South Dakota: We’re Sluts for Assets

Over the weekend, the Pandora Papers — a collection of 11.9 million confidential files leaked to the International Consortium of Investigative Journalists — revealed financial secrets from hundreds of politicians and world leaders. Everybody who’s anybody was in there: Vladimir Putin, Tony Blair, King Abdullah II of Jordan, Dominique Strauss-Kahn, allegedly demented billionaire Robert Brockman, Ringo Starr, Elton John, Shakira, and naturally, Swedish House Mafia. But the trove also included dirt on South Dakota, America’s fifth-least populous state. From the Washington Post:

The files provide substantial new evidence, for example, that South Dakota now rivals notoriously opaque jurisdictions in Europe and the Caribbean in financial secrecy. Tens of millions of dollars from outside the United States are now sheltered by trust companies in Sioux Falls, some of it tied to people and companies accused of human rights abuses and other wrongdoing.

It seems the global one percent has tired of storing their liquid assets in sexy destinations like the Seychelles, Cyprus, and Delaware. Now Sioux Falls is their best friend. Eighty-one of the 206 U.S.-based trusts identified in the leak were set up in South Dakota. In total, the documents revealed that the “Mt. Rushmore state” housed more than $360 billion in trusts — or approximately 72,000 times what the state spent on its infamous “Meth. We’re On It” campaign.

Many of those accounts were set up by a Sioux Falls outpost of a financial firm called Trident Trust (which welcomes visitors with a sign that reads: “The Heart of America”). According to the Post, Trident’s clients include:

• “A Colombian textile magnate caught in a scheme to launder the proceeds of an international drug ring.”
• “An orange juice mogul who settled with authorities in Brazil for allegedly colluding to underpay local farmers.”
• “Family members of the former president of a sugar producer in the Dominican Republic that has been accused of exploiting laborers and forcibly evicting families from their homes.”

The transformation of South Dakota from fly-over state to the Mid-West’s Malta has accelerated over the past decade — in 2010, South Dakotan trusts held only a fourth of their current balance — but dates back to the early 1980s. A history of the state’s financial deregulation in The Guardian traces the trend to former Gov. William “Wild Bill” Janklow. Wild Bill did once bring “a rifle to the scene of a hostage crisis,” but he was mostly wild in the way of deregulating financial services.

Most notably: he eliminated the time limit for trusts, ensuring that any assets placed in South Dakota trusts could stay there forever — where they would also be free of taxes on income, inheritance, and capital gains. This has produced some amazing outcomes. For example: hotel heiress Leona Helmsley, inventor of the phrase “only the little people pay taxes,” left $12 million in a South Dakota trust for her Kobe beef and crab cake-loving maltese, “Trouble.”

This is all a bit embarrassing for Delaware-native Joe Biden, who has made cracking down on tax avoidance a major part of his agenda. Just last month, House democrats introduced a bill to make it harder for multinational corporations to shield taxable-revenue in offshore havens. Perhaps Biden could also do something about the offshore accounts on his own shores. There is only one reason South Dakota should be in the news, and that’s when Gov. Kristi Noem finally adds a new head to Mt. Rushmore. We suggest David Spade.