Most of us are familiar with the problems of "the little people, " as dog lover and fortunate marriage picker Leona Helmsley famously set her self apart. A former employee declared that Helmsley said: "We don't pay taxes. Only the little people pay taxes ..." This infamous quote never only applied to Helmsley but to the wealthy in general.
And a report set to be released today from the U.S. Senate's subcommittee on Investigations, details how the rich and wealthy in this country use international banks to avoid paying exactly that -- their fair share of taxes.
One operates an estimated $63 billion portfolio of 118 shopping centers and malls in the U.S., United Kingdom, Australia and New Zealand.
Another manufactures and markets toys through a company with an estimated $35 million in annual sales and corporate offices in New York City, Holland, Hong Kong and Taiwan.
And a third is a Florida-based construction contractor who reportedly amassed more than $49 million in family assets.
Along with wealth and success, the three have something else in common, a Senate report set for release Thursday says: All were clients of an overseas bank whose financial practices "can facilitate, and have resulted in, tax evasion by their U.S. clients."
The report asserts that Swiss banking giant UBS and LGT, a large bank in the tiny European principality of Liechtenstein, actively helped wealthy American clients evade federal taxes. Since 2001, the banks collectively held thousands of U.S. client accounts with billions of dollars in assets that weren't reported to the IRS...
The point is a simple one, several banks who were required under a 2001 law to collect taxes, failed to do so and further even helped the wealthy to hide their assets from the Internal Revenue Service. One has to wonder, what would happen to individuals - "the little people" - if they perpetuated a fraud to hide taxes from the federal government?
And one has to wonder how much is actually owed to the government, especially when high penalties are added since this was an intentional crime. I believe the crime is called Tax Evasion.
UBS [one of the foreign banks] has an estimated 19,000 U.S. clients with a combined $17.9 billion in accounts "that have not been disclosed to U.S. tax authorities," according to estimates given to the Senate panel by the bank and Bradley Birkenfeld, a former UBS banker.
He told the subcommittee roughly 80 UBS bankers traveled to the U.S. four to six times per year to pitch the bank's secretive services to well-heeled clients at such upscale events as Miami's annual Art Basel fair.
"It's really, "Where do the rich people hang out, go and talk to them,' " Birkenfeld told the Senate staffers.
Many U.S. clients were motivated by "tax evasion," Birkenfeld told Senate investigators, adding that both sides "clearly understood" no U.S. taxes would be paid on the overseas accounts.
The bankers used encrypted computers, devised codes for their clients' identities, told Customs agents the trips were for vacations, not business, and advised clients to place jewelry, paintings and other assets in Swiss safe deposit boxes, Birkenfeld testified in June, when he pleaded guilty to helping California billionaire Igor Olenicoff evade $7.2 million in U.S. taxes.
One would hope that the government would take the same approach to collecting these back taxes and penalties as it does from "the little people."