More than 100 other universities and university-associated foundations appear in the Paradise Papers leak, showing that offshore investing is far from an isolated incident at UM. While the offshore investing by the UM Foundation appears to be completely legal, the practices of offshore investing have been criticized by the public and scrutinized by the federal government.
The law firm at the center of the Paradise Papers leak, Bermuda-based Appleby, has been repeatedly criticised by inspectors for “failures in the way it applies regulations designed to thwart money laundering and terrorist financing,” according to reporting by the Guardian, which collaborated on the leak investigation.
Jane Gravelle, a senior specialist in economic policy for the Congressional Research Service at the Library of Congress, said the only reason anyone would invest through offshore companies is to hide their money from tax collectors or public scrutiny.
“It’s just a way to avoid taxes,” Gravelle said. “There’s nothing in the Cayman Islands, for example, except a bunch of tourists and a couple of buildings with filing cabinets. Some of these offshore companies are nothing more than a file folder.”
The Internal Revenue Service cracked down in 2009 on investors in offshore hedge funds and private equity firms in an attempt to uncover undisclosed investments that dodged taxes.
According to a report by the Wall Street Journal during the 2009 IRS crackdown, hedge-fund investments in tax havens like the Cayman Islands and Bermuda represent more than two-thirds of the roughly $1.3 trillion hedge-fund industry, with around $250 billion of that coming from tax-exempt foundations, endowments and pension funds.
Related: Ivy League Taxpayer Subsidies: 2010-2015:
1. Ivy League payments and entitlements cost taxpayers $41.59 billion over a six-year period (FY2010-FY2015). This is equivalent to $120,000 in government monies, subsidies, & special tax treatment per undergraduate student, or $6.93 billion per year.
2. The Ivy League was the recipient of $25.73 billion worth of federal payments during this period: contracts ($1.37 billion), grants ($23.9 billion) and direct payments – student assistance ($460 million).
3. In monetary terms, the ‘government contracting’ business of the Ivy League ($25.27 billion – federal contracts and grants) exceeded their educational mission ($22 billion in student tuition) FY2010-FY2015.
4. The eight colleges of the Ivy League received more money ($4.31 billion) – on average – annually from the federal government than sixteen states: see report.