DAVID KESTENBAUM, HOST:
If you've been listening to this show, you know that this summer we tried to set up an offshore shell company. We've been hearing in the news about how Mitt Romney had offshore accounts but, mostly, we were just curious. There are estimates that trillions of dollars are held offshore. What is all that money doing there? What is going on in this secretive world?
ROBERT SMITH, HOST:
We didn't know anything about how to set up one of these things, so we started where it would logically start, by googling company registration tax haven and started calling. Chana did.
CHANA JOFFE-WALT, BYLINE: Hi, my name's Chana Joffe-Walt. I'm calling hoping to set up a shell company somewhere offshore - Cayman Islands, Belize, Bahamas. I don't know. I would love your help trying to figure out how to do that. Thanks very much.
SMITH: In no time, we had a shell company in Belize and we came up with - I thought it was a pretty clever name - Un-Belize-able (ph). And then we got another shell company in a secretive place that's a little closer to us. This one was in Delaware and this one was a little harder to come up with a name for it but we did - Delawho? (ph). There's an actual question mark on that company name.
KESTENBAUM: It turns out these shell companies - their uses - they fall into sort of three categories. Some are used for totally legitimate international business purposes. This is what Mitt Romney says his are used for. Two, shell companies can be used for totally illegal reasons - money laundering, tax evasion, that kind of stuff. And then there is this other third use for them that I don't quite know what to make of. It's called asset protection, and it's a way of hiding your wealth, hiding your wealth from anyone who might try to get it from you. Today, we're going to tell you how to do it.
(SOUNDBITE OF SONG, "TIME TO RUN")
LORD HURON: (Singing) It's time to run. They'll string me up for all that I've done. I'm going soon...
KESTENBAUM: Hello, and welcome to PLANET MONEY. I'm David Kestenbaum.
SMITH: And I'm Robert Smith.
KESTENBAUM: And Robert, today, the world we're about to enter, it can be very secretive. In fact, that's really the whole point of this.
SMITH: Yeah. If you're going to hide your money, the number one rule is don't do a lot of interviews and talk about where you hide your money.
KESTENBAUM: We did find someone to talk about this, to lay out how the whole thing works. He actually emailed us after our first story aired. His name is Bobby Casey, and he works for a company called Global Wealth Protection. He lives in Latvia, so we spoke over Skype. And for someone who hides things for a living, Casey is surprisingly open. He's setting up a big conference on this stuff in - guess where - on an island off the coast of Panama. The conference is called Global Escape Hatch and he says the people who are interested in asset protection, they have some money, typically $5 million to $20 million. So it helps to have the conference somewhere kind of nice.
BOBBY CASEY: I'm really looking forward to hanging out on the beach in Bocas Del Toro at a beautiful beautiful resort. We basically have the whole island resort to ourselves just for the event - scuba diving, surfing, sailing, horseback riding.
SMITH: Money transfers, offshore limited liability companies, second passports - you know, typical beach vacation stuff.
KESTENBAUM: All right. This may seem a little dodgy, you know...
SMITH: Yeah, it does.
KESTENBAUM: But we really wanted to understand this world and have Bobby Casey show us around and explain how he thinks. And from Bobby's perspective, there are lots of very good reasons to hide your wealth. He says, imagine you're a doctor and you're worried a patient might sue you for everything you own or say you want to hide money from your ex-wife.
CASEY: Or future ex-wives, ex-husbands. That's always that's always a big concern.
KESTENBAUM: Bobby Casey paints a picture of a world that has two kinds of people in it. The people with money and the people he calls financial predators trying to sue the people with money. In his view, the people with money, the entrepreneurs, the doctors, the small business owners, these are the good guys. He says he's working for the good guys.
SMITH: So we're thinking, we're good guys, too and we have shell companies. And, you know, we have this aspiration to sell a swanky PLANET MONEY T-shirt so let's just say, for argument's sake, for the show, that we make a few million dollars off this shirt. And...
SMITH: Come on, it's for argument's sake. And I don't know who would sue us, exactly, but let's just say we want to protect these dollars that we have worked very hard for. Build a fortress around it, as Bobby might say.
KESTENBAUM: So Bobby Casey says, if, somehow, we get rich, you know, it's unlikely we're going to have all that in cash. Some of it will be invested. So let's say we bought an apartment building with some of that money, out in Flushing, Queens. This is actually pretty common to have some sort of real estate investment. And say we're worried that, as landlords, we might get sued. We're worried maybe somebody claims they slipped and fell on the sidewalk outside of our building. So Bobby offers up asset protection trick number one - we can place our property 123 Main Street in a legal entity called a trust. And now when some lawyer tries to look in public records to find out who owns our building...
CASEY: They'll find nothing, basically. They'll find 123 Main Street is owned by 123 Main Street Land Trust.
SMITH: So the lawyer has to go to a judge and get a court order. He will ask for the trust documents and this is when he encounters the second layer of our financial fortress. So he scans down the document. He will not find the name PLANET MONEY anywhere on there. He'll just see that 123 Main Street is owned by some company in Delaware with a ridiculous name - Delawho? And then he goes to look up the documents on Delawho? and guess what. He still doesn't find out it's us. We're not listed in the public documents.
CASEY: It's kind of like the "Alice In Wonderland" down the rabbit hole. It makes it very complicated to chase down the owners.
KESTENBAUM: So how long would this whole thing take for them to actually even just figure out who owned that building?
CASEY: It could take weeks or even months.
KESTENBAUM: Robert, this is the crucial point about asset protection. The whole idea is to put up barriers to make anyone who might want to sue us really think twice about it.
SMITH: You know, I look at it it's kind of like putting that thing on the steering wheel of your car - the club - you know the big red metal bar. It doesn't make it impossible to steal a car but the hope is a thief walks by looks of that and goes, it's not worth it. It's not worth going after this Honda Civic if I have to saw through the club.
KESTENBAUM: There is a problem with this first asset protection trick, which is that it can only hold off the people trying to sue you for so long. I mean, suppose the lawyer is really on a mission, really wants to find us. And they do figure out that it's PLANET MONEY that owns that building and they sue us. There is going to be a moment when one of us at PLANET MONEY is sitting in a room under oath and we're told under penalty of law, you at Planet MONEY, tell us everything you own.
CASEY: Obviously, you want to disclose them because if they ever found out you didn't disclose something, you could be held in contempt of court and that's not going to be pleasant for you.
SMITH: Yeah it's really hard to do a show like this one from jail. So. So we want to do everything legally.
KESTENBAUM: All right. Don't worry, there is a second trick. There's asset protection trick number two. Because even if the person suing us knows that we own all this stuff - right? - even if the court pries it out of us, it doesn't mean they can actually get their hands on that stuff. So asset protection trick number two - Bobby Casey recommends all his clients keep some money out of the country entirely. So maybe in a shell company, say, on the beautiful Caribbean island of Nevis that has a bank account in Latvia.
CASEY: Now you're not dealing with just one country but you're dealing with three different countries - right? - the U.S. court system, Nevis court system and the Latvian court system.
SMITH: Think about this. You actually win in U.S. court, you celebrate, you're the lawyer, we're going to take down that Planet MONEY, we're going to get their money. And then they have to go find it. They have to go to two other courts, they have to fly basically around the world to chase us.
KESTENBAUM: And the idea is that lawyer would have to fly to Nevis and get the Nevis court to honor the U.S. court ruling. And Nevis - that Nevis court system requires a $10,000 bond be put up. So the person suing you as to put up $10,000 just to try to get past that barrier. And then, even if the lawyer coming after us wins...
SMITH: In Nevis?
CASEY: Then they have to fly to Latvia to do it all over again.
SMITH: And this is where it gets really evil because we could put our money in many different banks, in many different countries. We can run this lawyer around the globe 10 times and maybe there's not even enough money in any of these accounts to make it worth their while. Maybe the lawyer gets the Latvian fines, there's just $10 in the account.
CASEY: Yeah. And then you've got a really, really angry creditor at that point.
KESTENBAUM: It almost seems like it's worth setting up 20 of those, 19 of which are empty.
CASEY: (Laughter) Well, that could get very expensive, to set up 20 of them.
KESTENBAUM: Unfortunately, Robert, asset protection trick number two, it is also not perfect. It's possible that the judge here in the United States ruins our international game of hide and seek and just says, you know, PLANET MONEY guys, you lost this lawsuit. It is your job to bring all that money back to the United States. And until you do, you can cool your heels in jail, my friends. That could happen.
SMITH: You know, we've been talking about this whole game of hide and seek like it's some private party who's trying to sue us and come after our money. But it occurs to me that, like, all of these techniques could just as easily be used to cheat the U.S. government out of money. You could use the same techniques to hide money from the IRS.
KESTENBAUM: I asked him about that.
So no one ever calls you and says, really what I want to do is evade taxes, can you help me do that, also?
CASEY: Oh (unintelligible) all the time. Yeah. I have that call all the time and I tell them they need to call somebody else because I'm not interested in dealing with that sort of thing and I'm definitely not interested in putting myself at risk for giving you that type of advice.
KESTENBAUM: Bobby Casey says he is simply trying to help people protect the money that they've earned. I talked to several lawyers about this. Like, is asset protection common? How is it viewed? And I was told, you know, look, there are simple versions of asset protection that are very, very common. It's common for people with money to put some stuff in their spouse's name or in a trust for their kids. But there are a couple catches. Like, you can't do this at the very last minute just as you're being sued. Then it could be considered fraud. But otherwise, as long as you pay your taxes and follow the rules, it is legitimate.
SMITH: It may be legitimate but the reality of this business is that you will piss people off. The people who want your money, they may give up but they will hate you forever. So just as a precaution, some of the people at Bobby's company prefer not to use their real names. In fact, the director of U.S. operations, he goes by the name of Adam Wolfe but it says right on the website that this is not his real name. And they do put a photo of him up but it's him riding a motorcycle dressed in black with a helmet on. You can't actually see his face.
CASEY: Actually it's kind of funny. The - I told him, I said, you need to give me a photo and the first one he sent me was like - it was just a photo of somebody with the giant, like, Magnum P.I. sunglasses and a huge fake mustache. It was quite funny. I called him up. I said, man, I can't run that. Give me something real. That's ridiculous.
KESTENBAUM: At the end of my conversation with Bobby Casey, I had this question. I mean, we've been imagining PLANET MONEY in this scenario as a kind and good landlord that's hit with a frivolous lawsuit. But, you know, suppose we're actually really bad landlords - right? Suppose we are too busy working on this show, we don't have time to fix anything, the electrical wiring is going bad. Heat isn't on, the roof is falling in. I mean, what if somebody really did get badly hurt and it is our fault. You know, in that case, it seems wrong that we should just be able to put up all these barriers so some little old lady's lawyer can't get her enough money for a wheelchair.
SMITH: When you put it that way, it does sound pretty bad. And you could argue that this is why we have a court system - to decide who is some scumbag filing a frivolous lawsuit and who's the real victim.
KESTENBAUM: Do you feel like the U.S. legal system gets things right at least half the time?
CASEY: (Laughter) That's a tough question, you know.
KESTENBAUM: Well, I just mean if you think it's right, even half the time, and you've helped someone hide their assets then half the time that money really is due somebody else, you know, who won the lawsuit, not them.
CASEY: I would say there is way more frivolous, unjustified litigation in the U.S. than there is justified litigation.
KESTENBAUM: There are certainly people who would argue with that but as one lawyer said to me, asset protection? It's legal. Is it moral? That's a question for the bishop.
(SOUNDBITE OF SONG, "TIME TO RUN")
LORD HURON: (Singing) I will run but I know that I will be there beside in my favorite ideas...
SMITH: As always, we love to hear what you think of the show. Write us - email@example.com.
KESTENBAUM: Or you can find us on our blog, npr.org/money. I'm David Kestenbaum.
SMITH: And I'm Robert Smith. Thanks for listening.
(SOUNDBITE OF SONG, "TIME TO RUN")
LORD HURON: (Singing) ...Run away for you, I gonna count the days 'til you make it through. I did it all for you, well I hope you live the life you want to. My time is spent, baby please don't tell 'em just where I went. I wanted everybody else in the world to know...
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