The Bermuda Tax Haven
So I just found out that Lazard is incorporated in Bermuda to avoid paying massive income taxes from income earned outside the United States. Becoming a Bermuda company is a paper transaction, as easy as securing a mail drop there and paying some fees, while keeping the working headquarters back in the United States to maintain American government security, and access to the legal system and courts. It's f*cking genius.
Many insurance companies are based there, but I was wondering why more companies don't do this to save billions for their stakeholders. I guess that patriotism is one factor they must consider. JPM paid almost $8 billion in taxes last year, but wouldn't it be more patriotic to reinvest that money in operations, dividends, and other investments? I guess it would look bad if Bank of America were incorporated in Bermuda, but doesn't making money trump everything else? I guess it pays for Lazard to be completely out of the public eye and clear of the media, while remaining one of the world's top investment banks.
Would you guys care America's largest corporations used tax havens to maximize their profit, or should congress pass a law to prohibit this and tax the hell out of corporations that pay us our salaries?
If all the insurance companies can do it why can' the banks.
Insurance companies like to incorporate in Bermuda because it has favorable regulations specific to insurance. I don't think this would apply to other banks.
Lazard's corporate structure is incredibly complex - during their IPO process, people couldn't figure out if they were profitable. The plan was the become a publicly traded partnership for tax reasons, and this may have something to do with their rationale for offshore incorporation.
I doubt it's because of patriotism, it's the bank's history. Credit Suisse is registered in Zürich city, why not just move it's HQ to Zug (tax paradise in Switzerland) where all the Glencores & Co. are? Same reason.
You guys also realize that even before the firm was unified, Lazard was three separate private companies, right? Lazard Freres and Co. in the US, Lazard Freres et Cie in Paris and Lazard UK (I'm forgetting on the name here) were the three separate privately held companies all tied together by family stakes in each entity. When the three firms came under the Lazard Ltd umbrella in the late 90s, culminating in the formation of the LTD that was incorporated in Bermuda, it was a realignment of those ownership interests into one centralized firm. At this point, the structure is simple. You had one man with the largest stake in both Lazard US and Lazard Paris and a had a stake in Lazard UK - so why not form a Bermunda Based Ltd and both sell your steak to the LTD and fund the buyout of the largest steakholders of the UK branch to bring everything under one company. It's a perk of private ownership that public ownership doesn't have.
As to the whole thing about going public, Lazard wasn't going to go public if it weren't for Wasserstein starting the process a few years after the LTD held all of the Lazard assets. Just saying.
Oh, Selective Hearing and taking quotes out of context. No. What I was implying with the "Just Saying" line was with respect to staying as a private partnership versus going public. It's a very well known fact that Michael David-Weil and Wasserstein fought bitterly over going public. David-Weil even said that hiring Wasserstein was the worst thing he could have ever done and regretted it.
And what I was implying is that you're dealing with Partnerships, not traditional corporations. So the tax implications are entirely different between a corporation and a public traded company.
Please refer to this article (below) - not saying you're wrong, but you're also not right that it's in any way "simple."
http://www.businessweek.com/stories/2005-04-24/commentary-lazards-ipo-m…
Please refer to this article (below) - not saying you're wrong, but you're also not right that it's in any way "simple."
http://www.businessweek.com/stories/2005-04-24/commentary-lazards-ipo-m…]
Sandhurst, your talking about two very different things here. The article your discussing has to do with debunking the LTD structure with respect to the IPO. I wasn't discussing that. I was discussing the pure incorporation of the LTD in Bermuda with respect to the original structure of Lazard. Reread what I originally wrote. Nowhere in the initial comment I made, did I even discuss the implications of the IPO. I kept it to why Lazard was incorporated in Bermuda. You do realize that Lazard unified it's partnership in 2000. This was 2 years before Wasserstein was brought on and 4 years before the IPO was announced. The OP asked how the hell Lazard got incorporated there, and I answered the question. The fact that the company is public had nothing to do with the giant implications of a foreign national consolidating ownership of his private companies into a Bermuda based firm before there were even any talks of the company going public. Jeez man, pay attention.
What the hell is with people just cherry picking one or two lines and completely ignoring the entirety of the comment. It's a lack of perspective that creates a biased answer.
Every large bank has some sort of off-shore affiliation. Whether it's Bermuda, Nassau, what have you they have found every legal loophole to bypass excess fees.
All cash is generally swept out before being placed with the fed and earning 15-25bp.
Plenty of companies are incorporated in Bermuda for tax loopholes. Accenture was first incorporated there as well.
Can I get in on the swordfight? you guys sound like 8th graders.
Wouldn't these banks have to be registered in the US to have access to the FDIC ? (since most big banks merged their idb with their retail banks..) Maybe that's the reason why such banks aren't in tax heavens.
No. Plenty of foreign banks have a US sub which is FDIC-insured.
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