surajmal Posted March 24, 2013 Posted March 24, 2013 Some Excerpts Who really lives at One Hyde Park, called the world’s most expensive residential building? Its mostly absentee owners, hiding behind offshore corporations based in tax havens, provide a portrait of the new global super-wealthy. Trevor Abrahmsohn, a U.K. real-estate agent, remembers London before the modern property boom began. “London was as Paris is today: an interesting, quirky souvenir town. We had the Tower of London, the Queen, the palace, and the Changing of the Guard,” he says, adding Scotch whisky as an afterthought. “That is what we stood for. London was not a tax haven.” Starting in the 1960s, new buyers began to fire up the market: crises of the Greek monarchy brought a significant influx of Greeks, pockets of which endure today. Next came the first wave of Americans, a trickle of bankers lured by London’s unregulated Euro-markets, and West Coast buyers, often from Hollywood. “They swarmed in,” remembers veteran London real-estate agent Andrew Langton, of Aylesford International. “They turned Chester Square into Little L.A. and tidied up all these properties, at enormous expense, with American kitchens, bathrooms, and showers.” The OPEC oil crisis, of the 1970s, lit the big fire under this market. Arab money surged into the so-called golden triangle of Knightsbridge, Belgravia, and nearby Mayfair, to buy high-end properties. Real-estate agents remember it as a tidal wave: “They came as a force,” says Hersham. “When they wanted to buy, there were no hysterics or reticence.” The fall of the Shah of Iran brought a surge of Iranian money, followed by buyers from the biggest African ex-colony, newly oil-rich Nigeria. The market paused for breath in the 1980s, with Britain’s economy in the doldrums and as sagging world oil prices sapped wealthy foreign buyers’ demand. But Margaret Thatcher’s financial reforms, notably her “Big Bang” of Wild West financial deregulation, in 1986, caused the stream of bankers to turn into a river, then a deluge. “We would wait for those e-mails ending in ‘gs.com’ to come rolling in,” remembers Jeremy Davidson, a Belgravia-based property consultant. “Goldman [sachs] partners, Morgan [stanley] partners: they were the top of the market, and we had lots of them.” The fall of the Soviet Union, in 1989, and the vast, corrupt post-Soviet privatizations, brought the biggest, most reckless wave of foreign buyers London had ever seen, with often questionable money sluicing in via the secretive British-linked stepping-stone tax havens of Cyprus and Gibraltar. “There is no real accountability of these guys coming in—the cops don’t really investigate them,” says Mark Hollingsworth, co-author of Londongrad, a 2009 book about the Russian invasion. “They see the capital as the most secure, fairest, most honest place to park their cash, and the judges here would never extradite them.” Nick Candy himself summarized the attractions neatly: “This is the top city in the world, and the best tax haven in the world for some.” ‘It seems to be that every big trading disaster happens in London,” U.S. congresswoman Carolyn Maloney observed last June. “And I would like to know why.” The disasters she was referring to were the ones that bankrupted Lehman Brothers and nearly bankrupted some other American firms, such as A.I.G. and MF Global, as well as causing JPMorgan Chase’s $6 billion loss at the hands of the trader popularly known as “the London Whale”—all of these happened to a high degree in the London branches of those firms and have cost the American taxpayer billions of dollars. To answer her question and to understand why so much of the world’s money goes to London in the first place, you need to go back hundreds of years, to the emergence of what must be the most peculiar, the oldest, the least understood, and perhaps one of the most important institutions in the menagerie of global finance: the City of London Corporation. It is the local authority for “the Square Mile,” the pocket of prime financial real estate centered on the Bank of England and located about three miles to the east of Knightsbridge, along the Thames River. But the corporation is also much more, its identity embedded in—and slightly apart from—the British nation-state. The corporation has its own constitution, “rooted in the ancient rights and privileges enjoyed by citizens before the Norman Conquest, in 1066,” and its own lord mayor of London—not to be confused with the mayor of London, who runs the Greater London metropolis, with its eight million inhabitants. One sign of the City of London’s distinct identity is the fact that the Queen, on official visits there, will stop at the boundary of the Square Mile, where she is met by the lord mayor, who engages her in a short, colorful ritual, before she may proceed. Most Brits see this merely as a relic from a bygone age, a show for the tourists. They are wrong. The lord mayor’s principal official role, his Web site says, is to be “ambassador for all UK-based financial and professional services.” He lobbies far afield, with offices in Brussels, China, and India, among other places, the better to “expound the values of liberalization” far and wide. The City Corporation and closely linked think tanks issue streams of publications explaining why finance should be less tethered by taxes and regulation. The corporation also has its own official lobbyist, with the delightfully medieval-sounding name of The Remembrancer (currently one Paul Double), lodged permanently in Britain’s Parliament. Local elections in the City are unlike any other in Britain: multi-national corporations vote alongside and vastly outnumber the tiny borough’s 7,400 human residents. Over the centuries the City has thrived, thanks to a simple advantage: it has had money to lend when governments or monarchs needed it. So the City has been granted special privileges, allowing it to remain a political fortress withstanding the tides of history that have transformed the rest of the British nation-state. It has nurtured a British tradition of welcoming foreign money, with few questions asked, and so has for centuries attracted the world’s wealthiest citizens. “There the Jew, the Mahometan, and the Christian transact together,” Voltaire wrote in 1733, “as though they all professed the same religion, and give the name of infidel to none but bankrupts.” When the British Empire crumbled in the mid-1950s, London replaced the cozy embrace of gunboats and imperial trading preferences with a new model: tempting the world’s hot money through lax regulation and lax enforcement. There was always a subtle balance, involving dependable British legal bedrock fiercely upholding U.K. domestic rules and laws while turning a blind eye to foreign law-breaking. It was a classic offshore-tax-haven offering that tells foreign financiers, “We won’t steal your money, but we won’t make a fuss if you steal other people’s.” The term “tax haven” is something of a misnomer, because tax havens offer escape routes not just from taxes but potentially from any of the rules, laws, and responsibilities of other jurisdictions—whether those be taxes, criminal laws, disclosure rules, or financial regulation. Tax havens are usually about parking your money “elsewhere,” in jurisdictions such as the Cayman Islands, beyond the reach of your home country’s regulators and taxmen. Or you park it in London: which is why some investment bankers have called it the Guantánamo Bay of finance. “The British think they do finance well,” says Lee Sheppard, a tax and banking specialist at the U.S. trade publication TaxAnalysts. “No. They do the legal stuff well. Most of the big investment banks there are branches of foreign operations. . . . They go there because there is no regulation whatsoever.” James Henry, a former McKinsey chief economist, watched at close quarters the recycling of petrodollar wealth into Third World loans via London’s unregulated Euro-markets, which among other things enabled Wall Street to avoid New Deal-era banking regulations. Henry saw a global private-banking network emerge, following the money, “helping Third World elites abscond with hundreds of billions in diverted loans, illicit commissions, and corrupt privatizations, and park it in London and other tax havens.” The number beside each location provides its ranking on the Financial Secrecy Index, which is calculated based on an analysis of the area’s role in global financial markets and a scoring of its laws and regulations that facilitate criminal activities carried out not within that area but elsewhere. It comes as a surprise to most people that the most important player in the global offshore system of tax havens is not Switzerland or the Cayman Islands, but Britain, sitting at the center of a web of British-linked tax havens, the last remnants of empire. An inner ring consists of the British Crown Dependencies—Jersey, Guernsey, and the Isle of Man. Farther afield are Britain’s 14 Overseas Territories, half of them tax havens, including such offshore giants as the Caymans, the British Virgin Islands (B.V.I.), and Bermuda. Still further out, numerous British Commonwealth countries and former colonies such as Hong Kong, with deep and old links to London, continue to feed vast financial flows—clean, questionable, and dirty—into the City. The half-in, half-out relationship provides the reassuring British legal bedrock while providing enough distance to let the U.K. say “There is nothing we can do” when scandal hits. Data is scarce, but in the second quarter of 2009 the three Crown dependencies alone provided $332.5 billion in net financing to the City of London, much of it from tax-evading foreign money. Matters are so out of hand that in 2001 Britain’s own tax authorities sold off 600 buildings to a company, Mapeley Steps Ltd., registered in the tax haven of Bermuda to avoid tax. Britain could close down this tax-haven secrecy overnight if it wanted, but the City of London won’t let it. “We have, to put it provocatively, a second British empire, which is at the very core of global financial markets today,” explains Ronen Palan, professor of international political economy at City University in London. “And Britain is very good at not advertising its position.” All of this raises the question of why so many of One Hyde Park’s apartments are owned offshore. In fact, this is not unusual in England. According to The Guardian, some 95,000 offshore entities have been set up in Britain (or the U.K.) since 1999 purely to hold U.K. property: a hefty portion of the national prime stock. These buyers use offshore companies for three big and related reasons: tax, secrecy, and “asset protection.” A property owned outright becomes subject to various British taxes, particularly capital-gains and taxes on transfers of ownership. But properties held through offshore companies can often avoid these taxes. According to London lawyers, the big reason for using these structures has been to avoid inheritance taxes—something that the government’s recent limited crackdown did not address. And of course City of London lawyers and accountants are currently scurrying to find ways around the new rules. But secrecy, for many, is at least as important: once a foreign investor has avoided British taxes, then offshore secrecy gives him the opportunity to avoid scrutiny from his own country’s tax—or criminal—authorities too. Others use offshore structures for “asset protection”—frequently, to avoid angry creditors. That seems to be the case with a company called Postlake Ltd.—registered on the Isle of Man—which owns a $5.6 million apartment on the fourth floor. Postlake is in turn registered as owned by Purcey Ltd., a B.V.I. entity, which is registered as held on behalf of an Isle of Man trust set up by the bankrupt Irish property developer Ray Grehan, who has been pursued by Ireland’s National Asset Management Agency to recover more than $350 million it says it is owed. Grehan had argued that the apartment is not really his but belongs to a family trust. Martin Kenney, a B.V.I. lawyer, says B.V.I. companies are frequently owned by foreign trusts from more outlandish jurisdictions, such as Nevis or the Cook Islands, deepening the secrecy. These structures are “debtor-friendly and creditor-unfriendly,” he says, so in cases of fraud it can be very hard to recover assets. Perhaps the most striking fact about One Hyde Park and the London super-prime property market is what it tells us about who the world’s richest people are. Many people think the greatest winners of globalization today are financiers. A decade or so ago, that may have been true. But today another class sits above even them—the global commodity plutocrats: owners of mineral rights, or dominant players in mineral-rich countries in sectors such as construction and finance that benefit from commodity booms. Hollingsworth notes in Londongrad that the oligarchs he studies became rich “not by creating new wealth but rather by insider political intrigue and exploiting the weakness of the rule of law.” Arkady Gaydamak, a Russian-Israeli oilman and financier, explained his elite view of accumulating wealth to me in 2005. “With all the regulations, the taxation, the legislation about working conditions, there is no way to make money,” he said. “It is only in countries like Russia, during the period of redistribution of wealth—and it is not yet finished—when you can get a result. . . . How can you make $50 million in France today? How?” Russia’s former privatization czar Anatoly Chubais put it less delicately: “They steal and steal. They are stealing absolutely everything.” London real-estate agents confirm that these commodity plutocrats dethroned the financiers some time before the financial crisis hit. “I can’t remember the last time I sold a property to a banker,” says Stephen Lindsay, of the real-estate agency Savills. “It’s been hard for anyone to compete with the Russians, the Kazakhs. They are all in oil, gas—that is what they do. Construction—all that kind of stuff.” Even the Arab money has taken a backseat to the new buyers, says Hersham. “The wealth of the ex-Soviets is incredible,” he says. “Unless you are talking about [Goldman Sachs C.E.O. Lloyd] Blankfein or [stephen Schwarzman], the head of Blackstone, or the head of one of the very big banks, there is no driver from the City of London at these levels anymore.” http://www.vanityfair.com/society/2013/04/mysterious-residents-one-hyde-park-london Kick in the nuts.
nballa Posted March 26, 2013 Posted March 26, 2013 as evident from the number of responses, no one cares about british bs
surajmal Posted March 26, 2013 Author Posted March 26, 2013 How many of those shady corporations originating from BVI or Caymans are of Indian Origin, you think? (hell did you even read the article?)
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