Can we trust Jack Lew?

FRIDAY, MAR 8, 2013 11:20 AM EST

Can we trust Jack Lew?

By all accounts, he's a dedicated public servant. Still, Lew has a history of parking money in the Cayman Islands

MICHAEL WINSHIP, BILLMOYERS.COM

·          

·          

·          

·          

TOPICS: BUSINESS NEWS, POLITICS NEWS

EnlargeJack Lew (Credit: AP Photo/J. Scott Applewhite)

This piece originally appeared on BillMoyers.com.

Along with its sandy beaches and quality snorkeling, the Cayman Islands’ reputation as an offshore tax haven for corporations, banks and hedge funds has become so well-known its financial institutions now are featured in travel brochures as yet another tourist attraction.

So as we traveled across the Caribbean this week – including a stretch paralleling the south coast of Cuba past Guantanamo Bay and the Sierra Maestra mountains, where Castro and his revolutionaries once hid out — we made a stop in George Town on Grand Cayman Island. A short walk along the shore took us to 335 South Church Street, a location made famous by Barack Obama a few years ago and more recently, Jack Lew, during his confirmation hearings to become Secretary of the Treasury.

There you’ll find Ugland House, a five-story office building that, according to a 2008 report from the US Government Accountability Office (GAO), houses 18,857 corporations, about half of which have billing addresses back in the States. It’s the business world equivalent of one of those circus cars that’s packed with more clowns than you thought possible.  In 2009, Obama said of Ugland House, “either this is the largest building in the world or the largest tax scam in the world.”

In Foreign Policy magazine in January 2012, Joshua Keating wrote that in reality Ugland is neither but, “… the building makes a mockery of the U.S. tax system.”

Keating noted that the Caymans have no direct taxes, it only costs some $600 to set up a company address there – while the company does business around the world — and that  “the Caymans also allow U.S. non-profit entities like pension funds and university endowments to invest in hedge funds without paying the ‘unrelated business income tax,’ which could be as high as 35 percent if those funds were based in the United States.” He also cited “concerns that the complexity and lack of transparency in Cayman Islands transactions can make tax evasion and money laundering easier, though,” he adds, “… the vast majority of Cayman Islands transactions are entirely legal.”  This is what the Internal Revenue Service euphemistically described to the GAO as “the Cayman Islands’ reputation for regulatory sophistication.”