Treasure Islands - Nicholas Shaxson [102]
Another argument is like the one on tax: Offshore promotes “efficiency” by driving financial innovation and being what the offshore writer William Brittain-Catlin calls a “seller of novelties on the financial market, a sweetshop for capitalism, developing new flavours.” The financial crisis exposed what most of this financial “innovation” really involves. Innovative forms of abuse are to be resisted, not encouraged.
The next offshore regulation argument involves deflection. Anthony Travers, chairman of the Cayman Islands Financial Services Authority, uses this technique widely. In a 2004 article in The Lawyer entitled “Framing Cayman,”36 he sought to explain why some of the biggest economic scandals in world history—BCCI, Enron, and Parmalat, in each of which Cayman played a pivotal role—were in fact not the Caymans’ fault at all.
Parmalat was brought down by its Cayman-based finance subsidiary Bonlat Financing, which had fraudulently claimed to hold nearly 4 billion euros in assets. According to Travers, the missing Bonlat billions “never existed at all, save in a document forged in Italy by a corrupt Parmalat executive. If that is the nature of the fraud in relation to Bonlat, how precisely is the ‘part’ of the Caymans ‘substantial’?” In other words, though the Caymans was central to the fraud, it is blameless because the fraudsters were actually elsewhere. He said a similar thing about BCCI. “Had BCCI not been so licenced [as a deposit-taker] by the Bank of England, at a time when the Caymans banking regulator was on secondment from the Bank of England,” Travers wrote, “its subsidiary would not have been licenced in the Caymans.” As for Enron’s 692 opaque Caymans subsidiaries: “These were on balance sheet consolidated subsidiaries which owned the overseas Enron operating assets, thereby lawfully deferring US taxation,” their profits “properly accounted for and audited.” Enron’s Caymans limited partnership LJM No. 2, Travers continued, was “a victim and not a perpetrator”—the perpetrators were Delaware limited partnerships. In other words, the frauds were carried out elsewhere. And he added, “None of the financial recklessness that has brought about much of the current global crisis occurred in or involved the Cayman Islands.”37
The breathtaking chutzpah of Travers’s claims is leavened by the fact that his arguments contain a truth: The frauds could not have happened only in the Cayman Islands. They required culprits elsewhere too. “The charlatans responsible for this type of behaviour,” Travers notes, “are far closer to Westminster than the Caymans.”
Quite so. But he is deliberately missing the point: This is how the offshore system works. Offshore structures always serve citizens and institutions elsewhere—so the beneficiaries are always elsewhere. This is why it is called “offshore.” Plausible deniability is the whole game. The fraudsters may well be elsewhere, but offshore is what makes the fraud work. Secrecy jurisdictions are to fraudsters what fences are to thieves. These arguments from the Caymans are like those of one who is caught fencing stolen property blaming the police for not stopping the thieves who stole the property in the first place.
The Caymans is a place “which has pledged to meet the highest and quite new international standards of tax transparency,” Travers continued, then added a more menacing note. “If it were not for a quirk in the laws of defamation,” he said (noting that jurisdictions cannot sue for libel), “comment of this sort would be actionable.”
On September 11, 2001, two months after the OECD’s tax haven project died, with Al-Qaeda’s attack on the United States, a new tale of hypocrisy and deception began that continues up to today.
After the attacks