It's no secret that the upper-echelon of New York City real estate is largely driven by shady foreign wealth. This weekend, the Times published part one of its five-part investigatory attempt to peel back the shell companies that allow plutocrats to exploit our laws and launder their money through luxury apartments.
It took reporters Louise Story (who previously looked at corporate tax giveaways) and Stephanie Saul a year to identify 200 shell companies that own units in the Time Warner Center alone, where 64% of all residences are own by such companies.
They found a $21.4 million condo connected to a Greek businessman arrested for corruption, a $15 million apartment owned by a trust connected to a former Russian senator who is accused of stealing money from Angola, and a $9 million unit connected to an Indian mining magnate whose business was booted from his home country and who has been accused of illegally dumping "arsenic-bearing slag." It's a building full of Mr. Burnses.
And that's just the Time Warner Center—in One57, the sun-blotting ultra-luxury skyscraper, 77% of all units are owned by shell companies. None of these foreigners are paying income taxes or any significant state or municipal taxes on their wealth, and in some cases they are eligible to receive abatements.
“For a long time we’ve taken the view that you have to focus on the people that manage the gateway to the financial system, and those guys are not only the banks,” said Stefan Cassella, a Justice Department lawyer. “Bad guys who are trying to invest money in the financial system — they use lawyers, they use accountants, they use real estate, they use jewelers and private jets.”
Where you and I might see a profound exploitation of taxpaying residents, the professional class that enables these transactions sees "joy."
Real estate agents say commitment to anonymity is essential. “One thing of being a high-end broker is we have to protect the privacy of our clients,” said Hall F. Willkie, president of Brown Harris Stevens. “If we didn’t, we wouldn’t have them as clients. We’re very much like private bankers in that sense.”
“That’s the joy of the condos,” said Julie Maxey-Allison, an agent for Brown Harris Stevens. “That’s why the L.L.C.s buy them. It’s a way foreigners can do whatever they want here.”
The man who manages Michael Bloomberg's wealth sees nothing wrong with the system.
— James Parrott (@JParrott10007) February 7, 2015
And if we needed another reminder why a tax is severely needed on apartments over $5 million owned by non-taxpaying foreigners, the founder of China's largest airline company just paid $47.4 million for an entire floor of One57, the same building that received generous public tax subsidies.
Sadly, none of the forthcoming pieces in the Times' series is entitled New York Politicians & The Real Estate Lobby.