Cables point to alleged secret IRS probe in Bahamas

Fri, Apr 12th 2013, 11:34 AM

U.S. Embassy cables recently released by Wikileaks reveal that there was a years' long investigation into whether the Internal Revenue Service (IRS) was carrying out a secret probe into financial activities in The Bahamas in the 1970s.
Then prime minister, the late Sir Lynden Pindling, accused American officials of using "back door" tactics.
According to a September 23, 1975 confidential cable, the issue came to light after a Miami Herald article alleged that the IRS was carrying out a secret probe, Operation Tradewinds, designed to catch U.S. tax cheats in The Bahamas.
More than 50 cables have been released related to the reported IRS probe into The Bahamas.
The then Cabinet responded with a statement that noted that under Bahamian law, disclosure of banning transactions by any person is illegal unless done through a court order and the U.S. is aware of such, the cable said, quoting articles in the local dailies at the time.
The U.S. ambassador was instructed in a September 26, 1975 cable that "if questioned by the (Government of Commonwealth of The Bahamas) GCOB, you should indicate an IRS investigation [is] underway and that until concluded you cannot offer any other comment.
"We will provide you with further instructions on how to respond to GCOB inquires as soon as investigation [is] completed."
One of the cables quoted an October 8, 1975 Nassau Guardian article that reported that Sir Lynden informed the U.S. ambassador at the time of his protest over reported spying into trust accounts held in The Bahamas by prominent Americans and had requested information as to what was going on.
According to the article, Sir Lynden said, "It did seem that some illicit activities have been taking place on Bahamian soil without the knowledge and consent of The Bahamas government with the effect that it could have sabotaged the Bahamian economy. "
According to the cable, the press report also stated that Sir Lynden "expressed surprise that American agents would come through the 'back door' when there exists such beautiful cooperation between Bahamian and American law enforcement officials as far as drugs are concerned."
A U.S. Embassy official commented that Sir Lynden's reference to "economic sabotage stems from his and the government's publicly stated position that benefits of tax haven status to the Bahamian economy far outweigh negative aspects i.e. attraction of undesirable elements coming principally from the U.S., and that opposition demands for controls are therefore both naive and unacceptable.
"Prime minister's contrasting of narcotics control cooperation between the U.S and [the] GCOB to the IRS activities reflects his and other Bahamian officials' genuine bewilderment as to necessity and propriety of alleged covert activities."
Response
Following the former prime minister's criticism, the embassy was asked to deliver an official response which was approved by the IRS, according to another cable dated October 17, 1975.
The response read, "The government of the United States has noted the concern of The Government of the Commonwealth of The Bahamas that alleged activities in The Bahamas of the Internal Revenue Service may have been in contravention of Bahamian laws.
"The government of the United States wishes to assure the Government of The Commonwealth of The Bahamas that it shares that government's concern and regards this matter with the utmost seriousness.
"A full investigation of all allegations of misconduct is underway. It is not possible at this early stage of the investigation to make any judgment in this matter.
"The government of the United States, however, will provide further information to the Government of the Commonwealth of The Bahamas as the investigation develops."
According to a December 1975 cable, the U.S. Department of Justice had taken over the investigation.
That was the last cable regarding the IRS probe until February 19, 1976.
In that cable, the U.S. noted that Sir Lynden in his February 11 Chicago speech to the mid-America committee answered charges that The Bahamas "courts illegal money, encourages tax dodgers, harbors secret numbered bank accounts, has refused to enter into a tax treaty with the United States and has refused to assist the United States in its efforts to track down tax dodgers".
Sir Lynden at the time was referring to charges made by U.S. Congressman Vanick, the cable said.
Sir Lynden refuted those allegations and pointed out that while "the U.S. government has never approached the GCOB on [the] question of tax treaty nor asked appropriate officials for assistance in tracking down tax dodgers, it was conducting activities which may be illegal and which could not have been calculated to enhance the further growth of the good relations extant between our respective countries".
The cable's author said, "I refer particularly to the reported activities in The Bahamas of activities involving Bahamian individuals or companies reportedly perpetrated by Operation Haven and Tradewinds.
"Such activities would be disruptive of the excellent record of cooperation which the Bahamas wishes to maintain between law enforcement agencies using conventional and lawful means of law enforcement."
Following Sir Lynden's speech, an embassy official recommended that the treasury and justice departments be pressed for full disclosure or information necessary to provide answers to the Bahamian government and to consider then Bahamian attorney general, the late Paul Adderley's suggestion that information can be made available to U.S. officials if they go through the proper protocol.
In one of the final cables in the batch accessed by The Nassau Guardian, a U.S. Embassy official commented that the IRS activities past and present continue to be a major interest and concern.
The embassy requested early approval of its response to the government on past activities of the IRS or an acceptable alternative. That cable was dated April 21, 1976.
Several of the cables were not available in an electronic copy.
The Bahamas later enacted stringent financial laws that prevented non-disclosure.

Click here to read more at The Nassau Guardian

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