‘Tax Planning — SCOTUS Style’ — A Guest Op-Ed By Martin Sheil
Retired IRS criminal investigator Martin Sheil’s latest op-ed on disgraced jurist Clarence Thomas, his wealthy benefactors, and the tangled webs they weave behind
‘Tax Planning — SCOTUS Style’
A guest op-ed by Martin Sheil
Who hasn’t heard by now the story of one percenter Harlan Crow’s financial grooming of Supreme Court Justice Clarence Thomas via gratis corporate jet travel and exotic yacht trips through the South Pacific?
Those luxury jet travel and nautical vacations went undisclosed on Judge Thomas’s original disclosure reports, which require mandatory reporting of receipt of valuable gifts… but let’s face it, that is already old news.
Fast coming up on the SCOTUS calendar is Moore v U.S., which will require SCOTUS scrutiny of the constitutionality of a Congressional legislative attempt to level the financial playing field for all taxpayers by applying a so-called Wealth Tax on unrealized gains of assets held by the rich overseas.
So what does that have to do with the price of eggs? Or more specifically, disclosing yacht trips?
Certainly, Harlan Crow maintains substantial investments outside of the U.S. which he would prefer to minimize any tax. And his Federalist Society and fellow Libertarian Leonard Leo who was involved in setting up some of the luxury trips Judge Thomas failed to disclose, also has an interest since a plank in the Libertarian philosophy is “taxation is theft.” So rich fellow friends and Libertarians share an interest in SCOTUS finding wealth taxes unconstitutional.
Doncha think?
Who else might have solicited Judge Thomas’s friendship via a yacht fishing trip around the Bahamas to have an opportunity to lobby the jurist on the unfairness of anyone taxing their wealth and compelling wealthy Americans to pay their fair share?
How about flying-under-the-radar rich guy Paul Anthony Novelly, who squired Clarence Thomas around the Bahamas in his yacht, which Thomas notably again did not report on his original or his amended disclosure report.
So what do we know about Novelly?
Not too much. But some of what we do know is — quite frankly — disturbing.
Novelly was one of the original investors and a Director in a Jeffrey Epstein offshore investment vehicle called Liquid Funding Ltd., which Epstein chaired from November 2001 until March 2007. Bear Stearns was the 40% owner of Liquid. It should be noted that Epstein was a one-time employee of Bear Stearns and Epstein made his bones on Wall Street as a self-promoting tax advisor to the wealthy.
The WSJ asked the question at one time as to just how does $100M in Liquid Fund equity support $20Bn in liabilities that Liquid garnered? Apparently, no one really cared, because by 2006 liabilities at Liquid Funding had grown to $67Bn.
Is the above disaster scenario bringing back bad memories anyone?
Well it should — 2008 arrived and the Fed bought out some $30Bn in toxic Bear Stearns’ assets and JP Morgan Chase bought out the rest of Bear Stearns’ mess before the end of 2008, which was almost the end of the U.S. financial system as we know it.
Before we chat about the multitude of Suspicious Activity Reports (SARs) filed by JP Morgan Chase with FinCEN on Jeffrey Epstein subsequent to his death of course, lets circle back to where we began — original investors in Liquid Funding Ltd Paul Anthony Novelly and Jeff Epstein and their predilection for offshore (away from the prying eyes of the IRS) investments.
Check out the ICIJ database graphics, which capture Liquid Funding, Novelly and Epstein in the following:
Please note how Liquid Funding is located in Bermuda. The bank for Liquid is located in Dublin, Ireland, and part of the Bear Stearns financial empire before it all came tumbling down.
Now let's click on Novelly:
Please note the American residential addresses and the multiple offshore businesses gong back decades.
These type of holdings are not unusual to the American financial elite. Wealth held offshore accruing in value and accessible only to an enabled few and away from the Tax Folks are a stable constant to American oligarchs. Congress has only recently attempted some small legislative maneuvers to tax the wealthy as the financial elite pay big bucks to their financial enablers and facilitators like Epstein, to avoid the tax man's reach.
One tax avoidance tool created by American wealth facilitators is something called GRATS and Paul Anthony Novelly is all about GRATS. Novelly has notably battled the IRS in the past with regard to what ProPublica referred to as an "Abusive tax avoidance scheme." That battle left some scars apparently and Novelly turned to GRATs.
I have teased you enough so what's a GRAT? Grantor Retained Annuity Trust. I will let you peruse the ProPublica exposé on GRATs, which it is claimed is used by more than half of America's 100 richest people to avoid Estate taxes.
Novelly is not one of America's 100 richest people, but he is working on it and he has the yacht and the GRATs to prove it. If we take a look at his current offshore holdings - it is full of GRATS or GRAT full.
When examining the first graphic contained in the above link the reader will note a host of AIC Limited entities related to Novelly. This is an old time offshore company headed by Novelly that Novelly slowly over time turned into the basis for most of the GRATs now associated with family members. Should readers click on The Novelly GRAT Trust graphic it will be quickly noted that AIC is associated with the Novelly Grat Trust as a shareholder and this GRAT becomes a vehicle to pass funds over to family members from AIC and do so tax free.
Further, Novelly GRAT vehicles to transfer wealth tax free include:
Chandra Novelly Nieman GRAT Trust
I think the Novelly Dynasty Trust is my favorite since it is the most transparently named given the motive of the Trust is included in the name. Please note the same Missouri home address of Paul Anthony Novelly included on each of the above GRATs located in Bermuda and the fact that AIC Limited is consistently included in each of the Trusts listed.
Oh my!
So given Mr. Novelly's past battles with the IRS over what has been termed his Abusive Tax Avoidance maneuvers, his relationship with noted tax advisor Jeffrey Epstein, his aggressive use of GRATs to avoid Estate taxes like over half of the 100 richest American taxpayers — when Novelly took Justice Thomas fishing for free on one of his two yacht's, a 126-foot luxury craft named Le Montrachet — after a fine French wine - anyone think the topic of tax planning came up for discussion?
Novelly could school Thomas on how to avoid Estate tax and Thomas could probably school Novelly on how to avoid Gift taxes on what ProPublica valued as a $60K value fishing trip yacht ride since this wasn't Thomas's first rodeo or gifted yacht vacay…
If Moore v U.S. came up for discussion at all, between Thomas and any corporate exec yacht attendees, I am quite certain it was noted on someone's diary - Tax Planning SCOTUS style!—Martin Sheil
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Heidi note: As I read Marty’s words, all I can think is this SCOTUS — with its extremist right-wing activist plants — is simply not fit for purpose, and we must address that fact sooner rather than later.
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