Post by jannikki on Aug 2, 2006 18:24:33 GMT -4
US Senate panel grills offshore tax shelter users
Tue Aug 1, 2006 8:22pm ET
By Kevin Drawbaugh
WASHINGTON, Aug 1 (Reuters) - Two wealthy Americans who spent millions of dollars in fees on offshore tax shelters now under government scrutiny told a U.S. Senate panel on Tuesday that advisers assured them the shelters were legitimate.
At a hearing before the Senate Permanent Subcommittee on Investigations, the chief executive of the firm that sold the shelters defended them and criticized a subcommittee staff report about them as "unfair, one-sided and inaccurate."
Michigan Sen. Carl Levin, senior Democrat on the subcommittee, said the report "blows the lid off tax haven abuses that make use of sham trusts, shell corporations and fake economic transactions to help people dodge taxes."
"These are as phony as a $3 bill," said Democratic Sen. Carl Levin, of Michigan.
In the latest foray by congressional investigators into the murky world of offshore tax avoidance, the subcommittee heard testimony from New York health care heir Robert Wood Johnson IV and from Hollywood media mogul Haim Saban.
Both men said they purchased a tax shelter known as the Personally Optimized Investment Transaction, or POINT, from Quellos Group LLC, a Seattle-based investment firm.
Saban said he paid fees of "close to $50 million," while Johnson said his fees were near $5 million. Both said they expected the shelter to help them defer federal taxes.
When presented with the POINT deal in 2001, Saban said he relied on a tax adviser as to its propriety. "I just said ... is it kosher and can we get a reputable firm to say so?" Saban told the subcommittee, adding that he did get that assurance.
Johnson, owner of the U.S. football team the New York Jets, said: "I was assured by my advisers that this transaction was legal."
Since then, Johnson said he has settled with the Internal Revenue Service over the shelter and agreed to pay back taxes. Saban, who made a fortune in the television business, said he is also making arrangements with the IRS to pay back taxes.
The subcommittee report said offshore tax haven abuse by individuals costs the U.S. Treasury between $40 billion and $70 billion per year in taxes owed but not collected.
Quellos chief executive Jeffrey Greenstein said his firm cooperated with the subcommittee staff for months. Their report, he said, "is unfair, one-sided and inaccurate ... the report seems to have glossed over or omitted several basic facts."
He said six POINT transactions were done five to six years ago by a Quellos unit that is now dormant. The deals were done with consultation and approval from top tax lawyers, he said.
"From the outset, we told the government about POINT by registering it with the IRS," Greenstein said.
Greenstein defended the tax deferral strategy and said Quellos clients "clearly understood the tax risk associated with the transactions and in consultation with the lawyers were comfortable in pursuing that."
But members of the committee were skeptical. Republican Sen. Susan Collins, of Maine, said the IRS had concluded the POINT transactions were not legitimate tax shelters and questioned how Greenstein could continue to defend them.
"I don't know how you can sit here today and say that you still view the POINT strategy as a legitimate one when it has been rejected by the IRS," Collins said.
IRS Commissioner Mark Everson told the subcommittee at the hearing that the tax collection agency has a number of offshore tax shelter investigations either completed or under way.
"Offshore tax shelters are robbing the American treasury of billions of dollars each year," he said in written testimony.
The subcommittee also questioned Texas businessman Michael French about his involvement with tax shelter strategies used by Sam and Charles Wyly, two rich Texan brothers.
The subcommittee said the Wylys from 1992 to 2005 moved over 17 million stock options and warrants worth about $190 million into a web of offshore trusts and shell companies, using annuity payment deals to avoid taxes on the options.
French, former chairman of life reinsurer Scottish Re Group Ltd. (SCT.N: Quote, Profile, Research), said he was involved with the Wylys from 1992 to 2000 and was a "protector" of Wyly trusts in the Isle of Man.
In a statement on Monday, William Brewer, a lawyer for the Wylys, said his clients relied on experts for advice and "continue to believe that their actions were entirely proper under law."
yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=urn:newsml:reuters.com:20060802:MTFH59426_2006-08-02_00-22-24_N01438906&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=HybArt-C1-ArticlePage3
Tue Aug 1, 2006 8:22pm ET
By Kevin Drawbaugh
WASHINGTON, Aug 1 (Reuters) - Two wealthy Americans who spent millions of dollars in fees on offshore tax shelters now under government scrutiny told a U.S. Senate panel on Tuesday that advisers assured them the shelters were legitimate.
At a hearing before the Senate Permanent Subcommittee on Investigations, the chief executive of the firm that sold the shelters defended them and criticized a subcommittee staff report about them as "unfair, one-sided and inaccurate."
Michigan Sen. Carl Levin, senior Democrat on the subcommittee, said the report "blows the lid off tax haven abuses that make use of sham trusts, shell corporations and fake economic transactions to help people dodge taxes."
"These are as phony as a $3 bill," said Democratic Sen. Carl Levin, of Michigan.
In the latest foray by congressional investigators into the murky world of offshore tax avoidance, the subcommittee heard testimony from New York health care heir Robert Wood Johnson IV and from Hollywood media mogul Haim Saban.
Both men said they purchased a tax shelter known as the Personally Optimized Investment Transaction, or POINT, from Quellos Group LLC, a Seattle-based investment firm.
Saban said he paid fees of "close to $50 million," while Johnson said his fees were near $5 million. Both said they expected the shelter to help them defer federal taxes.
When presented with the POINT deal in 2001, Saban said he relied on a tax adviser as to its propriety. "I just said ... is it kosher and can we get a reputable firm to say so?" Saban told the subcommittee, adding that he did get that assurance.
Johnson, owner of the U.S. football team the New York Jets, said: "I was assured by my advisers that this transaction was legal."
Since then, Johnson said he has settled with the Internal Revenue Service over the shelter and agreed to pay back taxes. Saban, who made a fortune in the television business, said he is also making arrangements with the IRS to pay back taxes.
The subcommittee report said offshore tax haven abuse by individuals costs the U.S. Treasury between $40 billion and $70 billion per year in taxes owed but not collected.
Quellos chief executive Jeffrey Greenstein said his firm cooperated with the subcommittee staff for months. Their report, he said, "is unfair, one-sided and inaccurate ... the report seems to have glossed over or omitted several basic facts."
He said six POINT transactions were done five to six years ago by a Quellos unit that is now dormant. The deals were done with consultation and approval from top tax lawyers, he said.
"From the outset, we told the government about POINT by registering it with the IRS," Greenstein said.
Greenstein defended the tax deferral strategy and said Quellos clients "clearly understood the tax risk associated with the transactions and in consultation with the lawyers were comfortable in pursuing that."
But members of the committee were skeptical. Republican Sen. Susan Collins, of Maine, said the IRS had concluded the POINT transactions were not legitimate tax shelters and questioned how Greenstein could continue to defend them.
"I don't know how you can sit here today and say that you still view the POINT strategy as a legitimate one when it has been rejected by the IRS," Collins said.
IRS Commissioner Mark Everson told the subcommittee at the hearing that the tax collection agency has a number of offshore tax shelter investigations either completed or under way.
"Offshore tax shelters are robbing the American treasury of billions of dollars each year," he said in written testimony.
The subcommittee also questioned Texas businessman Michael French about his involvement with tax shelter strategies used by Sam and Charles Wyly, two rich Texan brothers.
The subcommittee said the Wylys from 1992 to 2005 moved over 17 million stock options and warrants worth about $190 million into a web of offshore trusts and shell companies, using annuity payment deals to avoid taxes on the options.
French, former chairman of life reinsurer Scottish Re Group Ltd. (SCT.N: Quote, Profile, Research), said he was involved with the Wylys from 1992 to 2000 and was a "protector" of Wyly trusts in the Isle of Man.
In a statement on Monday, William Brewer, a lawyer for the Wylys, said his clients relied on experts for advice and "continue to believe that their actions were entirely proper under law."
yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=urn:newsml:reuters.com:20060802:MTFH59426_2006-08-02_00-22-24_N01438906&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=HybArt-C1-ArticlePage3