House of 19,000 Corporations

The uproar over Mitt Romney's finances shines a light on the world's most unlikely financial capital.

BY JOSHUA E. KEATING 

Grand Cayman is known for its beach resorts, world-class scuba diving, and as the unlikely facilitator of billions of dollars in global financial transactions.
The island has been garnering a lot of publicity this week -- not the good kind -- thanks to the scrutiny of presidential candidate Mitt Romney's tax returns, which include millions of dollars in foreign investments. According to ABC News, Romney has as much as $8 million invested in 12 Cayman Islands funds. (The governor has money parked in Bermuda, Ireland, and Luxembourg as well.)

Romney's Cayman riches aren't actually a new story. The L.A. Times reported in 2007 that the former Massachusetts governor was listed as a general partner and investor in BCIP Associates III Cayman, a fund set up by his old employer Bain Capital. Bain has as many as 138 funds registered in the Caymans, according to ABC. The BCIP fund is registered at P.O. Box 908GT in George Town, the Caymanian capital. This is the address of Walker House, the local office of international law firm Walkers. It's also, on paper at least, home to dozens of other companies including Del Monte Fresh Produce Inc., the global food giant physically headquartered in Coral Gables, Florida.
Walker House is just one of a number of addresses in downtown George Town used by corporations, including Coca-Cola, Oracle, and Intel, to minimize taxes or cut out the red tape in international transactions. The vast majority of these companies are legally prohibited from doing business in the Caymans themselves. The most famous of these addresses, located just down the road at 335 South Church St., is Ugland House, a five-story office building that is home -- physically -- to law firm Maples and Calder, and -- on paper -- nearly 19,000 companies.
President Barack Obama called out Ugland House specifically in a 2009 speech, saying "either this is the largest building in the world or the largest tax scam in the world." Legally speaking, it's neither. A 2008 GAO report found no evidence of illegal activity by Maples and Calder or any of the entities registered at Ugland House, about half of which have billing addresses in the United States. But, particularly in the case of hedge funds and private equity funds like Bain's -- about 38 percent of Ugland's "tenants" -- the building makes a mockery of the U.S. tax system.

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