| Offshore financial centers are often used
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| | "premium", hence the "BLIPS".The
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| to run tax shelters. They have little or
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| | mechanism was as follows: Two companies
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| no taxes, and little or no financial
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| | in the Isle of Man (UK), St. Croix and
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| regulations. For example, in the British
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| | another investment firm "Rogue" each
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| Virgin Islands, corporations can be
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| | borrowed $41.7 million from National
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| formed without the public disclosure of
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| | Westminster Bank. The loans were for 7
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| the names of the directors or officers of
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| | years at fixed interest rates. The loans
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| the corporation. Favorite offshore tax
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| | paid Interest Only, until a balloon
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| havens include colonial relics such as
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| | payment at the end of the 7 years. St.
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| the Cayman Islands (British), the Dutch
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| | Croix and Rogue agreed to pay high
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| Antilles and Curacao (Netherlands).
| |
| | interest rates of 17.97%, in exchange for
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| Other places are feudal relics like
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| | a $25 million payment to them from Nat
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| Monaco, Liechentenstein and Andorra in
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| | West at the time the loans originated.
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| Europe, or other nominally independent
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| | So St. Croix and Rogue, received at the
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| small nations from the old British, Dutch
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| | beginning of the loans a total of $66.7
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| and French Empires. Other places
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| | million. Then the $66.7 million plus
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| historically in the U.S. zone of
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| | $1.5 million from each was put in an
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| influence are Panama and the U.S. Virgin
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| | interest bearing loan at Nat West.In
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| Islands.The leading offshore center is
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| | addition, St. Croix and Rogue agreed to
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| the Cayman Islands, which is now the
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| | pay $25 million to NatWest, if they paid
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| fifth largest banking center in the
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| | off the loan early, which is exactly what
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| world, after New York, London, Tokyo and
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| | they did a couple of weeks later, May
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| Hong Kong.This is the backdrop on looking
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| | 25th, 2000.
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| over legal papers from a court opinion on
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| | To make it a little juicier, the two
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| July 20th 2006. The judge in Texas
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| | onshore companies behind the offshore
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| District court ruled that certain
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| | companies had an interest swap deal with
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| technicalities of the case against the
| |
| | NatWest, where they received a floating
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| BLIPS tax shelter were wrong. This will
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| | interest rate, in exchange for the high
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| have some effects in the case against 8
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| | fixed interest rate. Those under
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| KPMG Accounting Firm former executives.
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| | indictment argued that the $25 million
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| KPMG itself has already pled guilty and
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| | that they received upfront was a
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| paid a $456 million fine. One gets a
| |
| | liability or not. It was money they
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| feeling how these illegal tax shelter
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| | received, but it was not actually
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| were carried out from these papers.
| |
| | "loaned" to them. Plaintiffs argued that
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| BLIPS stands for Bond Linked Issue
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| | it was not a liability under IRS section
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| Premium Structure. It created a
| |
| | 762, because this money was never lent to
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| financial structure to make the capital
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| | them. The tax shelters aim to create an
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| gains tax deductions, through a capital
| |
| | illusion of capital losses, and also
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| loss. However, this "loss" had been paid
| |
| | interest payments, both of which are tax
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| at the beginning of the deal as the
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| | deductible.
|
