Tax Day, Tax Havens

Muddy Waters Offshore

By Margie Burns

Beginning on March 16, the Securities and Exchange Commission now requires all companies to report Form D securities sales electronically. Form D is convenient in that it requires little detail. Most securities (shares) sold in the US must be registered, but Form D registration requires less disclosure than other stock sales. SEC Regulation D was intended to facilitate access to capital markets funds for small companies that might otherwise have trouble finding capital. The sellers are named, but investors are not.

In a holdover from the Bush administration, a large corporation or a highly capitalized global network of investment firms can avail itself of Form D.

On March 16, Form D filings show that hedge funds connected to Marvin P. Bush—youngest brother of former president George W. Bush, former GOP finance chairman in Virginia, and head of a northern Virginia hedge fund—raised over $1.6 billion by filing deadline. More Form D filings from March 12 show another $7.8 billion raised by Bush companies, companies directed by Bush co-directors, or spin-off companies. The total is almost $10 billion raised by Bush-connected hedge funds.

More than half of the money was raised offshore, in large Form D transactions for Bush-connected firms located on Grand Cayman and Tortola, British Virgin Islands. The island locations are known to be tax havens for high-net-worth investors.

Winston Global Fund Ltd, a private investment firm with Marvin Bush as director based in Tortola, raised more than $184 million. Back home on Tysons Boulevard in McLean, Va., Bush’s Winston Global Fund LP raised $308 million.

Global Strategies Absolute Return Fund Ltd—based in the Tortola office of Winston Global Ltd and formerly named Winston Absolute Return Fund Ltd—sold $39.5 million in investments. Global Strategies branches named Global Strategies Event-Driven Fund LP, Global Strategies Fund Ltd, Global Strategies Master Fund LP, Global Strategies Small Cap Fund LP, Global Strategies Small Cap Fund Ltd, and Global Strategies Small Cap Master Fund LP also raised more than $175 million. The onshore Global Strategies firms are located in the Atlanta office of a longtime Bush associate on Peachtree Street.

Two of Bush’s fellow directors at Winston Global, David Bree and Don Seymour, are based on Grand Cayman. March 16 filings show 38 Form D transactions for David Bree and 18 for Don Seymour. March 12 filings show four Form D transactions for Bree and two for Seymour.

The largest amount was filed March 12 by Diamondback Offshore Fund Ltd, Grand Cayman, where Bree and Seymour are directors: $4,505,725,935. Next largest is registered on the March 13 amended filing of Boronia Diversified Fund Ltd, where Seymour is a director: $1,072,967,251. Another partnership, Boronia Diversified Fund LP, also amended its March 12 filing to record $163,548,721. As stated, the Boronia funds share Bush’s Winston Global office and a Winston Global director.

Boronia executive Neil Power, in Sydney, Australia, returned a call for comment. Communicating clearly across oceans and continents can be difficult; Power, very courteous, had trouble understanding my name, replied to a question about securities by saying that the firm has made no such “sales of assets,” and referred to “Form B” (“D” as in dog, I clarified; “oh, D as in dog”). Saying that his position would make him knowledgeable about such transactions, he disclaimed knowledge of the Form D transactions.

In a follow-up email after being sent the SEC filings, Mr. Power said, “These filings relate not to a securities sale from our portfolio but to us registering with the SEC every time a ‘sale’ in a new state has occurred, or in other words every time we have received an investment from a particular US state for the first time. I think the below filings were us playing catch up and registering all previous sales, as we had not previously been keeping up to date with the filings.”

Power declined to answer questions about potential investments.

If Power’s guess is correct, then perhaps the $10 billion in proceeds registered on March 12 and March 16 was Bush-related firms playing catch up. (And some people say change has not come.)

Spokespersons of other companies contacted have been unavailable or have not returned calls.

Under SEC regulations, the Form D notice must be filed “within 15 days after the first sale of securities in the offering, not counting weekends or holidays. So the proceeds indicated on March 16 and March 12 could have been raised back to Feb. 27 or Feb. 25.

In any case, the network of relationships indicates that either the quiet transactions or the filings were coordinated, or both.

These unregulated transactions seem to have a lot of vibrancy offshore. Evidently huge amounts of “liquidity” can be raised in the British Virgin Islands and the Caymans even when we read every day about the skittishness of investors unwilling to wet their toes in American stock markets. That skittishness is used to justify enormous taxpayer bailouts for US banks and other financial entities, to induce them to invest in lending in the US housing, education and transportation sectors—but the brother of an ex-president can still find a remarkable splash of investor energy, even in Tortola.

Again, the hedge fund transactions mentioned share an offshore dimension. Broadly the money trail is always the same—from island base to shared personnel to shared company name back in Dallas or Atlanta or Stamford, Conn., or Chatham, N.J.

The companies have not clarified what kind of investment they contemplate, but realistic possibilities include short-selling. By definition, hedge funds aggressively play both the ups and the downs in the market by investing in stocks expected to rise and also short-selling stocks expected to go down. Theoretically they thus hedge their position against market downturns—hence the name.

Ironically, former Federal Reserve chairman Alan Greenspan refused to regulate hedge funds, or to monitor them stringently, thinking that increased regulation would drive them offshore.

The EDGAR ( list of new filers for March 16 includes numerous hedge funds.

The March 12 and March 16 filings may indicate a pre-emptive effort to move offshore ahead of new proposals for regulatory reform, such as those suggested by Treasury Secretary Timothy Geithner on March 26.

Proposals to regulate hedge funds are now being floated in Congress. High time: Federal oversight is overdue for the least monitored sector in financial markets, where billions of dollars get floated for scantly defined and sometimes (as it turns out) unsecured shares, in sales that also exploit an SEC regulation intended to benefit small companies.

No productive purpose can be served by setting up a vertiginous array of separate company names, filing separately with the SEC—sometimes with shades of difference as small as different punctuation for the same company address—for the sake of issuing and selling undefined shares. These mechanisms, exploited up to the highest levels of politics and finance, look like a security breach as well as a drain on the US Treasury.

Margie Burns is a Texas native who now writes from Washington, D.C. Email See her blog at

From The Progressive Populist, May 15, 2009

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