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| St. Kitts and Nevis |
The Texas billionaire who lavished gifts on U.S. Supreme Court Justice Clarence Thomas for more than 20 years held citizenship in island tax havens as recently as last year, according to a report today at The Intercept. Under the headline "Clarence Thomas Billionaire Benefactor Harlan Crow Bought Citizenship in Island Tax Haven; Leaked documents reveal the GOP megadonor held dual citizenship in St. Kitts and Nevis as he lavished the Supreme Court justice with gifts," reporters Jason Paladino and Ken Klippenstein write:
Harlan Crow, the billionaire GOP donor who paid for luxury travel on his private jet and yacht for Supreme Court Justice Clarence Thomas, was a dual citizen of the U.S. and the island nation of St. Kitts and Nevis as recently as last year, according to recently unearthed documents.
In 2012, Crow and his family were granted passports for St. Kitts and Nevis, a tax haven known for impenetrable financial secrecy, through a cash-for-citizenship scheme. Documents provided to the Daphne Caruana Galizia Foundation by a whistleblower as part of its Passport Papers investigation and reviewed by the Project on Government Oversight, or POGO, and The Intercept suggest Crow and his brother Trammell S. Crow paid hundreds of thousands of dollars for the passports. Financial transparency experts say the island’s tax regime would make tracking Crow’s assets, including gifts to Supreme Court justices, extremely difficult.
The documents were leaked from Henley and Partners, a London-based firm known for assisting the ultra-wealthy in obtaining “golden passports,” which allow the holders to shield assets from their home country’s tax authorities. The firm advertises itself as “the global leader in residence and citizenship by investment” and has been shown to do business with controversial clients. An Organized Crime and Corruption Reporting Project investigation using the leaked documents reported that the firm was working with a rogues’ gallery of accused financial criminals from around the world. An investigative journalism collaboration, also based on the leaked trove of Henley documents, reported that oligarchs, fugitives, and sanctioned business people were among the clients seeking foreign passports. The passports, granted in 2012, would expire after 10 years unless renewed. It’s unclear if the Crow family renewed them last year.
What does this mean? The reporters explain:
The revelation of Crow’s history as a dual citizen of a nation considered to be one of the world’s most secretive tax havens raises new questions about the lavish, undisclosed gifts to Supreme Court Justice Clarence Thomas, first revealed by ProPublica. On Monday, Senate Finance Committee Chair Ron Wyden, D-Ore., sent a letter to Crow seeking evidence that Crow “complied with all relevant federal tax and ethics laws,” something his dual-citizen status is sure to complicate.
“The American public deserves a full accounting of the full extent of your largesse towards Justice Thomas, including whether these gifts complied with all relevant federal tax and ethics laws,” Wyden wrote to Crow, demanding answers to detailed questions about whether he complied with IRS gift tax rules by May 8. St. Kitts and Nevis passport holders are not subject to a gift tax.
Even among tax havens, St. Kitts and Nevis is considered high risk by regulators, once even appearing on a Financial Stability Forum list of countries that were “non-cooperative” with global efforts to fight money laundering and financial crime. In 2018, the European Union moved the nation to a list of “non-cooperative jurisdictions,” citing its “harmful preferential tax regime.” A 2018 investigation in The Guardian dubbed it “the world’s most secretive offshore haven.” Even when tens of thousands of St. Kitts and Nevis business documents appeared in the “Paradise Papers” leak, company ownership was still hidden because the jurisdiction keeps so little information filed.
“International business tycoons and politicians, who have looted the assets of their nations — and other high wealth individuals — have used the dubious network of offshore tax havens across the world, which includes St. Kitts and Nevis, to hide their assets and income,” said Rep. Hank Johnson, D-Ga., ranking member of the House Judiciary subcommittee overseeing courts.
Harlan Crow did not respond to questions about his citizenship arrangement.
There is no evidence that Crow’s dual citizenship is connected to any illegal activity. A review of Supreme Court cases involving dual citizenship and taxation do not show any obvious signs of influence by Crow or favorable decisions by Thomas. But the existence of the potential conflict of interest is alarming to ethics experts.
Fallout from the Thomas-Crow bromance already has raised a load of ethical questions. The story of Crow's dual citizenhip, and the possible financial implications, add to it. Chief among the questions is this: How might Clarence Thomas have benfited from Crow's peculiar arrangement?
Thomas has enjoyed one of Crow’s overseas assets registered in another “tax efficient” jurisdiction. The billionaire’s 162-foot luxury yacht, the Michaela Rose, that Thomas and his family spent a nine-day trip on in Indonesia in 2019, is owned by Rochelle Marine Limited, a company domiciled in Guernsey, a British protectorate in the Channel Islands known for minimal taxation and maximum secrecy.
“If tax avoidance and secrecy are what Harlan Crow was seeking, it might be no coincidence that concurrently and for more than two decades Justice Thomas has been concealing the full extent of his financial relationship with Harlan Crow,” said Johnson, who recently introduced legislation in the House that would create ethics and transparency rules for Supreme Court justices. “The public interest requires that financial relationships between Supreme Court justices and people like Harlan Crow be publicly disclosed.”
According to NPR, the value of Thomas’s undisclosed gifts could total more than a million dollars, and ProPublica’s investigation valued the Indonesia trip alone at $500,000. ProPublica later revealed that in 2014 one of Crow’s companies purchased and renovated Thomas’s mother’s home in addition to buying several lots on the street. CNN then reported that the Supreme Court justice’s mother does not pay rent and still resides in the home. Thomas didn’t disclose the sale on his ethics forms, despite co-owning the home prior to the sale.
Thomas has said that his failure to report gifts he accepted from Crow did not violate the law because he did not have business before the court. But in 2005, an architecture firm appealed the Supreme Court in a case alleging misuse of copyrighted designs and sought $25 million in damages from Trammell Crow Residential, a firm founded by Crow’s father and in which the Crow family was invested at the time, as Bloomberg reported on Monday.
The court, including Thomas, who did not recuse himself, voted to deny the petition.
Questions about Harlan Crow go way beyond the nation's highest court, The Intercept reports:
Crow is not just a close friend to one of the most powerful judges in the country; he is also a prolific political donor, personally giving more than $10 million by ProPublica’s estimates, largely to conservative causes, and that is only in publicly disclosed donations. ProPublica notes he also donates to groups not required to disclose their donors. While current law forbids political giving or expenditures by foreign nationals, it does not preclude dual citizens who hold a U.S. passport from doing so.
The financial secrecy afforded by dual citizenship could allow Crow’s accounts in third-party countries to remain invisible to regulators in the United States.
Crow oversees several financial entities in another small Caribbean island nation also known for its tax avoidance policies. Three investment funds belonging to Crow Holdings — the real estate conglomerate on which Crow serves as chair — are located in the Cayman Islands, according to the IRS’s foreign financial institution list. One of the entities is an offshore feeder fund, a type of foreign investment fund that shields investors from certain domestic taxes. (A company founded by Crow’s late father, Trammell Crow, also lists a subsidiary in the Cayman Islands.)
“Feeder funds generally refers to an offshore fund that then buys onshore funds — it’s a way for foreigners to buy U.S. investments without normal reporting requirements,” said Sarah Alexander, a partner at Constantine Cannon, whose practice focuses on international financial misconduct. “In practice, it’s also a way to shield assets, and there’s a lot of U.S. persons who shouldn’t be there.”
“A very small percentage of American citizens hold dual citizenship with another country, and a key question is why Mr. Crow acquired St. Kitts and Nevis passports for himself and his family,” said Elise Bean, former staff director and chief counsel at the Senate Permanent Subcommittee on Investigations. “U.S. passports already enable U.S. citizens to visit a lot of countries without a visa, and there’s no indication Mr. Crow or his family plan to buy a house in St. Kitts and Nevis, so what is the purpose?”
For a U.S. citizen, gaining a St. Kitts and Nevis passport would allow less restricted access to only a few countries like Russia, Iran, and Belarus, according to data compiled by Passport Index.
Crow's efforts to obtain a "golden passport" took a circuitous route, and that process has drawn the attention of government officials in multiple countries, including those in the U.S. Treasury Department, State Department, and the Department of Justice, The Intercept reports:
To obtain golden passports in St. Kitts and Nevis, the Crow family paid into the Sugar Industry Diversification Fund, one of several options for the citizenship-by-investment program at the time, according to internal Henley and Partners documents. That program and the law firm that had the exclusive rights to sell citizenship through donation have faced questions of self-dealing. The fund, controlled in part by lawyers associated with the firm, made several investments into companies connected with the chair of Henley and Partners, according to an Organized Crime and Corruption Reporting Project investigation, and the arrangement was eventually terminated.
Documents reviewed by POGO and The Intercept show payments of approximately half a million dollars for the Crow family’s passports, a small price to pay when considering the potential savings to be had by avoiding pesky estate, inheritance, income, or wealth taxes.
The prime minister of St. Kitts and Nevis criticized the investments of the fund, telling Parliament it was as if the money, intended to help residents of the islands’ transition from the sugar trade, had been “given away.”
In 2014, two years after the Crow family paid for St. Kitts passports, the U.S. Treasury Department’s Financial Crimes Enforcement Network raised the alarm on the practice. The financial regulator was concerned about Iranian nationals using the system “to mask their identity and geographic background for the purpose of evading U.S. or international sanctions or engaging in other financial crime.”
That same year, Canada decided to require St. Kitts and Nevis citizens to obtain a visa to enter the country, “to properly determine the true identity of St. Kitts and Nevis passport holders,” citing “concerns about the issuance of passports and identity management practices within its Citizenship by Investment program” — the same program the Crow family bought into just two years prior.
In 2017, the State Department noted in a report on money laundering that St. Kitts and Nevis’s Citizenship by Investment Program was “afflicted by significant deficiencies in vetting candidates and conducting due diligence on passport and citizenship recipients after they receive citizenship,” and noted that the country was a “desirable location for criminals to conceal proceeds.” The country remains on the State Department’s 2021 list of high-risk jurisdictions due to the prevalence of money laundering.
In 2020, the Department of Justice indicted tech CEO Robert Brockman in what law enforcement officials called “the largest ever tax charge in the United States.” Prosecutors alleged that companies in Nevis that were key to the scheme were used to hide $2 billion of wealth from U.S. tax officials. Brockman died last year while still facing trial.
Last year, Armenia’s then-President Armen Sarkissian abruptly resigned after a news outlet learned that he had secretly retained citizenship to St. Kitts and Nevis. Sarkissian has said that he received the passport after he invested $500,000 in a luxury hotel on the island.
The schemes involved in obtaining "gold passports have even raised eyebrows in the U.S. Congress:
Last month, a Senate Finance Committee report singled out the risks of high-net-worth dual citizens avoiding taxes. According to the report, investigators found a trend of “complicit bankers” helping high-net-worth U.S. citizens hide the true ownership of bank accounts through citizenship-by-investment schemes, like the one Crow bought into. The report investigated several cases where Credit Suisse was facilitating these arrangements on behalf of wealthy Americans, finding hundreds of millions of dollars hidden offshore, sometimes using St. Kitts entities.
The committee report points to a 40 percent reduction in IRS revenue agents since 2010 as a contributor to the problem, and recommends fully funding the IRS. Doing so, according to the committee, is “the single most important factor in stemming offshore tax evasion by wealthy tax cheats.” The Inflation Reduction Act provides a historic investment in the IRS, and the agency has pledged to use that money to pursue any tax avoidance by high-net-worth individuals.
Several U.S. watchdog organizations, including POGO, have called for an investigation into the Supreme Court justice’s alleged violations of the Ethics in Government Act, which requires financial disclosures, and, if warranted, for civil monetary penalties.
“The Department of Justice has a duty to hold Justice Thomas accountable for this flagrant and repeated law breaking, unless an investigation reveals that the facts radically differ from what has been reported,” wrote POGO’s Walter Shaub and Sarah Turberville. “The department has enforced the disclosure law against other federal officials. There is no reason to treat Justice Thomas differently.”
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