1988 - In the Bahamas (3)
1988 - In the Bahamas (3)
"It's a pleasure to meet you. Mister Kim."
"I hope the flight was comfortable."
"It was, thank you."
I had received a lot of help from him since the previous cycle.
In the current situation, he was also the person I could trust the most.
Even with an astronomical amount of money on the line, he never betrayed me to the end.
That's because he's a lawyer obsessed with his family's honor and discipline as much as money.
"Shall we go?"
"Thank you."
Here, one of Ara's shortcomings reveals itself.
Originally, this kind of thing should be done by a secretary.
The kid is just too physically weak, so we had to load the luggage ourselves.
I even had to do the driving.
"......I'm sorry."
"You just need to get a license. And later, we'll hire a separate chauffeur, so it doesn't matter."
Ara's shoulders slumped.
"Is she your secretary? I thought she was your younger sister. I'm Matthias."
"Ara Berry. Nice to meet you."
"......Did I say something wrong?"
"No. Not at all."
Matthias's flustered expression was visible through the rearview mirror.
I chuckled softly, started the car, and began heading to the hotel.
"She just doesn't show her emotions easily, so don't worry too much."
"Is that so......."
"More importantly, shall we finish the business talk first?"
"Good. Seeing that you called me to the Bahamas, it must be either taxes or a fund. One of the two."
He said with a confident voice.
Well, if you call a lawyer to a tax haven, what else could it be but those two cases?
"It's both."
"A fund deferral, then."
"Correct."
"That shouldn't be too difficult."
"It will be quite difficult for you, won't it?"
"Huh?"
Even for Matthias, it would be a difficult request.
He'd have to stay in the Bahamas permanently and handle all the paperwork.
"Ara. If you open the bag, there should be a brown envelope. Hand it over."
Ara opened the briefcase and took out a document envelope.
"Is this the one?"
"Yes."
"Here you go."
As soon as Matthias received the envelope, he examined its contents.
"Bearer shares? Do I just launder them and put them here?"
"No. Those companies already contain laundered funds. Roughly 8.3 million dollars."
I explained the method I used for laundering, step by step.
Of course, the origin of the initial funds was a secret.
"Ah-. Were you originally in that line of work?"
"I picked it up here and there. Will it be a problem?"
"No. The method is actually quite clean for that."
That's a relief.
I only knew the method; it was my first time actually doing it.
"That is the retainer fee."
"Oh! This is the highest retainer I've ever received......."
"Huh?!"
Ara's surprised voice cut off Matthias's words.
That's understandable.
She knows roughly how much my assets are, and I just gave 80% of my assets as a retainer fee.
"Is something wrong?"
"Ah, no. It's nothing."
"?"
"Please participate as an LP in the fund I'm creating with that money."
"......? LP? An investor?"
"Correct."
Matthias closed his mouth.
He seemed not to understand the current situation.
I get it.
Even if I put myself in his shoes, I'd wonder what the hell is going on.
"No, why on earth?"
"Because I plan to take a GP carry."
"I'm having trouble understanding, so let me get this straight. So, Mister Kim is giving me this money, then getting it back as an investment, and then taking the fund management fee? Is that what you're saying?"
"Exactly."
Matthias, as if he had a headache, pressed his forehead firmly.
I hadn't initially planned to structure it this complicatedly either.
But after much thought, there seemed to be no other answer but this structure.
"A carry structure through a corporation could also....... Wait, are there no other investors?"
"Yes. I plan to establish a partnership fund with a 1-person GP and a 1-person LP."
"......Ugh. I simply cannot comprehend this. I'd rather understand a 1-person partnership."
"Let's discuss the rest inside."
I said, parking the car in front of the hotel.
"Very well."
He let out a deep sigh and shook his head vigorously.
"It's a nice room, isn't it?"
"I appreciate you booking a suite, but let's finish sorting out the retainer first."
Matthias had been groaning with a grim expression the entire way to the room.
He's suffering from the curse of knowledge.
If he were like Ara and knew absolutely nothing, he'd just accept it.
"First of all, do you know that's an incredibly risky structure? Formally, it's tax avoidance, but if it's interpreted as tax evasion by even a hair's breadth, the penalty tax will be astronomical."
Matthias said, glancing at Ara.
I also nodded in agreement.
There's a reason I recruited Ara and even filmed that dirty video.
It's truly a structure like a sandcastle.
A single plank bridge that would collapse immediately if given the slightest opening to the IRS.
Since my most fatal weakness lies with Ara, I need to hedge my bets too.
"I know."
"I'd like to know the reason at least. Establishing through a corporation or a blocker feeder would make everything easier—operation, management, and taxes. What's the reason for insisting on a partnership when there are good tax avoidance techniques available?"
"Because when liquidating, I plan to take stocks and bonds as unrealized gains in-kind."
"......."
Matthias, seemingly at a loss for words, opened and closed his mouth a few times before barely managing to continue.
"You're taking on that enormous high risk just for that reason?"
"Well. Is it really 'just' for that?"
"Just how much and what kind of physical assets are you planning to take? You could just pay the tax upon liquidation and reset the acquisition cost."
"The estimate would be over 2 billion dollars in U.S. stocks and over 50 billion dollars in long-term U.S. Treasury bonds."
"Just 50 million....... ......Huh???? Billion? Not million?"
"Billion. That's correct."
"50 billion dollars? U.S. Treasury bonds?"
"Yes."
"Uh, um-. Ughhh-. Tha-, are there additional assets from Middle Eastern countries, royalty, or Japanese banks coming in?"
"There's no way that's the case."
Matthias raised his hand, rubbed his eyelids, and gave himself a dry wash.
Ara, too, with her characteristic expressionless face, was staring at me blankly, her mouth agape.
50 billion dollars is certainly not a small amount.
It's probably more than the amount of long-term U.S. bonds held by the Bank of Japan?
It must be hard to believe that an individual holds a larger U.S. bond position than a country.
But if I can't secure a position of that scale even after regressing, then my previous cycle would have been too futile.
That much is possible even without the help of the Status Window, as long as there's sufficient capital.
"This is hard to accept."
Matthias said, lowering his voice.
He seems to view me as a fraud.
"Let's put it in the articles of association. After allocating 10% of the investment amount per quarter as the LP's profit share, any excess returns are distributed as the GP's profit share for rebalancing."
"......10% per quarter?"
"Will that be sufficient as a retainer fee?"
"9 years, 36 quarters. So 1.1 to the power of 36......."
He hurriedly tried to take out a calculator and tap on it.
"300 million dollars?"
But Ara's words were faster.
Can she calculate that?
It's more of an estimate than mental arithmetic, though.
From what I calculated before, I think it was around 280 million.
But still, it couldn't have come from mental arithmetic.
"Thank you, miss. 300 million, 300 million dollars......"
"Does that make it a bit more believable?"
"No. It makes me even more suspicious. It's a typical Ponzi or multi-level scheme."
"That's true too."
I shrugged my shoulders.
It's not an unpleasant thing.
I can't help it if I'm suspected.
I would have had the same reaction if I were in the opposite position.
"Let's add one more line to the articles. If the fund's net assets fall below the initial investment amount, the fund is immediately liquidated early, and the remaining assets belong to the LP. Wouldn't that be sufficient as a safety measure?"
"......You're serious."
"What reason would I have to lie?"
"This is driving me crazy. If this is for laundering criminal proceeds, please tell me in advance. We have separate staff who handle that side of things cleanly."
"It's a simple investment."
"The financial industry?"
"Yes."
"Damn it....... Ahem. Sorry."
Even if I were a fraud, once the contract is written, there's no way to embezzle the money.
From Matthias's perspective, if he just sets up a protector with the bank when establishing the fund, at least the initial investment is guaranteed.
"Ughhhhh-."
So the reason he's suffering like this is solely because something has happened that he can't comprehend with his common sense.
"Do you need time to think?"
"Damn it! It's like I'm possessed by a ghost. A 300 million dollar retainer fee! How does it make sense that it's more than all my family's earnings combined!"
"I understand."
"Um, boss......."
Ara cautiously raised her hand and called me.
"What?"
"I don't really understand well, but it seems like a very dangerous method....... Can't you just create a fund in the U.S. using the same method?"
"It's fine if you pay taxes."
Matthias interjected.
Since he's a lawyer, will he try to explain more easily than me?
"Does a Bahamas fund not pay taxes?"
"In the U.S., there's an exception clause called the Trading Safe Harbor. It's a tax law where the U.S. tax jurisdiction does not apply to funds composed of foreign investors if they only engage in simple financial transactions."
"Ah......."
"So, the young lady's boss has zero profits, so there's no tax to pay, and I'm not a U.S. citizen, so I don't need to pay taxes."
"I see."
"An obligation to pay taxes in the Bahamas arises, but as you know, the Bahamas is a tax haven."
"It's like a kind of nominee account?"
"No. It's not borrowing someone else's name. The client legally and normally receives all the management fees in a lump sum at the end. Until liquidation, the profits are structured to not be recognized at all."
Being a lawyer doesn't mean he's good at explaining.
He even left out important explanations like pass-through.
But Ara seemed to understand, as she nodded and took out a notebook to start writing something down.
That's impressive learning ability and academic zeal.
If it were me, I would have had a hard time understanding with such a brief explanation.
"So, the deal?"
"......Just one more thing."
"What is it?"
"If it's not a scam, how on earth can you generate such profits?"
"Hmm-. I was planning to tell you after the contract. Fine. First, you borrow gold from the Swiss central bank."
The gold carry trade.
That will be the magical strategy that turns the seed money of 8 million dollars into 40 million dollars.