The Justice Department on Thursday charged Dimitri Simes, pro-Russian pundit and former head of a Washington think tank, along with his wife, Anastasia Simes, with violating US sanctions by accepting millions of dollars from a Russian state television network and laundering the proceeds.
Reached by phone in Moscow, where he has a home, Dimitri Simes, who was an adviser to Trump’s 2016 campaign, declined to comment on the allegations against him. But he denounced the charges against his wife as “lies and half-truths” and argued that the Biden administration is targeting the couple to punish him for expressing pro-Russian views.
“If you think this is a law abiding administration [it] would be shocking, but no, I am not terribly surprised,” Simes said, of the charges against his wife.
“I think that Mr. Garland would have to be ashamed of producing something like that,” Simes added. “It is beneath the dignity of the Department of Justice.”
Simes indicated that he does not plan to return the US to face the charges. He said he believes the Justice Department charged him “to stop me from coming to the US.”
“They want to punish me” for criticizing US support for Ukraine, he claimed.
Simes said he “would most certainly welcome an opportunity to come to a trial in Washington as a witness” to testify against Biden administration officials “who betrayed the US…and are trying to start World War III.”
The indictment against the couple alleges that they received $1 million, a personal car and driver, and a stipend for an apartment in Moscow, in exchange for work they did for Russia’s state-owned Channel One after the US sanctioned the network over Russia’s 2022 invasion of Ukraine.
“These defendants allegedly violated sanctions that were put in place in response to Russia’s illegal aggression in Ukraine,” Matthew Graves, the US Attorney for Washington DC, said in a statement announcing the indictments. “Such violations harm our national security interests—a fact that Dimitri Simes, with the deep experience he gained in national affairs after fleeing the Soviet Union and becoming a US citizen, should have uniquely appreciated.”
Simes is the former longtime head of the Center for National Interest, which was founded by Richard Nixon in 1994 and advocates for “strategic realism” in US foreign policy. Simes’ efforts in 2016 to arrange contacts between the Trump campaign and Russia drew scrutiny from special counsel Robert Mueller, but Simes was not accused of wrongdoing.
The charges against the Simes couple are part of a Justice Department crackdown on Russian influence efforts. Federal prosecutors yesterday indicted two employees of Russian state-controlled network Russia Today with violating the Foreign Agents Registration Act by secretly running a right-leaning media company they used to push pro-Kremlin messaging.
The site featured content from pro-Trump pundits including Benny Johnson and Tim Pool. Both Johnson and Pool said they are victims of the scheme.
Deputy Attorney General Lisa Monaco, said the defendants in the Tenet case “used American-based individuals and entities to exploit, frankly, our free society to try to undermine our election,” including by deploying “unwitting influencers to push Russian propaganda and pro-Russian messaging.”
DOJ alleges that Anastasia Simes received funds from a Russian businessman named Alexander Udodov, whom the Treasury Department sanctioned last year for his support for the Russian government. Prosecutors allege that Anastasia Simes helped Udodov evade sanctions by “purchasing art and antiques for the benefit of Udodov from galleries and auction houses in the United States and Europe, and having the items shipped to her residence in Huntly, Virginia, where they were stored for onward shipment to Russia.”
Anastasia Simes could not be reached, but Dimitri Simes said his those charges against his wife are false. “She started working with [Udodov] before the sanctions and was never aware of any sanctions” against the oligarch, Simes said.
He also said his wife took no steps, such as contacting a shipping company, “to ship goods to Russia.”
“There was no conspiracy, nothing,” Simes said. “She has a legitimate business. I am proud of my wife. I am very supportive of what she is doing.”
The gender gap in cybersecurity isn’t a new issue. The lack of women in cybersecurity and IT has been making headlines for years — even decades. While progress has been made, there is still significant work to do, especially regarding salary.
The recent ISC2 Cybersecurity Workforce Study highlighted numerous cybersecurity issues regarding women in the field. In fact, only 17% of the 14,865 respondents to the survey were women.
Pay gap between men and women
One of the most concerning disparities revealed by the study is a persistent pay gap. The study found that U.S. male cybersecurity professionals are paid higher on average than females of the same level. The results show an average salary of $148,035 for men and $141,066 for women. A pay gap also exists globally, with the average global salary for women being $109,609 and for men $115,003.
ISC2 also found a gender pay disparity among people of color in the U.S. The study found that men of color earned an average of $143,610, and women of color earned $135,630. However, the study wasn’t able to compare salaries for people of color on a global basis.
Lack of women in cybersecurity
The study also showed a gap between the number of men and the number of women who work in cybersecurity. Based on the results, ISC2 found that only 20% to 25% of people working in the cybersecurity field are women. Because the percentage of women under 30 years of age in cybersecurity was 26% compared to 16% among women between 39 and 44, the report created optimism that more younger women are choosing cybersecurity as a career.
Interestingly, teams with women on them seemed to have a higher proportion of women than of men, illustrating that women likely seek out teams and companies that have other women working in cybersecurity. Women reported a higher number of women team members (30%) compared to men (22%).
However, 11% of security teams were found to have no women at all, with only 4% saying that it was an equal split between men and women. The industries with the highest number of no-women security teams included IT services (19%), financial services (13%) and government (11%). Mid-sized organizations with 100 to 999 employees were most likely to have security teams with no women.
However, the report also found several areas of concern regarding women’s experiences working in the cybersecurity field:
29% of women in cybersecurity reported discrimination at work, with 19% of men reporting discrimination
36% of women felt they could not be authentic at work, with 29% of men reporting this sentiment
78% of women felt it was essential for their security team to succeed, compared to 68% of men
66% of women feel that diversity within the security team contributed to the security team’s success, compared to 51% of men
Using hiring initiatives to increase women on security teams
The gaps in cybersecurity — both pay and gender — won’t be resolved without a focused effort by industry and companies. Many companies are seeing results by adopting specific DEI hiring initiatives, such as skills-based hiring, and using job descriptions that refer to DEI programs/goals.
The ISC2 report found that businesses using skills-based hiring have an average of 25.5% women in their workforces compared with 22.2% for businesses using other methods. By including DEI program goals in job descriptions, companies can also increase the number of women on their security teams, with 26.6% for those using these types of job descriptions vs. 22.3% for women at those that do not.
Lack of perspectives hurts cybersecurity teams
Without women on cybersecurity teams, security teams lack the wide range of experience and perspectives needed to reduce security risks. Organizations can improve their security by focusing on increasing the number of women on their team, which also means eliminating the pay gap.
“Broader than cybersecurity, there’s a body of research that says the more perspectives you bring to the table, the better off you will be at problem-solving,” Clar Rosso, CEO of ISC2, told Dark Reading. “In cybersecurity, which is a very complex, growing threat landscape, the more perspectives that we bring to the table to solve problems, the more likely we will be able to impact our cyber defense.”
A federal indictment unsealed on Wednesday alleges that a Tennessee-based media company which played home to several prominent right-leaning online commentators was secretly a Russian government-backed influence operation. The company is accused of receiving nearly $10 million from employees of Russia Today (RT), a Russian state-backed media company, as part of “a scheme to create and distribute content to U.S. audiences with hidden Russian government messaging,” according to Attorney General Merrick Garland.
The allegations were part of a broader effort against Russian influence sites seeking to subvert the elections.
Tenet Media worked with American conservative or heterodox media figures, including Dave Rubin, Benny Johnson, Tim Pool, and Lauren Southern, who variously present themselves as independent journalists, documentarians, and political commentators. Not all of them immediately commented on having been publicly linked to a foreign propaganda site, but Johnson soon tweeted that he and other influencers had been “victims in this alleged scheme.” In his own tweet, Pool echoed that line, writing, in part, “Should these allegations prove true, I as well as the other personalities and commentators were deceived and are victims.” Rubin, too, described himself as a victim, adding, “I knew absolutely nothing about any of this fraudulent activity. Period.”
The indictment, filed in the Southern District of New York, alleges that RT and two specific employees, Kostiantyn “Kostya” Kalashnikov and Elena “Lena” Afanasyeva, worked to funnel money to Tenet Media as part of a series of “covert projects” to shape the opinions of Western audiences. RT has faced cancellations and sanctions in the United States, Europe, Canada, and the UK after Russia’s invasion of Ukraine; federal authorities allege those travails led the company to instead create more covert means of influencing public perception.
While Tenet is only referred to in the indictment as “U.S. Company 1,” details made it readily identifiable. The indictment alleges that Tenet’s coverage “contain[ed] commentary on events and issues in the United States, such as immigration, inflation, and other topics…consistent with the Government of Russia’s interest in amplifying U.S. domestic divisions.”
The indictment also alleges that not everyone affiliated with Tenet was unaware of the scheme, stating that “Founders 1 and 2” of the company knew the source of their funding. The founders of Tenet Media are Lauren Chen and her husband; Chen is a conservative influencer and YouTuber who’s hosted a show on Blaze TV and who’s affiliated with Turning Point USA. Her husband, Liam Donovan, identifies himself on Twitter as the president of Tenet Media.
The indictment alleges that the RT officials and Founders 1 and 2 “also worked together to deceive two U.S. online commentators (“Commentator-I” and “Commentator-2″), who respectively have over 2.4 million and 1.3 million YouTube subscribers.” Dave Rubin has 2.4 million YouTube subscribers, while Tim Pool has 1.37 million.
The indictment indicates that even some of the people working at Tenet found their content heavy-handed. On February 15 of this year, Afanasyeva, using the name Helena Shudra, shared a video in a company Discord channel of what the indictment calls “a well-known U.S. political commentator visiting a grocery store in Russia.” While he’s not named in the indictment, it clearly matches Tucker Carlson, who toured such a grocery store, declaring himself slackjawed in wonder at how nice it was.
“Later that day,” the indictment adds, “Producer-I privately messaged Founder-2 on Discord: ‘They want me to post this’—referencing the video that Afanasyeva posted—but ‘it just feels like overt shilling.’ Founder-2 replied that Founder-I ‘thinks we should put it out there.’ Producer-I acquiesced, responding, ‘alright I’ll put it out tomorrow.’”
Tenet’s recent content on sites like YouTube, Twitter, and TikTok has been heavily larded with critical commentary about Kamala Harris. Conservative political commentator and documented plagiarist Benny Johnson, for instance, recently starred in a video about her “empty words.”
The allegations against Kalashnikov and Afanasyeva, who are charged with conspiracy to violate the Foreign Agents Registration Act (FARA) and conspiracy to commit money laundering, were part of a broader effort against what US authorities allege were Russian influence sites seeking to subvert the elections. Earlier on Wednesday, the Justice Department announced it had seized 32 internet domains used in what they called “Russian government-directed foreign malign influence campaigns.”
At an Aspen Institute event on Wednesday afternoon, a DOJ official, Deputy Attorney General Lisa Monaco, said the Russians charged in the case “used American-based individuals and entities to exploit, frankly, our free society to try to undermine our election,” including by deploying “unwitting influencers to push Russian propaganda and pro-Russian messaging.”
One of the last things Tenet posted on their social media sites before the indictment was unsealed concerned—ironically enough—a government employee accused of secretly acting as a foreign agent. Tenet posted a video of Linda Sun, a former aide to New York governors Andrew Cuomo and Kathy Hochul who has been charged with using her position to benefit the Chinese government. Tenet seemed to suggest that a few words Sun offered on a video call endorsing diversity, equity, and inclusion measures were part of an alleged foreign-backed messaging plot.
“Why would the Chinese government want to push DEI in America?” a tweet from Tenet read.
New York’s Metropolitan Museum of Art expelled an attorney for the Cambodian government from a Tuesday meeting between museum officials and the representatives of Cambodia’s culture ministry, heightening tensions in a yearslong campaign to press the museum to return Khmer treasures to their home country.
The attorney, Brad Gordon, has been one of the most prominent faces of Cambodia’s national effort to trace lost ancient artifacts looted during years of turbulent civil war. Gordon has worked for the Cambodian government in that capacity for a decade. Many of the pieces were trafficked to the United States and other Western nations and sold to ultrawealthy art patrons and some of the world’s largest museums, including the Met.
Officials from Cambodia’s Ministry of Culture and Fine Arts visited the Met on Tuesday as part of a U.S. State Department program that provides tours of U.S. institutions for foreigners. While the Cambodian delegations’ itinerary included stops at multiple American museums, their visit to the Met held special significance — and sensitivity — because of Cambodia’s extensive push to reclaim cultural objects from the museum.
In recent years, the museum’s Cambodian pieces have been a focal point of increasing scrutiny on the Met’s collection by journalists and law enforcement. In 2021, the International Consortium of Investigative Journalists and its partners began asking the Met questions about more than a dozen pieces in its collection that had passed through the hands of accused antiquities trafficker Douglas Latchford or his associates. This followed a long run of attention from online sleuths, including the Chasing Aphrodite blog. Latchford was indicted in 2019 by federal prosecutors in New York and accused of helping orchestrate the large-scale looting of Cambodian cultural heritage decades ago. Latchford died in 2020 before the case against him proceeded.
In March 2023, ICIJ and media partners found at least 1,109 pieces in the Met’s collection that were previously owned by individuals who had been either indicted or convicted of antiquities crimes. The museum subsequently hired a team of researchers to vet its collection, and in December it announced it would repatriate more than a dozen works to Cambodia. But that didn’t end the saga. The Cambodian government claims that dozens more of its stolen treasures remain in the Met’s collection, and it wants them back.
Gordon said that when he arrived at the Met on Tuesday, he was led to a conference room where the Cambodian delegation would meet with Met officials. Immediately upon arriving, he said, two Met attorneys approached him and asked to speak with him privately outside the conference room. He said he was then asked to gather his belongings. From there, the officials told Gordon he was barred from the meeting before a guard escorted him out of the museum, according to his account.
A Met spokesperson said that Gordon had not been invited to the meeting and was “asked politely to leave.” The spokesperson said that afterward, “The Met continued amicable discussions with their Cambodian colleagues, including a gallery tour and agreement to meet further to expand cooperation.”
Among the planned attendees at the meeting was Lucian Simmons, the Met’s new head of provenance research. Last year the museum hired Simmons to lead a team of researchers to scour and identify potentially problematic pieces in the museum’s collection. Simmons’ hiring was portrayed in the press as a sign of the museum bolstering its approach toward addressing concerns over trafficked art in its sprawling collection.
Gordon said that the exact agenda of yesterday’s meeting was unclear but related to conservation issues. He told ICIJ that he had been specifically asked to join the meeting by H.E. Hab Touch, a senior official in the Cambodian culture ministry, who is leading the delegation.
“As you know, we are in the midst of negotiations for the return of additional stolen artefacts from the Met,” Gordon said in an email to several State Department officials that he shared with ICIJ. He added that because the situation with the Met was delicate, the Cambodian delegation had been “very clear that they wanted me as their counsel to be present” in the meeting.
Gordon said he pleaded with the Met to let him stay in the meeting, with a member of the delegation even calling Cambodia’s minister of culture to affirm the importance of his attendance. Gordon added that the Met officials offered no explanation for his expulsion apart from saying it was a State Department meeting.
“After the MET rejected the Minister’s request for me to attend, I agreed to leave,” Gordon told the State Department. “I have never felt so humiliated in my life.”
The campaign is drawing to a close for Algeria’s presidential election this weekend.The only real unknown is how many voters will turn out.
Tuesday was the final day of campaigning for the vote on Saturday, 7 September, with a media blackout to be imposed from Wednesday. The outcome is largely predictable – Incumbent President Abdelmadjid Tebbounewillsecure his re-election with a majority of votes in the first of the two rounds of voting. We’ve expected, this election has proceeded without any surprises. In this country, elections tend to be meticulously orchestrated and tightly managed. Tebboune has the support of the administration as the incumbent president.He has eased relations with Algeria’s powerful military. He is also expected to benefit from a change in the election schedule, which left his rivals with less time to campaign.Originally scheduled for December, the poll was brought forward because of what the President called the current international situation and the dangers looming over Algeria.
The country typically avoids holding elections in the summer, when intense heat makes campaigning difficult – but this year’s campaign kicked off in mid-August.
While campaign staff would usually head out into streets and markets to talk to voters, in recent weeks they have tried to meet voters in their homes.
The opposition has complained of intimidation, with dozens of people arrested last month over alleged election fraud and three would-be candidates placed under judicial supervision.
The opposition leader, Fethi Ghares, was detained last week. He stands accused of insulting the president and spreading disinformation online.
the so-called ban on leaving the national territory (ISTN), rarely justified by a court decision, affects hundreds of activists, journalists, businessmen and politicians.
A prominent figure on Algeria’s secular left, Ghares was involved in the 2019 Hirak movement, the series of mass protests that led to the ousting of long-time president Abdelaziz Bouteflika.His party, the Democratic and Social Movement, succeeded the Algerian Communist Party, but was banned in February 2023.
“The situation is disastrous because civic space and freedoms have been reduced over the years since the start of the Hirak and there are strong reasons to believe that the situation could potentially get worse.
It is very difficult to do politics in Algeria. and to exist as an opponent. Some journalists or even citizens who have published posts on social media can get arrested.
A lot of people still fear repercussions and do not speak to journalists, for instance, because they are afraid for their safety.People ultimately do not make comments on politics in public, or say things that are a little general.
However Algeria’s political system itself is evolving, and is no longer set around this duality between the armed forces and the political power. Civilians are trying to have a role.
With members of the opposition calling for a boycott, however, some voters are refusing to participate.This is an authoritarian regime that does not respect the rules of democracy. Every Algerian knows the outcome of this election in advance. The current regime fully assumes its authoritarian natureAuthoritarian laws justify the repression of political opponents.In 2021, the Algerian authorities amended the penal code to qualify as a terrorist act and sabotage “any act targeting the security of the state, national unity, stability and the normal functioning of institutions”through actions that “work or incite by any means whatsoever to access power or change the system of governance by non-constitutional means and to undermine the integrity of the national territory.
Article 97 of the penal code, for example, prohibits any type of gathering, while the 2012 laws relating to political parties and associations subject the formation of an NGO or a political party to prior government approval.
In 2023, a new milestone in the restriction of freedom of expression was reached with the adoption of a law on information that bans Algerians with dual nationality from owning or being shareholders in a media outlet in Algeria.
Algerian election campaign marked by social pledges and claims of unfair play.
The last presidential election of 2019 was widely boycotted, resulting in low turnout that undermined the legitimacy of Tebboune’s victory.
The president and his supporters are hoping to up participation this time round.
The public appears to be responding positively to Tebboune’s leadership and policy decisions. The crucial question now is whether this level of support will endure, and what the implications of another five years under Tebboune’s leadership will be for Algeria’s future.”
But In its sixty-two-year modern history, Algeria has never witnessed a smooth transfer of power from one president to another.
The country’s first post-independence president was deposed in a military coup after just three years in office. The coup leader, Houari Boumediene, ruled with an iron grip for more than a decade, entrenching a system of military rule with a thin civilian façade that has endured ever since.
His successor, Chadli Bendjedid, elected in 1979, ruled until an oil price slump obliged the state to curtail social spending, provoking a crisis. His solution, a hasty political opening, nearly delivered the country to an extremist Islamist party. To prevent that outcome, the army seized power in 1992, triggering a civil war. The military tapped independence hero Mohamed Boudiaf—but soon regretted its choice when he launched ambitious anti-corruption and reform campaigns that threatened its interests. After just five months in office, Boudiaf was assassinated on live television by his own bodyguard. the army’s hand-picked candidate, former Foreign Minister Abdelaziz Bouteflika, won an election intended to turn the page on Algeria’s “dark decade.” He was reelected three times and, despite being incapacitated by poor health, remained le pouvoir’s default pick in 2019.
Tebboune, a former regional governor, housing minister, and failed prime minister—who holds the distinction of being Algeria’s shortest-serving premier, lasting less than three months in 2017—emerged as the army’s anointed pick in the controversial polls, which protesters boycotted. He was elected amid record-low turnout.
The Military Establishment:
Role in Elections: The military in Algeria has historically played a significant role in the country’s politics. While they may not publicly endorse a specific candidate, their support is crucial for anyone aspiring to hold the presidency. They are likely to back a candidate who aligns with their interests and can ensure stability. This will be the incumbent President Abdelmadjid Tebboune.
Potential Candidates: If the military perceives a candidate as a stabilizing force or someone who will maintain the status quo, they are more likely to support that person, either overtly or behind the scenes.
Support Base: The FLN, the party that led Algeria to independence, has been a dominant political force in the country. However, its influence has waned in recent years due to internal divisions and public dissatisfaction.
Alliances: The FLN may support a candidate who promises to revitalize the party or someone who represents the traditional power structure in Algeria.
3. Islamist Parties:
Influence: Islamist parties, such as the Movement of Society for Peace (MSP), have a substantial support base, especially among those dissatisfied with the current system. They are likely to support a candidate who promises reforms that align with their religious and political goals.
Unity or Fragmentation: Islamist parties in Algeria have a history of both uniting and fragmenting, so their support could be split among different candidates, depending on who best represents their interests.
4. Civil Society and Protest Movements:
Hirak Movement: The Hirak protest movement, which began in 2019, represents a significant force in Algerian politics. It includes a broad coalition of civil society groups, activists, and ordinary citizens demanding systemic change.
Support for Reformist Candidates: This movement is likely to back candidates who advocate for genuine reforms, transparency, and an end to corruption. However, they may also call for a boycott if they believe the elections are not free and fair.
5. International Actors:
France and Other Foreign Powers: Algeria’s former colonial power, France, as well as other countries, may have an interest in the outcome of the elections. While they may not openly endorse candidates, their diplomatic actions and relationships could indirectly influence the election by signaling preferences for stability or reform. We assured This is incumbent PresidentTebboune.
6. Incumbent or Government-Backed Candidates:
Government Support: Candidates backed by the current government or those perceived to be close to the existing power structures, including the presidency and the ruling party, are likely to receive support from state institutions and resources.This is incumbent President Abdelmadjid Tebboune.
Public Reception: However, public perception of these candidates could be mixed, especially if they are seen as representatives of the status quo, which has been a source of frustration for many Algerians.
7. Youth and First-Time Voters:
Decisive Factor: Algeria has a young population, and youth voters could play a crucial role in the elections. Their support may go to candidates who address issues like unemployment, education, and social justice.
Support for Change: Given the disenchantment with traditional politics, younger voters might gravitate toward newer, more progressive candidates who promise change.
The support in Algeria’s elections will depend on how various candidates position themselves in relation to the military, political parties, civil society, and the general public’s demands. The military’s role is pivotal, but the influence of protest movements and the public’s appetite for reform will also shape the election’s dynamics.
Eswatini’s King Mswati III’s plans to wed Nomcebo Zuma, the daughter of former South African President Jacob Zuma, as his 16th wife. This will strengthen the ties between the two leaders.
A royal delegation from Eswatini visited Jacob Zuma’s homestead at Nkandla in July in accordance with tradition, marking the start of Mswati’s marriage proposal to Zuma.
This union can be seen as a strategic move, cementing economic and political interests.
President Zuma’s role and capacity to be a major ambassador for Swaziland or the Swazi royal family is a noncontestable issue and has become even far more important in view with the development or the emergence of MK [uMkhonto weSizwe] as a political party with President Zuma as its absolute president.
However, Zuma’s diminished role in South African politics renders him unable to influence Swazi politics.
But the marriage strengthening bilateral relations between the king of Swaziland and the former president. The former president of South Africa and king are actually business partners and so, we expect that part of their relationship will actually blossom.
Zuma is expected to go on trial on multiple corruption and racketeering charges next April. He has pleaded not guilty.
Meanwhile, Mswati has been criticized for his controversial polygamy and lavish lifestyle.
This high-profile wedding, with its steep dowry of 100 cattle and R2 million (2 million rands(, or USD $113,300 and all the other hidden costs associated with a wedding of this nature, puts a significant strain on Swaziland’s economy. Within royal circles, this union has also been met with internal opposition among the royal wives. … This marriage will cause an uproar.
Whether seen as a strategic union of two powerful families or a personal decision to extend influence and financial gain, the king’s marriage to Nomcebo Zuma will have a lasting impact on the two nations’ ties, for better or worse.
The engagement between King Mswati III of Eswatini and Princess Ntandoyesizwe, carries several potential implications:
1. Strengthening of Political Ties between Eswatini and South Africa:
Diplomatic Relations: The marriage could symbolize a deepening of ties between Eswatini and South Africa, especially given the familial connection to a former South African leader. This could foster stronger diplomatic relations and closer collaboration between the two nations, which already share cultural and historical ties.
Political Influence: By aligning with a family that has held significant political power in South Africa, King Mswati might gain a more influential position or a channel to influence political matters in the region.
2. Impact on Domestic Politics in Eswatini:
Public Perception: Eswatini has experienced political unrest, with calls for democratic reforms and more participation from the public in governance. King Mswati’s engagement to someone from a high-profile political family might be seen as a move to bolster his position, but it could also attract criticism if seen as prioritizing alliances over addressing domestic issues.
Symbolic Unity: For supporters of the monarchy, this engagement might be seen as a strengthening of traditional and royal values, reinforcing the king’s stature as a leader who can unite influential families.
3. Economic Implications:
Business and Economic Ventures: The Zuma family has various business interests, and this alliance could pave the way for economic collaborations or investments between businesses in South Africa and Eswatini. It could potentially attract South African investors who are aligned with or influenced by the Zuma family.
Tourism and Cultural Exchange: The engagement could lead to an increase in tourism and cultural exchanges between the two countries, capitalizing on the royal connection and shared cultural heritage.
4. Regional Power Dynamics:
Influence in Southern Africa: The marriage may influence regional power dynamics, especially within the Southern African Development Community (SADC). The Zuma family’s involvement in South African politics, coupled with King Mswati’s status as Africa’s last absolute monarch, could create a bloc of influence, affecting negotiations and alliances within the SADC region.
Potential for Mediation Roles: Given their statuses, both families might be seen as potential mediators or power brokers in regional conflicts or disputes, which could impact political negotiations in southern Africa.
5. Public Opinion and Reactions:
Criticism and Support: The engagement has already sparked diverse reactions on social media, with some viewing it as a union of power and wealth, while others criticize it as part of ongoing political maneuvering. The public’s reaction will play a crucial role in shaping the narrative around this engagement.
Gender and Social Justice Issues: In both Eswatini and South Africa, issues related to gender equality and social justice are prominent. The engagement could bring these topics to the forefront, especially considering King Mswati’s history of multiple marriages and the ongoing debates about traditional versus modern values.
6. Potential Impact on Jacob Zuma’s Legacy:
Public Perception: The engagement could affect how Jacob Zuma is perceived, especially if it is seen as extending his influence beyond his political career. It may also be viewed as a way for him to maintain relevance in South African and regional politics.
Legal and Corruption Cases: Zuma faces ongoing legal battles in South Africa over corruption charges. The royal connection could be seen as a strategic move to gain favor or leverage, although it is unlikely to directly impact legal proceedings.
7. Cultural and Traditional Significance:
Traditional Alliances: Marriages have historically been used to cement alliances and strengthen ties between powerful families. This engagement could be seen as a continuation of that tradition, reinforcing the cultural practices of both the Zulu and Swazi peoples.
Royal Protocols and Customs: The engagement may highlight and reinforce traditional customs and protocols within the royal families, setting an example for other traditional leaders in the region.
In conclusion, while the engagement is primarily a personal and familial matter, it has broader political, economic, and social implications for Eswatini, South Africa, and the southern African region. The actual impact will depend on how these relationships and alliances are managed and perceived by the public and political leaders.
For those working in the information security and cybersecurity industries, the technical impacts of a data breach are generally understood. But for those outside of these technical functions, such as executives, operators and business support functions, “explaining” the real impact of a breach can be difficult. Therefore, explaining impacts in terms of quantifiable financial figures and other simple metrics creates a relatively level playing field for most stakeholders, including law enforcement.
IBM’s 2024 Cost of a Data Breach (“CODB”) Report helps to explain the financial impact when law enforcement is involved in the response. Specifically, the CODB report, which studied over 600 organizations, found that when law enforcement assisted the victim during a ransomware attack the cost of a breach lowered by an average of $1 million, excluding the cost of any ransom paid. That is an increase compared to the 2023 CODB Report when the difference was closer to $470,000.
But law enforcement involvement is not ubiquitous. For example, when an organization faced a ransomware attack only 52% of those surveyed involved law enforcement, but the majority of those (63%) also did not end up paying the ransom. Moreover, the CODB Report found law enforcement support helped reduce the time to identify and contain a breach from 297 days to 281.
So why are nearly half of victims not reaching out to law enforcement? Let us look at a few possibilities.
Outside of cyberspace, a 911 call to local law enforcement is a pretty reasonable first call when falling victim to a crime. But there is no “911” to dial for a cyberattack, and certainly no menu options for ransomware, data exfiltration or destructive attacks. Even experienced incident responders will likely share experiences where opening questions to the victim are, “Have you contacted law enforcement?” or “Have you reported this IC3?” The first answer is often “no” or “not yet,” while the second is “I see what?” Therefore, the awareness issue is still prevalent.
We must also consider emotional responses, such as embarrassment. Think of the employee who may be thinking, “Was I responsible for this by clicking a wrong link?” Embarrassment leads to reluctance, therefore both organizations and law enforcement must message better to their people and partners that reaching out for help is okay. Moreover, add in another psychological factor: additional threats made by the actor demanding victims not contact law enforcement.
There is the secrecy aspect, especially from a business impact perspective. Decision makers may not yet know the business impact of law enforcement involvement. Will the news go public? Will competitors find out? What privacy assurances are available? All of these are reasonable questions, and likely to be important with the regulatory requirements of reporting cyber crimes.
Trust ties all these factors together, ranging from benign “Can I trust law enforcement?” to explicit “We do not trust law enforcement.” These gaps must be bridged.
Building relationships and the future of reporting
Managing a crisis requires competence, but also trust, so exchange business cards before the incident. The issues identified can be proactively addressed by reaching out to law enforcement partners when you do not need them. Learn the capabilities of your local agencies; request meet-and-greets with those in your state and federal regions.
Remember, there is a little “Customer Service 101” here. When the incident hits, what do you want: the general helpline, or somebody you know and have a bond with?
Moreover, the future of cyber crime reporting is becoming more of a public matter, such as SEC reporting rules. Having relationships in place will be beneficial. They can buy time and serve as extra hands.
The case for involving law enforcement from a cost-savings perspective appears pretty transparent. Therefore, it is more of a cultural issue. Make friends, build two-way trust and establish protocols. These can go a long way to reduce the pain and cost of an attack.
European banking giant Nordea has agreed to pay $35 million to New York’s financial services watchdog following an investigation into the Helsinki-based bank’s alleged failure to prevent money laundering and other criminal activities, including some exposed in the Panama Papers leak.
The New York State Department of Financial Services said it had identified “significant compliance failures” between 2008 and 2019 by the bank, which failed to conduct proper due diligence of its clients and banking partners as required by the Bank Secrecy Act.
“International financial entities such as Nordea must safeguard against criminal activity in the global financial system, and for years Nordea failed in these respects,” said Superintendent Adrienne Harris, who leads DFS, in a statement.
According to the regulator, Nordea’s weak compliance program exposed the bank’s financial channels, and therefore the New York financial system, to “a high risk of criminal abuse.”
The consent order cited ICIJ’s 2016 Panama Papers investigation, which exposed a shadowy global industry of law firms and big banks selling financial secrecy to clients — including politicians, celebrities and fraudsters — around the world.
The investigation was based on 11.5 million leaked documents, which named 72 customers of Nordea’s international branch in Vesterport, Denmark. DFS said the revelations exposed Nordea as one of many financial institutions that failed to “follow legal requirements that would ensure their customers were not involved in criminal endeavors, tax evasion, or political misconduct.”
It said that Nordea was linked to billions of dollars of suspicious transactions over roughly a decade, and that the Vesterport branch was also implicated in two other high-profile money laundering schemes, known as the “Russian Laundromat” and “Azerbaijani Laundromat.”
Last month, Danish authorities indicted Nordea for violating anti-money laundering laws by failing to stop $3.7 billion of suspicious transactions involving Russian clients, shortcomings previously exposed in a separate ICIJ investigation a decade ago.
ICIJ media partner Politiken revealed in 2013 as part of Secrecy for Sale that Russian nationals and others used services of Nordea’s Copenhagen branch to maintain about 100 offshore companies, sparking an eight-year investigation.
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Nordea’s chief compliance officer, Jamie Graham, acknowledged in a statement that the bank had “historically … underestimated the complexity of preventing financial crime and the resources needed for that purpose.” The statement noted that Nordea had invested some 1.5 billion euros, or roughly $1.7 billion, in anti-money laundering controls since 2015.
“The bank has taken significant measures to improve financial crime processes and procedures since the period covered by DFS’s investigation,” Graham said.
According to the consent order, Nordea’s total assets were worth approximately $627 billion as of 2023, with its New York branch holding more than $37 billion in assets. The bank’s statement said the New York fine would have “no material impact on the financial position of Nordea.”
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Columbia University law professor John Coffee, who specializes in white-collar crime, told ICIJ via email that the settlement agreement implied the state regulators were “very happy with Nordea’s level of cooperation.”
Suzanne Lynch, an adjunct professor on financial crime at Utica University, also noted the heavy emphasis on cooperation. Lynch said she was surprised to see scarce mention of federal-level investigations in the 44-page consent order.
“So the question remains, will the feds go after them too?” she said. “They’re the ones that ultimately really deal with the financial intelligence gathered.”
In early 2010, U.S. lawmakers gave what was supposed to be a gift to IRS agents with the grueling job of ensuring the wealthiest people and largest corporations pay their fair share of taxes. Tucked inside President Barack Obama’s landmark Affordable Care Act was a new law that prohibited shifting money around for the sole purpose of avoiding taxes. This struck at the heart of the complex offshore tax maneuvers — the shell companies, sham trusts and dubious intercompany loans — that the affluent use to help keep billions of dollars from government coffers. Suddenly the notion that many of these schemes were technically legal was cast in doubt. Now it was up to the IRS to enforce the new law.
In an era of government cuts and starved social services, this new law — known as the economic substance doctrine — was supposed to help U.S. tax authorities fight the estimated $688 billion a year in unpaid taxes. But then nothing happened. The IRS hardly touched its new weapon against high-end tax evasion — leaving billions of dollars on the table and its agents with little experience in using the law. But why?
An investigation by the International Consortium of Investigative Journalists shows how, after coming under pressure from the industries that help wealthy people and corporations avoid taxes, the IRS’s Large Business and International Division, or LB&I, issued a directive that blocked agents from using the economic substance doctrine.
“The IRS had this institutional view not to raise it,” Monte Jackel, a tax attorney who has served several stints as a high-ranking IRS lawyer, said of the economic substance doctrine. “For a decade or so, it was a dead letter — invisible.”
ICIJ found that this IRS directive not only echoed some of the key requests of powerful tax industry players, it also copied several sentences directly from an industry lobbying letter that had urged restrictions on the new law, turning the exact words of tax attorneys for the wealthiest people into official IRS policy. Among those who prepared the lobbying letter were at least four tax attorneys at the corporate law firm Skadden, Arps, Slate, Meagher & Flom, where the IRS official who issued the directive had recently worked. That official, Heather Maloy, has since risen to top brass at the IRS, overseeing all of its enforcement divisions.
A congressional committee estimated that the new tax law was supposed to raise billions in revenue, meaning that the directive may have quietly cost the government large sums.
The reporting adds to growing evidence that LB&I, the office tasked with policing the wealthiest taxpayers, often takes a deferential approach to these powerful players. It also sheds light on the prevalence in the leadership of the IRS and the Treasury Department of tax lawyers who have recently represented the sorts of wealthy taxpayers LB&I is supposed to regulate.
In response to ICIJ’s questions, the IRS emphasized that a recent inspector general report found that the agency did not give large multinational corporations preferential treatment. It also defended its handling of the economic substance doctrine and said that it values input from outside the government. “A cornerstone element of fair and balanced tax administration is allowing those affected by IRS policies to have an opportunity to offer input,” the agency said in an emailed statement to ICIJ. “The tax system cannot operate in a vacuum, and we have a responsibility to give taxpayers the opportunity to be heard as we implement policy.”
ICIJ recently revealed that LB&I applies different and friendlier rules when auditing the wealthy as opposed to small businesses, and that its upper management shies away from even considering egregious tax-dodging cases for criminal referrals. The tiny number of such referrals from LB&I — no more than 22 in a recent span of five years — has frustrated some officials within the IRS’s Criminal Investigation Division, who say they’re often unsupported in identifying cases involving the biggest taxpayers.
President Joe Biden’s administration vowed to tackle high-end tax evasion and secured a historic $80 billion from Congress in part to fulfill this pledge. Now, with this infusion of funding, LB&I is being put to the test. The agency recently made a dramatic reversal in how it regards the economic substance doctrine, touting it as a key tool to stand up to powerful tax cheats.
The IRS now has to play catch-up with its deployment of the doctrine, after letting it gather dust since 2010. At stake are not only billions in government revenue, but also the fate of a key Biden campaign promise to stand up to some of the world’s wealthiest taxpayers.
At least for the richest Americans, avoiding huge amounts of tax often comes down to paying well-heeled accountants and tax attorneys to create complex arrangements that exploit legal loopholes. Corporate tax advisers, though, fear the economic substance doctrine because it can cut through the artificial complexity at the center of many of these schemes.
In the decades leading up to 2010, the economic substance doctrine lived informally in the court system. The government used the doctrine based on case law — i.e., the opinions of previous judges — to cobble together ad hoc and sometimes inconsistent ways of asserting it in tax cases.
Lawmakers saw formalizing the doctrine in federal legislation as a crucial step to strengthen it as a deterrent to high-end tax evasion. The issue united Democrats and Republicans in the belief that the growing tax shelter industry posed a threat to the country’s governance.
For a decade, a group of U.S. senators tried repeatedly to make the doctrine official law and consequently faced fierce opposition from the industry representing private tax advisers. In 2003, then-Sen. Joe Lieberman, D-Conn., said that legislating the doctrine would help fight the “systemic corruption that plagues the accounting, legal and financial communities in the pursuit of tax shelters.” Sen. Chuck Grassley, R-Iowa, a two-time chairman of the tax-writing Senate Finance Committee, declared in 2007 that it was the “right policy.”
Although its enactment into law in 2010 was eclipsed in the news by the larger health-care reform bill, high-end tax advisers quickly took notice.
In public pronouncements, the industry warned that the legislation had ushered in a new world where the codified economic substance doctrine could “dramatically change the tax enforcement landscape.” Just hours after the law passed, the corporate law giant Skadden, which has represented some of the country’s highest-profile tax evaders, warned that it “will have an immediate effect on transactions in the planning stage” and said “taxpayers will need to proceed cautiously.”
The Big Four accounting firms — known to design highly complex structures of offshore shell companies for clients seeking to avoid taxes — also recoiled.
PwC sought to shield itself from the potential impact of the economic substance doctrine. Image: Michael Kappeler/picture alliance via Getty Images
Tax advisers should have difficult conversations with clients and take “a back-to-basics, prudent course,” warned an article in an industry publication co-authored by two tax accountants at accounting giant PwC.
The Big Four firms began trying to shield themselves from the law’s impact, according to documents leaked to ICIJ as part of the Paradise and Pandora Papers. In an agreement to provide tax services to a hedge fund using an entity in the British Virgin Islands, PwC stated it would not be liable for “penalties imposed on you if any portion of a transaction is determined to lack economic substance,” citing the 2010 law. In another tax services contract for a major private equity firm using shell companies in the Cayman Islands, Deloitte said it assumed no “responsibility for any penalties resulting from client’s failure to meet the requirements of the economic substance doctrine.”
Deloitte and PwC did not comment for this story.
The law appeared to be changing the behavior of some of the largest firms. But would this last?
Like Santa Claus
Back in the U.S., the powerful tax law firms that work closely with the Big Four pressed the IRS to restrain its new powers. On Jan. 18, 2011, a group of eminent corporate tax lawyers sent a 66-page letter to then-LB&I Commissioner Maloy and other IRS executives. It urged the IRS to place extensive restrictions on the law that would, in practice, widely obstruct agents’ ability to use it. The letter called the law’s civil fines “a significant stick” and urged the IRS “to be measured in how it swings this stick.”
This letter was written and reviewed by various prominent lawyers, including at least four tax attorneys at Skadden, the firm where Maloy had recently worked as a tax attorney. Two of those were partners at Skadden.
It didn’t take long for the private sector to get what it wanted from LB&I.
On July 15, 2011, Maloy issued a directive that required agents take a series of steps and analyze more than two dozen factors before even asking for approval from a high-ranking IRS executive to use the new law. Agents had to notify the taxpayer as soon as they even considered asking for approval to pursue the economic substance doctrine, and then an IRS executive had to offer the taxpayer a chance to explain their position before the agent could receive approval to use the doctrine. The directive narrowed the scope of penalties agents could seek and defined how agents were generally supposed to analyze transactions — provisions sought by industry.
By placing procedural hurdles in the way of using the doctrine, the directive effectively torpedoed a tax law that legislators had fought for a decade to pass. In addition to fulfilling key requests of industry players, the directive copied three sentences directly from the 66-page lobbying letter into official government policy.
High-end tax attorneys celebrated the directive. A news bulletin on one tax law firm’s website trumpeted: “LB&I directive softens economic substance doctrine.” Another firm declared that the steps imposed on agents will likely place “a damper on the number” of cases in which the doctrine could be used.
Industry players themselves “could not have written a more favorable set of audit guidelines than those in the new LB&I Directive,” observed Jasper Cummings, a tax attorney with the law firm Alston & Bird LLP who co-authored the 66-page lobbying letter, in a memo posted to the firm’s website.
“As a result of the Directive recently issued,” Cummings added, “the Economic Substance Doctrine will begin to share a key attribute of Santa Claus: to be more talked about than seen.”
In a memo posted to its website, Skadden described the directive as fulfilling hopes of the industry and said it provided a “welcome assurance” that the new law “will not be asserted without considered review.”
Counsel said the approval process was too burdensome, so they didn’t want to pursue it … They made it administratively impossible to use.
One industry contributor to the 66-page lobbying letter said in a 2018 academic article that as a result of the Maloy directive, the “economic substance doctrine arguably loses any deterrent effect … because taxpayers know that the IRS is unlikely to raise the economic substance issue.”
An LB&I agent who spoke on the condition of anonymity because he was not authorized to speak with the press said he worked on an audit several years ago in which a wealthy individual had dodged millions in taxes through a series of maneuvers that the agent believed could be challenged under the economic substance doctrine. But, the agent said, the July 2011 directive stopped him from using it, partly because of hesitance from the IRS attorneys he worked with.
“Counsel said the approval process was too burdensome, so they didn’t want to pursue it,” the agent told ICIJ.
After this instance, the agent said that he did not try to use the doctrine again: “They made it administratively impossible to use.”
The U.S. Treasury building in Washington, D.C., U.S. Image: Al Drago/Bloomberg via Getty Images
‘A revolving door influence’
For years, watchdogs and lawmakers have expressed concern about the potentially corrupting effects of individuals from the private tax industry ending up in high ranks of the IRS and its parent agency, the Treasury Department. Prominent tax attorneys from Big Four accounting firms or corporate law firms sometimes help implement favorable policies for their former clients. These officials often rejoin the private firms with rapid promotions.
Earlier this year, ICIJ reporting showed that top executives in LB&I commonly switch hats from regulating the wealthiest taxpayers to working for them. A review of LB&I executive lists from the past 13 years shows that out of 114 top executives named, at least a quarter either had worked for a major accounting firm, a tax consulting firm or a major tax law firm shortly before joining the IRS, or left the IRS for such private sector roles.
The IRS’s watchdog, the Treasury Inspector General for Tax Administration (TIGTA), warned last year that the movement of employees between the IRS and accounting firms and big companies raised “impartiality concerns.”
As the IRS embarks on a major hiring spree with its new billions, the questions around guarding against industry influence have gained new urgency.
“People from the private sector provide important viewpoints and unique expertise needed to help the IRS run the tax system,” IRS spokesperson Robyn Walker told ICIJ in a statement for a previous story. “This takes on even more importance as the agency works to build compliance work in high-risk corporate and high-wealth areas.”
The agency also told ICIJ that safeguards are in place to prevent conflicts of interest. These rules forbid officials from working on matters too closely related to their work for a former employer in the private sector. Yet these safeguards generally rely on these officials to proactively identify and declare such conflicts to the agency.
In January 2022, TIGTA received an eight-page complaint from an agent alleging that Maloy’s directive had been influenced by the private sector. The complaint alleged that “we at the IRS are not enforcing our tax laws on multinational taxpayers using tax structures lacking economic substance.”
The complaint emphasized that the 66-page letter urging LB&I to restrict the new law was co-authored by attorneys at Skadden, Maloy’s former employer, and alleged that the government was not enforcing its own rules around conflicts of interest.
“There’s clearly a revolving door influence in play within the IRS,” the complaint stated.
“Private sector attorneys from numerous firms known to be involved in promoting, opining, and defending abusive tax structures seized the opportunity to use revolving door colleagues in the executive ranks of the IRS to request, influence and craft guidance,” the complaint also said. The complaint urged the inspector general to assist the IRS in reviewing and revoking the directive.
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One of the world’s largest corporate law firms, Skadden has a tax practice that employs a former IRS commissioner and a former executive of LB&I. One of the authors of the 66-page letter, Brendan O’Dell, left Skadden in 2016 to spend six years in high-ranking positions within LB&I and Treasury before becoming the director of tax controversy for Amazon. Another of the letter’s authors, Cary Douglas Pugh, left Skadden in 2014 to become a judge in federal tax court in Washington, D.C., making her among the most powerful people in tax law.
The IRS agent’s complaint to TIGTA has not been previously reported. Michael Welu, a former IRS agent who has been outspoken on the issues he saw within LB&I during his more than three decades at the IRS, provided a copy of the complaint to ICIJ. The complaint’s author, Brian Visalli, is a special agent in the Criminal Investigation Division.
“While I’ll confirm I’m a government whistleblower, I will not confirm or deny any specific complaints or documents I’ve provided to TIGTA,” Visalli told ICIJ in a LinkedIn message. Visalli added that, due to concerns over retaliation, he would not comment further.
In 2015, after almost six years of running LB&I, Maloy left the IRS to become the US Tax Controversy Leader at the Big Four accounting firm EY. EY’s website from that time lists Maloy as a contact in relation to its services around a highly technical practice known as “transfer pricing” that is at the heart of some of the largest tax avoidance schemes.
After five years at EY, Maloy returned to the IRS as a top executive in charge of the entire agency’s compliance efforts. The heads of LB&I, Criminal Investigation and other major compliance divisions now report to her.
ICIJ found that Maloy was not the only government official receiving policy requests from former private-sector colleagues related to the 2010 law. In January 2011, Lisa Zarlenga, then a tax partner at Steptoe & Johnson LLP — a corporate law firm that had opposed to the new law — was named as an author on the 66-page letter requesting restrictions on the IRS’s use of the doctrine. Two of Zarlenga’s colleagues at Steptoe, Mark Silverman and Amanda Varma, were also co-authors of the letter.
But a similar letter co-authored by Silverman and Varma and sent just 3½ months later listed Zarlenga as a recipient. This was because Zarlenga had switched hats to become a high-ranking tax policy official at Treasury.
In an interview with ICIJ, Zarlenga said she had nothing to do with Maloy’s directive. “Treasury would have had no involvement in that directive. I saw it when it was published in Tax Notes along with everyone else.”
In an interview after the the 2011 directive, Silverman — who had helped lead Steptoe’s opposition to the doctrine — called the directive “thoughtful” and “extremely well done.”
Zarlenga, who now heads Steptoe’s Tax Policy Practice, said that it’s both common and important for the industry to weigh in on what the IRS is working on. “Government officials interact pretty regularly with practitioners,” she said. “It’s all part of the flow of information. Otherwise, the government attorneys are sort of sitting in an ivory tower and they don’t know what is going on.”
New life for an old law
Several months after TIGTA received the complaint in 2022, the IRS quietly rolled back the LB&I directive at issue, replacing it with a set of rules that stripped away a number of restrictions on agents’ use of the economic substance doctrine. This was more than a decade after Congress passed the doctrine into law.
The IRS did not respond to requests to comment on this story or answer questions about why it changed its rules around the doctrine in 2022.
Suddenly the industry that had once applauded the directive sounded the alarm once more. In the wake of the new guidance, EY told its clients that “taxpayers should focus on penalty protection” and should consult tax professionals “before entering into transactions with related parties” — a technical term that generally means shifting assets or liabilities between entities all owned by a single person or business.
In a post on its website, corporate law giant Baker McKenzie said the updated directive exemplifies what it called “the IRS’s increasingly offensive posture.”
The law firm was right. In August 2022, Biden signed the Inflation Reduction Act, which included the $80 billion for the IRS to help fulfill his promise to make the wealthiest people and corporations pay their fair share of taxes.
Despite its languid existence after being passed, the 2010 law has become a critical part of this effort. In June, the IRS announced an initiative to tackle tax abuse in the highly complex realm of investment partnerships, which have become a key means for the richest people on Earth to increase their wealth while minimizing the U.S. government’s slice of the pie. In announcing the move, U.S. Treasury Secretary Janet Yellen raised eyebrows by stating that “many of these transactions violate the codified economic substance doctrine” — a clear shot at the tax planners serving the ultrawealthy.
Following through on this tougher rhetoric may be difficult, though. Recent ICIJ reporting showed that LB&I often takes an accommodating approach toward the largest taxpayers. Over the past five years, the division flagged no more than 22 instances of possible tax crimes for criminal investigators to review further — out of trillions of dollars in annual income from large corporations and ultrawealthy people that the office oversees. The IRS office that covers small businesses and self-employed people flagged roughly 40 times more possible crimes.
In the agency’s own comments to ICIJ for earlier stories, the IRS suggested that large corporations break the law less often than other types of businesses, saying their checks and balances and their use of independent accountants “generally limit the opportunity for criminal activity.” ICIJ found that the agency treats these powerful taxpayers accordingly.
On Wednesday, TIGTA released an extensive report on the IRS’s challenges to stand up to tax evasion by multinational corporations and addressed frustrations of agents around the difficulty of using the economic substance doctrine. The report also said that the IRS’s 2022 change to the directive was “a result of gaining experience and a level of comfort in the application of the doctrine.” It added that “the IRS could not provide us with the number of cases where examination teams considered the Economic Substance Doctrine.”
The report, which was premised on determining whether the IRS gives multinational corporations preferential treatment, said it found no instances of such treatment. It did, however, recommend that LB&I review its procedures around enforcement of multinational taxpayers, including around its use of the economic substance doctrine.
Experts say that the decade when the doctrine lay dormant may put the office at a disadvantage for a number of reasons. One is that the IRS’s agents and attorneys have little experience using it and could be forced into a trial-and-error approach. Some commentators say that, despite all of the commotion around the law, it may be vulnerable to legal challenges. The previous dearth of cases involving the new law also means that judges are just now getting the chance to issue significant rulings on it. The way judges interpret any tax law sends important signals to the IRS about how to pursue winning legal arguments in court — where they face tax attorneys for large corporations and the ultrawealthy known to spend massively to defeat the IRS.
“They haven’t had a lot of experience in actually applying it in real-world cases or seriously thinking about it,” Jackel, the tax attorney, said of the 2010 law. “It will be a slow process for them to get up to speed on it and be confident in their ability to assert the doctrine.”
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Some of the IRS’s cases using the 2010 law are beginning to make their way through the courts. Most significant of these is the agency’s attempt to invalidate a $2.4 billion tax deduction claimed by Liberty Global, the multinational telecommunications firm led by billionaire John C. Malone. With a net worth of roughly $9.8 billion, Malone is the largest voting shareholder in Liberty Global and is listed by Bloomberg as the second largest private landowner in the U.S., holding some 2 million acres across the country.
In 2020, Liberty Global asked the IRS for a $110 million refund for overpaying its 2018 taxes. The massive refund request was based on a complex series of maneuvers — involving shuffling assets between subsidiaries in places like Belgium, the Netherlands and Slovakia — that had been created by Liberty Global’s tax department with help from Deloitte. In challenging the refund request, Justice Department lawyers alleged that the entire point of the transactions was to improperly exploit a new loophole in federal tax law.
Billionaire John C. Malone is the largest shareholder in Liberty Global. In 2020, Liberty Global asked the IRS for a $110 million refund for overpaying its 2018 taxes. Image: David Paul Morris/Bloomberg via Getty Images
Liberty Global’s tactics did not emerge out of thin air. In one filing, the Justice Department noted that the “situation arises because tax litigators have been developing strategies” like Liberty Global’s. In emails contained in court records, Liberty Global’s tax department discussed paying Deloitte and another Big Four firm, KPMG, hundreds of thousands of dollars for their work on the complex international tax structures. The Justice Department attorneys noted that Skadden had publicly endorsed a refund tactic similar to that of Liberty Global.
Skadden did not respond to a request for comment.
In October 2023, the IRS won its case against Liberty Global, with a federal judge in Colorado ruling that the company’s use of a loophole was not permitted under the 2010 law.
That ruling was “the worst nightmare for tax planners who rely on ‘catching’ Congress in a glitch in the law,” wrote Jasper Cummings, the tax attorney at Alston & Bird. “This Liberty Global opinion is by far the scariest [economic substance doctrine] opinion of recent times and shows a Justice Department unleashed from the historic norms of the income tax.”
Liberty Global maintains that its tax reporting in connection with the case was correct. Although Liberty Global had acknowledged that the maneuvers did not have any true business purpose apart from avoiding taxes, according to court documents, it appealed the ruling in April on technical grounds around applying the doctrine. The firm’s lawyers said “the court fundamentally misunderstood” the case and asserted that the IRS “wrongly wields the economic substance doctrine to rewrite, rather than interpret, the law.”
If Liberty Global prevails in its appeal, it could create a precedent, perhaps as high as with the U.S. Supreme Court, that would weaken the IRS’s use of the doctrine moving forward.
The law firm representing Liberty Global in this quest: Skadden.
Delphine Reuter and Rick Sia contributed to reporting
Are Russian military defectors spies? War criminals? Or heroes? That’s one of the central questions of this week’s episode of Reveal, which follows the dramatic journey of an officer who deserted the Russian army, fled the country, and now lives in exile.
This week, Associated Press reporter Erika Kinetz examines the costs of people who leave Russia’s military with the help of Idite Lesom, an antiwar group whose name translates roughly to, “Get Lost.” As Russia’s war on Ukraine enters its third year, the group has helped thousands of people desert military service or evade it altogether.
For the man at the center of the episode, sacrifices are constant. “You can only leave wounded or dead,” another former military Russian officer tells Kinetz. “No one wants to leave dead.” He decides his best option is to ask a comrade to shoot him in the leg.
Former soldiers like him are waiting for a welcome from western nations that hasn’t come. This week, in partnership with the Associated Press, we’ll hear about why these defectors are not finding sanctuary in the West, and how staggering casualty rates may affect the future of the war. We’ll also meet a Ukrainian man on a quest to give fallen soldiers—Russian and Ukrainian alike—a final resting place. Don’t miss this gripping story on this week’s episode of Reveal, available wherever you get your podcasts.
