Sat. Oct 16th, 2021

SIOUX FALLS, S.D. — Across from a Holiday Inn, in a red-brick building with a welcome sign that reads “The Heart of America,” a little-known financial firm set up shop seven years ago and extended an invitation to the world’s elite.

Trident Trust promised to protect the fortunes and privacy of its new customers by relying on the laws of a state that had become a global destination for wealth. The company called it “The South Dakota Advantage.”

Among those who answered the call: a Colombian textile magnate caught in a scheme to launder the proceeds of an international drug ring, an orange juice mogul who settled with authorities in Brazil for allegedly colluding to underpay local farmers, and family members of the former president of a sugar producer in the Dominican Republic that has been accused of exploiting laborers and forcibly evicting families from their homes.

The U.S. government has long condemned prominent offshore financial centers, where liberal rules and guarantees of discretion have drawn oligarchs, business tycoons and politicians.

But a burgeoning American trust industry is increasingly sheltering the assets of international millionaires and billionaires by promising levels of protection and secrecy that rival or surpass those offered in overseas tax havens. That shield, which is near-absolute, has insulated the industry from meaningful oversight and allowed it to forge new footholds in U.S. states.

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The Washington Post and the International Consortium of Investigative Journalists (ICIJ) gained an unprecedented look into the money flowing into trusts in the United States by examining a trove of more than 11.9 million confidential documents maintained by trust and corporate services providers around the world.

The records, known as the Pandora Papers, expose how foreign political and corporate leaders or their family members moved money and other assets from long-established tax havens to U.S. trust companies.

The investigation identified 206 U.S.-based trusts, linked to 41 countries, holding combined assets worth more than $1 billion. Nearly 30 of the trusts held assets connected to people or companies accused of fraud, bribery or human rights abuses in some of the world’s most vulnerable communities.

The cache of confidential files, obtained by the ICIJ and shared with more than 150 media partners, describes only some of the trusts in the United States but is the most significant set of records ever made public from inside America’s trust industry.

[Trove of secret files details an opaque financial universe where the global elite shield their riches]

The trust documents come mostly from the Sioux Falls office of Trident Trust, a global provider of offshore services. In a written statement, Trident said it is committed to compliance with all applicable regulations and routinely cooperates with authorities. The company declined to answer questions about its clients.

Other states competing to lure wealth include Alaska, Delaware, Nevada and New Hampshire. In South Dakota, assets in trusts more than quadrupled over the past decade to $360 billion. One of the largest trust companies in the state, the South Dakota Trust Co., boasts a roster of international clients from 54 countries.

The industry’s rapid expansion was led by a group of trust company insiders, who year after year pitched legislative proposals that were highly appealing to customers in the United States and abroad: protecting trusts from creditors, from taxing authorities, from foreign governments.

With little opposition, state legislators turned the proposals into laws — dozens since the late 1990s.

“Nobody understands any of them,” Gene Abdallah, Republican chairman of South Dakota’s Senate Judiciary Committee, quipped at a legislative session in 2007. He died in 2019.

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Trident Trust Co., one of the world’s largest managers of offshore wealth, has an office in this building in downtown Sioux Falls, S.D. It opened in 2014, advertising its services for clients from the United States and the “international high net worth community.”

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Former South Dakota state senator Craig Kennedy (D), seen in June 2021, was one of a few members in the legislature who questioned expansion of the trust industry in the state.

Bret Afdahl, director of the South Dakota Division of Banking, said that trust companies are required to confirm the identities of all customers and that foreign clients and assets receive additional scrutiny. The state seeks to audit trust companies at least once every two years and can penalize firms that do not meet standards, he said.

Critics say the oversight is limited, regulations are vague and trust secrecy is nearly impossible to breach.

“My concern is that … we become like Switzerland or Panama,” said former South Dakota state senator Craig Kennedy (D), one of a handful of lawmakers who questioned the growing industry. “I don’t know who the beneficiaries are, what kind of assets are being managed. People use banking and trust laws for inappropriate purposes. I can’t say that’s happening in South Dakota. But I don’t know.”

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Like banks, trust companies are prohibited from knowingly accepting money generated by criminal activity. There is no evidence in the Pandora Papers documents that any of the foreigners with trusts in the United States sheltered criminal proceeds.

Financial experts, however, say the U.S. trust industry should look beyond convictions — investigating and turning away clients whose wealth was amassed amid credible accusations of crimes or human rights abuses or through ties to corrupt regimes.

“It has become abundantly clear that our national interests are really dependent on keeping that kind of money out even if it’s not a financial crime,” said Josh Rudolph, a member of the National Security Council staff in the Obama and Trump administrations. “We fortify thugs and crooks, fail to uphold our values and fuel popular resentment against America.”

With little transparency in the industry, it’s nearly impossible to determine whose money is being managed by trust companies. While regulators in the past two decades focused on the banking industry’s roster of questionable customers, they largely left trust companies alone, free to grow client lists with customer-friendly offers that include tax protection for generations.

[Rogue Americans stashed assets offshore, eluding victims and impeding investigators]

The Pandora Papers records do not provide much detail on what the trust companies knew about their clients when the trusts were established or what steps may have been taken to scrutinize the transactions.

In every case identified by The Post and the ICIJ, details about criminal charges or other allegations were accessible through public records, media accounts, court documents and government reports. Most were posted on the Internet at the time.

Guillermo Lasso, the newly elected president of Ecuador, transferred assets to new trusts at Trident in Sioux Falls in 2017 amid international media reports that questioned his interests in a bank in Panama. He said he has complied with Ecuadoran law on offshore activities.

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Ecuadoran President Guillermo Lasso at a Sept. 18 summit in Mexico City. Before assuming the office this year, Lasso in 2017 transferred assets to new trusts in South Dakota amid media reports questioning his interests in an offshore bank. He denied any wrongdoing.

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Carlos Morales Troncoso speaks at the United Nations in New York in 2009, when he was the Dominican Republic’s foreign minister. The onetime Central Romana sugar company chief executive also served as the country’s vice president.

Human rights advocates had for many years publicly protested the mistreatment of sugar workers at Central Romana Corp. in the Dominican Republic when family members of the company’s former president finalized several trusts at Trident in Sioux Falls in 2019. The trusts contained shares of Central Romana and personal wealth worth $14 million, the records show.

Carlos Morales Troncoso led the massive sugar operation for about eight years and remained one of the industry’s most vocal supporters after he became the Dominican Republic’s vice president and, later, ambassador to the United States and foreign minister.

Morales died in 2014. His four daughters, who are trust beneficiaries and dual U.S. citizens, did not respond to questions about why the shares and other assets were moved to South Dakota from a trust company in the Bahamas. Through an attorney, they said they have never been involved in Central Romana operations, which have continued to draw international rebuke.

In 2016, the company sent armed guards and bulldozers to evict 60 families from makeshift houses built on the dusty edge of a sugar plantation in El Seibo, one of the poorest and most remote corners of the Dominican Republic. Human rights advocates and representatives of the United Nations have criticized the operation.

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Yeidi Sierra, then 5, was sleeping in house No. 10, with a dirt floor, no running water or electricity, and a tin roof fashioned from scraps. As the houses fell, she grabbed a single black sandal and fled into the rain, watching the guards from under a mango tree where she once said her prayers and shared rice and beans with neighbors.

When there was nothing left but a twisted pile of metal, she discovered that her other shoe had been lost under the rubble.

“It was the only pair I had,” she recently recalled.

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Laborers work a Central Romana sugar cane field near El Seibo in the Dominican Republic. The company and its predecessors faced allegations of human rights and labor abuses for years, including while Carlos Morales Troncoso, who would later become the country’s vice president, led the operation.

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Yeidi Sierra and her mother, Emily Sierra, survey the scene where bulldozers tore through their home in El Seibo in an overnight raid in 2016.

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Claribel Alvarez serves dinner to her son Endri, 7, at their home in El Seibo. Her family was among dozens forcibly evicted five years ago from houses on an abandoned road in a 3 a.m. raid ordered by Central Romana. The company said it has defended its property for years from “illegal land invasion.”

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At Central Romana’s worker housing near El Seibo, the dank shacks often lack electricity and running water.

In a statement to The Post and the ICIJ, Central Romana said it created more than 20,000 jobs, built more than 5,000 homes and donated land for housing projects and other facilities. The company said it works closely with a labor union to address wages and working conditions and denied that it illegally evicted the families, arguing that the company has long defended its property from “illegal land invasion.”

Advocates for the evicted families say the houses were built on a service road not used in more than half a century, that the land had no clear owner and that the forced removal — no matter who owns the property — violated international human rights standards.

“It’s blood and death and sugar,” said local friar Miguel Ángel Gullón Pérez.

Like ‘lava out of a volcano’

In 1995, while fishing for king salmon on Alaska’s Kenai Peninsula, New York lawyer Jonathan Blattmachr sketched out an idea that would position the United States to compete with the world’s tax havens: insulating the assets of trusts from taxes and creditors.

Millions of Americans legally use trusts to manage wealth — money, property, companies, art — by entrusting a person or entity to hold and use the assets for trust beneficiaries, such as children or grandchildren.

Anglo-American jurisprudence for centuries limited the duration of trusts, but South Dakota helped lead the movement to change that in the 1980s, creating trusts that could be passed down for generations with little or nothing in tax obligations.

Blattmachr, an early proponent, recalled telling a trust officer in Delaware about the idea before the state created “dynasty trusts” in 1995.

After the change in Delaware, he said, “the business started flowing like lava out of a volcano.”

Fishing with his brother in Alaska 25 years ago, Blattmachr proposed a second sweeping change in the law. He wanted to protect trusts from the claims of future creditors, a practice already in place in offshore financial centers such as the Cook Islands and Belize.

Within months, Alaska lawmakers overwhelmingly approved legislation drafted by Blattmachr, his brother and others.

“We were having an economically hard time in Alaska,” former state representative Al Vezey, a Republican who sponsored the bill, said in an interview. “A barrel of oil was worth less than one red salmon. As a legislature, we were scratching our heads about how to give our state a boost.”

High-level officials raised concerns, according to correspondence maintained in the state archive.

End of carousel

“The underlying policy question is whether or not we, as a state, want to endorse a system that can make it easier for a person to avoid payment of legitimate debts,” the deputy commerce commissioner wrote at the time. “Personally, I don’t think that’s a good idea.”

Then-Gov. Tony Knowles (D) agreed, saying parts of the legislation were more liberal than laws in Bermuda and the Cayman Islands. The bill, the governor noted, would potentially harm spouses and children by blocking support payments.

Knowles vetoed the legislation. One year later, the state legislature tried again, passing a similar measure.

“Make no mistake about one thing: This bill is aimed at one type of trust that the out-of-state lawyer who is behind this bill wants to create for his wealthy clients,” Lawrence Waggoner, a University of Michigan law professor and noted trust scholar, wrote to the state. “This is perhaps the most pernicious bill that I have seen.”

This time, the governor signed the measure, saying lawmakers had addressed his concerns.

From left, Jonathan Blattmachr, Alaska Gov. Tony Knowles (D) and Douglas Blattmachr in September 1997. The Blattmachr brothers were among the architects of a change in trust law in Alaska that would position the United States to compete with the world’s tax havens.
From left, Jonathan Blattmachr, Alaska Gov. Tony Knowles (D) and Douglas Blattmachr in September 1997. The Blattmachr brothers were among the architects of a change in trust law in Alaska that would position the United States to compete with the world’s tax havens.

“After vetoing an original trust bill because of lack of protection for spouses and children, I signed a corrected version the following year,” Knowles said in an interview with The Post and the ICIJ. “It had broad public and business and legislative support. I have not heard of any abuse of this bill in Alaska for the last 25 years.”

The groundbreaking law spurred other states — locked in competition to grow the industry — to advance trust legislation that would draw customers from around the world.

“This subject for me is about as exciting as watching paint dry, but I understand the position that our state holds in the trust business,” South Dakota state Sen. Craig Tieszen (R) said during one 2016 legislative hearing.

The architects of the industry benefited from the changes.

In 1997, before the new trust law was enacted in Alaska, Jonathan Blattmachr, his brother and others helped launch one of the most prominent trust companies in the state. Now called Peak Trust Co., the firm has since expanded to Nevada.

Blattmachr said he gave his shares of the company to his brother and sister-in-law early on and no longer has an ownership stake in the firm. His brother, Douglas, declined to comment.

In New Hampshire, business leader Paul Montrone successfully helped advocate for landmark trust legislation in 2006. A year earlier, a newly formed limited liability company managed by his son had commissioned a study that found the industry could add as many as 2,100 jobs and produce as much as $3.7 million in annual revenue for the state.

Montrone went on in 2007 to co-found Perspecta Trust, which advertised wealth strategies to “ultra-high net worth individuals and families around the world.”

A study prepared for the New Hampshire Trust Council and shared with lawmakers in 2019 reported that an estimated 225 to 275 people were working in the state’s trust industry. “Negligible,” the state’s banking commissioner, Gerald Little, said of the financial benefit to the state in an email to a lawmaker.

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In a written statement, Montrone said he wanted to help boost New Hampshire’s economy “by making it a world-class trust jurisdiction” and that after Perspecta Trust merged last year with another firm, he stepped away from any official role.

Glenn Perlow, the company’s general counsel and president of the state’s Trust Council, said the industry now oversees $600 billion in assets.

“The modernization of New Hampshire’s trust laws has had a meaningful, positive impact on our state’s economy, bringing new job opportunities at above-average wages and the economic activity they generate,” he said.

South Dakota Trust Co.’s office in Sioux Falls, S.D. The company’s co-founder was a founding member of a governor’s task force that successfully pitched legislative proposals that would shield trusts from creditors, taxing authorities and foreign governments.
South Dakota Trust Co.’s office in Sioux Falls, S.D. The company’s co-founder was a founding member of a governor’s task force that successfully pitched legislative proposals that would shield trusts from creditors, taxing authorities and foreign governments. (Salwan Georges/The Washington Post)

In South Dakota, attorney Pierce H. McDowell III in 2002 co-founded the South Dakota Trust Co., located in a Sioux Falls office building near an ax-throwing social club.

McDowell was a founding member of a working group known as the Governor’s Task Force on Trust Administration Review and Reform, which routinely proposed laws to advance the state’s trust industry.

McDowell declined to comment on his role, referring to a company statement that noted, “South Dakota has worked very hard to build a robust financial sector that includes the state’s bank and trust companies … an industry that provides many benefits (jobs, general tax revenue, supervision fees, and philanthropy).”

[Ask The Post your questions about the Pandora Papers]

A father’s struggle

While the industry prospered, Christopher Pallanck went to court.

In 2017, the single father of two learned he would no longer receive child-support payments from Trident in Sioux Falls, which oversaw a trust for his ex-wife, Cleopatra Cameron. The oil heiress struggled for years with addiction, and a California court in 2010 had awarded Pallanck full custody of their young children and later ordered Cameron to pay $8,500 a month in support, according to court records and interviews.

Pallanck, in court records, said the trust’s assets exceeded $8 million.

The trust was originally established in California, where creditors can place demands on trust assets. In 2012, Cameron moved the trust to South Dakota and, in 2016, to Trident.

Trident and a New Mexico firm acting as trust protector opted to end child-support payments, records show.

In sealed court documents, obtained by The Post and the ICIJ, Trident argued that South Dakota law prevented the payments and that Pallanck was “not a good steward of his children’s finances.” The trust provides $1,500 a month for general expenses, Pallanck said.

Christopher Pallanck walks with his children on a beach in Santa Barbara, Calif. His ex-wife, Cleopatra Cameron, said that she always intended to provide for her children but that she and Trident Trust did not believe Pallanck could manage the money.
Christopher Pallanck walks with his children on a beach in Santa Barbara, Calif. His ex-wife, Cleopatra Cameron, said that she always intended to provide for her children but that she and Trident Trust did not believe Pallanck could manage the money. (Salwan Georges/The Washington Post)

In 2019, after he went to court to enforce the California child-support order, the South Dakota Supreme Court sided with Trident. “Our Legislature has placed formidable barriers between creditor claims and trust funds,” the court wrote in a unanimous opinion.

Pallanck, who works at a telecommunications laboratory, recalled telling his children, then 12 and 14, about the decision in their two-bedroom rental apartment in Santa Barbara, where he sleeps on a single bed in the living room.

“Not only was there the emotional and physical abandonment, but now there was also the financial aspect of it,” he said. “The trust and their mom make it very difficult for these kids to know they are loved.”

The Santa Barbara district attorney’s office last year filed criminal charges against Cameron for failing to provide support. She pleaded not guilty; prosecutors ultimately dropped the case.

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In an interview, Cameron said that she always intended to provide for her children but that she and Trident Trust did not believe Pallanck could manage the money. She said she opted to move the trust to South Dakota because of “all the privacy laws” and to avoid paying taxes in California.

“There’s never not been child support for my kids,” Cameron said. “After Trident … started looking into everything, they were like, ‘What in the world? We’re not going to give him another dollar.’ I can’t fault them for that. … It was very refreshing.”

Trident declined to answer questions about the case, saying it does not discuss its clients with the media.

Pallanck, 50, said there is little more he can do except to focus on his son and daughter.

“What do they do when no one is looking? They cry,” he said.

 Trident Trust Co. is listed on the directory of its building in Sioux Falls. Cameron said she moved her trust to South Dakota because of “all the privacy laws” and to avoid paying taxes in California.
Trident Trust Co. is listed on the directory of its building in Sioux Falls. Cameron said she moved her trust to South Dakota because of “all the privacy laws” and to avoid paying taxes in California. (Salwan Georges/The Washington Post)

Money moves to heartland

Trident, whose owners have not been publicly disclosed, drew business not only from Americans like Cameron but also from customers around the world.

Trident opened its Sioux Falls office in 2014, advertising services for clients from the United States and the “international high net worth community.”

Among its first clients: José “Pepe” Douer Ambar, a clothing magnate in Colombia who had a trust with $100 million in assets at Trident’s office in the British Virgin Islands.

Douer had a well-publicized past: He agreed to forfeit $20 million to the U.S. government in 2004 after a global investigation uncovered a vast enterprise to sell drugs in the United States and launder the proceeds. According to U.S. investigators, drug traffickers sold U.S. dollars to middlemen brokers, who swapped the money for pesos with businessmen in Colombia, including Douer.

To avoid prosecution, Douer settled with the U.S. government. He died last year.

When the South Dakota trusts were established, a Google search for the words “Douer Ambar” and “Colombia” yielded a U.S. government summary of the case, as well as a story by the BBC with the headline “Colombian Drugs Cash Ring Broken.”

His family declined to comment. In 2013, records in the Pandora Papers show, Douer’s lawyer told Trident in the British Virgin Islands that his client’s involvement in the criminal case was an “unfortunate experience” brought on by a broker whom Douer had trusted. The records do not make clear whether Trident in Sioux Falls was made aware of the correspondence.

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In 2016, Trident took on a new client: Federico Kong Vielman, a member of one of the most prominent families in Guatemala. Kong Vielman’s trust held $13.5 million in assets, generated in part from an inheritance and his family firm’s sale of household products, the Pandora Papers documents show.

In 2014, two years before the trust was established, the U.S. government filed a complaint against Guatemala, alleging that the country had breached its free-trade agreement by failing to enforce labor laws. Among the cited examples: a palm oil company owned by the Kong Vielman family, where workers said they were paid about half the minimum wage and were required to handle chemicals without protective equipment.

In 2015, the U.S. Environmental Protection Agency named the company and two others in an investigation of toxic pollutants in the Pasión River, which winds through the country’s northern lowlands and provides food and water to nearby communities.

A Guatemalan court suspended the operations of another company after the incident but took no action against the company owned by the Kong Vielman family.

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Oil palm trees are silhouetted at a plantation in northern Guatemala.

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Fishermen collect poisoned fish from Guatemala’s Pasión River in 2015. The event was one of the largest environmental catastrophes in Guatemala in recent years.

Kong Vielman did not respond to requests for comment. In a written statement, the palm oil company said that it did not pollute the river and that the labor complaint was resolved by an arbitration panel. Kong Vielman, the company said, has no role in the operation. In corporate records from 2010, he was listed as the company’s secretary.

In 2018, Trident also set up a trust for Horst Happel in Brazil, who two years earlier was among orange juice producers and individuals who settled a massive case with Brazil’s antitrust agency. Happel and others paid a total of $88 million to the Brazilian government for allegedly colluding to underpay local farmers.

The orange juice executive had been accused of wrongdoing before. In 1991, he agreed to pay $255,000 to the U.S. government to settle allegations that he had violated limits on orange juice futures trading.

For nearly three decades, the leaked records show, Happel maintained a trust in Jersey, a well-known tax haven in the English Channel that in recent years has faced international pressure to require trust providers to collect and share more information about their customers.

Happel did not respond to requests for comment.

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The documents do not include details on what Trident might have known at the time about the clients or their sources of wealth, and Trident did not respond to inquiries about specific cases.

“Each of Trident’s trust and corporate services businesses is regulated in the jurisdiction in which it operates and is fully committed to compliance with all applicable regulations,” the company said in a statement. “Trident routinely cooperates with any competent authority which requests information.”

International clients also turned to other trust companies, including one a few blocks from Trident’s office in Sioux Falls.

In 2012, the family of brothers William and Roberto Isaias created three trusts through the South Dakota Trust Co. Months earlier, the brothers had been convicted in absentia in Ecuador of embezzling government bailout money from their failed bank.

In 2012, months after brothers Roberto, above, and William Isaias were convicted in absentia in Ecuador of embezzling government bailout money from their failed bank, their family created three trusts with assets worth millions through the South Dakota Trust Co. The brothers have lived for years in South Florida.
In 2012, months after brothers Roberto, above, and William Isaias were convicted in absentia in Ecuador of embezzling government bailout money from their failed bank, their family created three trusts with assets worth millions through the South Dakota Trust Co. The brothers have lived for years in South Florida. (Angel Valentin)

The trusts owned several shell companies in the British Virgin Islands. One held a family inheritance valued at $5 million to $10 million, the documents show.

The New York Times, the Miami Herald and others have written about the brothers, who have lived in South Florida for years despite an extradition request from Ecuador. They were briefly detained by U.S. immigration authorities in 2019.

In May, a court in Ecuador reversed the 2012 conviction. Oscar Ayerve, president of a group of bank creditors, posted on Twitter that his members were “outraged.”

“Many died without getting their money back 14 years of tireless struggle,” he tweeted.

Podcast: A tax haven in America’s heartland

The U.S. has long condemned secretive offshore tax havens where the rich and powerful hide their money. But a burgeoning American trust industry now shelters the assets of wealthy foreigners by promising even greater secrecy and protection.

Through their lawyer, the brothers said they were honest stewards of the bank’s money and “victims of unprecedented political persecution by Ecuador’s corrupt authoritarian regime.” The brothers did not respond to questions about the South Dakota trusts.

The South Dakota Trust Co., in a statement, said the company “does not and will not comment nor provide any information concerning past, current or potential clients.” The company said its review process for clients is “thorough, comprehensive, continuous and exceeds minimum requirements,” with clients screened for legal or regulatory concerns, as well as criminal activities.

‘Always a step behind’

Industry leaders say trust companies work hard to scrutinize clients because due-diligence lapses create reputational risk.

“No bank or trust company wants to be accused of aiding or abetting even a past civil rights violator or human rights violator,” said Jonathan Blattmachr, who helped grow the industry in Alaska.

Former prosecutors and other financial-crimes experts, however, say far more oversight is needed.

For years, legislative reform has focused on banks and shell companies, which drew headlines after the 9/11 attacks for enabling terrorists, drug traffickers, arms smugglers and others to move money in and out of the United States.

Trusts have been around for hundreds of years. They’re widely used by the middle class as well as the wealthy. They can be complex legal instruments with a limited paper trail and strict secrecy rules, and can be difficult to understand even for experienced lawmakers or investigators.

Cars pass the building in downtown Sioux Falls that houses Trident Trust. The company, a global provider of offshore services, said it is committed to compliance with all applicable regulations and routinely cooperates with authorities.
Cars pass the building in downtown Sioux Falls that houses Trident Trust. The company, a global provider of offshore services, said it is committed to compliance with all applicable regulations and routinely cooperates with authorities. (Salwan Georges/The Washington Post)

The widely lauded Corporate Transparency Act, enacted in January, requires some categories of businesses to disclose the names of their owners to a database managed by the federal government. Those who create and receive payments from trusts, however, are not mentioned in the law. Experts say they are hopeful that new regulations, expected next year, will add trust clients to the list.

Other countries, including many in the European Union, already require trusts to report their creators, trustees and beneficiaries to a centralized registry.

Federal regulations are also limited. New requirements by FinCEN, the Treasury Department’s financial crime watchdog, now mandate that trust companies better identify and monitor clients, but they also largely allow the companies to decide how much scrutiny is needed.

Prosecutors point to another enforcement gap: Under the 1986 Money Laundering Control Act, the government can pursue money-laundering cases against foreigners with assets in the United States, but only if the assets were generated from the proceeds of one of six categories of crimes, such as arms or drug trafficking.

The law leaves out hundreds of other offenses, including smuggling, child labor abuses, wildlife trafficking, the theft of antiquities, counterfeiting and tax evasion. In other countries, money-laundering statutes cover all crimes.

“I recently talked to someone about the proceeds of the deforestation of the Amazon rainforest,” said Stefan Cassella, a former deputy chief of the asset forfeiture and money-laundering section at the Justice Department. “How about if we found the proceeds in the United States? Would that be subject to a money-laundering offense? No — because that’s not on the list. … We’re always one step behind the bad guys in trying to get these laws updated.”

A Justice Department spokesperson said prosecutors have other ways to address criminal conduct, such as bringing charges for wire and mail fraud, transporting stolen property or bank fraud.

Stefan Cassella, a former deputy chief of the asset forfeiture and money-laundering section at the Justice Department, says the U.S. government “is always a step behind the bad guys” when it comes to a law enabling pursuit of money-laundering cases against foreigners with assets in the United States.
Stefan Cassella, a former deputy chief of the asset forfeiture and money-laundering section at the Justice Department, says the U.S. government “is always a step behind the bad guys” when it comes to a law enabling pursuit of money-laundering cases against foreigners with assets in the United States. (Salwan Georges/The Washington Post)

Pain and profit

Central Romana is the largest sugar producer in the Dominican Republic. While ownership of the operation has changed over the years, the company’s website describes “100 years of uninterrupted work.”

By the time Morales became president of the operation in 1974 through what was then Gulf and Western Industries, allegations of evictions and human rights abuses had mounted for decades.

In 1979, the Anti-Slavery Society for the Protection of Human Rights reported to the United Nations that Haitian immigrants were “purchased” by the company and two others, forced to live in squalor and paid paltry wages.

In 1984, a new company, Central Romana Corp., acquired the sugar operation. Morales left in 1986 to become vice president of the Dominican Republic.

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He went on to become ambassador to the United States and, later, foreign minister of the Dominican Republic. He was an “important” Central Romana shareholder, according to the Dominican Embassy in Washington.

Morales eventually became one of the most prominent representatives of the country’s sugar industry. In 2006, after a delegation of U.S. lawmakers demanded an investigation into the use of Haitian migrants who worked in the sugar-cane fields, Morales said the Dominican Republic wanted no foreign interference in its affairs, according to a media report at the time.

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Jean Clairmont, center, carries sugar cane to a truck this spring at a Central Romana field near El Seibo. The 67-year-old has been on the same job for two decades, swinging a machete and hauling cane from dawn till dark.

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Clairmont said he is paid about $1,000 Dominican pesos a week, or just under $18.

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Laborers pack a bus that is being towed by a tractor after a workday in a Central Romana field, en route to company housing that often lacks electricity.

In 2012, he criticized a well-known Roman Catholic priest who had reported to the United States that the country’s sugar-cane workers were subjected to harsh and inhumane treatment. The priest, Morales said, was unfairly “denigrating” the sugar industry.

That same year, a report by a Massachusetts-based nonprofit chronicled alleged labor abuses among several of the largest sugar producers in the Dominican Republic, including Central Romana. Laborers worked 12-hour days and many lived in company housing without electricity and potable water, the report found.

[While his country struggles, Jordan’s King Abdullah secretly splurges]

In its statement to The Post and the ICIJ, Central Romana said that some rural areas in the Dominican Republic are not on the government’s electrical grid and that potable water is provided.

“We strive to advance each year and continue to invest in all of our processes, including health and industrial safety, labor aspects, environmental compliances and social responsibility programs,” the company said.

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After the 2016 evictions, which occurred two years after Morales died, the Geneva-based nonprofit Dominicans for Justice and Peace contacted the United Nations. Two U.N. experts, including the special rapporteur on the right to adequate housing, called on the Dominican government to intervene.

“We … express our concern due to the apparent inability of the State to protect and ensure the rights of people … and to deal with illegal eviction and the use of force carried out by agents of a private company,” they wrote in a letter.

In January 2020, the evicted families sued Central Romana and the West Palm Beach-based Fanjul Corp., a company shareholder, in federal court in Florida. A judge recently dismissed the case, finding that the plaintiffs did not sufficiently show that Central Romana was acting as an agent of Fanjul. The families have appealed.

Fanjul referred questions to Central Romana, which said the evictions were proper.

Our company would not and has never engaged in the eviction of people that have the right to live on or legally own the land they possess,” the company said.

The Morales family finalized the transfer of the trusts to South Dakota in 2019 shortly after the Bahamas, where the family previously held their trusts, passed sweeping legislation requiring companies and certain trusts to declare ownership to a centralized government register.

Industry leaders at the time complained that the register would deter potential clients.

“The winners of these new double standards are the U.S. States of Delaware, Alaska, and South Dakota,” wrote one Bahamian attorney.

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Lico Suero wears a five-gallon container on his back while spraying chemicals in Central Romana’s sugar-cane fields, the sweat and friction causing his skin to peel.

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Central Romana’s worker housing complexes are home to many families along the cane fields near El Seibo.

In May, workers far removed from the political and business circles of the Dominican Republic labored in unrelenting heat in the sugar-cane fields. On one of Central Romana’s fields in El Seibo, 67-year-old Jean Clairmont swung a machete at the thick stalks of cane.

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He’s been doing the same work for 21 years, swinging and cutting and hauling from sunrise until dark in sweat-soaked shirts and rubber boots. This year, he said, the company gave him a hat for the first time, with “CR” in red, white and blue. Clairmont said he was grateful because hats cost about 500 Dominican pesos and he earns about 1,000 a week, or just under $18.

“Whatever they give to us, we have to take it, but that doesn’t mean it is enough,” he said.

On the site of the 2016 evictions, Yeidi Sierra and her mother searched for the spot where their house once stood. Standing in the high grass, they pointed to the number 10, still visible on a mangled tree in faded white paint.

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Yeidi, now 10, walked along an old fence line, studying the mountains in the distance.

The girl who was born on an island but has rarely seen the sea lost nearly everything in the raid, including the gas lamps and candles her family had used for light. She did not return to school for a month because her father, a day laborer, could not afford new shoes to replace the single black sandal she had lost in the commotion.

“My friends, I couldn’t see them,” said Yeidi, who wants to become a teacher.

Under a tree, Yeidi and her mother spotted a rusting box spring, left behind on the night of the evictions. Yeidi crouched low. She pulled at sticks and leaves, near a concrete road marker bearing the letters “CR.”

There, in the shadows of the sugar-cane field and nearly hidden beneath the brush, she let out a soft cry.

Yeidi found her missing shoe.

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Yeidi Sierra holds the sandal she lost in 2016 when her family’s El Seibo home was razed. The 10-year-old found the shoe during a visit with her mother to the site in May 2021.

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Claribel Alvarez rides her motorcycle home this spring with daughter Heisha, 13, after visiting the site of the house they were forced from during an eviction near the company’s sugar-cane fields five years before.

About this story

Will Fitzgibbon is with the International Consortium of Investigative Journalists. Graphics by Kevin Schaul and Artur Galocha. Alice Crites and Shawn Mulcahy of The Post, Brenda Medina and Delphine Reuter of the ICIJ, Alicia Ortega Hasbun of El Informe, Monica Almeida of El Universo, Enrique Nevada of Plaza Pública and Anna Anjos of Agência Pública contributed to this report.

Photos used in trust graphic illustrations from Jabin Botsford/The Washington Post; Salwan Georges/The Washington Post; Alamy; Natalia Kolesnikova/AFP/Getty Images and Tang Chhin Sothy/AFP/Getty Images.

The Pandora Papers is an investigation based on more than 11.9 million documents revealing the flows of money, property and other assets concealed in the offshore financial system. The Washington Post and other news organizations exposed the involvement of political leaders, examined the growth of the industry within the United States and demonstrated how secrecy shields assets from governments, creditors and those abused or exploited by the wealthy and powerful. The trove of confidential information, the largest of its kind, was obtained by the International Consortium of Investigative Journalists, which organized the investigation. Read more about this project.

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