Paradise Papers: Trump Ally Robert Kraft Revealed As Longtime Owner Of Offshore Firm

The New England Patriots’ billionaire boss is among several major US sports team owners who appear in the Paradise Papers

Trump has said that Kraft, the owner of the New England Patriots, urged him to “tax the rich people” and take care of the poor. During a Super Bowl celebration at the White House in April, Kraft hailed “hard work” as the essence of America.

Kraft, who donated $1m to Trump’s inaugural celebrations, claims he buys his coffee at Dunkin’ Donuts, not Starbucks – and pays for those in line behind him.

At the same time, files leaked in the Paradise Papers reveal, Kraft has for more than two decades quietly owned an offshore company that could be used to legally avoid or reduce US taxes.

The 76-year-old chairman of the reigning Super Bowl champions is identified deep within a June 2012 file as the owner of a holding company and bank accounts on the Atlantic tax haven of Bermuda.

Kraft is one of several owners of major US sports teams to appear in the leak through involvement in firms in tax havens. Wealthy bosses at franchises in the NFL, NBA and NHL are named in the leaked files as senior figures at firms incorporated in zero-tax jurisdictions such as Bermuda, the Bahamas and Barbados. Several have, like Kraft, made significant donations to political campaigns at home.

Also named among the leaked files are the NBA team owners Micky Arison of the Miami Heat and Steve Pagliuca of the Boston Celtics, along with Peter Karmanos of the Carolina Hurricanes hockey team.

A spokesperson for Kraft said the Bermuda company had been established to do business with certain customers, which the spokesperson declined to identify. The spokesperson insisted the offshore vehicle dealt with relatively small sums.

“These entities are not organized or maintained for any reason other than to facilitate doing business in any particular location and decisions are not income tax motivated,” said the spokesperson.

Trump left his own Super Bowl party at half-time in February, when his favoured Patriots were down 21 points to 3. His early departure meant he missed one of the great sporting comebacks of all time.

But the president made sure to bask in the glory when Kraft brought his victorious team to the White House a couple of months later. Kraft, a longtime friend, presented a “Trump 45” shirt to the 45th president, along with a personal Super Bowl ring.

In remarks at the event, Kraft spoke of toil and perseverance as “the foundation of everything that is great about this country”. But his financial arrangements have not always been so flag-waving.

Kraft’s Bermuda firm was incorporated as a branch of International Forest Products, a wood and paper exporting division in his privately held Kraft Group. The Bermuda vehicle is an investment holding company, meaning it collects returns on investments or property rather than trading in goods or services.

The June 2012 document was produced by Appleby, a corporate services company that handles administration for Kraft’s firm. Internal communications show that Appleby’s executives classed Kraft as a “PEP” client – a politically exposed person whose affairs should be handled with particular care.

Kraft’s firm’s classification under Bermuda law means that in return for an annual fee it pays no tax on profits, income or dividends. It is not allowed to do business in Bermuda itself.

Kraft is listed in the document as the owner of all 12,000 shares of the Bermuda company. His ownership would have been declared to Bermuda authorities, who promise to hold this information in strict secrecy. Kraft was also listed as authorized to sign for transactions involving two bank accounts on Bermuda: one at HSBC that holds US dollars and another at the island’s Butterfield bank that contains British pounds.

The value of the offshore company’s holdings was not disclosed in the files. Separate Appleby documents from 2013 said Kraft and his fellow directors had decided – as Bermuda law allows – that on an indefinite basis they would not be holding annual meetings, appointing an auditor or presenting audited financial statements.

While Bermuda imposes no income tax, capital gains tax or estate tax, it warns American investors that they may incur some US taxes on money they earn through companies incorporated on the island.

Arison, the billionaire owner of the Miami Heat in Florida, appears in the leaked files in relation to his work in the luxury cruise industry, which Forbes estimates has made him a personal fortune of $9.5bn.

The 68-year-old is the chairman of Carnival Corporation, the world’s biggest cruise operator, which was founded by his father, Ted. Carnival, headquartered just outside Miami, posted a company-record $2.8bn profit in 2016. Arison has donated to Republicans and Democrats in recent years, most notably $505,000 to a Pac supporting Jeb Bush in the 2016 Republican primary.

A 2012 document lists Arison as a director of Trident Insurance Company Ltd, a Bermuda-based subsidiary of Carnival that is a so-called captive insurer. Captives are in-house insurance firms created within corporations, used to insure their operations instead of buying coverage from an outside insurance company.

Forming a captive insurance company in Bermuda, which has no corporation tax, can lower a corporation’s tax bill. The insurance premiums that a company pays to its in-house insurance firm may be tax-deductible. The premiums themselves remain within the corporation, without being taxed as profits would be. Companies are not required to make the captive insurer’s accounts public.

In 2015, the US Internal Revenue Service (IRS) included the use of captive insurers on its “dirty dozen” list of tax schemes and said it was looking into potential abuse of the system. The same year, Arison’s Trident Insurance Company was inducted into Bermuda’s Captive Hall of Fame, which marks contributions to the island’s economy.

Roger Frizzell, a spokesman for Carnival, said in an email: “According to our financial experts, we are seeing very little, if any, income tax benefits. For us, this is a vehicle to allow us to access consumers to provide travel insurance. As you know, our business is global, operating in more than 700 cities and ports around the world.”

A separate leak of documents from the Bahamas corporate register also names Arison as having been a director of five companies incorporated on the islands since the 1980s, including Carnival Leisure Industries, a sister company of the cruise corporation that operated hotels and casinos.

Pagliuca, a co-owner of the Boston Celtics in Massachusetts, appears in the leaked files in connection with Virgin Voyages, a joint venture of Richard Branson’s Virgin Group and Bain Capital, a private equity group of which Pagliuca is co-chairman.

The privately held cruise venture was unveiled in 2014, with Bain reported to be investing hundreds of millions of dollars alongside an estimated $100m from Virgin. The company, previously named Virgin Cruises, describes itself as based in Florida. But, like other divisions of Branson’s empire, it is held offshore.

Virgin Voyages was incorporated in Bermuda in 2014, with Pagliuca as one of six directors. The leaked files show that Bain’s stake in Virgin Voyages is held through a limited liability company formed in Delaware, which does not disclose filings that would state what Pagliuca’s own holding in the cruise venture was worth.

A private list of the cruise company’s shareholders within the leaked files shows that in addition to Bain and Virgin, investors include the Liechtenstein royal family’s private banking arm and an investment vehicle in the Cayman Islands named Portland Ltd. Pagliuca is also a director of a holding company in Bermuda that owns Virgin’s cruise ships.

Pagliuca, 62, was recruited to the Boston-based investment firm by the 2008 Republican presidential nominee, Mitt Romney. His net worth was once estimated at $410m by Boston Magazine. He ran unsuccessfully for the Massachusetts US Senate seat after the death of Ted Kennedy in 2009.

Pagliuca and Bain Capital did not respond to requests for comment. A spokesman for Virgin Voyages said: “As it relates to offshore registration, including Bermuda, given the international nature of the cruise ship industry and the voyages themselves, it is a universal and legal practice.”

Karmanos, the owner of the Carolina Hurricanes in Raleigh, North Carolina, appears in a leaked registry of Barbados corporations in his former capacity as chairman of the software company Compuware.

He founded Compuware in 1973 and built a fortune once estimated by Forbes to total more than $1bn. The leaked files show that he formed a Compuware subsidiary in Barbados in 1988. The company was a foreign sales corporation, a type of company that faces no taxes from Barbados authorities.

Karmanos, 74, as the chairman and chief executive of Compuware, was a director of the offshore subsidiary. The Barbados company was dissolved in September 2011. Karmanos retired the following year.

In an interview, Karmanos said he had set up the offshore firm “for tax purposes”, which he said “was perfectly appropriate” given the laws at the time.

Under tax reforms signed by Ronald Reagan a few years before Karmanos formed the vehicle, Americans were able to keep a third of their overseas income completely away from the IRS by operating foreign sales corporations in jurisdictions such as Barbados. The loophole was later closed under international pressure.

“Everybody was doing it,” said Karmanos. “That’s why they ended it.”