Following on this previous post from last year, this WSJ ($) article reports that colorful Dallas-based investor Sam Wyly (previous posts here) and his brother Charles get hauled in front of the Senate’s Permanent Subcommittee on Investigations tomorrow in connection with the panel’s investigation into the Wylys’ use of the the Isle of Man tax haven to protect assets and avoid US income taxes.
The Isle of Man is a quasi-independent, largely agrarian republic of about 75,000 people in the sea between England and Ireland that operates under its own financial laws, the most important of which is that a foreign government cannot enforce a claim for unpaid taxes against an Isle of Man entity. As a result, wealthy foreigners for years have used Isle of Man-based shelf corporations and trusts to shield assets and limit taxes. This arrangement has often led to the unusual scene of $1,000 per hour London soliciters and barristers waiting for their court hearing to be called in the Isle of Man courts while the judge (called “the Dempster”) adjudicates a dispute between local farmers over such matters as, say, the ownership of a goat.
The Senate panel has been probing offshore tax havens for several years under the direction of its panel’s senior Democrat, Sen. Carl Levin of Michigan. Interestingly, Sam Wyly is one of the largest benefactors of the business school at Senator Levin’s home state university, the University of Michigan.
As noted in the previous post, the Wylys are already the subject of a criminal investigation by the Manhattan District Attorney’s office, the IRS and the SEC over their Isle of Man arrangements. The WSJ article reveals for the first time that the Wylys were advised on their Isle of Man investments by a network of shady characters, including former attorney David Tedder, a California-based, self-styled “asset-protection expert” who was disbarred in California before moving his practice to Florida in the 1990’s. Tedder is currently serving a five-year federal prison sentence on tax and money laundering charges unrelated to his work for the Wylys.
Unlike most Senate hearings on rather dry financial matters, this one could be pretty entertaining.