The Guardian
The Manhattan District Attorney, the Securities and Exchange Commission (SEC) and the US Internal Revenue 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 George Bush's election campaign among others, is being probed for possible breaches of securities and anti-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 involved executives and corporations handing over stock to trusts that they declared they neither owned nor controlled. When the options were cashed in, no tax was payable. However, the IRS changed the rules in 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 allegations that some of these trusts were controlled by the people passing on the stock options. Both the IRS and the SEC have now joined in this probe. They have contacted the regulators on the Isle of Man asking for information on one particular scheme 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 President Bush's re-election campaigns, but also bankrolled TV adverts attacking his rivals, John Kerry and Senator John McCain. Sam Wyly describes himself as "the entrepreneur's entrepreneur" and came to prominence when he unsuccessfully tried to oust the board of Computer Associates in 2001 - only a year after the brothers sold their Sterling Software business to the group for $4bn.
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