Mayor Michael Bloomberg on Thursday said there’s nothing wrong with his money managers investing hundreds of millions of dollars in offshore tax havens, defending it as a practical way to make more money for his philanthropic foundation.
The billionaire mayor’s foundation has transferred some $400 million to offshore funds in widely known tax-sheltering countries like the Cayman Islands, Cyprus, Mauritius and Bermuda, according to the Bloomberg Family Foundation’s tax forms.
Bloomberg’s money is invested through a blind trust that prevents him from knowing his specific holdings, but he signs the tax returns that clearly list the overseas funds.
“I don’t have any control over where my investments go,” Bloomberg said.
“And incidentally, as far as I know, the investments that my money managers make are perfectly legal, they’re fully disclosed and they’re appropriate to maximize the assets which I’m giving away to charities,” he told reporters.
The practice is legal and not uncommon, but it could be considered to conflict with the spirit of Bloomberg’s oft-repeated message that it is crucial to the financial health of New York City and the nation to keep companies and their economic activities in the United States, funding the tax base that pays for government services.
“We need more people here paying taxes and when they make money, they pay more taxes,” he said this week.
Bloomberg, the former CEO of the financial information company Bloomberg LP, established a formal foundation in 2006 to concentrate full time on his charitable giving.
The foundation’s tax forms show that his money managers were moving around millions of the mayor’s estimated $18 billion fortune in multiple offshore investments.
Reports of the foundation’s offshore investments first appeared in the New York Daily News in January and in the New York Observer this week.
The forms list foreign investments including more than $1.1 million transferred to a fund with an address at what is known as the Ugland House. The Cayman Islands building was singled out as a notorious offshore tax vehicle by the Government Accountability Office in a 2008 report.
The address is used by 18,000 companies, the Government Accountability Office said.
Many large U.S. charities, universities with big endowments, hospitals and other nonprofit institutions invest in offshore hedge funds to reduce their tax burden. The Managed Funds Association, which represents hedge funds in Washington, said the practice is relatively common.
Wealthy politicians sometimes invest in hedge funds with foreign addresses, too, although they face criticism over the practice.
Meg Whitman, a former eBay executive now running for governor of California, has been chided by some opponents recently over investments her charitable foundation made in funds based in the Cayman Islands and Bermuda.
Congress has talked in the past about changing the tax code to prevent charities from taking advantage of the offshore loophole, but has not done so.
Offshore financial centers such as the Cayman Islands, the British Virgin Islands and the Bahamas have scrambled to sign new international tax treaties and defend an industry that has flourished as an alternative to tourism. They have also lobbied Washington in an attempt to weaken any crackdown.
When asked Thursday about the appropriateness of his offshore investments, Bloomberg first said he had nothing to say.
When an Associated Press reporter pointed out that he signed the tax forms, he initially denied doing so, then relented, “If they are tax forms that I signed, I signed.”
His signatures appear on the state and federal tax returns that are publicly available and have been reviewed by the AP.
Bloomberg defended the investment practices, saying it is an unavoidable reality in a global economy.
“You can’t invest without investing around the world, you can’t have a business without doing business around the world,” he said.
After he formed his philanthropic foundation, Bloomberg put his investments in the hands of Quadrangle Asset Management, part of the Quadrangle Group LLC.
The firm was founded by Steve Rattner, who is now under investigation for his role in a state pension scandal.
Bloomberg’s relationship with Quadrangle ended earlier this year, but officials said most members of the team that managed his money at Quadrangle were moving to the newly formed firm that is handling only his money.
Associated Press researcher Judith Ausuebel and AP writer David B. Caruso in New York contributed to this story.
Source: The Associated Press.