Liberty and justice for all United States persons abroad

The Isaac Brock Society

NBC Nightly News interviews Phil Hodgen, Chuck Schumer about Denise Rich

Posted on by Posted in Issues regarding US persons abroad 41 Comments

The video is not embeddable; you’ll have to watch it over on NBC’s site. You can also check out Phil’s post on it. The somber-faced newsreader begins by intoning:

00:00/Announcer: While many Americans are struggling to make ends meet, there is a growing trend among some of America’s ultra-wealthy: they are willing to give up their U.S. citizenship, in many cases to save money in taxes.

Clearly if two people renouncing citizenship are ultra-wealthy, then all 1,800 must be!

Cartoon by Randall Munroe/xkcd.org; licensed CC-BY-NC 2.5


Unless of course you could be bothered to look at Wikipedia’s list of famous people who renounced/relinquished — which consists primarily of politicians running for office in foreign countries, activists who object to U.S. policy, and other random emigrants. Not to mention the ordinary people who don’t make it into these lists, like Peter Dunn and Genette Eysselinck who have been interviewed by a real and honest journalist about their choice to give up U.S. citizenship.

00:15/Announcer: Our report tonight, from NBC’s Andrea Mitchell.

(Archive footage of Denise Rich and Bill Clinton)

00:20/Rich (archive): We know this saxophone has your name on it

00:24/Mitchell: A songwriter and philanthropist, Denise Rich even got the president of the United States, the First Lady, and Michael Jackson to headline her fundraisers for cancer, honouring her daughter Gabrielle, who died of leukaemia. She supported the Clinton campaign, and just before leaving office, Bill Clinton faced a storm of criticism for pardoning her husband, fugitive financier Marc Rich, who fled prosecutors for tax fraud in 1983.

To Mitchell’s credit, she at least opens her report with a balanced summary of Rich’s life, including mention of her philanthropy and of human tragedy which afflicts the rich and the poor alike. This offers a sharp contrast to how Lynnley Browning covered the same subject. But Mitchell’s report goes downhill from there.

00:49/Rich (archive): Just to be recognised by your peers is so wonderful.

00:52/Mitchell: From politics to the Grammies, Denise always surrounded herself with superstars and the super rich.

00:59/Rich (archive): It’s just a lot of fun, and everyone has a really good time.

01:01/Mitchell: But now, she’s put the 5th Avenue apartment — twenty rooms with view — on the market for $65 million dollars. She’s one of nearly 1,800 people last year who gave up their U.S. citizenship, compared to only 235 four years ago. It’s not only Denise Rich. Facebook co-founder Eduardo Saverin gave up his citizenship before the Facebook IPO. He moved to Singapore.

As usual, the mainstream media either do not understand — or do not care to make it clear — that people emigrate first and then renounce, and that the process moves at the speed of government and not of news reporting. Saverin moved to Singapore in 2009. And after living there for two years, he gave up U.S. citizenship in favour of retaining his existing Brazilian citizenship. He began the process of renunciation in January 2011. He finished it in September 2011. The government declined to mention it until eight months later. The media love to focus on the tax aspects; they make no mention of the other difficulties Saverin would face by retaining his U.S. citizenship if he wanted to invest in local startups and maintain a local bank account.

Certainly you can describe the above sequence of events as “gave up citizenship before the Facebook IPO, and moved to Singapore”. All three of those statements are factually accurate in isolation. Similarly, if a woman you wanted to libel met a good man, took him to her hometown to meet her relatives, got married, and had a son two years later, you could say, with the same logic, that she “got married before her baby was born, and introduced the father to her parents”. We all know what you’re trying to sneakily imply with your wording and your distorted ordering, but of course your careful wording preserves plausible deniability.

01:28/Mitchell: Why the trend? Tax lawyers say, because of an IRS crackdown, and to avoid estate taxes.

01:30/Hodgen: They don’t pay any estate tax when they die, and this is a big concern to them, particularly for preserving family businesses.

What happened to the rest of that quote? Who’s the “them” that Phil Hodgen is referring to? My guess would be that he’s talking about Persian Gulf oil state families where it’s common for brothers to jointly own businesses, the same as he mentioned in “Why People Expatriate” “[F]or those living in countries with no estate tax, the impact is profound. I have many clients in the Middle East. There it is the norm to have very large family-owned businesses. If two brothers own a business and one is a U.S. citizen, upon the citizen’s death an estate tax will be imposed, essentially causing his share of the business to be sold to the non-citizen’s side of the family. In order to preserve the family business, ownership must be removed from U.S. citizens.”

But thanks to the magic of careful editing, anyone quoted on TV can be made to seem like they’re talking about anything at all. No doubt most viewers will have concluded that Mr. Hodgen’s “them” refers to Saverin and Rich, and the editors will have succeeded at leaving the audience with the impression that the only reason to renounce citizenship is to avoid the estate tax.

01:38/Mitchell: In a statement, Rich says she gave up her citizenship in order to be closer to her long-time life partner as well as her family and loved ones in Europe. New York Senator Chuck Schumer, who’s sponsoring a law to penalise people like Rich, sees a tax dodge:

01:49/Schumer: You certainly don’t need to renounce your citizenship to be closer to your family. We all know the reason she’s doing this, and it’s to avoid paying taxes. I find the people who renounce their American citizenship to be despicable.

Indeed, you certainly don’t need to renounce your citizenship to be closer to your non-US family. You and your non-American spouse can treasure the experience of hundreds of thousands of dollars of FBAR fines together. Shared hardship is great for bringing people closer. And think of the benefits to the U.S. Treasury, which can get its hands on all those assets which were earned by non-Americans elsewhere in the world. It’s Patriotic And It’s Their Fair Share!

02:05/Mitchell: Whatever her reason, Denise Rich, whose father escaped the Holocaust and found refuge in the U.S., has now become a citizen of Austria. Andrea Mitchell, NBC News Washington.

Browning’s story implied that Rich had been an Austrian citizen all along (“Rich, who was born in Worcester, Massachusetts, has Austrian citizenship through her deceased father, said Michael Heidt”); however, this apparently was refuted by a statement by Rich’s spokeswoman Judy Smith reprinted in the WSJ’s Washington Wire blog. Rich might have had dual citizenship at birth, but she might have never claimed it, or at the time she became an adult Austrian law might not have permitted dual citizenship. Current Austrian nationality law permits those who were born dual citizens to retain both citizenships indefinitely, but those who naturalise must give up other citizenships.

So either Mitchell or Browning must be wrong about Rich’s Austrian citizenship. Between that and Browning’s false statement that Saverin became a citizen of Singapore, we can see very clearly how this story is progressing: news organisations are sacrificing any semblance of fact checking, clarity, and accuracy in favour of speed and sensationalism. All they have to do is keep the outrage at an orgiastic peak for another couple of weeks, and then the second quarter name-and-shame list will come out and there will be a new Emmanuel Goldstein for everyone to denounce. Anyone wanna take a bet on how long before Schumer hijacks the Senate floor again to demand immediate passage of his “Emigration Punishment by Abusing Taxpayers Residing In Other Territories” Act?

41 thoughts on “NBC Nightly News interviews Phil Hodgen, Chuck Schumer about Denise Rich”

  1. @Tim…

    Thanks for that link.  Funny you should bring that up. I got a copy of that from Victoria (not sure how she found out about it) and I have had it open in a tab all day to read. However, since it was my wife’s day off we went touring on a beautiful day in the Pacific NW instead. Now, tonight, I am listening to Libor stories and trying to catch up on my reading. I will definitely read it next.  

    I was wondering if that should get a post all of it’s own, and as you have had a hand in its publication success, it would be good if you had permission to give it wider viewing.

    BTW, in the same edition of Tax Notes Int’l, should be Steven Mopsick’s proposal on noisy “make my day” disclosures.  I think I understand there is a period before he can publish it separately, but I would expect by next week to see it up here too…

    All of this helps get visibility and more intelligent discussion of alternatives to the IRS stupidity, unfortunately the sensationalist at NBC won’t bother to read…

    @Em…  Just another little podcast out today about questions of our favorite Treasury Secretary on what did he know about LIBOR manipulation back in 2007…

    Here it is for your edification:  http://www.thetakeaway.org/2012/jul/11/libor-scandal-reaches-united-states/

  4. @ Just Me
    Thanks for the links. I’m about to explore them now. Please don’t mistake me for some sort of financial whiz though. I’m not at all whizzy, just an ordinary person with perhaps a bit more curiosity than what’s good for me. I picture you as someone who reads 1000 words a minute and juggles 10 tasks at once so please don’t burn yourself out … we’ll need you for the long haul here. 🙂 Also, I sometimes think you never sleep!

  5. @Em…

    I am just an average person with a lot of curiosity too, and spend way too much time on all this just to keep me “Fool Proof”  I guess.  I tend to listen to a lot of things to see if I can pick up the nuances that might be missed in any one story.  The Biggest thing that worries me, is that we have a BIG crumbling of trust in all financial and government institutions after seeing one scandal or another, or one ridiculous government policy after another. Everyone is engineering or manipulating something to their own selfish benefit it seems. Trust is the underlying foundation of Capitalism if it is to work as envisioned by the idealist, but that Trust is taking a beating. It is essential that it survives, as it forms much of the fabric that holds society together. Once it is gone, katie-bar-the-door.  

  7. @Tim and Just Me

    While basing FBAR and FATCA reporting on country of residence will help a lot of people who are being unfairly burdened by these requirements, it is, unfortunately, not enough in the global world we are living in.  In particular, it is not enough for the increasingly borderless Europe that many dual citizens live in.  I will provide 5 examples that show while reporting bank accounts based on country of residence would be a good step to take, large and increasing amounts of dual citizens will still be subject to these destructive positions.

    Example 1:  My European large multinational employer makes money by contracting a significant part of its workforce to work in other countries.  These contracts are usually for only one year, but as part of the salary and expenses are paid in the country of employment, it is necessary to have a bank account there.  However, the employee fully intends to return to his or her “home” country after 1 year.  These employees are not resident in their home country, but it would be foolish to close out all their home country bank accounts since they intend to return. Thus, while performing a legitimate activity in the country they reside in, they have accounts in a country they are not resident in, which is really their “home” country.

    Example 2:  Many of these employees who work in foreign countries for a year are required to participate in local retirement schemes.  When they leave that country, their contributions are by law sometimes required to be transferred to a private bank account.  Two notable examples are Swiss Vested Pension Benefits and Mexican AFORE accounts.  While Switzerland will let you liquidate the account if you move abroad, if you move within the EU, you cannot liquidate a portion of the account until you are 65.  Switzerland offers some flexibility in that you can keep the money in cash, but Mexico automatically invests the money in funds and there is no possibility to liquidate it before age 65.  Thus, a young dual national who thought it would be a great opportunity to live and work in Mexico for a year becomes saddled with a PFIC for most of his or her life in a country he or she does not reside in. This PFIC will likely cost more in accounting fees and US taxes than the account is worth.

    Example 3: What about the cross border worker whose employer pays the salary into a local bank account in the country of employment?  That same bank also offers accounts in the currency of the country the employee lives in so the employee keeps a large part of their money in an account in the country of employment, not the country of residence, as the exchange rates are better. 

    Example 4:  What about the dual citizen retiree from Sweden who retires to Thailand or Spain, but yet spends the summers in Sweden visiting family and friends.  As they have a legacy account in Sweden and do spend some time in the country each year, it would be foolish to close the account as they will have several months of local expenses to pay.  These people will be unnecessarily punished and examined for legitimate activity. 

    Example 5: What about the dual citizen employee who participates in the stock plan of the company he or she works for?  One day, the company decides that they can save money by transferring the plan to a bank in a third country.  Suddenly, the employee has an account in a country they do not reside in even though they have never stopped residing in their country of employment.  .

    These are realities, especially for many of us who live in Europe.  They illustrate that a same country exception binds the wound, but it does not heal it.  Reporting exemptions based on bona fide residence abroad (not related to the country of the bank account), or residence based taxation, or renunciation appear to be the only true answers.

  9. @Just Me. Thanks. I left a comment (I’m “deo” over there):

    Focusing on the ultra-wealthy fatcats only tells 1% of the story. How about you do a series on the many more NON-rich people who renounced U.S. citizenship for political or personal reasons. Here’s five names to start you off: Robin Winkler, Yuan T. Lee, Garry Davis, Mike Gogulski, Henry Martyn Noel. There’s tens of thousands of others who have renounced citizenship over the years — starry-eyed idealists, as well as plain old ordinary American emigrants living out their ordinary lives in other countries

    Slowly learning to be more succinct and restrict myself to making one point rather than trying to refute all the garbage that gets left in the comments — if I tried that I’d be there all night. Already getting late over here; must be even later down in NZ.

  10. @Eric

    I should learn to be succinct, but I can’t help myself!  🙂 I saw yours. I tend to write an entire narrative, which for the “drive by” readers is skimmed or not read, and yours, probably sticks better. On the other hand, I hope to influence journalist that might read more deeply to get a better understanding.  You never know. 

    So, I put up a more lengthy comment just now.

    I am in the Seattle/Bellingham region these days, and back in NZ right now, the sun is just getting up.  

    Here is what I wrote, just to have it somewhere I can find for cut and past later.. LOL

    I am not for sure what the agenda is with this article. Did the Denise Rich story (not new news) cause you to go scratching into the past to find the Rich and Famous who you charge that renounced for tax purposes. Maybe they did and maybe they did not , but that misses the bigger point. 

    You fail to recognize that some (Denise Rich as an example) have moved to higher tax jurisdictions than the US, so that destroys the tax escape narrative. And, that EXIT tax can be severe, so they are not getting off Scott free, for god sake. 

    It is not easy to renounce no matter what tax expert Duggan says. It is emotionally traumatic for many. It is a bureaucratic hassle and lengthy process. The State Department charges you $450 for the privilege of exercising a fundamental right to choose. It takes multiple appointments, declarations and there are many forms to sign before you get that CLN. Then you are not done yet as the IRS has more forms and reporting required. 

    Also, I note, that CBS has not been reporting on the last 3 years of IRS and Congressional jihad against offshore accounts using FBARs as penalty wedge and FATCA as a global hunt for All US Persons living EVERYWHERE in the world. Why not? If you had, you might have understood this story better. 

    FATCA was originally intended for Homeland Tax Evaders,(It was passed in the 2010 Hire Act) but now is having impacts on many dual citizens and accidental Americans abroad which do not seem to merit the same sensational attention of a Denise Rich, but how would you know? I doubt I will find one story on your web site speaking to FATCA and the impacts. 

    I would strongly recommend CBS get away from the one day hot headline of a big name reporting to do a serious focused analysis why Americans are renouncing their citizenship in ever increasing numbers. 

    U.S. citizenship tax policy coupled with FATCA legislation plus FBAR penalties and other SEC regulations has made it near impossible for Americans to reside overseas, to maintain bank accounts and even to keep jobs. U.S. policies are destroying the community of Americans abroad – many average citizens are forced to renounce to survive. 

    It is also blatant propaganda on our politicians part to define those who renounce as “despicable” while claiming it is for Tax purposes. Senator Schumer, for one, does not know what he is talking about. He lives in a bubble of his own absurd rhetoric. It is U.S. policies and application of stupid statutes that his votes created that are causing the uptick in those that are shedding that US passport. The cost vs benefit analysis has gone decidedly negative in the past 3 years, and folks are having to make hard choices to relinquish or renounce depending on their circumstances. 

    The United States is the only country to tax its citizens residing overseas, leading to double taxation and to second class citizenship. Furthermore, the U.S. sees the arrival of 100,000 or more immigrants every year who know not what they are signing up for, a life time shackle that can only be cut free by renouncing your citizenship if you return to your original homeland to live. 

    Other countries are not complaining about their citizens having a free choice to move abroad. In fact, they encourage them, as they are goodwill ambassadors and export job creators for their homeland. Ask the Indian, or the Chinese in your work place if their government treats them like the US is treating its diaspora, or requires them to pay taxes and report accounts back to their homeland under threat of draconian penalties for even non willful failure. I think you might be surprised by the answer. Why has the U.S. become so defensive, so narrow-minded, frankly so stupid in its handling of its citizens residing overseas. And we wonder why we have trade deficits. America wants all the salesman to come home to Kansas, apparently, as that is the effect of it current policies.

    BTW, on those new immigrants arriving on American shores, they are never informed of their FBAR obligations in their “Welcome to America” State Department packages. Many are also being caught out in an IRS offshore tax hunt for benign failures to file FBARs and are being improperly characterized as Tax cheats hiding money over seas. Many of them are finding their American Dream dashed by U.S. practices promoted by the likes of Senator Schumer who lives in his New York tax ghetto. I bet he renounces those that leave NY and move to Florida as tax cheats too. 

  11. More Chuck Schumer

    High-ranking Democratic Senator Charles Schumer says the U.S. government should stand in the way of CNOOC’s $15.1-billion deal to buy Nexen unless China lives up to promises it has already made to open its market to U.S. companies.

    CNOOC — the China National Offshore Oil Corp. — is a state-owned oil company.

    The New York senator, a noted opponent of China’s international trade policies, told U.S. Treasury Secretary Timothy Geithner that the U.S. should block the takeover of Calgary-based Nexen unless China lives up to its free trade commitments.

    “It is rare that we have so much leverage to exert upon China,” Schumer said. “We should not let this window of opportunity pass us by. At some point, we have to put our foot down over China’s refusal to play by the rules of free trade.”

    The committee on foreign investment in the United States, headed up by Geithner, has the authority to approve or decline foreign takeovers involving U.S. assets based on national security concerns.

  12. @Calgary:  Well, maybe that will get Prime Minister Harper’s attention about US bullies in a way FATCA doesn’t seem to be doing!

  13. @Blaze, one would hope so, though:

    “Stephen Harper is warning Canadians not to jump to conclusions about whether the federal government supports a $15-billion Chinese bid for oil giant Nexen Inc.

    The bid will be carefully scrutinized and assessed on the basis of whether or not it’s of net benefit to Canada, as the law requires, Harper told a news conference Tuesday in Oshawa, Ont.

    “Under the law, the transaction must be of net benefit to the country, (and) the government will make sure the transaction is clearly scrutinized to make sure that it is of net benefit, if it is approved,” he said….”

    Perhaps this will catch the ire of Canadians on American exceptionalism and we can take advantage of that by fueling the fire with our stories on FATCA and all we talk of here.

  14. @Calgary:  I’m sure we all have our own views on Nexen and China–as does Harper.  What galls me is that Schumer, et. al. think it is any of their business.  

    Just leave us alone!  They don’t own Alberta’s oil any more than they own those of us unfortunate enough to have been born in US!

  15. @Blaze,

    Exactly! They just can not ever keep their nose out of the business of other countries. They are NOT king of the world.

  16. One more reason to support the deal.  Lenin was right: When it comes time to hang the capitalists they will gladly sell us the rope.

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