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Not Just a Few Bad Actors: South Dakota Complicit in Russian Oligarchs’ Undermining of Western Values

Bloomberg sends Anders Melin to downtown Sioux Falls to look into South Dakota’s facilitation of global corruption. Melin gets the usual a-few-bad-apples downplaying of the negative effects of our on-shore offshoring from state Task Force Trust law prof Tom Simmons:

“If you’re in the service industry, there are bad people that occasionally sneak through the cracks,” he says as chatter and Beatles tunes fill the room. “If you look at 12 million documents,” — the size of the Pandora Papers leak — “and you find half a dozen people that have, that’s not a bad error rate. But we want zero, of course.”

The Washington Post, which took part in the Pandora Papers investigation, identified nearly 30 U.S.-based trusts with assets tied to people or companies that have been accused of fraud, bribery or human rights abuses [Anders Melin, “The World’s Rich and Powerful Are Stashing $500 Billion in This Tax Haven,” Bloomberg Wealth, 2021.10.14].

Sigh. The problem is not just a half dozen or two and a half dozen bad actors. It’s the fact that our deliberately blinkered view of our role in secret global finance leads us to shoot our own ideals and interests in the foot.

Consider that a lot of the shady money documented by the Pandora Papers investigation is the wealth Putin’s crony oligarchs have raided from their country. The kingpins of the Russian regime use global trusts and shell companies to shield their wealth not only from power swings in Mother Russia but from the Western powers who might try to hold them accountable:

So if you’re an oligarch and you’re tight with Putin and you can do whatever you want, what happens when you’re no longer tight with Putin? What happens when Putin is no longer in power? So perhaps one of the reasons that Russian oligarchs move so much money into these offshore systems is to protect it, is to put it in a safe place where they and they alone can get to it, and the state can’t try to get it back. And it doesn’t – they’re protected no matter what happens politically in Russia. And, you know, there’s a couple of other reasons, too. And Russian business leaders will sometimes even talk about this. I mean – that the interest in moving money into safer jurisdictions, moving money into places offshore, whether it’s the British Virgin Islands or in Singapore, so that it’s not only out of Russia but perhaps even beyond the reach of Western financial institutions because if you’re a Russian oligarch, one of the other risks of doing business is that you might be sanctioned because of your close ties with the Russian president [Greg Miller, Washington Post reporter, interviewed by Terry Gross, “The ‘Pandora Papers’ Expose the Secret Financial Dealings of the Global Elite,” NPR: Fresh Air, 2021.10.14].

When we help the oligarchs hide their wealth, we as a state and a nation are complicit in the piracy and thuggery of a Russian regime that we never would have tolerated when that regime was a bunch of Godless Commies instead of silk-suited crony-capitalists who look a lot like the nicest folks working on Phillips Avenue. Former Estonian president Toomas Hendrik explains how we in the West have slid from the moral clarity we used to exercise in defending dissidents from Russian authoritarians:

Back in those days, we in the West at least had the moral clarity to stand up to the thugs, and to raise these issues with our governments, in our parliaments, in all possible international forums.

Paradoxically, it helped that our foes were ideologically anti-capitalist. Commissars and Politburo members could hardly buy villas on the Riviera, ski chateaus in St. Moritz, Switzerland, or apartments in a skyscraper owned by a U.S. president. They did not dock their 470-foot yachts in Saint-Tropez, France, or Piraeus, Greece. On our side, taking money from totalitarians counted as bribery or as espionage — bringing severe criminal penalties and social disgrace.

Today, the liberal democratic West has abandoned that one-time clarity. We have become partners in crime, colluding with the enemies of liberty, of our Enlightenment heritage of rule of law and human rights. We are the unindicted co-conspirators of our own demise and the destruction of Russia, collapsing under the weight of its corruption and thievery.

So it is not enough to celebrate the heroism of Navalny and his immense contributions to exposing the miasma of corruption in Russia. That serves only to give us a smug and utterly false sense of moral superiority. To truly honor Navalny, we instead must confront the stench of our own liberal democratic West.

That stench swirls from our own corrupt politicians and political parties, from our naive and greedy governments, and even the most prestigious, centuries-old universities. It swirls from businesses who prize profit over justice, truth and freedom. It swirls from bankers, lawyers and accountants who launder money and reputations. The revelations of the Pandora Papers, like the other tales of financial skulduggery that have come before, once again demonstrate that we ourselves are systematically complicit in the thievery and corruption that plague so many societies.

It is this corruption, our corruption, that aids, abets and sustains, indeed nourishes the murderous looting of the Kremlin’s boyars and their minions, as well as other odious regimes around the globe [Toomas Hendrik, “Why the West Has Itself to Blame for Russian Corruption,” Washington Post, 2021.10.11].

Professor Simmons and the lawyers and clerks on Phillips Avenue aren’t attacking and poisoning Alexei Navalny. But they are making excuses for, participating in, and creating in South Dakota one of the greatest bastions of financial secrecy that Russia’s autocrats happily exploit to preserve the wealth and power they use to oppress dissidents, journalists, and other defenders of democracy.

It’s not just a few bad actors. South Dakota, all of us, are bad actors for allowing this oppressive system to flourish in our state.

33 Comments

  1. John 2021-10-14

    The problem is sooooo republican . . . the trust officers are not accountable, the trustees are not accountable, the trust attorneys are not accountable. What could go wrong?! Meanwhile the public is denied estate tax funds to build our nation.

    Maybe if alleged pedophile Lazzaro (aka Epstein) and Dusty (aka Prince Andrew?) set up and transferred campaign funds via a trust they may have kept their secret. It’s amazing Dusty’s remained silent for 48-hours, is silence consent . . . asking for a friend.

  2. ArloBlundt 2021-10-14

    Well…it raises the question, “Who really won the Cold War.”?

  3. Francis Schaffer 2021-10-14

    Arlo
    Military contractors, military hardware suppliers, whoever loaned them the money, politicians, lobbyists, Wall Street central bankers. Not an exhaustive list just a start. Still waiting for the peace dividend.

  4. DaveFN 2021-10-14

    These investors taking advantage of South Dakota’s tax havens only in part make their own choices since their choice is enabled by the system as it is arranged to benefit them and only them, irrespective of their corrupt motives and irrespective of consequences of their actions and those of their enablers, both of which are detrimental to the greater good.

    Fully consistent with Noem’s approach to COVID: “I shall enable all of you to make your own [bad and willfully, if not deliberately uninformed] choices for yourselves and for others, irrespective of the consequences.”

    But do wash your hands [of it all], and talk to your physician about monoclonal antibodies [as though your physician won’t be the first to broach the topic].

  5. chris 2021-10-14

    Cory, it’s not as if these trust lawyers are just sitting out here in South Dakota soliciting their unique business model to russians and special folks in central america. I mean, come on.

  6. bearcreekbat 2021-10-15

    Boy I feel stupid. After previously failing to discover any significant SD secrecy statutes in the SD Codified laws, and after posting more than one comment on DFP asking Cory and DFP commenters to help me out by identifying the culpable secrecy or privacy statute, all to no avail, I begin to think the story about some sort of unique and powerful SD secrecy law was another mere Q-anon type conspiracy claim or trust company hyperbole designed to draw trust customers.

    But then saw this DFP story and followed Chris’ link and sure enough, some trust salesman was bragging about SD secrecy laws that foreigners could take advantage of, but the salesman still identified no specific statute. So I again searched online this time using the query: “What SD statutes grant more secrecy to trusts than other states?”

    I found many linked articles saying that such statutes and laws exist in SD, but found none with links or citations to the particular SD statute. Instead, the stories basically wrote something along these lines:

    Financial secrecy laws in South Dakota have made the state a prime location for foreigners who want to conceal and protect their assets, with tens of millions of dollars tied to people accused of financial crimes and human rights abuses, according to newly public documents.

    The Pandora Papers, leaked to the International Consortium of Investigative Journalists (ICIJ), explores the secretive offshore system the wealthy and power use to shield their money. The millions of pages of documents were shared with media partners including the Guardian, BBC Panorama, Le Monde, and the Washington Post.

    https://www.businessinsider.com/pandora-papers-south-dakota-rivals-offshore-tax-havens-for-financial-secrecy-2021-10

    But there was still no citation to the statute the various sources had discovered that aided miscreants in concealing assets, nor any links to such a statute.

    My search results also provided links to the entire trust section of SD Codified laws (SDCL ch. 55-3, which I had previously reviewed without success), but no links or cites to a specific SD secrecy, concealment or privacy statute.

    Then I noticed a result that appeared to be the gold standard – a link to a site from the South Dakota Trust Company, Inc., that purported to list the “Unique South Dakota Laws” making SD was the best place for a trust. Surely since so many had written about SD unique secrecy laws, this cite would finally direct me to the troublesome secrecy statute. The list indeed had a section devoted to SD’s unique priivacy and secrecy statute:

    Best Privacy Statutes in the U.S.:

    South Dakota has the most comprehensive privacy statute in the U.S. for trust matters involving court, i.e., automatic total seal in perpetuity. This may involve litigation, court blessed reformations/modification or decants.

    https://www.sdtrustco.com/why-south-dakota/unique-south-dakota-laws/

    Trouble is they didn’t identify this “most comprehensive privacy statute,” still leaving me in the dark. It couldn’t be the repeal of the rule against perpetuity since 17 states have the same repeal, and that rule has nothing to do with privacy or secrecy anyway. And the only SD statutes I found relating to court action all authorized a judge to order the release of trust information. If this secrecy claim about some SD statute is real rather than some bogus claim to sell stories or mere hyperbole to sell trusts to the uninformed and unwitting, then, boy, I feel stupid.

  7. DaveFN 2021-10-15

    Above format to link not working.

    Search “A BELLWETHER OF MODERN TRUST CONCEPTS: A HISTORICAL REVIEW OF SOUTH DAKOTA’S POWERFUL TRUST LAWS” in https://www.thefreelibrary.com/

  8. happy camper 2021-10-15

    Good article. We know they’re here. We knew years ago they were taking over old storefronts like Kresge’s in downtown Sioux Falls. At that time it was mostly just trust clerks because a presence was necessary here. The money management and more important jobs were in other parts of the country but the industry has grown because of our unique laws. It would be interesting to see the exact wording of the laws and why they compare so favorably to other states. If this can be explained SIMPLY to the public, they just might vote to amend the law. If BCB can’t even find them how many country bumpkins in the legislature even understand them? It might be worth asking your Representative, especially if they voted for the law. This might be something the new Democratic group could take on, although it’s not just a D issue.

  9. chris 2021-10-15

    hey bearcreekbat, try googling “South Dakota Foreign Grantor Trust”.

  10. Eve Fisher 2021-10-15

    This site has some excellent information, and it’s written by a South Dakota Trust Company that does “excludes foreign grantor trusts from its trustee service offering.” https://www.wealthadvisorstrust.com/blog/foreign-grantor-trusts-south-dakota-trust-law

    And this website says:
    “All records relating to the trust and its information, the grantor, the value, the beneficiaries, are perpetually sealed by the courts. This takes your estate plan out of the public eye and keeps it for you and your family.
    Another unique law is that the grantor can restrict notice of the trust to beneficiaries during their lifetime. This means that the person who establishes the trust isn’t required to inform the beneficiary (or anyone else for that matter) of the trust. A beneficiary might not know about the trust for decades before the grantor passes away.
    The real key here is that no one is required to know about the trust. This allows the grantor added privacy and protection as the trust is created and funded. ” https://www.firstdakota.com/news/why-south-dakota-is-the-best-state-to-house-your-trust

    Looking it up on SDLC, I think the key is the link between the trust having invested in a “closely held entity” and thus having to requirement to tell anybody anything about itself. SDLC 55-5-9
    https://sdlegislature.gov/Statutes/Codified_Laws/2072772

    Anyway, that’s all I have time to look up today.

  11. leslie 2021-10-15

    1/
    “The American billionaires mentioned in the secret documents include two tech moguls, Robert F. Smith and Robert T. Brockman, whose trusts have been the targets of investigations by U.S. authorities. Both were clients of CILTrust, an offshore provider in Belize operated by Glenn Godfrey, a former attorney general of Belize….

    Smith agreed last year to pay U.S. authorities $139 million to settle a tax probe and is cooperating with prosecutors. A U.S. grand jury indicted Brockman, Smith’s mentor and financial backer, in what prosecutors called the biggest tax fraud in U.S. history.
    Smith declined to comment. Brockman has pleaded not guilty. Neither CILTrust nor Godfrey have been accused of wrongdoing. Godfrey did not respond to requests for comment.”
    ***

    “I’m so sad that my state was the state that opened Pandora’s box”, Susan Wismer, a former lawmaker, told ICIJ.
    By 2020, 17 of the world’s 20 least-restrictive jurisdictions for trusts were American states, according to a study by Israeli academic Adam Hofri-Winogradow. In many cases, he said, U.S. laws have made it more difficult for creditors to put their hands on what they are owed, including child support payments from absent parents.
    Using documents from the Pandora Papers, ICIJ and The Washington Post identified nearly 30 U.S.-based trusts linked to foreigners personally accused of misconduct or whose companies were accused of wrongdoing.
    Among them is Federico Kong Vielman, whose family is one of Guatemala’s economic powerhouses.

    In 2016, Kong Vielman moved $13.5 million into a trust in Sioux Falls. Some of the money came from his family’s company, which makes floor waxes and other products.

    Guatemalan media reported for decades on the family’s ties to politics. In the 1970s, the family was identified as a key ally of Gen. Carlos Manuel Arana Osorio, the former Guatemalan dictator known as the “Jackal of Zacapa.” In 2016, the family’s luxury hotel in Guatemala City made a gift of 100 free nights to then-President Jimmy Morales. Guatemalan media outlets reported that a possible payment for “political favors” was suspected.

    In 2014, U.S. labor officials filed a complaint against Guatemala’s government that included allegations that the family’s palm oil company underpaid workers and exposed them to toxic chemicals. Company records show Kong Vielman was the former company treasurer.

    Another wealthy Latin American who set up trusts in South Dakota is Guillermo Lasso, a banker who was elected as Ecuador’s president in April. Leaked records show that Lasso moved assets into two trusts in South Dakota in December 2017, three months after Ecuador’s parliament passed a law prohibiting public officials from holding assets in tax havens. The records show that Lasso moved two offshore companies to the South Dakota trusts from two secretive foundations in Panama.

    Trusts set up in South Dakota and many other U.S. states remain cloaked in secrecy, despite enactment this year of the federal Corporate Transparency Act, which makes it harder for owners of certain types of companies to hide their identities.

    The law is not expected to apply to trusts popular with non-U.S. citizens. Another glaring exemption, financial crime experts say, is that many lawyers who set up trusts and shell companies have no obligations to examine the sources of their clients’ wealth.
    Clearly the U.S. is a big, big loophole in the world, said Yehuda Shaffer, former head of the Israeli financial intelligence unit. —The U.S. is criticizing all the rest of the world, but in their own backyard, this is a very, very serious issue.

    South Dakota apparently thinks “if we don’t do it, somebody else will.” South Dakota leads the nation downward with 81 secret trusts; followed by Florida and Delaware in the 30’s; Texas in the 20’s; and Nevada in the teens.

    Sin tax and secret trusts. Thus are the rubes in South Dakota.

    As Gov Kristi infamously mouths: “Not on my watch!”

    https://www.icij.org/investigations/pandora-papers/global-investigation-tax-havens-offshore

    In December 2018, the Bahamas enacted legislation requiring companies and certain trusts to declare their real owners to a government registry. The island nation was under pressure from larger countries, including the U.S., to do more to block tax dodgers and criminals from the financial system.
    Some Bahamian politicians opposed the move. They complained the register would discourage Latin American clients from doing business in the Caribbean. The winners of these new double standards are the U.S. states of Delaware, Alaska and South Dakota, one local attorney said.

    A few months later, a confidential document indicated that the family of the Dominican Republic’s former Vice President Carlos Morales Troncoso had abandoned the Bahamas as a go-to sanctuary for their wealth.
    For their new refuge, they chose a place 1,600 miles away: Sioux Falls, South Dakota.

    The family set up South Dakota trusts, leaked records show, to lay away various assets, including shares they’d held in a Dominican sugar company. The family did not respond to questions about the assets moved from the Bahamas to South Dakota.

    The Pandora Papers provide details about tens of millions of dollars moved from offshore havens in the Caribbean and Europe into South Dakota, a sparsely populated American state that has become a major destination for foreign assets.

    U.S. states have transformed themselves into leaders in the business of peddling financial secrecy.

    Meanwhile, most of the policy and law enforcement efforts of the world’s most powerful nations have stayed focused on “traditional” offshore havens such as the Bahamas, the Caymans and other island paradises.

    The U.S. is one of the biggest players in the offshore world. It is also the country best situated to bring an end to offshore financial abuses, thanks to the outsize role it plays in the international banking system. Because of the U.S. dollar’s status as the de facto global currency, most international transactions flow in and out of New York-based banking operations.

    U.S. authorities have taken action over the past two decades to force banks in Switzerland and other countries to turn over information about Americans with overseas accounts.

    But the U.S. is more interested in forcing other countries to share information about Americans banking offshore than in sharing information about money moving through U.S. bank accounts, companies and trusts.

    The U.S. has refused to join a 2014 agreement supported by more than 100 jurisdictions, including the Cayman Islands and Luxembourg, that would require American financial institutions to share information they have about foreigners’ assets.

    Year after year in South Dakota, state lawmakers have approved legislation drafted by trust industry insiders, providing more and more protections and other benefits for trust customers in the U.S. and abroad. Customer assets in South Dakota trusts have more than quadrupled over the past decade to $360 billion.

    2/
    For a few hundred or a few thousand dollars, offshore providers can help clients set up a company whose real owners remain hidden. Or, for perhaps $2,000 to $25,000, they can set up a trust that, in some instances, allows its beneficiaries to control their money while embracing the legal fiction that they don’t control it – a bit of paper-shuffling creativity that helps shield assets from creditors, law enforcement and ex-spouses.

    Offshore operatives don’t work in isolation. They partner with other secrecy providers around the globe to create interlocking layers of companies and trusts. The more complex the arrangements, the higher the fees – and the more secrecy and protection clients can expect.

    Another document in the Pandora Papers shows that banks around the world helped their customers set up at least 3,926 offshore companies with the assistance of Alemán, Cordero, Galindo & Lee, a Panamanian law firm led by a former ambassador to the U.S.

    A FORMER AMBASSADOR TO THE U.S.

    The document shows that the firm – also known as Alcogal – set up at least 312 companies in the British Virgin Islands for clients of the American financial services giant Morgan Stanley.
    A Morgan Stanley spokesperson said: “We do not create offshore companies. . . . This process is independent of the firm and at the discretion and direction of the client.”

    —Sounds a bit like Professor Simmons doesn’t it? A few bad apples in 12 million documents! Come on, look at the size, in BILLIONS, of these trust assets ($360 B in SD) and transfers ($5.5 B laundered and $4.5 B embezzled, below)!—

    The Pandora Papers investigation also highlights how Baker McKenzie, the largest law firm in the U.S., helped create the modern offshore system and continues to be a mainstay of this shadow economy.

    Baker McKenzie and its global affiliates have used their lobbying and legislation-drafting know-how to shape financial laws around the world. They have also profited from work done for people tied to fraud and corruption, reporting by ICIJ has found.

    The people that the firm has done work for includes Ukrainian oligarch Ihor Kolomoisky, who U.S. authorities allege laundered $5.5 billion through a tangle of shell companies, purchasing factories and commercial properties across the U.S. heartland.

    Baker McKenzie also did work for Jho Low, a now-fugitive financier accused by authorities in multiple countries of masterminding the embezzlement of more than $4.5 billion from a Malaysian economic development fund known as 1MDB. ICIJ’s reporting found that Low relied on Baker McKenzie and its affiliates to help him and his associates build a web of companies in Malaysia and Hong Kong. U.S. authorities allege they used some of those companies to shift money looted from 1MDB.

    —Simmons father was esteemed lawyer for Bangs Butler for decades and recently deceased legislator David Lust was parter in Gunderson Palmer, the largest western SD firms scrambling for secret trust business are directly benefiting from trust laws they craft.—

    These affairs often amount to shifting profits from high-tax countries, where they are earned, to companies that exist only on paper in low-tax jurisdictions. Using offshore shelters is especially controversial for political figures, because they can be used to keep politically unpopular or even illicit activities from public view.

    3/
    An ICIJ analysis of the secret documents identified 956 companies in offshore havens tied to 336 high-level politicians and public officials, including country leaders, cabinet ministers, ambassadors and others. More than two-thirds of those companies were set up in the British Virgin Islands, a jurisdiction long known as a key cog in the offshore system.

    In an era of widening authoritarianism and inequality, the Pandora Papers investigation provides an unequaled perspective on how money and power operate in the 21st century – and how the rule of law has been bent and broken around the world by a system of financial secrecy enabled by the U.S. and other wealthy nations.

    The findings by ICIJ and its media partners spotlight how deeply secretive finance has infiltrated global politics – and offer insights into why governments and global organizations have made little headway in ending offshore financial abuses.

  12. bearcreekbat 2021-10-15

    Many thanks to Dave FN, Chris, and Eve Fisher for your help and suggested links. The links provided by Chris and Eve were very interesting but didn’t provide a cite or link to some particularly unique SD trust statute that justified the claims of unique SD privacy. Eve linked SDCL 55-5-9, which I looked at but could not recognize any particular privacy requirements in that stutory language. Nevertheless I do appreciate these kind efforts.

    DaveFN’s direction to finding “A BELLWETHER OF MODERN TRUST CONCEPTS: A HISTORICAL REVIEW OF SOUTH DAKOTA’S POWERFUL TRUST LAWS” finally linked a scholarly article that actually did identify a particular SD statute (see footnote 180), that the article thought supported a secrecy statement virtually identical to the statement I quoted above from the internet site posted the South Dakota Trust Company, Inc., purporting to list all the “Unique South Dakota Laws” making SD was the best place for a trust. That statute is SDCL 21-22-28. It reads:

    Protection of privacy–Sealing and availability of documents.

    The privacy of those who have established a court trust or other trust shall be protected in any court proceeding concerning the trust. Upon the filing of any petition, the instrument on which the trust is based, briefs, and the entire court file including a trust’s inventory, statement filed by any fiduciary, annual verified report of a fiduciary, final report of a fiduciary, and all petitions relevant to trust administration and all court orders thereon shall be sealed upon filing and may not be made a part of the public record of the proceeding, but are available to the court, to the trustor, to any fiduciary, to any enforcer, to any beneficiary or the beneficiary’s representative as provided in chapter 55-18, to their attorneys, and to such other interested persons as the court may order upon a showing of the need.

    I had found that same statute earlier but didn’t give it the powerful secrecy and privacy effect trumpeted by Cory’s stories and so many Pandora based SD trust articles that I read, including the scholarly article referenced by DaveFN. The language of SDCL 21-22-28 that requires release of any and all trust documents and information “to the trustor, to any fiduciary, to any enforcer, to any beneficiary or the beneficiary’s representative . . . and attorneys,” and that permits the files to be released “to such other interested persons as the court may order upon a showing of the need,” sure seems to provide a “secrecy” loophole big enough to drive a semi-truck through. And, since this statute only dealt with sealing a “court file,” rather than SD trust files not involved in litigation, I didn’t, and still don’t, see how it supports broad generalizations about SD’s so-called unique trust secrecy and privacy protection laws.

    As has previously been pointed out, trusts are mere contracts between parties that in virtually every jurisdiction, including SD, are simply private matters that need not be filed or otherwise disclosed to the public. Indeed, that is one of the points of all testimentary trusts – avoiding probate court.

    Anyway, many thanks to DaveFN, Chris and Eve Fisher for their willingness to try to help me (and other DFP readers) learn the correct factual information, about SD trust secrecy and privacy laws.

  13. Ryan 2021-10-15

    just like bcb, i am still waiting to see what the problem is with SD laws…

    do our state courts have authority to file charges against foreign heads of state for alleged crimes occurring overseas? is our division of banking authorized to seize trust property without due process if there is an allegation that the funds haven’t been taxed by some rightful authority? what the heck do you people want? haha

  14. ArloBlundt 2021-10-15

    Well…Governor Frank L. Farrar was a banker and got into some banking controversies while Governor which a dairy equipment salesman named Kneip turned into some effective campaign issues. Farrar served one term of two years. He had more impact as a banker in Britton than he did as Governor.

  15. larry kurtz 2021-10-15

    Bankster and former South Dakota Governor Frank Farrar sat on Citibank and Wells Fargo boards. Elitism in South Dakota is Denny Sanford and Dana Dykhouse and careers in usury get your names on an underground lab, public buildings and a football stadium.

  16. Mark Anderson 2021-10-15

    Come on folks kristi is all for this, she almost lost the farm right? Although I’ve read that absolutely no farm has been lost to an inheritance tax, its still a good line to use for the base, no death tax, right? If you love the aristocracy you have to be for this one. If you can afford 10 minutes in space you have to have someplace to store your cash away from prying taxers. You think everyone is born equal?

  17. grudznick 2021-10-15

    My close personal friend Lar and I are still a little bitter about how Mr. Farrar can outrun and outbike and outskydive and just frankly even outeat us. It pisses Lar and I off, while Franks mind is slowly wilting away he can still out-do us in any track event. Lar is especially pissed about the banking, grudznick not as much. Frank did out-bank Lar by a large margin.

  18. leslie 2021-10-15

    Secrecy statutes not listed in the index, eh?:)

    Drafters of our annual update of trust laws clearly have global vision and expertise in subterfuge. As SD legislator Gene Abdullah once remarked: “no one in the legislature understands these trust laws that we pass….” to chamber laughter. David Lust publicly ridiculed Democratic legislator Susan Wismer CPA for questioning the wisdom of this secret global financial industry.

    California divorcee Chris Pallenk incurred legal fees of hundreds of thousands of dollars and a decade of litigation with his wife’s Sioux Falls SD trust company TRINITY for sole custody and child support. In re Cleopatra Cameron Family/Gift Trust 1996/1998 decided (2019) by SCOTSOSD, Justice Gilbertson concurring [who bragged about the size of the state trust industry upon retirement recently—SDPB]: 906 NW2d 369, 374 (stating [precedent] that courts “must be mindful of the Legislature’s public policy determinations….”), Child support payments from the South Dakota trust company were cut off, the Supreme Court declaring:

    Our Legislature has placed formidable barriers between creditor claims and trust funds protected by a spendthrift provision. (Citations omitted)

    More to the point, the Legislature has emphatically rejected even the specter of an argument that would allow a child support creditor to reach trust funds protected by a spendthrift provision. Indeed, this precise legal theory is identified in § 59 of the Restatement (Third) Trusts (2003) which states that “[t]he interest of a beneficiary in a valid spendthrift trust can be reached in satisfaction of an enforceable claim against the beneficiary for … support of a child ….” However, the Legislature anticipated such an argument …. [South Dakota’s] 2007 enactment of SDCL 55-1-25 … provides in part: In the area of creditor rights, the Restatement of Trusts (Third) and the Uniform Trust Code create many new positions of law as well as adopts many minority positions of law. The provisions of §§ 55-1-24 to 55-1-43, inclusive, affirmatively reject MANY of these positions. Therefore, the Legislature does not intend the courts to consult the Restatement (Third) of the Law of Trusts … § 59 …. (emphasis added)

    The legislature’s public policy determinations, eh?

  19. leslie 2021-10-20

    Finally some SDSU professors talking truth (tip of the iceberg) on SDPB this noon, about SD’s illicit financial industry far dwarfing Agriculture (whose participants love trusts to keep the family farm/ranch). Think SD political power is not owned by the millionaires and billionaires and mafias of the world?

    Perhaps the rubes will wake up?

    Bear, your doubts are odd!?

  20. bearcreekbat 2021-10-20

    leslie, did I miss a SD secrecy or privacy trust statute? If not, then SD law on trust secrecy doesn’t seem that much different than either the common law or other state statute with the possible exception of SDCL 21-22-28, which seals court files in trust litigation. I don’t know if other states have anything similar.

    But with the all disclosures authorized under SDCL 21-22-28, especially the provision that allows the court to order disclosure “to such other interested persons as the court may order upon a showing of the need,” even this SD statute doesn’t seem particularly helpful to grantors seeking additional secrecy protections beyond that provided by basic trust and contract law. What statutes or case law have you found that supports the various articles’ claims (as well as the trust salesmen’s claims) about some unique trust secrecy or privacy laws in SD?

  21. leslie 2021-10-23

    Bear: your “Briggs & Stratton” half a horsepower research engine does not compare to Tom Simmons law firm’s “426 Hemi” research vehicle used in the latter part of the last century that generated ceiling-high stacks of litigation into inheritance trusts, assets and land of historic Warren Lamb Lumber; nor the combined horsepower of a hundred staffed lawyers in a typical RAGA Republican attorney general’s state office; nor the tremendous legal horsepower of a federal agency (Anti-trust) or Department of Justice; and, much less an Apple, Google-sized or other ultra-wealthy research vehicle. No offense intended.

    If billionaires Bob&Becca Mercer use these secrecy tools in aim to “burn it all down” to avoid taxation, as he was quoted prior to saving Trump’s 2015 campaign, the benefit-of-the-doubt given to families and criminal conspiracies like the Trumps is odd, from my liberal perspective.

    South Dakotans’ “gee—shucks” posture accelerating world economic inequality, is only matched by their rube-like role ignoring the health of the 70,000 sq mi of our state’s environment experiencing the dire circumstances of climate change.

    But as is clear from recent lessons Mueller’s encyclopedic report taught the world, billionaires, unscrupulous high political office holders and aggressive corporations have learned that laws, rules, regulations and norms are often insufficient to hold indicted, impeached, foreign and immune perpetrators to account. And legislative research councils often overlook unintended consequences of complex insider-generated laws that states pass. With little or no actual oversight over decades, the trust industry in SD has served up a likely laundromat “buffet” within the $360B now held in assets, in secret, by the fictional inter-layered “paper”companies which reside in downtown Sioux Falls. It is not surprising you are unable to find a clear or specific law putting the public on notice. That *would* make these crooks quake in their boots! You remember the laws crafted by Jamie Diamond-types enacted after the Great Recession? Pure subterfuge.

    Perhaps deep understanding of global criminal financial transactions is necessary. I can’t imagine such information or advice comes easily.

    The Guardian article describes one $4B trust in SD that is suspicious. The ICIJ article spotlights several more suspicious SD trusts, and I mentioned Cleopatra Cameron, contacted since the Pandora Papers came to light, who openly admitted on NPR that she did not like her former spouse’s (child support) money-management style, after litigation over her strategy moving her trust(s) to SD was successful. Chief Justice Gilbertson’s 2019 SD Supreme Court overturned the lower court and a line of California courts’ several decisions, all which had been in the former spouse’s favor. The Sioux Falls TRINITY Trust company lawyers participated in the appeal, a unanimous decision, on Cleo’s behalf.

    Driving a semi-truck through a vague “needs-based” disclosure loophole likely will merely create more case law our state trust industry can litigate to build up and cement SD trust secrecy—the long (global) game Republicans are infamous for playing. Perhaps “technically legal”, until superseding law
    can catch up and overtake the reckless actions of a small red state captured legislature. This whack a mole strategy is tiring.

    With global power houses like Baker McKinsey leading the race to the bottom, the SD trust salesperson in Sioux Falls is not the one to speak in detail about “how it is done.”

  22. bearcreekbat 2021-10-23

    leslie, I hope my comments have not projected any intent to give “the benefit-of-the-doubt . . . to families and criminal conspiracies.” Rather, my interest was in whether Cory’s article, the Pandora papers, and other articles accurately described SD statutory trust secrecy or privacy law, especially since none actually referred any particular troublesome statute (nor some expansive SD Supreme Court interpretation of a particular SD secrecy or privacy statute).

    And I do realize that case law always can expand or contract the plain language of SD statutes, which, as you point out may have added extra secrecy and privacy protections to existing SD trust statutes through a liberal interpretation of those statutes. A name or cite to what you have found to be the key case or cases, such as the “Chief Justice Gilbertson’s 2019 SD Supreme Court” decision you reference in your comment, would be extremely helpful, given my limited ability to research. I always prefer to educate myself about the meaning of SD statutes by reading unique SD Supreme Court interpretations.

    Still, to date, neither Cory nor any one else on DFP has cited any particularly unique SD secrecy or privacy statute (other than the statute sealing court files from folks who are not “interested persons”) with language on its face, or through a court decision, providing some unique trust contract secrecy or privacy. Maybe the problem is a lack of such a statute. e.g. perhaps a statute that requires public disclosure and filing of all of trust contracts would help solve the purported secrecy problems? Even if this absence of such a statute is the problem, the lack of such a statute doesn’t appear to be unique to SD (although I have not researched other state laws for such statutes so I could be mistaken).

    Ultimately, it looks as if the claim of unique trust secrecy in SD is more a type of marketing hype presented by trust companies than based on any actual SD statutes, which has succeeded in drawing a huge number of wealthy people to place funds with SD trust companies. And I know there are other potential advantages in SD, such as protection from creditors (do the extremely wealthy really need such protection), and for folks who want a dynasty trust (although I can’t see any logical reason or objective why a grantor would want to tie up trust principle forever, and thereby avoid distributing the principal to a favored benficiary). Repeal of SD usuary laws also is often mentioned in these articles about SD trusts, but that seems entirely irrelevant?

    Anyway, I have no dog in the fight about SD trust laws. Rather, my interest is in understanding verifiable facts about SD law.

  23. Porter Lansing 2021-10-23

    Bear says, “Still, to date, neither Cory nor any one else on DFP has cited any particularly unique SD secrecy or privacy statute (other than the statute sealing court files from folks who are not “interested persons”) with language on its face, or through a court decision, providing some unique trust contract secrecy or privacy.”

    Perhaps, there aren’t any of the specific laws so often held over the IRS’s and FBI’s attempts to follow up on leads.

    Maybe, it’s just a facade, as weak as the corporate veil it’s trying to create.

  24. Anne 2021-10-23

    In my job which involved work with attorneys, I found the attorneys, particularly those dealing with press freedom and wrongful convictions, regarded South Dakota’s open records law as an absurdist joke compared with the laws in other states. It declares all records open to the public except those given specific exceptions. And then gives a list of exceptions that cover almost everything.
    1-27-1.5. Certain records not open to inspection and copying.
    The following records are not subject to §§ 1-27-1, 1-27-1.1, 1-27-1.3, and § 1-27-1.23:
    (1) Personal information in records regarding any student, prospective student, or former student of any educational institution if such records are maintained by and in the possession of a public entity, other than routine directory information specified and made public in accordance with 20 U.S.C. § 1232g as the law existed on January 1, 2009;
    (2) Medical records, including all records of drug or alcohol testing, treatment, or counseling, other than records of births and deaths. This law in no way abrogates or changes existing state and federal law pertaining to birth and death records;
    (3) Trade secrets, the specific details of bona fide research, applied research, or scholarly or creative artistic projects being conducted at a school, postsecondary institution or laboratory funded in whole or in part by the state, and other proprietary or commercial information which if released would infringe intellectual property rights, give advantage to business competitors, or serve no material public purpose;
    (4) Records which consist of attorney work product or which are subject to any privilege recognized in article V of chapter 19-19;
    (5) Records developed or received by law enforcement agencies and other public bodies charged with duties of investigation or examination of persons, institutions, or businesses, if the records constitute a part of the examination, investigation, intelligence information, citizen complaints or inquiries, informant identification, or strategic or tactical information used in law enforcement training. However, this subdivision does not apply to records so developed or received relating to the presence of and amount or concentration of alcohol or drugs in any body fluid of any person, and this subdivision does not apply to a 911 recording or a transcript of a 911 recording, if the agency or a court determines that the public interest in disclosure outweighs the interest in nondisclosure. This law in no way abrogates or changes §§ 23-5-7 and 23-5-11 or testimonial privileges applying to the use of information from confidential informants;
    (6) Appraisals or appraisal information and negotiation records concerning the purchase or sale, by a public body, of any interest in real or personal property;
    (7) Personnel information other than salaries and routine directory information. However, this subdivision does not apply to the public inspection or copying of any current or prior contract with any public employee and any related document that specifies the consideration to be paid to the employee;
    (8) Information pertaining to the protection of public or private property and any person on or within public or private property including:
    (a) Any vulnerability assessment or response plan intended to prevent or mitigate criminal acts;
    (b) Emergency management or response;
    (c) Public safety information that would create a substantial likelihood of endangering public safety or property, if disclosed;
    (d) Computer or communications network schema, passwords, or user identification names;
    (e) Guard schedules;
    (f) Lock combinations; and
    (g) Any blueprint, building plan, or infrastructure record regarding any building or facility that would expose or create vulnerability through disclosure of the location, configuration, or security of critical systems of the building or facility;

    (9) The security standards, procedures, policies, plans, specifications, diagrams, access lists, and other security-related records of the Gaming Commission and those persons or entities with which the commission has entered into contractual relationships. Nothing in this subdivision allows the commission to withhold from the public any information relating to amounts paid persons or entities with which the commission has entered into contractual relationships, amounts of prizes paid, the name of the prize winner, and the municipality, or county where the prize winner resides;
    (10) Personally identified private citizen account payment information, credit information on others supplied in confidence, and customer lists;
    (11) Records or portions of records kept by a publicly funded library which, when examined with or without other records, reveal the identity of any library patron using the library’s materials or services;
    (12) Correspondence, memoranda, calendars or logs of appointments, working papers, and records of telephone calls of public officials or employees;
    (13) Records or portions of records kept by public bodies which would reveal the location, character, or ownership of any known archaeological, historical, or paleontological site in South Dakota if necessary to protect the site from a reasonably held fear of theft, vandalism, or trespass. This subdivision does not apply to the release of information for the purpose of scholarly research, examination by other public bodies for the protection of the resource or by recognized tribes, or the federal Native American Graves Protection and Repatriation Act;
    (14) Records or portions of records kept by public bodies which maintain collections of archeological, historical, or paleontological significance which nongovernmental donors have requested to remain closed or which reveal the names and addresses of donors of such articles of archaeological, historical, or paleontological significance unless the donor approves disclosure, except as the records or portions thereof may be needed to carry out the purposes of the federal Native American Graves Protection and Repatriation Act and the Archeological Resources Protection Act;
    (15) Employment applications and related materials, except for applications and related materials submitted by individuals hired into executive or policymaking positions of any public body;
    (16) Social security numbers; credit card, charge card, or debit card numbers and expiration dates; passport numbers, driver license numbers; or other personally identifying numbers or codes; and financial account numbers supplied to state and local governments by citizens or held by state and local governments regarding employees or contractors;
    (17) Any emergency or disaster response plans or protocols, safety or security audits or reviews, or lists of emergency or disaster response personnel or material; any location or listing of weapons or ammunition; nuclear, chemical, or biological agents; or other military or law enforcement equipment or personnel;
    (18) Any test questions, scoring keys, results, or other examination data for any examination to obtain licensure, employment, promotion or reclassification, or academic credit;
    (19) Personal correspondence, memoranda, notes, calendars or appointment logs, or other personal records or documents of any public official or employee;
    (20) Any document declared closed or confidential by court order, contract, or stipulation of the parties to any civil or criminal action or proceeding except as provided under § 1-27-1.23;
    (21) Any list of names or other personally identifying data of occupants of camping or lodging facilities from the Department of Game, Fish and Parks;
    (22) Records which, if disclosed, would constitute an unreasonable release of personal information;
    (23) Records which, if released, could endanger the life or safety of any person;

    (24) Internal agency record or information received by agencies that are not required to be filed with such agencies, if the records do not constitute final statistical or factual tabulations, final instructions to staff that affect the public, or final agency policy or determinations, or any completed state or federal audit and if the information is not otherwise public under other state law, including chapter 15-15A and § 1-26-21;
    (25) Records of individual children regarding commitment to the Department of Corrections pursuant to chapters 26-8B and 26-8C;
    (26) Records regarding inmate disciplinary matters pursuant to § 1-15-20;
    (27) Any other record made closed or confidential by state or federal statute or rule or as necessary to participate in federal programs and benefits;
    (28) A record of a settlement agreement or litigation regarding investment or bankruptcy and involving the South Dakota Investment Council or the South Dakota Retirement System, or both, unless the settlement or litigation results in a finding of liability against the council or system, or both; and
    (29) A record of a settlement agreement or litigation regarding medical services involving any county hospital established under chapter 34-8 or any municipal hospital established under chapter 34-9.

    Source: SL 2009, ch 10, § 6; SL 2012, ch 11, § 1; SL 2019, ch 5, § 2.

  25. bearcreekbat 2021-10-23

    Anne makes a great point about the broad exceptions to disclosure of records held by the “. . . state, any county, municipality, political subdivision, or tax-supported district in this state, or any agency, branch, department, board, bureau, commission, council, subunit, or committee of any of the foregoing. . . . .” SDCL 1-27-1.1.

    As previously noted, however, since trust documents are merely contracts and are not required to be filed with any of the above sources, the provisions of SDCL ch. 1-27 don’t seem to apply.

  26. leslie 2021-11-26

    Thks Bear. Was it:

    In re Cleopatra Cameron Gift Trust, dated May 26, 1998, 931 N.W.2d 244 (S.D. 2019)?

    A new source, too, I want to read:

    https://read.macmillan.com/lp/american-kleptocracy/

    “$24-32 trillion” is the size of global kleptocracy. (e.g. off-shoring.” South Dakota’s new (secret) primary industry. Shame, shame,shame!

    Author Casey Michel.

    And little old red South Dakota is at the top. Every year our legislature burnishes its place there. Our captured Republican legislature. https://podcasts.apple.com/us/podcast/making-a-killing/id1551344782

    Bear, it has been awhile since reading Cleo, and I have zero passion left for Cory after he deleted posts w/nary a word containing hours of real research that can’t be replaced (b/c it was not relevant). But we are assured we can keep reading Grdz irrelevant tripe ad nauseam here, daily.

    Pass.

    Happy Turkey day. We had zita. https://www.theguardian.com/us-news/2021/nov/25/thanksgiving-myth-wampanoag-native-american-tribe

  27. bearcreekbat 2021-11-26

    leslie, thanks for the cite. I read the Cleo case with interest. As best I can tell it addressed an interpretation of the full faith and credit clause, rather than trust law. It did cite a SD trust statute prohibiting child support creditors from forcing collecting that debt from a SD spendthrift trust, and noted that the SD legislature specifically rejected a contrary rule in the Restatement of Trust Law. But I saw nothing pertaining to trust secrecy, nor expanding the meaning of any SD trust statute. That said, it was still a very iteresting case. Thanks.

  28. leslie 2021-11-27

    “…statute prohibiting child support creditors from forcing collecting that debt from a SD spendthrift trust, and noted that the SD legislature specifically rejected a contrary rule in the Restatement of Trust Law.”

    Bear, I seem to recall it was a *majority* precedential position that was recognized by the Restatement, which our lame SD Legislature in its “vast” disinformational wisdom in law and policy (snark), misunderstood, or at least Gilbertson’s Supreme Court misunderstood. That flimsy language in Cleo’s case could certainly entertain a truck driving through it, as you colorfully described in an earlier post.

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