US probes Isle of Man scheme used by Bush donors

 

By Jason Nisse05 June 2005The Manhattan District Attorney, the Securities and Exchange Commission (SEC) and the US InternalRevenue Service (IRS) are jointly probing a tax-shelter plan run out of the Isle of Man.The scheme, devised by one of America's biggest banks and used by two billionaire donors to GeorgeBush's election campaign among others, is being probed for possible breaches of securities andanti-money-laundering rules.The investigating bodies believed that up to $100m (£55m) of tax was saved through one scheme alone,and as much as $700m in taxes may have been avoided over an 11-year period. The scheme involvedexecutives and corporations handing over stock to trusts that they declared they neither owned norcontrolled. When the options were cashed in, no tax was payable. However, the IRS changed the rulesin 2003 to say that tax should be paid anyway.In the previous 11 years, tax schemes were marketed by Bank of America to at least 42 corporations.Earlier this year the Manhattan District Attorney, Robert Morgenthau, started probing allegationsthat some of these trusts were controlled by the people passing on the stock options. Both the IRSand the SEC have now joined in this probe.They have contacted the regulators on the Isle of Man asking for information on one particularscheme used by two Texan billionaire brothers, Charles and Sam Wyly.The duo, who made their money in computing and retailing, not only gave over $200,000 to PresidentBush's re-election campaigns, but also bankrolled TV adverts attacking his rivals, John Kerry andSenator John McCain.Sam Wyly describes himself as "the entrepreneur's entrepreneur" and came to prominence when heunsuccessfully tried to oust the board of Computer Associates in 2001 - only a year after thebrothers sold their Sterling Software business to the group for $4bn.The Isle of Man authorities have passed documents to US investigators relating to 20 differententities linked to the Wyly brothers that are registered in the Irish Sea tax haven. One, DevotionLtd, is a holding company with two directors and no employees; it is run, according to SEC filings,from a remote farm on the island. Another director, who lives in a terraced house, signed a transferdocument for $25m. At one point, Isle of Man entities owned 20 per cent of the shares in SterlingSoftware, as well as 12.8 per cent of another Wyly group, Michaels Stores, and 42 per cent of athird, Green Mountain Energy.The Isle of Man authorities have said they are co-operating fully with the US investigations, as hasBank of America. A spokesman for the Wyly brothers' lawyers said "they felt they only did what wasappropriate".The US authorities said they could not comment on ongoing investigations.©2005 Independent News & Media (UK) Ltd.http://news.independent.co.uk/business/news/story.jsp?story=644159