Hiltzik: Allegations of a Getty family tax dodge

For all we may have grown fed up with with billionaires trying to use their fortunes to get ahead in business and government, the lifestyles of the rich and famous are still powerful. captivating and shocking.

Consider a lawsuit filed last month in Brooklyn Federal Court by Marlena Sonn, who describes herself as an investment advisor to two of the three daughters of Gordon P. Getty, the heir to the late tycoon. J. Paul Getty oil.

Sonn claims she helped the Getty descendants reposition their portfolios to emphasize “socially responsible” ventures, in part to help them “compensate… for reality.” source of their vast wealth is inextricably linked” with climate change and the devastation of the Amazon basin.

As one of the people who will have to pay for all these avoidable taxes and costly out-of-state meetings, I find that frustrating.

– Nicolette Getty, protesting family’s alleged California tax evasion

Her advice has generated huge financial success for a client’s trust, she says, boosting the value of a key trust to more than $1 billion from $600 million over a period of several years. .

But it all fell apart, she said, when she began to question the trust’s performance in depicting them and their beneficiaries residing in Nevada, even though they spent most of their time in California or New York.

Sonn alleges, the goal was to evade at least $300 million in taxes in California between 2013 and 2021, around the time she worked for two of her three sisters. That was Sonn’s estimate of the taxes likely to be paid by a Getty trust the sisters had an interest in, called the Pleiades Trust. But there are other Getty credibilitys; if they all followed the practice that Sonn alleges about the Pleiades, the amount in question could run into the billions.

Sonn says her suggestion that they swallow the pills and follow California law resulted in her being fired in retaliation and being tricked into losing more than $4 million in wages she was promised.

Sonn filed the lawsuit on May 11, naming Kendalle and Alexandra Getty, their personal hedge fund, and Robert L. Leberman, who manages several of the Getty family trusts and manages Gordon’s wealth. Getty.

A few words of warning. Most of the defendants have not responded to the lawsuit, so we don’t know how they would describe their relationship with Sonn. Defendant’s attorneys declined or did not respond to my request for comment.

However, Kendalle Getty sued Sonn in Reno state court about two weeks after Sonn filed the lawsuit. In her lawsuit, which has been moved to federal court in Nevada, Getty alleges that Sonn “coerced” and “pressured” her to secure Sonn a $2.5 million payment when Getty fired her.

Sonn’s lawsuit bears the mark of an act of revenge. At face value, Sonn learned that the sisters and other family advisors were pushing tax laws beyond reasonable limits, she advised her clients to stop doing so, and in retaliation, they fired and tough on her.

However, Sonn’s allegations are now public and serve as a road map for California tax investigators, should they choose to follow the route. So it’s appropriate to let them air.

Before that, though, remember how the sisters fit into the Getty family history.

Their predecessor, J. Paul Getty, was rated in the 1950s as the richest man in America and possibly the world thanks to his fortune built from oil wells in Oklahoma and Saudi Arabia.

Getty is also known as a world-class forger, famous for installing a payphone in his UK mansion for guests and refusing to pay the ransom paid by the kidnappers of his nephew John Paul Getty. III demanded, instead lend his son part of the money and charge him interest on the loan.

Among the manifestations of his property and art collection are the Getty Center and the Getty Mansion in Los Angeles.

Tax avoidance has been steeped in family history, beginning with the Getty family’s original trust and continuing through the founding of the Getty Villa in the Pacific Palisades, which architectural historian Martin Filler calls as “transparent tax avoidance” and the controversy surrounding the tax exemption from fiduciary duty to the Getty Center.

Gordon P. Getty, 88, is the fourth son and heir of J. Paul Getty. Although he initially entered the oil business on his own, he still wanted to pursue his career as a classical composer. In 1986, 10 years after his father’s death, Gordon sold Getty Oil to Texaco for $10 billion.

Gordon has four sons, as far as the outside world is known. However, in 1999 news emerged that he also had three daughters with his longtime mistress, Cynthia Beck – Nicolette, Kendalle and Alexandra. This became public when the sisters applied to change their names from Beck to Getty.

Gordon Getty publicly acknowledged the paternity: “Nicolette, Kendalle and Alexandra are my children,” he said. “Their mom, Cynthia Beck, and I love them so much.”

Of the three sisters, all in their 30s, Kendalle, an avant-garde multimedia artist, may be the one who stands out the most as a public figure. Nicolette is not the defendant named in Sonn’s lawsuit and does not appear to be a client of Sonn.

The Getty family trust, of which Gordon and his sons were beneficiaries, was restructured by creating a successor, called the Pleiades Trust, to the benefit. for his daughters. Gordon became the primary beneficiary of the Pleiades, which the suit says his daughters would inherit upon his death. Sonn claims that between 2015 and 2020, Gordon received about $176 million from the trust. The sisters received modest fees and loans from their father.

Sonn entered this story in 2013, when she said she had taken over the management of Kendalle’s $5 million portfolio from Goldman Sachs.

Kendalle wanted her investments to reflect “her interests, her morals and her values… her advancement,” Sonn recounts; Goldman Sachs has invested most of her money in broad-market funds. Alexandra became Sonn’s client later that year. Sonn began attending the quarterly meetings the three sisters had with their father about managing the Pleiades.

Sonn says she’s more than just a financial advisor to Kendalle, who “regularly turns to Ms Sonn for advice on interpersonal relationships with various family members, roommates, and roommates.” and/or romantic partner.”

She said that “anytime Kendalle was in crisis, she would call on Miss Sonn … to clean up her mess and help her deal with her personal troubles.” Sonn said she was paid a total of about $180,000 by Kendalle and Alexandra, plus bonuses depending on the sisters’ discretion.

Kendalle, in her own lawsuit, admitted that over the years she had “unconditionally trusted, accepted, and depended on” Sonn. She alleges that Sonn used that relationship to arrange an “inflated” bounty, which Sonn disputes.

Sonn said she eventually learned that much of the Pleiades Trust’s management was designed to maintain the “fictitious” impression that everything related to the trust was located in Nevada, including the its customers.

This is important, she said, not only because Nevada has no income tax, but because it has become a recognized tax haven thanks to financial security laws that are no different from those of the Cayman Islands.

The first spark of this strategy, she said, came when a trust official told her that New York state taxes would not be withheld from her paycheck, even though she lived and worked in the state.

The idea was to remove any indication that the trust was already doing business in New York, a high-tax state. The primary goal is to demonstrate that the trust has conducted all of its business in Nevada—especially not in California, even though “it is well known” that the majority of the fund’s business is The trust “is continuously conducted in and/or from Los Angeles or San Francisco,” Sonn said.

Things turned sour in 2018, when all three sisters mostly lived in California and were aware of the state’s “return” rule, which allows California to tax trust income if it is determined that the recipient is a state residents at the time they receive the money and while it is accumulated in the trust.

Sonn insists the Getty family is counting on their political traction in California to minimize that possibility, but it’s a “calculated risk”. Among their relationships was Governor Gavin Newsom, with whom his father, Bill, was a lifelong friend and financial manager of Gordon Getty. Gordon, now a business partner of Gavin Newsom’s, and other family members have contributed hundreds of thousands of dollars to Newsom’s political campaigns over the years.

According to Sonn, the burden of concealing their California presence began to weigh on the sisters. Her lawsuit says they want to live openly in California and stop worrying about taxes.

Nicolette allegedly complained to Leberman in an email about the costs of the strategy, which included “quarterly out-of-state meetings for more than 30 people at expensive hotels … using jet planes. private force, etc… As someone who will pay for all these avoidable taxes and costly out-of-state meetings, I find it frustrating.”

According to the lawsuit, “Ms. Sonn repeatedly encouraged Kendalle and her sisters to simply pay their taxes in California.” Sonn said that in the end all three sisters followed Leberman’s advice to go ahead with what she calls “a dubious tax avoidance scheme. … Ms. Sonn’s dissenting views on this matter are no longer welcome. “

She said that Alexandra fired her in January 2021 with a pledge to pay $2.5 million in severance, but then tried to settle for $30,000. Sonn said she is seeking “fair and just compensation” through the lawsuit. She said Kendalle had individually agreed to a $2.5 million grant, divided into three annual installments of $833,333, but only paid the first installment.

There are lessons to be learned here, although they are necessarily conditional, as we now have only one side of the story.

If there is a corollary to Benjamin Franklin’s observation that death and taxes are the only certainties in the world, the 1% rate would protect their tax cuts to their last drop of blood.

Even if Sonn’s lawsuit is an act of revenge, it could still serve a public service. If she’s right that Gordon Getty and his daughters tore up the state of California for $300 million or more, don’t ignore that you, the average taxpayer, got the bill.

https://www.latimes.com/business/story/2022-06-21/the-getty-oil-fortune-a-family-scandal-and-an-alleged-tax-scam Hiltzik: Allegations of a Getty family tax dodge

Edmund DeMarche

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