The New York Times has a fascinating article about a supposedly woman-owned hedge fund that in fact was backed by a man, S. Donald Sussman. Reports the Times:
The arrangement with Mr. Sussman "may have been designed to mislead a number of observers, from the tax authorities to the S.E.C. to entities wishing to invest in women-owned businesses," Judge Richard J. Sullivan of the United States District Court for the Southern District of New York wrote in an August ruling in the case
In 1997, Mr. Sussman, who had earlier withdrawn his investment adviser registration with the Securities and Exchange Commission, settled a claim with the commission that he had failed to disclose a loan he made from a hedge fund he controlled to acquire a building that was used as offices.
In a deposition taken a year ago, James L. Berens, a Paamco co-founder, said there were "two important factors" behind why the firm had structured its relationship with Mr. Sussman as it did: "The first was the potential impact of disclosing Mr. Sussman's involvement on our Form ADV," a registration filing with the S.E.C.
"And the second was our — the potential to have status as a majority female-owned entity."
The Times doesn't get into it in this article, but Mr. Sussman has been in the news recently after the Boston Herald and the Wall Street Journal reported that he gave Rep. Barney Frank, the chairman of the House banking committee, a wintertime roundtrip private jet ride to the U.S. Virgin Islands along with Rep. Frank's domestic partner. Also reportedly aboard was Mr. Sussman's fiancee, a Democratic congresswoman from Maine, Rochelle Pingree.
Back in 2004, the Times wrote about how Mr. Sussman was using his Virgin Islands residence to reduce his tax liability:
federal officials say the biggest threat to mainland tax coffers may be the emigration of highly compensated hedge fund managers who have begun claiming the program's tax benefits, executives like S. Donald Sussman, the founder of Paloma Partners of Greenwich, Conn., which manages nearly $3 billion in capital.
An avid yachtsman, Mr. Sussman has a home in St. John, where he spends most of his time, and he cruises between it and houses in Greenwich and Deer Isle, Me.
In 2000, he established Trust Asset Management under the E.D.C. program, and serves as chairman and chief executive of Paloma through it. Paloma pays Trust Asset to cover his compensation and the services of 10 other Trust Asset employees in St. Thomas.
As owner of Trust Asset, Mr. Sussman pays the Virgin Islands government the low tax rate on the share of income that Trust Asset gets from his funds and the full federal tax rate on the rest. "I live in St. John," he said in a telephone interview. "I follow the rules. I do what I'm supposed to do."
Mr. Sussman is confident that he is within the law and upset that others may be playing fast and loose.
Federal Election Commission records reviewed by FutureOfCapitalism.com show Mr. Sussman is a major Democratic political donor. He gave $100,000 to the Democratic National Committee in 1998, $10,000 to the DNC in 2000, and gave $58,900 total to the Democratic Congressional Campaign Committee over 2007 and 2009. He also gave $10,000 to Minnesota Democrat Al Franken's recount effort in 2009.
The level of hypocrisy all around here is just mind-boggling. Here is Rep. Pingree in 2006:
Most Americans never have and never will fly on a chartered jet, much less a fancy corporate jet complete with wet bar and leather couches. So when members of Congress constantly fly around on corporate jets and pay only the cost of a commercial ticket, it contributes to the corrosive public perception that members of Congress are more like the fat cats of Wall Street than they are like the rest of us
The Democratic politicians all say they want to raise taxes on the "rich" and denounce "fat cats" and "corporate jets," yet when the chance presents itself for a nice Virgin Islands vacation, it's all aboard on Air-Avoid 90% of His Taxes-Sussman. Maybe the voters in Maine and Massachusetts will be disgusted enough with this sort of thing to choose not to return Mr. Frank and Ms. Pingree to Congress. Then the two of them will have plenty of time to accompany Mr. Sussman in the Virgin Islands without having to worry about getting back to Washington for any votes.