REPORT: Loeffler Marketed An Offshore Tax Scam For Wall Street During Great Recession

Loeffler Firm’s Arrangement Allowed Big Banks to Dodge U.S. Taxes at the Cayman Islands Ugland House  — “One Of The Most Egregious Examples Of An Offshore Tax Dodge In The World”

A new report this weekend detailed how unelected Senator and political mega-donor Kelly Loeffler marketed an offshore tax shelter at Ugland House, a location infamous in the Cayman Islands for being an “offshore tax dodge.” Just months after the 2008 market crash cratered America’s economy, Loeffler’s company Intercontinental Exchange (ICE) “created a way for the world’s biggest banks to keep trading in the very financial instruments that contributed to the crisis in the first place.” As ICE’s top marketing officer, Loeffler played a key role and “helped package and sell the product.”

Ugland House is known as “one of the most notorious locations for offshore tax shelters,” and ICE’s Cayman Islands arrangement allowed the world’s biggest banks to dodge U.S. federal taxes during the Great Recession. At a time when Georgians “were reeling amid generational global economic turmoil,” Loeffler and ICE “created a system that rewarded the people whose recklessness had destroyed the economy only months earlier.” 

“Kelly Loeffler clearly thinks she does not have to play by the same set of rules as everyone else,” said DSCC spokesperson Helen Kalla. “While millions of hardworking Georgia taxpayers were suffering from a historic economic crash, Loeffler was focused on helping the very culprits of the Great Recession avoid responsibility. It’s more of the same troubling pattern from a D.C. politician who’s always looking out for herself instead of Georgia families.”

IN CASE YOU MISSED IT

Salon: Kelly Loeffler marketed derivatives during Great Recession at world’s most notorious tax haven
By Roger Sollenberger
November 21, 2020

Key Points:

• Months after the Great Recession brought the global economy to its knees, a financial management company called International Exchange (ICE) created a way for the world’s biggest banks to keep trading in the very financial instruments that contributed to the crisis in the first place.

• To help those clients duck U.S. tax laws, ICE created an offshore entity in the Cayman Islands, and registered it in a building known as Ugland House — one of the most notorious locations for offshore tax shelters.

• Salon reported in September that Sen. Kelly Loeffler, the ultra-wealthy unelected Georgia senator who faces a heated runoff this January, helped establish and market that tax dodge and give the banks a new lease on derivatives trading. In 2009, Loeffler was the top communications and marketing officer at ICE, and had been married to the company’s founder and CEO, Jeffrey Sprecher, for several years. They bought a $10.5 million mansion that year.

• Though ICE pushes back against the notion that its clearinghouse allows companies to avoid U.S. taxation, the new disclosure of its use of Ugland House — for years pilloried and parodied as one of the most egregious examples of an offshore tax dodge in the world — sharpens questions about the company’s true intent.

• It also raises questions about the activities of Sprecher and Loeffler, at a time when Americans were reeling amid generational global economic turmoil.

• But just a few months after markets crashed that September, ICE, under Sprecher’s leadership, set up an offshore CDS clearinghouse for the largest banks in the U.S., as well as foreign banks such as Deutsche Bank, UBS and Credit Suisse. The idea was to add a layer of protection to the trades.

• Unlike many other countries, including the European Union, the United States taxes income earned overseas — at a rate of 35%. If that money gets reinvested abroad, however, the tax is deferred. In other words, if American companies put profits from their foreign subsidiaries in offshore holding companies, they can access it tax-free.

• Those deferrals add up. In 2014, the Joint Committee on Taxation projected the revenue loss from deferrals at $83.5 billion, and the nonpartisan Economic Policy Institute estimated in 2017 that deferred taxes on offshore profits will cost the U.S. $1.3 trillion over the next decade, or about $126 billion a year.

• Former President Barack Obama remarked of Ugland House in 2008, “Either this is the largest building in the world or the largest tax scam in the world.”

• The press has frequently profiled Ugland House. In 2013 the Associated Press called it “a notorious tax shelter.” Foreign Policy magazine said in 2012 that “the building makes a mockery of the U.S. tax system.” The Economist wrote that it was “a symbol of all that is wrong with offshore financial centers.” In 2009, the year ICE registered its Cayman clearinghouse, Rachel Maddow said that Ugland House was one of the “go-to destinations for U.S. companies to set up fake headquarters so they can avoid paying U.S. taxes on their profits.”

• The ICE Cayman Islands arrangement incentivized the largest American financial institutions to execute CDS trades around the world by allowing them to dodge U.S. taxes on their profits.

• Sprecher then created a system that rewarded the people whose recklessness had destroyed the economy only months earlier. He found a way to give new life to their CDS trades, which had cost millions of Americans their wealth, homes and livelihood. And Loeffler, his wife and ICE’s top marketing officer, helped package and sell the product.

• More recently, Loeffler and Sprecher appear to have tapped another tax loophole for themselves, in the form of a provision in President Trump’s 2017 tax bill that turns private jets into flying tax shelters.

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