This article has been revised to reflect the following correction: There are 106 licensed trust companies in South Dakota. Trust companies handle hundreds or thousands of trusts.
SIOUX FALLS, S.D. (KELO) — Data gathered by a team of journalists from all over the world indicates hundreds of millions of dollars from offshore accounts in the Caribbean and Europe are now being funneled through South Dakota.
The Pandora Papers – as they are being called – show foreign politicians and millionaires are hiding their money in South Dakota because of the state’s secretive trust laws. The International Consortium of Investigative Journalists obtained the trove of almost 12 million confidential files. A team of more than 600 journalists from 150 news outlets spent two years sifting through them and digging into court records and other public documents.
South Dakota is mentioned several times in the report, for instance it accuses a Ukrainian oligarch of laundering $5.5 billion through shell companies and buying property.
And the Dominican Republic’s former Vice President moved tens of millions of dollars from the Bahamas to accounts in South Dakota.
The report says over the years state lawmakers have approved legislation that ultimately protects and benefits trust customers who want to hide or protect large sums of money.
Gary Kalman, the Executive Director of Transparency International says South Dakota’s secretive trust laws only benefit a small portion of the state’s economy.
“I would imagine that the majority of South Dakotans do not see any kind of significant benefit from this strategy,” said Kalman.
Are trust companies in South Dakota doing anything wrong?
“They are not doing anything illegal if that’s what you mean,” he said. “I think if you ask the average person who goes to work and earns a salary and pays taxes on that salary whether privileged individuals should be able just by the nature of being able to set up through certain legal arrangements with a lawyer hiding money that would otherwise be taxable, to have that not taxed would at the least call that unfair,” said Kalman.”
Kalman says many might call it ethically bankrupt.
“So there really is no more offshore, it really is onshore,” said reporter Debbi Cenziper.
Cenziper, with the Washington Post, is one of the investigative journalists who worked on the Pandora Papers. She spoke with CBSN about the rising number of millionaires forgoing offshore bank accounts and hiding money in the U.S.
“Places that you would never expect like South Dakota or Alaska. They’ve really become international leaders they’ve been soliciting offshore wealth for years, through very friendly liberal laws and they have provided near-absolute secrecy to their clients,” said Cenziper.
There are 106 licensed trust companies in South Dakota, and many serve a useful purpose.
But Kalman says laws that allow secrecy around those trusts, have very little benefit to the average hard-working South Dakotan, he hopes South Dakota will rethink its trust laws.