US Is Main Actor In Panama Papers Tax Evasion: Author Bernstein

tax havens. Here to talk about this whole underworld of secretly stashed money is Jake Bernstein. He's author and reporter and journal it and uh the person who wrote the book Secrecy World Inside the Panama Papers Investigation of Alyssa money networks and the global Elite. He joins us here in our eleven three Oh Studios. Jake, can you give us a sense of just how big this secret world is and who the players are that have stashed their

money in it? Lisa, I mean, it's only an estimate, but there are trillions of dollars that throw that flow through this underground economy. I mean, just to give you a taste of it. The U. S. Treasury estimates that three hundred billion dollars is laundered in the United States every year. That's just in the United States. Um. And to give you a taste of of what of what the Panama Papers sort of reaped for tax authorities worldwide.

To date, they've recovered half a billion dollars in taxes that were evaded as a result of the Panama Papers leak. What did you learn in doing all of your investigations for the book in terms of the motivation behind all of this, Because there are a lot of ways that you can hide your income, there are many ways in which you can avoid paying taxes. What did you come away with on a thematic basis? That's interesting question because as one most like Fonseca lawyer, this is the Panamanian

law firm behind the Panama PAPERSUS. One lawyer said candidly in a private email. He said, of our business is to help our clients legally avoid taxes, and so I think that's the major so impetus for people who use this off shore system. But at the same time it's also being used for criminals, money launders, drug traffickers, ponzi schemers, all those kinds of things that we found in the

Panama papers. So how does this work? Ah? Well, I mean there's there's different layers of sophistication, right, I mean, the the simplest way is is you get an anonymous shell company in Panama or the British Virgin Islands or a place like that, and they use that to open a bank account somewhere, maybe in Singapore, maybe in Cyprus, someplace like that, and then you can do sort of business. But true wealthy people are much more sophisticated. They do layering.

So you have an anonymous shell company, it'll have fake directors, It'll be attached to a trust, which will be attached to a foundation, and so there's different layers that makes it almost impossible to figure out who's actually behind it. Is there any guidance that you've seen from governments or law enforcement officials in order to deal with this in the future, because I can't imagine that everybody's just shut down their entire system as you've described it. It's probably

morphed into something else, perhaps even more sophisticated. You're absolutely right. I mean, this is one of the things that I talked about in my book Secrecy World, and that you can really see through the Panama papers is this is a living organism almost. I mean it evolves over time to to take advantage of different things. And you know, one one avenue is shut off, it moves to another place. So for example, if the b v I tightens up, uh, you know, stuff moves to Singapore, moves to Dubai and

uh and it continues on. We talked about who the people are behind this world. It's from rich people all over the world, right, Um, But Russia has played a sort of central role in this universe. Can you explain why that is? Sure? I mean, part of it is the fact that there is you know, the rule of

law as tenuous at best in Russia. So people are are eager to to send their money out of the country because they're afraid that someone might take it because the judicial system is rigged, right, So there's major offshore and there's been a lot of instability, you know, and and and prices are fluctuated, and so that's part of the motivation. Also, people want to park their cash someplace where it's safe, oftentimes in real estate here in the

United States or in London places like that. But at the same time, the oligarchs and UH and the power centers around Vladimir Putin himself are very adept at using this. A number of them have backgrounds in the KGB and they have been working with the offshore system for decades. They know how to use is it and how to hide their activities? Really well, how prevalent is it among

the wealthiest individuals in the United States? I mean, I know that there's been some talk of the current cabinet of the US UH government that it's the wealthiest cabinet ever in the history of of the country. Um, are they tied in it all? Well? There was a second leak after the Panama Papers, called the Paradise Papers, which centered around a law firm in Bermuda called Appleby, and there were more than thirty one thousand Americans found in

that league alone. So it's it's quite prevalent, and it is being used by wealthy all over the world, including the United States. The Paradise Papers UH revealed a number of Democratic wealthy donors and Republican wealthy donors, and as you say, a number of Trump cabinet members and donors, including Wilbur Ross. The Secretary of Commerce. Is there an industry uh that is out there actively pursuing this kind of business? I mean yes, it's there's a whole infrastructure

behind the secrecy world. And it's bankers, it's lawyers, it's accountants, it's trust managers. Um, it's it's thriving. They have meetings, um and uh, and they're doing well that they do not feel any I mean the more regulatory rules that are overlaid on top of this just means more business

for them. That's where I was going with this. So, as a result of increased attention to this very issue, has this is this something that you can fight from the regulatory side or is there a way to I don't know whether there's a way to convince individuals who do this kind of stuff to just stop doing it because it's so complicated. What's so interesting is that what the Panama paper showed was this firm, most Conseca, that

had this crazy business model, right. They wanted to be the McDonald's of the off shore system, right, high volume, low cost, and they want to make it available to lots of people, particularly the New Wealth in the developing world. Well that's starting to change now and the bar to entry is getting higher. So really it's for people who who are who are really rich, and you know, not just the merely wealthy, but the uber wealthy, people who

have fifty million dollars and more. And these people do not look at the nation state in the same way that most of us do. Right. They have homes in London and New York and in some place sunny, and they have bank accounts in Switzerland and lots of different places, and uh, and it's very hard to sort of appeal to their conscience and say, oh, you know, you should pay attention to the place where you were born or

where you make your money. So it's a challenge, but I mean, it's going to require a population that gets awoken to what's happening here. One thing that you said when you walked in is it's sort of interesting how central of a role the US plays in this secret world. Can you just quickly give a sense of what you're talking about? Sure? I mean, one of the people have have have said, and I think it's probably true that the the US is the largest tax haven in the world.

Now this strikes many people as crazy, right, They think of tax havens as a sunny place with palm trees and ocean breezes. But in fact, Delaware, Wyoming, Nevada are pumping out tens of thousands, hundreds of thousands of these anonymous shell companies all the time. I mean, the Delaware Public Registry pulls in a billion dollars a year on

fees just associated with this business. It's great for them, and the Secretaries of State, led by Delaware have made sure that the rules have always been very favorable to them for this, even though the State Department and Treasury Department have complained bitterly that this system Delaware companies are being used by Russian mafia and transnational gangs. Jacob Bernstein,

thank you very much. Author reporter his book Secrecy World Inside the Panama Papers, investigation of elicit money, networks and the global elite. Follow him on Twitter at Jake Underscore Burns Sam Let's turn our attention out to the world

of gaming. Brian Edgar is our senior gaming and lodging analysts for Bloomberg Intelligence, and he can be followed on Twitter at Breaking Call and Brian, I understand that the kind of epicenter of the world of gaming might be shifting just slightly to upstate New York, cat slots, a hundred and thirty table games, one point to billion dollars, three hundred and thirty hotel rooms, a golf course, a water park, and it's just five miles from uh Monticello

Raceway exactly. No, it's a big year for domestic gaming outside Vegas, with anywhere from five to fifteen casinos opening up. You mentioned the one of the cat's skills. That's a big deal because Genting is a powerful company with a lot of Asian properties. That property will be ninety miles from New York City. There's a cross marketing opportunities. So we are seeing this year a very big and consequential build out of casinos in various states within the Northeast,

which is which is a very pronounced development. So what's driving this because typically we think of Las Vegas. Uh, it has the weather, right, I mean, if you've got the snow, it's not exactly as encouraging. They have the laws that allow it. What's driving the Northeast build out? I think it's really tapping new markets there's high population density. You've got the build out and development of the Western New England market where MGM will be the Catskills market.

As you mentioned, uh Atlantic City had a monopoly in the northeast up until the that's all changed and now the northeast market is a ten billion dollar five state market, the same size as Las Vegas. So it really it's about where the people are and the opportunity to bring those casinos closer to population centers. Is it likely that this will encourage even more building and as a result we're gonna end up with a glut of gaming opportunities. Well, the one state I would point to where there is

an unusual a man of expansion is Pennsylvania. Pennsylvania just in October authorized ten new uh mini casinos to be built throughout the state. That's on top of twelve existing racetrack and stand alone casino So Pennsylvania authorized for tax revenue generation purposes a very large build out. It will include slots and airports and and up to five video gaming devices at truck stops. So Pennsylvania itself is making a big rab for a big move towards expanding gaming

in that state. So yes, there's some cities where it's very rapidly development. So what does this all mean for Atlantic Avenue. I mean it has obviously gotten pretty run down. Will it rebuild, will it try to compete, or will this just sort of further deteriorate the outlook Atlantic City. Despite its many problems, it went from twelve casinos to seven after an extensive shakeout. At least now is starting to grow. Same store growth in Atlantic City was up

seven percent last year. Um, Burgata uh is still the dominant property owned by MGM that's in the market. Um, we'll see I think we're what you're doing now is this summer you'll see two new casinos in Atlantic City

opening up. You've got both the hard Rock Casino and the and the Ocean Ocean Resort will grow the market by almost The real test will be whether or not you've get enough critical massive gaming attractions to bring in enough people to offset the potential adverse effect, competitive effect and other properties. So who's gonna be the big beneficiary? What companies are the ones that really are going to

be able to take advantage of this build out? You know, taking a step back and looking at the northeast horizon, generally, MGM has got a big advantage because it has really a corridor of casinos from National Harbor in Maryland to Burgota, Atlantic City and as a September Springfield and Massachusetts. So it really has got a walk on a corridor of powerful properties with a big brand name in the northeast. There are some losers as well, and I can talk

about those. Uh in Pennsylvania. Penn National is going to face off against some potential new small casinos in that state. And also penn has a racetrack casino in Massachusetts, Plain Rich Park, which is going to get new competition both from MGM and Springfield and from Tiverton in Rhode Island. So I just sort of backing out a little bit. I just want to get a sense of how gambling revenues have been. I mean, it's been a pretty good economy.

Does that usually mean that people cample more? Do they gamble less? Because they actually have jobs that can pay their bills? The good economy helps. But at the same time, we've had a lot more competition. So if I were to characterize US gaming outside of Vegas, it's a slow growth, mature industry, maybe anywhere from you know, minus two percent to plus two percent same store growth. It's growing modestly.

It's a relatively mature industry. There are pockets of opportunity, but compared to thirty years ago, Uh, the domestic gaming scene outside Las Vegas in many parts of the country is fairly well built out. Again with these pockets of opportunity like Western New England, for example, online gaming and he thought gaming is right now on an intrastate basis limited uh to Nevada and New Jersey. There's talk about

placing and elsewhere. Uh, there's uh there's an online gaming element to what's happening in Pennsylvania, which had this big, massive expansion of gaming. So online gaming may continue to develop state by state intrastate, but for now on a federal interstate basis that's a bit more problematic. Brian Eger, thank you so much for joining us. Brian Egger, senior

gaming and lodging analysts for Bloomberg Intelligence. Talking about the gaming industry, there have been many stories about the various method that Uber used that really uh went up to the edges of the law. And there's a phenomenal article on the Bloomberg today. Uber used secret tool for keeping the authorities in the dark. That just builds on some of what we have heard in the past. Joining us now is one of the authors of that article, Olivia's Aleski.

She's a technology reporter for Bloomberg. Olivia, what is this secret tool and how is Uber using it? Well, let me give you some contacts. First, U in Uber really started to get a lot of attention from the authorities. Uh. These authorities, especially in the you believe that the company was violating tax laws and labor laws and was really UM sort of playing too hard and too fast in their jurisdictions. So these authorities began raiding Uber's offices looking

for evidence. Uber didn't like this, and UM created a tool that it called ripley Um to essentially shut down its offices whenever there was a police rate and shut down all the computers so that police could not collect evidence. Now, this is a tool that I guess ripley is you mentioned a riff on the character that's Sigourney an alien In true Uber form that you know, they would come up with these creative names for their various software programs.

We had gray Ball, and in Hell or god View, and justin in Uber fashion, this one was called Ripley after the main character an alien Um because she had a line in the movie where she says, uh, let's nuke the site from orbit. It's the only way to be sure, meaning it's the only way to be sure that the aliens won't come back and get us. Okay, So run with that and maybe use the example of what authorities in Montreal we're looking for and how Ripley works.

It's a remote control system. Yeah, let me walk you

through it. So essentially, in authorities from the Canadian Tax Bureau showed up at Uber's headquarters in Montreal um seeking tax documents, and essentially a manager in that office paged system this Ripley system, and within a few minutes UM the headquarters in San Francisco shut down all the computers and some phones in Montreal and made these Canadian authorities very frustrated because they went to open you know, they went to uh talk to employees and ask them for records,

and those employees couldn't even open their computers because they had been locked out. Is this legal? So that's a very good question. We have had trouble getting an answer on that because there's a real patchwork of different laws abroad, and some people have said it's it's an obstruction of justice.

Some people have said it is legal as long as it's done in the right way, and you have to have uh, you know, there are all sorts of various complicated conversations, but you know, that'll be for somebody else to determine. What we do understand is that employees at Uber felt very uncomfortable with it, and um that there were a lot of discussions about, you know, how to keep this quiet, how to keep it secret. So they were obviously concerned about something olivia physically. How did they

engage this tool? In other words, how did they find out that there was going to be some kind of investigation and automatically shut down all of the computers? Well, I think, you know, I don't want to go into whether or not they knew the police were coming or the authorities were coming, because that can be seen as a violation of Foreign corpt Practices Act. And we just

don't know if they did that. UM. We do understand that they were expecting raids in in their offices all over the world because they knew they were a target because they were disruptive. UM. So they designed the system to work in any office abroad. UM. And essentially the employee in the office, the manager or some boy who had been trained to use it, would page a number

on their phone UM. It would route through this program Twilio, and then it would go to headquarters UM where they it would initiate a program to just log everybody off the computers or UM. Eventually they developed a program where they could keep the computers on, but they could hide information UM that perhaps the authorities were collecting. Olivia, what have you heard from either Joe Sullivan or Sally you These were both the heads of the departments, the security

and legal departments, respectively at UBER when this has taken place. Yeah, we haven't heard back from them. UM. Both of them did not respond to our requests for comment. UM Uber's UM communications department has been very active in managing this story with us. We've been on the phone with them many times the past week, and I'm really trying to

understand the program. And they feel very much that that this was in their rights and that they UM you know, essentially, they feel that they were doing what was in the best interests of their customers, which was to protect data, and that these authorities in other countries were on fishing expeditions.

They feel that they were the warrants that they were collecting information for were too broad and so that they had the right to um request, you know, to lock everything down and say come back to us with something that's more specific. Olivia, real quick, do you know of any other company out there that has done something similar to this? So it's interesting. That was another point that

Uber brought up. They said, everybody does this. You know that this is common, that everybody has a lockdown button, and you know, you should even look at Bloomberg they may have this. What we found is lots of companies have a way to shut down computers for an unexpected visitor and you know, maybe there's um, a competitor breaks in, or there's a situation where um, you know, there's even a terrorist attack and they need to keep their information

all locked up. But we have not found a situation where it was used so frequently, um you know, dozens of times, and where it um was pervasive in offices around the world. We've got to leave it there. Olivia Zeleski, technology reporter for Bloomberg. Thanks very much. Trade talks they are heating up again this year, and yesterday there is news that Canada believes that there is a much greater likelihood that the US will exit the NAFTA, the North

American Free Trade Agreement in the upcoming months. Here to talk about that is Caitlin and Webber, government analysts covering US trade policy for Bloomberg Intelligence. Since she comes to us from our Bloomberg studio in Washington, d C. Caitlin, can you just lay out what we found out yesterday and if there really is a much greater likelihood at

this point that the US will withdraw from NAFTA. Yeah, So, yesterday news broke that Canada, um, you know, really actually came out and and sort of is reflecting a lot of the pessimism we're hearing from a lot of the company's industries that rely on NAFTA. There's been a lot of sort of doom and gloom around the NAPTA talks so far. Um, we're on the sixth round and there's been no chapters closed so far, and typically you see

that after a couple of rounds. Um, So I think Canada coming out yesterday and saying, um, you know, even though they sort of walked that back a bit later, that there's an increasing likelihood the Trump administration may attempt to withdraw from the deal. UM. You know, I think that is a growing sort of recognition of increasing reality. Caitlyn, I keep thinking that we're gonna end up sending you to Detroit to cover this story because NAFTA and the

automobile industry they are linked. And I'm wondering if you could tell us what are some of the issues that contentious demands that the US has when it comes to automotive content. Yeah, so the Trump administration has really said that the auto the auto industry is why they came to the table. Really, that's their number one issue that they want to see a lot of change on and

that really centers around content rules. So currently too, in order to qualify for duty free status under the deal, UM a vehicle has to be a little over half UM NAFTA UM content in order to qualify for getting tariffs reduced. Now, the Trump administration wants to significantly increase that, including solely US value. Canada and Mexico for their parts, say that proposal is a non starter and to this point haven't even tabled um sort of counter counters to

that yet. So yeah, the content rule is really, um the biggest issue there. The Trump administration wants thanks that by making that more stringent, they'll be able to cut down on what they see as cheaper parts coming in from Asia from other places, as um, getting into cars and qualifying for napt TO benefits that really shouldn't Caitlin.

The response from the stock market was pretty decisive. GM shares, for example, declining nearly two point four percent on the news and escalating to clients with Canada's sort of reflection of the pessimism that you're hearing from a lot of companies.

I'm just wondering, do you think that there will be any recognition from people in the Trump administration or whoever is negotiating the NAFTA arrangement that this could potentially be detrimental to the companies should the naftogram, should the US pull out. Yeah. Absolutely, I think that they're very conscious

of that. I think that that you know, that in particular, will be the number one thing that if the Trump administration does, um, you know, agree to continue negotiating even after this sixth round, it's because of of a stepped up lobbying effort from the US Chamber of Commerce from companies.

Donald Trump is obviously, um you know, very interested in the stock market and um, you know, taking credit for UM for gains there and so anything you know, tying potential UM losses there to to naft uncertainty I think will be very very powerful and influential. Indeed, well, Caitlin, we know that the manufacture of light vehicles in Canada and in Mexico is linked to their UH, their sale in the United States, but also it's a it's a

global market. UM. Is there any understanding that if indeed they force the automakers to produce cars in the United States, that's going to hurt those companies in their global ambitions as well. Yeah, absolutely, because you know, if the US does exit from NAFTA, not only would US tariffs go up, but but tariffs in Canada and Mexico would would as well, and the tariffs there are much higher, and those are

very important markets for US automakers, UM. You know, and there's also increasingly talk about US automakers when they're coming up with their contingency plans for what to do if NAFTA goes away, thinking about UM manufacturing more in Asia.

So you know, it's it's very uncertain whether or not the Trump administration, may you know, achieve their goal of increasing US manufacturing if they do sort of uh tinker with this deal so much that um it shifts these supply chains that have really become integrated across the North American economy. Caitlin, can you give us a sense of which industries would be most affected. So we've talked a lot about automakers, and you know, they're probably number one. UM.

Number two would be the US energy sector. While there there isn't a concern there as much about terrorists being reimposed because tariffs are are normally um, you know, much lower on energy products. The concern there is that Mexico in particular has become a very important market for US natural gas and oil exporters, and so if the US exited from NAFTA, we would really likely see a contraction in the Mexico economy. So always the list demand there

for electricity, for oil. Um. There's also a number of um, pretty thorny kind of red tape that would that NAPTA does away with now in terms of gas exports and other things that um you know, if the deal went away, that it would just make it much much more difficult for that industry to to do um you know, to

do business to do their do their exports um. And then I think the third I would mention retailers you know obviously um rely heavily on the duty free benefits under NAPTA, which are fully UM in place this time, and so um you know, retailers and also transportation companies UM, rail companies, UM, you know, trucking companies that do a lot of business bringing those consumer products back and forth. I want to thank you very much for being with us.

Caitlin Weber is a government analyst for US trade policy for Bloomberg Intelligence, speaking about the North American Free Trade Agreement to Canada, then preparing new talks related to naphta's provisions, focusing, as Catalin said, on perhaps the automobile sector. Uh. In fact, the Canadian Foreign Minister, Christie you Freeland was speaking to reporters outside a cabinet meeting today saying that the country Canada would bring new ideas for unconventional US proposals, but

she didn't actually give any details. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio