Globe Magazine

The costs of a secretive ‘wealth defense industry’ of shell companies, offshore tax havens, and empty luxury condos

When oligarchs and ultra-wealthy around the world game the system to hide riches in Boston and other cities, everyone else pays.

Mark Smith for The Boston Globe

Thirty wealthy people sit in a circle of couches and comfortable old chairs. I am one, a participant at a weekend conference for people with inherited wealth, sponsored by a local family office and a foundation. It is 1983 and I am 23 years old. A few years earlier, I learned that as the scion of a successful Midwestern meatpacking family I would inherit a substantial amount of money upon turning 25. I quickly suppressed this information and went about my life. Now, having finished college, I am finally coming to terms with this reality. But I’m perplexed and actively wrestling with the ethics of inherited wealth.

The meeting room is in a stone mansion on a 100-acre estate that had been previously owned by the Stevens family, who made their money from wool and cotton. The house is perched on a hill at the end of a long driveway, about 30 miles northwest of Boston. Water sprinklers swoosh constantly outside the window, ensuring the acres of grass remain green, even through hot August days. A tall, lanky woman named Melanie stands in front of an easel, writing down topics for discussion. She is the only Black person in a room of white people. Participants are encouraged to suggest topics not already on the agenda and form small discussion groups. Some people suggest “setting up a family foundation” and “teaching children about money and values.”

I raise my hand. “I know everyone says that you should never give away your principal.” This is the asset foundation of one’s wealth that generates income. “But why not?” I say. “I’ve been wrestling with the ethics of continuing to hold onto wealth. Would anyone else like to talk about giving away assets?”

“That would be . . . " flutters an older woman named Dee, craning forward in her chair. “That would be utterly foolish.”

“Yes,” agrees Catherine, a friend of Dee’s. “Don’t ever touch the principal.”

“Hold your horses,” Melanie interjects with a chairwoman’s authority. “They can talk about whatever they want. Are there others that want to join Chuck?” A woman I had talked with the night before says she would, two others raise their hands, and we are assigned a meeting room. Dee and Catherine join our group of four to convince us we are loony.

“We are both grandmothers,” Dee explains. “We know a thing or two.”

“What will you prove by committing class suicide?” asks Catherine. Her face is flushed and agitated — and she eyes me through her thick glasses as if I am about to detonate a bomb.

Chuck Collins is a senior scholar at the Institute for Policy Studies. This story was adapted from his new book, "The Wealth Hoarders: How Billionaires Pay Millions To Hide Trillions."

A lifetime has passed since 1983. A few years later, I gave the wealth in my name to several foundations that fund “change not charity.” Decades later, I have no regrets about this decision. Even without the money, I appreciate the ample inheritance I received of other intergenerational advantages, many of them hardwired into my life.

My feelings about inherited wealth and philanthropy have only intensified over time, after four decades of surging income and wealth inequality. For 20 years, I’ve worked to defend the estate tax — the only US levy on the inherited wealth of multimillionaires and billionaires. I’ve seen how philanthropy has become increasingly top heavy, dominated by larger mega-donors as donations from small donors decline. Most alarming, trillions of dollars are now vanishing into a hidden-wealth archipelago. With the help of an increasingly aggressive “wealth defense industry,” vast amounts of treasure are being sequestered into dynastic trusts, anonymous companies, shell corporations, and offshore tax havens.

I recently read that there are an estimated 10,000 family offices globally. They manage the assets of the global super-wealthy, all with the primary mission of wealth preservation over multiple generations. Boston was an early center of managing private wealth, because during the Industrial Revolution, Boston was the Silicon Valley of its day. Huge fortunes emerged from early manufacturing that were substantially bigger and different from land-based fortunes. The Cabots, Lodges, and Lowells, with wealth from shipping, merchandise, and early manufacturing, literally had more cash than they knew what to do with. Public officials were obviously very interested in how to tax these great industrial fortunes.

“The Cabots and Lowells deployed people to ensure that the state didn’t get its hands on their money,” says Brooke Harrington, a sociologist at Dartmouth College. “And that’s been the job of the wealth manager ever since.”

Today’s global rich are increasingly stateless, detaching their money from nation states and conventional representations of ownership to hide and preserve it. A global oligarchy is growing — and it does not bode well for everyone else and the planet.

Researchers estimate that some 10 to 12 percent of the world’s wealth — trillions of dollars — is now hidden through a combination of tax-haven secrecy jurisdictions, shell companies, opaque trusts, and other mechanisms. The exact amount of hidden wealth is difficult to measure because . . . it is hidden. At the low end, researchers estimated in 2014 that the number was 8 percent of the world’s private wealth, or more than $7.6 trillion. At the high end, the Tax Justice Network estimates between $24 trillion and $36 trillion is sequestered globally.

Why does wealth hiding matter? Perhaps the answer is as obvious as to a question like, “Why shouldn’t you throw rocks at the playground?” But in a world where the far-flung implications of our individual choices are not always clear, it is worth spelling out the societal costs of advanced wealth hiding.

The dangers of the hidden-wealth system are four-fold. It enables the plundering of the wealth of nations, especially hurting the world’s most poor and vulnerable populations. It allows wealthy individuals and corporations to dodge and evade their tax responsibilities, shifting obligations onto those with fewer resources. It empowers criminals, deadbeats, and kleptocrats, allowing them to thrive in secrecy. Finally, it contributes to the rapid growth of income and wealth inequality. By helping to sequester trillions of dollars into complex trusts and offshore tax havens, the wealth defense industry fortifies oligarchic concentrations of dynastic wealth and leads to an erosion in economic opportunity and social mobility. Ultimately, this threatens self-governing democracies by undermining how they organize meaningful tax systems, raise revenue, and make public investments.

When those with the most wealth in the society use their power to reduce their own taxes, they shift obligations onto everyone else (or force spending cuts to services that assist the non-rich). When the wealthy don’t pay, they leave the bills to everyone else for public services, ranging from caring for veterans and protecting national parks to building infrastructure and protecting the public from infectious diseases. By hiring wealth defense industry professionals to shrink or eliminate their taxes, the rich create a two-tier tax system — one set of rules for themselves, another for everyone else. As a result, we end up with absurd situations where a senior government official says that “only morons pay the estate tax,” acknowledging that the US inheritance tax system is optional for the wealthiest. These super-freeloaders disproportionately benefit from public investments in technology, property rights protections, infrastructure, and public services, yet refuse to pay back into the system to ensure that future generations have the same opportunities they had.

The wealth defense industry, in short, works as an agent of inequality. By helping the rich avoid their responsibilities to the communities and nations from which they draw their wealth, they accelerate our movement toward a future of grotesque division and social disruption. They will claim they are helping their clients obey the laws. But, while the left hand is using various wealth-hiding techniques and loopholes, the right hand is fending off oversight, lobbying for special privileges, and creating new loophole innovations.

Here’s how bad it has become: In the early 1980s, Forbes magazine started its infamous list of the 400 wealthiest individuals in the United States. In 1983, there were only 15 billionaires on the list, and the total combined net worth of the richest 400 people was $118 billion. In March 2021, there were more than 650 US billionaires, holding combined assets exceeding $4.2 trillion. In contrast, the bottom half of all US households — 165 million people — have a combined wealth of $2.4 trillion. This is because the bottom fifth of US households have zero or negative net worth, and the next fifth have so few assets they live in fear of destitution.

The three wealthiest US families are the Waltons of Walmart, the Mars candy family, and the Koch brothers, heirs to the country’s largest privately-held company, the energy conglomerate Koch Industries (David Koch died in August 2019, passing his wealth to his wife). These are all enterprises built by the grandparents and parents of today’s heirs and heiresses, whose descendants possess $446 billion combined. Since 1983, these three families have seen their wealth increase more than 3,500 percent, factoring in inflation. Over the same period, the median household wealth in the US went down 3 percent.

Charles Koch, chief executive of Koch Industries, the country’s largest privately held company. David Zalubowski / Associated Press

With the exception of the Gilded Age of 1880 to 1910, Americans have traditionally abhorred the idea of hereditary wealth and power. Between 1910 and the 1970s, most grand fortunes were dispersed by the time the great-grandchildren came around — hence the adage “shirtsleeves to shirtsleeves in three generations.” We don’t have aristocratic wealth dynasties lording over us because wealth diminishes over multiple generations as money is spent, passed down to heirs, given to charity, and paid in taxes. Only when families aggressively intervene to arrest this cycle does wealth continue to expand over multiple generations, even as the number of heirs increases.

For example, Dorchester born-and-bred casino magnate Sheldon Adelson, who was number 19 on the 2020 US billionaire list with $29.8 billion, set up a complicated trust mechanism called a grantor retained annuity trust. He reportedly used it to pass on $7.9 billion in gifts to his children between 2010 and 2013, while avoiding $2.8 billion in gift and estate taxes. Adelson, who died in early 2021, also broke spending records during the 2018 mid-term elections, with more than $100 million in campaign donations.

In the face of weakened tax laws and aggressive wealth hiding, we see the widespread emergence of wealth dynasties. As the French economist Thomas Piketty warned, if we don’t intervene to reverse these dynamics, we are moving toward a “hereditary aristocracy,” where the heirs of today’s billionaires will dominate our politics, culture, philanthropy, and economy. The concentration of wealth in fewer hands is a troubling trend. And that’s the wealth we know about. What if trillions of dollars are simply vanishing from the ledger?

In Boston’s Millennium Tower, close to 80 percent of units had anonymous ownership, according to a 2018 analysis. Jim Davis/Globe Staff

I don’t have to go far to find ways the wealth defense industry has touched me personally. In Boston, the COVID-19 pandemic has fueled an unprecedented housing emergency. Tens of thousands of households are unable to pay their rents in the private speculative market. People are marching in the streets in protests over racial injustice and the ways that inequality has weakened our society’s ability to respond to the pandemic. Meanwhile, the wealth of the billionaire class is surging in the face of job losses, illness, and death. People are waking up to the ways in which our economic system extracts the wealth of the commons and funnels it upward into the hands of the few.

A significant portion of hidden wealth touches down to earth in the form of real property and luxury real estate purchased anonymously through shell companies. Anonymous ownership is not without legitimate reasons: the ultra-wealthy face risks such as having their children kidnapped for ransom. But across the world, skyscrapers and mansions are rising in globalized super-cities, a form of “wealth storage” for the world’s wealthy who are seeking to diversify their asset holdings. This is leading not just to gentrification, but to a “plutocratization” of urban neighborhoods. As Richard Florida observes in The New Urban Crisis, “Some of the most vibrant, innovative urban neighborhoods are being turned into deadened trophy districts, where the global superrich park their money in high-end housing investments as opposed to places in which to live.”

Perhaps the original super city for using shell companies to anonymously buy real estate was London. Entire neighborhoods — such as Kensington and Mayfair — were transformed into ghost towns of absentee-owned properties, many of them empty. As the UK cracked down on anonymous ownership by creating a beneficial ownership registry, global investors looked elsewhere, notably the United States and Canada. Vancouver suffered such an influx of global investors buying real estate that the city, and later the province of British Columbia, enacted strict restrictions on foreign buyers.

New York City was an obvious first destination in the United States for global capital. In 2015, The New York Times published “Towers of Secrecy,” a series documenting the impact of anonymous buyers on Manhattan’s luxury market. It traced multiple shell company owners to criminal activity and money laundering by foreign buyers. In 2014, 54 percent of real estate purchased in New York for more than $5 million was acquired in the name of anonymous shell companies. In the six most expensive condo projects in the city, the owners of a majority of units were hidden by shell companies, including 77 percent of the units in the One57 skyscraper in Midtown and 69 percent of those at The Plaza. The value of the 900 condominiums in these six buildings was equal to 20,000 average American homes.

Many US cities, especially coastal markets, are experiencing similar trends, with thousands of new luxury residential and rental units in different stages of development. A decade from now, the skylines and population demographics of these cities will be transformed by decisions being made today for the benefit of the ultra-rich, not the residents of those cities. There are some broad benefits from these projects, which provide jobs in the building trades and increase property tax revenue for the city. And luxury development creates additional jobs in the “service-rich lifestyle” sector.

But the boom poses perils for US cities, many of which are experiencing affordable housing emergencies. It is hard for city policy makers to look past the construction boom hype and ask critical questions about the disruptive impact of their city’s luxury real-estate boom. As both domestic and foreign capital surge into cities, in what Richard Florida calls “the recolonization of the city by the affluent and the advantaged,” it also drives gentrification and inequality. In Boston, thousands of units of luxury housing are rising around the central city, with more than 5,000 high-end units in the permitting and construction pipeline. High-end rental and luxury condos have transformed the Seaport area into a neoliberal neighborhood, with virtually no public space, coastal access, or services such as schools and libraries. In a 2018 Institute for Policy Studies report I coauthored with Emma de Goede called Towering Excess, we analyzed 12 luxury buildings with condos starting at $2 million. More than 35 percent were owned by shell companies or anonymous trust entities. At Millennium Tower, close to 80 percent of units had anonymous ownership.

Constructing thousands of units of housing for people in the wealthiest 1 percent will accelerate divisions. Wealthy families that privatize their needs — in the form of private schools, private club and recreational facilities, and other services — do not maintain a stake in the public services on which low- and middle-income urban residents depend. Over time, the rich resent paying for services they don’t use and deploy their considerable clout to reduce taxes and expenditures on public services used by the bottom 80 percent, such as public transit, education, public recreation, public health, and more.

Among the most perverse impacts of luxury booms is the construction of mostly vacant buildings, deploying wasteful amounts of resources and energy. In the face of catastrophic climate change, many cities are attempting to be global leaders on sustainability and achieving the carbon reduction goals of the 2016 Paris climate accords. But the luxury-housing boom is constructing huge energy hog buildings. In Boston, the 61-story luxury tower One Dalton required the construction of a new natural gas pipeline to service units with amenities such as gas ignition fireplaces.

There is increasingly the risk that cities could host criminal money laundering or other illicit activities, because of the abundance of cash transactions and anonymous shell corporations, including limited liability companies organized in Delaware, the premiere secrecy jurisdiction in the country. With multiple layers of trusts, shell companies, and anonymous bank accounts clouding up the picture, hiding funds is easy. The New York Times report found dozens of examples of red flag transactions. In 2010, a shell company poetically named 25CC ST74B L.L.C. bought a condominium on the 74th floor of the Time Warner Center in Manhattan for $15.65 million. The report traced the ownership to Vitaly Malkin, a former Russian senator and banker who had been barred from entering Canada because of suspected connections to organized crime.

In Towering Excess we identified a number of transactions in Boston that appeared suspicious. For example, a condominium was purchased at the Mandarin Oriental residence for over $5 million by a Delaware-based LLC, with funds wired from an anonymous offshore private account in the British Virgin Islands. What could go wrong?

The Financial Crimes Enforcement Network is an arm of the US Treasury Department that monitors financial transactions to combat international money laundering, terrorist financing, and other financial shenanigans. In early 2016, FinCEN imposed a temporary transparency rule on Miami-Dade County and Manhattan to crack down on dark money transactions. Purchasers of real estate with cash over $1 million were required to disclose beneficial ownership. After the implementation of these rules in March 2016, Miami-Dade saw an immediate 95 percent drop in cash real estate purchases by shell companies and anonymous corporations. An academic study found that the threat of greater transparency enforcement led to a 70 percent decline in all-cash purchases nationwide.

The late Sheldon Adelson, whose trust mechanism reportedly let him avoid paying billions of dollars in gift and estate taxes. Kiyoshi Ota / Bloomberg

The good news is that local jurisdictions are taking action to protect themselves from the disruptive impact of this luxury housing boom — and even steer some of the wealth toward addressing their local housing emergencies. Cities such as San Francisco, Oakland, California, and Boston have regulated and taxed vacancies, imposed requirements that new buildings meet green construction standards, and levied luxury real estate transfer taxes (although Boston’s luxury real estate transfer tax is awaiting approval from the state Legislature).

Real estate as a form of wealth storage is attractive in countries with strong property rights protections, functioning and effective representative governance, and publicly financed amenities. This explains why money is moving from less stable closed societies — Russia, China, and petro-dictatorships — to US, Canadian and UK metropolitan areas. One step toward broader transparency of beneficial ownership is to require real estate ownership disclosure at local, state, and national levels.

During her 2020 presidential campaign, Massachusetts Senator Elizabeth Warren called for the expansion and institutionalization of real estate disclosure requirements. She pointed to the ways that US real estate is attractive for illicit money from all over the world. “It’s a stable investment that generally maintains or grows in value — and it gives corrupt oligarchs and dictators a potential escape route if they’re ousted from their home countries,” said Warren. “But this money drives out honest purchasers and makes cities hotbeds for dirty, unproductive cash.” Warren observed that there were sections of New York City where the Census Bureau estimates that 30 percent of the apartments are unoccupied most of the year.

Cities should require public municipal disclosure of beneficial ownership as part of the property registration process, especially as anonymous luxury developments disrupt local housing markets. Real estate, as a class of property, has the advantage that it is place-based and real, compared with some intangible assets. An existing system of deed recording and property ownership registration already exists in every jurisdiction.

FinCEN uses geographic targeting orders — which require financial institutions in a region to report certain types of transactions — to scrutinize a limited number of real estate markets, including Boston. This should be expanded to a nationwide mandate on cash transactions over a certain threshold. Local municipalities should require property owners, as part of recording their deeds, to name the actual human being who owns the property — the beneficial owner.

What we’re talking about here is the “library card” level of disclosure. In most communities, getting a library card requires full disclosure of identity and a real address. Cities should require the same level of disclosure for owning real estate.

Pushing the United States to become a leader in transparency would have enormous positive benefits both in the country and globally. The US has become the number two financial secrecy jurisdiction and an attractive haven for kleptocratic capital from around the world. This should be a source of shame and motivation for change. One positive indicator is how many candidates for the Democratic Party nomination in the 2020 election made greater transparency an important plank in their campaigns. A number of the campaigns called for reforms including registering trusts, banning anonymous shell companies, and aligning the US with global anti-money laundering protocols. Congress made one significant step in this direction at the end of 2020 with the passage of the Corporate Transparency Act, which requires companies to register real owners with FinCEN. Unfortunately, the law doesn’t include trusts and partnerships, loopholes that the wealth defense industry will use to circumvent it. But these trends reflect a growing awareness of these challenges and the political will to address them.

One of the brutal lessons of the COVID-19 pandemic is that our societies were ill-prepared to respond, weakened and made fragile by decades of tax dodging, disinvestment, financialization, and austerity. Now is the time for social movements to press for racial and economic justice, to demand a closing down of the hidden-wealth apparatus, and for a system of finance that works for everyone, not just the planet’s billionaires.

Chuck Collins is a senior scholar at the Institute for Policy Studies, where he co-edits This story was adapted from his new book, “The Wealth Hoarders: How Billionaires Pay Millions To Hide Trillions.” Copyright 2021 by Chuck Collins. Permission to publish granted by Polity Press. Send comments to

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