Tax Evasion Tuesday – Sackler Family Wires a BILLION dollars in Opioid Blood Money Offshore Prior to Bankruptcy Declaration

Outrage Fatigue. It’s a thing, people. I don’t know about you, but I feel like the past few years have been one non-stop freakshow parade of horrors. If you’re a semi-sentient being, there’s no need for me to list them all, and I’m sure you’ve got your own personal hit parade of disturbing, enraging idiocy that you mentally project onto your bedroom ceiling each night before the Xanax/Ambien/Kava Kava takes hold and drags you down into the slumbery depths. I’ve got three words that are quite enough for me: Children in cages.

However, I’d like to think that I possess enough residual humanity to still be startled into a “WTF?” moment now and then. Today was one of those moments. From FoxBusiness:

Purdue Pharma’s Sackler family wired billions through Swiss bank accounts: Report

“The Sackler family, which owns embattled OxyContin maker Purdue Pharma, may have gone to great lengths to shield their profits and fortune from litigators.

The New York attorney general’s office on Friday said the family made about $1 billion in wire transfers through Swiss bank accounts, as reported by The New York Times.

A spokesperson for the company declined to comment.

The Purdue family was paid more than $4 billion from Purdue Pharma over the course of about a decade.

According to Forbes, the family is worth an estimated $13 billion.

As reported by The Associated Press last week, the Sacklers shielded much of that wealth in “an intricate web of companies and trusts,” some registered in offshore tax havens like Bermuda.

New York has issued subpoenas to 33 investment advisers and banks to get more information on funds transferred out of Purdue.

Earlier this week, there was a tentative settlement announced for the part Purdue Pharma played in the national opioid crisis – which would require the company to file for structured bankruptcy and pay $12 billion – including about $3 billion from the Sackler family.

The family would also have to give up ownership of the company and sell another one of its pharmaceutical companies – Mundipharma.

Not everyone is satisfied with the terms, however.

When there is a bankruptcy filing, often all other litigation is halted. It is unclear whether a settlement would shield the family, however.

New York Attorney General Letitia James said in a statement on Wednesday that the company continued to “lowball the millions of victims of the opioid crisis,” adding that she would “continue to seek justice for victims.”

Sixteen states have sued family members by name.

The Sacklers paid $75 million as part of a $270 million settlement with the state of Oklahoma earlier this year.

Opioid addiction has resulted in hundreds of thousands of American fatalities.”

 

Outrageous doesn’t BEGIN to cover the depth and breadth of the “alleged” actions of the Sackler family and their army of paid enablers – the shadow inhabitants of the global underground finance infrastructure. It would be most interesting to find out the current locations of the transferred funds. Someone should get on that.

If the Sacklers were your garden-variety members of the kleptocratic elite, these revelations would hardly raise an eyebrow anymore. OF COURSE weasely billionaires are going to use any means at their disposal to avoid giving up even a nickel to the jurisdictions whose populations they’ve fleeced. It’s kind of built into the Late Stage Capitalism model.

In this particular instance, however, it’s appears that the Sacklers and their front corporation, Purdue Pharma, have stepped over the invisible line that even the present administration realizes exists. The public has a really difficult time understanding how mortgage securitization blew up the global financial system a decade ago, but even the slowest among us get how a drug dealer operates, and we’ve all seen, directly or indirectly, to paraphrase Neil Young, The Needle and the Damage Done.

The hubris is staggering. A family already worth an estimated $13 billion goes to enormous lengths, breaking all sorts of laws, to hide a billion dollars beyond the reach of virtually anyone, international law enforcement authorities included. Think about that: They were willing to brazenly wire unfathomable sums of money via the SWIFT interbank transfer system, knowing full well that U.S. authorities would receive SAR reports on the transfers, and literally NOT GIVING A SHIT and doing it anyway. The only logical explanation: They figured they would get away with it. That they were, quite literally, above the law. This would be bad enough if the transferred money was earned ‘honestly,’ through corporate M&A or selling shares in one of their companies. But this cash is the very definition of Blood Money. Each dollar in that fortune represents human suffering, and the Sacklers know it, and simply do not care.

I desperately hope the Southern District of New York can get individual indictments and eventual convictions on these despicable weasels, but I won’t hold my breath.

Thoughts? Questions? Comments? email me at jdmcdaid@gmail.com, or follow me on Twitter @JustinMcDaid, Facebook, or LinkedIn.

 

Welcome to the Jungle or, The Taxman Cometh

“It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things” – Niccoló Machiavelli, The Prince


Fraud Friday is coming to you from the long & winding road this week. Accompanying the lovely & talented spouse to a corporate awards event & enjoying a brief respite from the deep freeze of the Central Plains has been a much-needed change of pace.

However, there is no escaping the increasingly-chaotic situation brought about by the recent sweeping changes to the federal tax code. We’ll focus on the implications for increased tax fraud & the deterioration of enforcement capabilities on the part of the regulatory agencies (aka the IRS).

As most of you are surely aware, Congress passed H.R. 1, the Tax Cuts & Jobs Act in late December of last year. While this blog assiduously attempts to avoid discussing the overt political aspects of the legal & regulatory environment, a couple of key developments pertain specifically to those of us in the compliance and investigative universes:

1) Loopholes in loopholes inside loopholes that also contain loopholes

Look, I am FAR from being an expert on tax structuring/avoidance, but minds far greater than mine have pointed out how the new legislation contains enough vague, opaque language to provide decades of billable hours to the tax nerds:

35 pages of Loopholes in the New Tax Law

Of particular concern is the potential for clever manipulation of individual earned income into lower tax rates by creating what are essentially one-person corporations. As explained by Vox:

‘Under the new law, the top ordinary rate on labor income will be much higher than the top rate on corporate income. As a result, many taxpayers will be able to shield a portion of their labor income from tax by setting up a corporation. So Joe Smith, previously an assistant account director for a PR firm, can become Joe Smith, Inc., a new startup company! The firm makes payments to the new corporation instead of to Smith. Thus, Smith shields his labor income from the higher individual tax rate.

The IRS might investigate whether the new corporation pays Smith a reasonable fee for his services, which some tax-law precedents suggest it is obliged to. That’s one check against this tax dodge, and there could be others. But how many new corporations can the IRS investigate? And if Smith can find a few friends to join his new corporation, it will be even harder for the IRS to challenge.” Which brings us to our second point:

2) The IRS is Hosed

It’s no secret that there has been an exodus of the IRS workforce over the past several years. And who can blame them? Years of significant budget cuts, failure to recruit new talent, and a seemingly infinite supply of political contempt for the entity that administers the collection of the vast majority of federal funds.

Predictably, the enforcement rate has plummeted, and academics and tax experts generally agree that the “rate of non-compliance” (i.e. tax cheating) is under-estimated, because it’s common sense that many people who cheat won’t volunteer that information on a survey, and enforcement actions against non-compliers by definition clearly don’t capture the full picture of tax cheating. As for that dreaded staple of American life, the audit, rates have never been lower. From CNBC:

The number of people audited by the IRS in 2016 dropped for the sixth straight year, to just over 1 million. The last time so few people were audited was 2004. Since then, the U.S. has added about 30 million people.

The IRS blames budget cuts as money for the agency shrunk from $12.2 billion in 2010 to $11.2 billion last year. Over that period, the agency has lost more than 17,000 employees, including nearly 7,000 enforcement agents. A little more than 80,000 people work at the IRS.

IRS Commissioner John Koskinen said budget cuts are costing the federal government between $4 billion and $8 billion a year in uncollected taxes.

‘We are the only agency if you give us more people and money, we give you more money back,’ Koskinen said in an interview.”

3) Which leads to Some Unsettling Possible Societal Outcomes

Besides the obvious fact that in order to function, the US gov’t requires revenue, there are additional sociological implications to a steady erosion in the willingness of the populace to pay what they owe. Income taxes are unlike many other forms of taxation in that they rely to a large degree on the voluntary compliance of taxpayers. As that obligation becomes less ingrained in the American psyche, questions arise about long-term societal stability and the underlying fundamental assumptions of our Republic: https://www.vice.com/en_us/article/d33daz/dont-look-now-but-americas-tax-system-may-collapse-soon

It will be certainly be interesting and scary to see how this plays out over the next several years.


Music Recommendations

Gotta go with a couple of classics on this one. Topically appropriate: “You know where you are? you’re in the jungle, baby! And you gonna die!”

And of course: “Let me tell you how it will be. There’s one for you, nineteen for me.”

Food Recommendation

Norman Love Confections. While in Southwest Florida this week, we visited this shop on the urgent recommendation of our Über driver, and we are quite glad we did. All manner of indescribably delicious confections that are also miniature works of art. The chocolate alligator looked absolutely real! A must-visit if you’re in the Ft. Myers/Na-les area, and they ship worldwide.

Until next time, keep up the good fight!

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