President Trump And The Dangers Of Shell Companies

After Trump won the Republican nomination, his companies saw a massive spike in income from shell companies. This secrecy leaves him susceptible to unseen foreign influence.
Donald Trump arrives to speak during a campaign rally, Monday, Nov. 7, 2016, in Manchester, N.H. From left, Eric Trump, Vanessa Trump, Donald Trump Jr., Mike Pence, Karen Pence, Trump, Ivanka Trump, Jared Kushner, and Tiffany Trump. (AP Photo/ Evan Vucci)

Donald Trump arrives to speak during a campaign rally, Monday, Nov. 7, 2016, in Manchester, N.H. From left, Eric Trump, Vanessa Trump, Donald Trump Jr., Mike Pence, Karen Pence, Trump, Ivanka Trump, Jared Kushner, and Tiffany Trump. (AP Photo/ Evan Vucci)

  • Trump allowed his name to be used in transactions that appear 3,450 times in the Paradise Papers.
  • Trump Organization’s dealings with secret corporations increased after Trump’s election.
  • Why the need for such increasing secrecy?

One month before his election victory in 2016, Trump declared to his supporters, “It’s a global power structure that is responsible for the economic decisions that have robbed our working class, stripped our country of its wealth, and put that money into the pockets of a handful of large corporations and political entities.”

He was right, in part. But a main source of the financing of that power structure comes from not paying their taxes and letting the working class pick up the tab.

Almost one year later, the Paradise Papers disclosed compelling evidence of a rising global class that accumulates serious wealth by not paying taxes in the country they live using strings of shell corporations and secrecy jurisdictions. Members were not only big donors but also political leaders.

Trump’s name appeared 3,450 times in the Paradise Papers. He can correctly claim that he sells permission for others to use his name so those occasions don’t necessarily involve any knowledge on his part. The Trump Ocean Hotel is one of such names.

According to a subsequent joint Reuters, NBC, and Global Witness report, it became a focal point for money laundering by organized crime: Russian gangster money, drug cartel money, people-smuggling money. They would buy condos, no questions asked, and could resell them getting a clean source of money. The report noted that the condos seemed mostly vacant.

The White House said the Trump organization had no part in running the project, however, the report noted that “Ivanka chose the real estate agent who sold the condo units. She helped kick-start the project a year later by selecting a Brazilian former car salesman, Alexandre Ventura Nogueira, as a lead broker to sell units. His firm, Homes Real Estate Investment & Services, sold 350 to 400 units worth about US $100 million, he told Reuters and NBC.”

A year later, Nogueira was arrested in Panama for real estate fraud, unrelated to the Trump project, and fled on bail.

None of this is evidence that Trump or his organization knew of the scams.

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Yet, there is more evidence of Trump associating and benefiting from people who use secret corporations. USA TODAY journalists spent six months cataloging every condo, penthouse or other property that Trump and his companies own - and tracking the buyers behind every transaction. They found a surprising statistic: Before Trump’s nomination, 4.2% of his units sold were to shell companies. After nomination, it rose to 70.7%. for properties ranging in price from $220,000 to $10 million - or more.

The investigators said they found no evidence of overpaying. Yet, so much secrecy can be used to cloak favors. Trump attorneys have argued that profits from individual real-estate sales route through a maze of subsidiaries and eventually become mixed in a large pool of undifferentiated money in the trust. That, they say, makes a conflict from an individual sale difficult to imagine.

True, except the purchasers can make sure Trump knows. That is what might be cloaked by the secret companies.

Sen. Sheldon Whitehouse, a Rhode Island Democrat on the Senate Judiciary Committee investigating the Trump campaign’s contacts with Russians during the 2016 election, raised concerns about the source of funds, considering Trump’s history with foreign investors hiding behind shell corporations in his development projects:

“Once you know - as we do - that corrupting influence by Russia is a matter of Russian practice through shell corporations, that puts a particular spotlight on transactions in which the President of the United States through his direct business interests is involved,” said Whitehouse, who is pushing legislation that would force more disclosure about the owners of all LLCs in real-estate transactions. “It’s easy: simply disclose who the party of interest is on the other side so we know it’s an ordinary business transaction and it’s not influence peddling.”

An important missing part of that puzzle is Trump’s tax returns, which House Democrats are currently attempting to obtain. The New York Times managed to obtain Trump’s tax figures between 1985 to 1994, which revealed that he lost $1.17 billion over those 10 years - 8 of which Trump did not pay income taxes. It also revealed in1989, Trump reported $52.9 million in mystery interest income - the source of which could prove relevant to our discussion here.

In April, 2019, the ICIJ located 13 names in the Paradise Papers of Trump influencers who used secret corporations including Commerce Secretary Wilbur Ross; Rex Tillerson, briefly, Secretary of State; and Randall Quarles, Federal Reserve Board of Governors.

The high net worth class supports Trump who will preserve their means to dodge taxes through secret corporations, both legal and illegal, a crucial factor to continue the rising wealth inequality. Ironically, because of that same rising wealth inequality, the working class supports Trump in the belief that only he, of all politicians, will end it.

A Legal Geek Interlude: The essential component of money laundering schemes is the secret corporation. All small private corporations formed in the US are secret in the sense that applicants are never required to reveal the true owners. They can hide behind nominees. In fact, they can use fake names. There are never any checks.

Other Dangers Of Shell Companies

Some uses of shell companies have proven to be dangerous. Concern about terrorists using shell companies to raise money in the US is realistic. For years, until discovered in 2012, an Al Qaeda linked organization raised money in the US and was able to provide its donors with a US charitable tax deduction for their contributions - yes, US taxpayers subsidized Al Queada. HSBC knowingly assisted with financial facilities. It’s all documented in a Senate committee report. What happened to HSBC? It got one of those sweetheart nonprosecution deals and a fine; nothing happened to the HSBC staff who helped Al Quaeda.

Mar Cabra, an ICIJ journalist, reported Europol (which has replaced Interpol as the name for Europe’s law enforcement agency) found more than 3,000 probable matches to organized crime and tax fraud. Out of those, 116 were connected to its program on Islamic terrorism.

So an average voter might think that once it was revealed how easy and how extensively terrorist groups such as IS or Mexican drug lords such as Shorty Guzman’s Sinaloa cartel, used the secrecy of small corporations; and Russia had, and China could, hide behind this secrecy to influence elections. Politicians of both parties should unite to pass laws requiring applicants to reveal who the owner of the shares are (called the beneficial owner in law). But that would also make tax evasion by the wealthy more difficult. So the politicians have decided to let all these groups continue their use of US secret corporations rather than impairing the ability of the 1% to avoid taxes.

Certainly, there is no direct evidence that Trump knew of any wrongdoing but that is not the concern. His profitable business deals with so many secret corporations make it unlikely he will support ending corporation secrecy that gives global corporations like Amazon tax advantages over local businesses, and underpins similar tax schemes only the wealthy can implement.

Trump’s associations bring to mind Aesop’s ancient adage: “A man is known by the company he keeps”

For more on the tax schemes that give multinational corporations their special, legally permitted tax breaks, see: High-Level Tax Avoidance: How Apple Amazon and Starbucks Do It.

For some of the simple, cost-effective schemes the super-rich can use to evade the tax man, see: The Paradise Papers: How Ridiculously Easy it is For the Rich to Avoid Taxes.

For more on the banking system follow Jan at and on Twitter @JanWeirLaw

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News // Donald Trump / Economy / Income Inequality / Taxes