Goldman Cheats and Wins Again: Gets Special Treatment in UK Tax Abuse Settlement

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How does Goldman get away with it again and again? Is it simply bribery? Well, we don’t call it bribes in advanced economies, since big fish typically have more complicated and indirect ways of rewarding people who help them out, but it amounts to the same thing. Or do they have the five by seven glossies on people in key positions of influence?

The latest sighting is in Private Eye, courtesy Michael Thomas. This is comparatively penny-ante stuff compared to other instances of Goldman winning at the expense of the general public. Here, the firm engaged in what is politely called a tax avoidance scheme:

The scheme concerned an offshore “employee benefit trust” used to pay bonuses to Goldman’s London bankers, who for secrecy reasons are employed by a British Virgin Islands company called Goldman Sachs Services Ltd. In London they legally work on secondment to UK-based Goldman Sachs International. The trust, it was planned, would enable the bank and its bankers to avoid national insurance running to £23m through a convoluted share purchase arrangement.

So the Goldman staffers underpaid the taxman by £23 million.

21 other companies tried the same trick. HM Revenue & Customs got settlements from all of them in 2005 in large measure because court decisions on employee benefit trusts came down in favor of the government. But Goldman tried to wriggle out of it:

Goldman, by contrast, hung out on the technicality that HMRC was pursuing its UK company for the NIC when it should have gone for the BVI one. That required Goldman to claim that the BVI company had a UK “presence”, an argument that collapsed embarrassingly at a tribunal hearing in December 2009 when HMRC produced a letter from Goldman’s tax director, Mike Housden, claiming – in order not to incur a corporation tax charge – that the BVI company did no business at all in the UK!

So Goldman clearly owes that £23 million plus interest from 2005, which is roughly an additional £20 million. As important, the HMRC had implemented the policy in 2007 of “litigation and settlement strategy” which translates into: “If our legal advice is strong, do not accept settlements for less than 100 percent of the tax and interest due”. And the advice they had gotten from outside counsel on the Goldman case was that their position was very strong.

So…the new head of HMRC, Dave Hartnett, lets Goldman slip the noose. Per Private Eye:

Papers seen by the Eye reveal that Hartnett personally “shook hands” on a deal over a long-running dispute concerning a tax avoidance scheme going back to 2002, without consulting HMRC lawyers (as he didn’t over Vodafone), and in the process unlawfully letting the US bank off around £20m.

Despite some consternation among the lawyers, the deal went through:

When HMRC’s lawyers, led by general counsel Anthony Inglese, met to discuss the deal in December after Hartnett had presented it as a fait accompli to HMRC’s “high risk corporates” board, there was unanimous disapproval since it breached both the law and HMRC’s own policies. But somehow, rather than point this out to Hartnett or anybody else, Inglese approved the settlement.

Private Eye wonders what winks and nods were involved:

The cushy settlement may or may not be related to a simple entry on Dave Hartnett’s hospitality register for May 2009 which shows that, as the dispute raged, he took “supper” at “Goldman Sachs office”.

UK Uncut is not going to get very far if people like Hartnett and Inglese are permitted to ride roughshod over official policy and allow rich bankers to pay less than they owe. I hope the organization takes note and includes craven and possibly complicit officials in its campaign targets.

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  1. pjwrites

    Shameful display of criminal back scratching. What else could one expect in this lawless, upside-down world?

  2. Nicholas Shaxson

    UK uncut began its activities partly as a result of a Private Eye story about vodafone, involving much bigger sums and involving . . . Dave Hartnett. But you’re right – they should target the man himself. More about the erosion of HMRC as a tax collection agency here, from yesterday morning:
    “The whole culture in HMRC changed. Taxpayers became ‘customers’. HMRC used to assign a ‘case director’ to investigate multinationals; this is now a ‘customer relationship manager’ charged with building a happy connection.

    “We used to have a priority to collect tax,” my informatn said, “now we have a priority to have a good relationship. We have got into a situation of persuading outselves that it is a win-win for us to have businesses pay their taxes voluntarily, rather than have us take them to litigation.”

    And then there’s this, from The Nation:

    “David Hartnett, head of the British equivalent of the Internal Revenue Service, apologized to rich people for being “too black and white about the law.”

    As an end note, Private Eye is a UK national treasure.

    1. ScottS

      God, these MOTUs are a sensitive bunch. They’re still not talking to Obama after he said mean things about them on TV.

      Give me a Rolls Royce and a mansion, and you won’t hear me whining. But, as the song goes:

      How many times have
      You heard someone say
      If I had his money
      I could do things my way

      But little they know
      That it’s so hard to find
      One rich man in ten
      With a satisfied mind

      Once I was waitin’
      In fortune and fame
      Everything that I dreamed for
      To get a start in life’s game

      Then suddenly it happened
      I lost every dime
      But I’m richer by far
      With a satisfied mind

      Money can’t buy back
      Your youth when you’re old
      Or a friend when you’re lonely
      Or a love that’s grown cold

      The wealthiest person
      Is a pauper at times
      Compared to the man
      With a satisfied mind

      When my life has ended
      And my time has run out
      My friends and my loved ones
      I’ll leave there’s no doubt

      But one thing’s for certain
      When it comes my time
      I’ll leave this old world
      With a satisfied mind

      How many times have
      You heard someone say
      If I had his money
      I could do things my way

      But little they know
      That it’s so hard to find
      One rich man in ten
      With a satisfied mind

  3. Francois T

    Time to go Michelle Malkin on Mr. Hartnett it seems; publication of name, private address, family ties…the whole exposure. Some “spontaneous” meetings outside the private dwelling with media presence could do wonder to help Mr. Hartnett see the light, or at least, feel the heat.

  4. jacke

    Just another part of the corruption and lack of ethics in the legal profession that uses back-scratching and payoffs to screw over anyone in the way for their wealthy clients. As one regional bank VP said while stealing our property said, ” We are doing this for our own reasons, not because you did anything wrong, but because the law allows it and you can’t afford to fight us. We will break you”

  5. Firean

    I wonder if Mr.Hartnett is expecting, or if he will find, passage through the revolving door and gainful employment at Goldman Sachs when his tenure at the HMRC expires ?

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