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Tax day, hedge funds, and tax havens: Murky waters in the Caribbean

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Message Margie Burns

As of March 16, the Securities and Exchange Commission requires all filers to submit their Forms D electronically on EDGAR.

Not coincidentally, March 16 was the date when subsidiaries or affiliates of several politically well-connected hedge funds, all with an offshore component, registered large Form D transactions.

 Form D is convenient in that it requires little detail. Most securities (shares) sold in the U.S. must be registered, but Form D registration requires less disclosure than other stock sales. SEC Regulation D was intended to facilitate access to capital markets funds for small companies that might otherwise have trouble finding capital. The sellers are named, but investors are not. Previously a company could choose to submit an electronic Form D notice of a securities transaction or could submit on paper. Now the registration of those exempt sales of securities—investments—must be filed online, where they are promptly posted; filings are a priority 1 on the SEC web site.

In a laissez-faire holdover from the Bush administration, a large corporation or a highly capitalized global network of investment firms can avail itself of Form D.

March 16 Form D filings show that hedge funds connected to Marvin P. Bush--youngest brother of former president George W. Bush, former GOP finance chairman in Virginia, and head of a northern Virginia hedge fund—raised over $1,612,000,000 ($1.6 billion) by filing deadline. More Form D filings from March 12 show another $7.8 billion raised by Bush companies, companies directed by Bush co-directors, or spin-off companies. The total is almost $10 billion raised by Bush-connected hedge funds.

Most of the money was raised offshore, in large investments in Bush-connected firms located on Grand Cayman and Tortola, British Virgin Islands. The islands are widely known to be tax havens for high-net-worth investors.

The transactions are too numerous to list, but a few examples indicate their scale. Bush’s firm Winston Global Fund Ltd, based in Tortola, raised more than $184 million. Back home on Tysons Boulevard in McLean, Virginia, Bush’s Winston Global Fund LP raised $308 million around the same time.

Global Strategies Absolute Return Fund Ltd—in the Tortola office of Winston Global Ltd and formerly named Winston Absolute Return Fund Ltd—sold $39.5 million in investments. Global Strategies Fund Ltd, on Grand Cayman, raised $11,966,972. Global Strategies Small Cap Fund Ltd, on Grand Cayman, raised $11,062,005.

Global Strategies firms, including Global Strategies Event-Driven Fund LP, Global Strategies Master Fund LP, Global Strategies Small Cap Fund LP, and Global Strategies Small Cap Master Fund LP, raised a combined $175 million. The onshore Global Strategies firms are located in the Atlanta office of a longtime Bush associate on Peachtree Street.


What ‘skittish investors’? The brother of an ex-president can still find customers

The network of hedge funds shares directors as well as offices.

Two of Bush’s fellow directors at Winston Global, David Bree and Don Seymour, are based on Grand Cayman. March 16 filings show 38 Form D transactions for David Bree and 18 for Don Seymour. March 12 filings show four Form D transactions for Bree and two for Seymour.

Hedge fund shares bought by investors are called, for SEC purposes, pooled investment fund interests. Bree and Seymour as directors registered the largest transaction on March 12 for an entity named Diamondback Offshore Fund Ltd, on Grand Cayman: $4,505,725,935.

Next largest was the March 13 amended filing by Boronia Diversified Fund Ltd, where Seymour is a director: $1,072,967,251. Another partnership, Boronia Diversified Fund LP, also amended its March 12 filing to record $163,548,721. As noted, all three Boronia hedge funds share a Grand Cayman office and a co-director of Marvin Bush’s from Winston Global.

Boronia executive Neil Power, in Sydney, Australia, returned a call for comment. Communicating clearly across oceans and continents can be difficult; Power, very courteous, had trouble understanding my name, replied to a question about securities by saying that the firm has made no such “sales of assets,” and referred to “Form B” (“D” as in dog, I clarified; “oh, D as in dog”). Saying that his position would make him knowledgeable about such transactions, he disclaimed knowledge of the Form D transactions.

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Freelance journalist in metro DC area.
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