U.S. Tightens Offshore Financial Loopholes
RICK SANCHEZ, CNN ANCHOR: Coming at you right now, the fat cats ripping you and me off, hiding their money overseas to avoid paying taxes. A list of 4,400 of them who are denying our children billions of dollars. Who are they? He admitted it to me on the air. The more we look into this, the more this appears that it was really planned, that it was almost...</s>UNIDENTIFIED MALE: Oh, it was more planned than you think.</s>SANCHEZ: So, he plotted to set up and have an armed man at an event near the president. The president! And guess what? We're going to reveal his ties to a dangerous militia movement.</s>UNIDENTIFIED FEMALE: We will resist people imposing their will on us through the strength of the majority with a vote.</s>SANCHEZ: Uh, Secret Service, are you listening? New details.</s>SANCHEZ: Also, why is the terrorist who bombed the plane out of the sky, killing 270 people, being given a -- quote -- "compassionate release"? It is amazing to watch. Are you outraged? What you say on your national conversation for Thursday, August 20, 2009.</s>SANCHEZ: And hello again, everybody. I'm Rick Sanchez. The next generation of news is what we do. It's a conversation. It's not a speech. And, as usual, it's your turn to get involved. Before I do anything else, I want to let you know that this -- this character, this terrorist, Abdel Basset Ali al-Megrahi, has, in fact, as we understand it, as being reported by the Associated Press, arrived now in Tripoli, Libya. And from what we understand, he is being welcomed as a hero with something like 1,000 people cheering and applauding his return back. This is old video from -- well, when I say old, I should say of a couple hours ago. This is the other side of that trip. This is him this morning as he was in Scotland getting ready to leave for Tripoli. As you can see, he turns here. He shakes hands with a couple of the men who had escorted him there. And then, wearing that Nike hat, oddly enough, he makes his way up the stairs, and has now been in the air and has arrived in Tripoli to a hero's welcome, to a hero's welcome, a man who had every single thing to do with the death of 270 people, literally just blown out of the sky over Lockerbie, Scotland. I know it's unsettling. It's unsettling for many people. It is what it is, at least according to Scottish justice. We are going to be giving you an update on this story. We hope to be able to get video out of Tripoli. When we do, we will turn it for you right away. Another story that I want you to follow right now, this is almost as much outrage in this story. Who is really cheating the average American taxpayer these days? This is what we hear when we watch a lot of these town hall meetings, for example.</s>UNIDENTIFIED MALE: You are going to bankrupt this country, you and the Democrats. And you're making a mistake. You are going to indebt my generation and we are going to pay more taxes because of you, sir.</s>SANCHEZ: This is what we don't often hear. We are being cheated out of billions of tax dollars. Did you know that? By whom? By wealthy fat cats who are hiding their money in tax-free offshore overseas accounts. Here's the news on this, a deal brokered between the IRS and the Swiss government involving banking monster UBS, UBS agreeing to release the names of 4,500 U.S. depositors who may have used UBS to evade paying their share of taxes. Again, we're talking about billions of dollars in taxes that has gone uncollected, by our estimate, as much as $6 billion. Two guests on this. Jordan Belfort, he's a tax cheat himself who describes himself in his book as the "wolf of Wall Street." Great book. Also joining now here in Atlanta is "Wall Street Journal" reporter Carrick Mollenkamp. Carrick, let me begin with you. These accounts were apparently in Liechtenstein, the Cayman Islands, Hong Kong and the British Islands. That's where the accounts were that these guys were using to hide their money from American taxpayers. How does this work?</s>CARRICK MOLLENKAMP, "THE WALL STREET JOURNAL": Rick, there was an interesting indictment handed up by a grand jury in California today that kind of laid out how one of these structures was set up.</s>SANCHEZ: Take us through it.</s>SANCHEZ: In layman's terms, how would someone who wants to hide money, has a lot of it, and has a big company, how would they go about going to, let's say, the Cayman Islands to hide money?</s>MOLLENKAMP: Well, why don't we go to Liechtenstein, in 30 days will set up a structure for you?</s>SANCHEZ: All right.</s>MOLLENKAMP: So, July 3, 2003, you're in Liechtenstein, the foundation. You're going to overlay that, 15 days later create an enterprise in Hong Kong, nothing behind it. You have got that done. About 12 days later, you open up the Hong Kong entity's account at a UBS branch in Zurich. A month later, you're flowing $1 million from a U.S. business into a U.S. domestic account and then out of the U.S. and into Zurich at the fake Hong Kong account.</s>SANCHEZ: You're actually looking at the note. Is this the indictment that you're looking at right here?</s>MOLLENKAMP: That's correct.</s>SANCHEZ: Oh, my goodness. Look at this. Robert, can you pick this up? You don't mind if I...</s>MOLLENKAMP: No, no, please.</s>SANCHEZ: I don't want to be a little grabby on you here, but I figure it's a public document. That's the indictment that was handed down. It has two of the names that we're talking about. The part that makes most people angry is it's Americans hiding money from Americans. I mean, that's money that could be used for my kids' school, for my grandma's health care, for a lot of things in this country. That's -- take me through that.</s>MOLLENKAMP: Yes. The thinking, I think, was pitched -- and there are some defense lawyers that will try to pitch this idea -- is that the Swiss were proposing this as legitimate transactions. You could argue the Americans that used it probably had some inkling, but they were so complex that some may not have grasped the -- how illegitimate they were.</s>SANCHEZ: But they knew it wasn't. I mean, the guy who -- a person who does this...</s>MOLLENKAMP: Well, we have got four guilty pleas so far just since April of people that have basically owned up to not paying income taxes.</s>SANCHEZ: Let me talk to somebody who's done this and knows how the game's played because he played it himself, spent some time in a federal penitentiary as a result of it. That's Jordan Belfort. Jordan, why does a person like you decide that they're going to use an offshore account and how do you do it?</s>JORDAN BELFORT, AUTHOR, "THE WOLF OF WALL STREET": Well, there are a bunch of reasons, depending on what you're trying to accomplish. One is simply to evade taxes. Another is to do business in a way where people don't know it's actually you, because you form what's called bearer corporations, so you don't appear on the transaction. And what happens is, the Swiss government is actually set up for this. They have trustees that create all the paperwork, that create a paper trail that allows the transaction to seem legitimate. So, you wouldn't just put $1 million in an account and have it wired to Switzerland. You would have an invoice from some phony company from either Hong Kong or somewhere else in the world, so it would appear that you're buying some good or service and you're overpaying for it, so, the money ends up flowing overseas. So, it looks like it's legitimate, but it's not, and ends up being your money in a foreign account. So, rather than having the profit here in the U.S., where you have to pay taxes, you end up having the money tax-free overseas. And what it's really about is greed. It's not -- these are all wealthy people. I know. I was there. And when you have that much money, you have a sense of entitlement. And every dollar you pay in taxes, you're like, wow, this is crazy. I'm paying more than anybody else, so on and so forth.</s>SANCHEZ: How do you look at yourself in the mirror after doing something like this? Because you're essentially stealing from my kids.</s>BELFORT: How -- me, myself, personally?</s>SANCHEZ: Yes, you, you, you. Yes, sure, you did it. I know you did time in a federal penitentiary. You have paid for your crime, but I just want to get in the head of you big guys, you fat cats out there who made all these millions of dollars and knew you were trying to get away with something and cheated the rest of us.</s>BELFORT: Well, I think at the time -- it's a good question and I don't think you get there in one step. You take a little tiny step towards doing this with a very small amount of money, and you say, well, I'm paying so much more taxes than anybody else anyway, this is really no big deal. Then once you do a little bit, you become desensitized. You do a little bit more. Before you know it, let's say two or three years later, you're doing it with massive sums of money and it feels perfectly OK. It's like putting your toe in a bathtub. It's piping hot at first. Five minutes later, the water feels just fine. That's how it happens.</s>SANCHEZ: You know, I'm wondering, Marrick (sic), how many people -- Carrick -- pardon me -- how many people who are big CEOs of health companies may be hiding their money overseas in some of these accounts, while we see -- quote -- "average Americans" fighting for them and defend them at these town hall meetings?</s>MOLLENKAMP: Yes, I think we will find out as these criminal prosecutions are brought in the 4,450 cases. I think we're going to see some pretty famous names.</s>SANCHEZ: Four thousand five hundred people, that's a lot of people.</s>MOLLENKAMP: It is.</s>SANCHEZ: That's 4,500 Americans that we know of, but there actually could be more.</s>BELFORT: Yes.</s>MOLLENKAMP: Well, I think ultimately because you have got people coming forward through the IRS' disclosure program, easily thousands more.</s>SNOW: This is something Americans should know about. It's something Americans should obviously check on, and it's something we are going to be committed to following. And it's a good thing we had you to be able to ask about this. And, Jordan, my best to you, too. Thanks for coming as well. And we're going to be talking to you a little bit more later about this, right?</s>BELFORT: You got it.</s>SANCHEZ: Yes. All right. I will look forward to it. Meanwhile, any moment now, we are going to be seeing the man who actually was responsible for blowing 270 people out of the sky. That's him. He's a mastermind. He's a terrorist. He is certainly by all aspects of what we know an evil man. He's also a free man, because he's been released now, because the justice system in Scotland has decided that he's too close to death to be allowed to remain in prison. So, we're going to be all over this. As soon as that picture comes in, we are going to share it with you. Also, guess what else we know about the man who admitted to me that he planned this gun-toting moment at a presidential event? Can you say dangerous militia movement? We will. You will know more about this when we come back. Stay with us.