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Pandora Papers Complete Bunk, Say Republican Legislators

The Pandora Papers have prompted policymakers to consider legal changes that would bring more transparency to the murky world of financial trusts and restore some of the wealth stolen by corrupt politicians and criminals to its rightful owners.

But here in South Dakota, where Republicans beholden to their trust-lawyer friends responded to revelations of our state’s facilitation of global corruption and erosion of democracy with cries of success!, legislators have not proposed a single bill dealing with the state’s trust industry. (Well, Representative Charlie Hoffman’s House Bill 1152 dealing with corpse disposal rights is placed under SDCL Title 55 on Fiduciaries and Trusts, but its focus is burial rights, not the actual financial workings of the trust industry.) Rather than taking action, Republican legislators are simply dismissing the evidence of the need for action:

Senate Majority Leader Gary Cammack (R-Union Center) told reporters in a news conference Thursday some lawmakers heard a presentation from people in South Dakota’s trust industry.

“I have all the confidence in the world that that sorta thing isn’t happening in South Dakota,” Cammack said. “The amount of vetting that they do to even accept a customer is absolutely amazing. They chase every rabbit down every trail.”

…“I don’t buy the report that was presented last fall,” House Majority Leader Kent Peterson (R-Salem) said. “The work that they do is done the right way” [Eric Mayer, “Republican Leadership Says No Trust Industry Bills Expected,” KELO-TV, 2022.02.10].

Kent, what part of the evidence revealed by the Pandora Papers don’t you buy? What did hundreds of journalists from 117 countries poring through 11.9 million records get wrong? Where are you and Gary hearing from anyone other than the trust tricksters themselves that the Pandora Papers are bunk and that everything in the trust industry is fine?

The trust industry has evidently decided to keep its head down this Session, proposing none of the usual arcane “improvements” that might give conscientious legislators and candidates for Governor the chance to question the wisdom of letting a handful of lawyers write the trust laws that help them get rich off global money laundering. They must be making enough money now, so they’ll let the Pandora Papers fade from the headlines before bringing their next round of personal wealth enhancements.

But given Senator Cammack’s assertion that South Dakota’s trust industry does an “absolutely amazing” job of vetting, perhaps we can at least be assured that, if Russia invades Ukraine, South Dakota’s responsible and patriotic trust managers will support global moves for sanctions by seizing any and all assets they hold for Putin and Russia’s oligarchs and handing them over to Uncle Sam. Or heck, maybe we could throw that Russian money into South Dakota’s budget and use it to pay for shooting ranges. What would Russia do, invade us?

21 Comments

  1. bearcreekbat 2022-02-14

    Cory, did you have a particular bill in mind that your think would improve SD trust law? For example, which specific existing laws would you propose repealing and/or amending? And what specific language would you propose in a new law?

  2. Nix 2022-02-14

    The complete bunk is that DWI Cammack
    Still has his job.

  3. Eve Fisher 2022-02-14

    “I have all the confidence in the world that that sorta thing isn’t happening in South Dakota,” Cammack said. “The amount of vetting that they do to even accept a customer is absolutely amazing. They chase every rabbit down every trail.”
    I seriously doubt that.
    I remember “A ring of savvy car thieves in New York exploited a bureaucratic weakness by registering many of their ripped-off Lamborghinis and Range Rovers in South Dakota, a state that lets people register out-of-state vehicles by mail and wasn’t thoroughly checking to see if they were stolen, the FBI said.” – and they did it through an RV registration sites (in Lake County, as a matter of fact) which registered around 1,500 out of state people as SD citizens, complete with auto and voter registrations. Nobody chased down ANY rabbit then. That particular RV registration site closed (in the middle of the night, BTW), but there are plenty still around. Because there’s plenty of money to be made in those out of state registrations.
    https://dakotafreepress.com/2018/11/10/lax-sd-registration-laws-help-national-crime-ring-steal-43-vehicles/
    Do I believe that the world of trusts is any better? Not for a minute.

  4. mike from iowa 2022-02-14

    Oversight does not exist in South Duhkota and truth is on the endangered species list and dying through neglect and disdain from magats.

  5. leslie 2022-02-14

    SD started the industry. Now it needs a deep forensic audit and expert committee analysis of what happened after the gate was left open. There are no professionals in the state other than insiders that know what is going on in this multibillion dollar “lottery laundromat”. However insiders have already gone on record saying they are extremely nervous about the quality of regulation and vetting. Yes it will be expensive. Legislators gave a tremendous gift to the lawyers and accountants deceased attorney/legislator David Lust helped spearhead. Now the taxpayers must pay to understand what has been let loose on the world from inside the state.

    The New York Times likely isn’t going to do our podunk little state the courtesy of deep investigative reporting for us. Thou ardent reporters Vickie Wick or Seth Tupper have the professionalism, who is really going to take on this multi-billion dollar Republican conspiracy? Dream on.

    I understand the trust industry also refuses masks, vaccinations, and hates baseball:) Neither legislator Peterson nor Cammack know anything more than disinformation talking points, is my bet. Silver tongues are Silvertones!

  6. bearcreekbat 2022-02-14

    Although my initial questions were directed to Cory it seems clear that many commenters have given this problem a great deal of thought. So I will ask anyone else that is commenting if they might have a good idea or suggestion on what statutory changes are needed to help stop an abuse of SD trust laws:

    1. Please identify the particular existing SD statute or statutes that you believe should be repealed to help address the problem;

    2. Please identify any remaining SD statute or statutes that should be amended rather than repealed to help address the problem;

    3. If you believe a new statute is necessasary please indicate the language that you would like to see enacted that might help solve the problem.

    Your new ideas have a great potential to be helpful in any efforts to approach sympathetic legilators open to changes in SD law to stop the abuse of the SD trust system. As I have noted in prior posts, however, I have had difficulty in finding troublesome existing SD statutes or coming up with new statutory language that effectively work to target the individuals that abuse the system while avoiding unintended harm to honest folks that use currently trusts for a variety of lawful and moral purposes., such as avoiding probate, preserving privacy, and protecting future generations, etc.

  7. Mark Anderson 2022-02-14

    My question is, what does the state of South Dakota get out of these financial trusts? Do the legislators get a pat on the back, a free meal, drinks? How easy is it to buy a legislator? I know I’m over the one limit South Dakota thingy, but really?

  8. larry kurtz 2022-02-14

    Hey, bcb I’m looking for a lawyer in Dewey County to do an estate plan. Can you recommend a couple?

  9. Cory Allen Heidelberger Post author | 2022-02-14

    Oh, Bearcreekbat, you do task me with your demands for practical proposals instead of inflated rhetoric. ;-)

    Let’s start with some reforms to address the harms demonstrated by the Pandora Papers. How about some disclosure requirements? Let’s require the trusts to reduce as much as we can before we run into some Constitutional Commerce Clause restriction. Let’s have annual reports on total amounts held by each trust, new amounts deposited, interest accrued, and tie those amounts to whatever information we can get about the owners. Maybe we can’t identify individual trust owners—just as I wouldn’t really like to require our local banks to post the names and account balances of every customer—but given the global nature of the industry and the global corruption the industry shelters, let’s publish breakdowns of wealth under management by country or smaller region.

    To check the externalities caused by wealth concentration and evasion of other taxes, let’s impose that wealth tax: impose some fraction of a percentage point tax on every dollar deposited in a South Dakota trust, a service fee for the privilege of securing one’s wealth here in our relatively lax regulatory regime. Let’s extend the bank income tax to the trust lawyers, charging them 6% on every dollar they make above $100K servicing their clients. South Dakota trust taxes wouldn’t restore wealth to the raided coffers of Russia, Ukraine, and Colombia, but they would do some social good here, funding schools and roads and parks and Medicaid expansion.

    To more directly address the hiding of ill-gotten gains, what do our laws currently say about the deposit of illegally obtained funds in South Dakota trusts? What sort of asset forfeiture laws apply to trusts? Under what circumstances can state officials seize money from South Dakota trusts harboring illegally obtained money? Under what circumstances can we fine trust companies and revoke their licenses?

    Part of the problem with regulating the industry is that it’s a remarkably complicated industry doing business in a very small community with very few professionals truly qualified to understand, explain, and write workable, responsible regulations… and those few qualified professionals are in the industry and thus are keenly interested in writing regulations that favor their interests. I don’t have a quick regulatory solution for this regulatory capture, but we need to create a body of professionals independent of the industry and thus willing to check the industry’s power. We need advocates in the Legislature and in public hearings who can explain what unfair advantages the trust lawyers have created for themselves and their clients and then propose effective regulations to rein in those selfish excesses.

  10. Arlo Blundt 2022-02-14

    Well…in South Dakota the mantra is “Everybody should pay their fair share of taxes.” This is why the poor pay a significant part of their income in sales tax on food. But….nobody is paying taxes, sales or otherwise on these trusts or the interest earned…its a free ride for the wealthy. If it is considered just state policy for the poor to pay sales tax on food, it should be just for the wealthy to pay an annual capital gain tax on their trust. Doesn’t seem that complicated.

  11. bearcreekbat 2022-02-15

    Cory, thanks for your thoughts on possible steps to take. It would seem, however, that like me you are not able to identify specific SD statutes that should be repealed, amended or expanded. Absent a more directed focus on existing statutes, it seems quite difficult to really make any progress in changing existing SDS law.

    And perhaps existing law already addresses a couple of your ideas and concerns. For example, if I am not mistaken SD statutes currently require all SD lawyers to collect and pay state sales tax for what they charge each of their clients, including trust clients. And likewise, I am unaware of any exemption to SD forteiture statutes that would protect unlawfully acquired funds from forfeiture simply because these funds are placed in a trust.

    Bottom line seems to be that unless we can identify some problematic SD statutes to be repealed, amended, or expanded, a call for reform seems hollow, especiually based on the Panama Papers which apparently did not identify any specific problematic SD statutes.

  12. bearcreekbat 2022-02-15

    larry, I haven’t had any direct experience with lawyers in Dewey County that I can recall so I am unable to suggest someone. Your best bet would be to talk with friends, relatives and individuals that you trust to see who might have helped them, or if that fails to identify a good estate lawyer, check with the SD State Bar as I think they keep a list of all licensed SD attorneys currently in good standing along with specific areas of practice.

  13. bearcreekbat 2022-02-15

    Arlo, correct me if I am wrong, but I don’t think capital gains realized on funds held in a trust are treated any differently under federal or SD tax law than capital gains realized on funds not held in a trust, although the tax rates might differ in some cases.

    2022 Long-Term Capital Gains Trust Tax Rates.

    Short-term capital gains (from assets held 12 months or less) and non-qualified dividends are taxed as ordinary income. Qualified dividends and capital gains on assets held for more than 12 months are taxed at a lower rate called the long-term capital gains rate. For trusts in 2022 there are three long-term capital gains brackets:

    0%: $0 – $2,800
    15%: $2,801 – $13,700
    20: $13,701 and higher

    Once again, these tax brackets also apply to all income generated by estates.

    Most trusts generate a majority of their income through investments, but this is not a hard and fast rule. Many manage assets such as buildings and property, for example. Any income generated by rents or rental fees from these assets would be classified as ordinary income, not capital gains.

    https://smartasset.com/taxes/trust-tax-rates

  14. All Mammal 2022-02-15

    South Dakota needs a self confidence boost to realize its worth. Always settling and selling out so cheaply. Know your worth, queen! What you lack in brains you over compensate in looks. Just remember, some say they love you for your beauty. They really love you for your booty!

    When I was in high school, my grandpa tried to gift me his old Nissan pickup for mowing his lawn. The transaction wasn’t allowed because there was no sales tax the state could collect. So he tried transferring it to me for $1. SD was unable to settle for making $.03 off a 30 year old pickup. As formidable a horse trader my grandpa was, they wouldn’t budge until they were able to make their 3rd sales tax off the same vehicle.

    If people aren’t able to do what they please with their own property without paying the state it’s portion, the state should play Billy Goat’s Gruff and not let huge hoards of money come and go without paying the toll.

    Sorry, BCB. Trolling under the bridge tax isn’t the adequate language you seek but billy goatin’ is the concept that comes to mind.

    Until she demands to be treated to at least a steak dinner before putting out, South Dakota is going to continue to be treated cheaply, used, and dropped off with a “Don’t call me. I’ll call you.”

  15. bearcreekbat 2022-02-17

    Cory, on its face that article looked like it would be quite helpful in identifying SD statutes needing work. I don’t recall seeing it before. As you indicate it identifies specific areas of SD statutory law. It doesn’t seem to advocate reform in most of those identified areas, however, for the purpose of addressing the issues raised in the Pentagon Papers. Indeed, as to privacy the article states:

    . . . . privacy is not the enemy here.

    Changing the South Dakota Trust Law to remove the default sealing of trust records in litigation, or eliminate the quiet trust, would do little to curb the influx of cash, ill-gotten or otherwise.

    And the idea that trusts are used to protect assets from creditors seems to have nothing at all to do with money laundering or illegal funds, as there is nothing is SD law that I have seen that offers any protection for such unlawful activity. Likewise the short statute of limitations for creditor claims againt a trust settlor runs up against the SD 2 year statute of limitations for challenging a transfer in fraud of creditors.

    The author’s only suggested changes that might address the Pentagon Papers issues seem to be related to so-called Domestic Asset Protection Trusts (DAPT), but then instead of explaining what changes are needed the author cops out:

    The problem is that a DAPT is a relatively tax-wonky concept, and it’s not as easy to fit into a news blurb or segment. It is much easier to make veiled references to secret trusts and let the reader/viewer do the heavy lifting of attaching the idea to “dark money” influences in politics and secret off-shore bank accounts.

    This article promises a potentially helpful focus on state statutes but fizzles out in the end offering little if any help identifying actual SD statutes that could be changed to reduce money laundering, foreign money, and whatever other issues the Pentagon Papers have raised.

    It still seems difficult, if not impossible, for SD voters to try to come up with language for an initiated law to repeal or change statutes that the Pentagon Papers imply that SD legislators have refused or neglected to repeal or change. Do you have any suggestions for the language in such an initiated law?

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