As far as liberal financiers go, you don’t get much more powerful than S. Donald Sussman.
Since 1989, the hedge-fund billionaire has pumped millions into the coffers of Democratic politicians and their political pet projects. Sussman sits on the board of the Center for American Progress, the Democracy Alliance and the dovish Israel Policy Forum, and he’s been one of the top contributors to left-leaning 527 organizations during the 2010 election cycle.
But while Sussman has long kept a behind-the-scenes profile, a recent ethics controversy in Maine has flung him into the center of a complicated dispute over state residency, tax dodging and congressional ethics – the implications of which extend all the way from the rocky coast of southern Maine to the offshore tax haven of the U.S. Virgin Islands.
According to Sussman’s fiancée, Rep Chellie Pingree (D-ME), the philanthropist lives with her and has been a resident of Maine since 2009. But financial records and other documents indicate that Sussman has claimed full-time residency and extensive tax breaks in the U.S. Virgin Islands for years – and may be continuing to claim them.
Progressive organizations and Democratic leaders – including ones who have taken significant financial contributions from Sussman – have long vilified offshore tax havens, pointing to them as evidence of corporate greed gone wild. Rep. Pingree has been an outspoken critic of this type of tax evasion, and made it one of the cornerstones of her unsuccessful 2002 senate bid against Sen. Susan Collins (R-ME).
Confusion over Sussman’s residency status has been dogging his fiancée’s congressional reelection bid for weeks. As the former president of an ethics watchdog group, Pingree caught flack in late September after she was found to be traveling on Sussman’s private jet – an activity prohibited by election rules, unless the aircraft owner is a family member.
In response to Republican criticism over the incident, the congresswoman said that Sussman lives with her in Maine, which may qualify him as family. The House Ethics committee has since cleared her of any charges.
“[Sussman’s] primary residency is in Maine. That’s where he votes and that’s where his driver’s license is,” Pingree’s press secretary Willy Ritch told me.
Maine’s secretary of state Matt Dunlap, a Democrat, also confirmed that Sussman has been a state resident since 2009, and pays state income taxes.
But this seems to conflict with records that suggest a company owned by Sussman is currently receiving financial benefits in the U.S. Virgin Islands. A decade ago, Sussman founded Trust Asset Management, LLP., in St. Thomas, and began paying himself income from his Connecticut-based hedge-fund firm through it. As recently as September, Trust Asset Management LLP., was listed as an active beneficiary of the Virgin Island’s tax breaks, known as the Economic Development Commission (EDC) benefits.
U.S. Virgin Island tax attorneys said that in order to receive these benefits through the EDC, a company owner must be a “bona fide” resident of the territory – meaning that the individual needs to live in the area for more than six months out of the year. Legal experts also said that it’s not possible for someone to be a bona fide resident of the U.S. Virgin Islands, and be a primary resident of another state at the same time.
“For tax purposes an individual can have only one primary residence at any one time,” said Daniel J. Gravel, an attorney for BoltNagi PC, a St. Thomas-based firm that specializes in tax law. “[T]o allow otherwise would encourage people to take advantage of the EDC program and would certainly create an enormous amount of other potential loopholes in general.”
Sussman’s attorney denied that his client was currently receiving EDC tax breaks. He refused to comment on when those benefits had ended, or whether the philanthropist had ever received benefits in the first place.
Other information has added to the confusion over Sussman’s residency status. During an interview with the Virgin Islands Daily News in July, the hedge-fund owner reportedly told the paper that he has resided full-time in the territory since 2000.
“[Sussman] moved the operation of his financial business to Red Hook on St. Thomas around 2000 and has been a full-time resident ever since, he said,” the paper paraphrased in a July 19 profile of the billionaire.
Sussman’s Securities and Exchange Commission filings from September also list his address as the Virgin Islands, as do political contributions he made in 2009. The website for the Great Cruz Bay Homeowners Association in St. John names Sussman as the organization’s president.
Over the past few years, the U.S. Virgin Islands have come under scrutiny for being a magnet for criminal tax evaders; individuals who want to take advantage of the territory’s 90 percent tax savings, but don’t want to make it their primary home. The Internal Revenue Service takes EDC fraud seriously – in 2003, the agency raided the offices of a major Virgin Islands-based firm, and charged several businessmen with claiming false residencies in order to receive the area’s financial benefits.
Sussman, himself, has been a critic of this type of fraud. In a 2004 interview with the New York Times, the hedge-fund owner railed against phony Virgin Islands residents, calling their behavior “outrageous” and dangerous to the EDC program.
“I live in St. John. I follow the rules. I do what I'm supposed to do,” Sussman told the Times. “If what has been alleged is true, those nonresidents who masquerade as residents are engaged in outrageous behavior and potentially endangering the EDC program.”
The Times wrote that “Sussman is confident that he is within the law and upset that others may be playing fast and loose.”
But while it’s unclear whether the billionaire’s current financial activities could be considered “playing fast and loose,” his well-documented use of tax havens to duck income taxes in the past raises questions about some of the Democrats he has contributed to.
Rep. Barney Frank (D-MA), Rep. Mary Jo Kilroy (D-OH), Rep. Michael Michaud (D-ME), and Rep. Mark Schauer (D-MI) have all taken stands against tax havens, and received political contributions or gifts from Sussman. The philanthropist also sits on the board of the Center for American Progress, which has publicly opposed this form of tax evasion as well.
Sussman’s fiancée, Rep. Pingree, has been a vocal critic of tax havens, even as she has received thousands of dollars in political donations from Sussman. In 2009, the philanthropist contributed $4,800 to his fiancée’s campaign, listing his address as “6100 Red Hook Quarters, St. Thomas, Virgin Islands.”
But in a speech before congress last May, Pingree pushed for legislation that she said would “[crack] down on tax loopholes that allow hedge-fund managers to avoid paying income tax on much of their salaries.” In 2009, Pingree joined other House members in signing letters to President Obama and Nancy Pelosi calling for a crackdown on the “use of offshore tax havens and abusive tax shelters,” particularly by corporations like AIG and Citibank.
And in Pingree’s unsuccessful senate bid in 2002, she made her opposition to tax havens one of the focuses of her campaign.
"Business owners here in the state of Maine ... end up being left with an unfair burden because corporations have decided to take a vacation from paying their taxes,” said Pingree during a press conference in August, 2002.
The congresswoman called for stricter laws, insisting that, "Ending tax loopholes that allow big corporations to evade taxes by using an overseas P.O. box is the right thing to do.”
Pingree denied that there was a contradiction between her previous statements and her current financial involvement with Sussman.
“Each of my last three opponents has tried to make Donald an issue, and suggested my relationship with him will somehow influence my vote. Nothing could be further from the truth and all you have to do is look at my record,” Pingree told me. “My positions couldn’t be more clear and they haven’t changed a bit.”
But Lance Duston, the spokesman for the Maine GOP said that this was just another example of hypocrisy among lawmakers.
“When somebody wants to change a law to legislate how other people act, I think it’s pretty reasonable to think they should lead the way,” said Dutson. “So when [Pingree] takes the floor and demands that hedge fund managers should stop taking tax loopholes while benefiting from it herself, that’s hypocrisy…We can parse the legality of these things but it’s a matter of right and wrong.”
Alana Goodman is a culture and media reporter at the Media Research Center.