(303)-875-4165
THE FRAUDULENT FLOW OF
FOREIGN WEALTH
The United States is known as the land of the free, and this is hardly more apparent than in the freedom with which vast sums of money flow into the country. Foreign wealth has found a comfortable home in the elite real estate of America’s biggest financial center: New York City.
That doesn’t sound so bad until you find out that many of the owners of these luxury Manhattan condos are actually shell corporations. Basically, shell corporations are facilitators of transactions that in and of themselves don’t participate in any significant business operations. They’re popular because they can hide the true identities of the property owners.
Their popularity is growing, as is apparent in one real estate complex in which last year, more than 80 percent of owners were shell companies. And who are the true owners? Often, it’s super-rich foreigners looking to discreetly park ill-gotten money. Corruption, ties to organized crime, regulatory violations, and financial fraud are the ties that bind these foreigners who choose to invest in U.S. real estate. The wealthy international elite is taking advantage of the fact that the United States doesn’t really require a lot of vetting before allowing untraceable money through shell companies to purchase high-end estate on U.S. soil.
Actually finding out who really owns a condo is frequently a Herculean task. It involves a search through business and court records, interviews with any cooperation. People who could be connected to the mysterious owner, examinations of property records, and looking into possible associations with lawyers and relatives.
In fact, because purchasers of real estate can register shell companies in the names of relatives, attorneys, accountants, or groups of investors, it can be practically impossible to nail down with certainty who the owners are. What’s more, ownership in shell companies can shift without notice or indication in property records, so even if you do track down an owner; it’s not always apparent if this is the one were looking for.
Elite attorneys and real estate agents are less than helpful. As long as a buyer has the money, signs the contract, and pays with no contingency, the deal will close. It’s gotten to the point where total privacy is expected, so contacting attorneys associated with mysterious real estate buyers don’t get much cooperation.
Even more worrisome is the fact that officials are addicted to this influx of capital from outside the country. Foreign investors who want to keep their assets anonymous have been flooding the high-end real estate market. Thinking about it from the perspective of city officials, how easy is it to turn away all that money, even if a lot of it is illegally obtained? Calls for greater transparency from shell companies have consistently failed.
One New York luxury real estate development isn’t just opaque metaphorically -t’s also opaque in a literal sense. The complex has dark glass that obscures the people living within, and there’s no indication of the residents’ identities inside or out. The condos are referred to as cryptic numbers like 52B, and reportedly, only about a third of the units are occupied at any given time. Many of the wealthy owners don’t live in the U.S. full time and count these condos as a second or third home.
The reason for the secrecy is rarely good. One buyer had ties to organized crime, while another was under investigation for owning a company that was polluting the environment. In all cases, the foreign rich are increasingly keeping their money tucked away snugly in an expensive piece of real estate that’s largely shielded from public scrutiny through shell corporations.
Ironically, the U.S. government has been trying to crack down on foreign countries that serve as destinations for offshore funds to avoid domestic taxes, but until our own laws start requiring greater transparency in shell corporations and high-end real estate transactions, the United States will continue to be a haven for corrupt, illicit, and fraudulent foreign funds.
Part of the reason our country thrives is because it attracts immense talent and investment from all over the world. While we naturally want to encourage more of the world’s resources to come to our shores, this effort can go too far. Officials in big shining cities like New York practically beg for foreign investment. In fact, New York offers tax breaks for condominium developments that represent a second or even third residence for ultra-wealthy buyers.
The ultra-wealthy tend to use shell companies to purchase and hold ownership in elite real estate. If you look at the situation closely, you’ll start to see that New York actually courts these types of individuals through favorable tax treatment while turning a blind eye to where the money comes from.
It’s true that many wealthy owners are simply celebrities or successful professionals like doctors, lawyers, and entrepreneurs, but there are also dozens of ultra-wealthy foreign investors who take full advantage of the lack of oversight in these high-ticket transactions.
One elite building in particular is home to at least 17 billionaires from Forbes’ annual list of the world’s richest people. The tower originally had 26 percent of its sales go to people from other countries, but that number has recently jumped to more than 50 percent. The whole scheme seems designed to help these individuals shield their identities from the public record, to the point where the owners can choose someone else’s name to list for them to get access to their own building.
Many deeds are now signed by a representative, signed illegibly, or even left blank. The registered phone numbers are under the owners’ lawyers’ names. The tax statements are addressed to their companies rather than to themselves. Even the transaction itself is designed to keep names out of it — because these deals are done in cash, there’s no mortgage statement or other public document to identify the true owner.
Privacy has become so important in these types of deals that high-end real estate agents and lawyers may actually go through an entire transaction without ever knowing the actual identity of the buyer. This trend toward opacity in high-end real estate deals is already the status quo, with many brokers insisting that commitment to anonymity is the only way to actually get these types of clients.
Part of the reason for this change is that newer luxury towers are condo developments, rather than cooperative boards where each resident jointly owns the building. In co-op boards, there’s bound to be extreme scrutiny to make sure you don’t let in the wrong person; for condo developments, each resident is wholly responsible for their own unit, so it’s a lot less relevant who your neighbors are. What’s more, the condo board requires residents to chip in and buy a unit if the board rejects a buyer, which creates further incentive for them to let in anyone with the financial capacity to buy.
As much as high-end brokers and city officials love the influx of foreign funds, they may not be so happy to learn where the money comes from in these deals.
The New York Times successfully tracked down the elusive owners of some of these shell corporations, and what they found was pretty horrific.
One owner was accused of using a commercial loan for personal expenditures, and another faced a fraud investigation involving an estimated 30,000 victims whom he profited from. One business magnate based in India moved money into the United States that he earned from industrial activities that harmed more than a hundred indigenous families — not to mention the employees who beat up residents and essentially held them as prisoners.
These stories will continue until something changes. Due to limited transparency and an unquenchable thirst for foreign investment, the United States has cemented its role as a safe haven for ill-earned wealth by shady members of the international ultra-rich community. It’s up to us to decide if we want this to be America’s legacy.
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YOU CAN GET BACK WHAT YOU’VE LOST,
OR SOMETHING EVEN BETTER.
Turn to God for strength to deal with your problem. God has a recovery plan for you.
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– 1Sa 30:8 NKJV
David went after the enemy and kept attacking until he recovered everything that had been stolen from him.
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