NYU is in the Paradise Papers
Because of course it is
It was only a matter of time before NYU turned up in the Paradise Papers, a massive document dump detailing individuals and institutions stashing enormous sums of money offshore in order to avoid taxation.
At NYU Local, we were absolutely shocked when NYU didn’t appear in a bombshell New York Times report detailing how American universities are investing their endowments in shady offshore entities to avoid paying taxes on their investments. Private universities such as NYU are nominally nonprofit institutions, but according to the International Consortium of Investigative Journalists, or ICIJ, endowments are required to pay taxes on investment income made in financial institutions such as hedge funds or private equity funds; basically, any investment that is not made in the school itself, to further the educational mission.
However, universities can invest their endowments in “blocker funds,” a legal offshoring technique, established in foreign tax havens. Through these blockers, universities can make speculative investments in hedge funds without paying any tax on their income.
Like the savvy journalists that we are, we control-F’d the New York Times article and somehow didn’t find any results for New York University, NYU, N.Y.U., or any other derivatives of the university. It couldn’t be!
But, on Friday, the ICIJ released a full list of universities invested in such blocker funds. And it included NYU!
According to ICIJ, as of 2014 NYU has invested in two entities incorporated in Bermuda, a popular offshore tax haven because it has no corporate income tax; most of its tax revenue comes from high consumption taxes.
The two Bermuda entities that NYU is or has been a shareholder in are called Genesis Limited and Arcadia Associates Ltd. Arcadia was active for only three months, from June to September 2001 (closing just one day before the September 11 attacks on the World Trade Center and Pentagon), and NYU appears to be the only university attached to it. Leonard N. Stern, for whom the Stern School of Business is named after, is listed as both the Vice President and a Director of Arcadia.
Reached for comment, NYU spokesman John Beckman stated that Arcadia was connected to a philanthropic donation to Stern. “That entity — which is more than 15 years old — was evidently connected to a large philanthropic gift to the Stern School,” Beckman told Local.
Genesis, however, has been active since 1980 and counts among its ranks numerous universities, including Columbia, Princeton, and Johns Hopkins, along with NYU.
Beckman told Local that Genesis also was not a blocker fund.
“Genesis is not and was not a blocker. It is a self-insurance consortium, or self-insurance pool, that we are in with a group of other universities,” Beckman said.
Beckman did not immediately explain why these entities were registered in Bermuda.
Individuals affiliated with the university also turned up in the Paradise Papers. As reported last week by Italian magazine l’Espresso, NYU trustee Andrea Bonomi’s company, Investindustrial, is controlled by trusts registered in the British Isles. In 2016, the Bonomi family requested a loan to purchase a private jet; the law firm Appleby, which also leaked the information regarding universities’ offshore holdings, reportedly advised the family to set up a shell company in the Isle of Man and purchase the jet as a company expense to avoid paying almost $3 million in tax.