY Observer notes:

"Several weeks ago, the foundation named a new 19-person board that reads like a who’s who of national politics and finance: Former Florida governor Jeb Bush, former Georgia senator Sam Nunn and former Treasury secretary Hank Paulson are among the members."

And now we have the former Manhattan crime-fighter in chief, Robert Morgenthau (who just joined our friends at GFI) revealing a related problem:

"Mr. Morgenthau said he’d spoken generally about offshore loopholes to four U.S. secretaries of the Treasury, twice to the commissioner of the general revenue and, as it happens, to Mr. Bloomberg himself. The mayor seemed uninterested in the offshore issue, he said. “I’ve talked to the mayor about it, and the budget director,” Mr. Morgenthau said. “We did get help from the State Division of Taxation and Finance. But nothing from the city.”

This is one of the most difficult problems with the offshore system. It is used most extensively by the world's wealthiest and most powerful (not to mention big media corporations which use and laud it) - making this an especially tricky issue to tackle.

A last word to someone in the non-governmental sector.

“I’ve never seen anything like it. It’s about as opaque set of investments as you can find,” said Rick Cohen, who covers foundations and charities for Nonprofit Quarterly, and who agreed to review the foundation’s tax return. “This involves extensive investments in hedge funds offshore, where the motivation and purpose is not discernible, so you can’t tell what kind of activity it is or who is going to benefit from the investments.”