SPECIAL REPORT | FEBRUARY 2012 The demand for a second passport is on the rise, and at least two nations are willing to sell their PASSPORTS FOR A PRICE

BY ATOSSA ARAXIA can also buy approved real estate worth ABRAHAMIAN at least $400,000. Not included are fees LONDON, FEBRUARY 12 to cover a mandatory background check. For nearby , the basic cost is or decades, the $75,000. two-island nation A third country, Austria, may also of- of St. Kitts and fer citizenship for an investment. A pro- Nevis exported sug- vision in the Austrian Citizenship Act Farcane to keep its economy states that citizenship can be granted afloat. When sugar prices to an applicant if he or she has per- fell, St. Kitts began to sell an formed, or would later perform, “ex- even sweeter commodity: its traordinary services” to benefit the citizenship. Austrian state. For $250,000, a foreigner Henley & Partners, a firm that spe- can buy full rights as a citizen cializes in repatriation, maintains there. The transaction can take that investing large sums of money as few as three months and ap- constitutes an “extraordinary ser- plicants need never visit the na- vice.” And Christian Kalin, a part- tion’s sandy shores. ner at the firm, said during a No- The allure? St. Kitts citizens vember conference in London that can travel without a visa to more his clients have successfully ob- than a hundred countries, includ- tained Austrian passports in this ing and all of Europe. They manner. In Henley’s brochure, pay no personal income taxes, and Henley says Austria extends citi- the island’s remote location in the zenship for those who invest at West Indies serves as a safe haven, least $10 million. should the need for a quick move Alice Irvin, a spokeswoman ever arise. at the Austrian embassy in

Demand for a second passport is CONWAY STANFORD REUTERS/ Washington, D.C., strongly “way up,” says David Lesperance, a rejects suggestions that Canadian immigration lawyer. Among the country’s citizenship his recent clients: an Egyptian pro- is for sale. “We are aware democracy activist who worries about that these claims have been around for a instability in his country, and a Chicago tries offering so-called while, but they are baseless,” she wrote in an businessman who is convinced that the citizenship by investment, burgeoning email. Henley’s CEO, Eric Major, says other- Occupy movements will lead to riots. programs that bestow on foreigners the ben- wise. On his website, Lesperance provides a efits of being a citizen - namely, a passport “The candidate has to have all the right questionnaire to help determine how ur- - for a price. trimmings,” says Major. “It’s been done, it’s gently a second passport is needed. He cites In St. Kitts, a passport goes for a $250,000 possible, but it’s fairly rare.” higher taxes, civil lawsuits, and terrorist at- cash donation to the country’s Sugar Indus- Other Western countries also welcome rich tacks as top expatriation factors. try Diversification Foundation, which was set foreigners. The United States, Canada, the St. Kitts is one of at least two coun- up to benefit retired sugar workers. Investors and New Zealand all offer immigrant visas to those who invest enough money in certain types of enterprise. These programs don’t instantly result in passports, but the visas are often a fast-track to natural- ization, and in some cases, large investments can expedite citizenship. “The idea that someone can gain fast- tracked citizenship in a country they have no ties to based on a wire transfer of funds or cash is a far cry from the vision of equal and participatory membership in a politi- cal community that is still reflected in many citizenship and naturalization laws,” says Ayelet Shachar, a professor of law, political science and global affairs at the University of Toronto’s Faculty of Law. “It is likely that we will see more of these economic citizenship programs,” Shachar says, “because there are significant pressures on both the demand and the supply side.”

PRICING A PASSPORT CONWAY REUTERS/STANFORD The Henley firm is at the center of the citizen- PROCESSING: Government officials process passports for St. Kitts and Nevis here, in the city of ship by investment movement. Registered Basseterre. in Jersey, an island in the English Channel known for its off-shore tax status in the Unit- “Today, a person of talent and EXIT STRATEGY ed Kingdom, Henley bills itself as a “citizen- Such instability is driving interest from the ship and residence planning” firm that man- means need not limit his or her world’s wealthiest, those involved in the pro- ages and markets parts of the citizenship life and citizenship to grams say. programs. Major, Henley’s CEO, says that during the As well as helping rich people obtain sec- only one country.” past three years, Henley’s citizenship and ond, and sometimes third, passports, Henley Last year, St. Kitts was 28th. Dominica was residence group more than doubled its staff, advises governments on how to attract high- 54th. A U.S. passport and an Irish passport clientele, and earnings. He won’t discuss the net-worth individuals. tied for the 5th most valuable. Finland, Swe- particulars but a Henley brochure says nine “Today, a person of talent and means need den and Denmark tied for first place, and specialists now handle citizenship matters. not limit his or her life and citizenship to only Germany and France second and third. “Uncertainty is a big ‘push’ factor,” Major one country,” reads Henley’s website (http:// But those rankings can change as quickly says. “When North Korea shoots missiles, link.reuters.com/qep36s). “Making an active as world events. Kalin warned as much at the we get a lot of South Koreans. When there’s decision with regard to your citizenship gives opening of last year’s conference, which Re- chaos in Cairo, we get lots of Egyptians on you more personal freedom, privacy and se- uters attended. the phone.” curity.” “It’s obvious to you why a Russian or a Val Kempadoo, a real estate developer in To reach would-be clients, Henley orga- Lebanese, a South African or maybe a Chi- the nation, says as many as 30 nizes events and throws parties through the nese would need a second passport and resi- firms or individuals, based in Moscow, Dubai, jet-set social networking site, A Small World dence,” Kalin said. “But why would a person Hong Kong, and other cities, are active in re- (http://link.reuters.com/pep36s). Kalin is from a stable country want one? ferring clients to St. Kitts for a passport. on the “council of experts” of the Sovereign “Until a few years ago, you enjoyed very Adam Bilzerian, a professional poker play- Society, a Florida-based newsletter that cir- wide and unhindered visa-free travel as a er and the son of former corporate raider culates a six-step guide on how to live com- citizen of Denmark. Until September 2005, Paul Bilzerian, said he worked through Hen- pletely tax-free and offers subscribers a dis- when a Danish newspaper published some ley to get citizenship in Austria. But put off by count on Henley’s services. Another forum is cartoons. By early 2006, Danish embassies the cost and exclusivity of Austria’s program, Henley’s annual Global Residence and Citi- in Damascus, Beirut, Tehran were set on he purchased property in St. Kitts, filled out zenship conference, held last November in fire, and as a citizen of Denmark you found some paperwork, and within a year, became London. yourself as a target of extremists all over the a Kittitian. Then, he became one of 231 Amer- Henley boasts that it can obtain pass- world. In some countries, you couldn’t even icans to renounce his U.S. passport in 2008. ports for individuals and families in as few as enter.” In 2011, government records show, the three months. It also publishes a yearly Visa Kalin paused. number of Americans renouncing their citi- Restriction Index, which ranks a passport’s “That is, unless you had a second pass- zenship reached 1,788 – the highest number value based on number of countries one can port.” since the government began keeping track in visit without a visa. 1997.

PASSPORT FOR A PRICE 2 Passport Power St. Kitts’ surging Some of the countries that Henley & Partners lists for its clients interested in alternative residency, followed by citizenship business the number of nations citizens there can visit without a visa* St. Kitts’ economic citizenship program Henley refers clients wanting a less COUNTRY OF CITIZENSHIP was established in 1984, shortly after expensive alternative to Dominica, the country’s independence from Great where citizenship costs $75,000. But the Denmark 173 Britain. But Kittitian officials, including incentive to sell St. Kitts is much stronger. Germany 172 Prime Minister Denzil Douglas, say For each client Henley brings in, the United Kingdom 171 interest has jumped in the past few years. company receives a client fee of at least The surge comes hand-in-hand with $35,000, plus a share of the investment France 171 the involvement of Henley & Partners, made into the sugar fund, according to Belgium 171 which has managed and marketed parts Val Kempadoo, who works directly with Italy 171 of the economic citizenship program Henley and the government on real since 2007. estate sales and development. Spain 170 No official numbers have been released David Checkemian, construction Ireland 169 about the size of the citizenship program manager for the Four Seasons Resort in St. Kitts, but government and Henley Estates, says Henley also receives United States 169 employees offered some estimates. commissions from developers when Austria 168 Between 1,000-1,500 individuals have their clients buy property. How much of a 167 obtained passports, either by buying share, Henley won’t say. real estate - the government recently Minister Douglas credits revenue from New Zealand 166 raised the qualifying property value the economic citizenship program with 166 from $350,000 to $400,000 - or by allowing St. Kitts to develop tourism, Greece 166 donating $250,000 (up from $200,000) even in tough economic times. to the Sugar Industry Diversification As of late 2011, a Henley catalog Canada 164 Fund, money intended to benefit retired listed more than 700 built or planned Singapore 164 workers in the sugar industry. properties in six high-end resorts that Liechtenstein 158 Most investors got their citizenship in could earn an investor citizenship and a the last five years. St. Kitts passport. Slovak Republic 157 For a country of just 45,000 with a The government has approved another Poland 154 sovereign debt nearing $3 billion, nearly 23 developments to attract more would- Lithuania 153 twice the country’s GDP, citizenship be Kittitians. is an important source of income. The 150 program alone probably added at least (Reporting By Atossa Araxia Monaco 150 $200 million to the country’s coffers. Abrahamian) Hong Kong (SAR China) 149 143 Israel 142 Many Americans give up their citizenship to find safe haven with a new passport. St. Kitts Bahamas 136 escape US taxes, but Bilzerian says his desire and Nevis, Dominica and Austria all have ex- St. Kitts-Nevis 131 to leave was different. As a child, he saw his tradition treaties with the United States. But father go to prison for a panoply of financial even though countries carry out background Croatia 122 crimes. In 2001, he watched as FBI agents checks, some question the thoroughness of Mauritius 122 raided his house. Then, while studying at the process. Panama 114 Vanderbilt, he says he grew more politically Kim Dotcom, the founder of file-sharing conscious. website Megaupload, obtained a New Zea- Serbia (Rep. of) 100 “When (George W.) Bush was elected for land residence permit by investing 10 million St. Vincent and the Grenadines 91 the second time, I felt that the country was New Zealand dollars - or about 8.35 million Grenada 86 going to be in such a downward spiral,” Bilze- U.S. dollars - in New Zealand government rian said. “They were eliminating freedoms, bonds through the country’s investor visa Belize 83 restricting the bill of rights. It’s so hard to program in 2010. Dominica 82 keep yourself out of trouble. If the IRS thinks Dotcom, a German-Finnish dual national United Arab Emirates 67 you’re doing something wrong and audit you, formerly known as Kim Schmitz, is in custody Dominican Republic 48 they make your life a nightmare ... they run in New Zealand after denying charges of in- you to the ground.” ternet piracy and money laundering. *Includes visa purchased on arrival That doesn’t mean criminals necessarily In Dominica, debate rages over the propri- Source: Henley & Partners

PASSPORT FOR A PRICE 3 ety of citizenship by investment. “I am not a fan of the economic citizenship program,” says Crispin Gregoire, Dominica’s former ambassador to the United Nations. Gregoire says he wants greater transparency and better screening in the citizenship pro- cess. “As it stands, it encourages people with something to hide. I understand that it must be a big source of income for the state, but they’re not doing a good job of regulating it.”

BUCCANEERS Some Kittitians criticize the extent to which citizenship by investment is changing the political - and physical - landscape of their island. Dwyer Astaphan, a former Kittitian minister of national security, justice, and legal affairs, complains that former sugar industry workers, intended to be the ben- eficiaries of the sugar fund, have no way of MARPLE REUTERS/NIGEL MEGAMANSION: The mansion in Aucklund of Kim Dotcom, founder of Megaupload who invested in New knowing where the money goes. Zealand’s investor visa program. “There’s no transparency,” he says. “Imag- ine making a contribution to a foundation to get citizenship of a country, but the inside GLOBAL BUSINESS information of the foundation is kept secret!” Henley has advised Canada and the United Astaphan also questions where Henley’s Kingdom on how best to attract wealthy indi- responsibility ends and the government’s be- viduals through their investor visa programs. gins. “They’re an obvious way to raise capital in Wendell Lawrence, a partner at Henley, is trying times,” says Major, of the expedited also St. Kitts’ ambassador to CARICOM, the visas. Caribbean Community and Common Market Henley is also advising several other coun- economic organization. SIDF.org, the sugar tries that want to adopt citizenship by invest- program’s website, is registered under the ment, Major says. Among them: and name of Henley’s chairman and to its office Croatia. address in Jersey. All the countries that offer or hope to of- The St. Kitts official in charge of the citizen- fer citizenship by investment have very low ship by investment unit, Cheryleann Pem- income tax rates, which make them particu- berton, says the sugar program is “an inde- larly attractive to Americans, who face life- pendent charitable foundation” registered long tax reporting requirements regardless privately. of their residence. Kempadoo, who is developing a new resort The only way to escape U.S. taxes is by called Kittitian Hill, worries that public-pri- renouncing U.S. citizenship – and finding a vate partnerships such as Henley’s compro- new one. mise the island’s sovereignty. Marshall Langer, an offshore tax and repa- “They’re pirates of the Caribbean,” he says triation attorney who spoke at the November of companies handling the citizenship busi- conference, talks about the benefits of the ness. “The situation of the country predicates program in crasser terms. that they are open to citizenship by invest- “It’s not enough to just move your assets ment. St. Kitts’ debt is 180 percent of its GDP. anymore,” Langer says. “Today, you have to CONWAY REUTERS/STANFORD CITIZEN: Former U.S. citizen Adam Bilzerian How can the government say no?” move your ass.” renounced his U.S. citizenship in 2008 and became (Edited by Blake Morrison) a citizen of St. Kitts.

FOR MORE INFORMATION MICHAEL WILLIAMS BLAKE MORRISON ATOSSA ARAXIA ABRAHAMIAN GLOBAL ENTERPRISE EDITOR INVESTIGATIVE PROJECTS EDITOR [email protected] +1 646 223 5462 +1 646 223 5488 [email protected] [email protected]

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