How the 1% Does Business. . . And Screws America: Renaissance Corp Stole $6 Billion From US — Avoided Taxes by Pretending It Didn't Own Stocks It Traded

Photo by Cory Doctorow.

By Zachary R. Mider
A Renaissance Technologies LLC hedge fund’s investors probably avoided more than $6 billion in U.S. income taxes over 14 years through transactions with Barclays Plc and Deutsche Bank AG, a Senate committee said.

The hedge fund used contracts with the banks to establish the “fiction” that it wasn’t the owner of thousands of stocks traded each day, said Senator Carl Levin, a Michigan Democrat and chairman of the Permanent Subcommittee on Investigations. The maneuver sought to transform profits from rapid trading into long-term capital gains taxed at a lower rate, he said.

“It meant enormous profit for both the banks and the hedge funds,” Levin told reporters today in Washington. “Ordinary Americans had to shoulder a tax burden of billions of dollars, a burden that was shrugged off by those hedge funds.”

The panel urged the Internal Revenue Service to collect taxes from the fund’s investors at the higher rate that Americans pay on wages and salaries. It said Congress should remove legal obstacles to audits of hedge funds and other large partnerships, whose returns the committee said are rarely questioned.

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