Su­per­donor Steyer used tax shel­ters

Hedge fund record draws com­par­isons to Demo­cratic at­tacks on Rom­ney in 2012

The Washington Times Weekly - - Politics - BY KELLY RID­DELL

Tom Steyer, the bil­lion­aire en­vi­ron­men­tal ac­tivist who is spend­ing $100 mil­lion to help elect Democrats this fall, is ral­ly­ing sup­port for en­ergy taxes that could im­pact ev­ery­day Amer­i­cans. But when he ran his own hedge fund, Mr. Steyer sought to help wealthy clients legally avoid pay­ing taxes, con­fi­den­tial in­vestor memos show.

Mr. Steyer’s strat­egy in­cluded es­tab­lish­ing funds in tax havens like the Cay­man Is­lands and Mau­ri­tius, and are rem­i­nis­cent of the tac­tics used by for­mer Repub­li­can pres­i­den­tial nom­i­nee Mitt Rom­ney dur­ing his ca­reer at Bain Cap­i­tal — which was re­peat­edly sav­aged by Democrats dur­ing the 2012 elec­tion.

For in­stance, Mr. Steyer boasted to in­vestors such as ma­jor uni­ver­si­ties that his hedge fund, Far­al­lon Cap­i­tal Man­age­ment LLC, had a “de­sire not to earn in­come which would be tax­able to our tax-ex­empt in­vestors,” one in­ter­nal memo re­viewed by The Wash­ing­ton Times showed.

Mr. Steyer also helped his firm’s wealthy clien­tele avoid the high­est of U.S. taxes and penal­ties by es­tab­lish­ing ar­cane tax shel­ters such as blocker cor­po­ra­tions — tac­tics most Amer­i­cans have never heard of or used.

The tax avoid­ance memos could com­pli­cate Democrats’ ef­forts to run pop­ulist, mid­dle-class tar­geted cam­paigns this fall to re­tain con­trol of the Se­nate by re­mind­ing vot­ers that one of their big­gest po­lit­i­cal bene­fac­tors is a clas­sic “one per­center” who made his re­ported $1.6 bil­lion for­tune by help­ing oth­ers avoid pay­ing taxes.

Con­ser­va­tives al­ready are sharp­en­ing their at­tack lines.

“To me, the most as­ton­ish­ing as­pect of this is the Democrats’ re­liance on this guy. While Harry Reid is on the floor of the Se­nate lam­bast­ing out-of-state bil­lion­aires for fund­ing po­lit­i­cal ac­tiv­i­ties, he has no prob­lem us­ing their money when it comes to his pur­poses. There’s a to­tally ab­surd dis­con­nect,” said Phil Ker­pen, pres­i­dent of Amer­i­can Com­mit­ment, a free mar­ket pub­lic pol­icy group, who also has writ­ten on Mr. Steyer’s busi­ness deal­ings. “They’re crit­i­ciz­ing the use of dark money, but Steyer’s money is about as dark as it comes.”

Now a po­lit­i­cal ac­tivist who left his hedge fund in 2012, Mr. Steyer is push­ing for a va­ri­ety of new taxes on the en­ergy sec­tor. In Cal­i­for­nia, Mr. Steyer sup­ports an oil ex­trac­tion tax, and he is fund­ing politi­cians who sup­port tax­ing car­bon, in­clud­ing Sen. Mark Udall, Colorado Demo­crat.

Mr. Steyer also has been a vo­cal ad­vo­cate for cap-and-trade mea­sures and has helped fund a de­fense of Cal­i­for­nia’s cli­mate change law. In­dus­try ad­vo­cates say such mea­sures nec­es­sar­ily raise en­ergy costs, which are passed on to con­sumers.

While at Far­al­lon, how­ever, Mr. Steyer used loop­holes in U.S. tax reg­u­la­tions to pro­duce max­i­mum re­turns for his elite clien­tele. That in­cluded us­ing tax havens in the Cay­man Is­lands, the Bri­tish Vir­gin Is­lands and Mau­ri­tius, “where there are no reg­u­la­tions at all, no call for trans­parency, and have lit­tle to no in­come tax rates,” said Matthew Gard­ner, ex­ec­u­tive di­rec­tor of the In­sti­tute on Taxation and Eco­nomic Pol­icy in Wash­ing­ton.

Re­li­gious con­ver­sion

Mr. Steyer, through his po­lit­i­cal ac­tion com­mit­tee, de­clined to com­ment.

A spokesman from Far­al­lon Cap­i­tal also de­clined a re­quest for com­ment from The Times. Far­al­lon was no­ti­fied of the con­tent of the in­vestor documents ob­tained by the Wash­ing­ton Times and didn’t ob­ject to it as in­au­then­tic or fraud­u­lent.

The bil­lion­aire has said lit­tle pub­licly about his hedge fund days, even af­ter news­pa­pers such as The New York Times ques­tioned why he once was heav­ily in­vested in fos­sil fu­els, an in­dus­try that con­flicts with his en­vi­ron­men­tal po­si­tions.

One of his few re­but­tals to the crit­i­cisms, how­ever, came in the form of a blog post late last month in which Mr. Steyer claimed to have un­der­gone a po­lit­i­cal con­ver­sion of self-de­scribed bi­b­li­cal pro­por­tions when he stepped down from Far­al­lon in 2012 to launch his en­vi­ron­men­tal move­ment.

“My ver­sion of a Paul on the Road to Da­m­as­cus con­ver­sion on the is­sue was the re­sult of con­tin­u­ing to learn more about the dev­as­tat­ing im­pacts of cli­mate change and as the sci­en­tific ev­i­dence be­came clearer, I re­al­ized I could no longer re­main at my com­pany — not when it meant sup­port­ing in­vest­ments in the fos­sil fuel in­dus­try,” Mr. Steyer wrote June 25.

In an op-ed pub­lished this week in Politico, Mr. Steyer ac­knowl­edged Far­al­lon’s in­vest­ment in fos­sil fu­els but said he has di­vested all his per­sonal fos­sil-fuel hold­ings since leav­ing the hedge fund.

“I left the firm and com­mit­ted my­self to ad­dress­ing global cli­mate change be­cause — based on the sci­en­tific ev­i­dence — I could not rec­on­cile my per­sonal val­ues with man­ag­ing a fund that by man­date is in­vested in all sec­tors of the global econ­omy, in­clud­ing fos­sil fu­els,” Mr. Steyer wrote in the July 14 ar­ti­cle.

He added: “To pre­vent any pos­si­ble con­flict of in­ter­est, I no longer own any stake in Far­al­lon or have any in­flu­ence over its ac­tions.”

Mr. Steyer didn’t ad­dress any tax is­sues in the op-ed. He also has de­clined to say whether his for­mer firm is man­ag­ing any of his per­sonal money.

Rom­ney and off­shore pol­i­tics

The mys­tery, in­trigue and po­ten­tial con­flicts for Mr. Steyer’s im­age as a pop­ulist en­vi­ron­men­tal cru­sader could be­come grist for Repub­li­cans hop­ing to blunt the im­pact of his spend­ing dur­ing the cam­paign sea­son.

When Mr. Rom­ney was run­ning for pres­i­dent two years ago, Mr. Reid, the Se­nate ma­jor­ity leader, cre­ated a firestorm in the na­tional me­dia by blast­ing Mr. Rom­ney on the cham­ber floor for not hav­ing paid U.S. taxes in a decade.

Mr. Reid never dis­closed where he ob­tained that in­for­ma­tion and told re­porters that they were the ones who should check out the claim. One of Pres­i­dent Obama’s at­tack ads at the time, how­ever, pro­vided a world map point­ing to the tax havens in Ber­muda, Lux­em­bourg and the Cay­man Is­lands, where Mr. Rom­ney owned as­sets.

Mr. Obama’s on­line ad ques­tioned: “Has Mitt Rom­ney avoided U.S. taxes by in­vest­ing mil­lions in tax havens? We’ll never know, be­cause he won’t re­lease his records.”

Mr. Steyer, through his rep­re­sen­ta­tives, also de­clined to re­lease his tax records to The Times.

Far­al­lon’s em­pire while Mr. Steyer was at the helm con­sisted of al­most 200 cor­po­ra­tions, part­ner­ships and LLCs set up in dif­fer­ent lo­ca­tions, in­clud­ing the Cay­man Is­lands, Sin­ga­pore, and Mau­ri­tius. All are known tax havens. In the Cay­man Is­lands, for in­stance, con­fi­den­tial­ity law states that a per­son can be im­pris­oned up to four years just


Tom Steyer, a for­mer hedge fund man­ager who helped wealthy clients dodge taxes, now is help­ing Democrats’ cam­paigns and push­ing for taxes on the en­ergy sec­tor.

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