The New York Times recently published an article that highlights a special issue in wealth inequality: how the very rich protect their money. (Permalink = http://nyti.ms/2gIYlf9 ). A wealthy couple who were both born in other countries but have lived and worked mostly in Florida, are getting divorced. Their work involved several businesses that offered services over the internet while delivering little and have been the subject of suits by several state attorneys general. In response to these suits, the husband took steps to move his wealth "offshore" and put it into accounts in locations impervious to legal attack in the United States. His wife claims not to have known about this, and to be surprised, when they filed for divorce, that she too has no access to this money in the divorce proceedings. She hired attorneys specially skilled in tracking "hidden" funds.
At one level, this is about the breakup of an unhappy marriage and how it leads to a fight over money to deal with the emotional distress. But it also tells something about the super-rich. The couple had several different homes in different countries and spent time living away in order to qualify for favorable tax rates based on where they were in residence. The husband spent little time in the US to avoid being vulnerable to legal proceedings. The suits against the various companies allege consumer fraud and even if this is not proven, it seems that the companies generated enrichment mostly for the owner(s?) and for the legal and accounting staff hired to sequester the wealth.
In the tension between the legal structure of local jurisdictions, and the protective desires of the super rich, individuals will make every effort to escape the regulation of the local system. And this is equally true for large multinational corporations. Apple, a tech darling, is known for sequestering much of its profits in a derivative company in Ireland where it pays much lower taxes. For some time, Switzerland was famous for a banking system which would allow wealthy from other countries to hold money in "secret" accounts, not readily accessible to foreign legal proceedings, though reportedly this has recently improved, and the Swiss have been replaced by several other banking havens. If we understand the "rule of law" as rules administered by a specific jurisdiction, then this story is about the super rich and major corporations do not believe they are subject to the jurisdiction or rule of law of the places where they earn their wealth!
And it would be a mistake to see this only as an offshore issue for the US. A "60 minutes" story repeated twice in the last year, shows how someone, pretending to represent a wealthy foreigner, is offered help in sequestering money by New York attorneys (not all of those approached agreed!) to protect their wealth from the local countries from whence they are escaping. There are super rich everywhere who, for one reason or another, wish to protect their money from local jurisdictions and legal suits and there are cadres of experts for hire to find ways to do so. Though the story in the New York Times features the wife's outrage at discovering that she is "locked out", in reality the entire country is "locked out". Such people believe their wealth can protect them from having to deal with their local society including litigation and tax laws. They believe that their wealth places them above the law.
This gives a different meaning to being super rich. It is not about how much you can buy or own, or how much you can enjoy your life. It is about how much you can "control" your life circumstances to avoid the consequences of your actions. Though you may have to live in special havens, avoid previous partners who have claims on your money, and subject yourself to other constraints to control your fortune. This is not a problem that can be solved by one country alone. Such transfers can only be managed by a system of international coordination of banking. And the rules protecting the rights of legal jurisdictions must be part of this process. The world is far from having that sort of cooperation. And it is not clear that the current US government sees this as a problem.
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