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Four charged with tax evasion.

A federal grand jury has charged a St Louis car dealer, two Texas men and a US Virgin Islands resident with using a US Virgin Islands economic development program to evade US$74 million in taxes, reports Bloomberg (March 28, 2007). The East St Louis, Ill. grand jury indicted James A. Auffenberg Jr. of Swansea, Ill, charging him with illegally sheltering US$300 million through Kapok Management, L.P., a St Croix-based partnership that qualified for tax benefits;

James W. Ferguson III of Amarillo, Tex, Peter G. Fagan of De Leon, Tex, and J. David Jackson of St Croix were also charged. The indictments cap a four-year investigation that began with a federal raid of Kapok and touched off new federal scrutiny of the USVI tax incentives. Approved by the US Congress, the program permits qualified taxpayers to cut their federal bill by 90%. A 2004 federal law placed new restrictions on the tax program and chased off a burgeoning hedge fund industry attracted by the incentives, the USVI government says;

To qualify for the tax incentives, firms must invest at least US$100,000 in the territory, buy products such as office supplies and computers in the USVI, contribute to area charities and hire at least 10 people, 80% of whom must be natives of the islands. Company owners must live in the territory for at least half of the year. The indictment claims Auffenberg, a St Louis-area car dealer, and other partners never actually became bona fide residents and used the St Croix-based Kapok to launder funds they earned in the US.
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Title Annotation:U.S. VIRGIN ISLANDS
Publication:Caribbean Update
Date:May 1, 2007
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