by Carl D. Holcombe on Monday, Jun. 14, 2004 11:33 am
The owner of Green Dental Labs of Heber Springs said rampant violent crime, a lack of adherence to financial rules by too many people enjoying enormous individual and corporate tax breaks and personal reasons led to his departure from the U.S. territory in the Caribbean.
He initially felt a twinge of concern over hearing of the Arkansas Department of Finance & Administration's investigation of up to 300 business and individual income tax filers. The recent conviction in federal court of a Massachusetts man who shifted $500,000 to a USVI company called Kapok Management and improperly claimed residency weighed as well.
"It made me a little nervous when it all came up," said Green, 50, now an Arkansas renter who was reached by phone at the Heber Springs area. "But, I lived there (in the USVI) six months and one day of the year ... Once I saw a lot about who they were going after, I wasn't worried.
"I feel very firm in the idea I'm all right."
Green, who left the USVI in February and now claims Florida residency, is one of a unknown number of business people linked to Arkansas who spent time in the Caribbean territory soaking up sun, surf and giant tax breaks.
These special business ownership incentives and residency rules let businesses certified by the U.S. Virgin Islands Economic Development Commission — and people who claim ownership stakes in them — to skip 90 percent of federal income taxes, both business and personal. There is no USVI income tax.
At least 100 different USVI corporations have qualified for the special tax benefits and at least three are operated by people from Little Rock and a fourth involves another former Little Rock man as a partner.
Business ties to the USVI — current or past — have been confirmed for 14 former Arkansans through interviews and public records. Besides Green, four newly identified by Arkansas Business as linked to big USVI tax breaks include:
• Steve Greenhaw, 53, and wife Terry Greenhaw, owners of Greenhaw's Mens Wear and Greenhaw Properties, both of Little Rock.
• Boyd David Cox, 58, an attorney licensed in Arkansas with a Fayetteville office.
• D. Scott Schrader, 33, an attorney with Miller & Schrader, which has an office in Little Rock.
Arkansas Business has also previously confirmed the identities of five other members of the Little Rock business community who have conducted USVI business and claimed territorial residency.
They include lawyer and businessman Theodore C. "Ted" Skokos; former Little Rock business owner Phil Whisenhunt; entrepreneur Mark Diggs, who recently reclaimed Arkansas residency; tax attorney Stan D. Miller, Schrader's partner at Miller & Shrader and co-owner of an EDC-certified company called IFW St. Croix Group LLP; and Mike Baldridge, who is CEO of IFW.
Skokos' tax attorney son, Theodore C. "Teddy" Skokos Jr., and his business partner, accountant Lance Talkington, operate EDC-certified Clearwater Consulting Concepts, but both have declined to say where they claim legal residency. Cox, the Fayetteville lawyer, was listed as a partner on a 2002 EDC application when Clearwater was formed.
Timothy Lance Waters and Suzanne W. Waters, both listed in Little Rock's 2004 telephone directory, are president and COO of USVI-based and EDC-certified International Asset Management Inc., which is also linked to Lance Water's father, Russ Waters. The only founding partner listed in IAMI's 1994 application to the EDC was Herman Waters Jr. of Little Rock.
Ideally, the financial benefits which were first put in place in 1972 and amended over the years, are supposed to stimulate economic and job growth in a territory heavily dependent on tourism dollars to sustain its three tiny islands.
But there has been greater scrutiny in recent years from the Internal Revenue Service, U.S. Treasury Department, and state tax authorities who suspect abuse and an unknown amount of unpaid taxes.
IRS officials provided DF&A with the names of approximately 300 people who previously filed tax returns in Arkansas but who now appear to be residents of the USVI or other known tax havens. Nationwide, some 25,000 names have been provided to state-level tax authorities for investigation.
Arkansas officials are unsure how much tax revenue has been lost through improper USVI transfers. But based on 2001 data, DF&A officials estimate $128 million — $94 million at the corporate and $34 million at the individual levels — in lost Arkansas tax revenue. Those figures, however, may include tax avoidance strategies not related to the USVI. DF&A's investigation is still months from completion, and no criminal cases have been filed.
Green declined to say which EDC-certified USVI company he was involved with, other than it wasn't Clearwater, IFW or IAMI.
He acknowledged working as a dentistry consultant through the unidentified company before selling his 4,500-SF mountaintop home on the isle of St. Thomas in February for between $700,000-$1 million.
Green says finances weren't the reason he chose to move to the USVI. Instead, he said he fell in love with the Virgin Islands lifestyle and bought a 50-foot catamaran sailboat.
"I'm not saying the tax incentives weren't a factor," Green said. "But, I originally wanted to go there to sail. I probably lived there eight or eight-and-a-half months of the year."
The DF&A wasn't investigating him and hadn't contacted him, Green said. Although he and Teddy Skokos are not close, they talked a few times and had dinner, he said.
He didn't say how he became aware of the huge tax breaks available in the three-island territory, but he confirmed that he consulted with Marjorie "Jorie" Roberts, a USVI attorney noted for helping clients establish residency and businesses.
Green Dental Labs also conducts business in Florida, Tennessee and Colorado.
Steve and Terry Greenhaw, who launched their clothing store 33 years ago, became USVI residents about two years ago. They bought a mountaintop condominium and quickly acclimated to cool breezes and stunning views.
They also launched, as sole owners, USVI-based Green Apple Holdings LLC. That company isn't EDC-certified and is not a holding company for their Ark-ansas businesses, Steve Greenhaw said.
But, through Green Apple, they bought into an EDC-certified company called Corporate Services Group, a business consulting firm, he said. As a result, they're eligible for the big tax breaks. Greenhaw said he was "familiar" with the big tax breaks but just pays whatever his accountants — whom he wouldn't name — tell to pay under U.S. tax code.
Green Apple is a partner in CSG and operates as a division of the firm. Greenhaw, like many involved in EDC-certified companies, was hesitant to describe the business plan. He said non-disclosure agreements he signed prevent him from discussing what Green Apple or CSG actually do.
"It all depends on the type of business you're in," Greenhaw said. "If you're asked how to run a clothing store profitability or a property company profitably, all that information is accumulated over many years, paid for with mistakes along the way. Why would you want to divulge that? To share that information is nuts."
The Greenhaws are in the USVI most of the year, he said, and his dentist, doctor, gym and golf club membership are there also. He's no longer a Little Rock Executives Association member.
He first fell in love with the USVI in 1976 while on vacation. After 33 years running the clothing store and enduring the sobering deaths of his parents, the Greenhaws realized life was short.
"It's just beautiful, it's pretty. There are cool breezes and the temperature mostly stays between 78 and 84 degrees," Steve Greenhaw said. "I moved there when I finally got to the point where I could afford it. You don't ever see a U-Haul behind a hearse."
"It's a pleasure to wake up there and be there," Greenhaw continued. "If you look at the average age (of death), I've only got about 20 years to be alive. I need to enjoy it."
Greenhaw said he and Teddy Skokos dined together once, but "we're not buddies."
"Every once in a while you run into someone you know (from Arkansas), but it's rare," Greenhaw said.
Schrader and Cox
Little Rock attorney D. Scott Schrader and Fayetteville attorney Boyd David Cox couldn't be reached for comment. But paperwork filed with the Virgin Islands EDC indicates that both were involved in different companies that eventually gained EDC certification for hefty tax breaks.
Schrader was listed as a partner on the 2002 benefits application IFW Group filed with the EDC, along with Miller, and a Texas attorney named B. Terry Dunken. In a question box asking for a date of USVI residency, Schrader only filled in "no." It's unknown whether he at any point obtained residency.
Cox indicated on the 2002 EDC application filed by Cosmic Con-sulting, which later became Clearwater Consulting Concepts LLC, that he would become a USVI resident on or before its approval. The application also indicated the company would provide business and management consulting services and one of its intended clients was Cardiac Concepts Inc., a medical device company with headquarters in Little Rock and Aspen, Co.
Ted Skokos was also listed as president and director of Cardiac Concepts on the application, as well as a founder and board member of 3F Therapeutics Inc., another medical device company. He resigned from the Arkansas Banking Commission in 2003 due to his USVI residency.
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