Update: In response to a request for comment, Amherst College Chief Financial Officer Kevin Weinman noted that SCUUL has been closed since 2001, when it was reformed as the Vermont-based United Educators. “Amherst has had no financial relationship with an offshore insurance entity for well over a decade now,” Weinman told AC Voice.
While SCUUL did exist, it was not “an investment to generate financial returns to fund Amherst operations, the way an endowment investment is intended to do.” Instead, it was formed in response to a gap in commercial insurance coverage at the time. Weinman said that media coverage of university investments in SCUUL, including a story in MassLive, “didn’t describe the nature of the SCUUL investment at all and left the reader with the unfortunate and needlessly damaging impression that college investments in SCUUL were sneaky, nefarious attempts make money offshore and in a tax-advantaged way.”
When asked for his views on the broader implications of Amherst’s previous offshore investments, Weinman said that, “Recently, there seems to be a perplexing eagerness in the media and general public to ascribe the worst of intentions to college and university financial practices, and this is a prime example of that. While there are no broader implications to the SCUUL episode, the rush to report a limited set of facts without analysis or context is leading to negative assumptions and conclusions that are then simply taken as the truth. This is feeding into the incredibly damaging tax reform proposals that, if passed, will be extremely harmful to Amherst in particular and to the entire U.S. population in general by decreasing access and affordability to higher education. This has been quite disheartening, given that we have always acted with the best of intentions to deploy our financial resources to the benefit of our students.”
(Abbas, Marc D.)– On November 5, 2017, the International Consortium of Investigative Journalists (ICIJ) began releasing a trove of leaked documents revealing a vast network of offshore investments and company registrations by prominent corporations and individuals. Named the Paradise Papers, these documents showed that a wide range of institutions stored hundreds of billions of dollars in Caribbean tax havens to avoid paying tax at home.
In a startling revelation, Amherst College, among other familiar names like Mount Holyoke, Smith, and Williams, was revealed on November 17 to be among these institutions – specifically, the Paradise Papers reveal Amherst’s role as a shareholder in the Bermuda-based reinsurance company School, College, and University Underwriters, Ltd. (SCUUL). SCUUL was founded in 1986 and limited information about the organization can be found here. Scuul.com, allegedly the website for SCUUL, is blank.
The Paradise Papers come in the wake of the biggest leak in the history of data journalism: the Panama Papers of 2016. Both expose a host of individuals and institutions who store portions of their wealth in offshore accounts and tax havens. While these business practices are not necessarily illegal, the primary purposes are typically to prevent assets from being taxed, to underreport net wealth, and to hide investments that might engender student protest.
The ICIJ reports that universities who resort to these offshore schemes do so to avoid the taxes they would otherwise have to pay on their investments. While colleges and universities, treated akin to charities, are exempt from most taxation, their investment returns are taxable if they are accrued through business ventures (e.g. private equity and hedge funds).
The New York Times details how these offshore accounts in low/no tax jurisdictions help universities avoid taxation: The tax is now owed by the corporations that the universities invest in, creating a “corporate layer” between the institutions endowment and the private equity funds it invests in. Because of this, these corporations in these low/no tax areas are called “blocker corporations”.
Although this offshore activity doesn’t necessarily constitute a legal infraction in and of itself, it is germane to the broader discussion on the loopholes and backdoors wealthy individuals and institutions exploit to preserve their wealth and attain the maximum possible profits.
In a political context where the pernicious effects of income and wealth inequality are making their way into the public consciousness – and particularly in light of the GOP’s proposed tax plan – offshore accounts are falling under increasing scrutiny, for they obscure the size and scope of an institutions wealth as well as mask the companies and industries it invests in. At the very least, the offshore investments of educational institutions raise questions about what constitutes ethical or appropriate business practices, particularly for educational institutions which pride themselves on their altruistic, progressive, and community-oriented values, particularly if these educational institutions receive tax-benefits based on their mission and values.
Correction– Due to a clerical error, an earlier version of this article incorrectly stated that Amherst College had not responded to a request for comment by press time. Amherst College’s response can be found at the top of this article.