The New York Jets might’ve stunk up the Swamp last season, but owner Woody Johnson is a World Champ when it comes to ripping off the public. From the New York Times’ David Cay Johnston (August 1).
So many superrich Americans evade taxes using offshore accounts that law enforcement cannot control the growing misconduct, according to a Senate report that provides the most detailed look ever at high-level tax schemes.
Among the billionaires cited in the report are the owner of the New York Jets football team, Robert Wood Johnson IV (above); the producer of the œMighty Morphin Power Rangers children™s show, Haim Saban; and two Texas businessmen, Charles and Sam Wyly, who the Center for Public Integrity found in 2000 were the ninth-largest contributors to President Bush.
Mr. Johnson and Mr. Saban, who are portrayed as victims in the report, are scheduled to testify today before the Senate Permanent Investigations subcommittee. They are expected to say that professional advisers assured them their deals to avoid taxes were more likely lawful than not. The Wyly brothers told the committee that they would invoke their Fifth Amendment right against self-incrimination and thus were not called to testify. The report characterizes them as active participants in tax schemes.
Cheating now equals about 7 cents out of each dollar paid by honest taxpayers, as much as $70 billion a year, the report estimated.
Both Mr. Johnson, the football team owner and scion of the Johnson & Johnson health care fortune, and Mr. Saban, the television mogul, are portrayed in the report as victims.
The two men, through representatives, said yesterday that they relied on professional advisers who told them the transactions were lawful, and that they were now settling with the Internal Revenue Service.
Mr. Johnson, known as Woody, told Senate investigators two weeks ago that to buy the Jets in 1999 he had to sell assets, incurring the 20 percent tax on long-term capital gains in effect at the time. He said that a way to defer the tax was proposed by Larry B. Scheinfeld, who had been his accountant at KPMG until he joined Quellos, where he worked closely with Chuck Wilk, a tax lawyer.
The technique involved a complex set of circular transactions using what the Senate report characterized as sham corporations in the Isle of Man with shell corporations given names like Jackstones. Their ownership was kept secret.
œAin™t capitalism great! Mr. Wilk wrote to Mr. Scheinfeld in an e-mail message extolling the tax benefits of the Johnson deal. Three weeks later, when the deal was set, Mr. Scheinfeld wrote back: œI just hope Woody doesn™t get cold feet or have the I.R.S. select his return for an audit!