Dept. of Phoney "Charities": Mayor Bloomberg's Foundation - $300 Million Offshore

[Hannah Bell]

For those who still imagine the tax-exempt foundations of billionaires don't first & foremost benefit their sponsors, this article is a quick primer if you can read between the lines.


Bloomberg's Foundation invested more than $300 million offshore from its 2006 inception through 2008 -- at the same time he was spouting off about being dedicated to keeping money in NY:

"According to an extensive review of the mayor’s financial records by The Observer, even as Mr. Bloomberg was trying to counter the loss of taxes and other income from the richest New Yorkers, the foundation he controls was in the process of shuttling hundreds of millions of dollars out of the city and into controversial offshore tax havens that would produce nothing at all for the city in terms of tax revenue."

One of the reasons for offshoring Foundation Money:

"Nonprofits like the Bloomberg Family Foundation are tax-exempt, but some investments that aren’t related to an organization’s core mission can be subject to a levy called the Unrelated Business Income Tax (UBIT, for short). So to avoid more than 40 percent in federal and local taxes on unrelated businesses, nonprofits use a legal loophole, routing investments through offshore tax havens.

“It cleanses the unrelated business taint from the total return,” Harvey Dale, of the N.Y.U. School of Law, told The Observer. “You invest in the same thing through an offshore entity. You are making the same investment; you are just putting an intermediary entity in the middle. Instead of investing directly in the hedge fund, you invest in the foreign entity, which, in turn, invests in the hedge fund.”"

For years, Bloomie's "charity" had no offices, no phone, & no staff -- & he was using his City Hall staff (courtesy of the taxpayers) to do Foundation work.


So what did Bloomie's Foundation "invest" in?

"The bulk of the investments ended up in the Caymans. The Rattner team transferred more than $71 million dollars to Highfields Capital Ltd., the Caymans arm of a Boston-based hedge fund. (Last month, Highfields’ co-founder, Richard Grubman, was arrested after he allegedly beaned a Ritz Carlton valet with the keys of his BMW.) Another $67.8 million went to Brookside Cayman Ltd, the island home of Brookside Capital.

Other money decamped for even more exotic locales: $710,000 zipped to the tiny Grand Duchy of Luxembourg. Another $700,000 went to two funds on the island nation of Mauritius, about 500 miles east of Madagascar in the Indian Ocean. A Brazilian hedge fund got $304,000.

Mystique surrounds even some of the smaller foreign investments. In one, the mayor’s foundation transferred $104,000 in cash to a Cyprus-based oil services firm called Geotech Oil Services Holdings Ltd., controlled by a Russian oligarch named Nikolai Levitsky; Mr. Levitsky was once the first deputy governor of the resource-rich Komi Republic in Russia’s Northwest...

Compared with those of the great foundations of America, the Bloomberg investment strategies stand out. “I’ve never seen anything like it. It’s about as opaque set of investments as you can find,” said Rick Cohen, who covers foundations and charities for Nonprofit Quarterly, and who agreed to review the foundation’s tax return. “This involves extensive investments in hedge funds offshore, where the motivation and purpose is not discernible, so you can’t tell what kind of activity it is or who is going to benefit from the investments.”

"...almost nothing is known about the foundation’s investments since 2008..."

http://www.observer.com/2010/politics/bloomberg%E2%80%99s-offshore-millions?page=2


Now supposedly, Foundation capital is managed by a "disinterested" 2nd party, not by the Foundation's namesake. But this is bullshit, and everyone knows it, because the manager is hired by the namesake & board, the board is picked by the namesake, & the manager continues in his post only to the extent that his work meets with everyone's approval.

And having that amount of tax-free money to "invest" = power.

- Power to "win friends" (hey, I'll put $100 grand into your hedge fund/company if you do X for me)

- Power to influence political developments at home & overseas by channeling money in the chosen direction (funneling money to Russian oligarchs, for example -- or education deform hedge funders).

- Economic power, by funding one avenue of research or development above another (out of streetcars, into personal automobiles, to use a historical example), & by having inside information about the direction money is moving that benefits one's *personal* investments.


In return for this "investment power," the foundation is required only to donate 5% of total assets to some "charitable cause" each year, which pretty much guarantees that the principal will continue to grow.


But "donor power" has benefits similar to "investment power":

- "I'll donate $100,000 to your cause if you'll do X for me."

- "I'll donate $100K to vaccinate Indian children because that's where my corporation is moving & I want worksites not subject to measles epidemics.

- "I'll donate $100K to GMO research because my long-term strategy is to get a patent lock on the global food supply".

- "I'll donate $100K to 'educating' Americans about the need to reduce Social Security benefits" (this is what Pete Peterson's foundation is dedicated to).


Then there's the whole category of power involved in the disbursement of Foundation jobs, but I won't get into that.


These forms of power aren't terribly different from the power having lots of money gives anyone, except:

1. There's less oversight because of the different tax/disbursement reporting requirements for Foundation Income v. Personal Income v. Public Corporate Income. And, as Bloomberg demonstrates, the constraints that do exist on the ways foundation money can be "invested" can easily be gotten around by offshoring the money.

2. Foundation investments are mostly tax-free. The main surcharge is the requirement that 5% of total foundation assets be disbursed every year for "philanthropy" -- which includes, for example, Pete Peterson's Social Security Propaganda-Fests.

3. Foundations have the halo of "good works" around them (helped by tax-free public relations expenditures paid for by the Foundation). The general public is less sceptical of rich people who appear to be "giving back" -- so much the worse for them.


Foundations are one of the biggest scams on the american people going.

[Smarmie Doofus]

1. Our boy's been busy, it seems. Hard to keep up with him.

I guess that's the idea.

K and R