Floating on a raft of ambiguity: the Cayman Islands drift offshore, unsure of whether they want to follow the fecund currents of capital or set course for land and the relative safety of the state

Risk & Insurance, Oct 1, 2005 by Cyril Tuohy

One only hopes that William Brittain-Catlin doesn't have any money stashed away in the Cayman Islands. It's not likely he's going to win any friends or tax breaks there anytime soon.

Thanks to his enlightening new book called "Offshore: The Dark Side of the Global Economy," (Farrar, Straus & Giroux) he's done the world--if not himself a service in showing how the rich become filthy rich thanks to offshore tax havens like the Cayman Islands, the Bahamas and Guernsey.

Brittain-Catlin, a former BBC producer and investigator for Kroll, now part of the parent company of Marsh & MeLennan, is at his best when he weaves his personal anecdotes of the sights and sounds of the Cayman Islands with the stories of the colorful characters who have made the islands prosper.

In describing Jean Doucet, for example, the Canadian banker who set out to build the Caymans' prestige, Brittain-Catlin writes: "Doucet was the offshore world's very own Renaissance man--banker, financier, playwright, filmmaker, poet. A man of action, not just dreams. The man who produced films like 'The Cayman Islands,' a feature-length documentary that had premiered to the sight of the 'Sterling Girls' posing in an array of cat-suits and miniskirts designed by none other than Mrs. Doucet. So cool, different, modern. So unlike the dull tedium of life onshore, with soaring inflation, rising taxes and unemployment." Shortly thereafter, Doucet's name was linked to the mafia and his bank quickly faced a liquidity cricis. He eventually fled the islands and was never heard from again.

Brittain-Catlin is keenly aware of the clashing interests ripping at the fabric of Cayman society. In one passage, he describes a scene with a seven-year-old girl, celebrating the anniversary of the first sighting of the islands by Columbus more than 500 year ago.

"Little Dorritt was caught between freedom and control, like Cayman itself between the global market economy and colonial dependency on the United Kingdom," the author writes. "With this thought we can begin, if we want to look at hard enough, to glimpse the strange hidden space between capital and state, the secret realm at the ambiguous heart of Western modernity, the ever-kept secret contradiction between the individual and the authority of the law."

And hidden it is.

When he tries to unearth the "public" documents about which companies are registered in the Cayman Islands, he typically finds one or two printouts with hardly anything in them. Corporate sleuths looking for 10-K and 10-Q documents, like the ones typically filed with U.S. regulators, aren't going to find them in the Cayman Islands. Which is exactly the point.

But given his experience as an investigator for Kroll, now owned by Marsh, the world's largest insurance broker with a big presence in the Cayman Islands, Brittain-Catlin was in a perfect position to find out exactly what happened to these companies.

He does that, to a certain extent. For example, he uncovers some of the links among the 692 Cayman-based companies registered by the Enron Corp. and its former CFO Andrew Fastow, who engineered the energy company's notorious special-purpose vehicles, which allowed the utility to temporarily hide its losses from analysts and investors.

Unfortunately Brittain-Catlin doesn't go much beyond that which has already been published and sheds little new light on the Enron scandal and downfall of Long-Term Capital Management, a Cayman-registered Connecticut-based hedge fund that collapsed in 1998.

Brittain-Catlin rarely quotes people involved with the scandal-plagued firms, which indicates that he probably wasn't granted interviews with those involved. It's a shame, because given the author's investigative background, he seems to be just the person with the kind of expertise capable of breaking new ground.

Instead, the author digresses into an "ambitious meditation on the soul of capitalism," in the words of "Publishers Weekly," and exposes readers to his heavy philosophical musings on the nature of capital and state.

Because of this, he isn't likely to elicit much sympathy from insurance managers working for large or midsize companies desperate to bring their premiums under control. Better to skip those chapters entirely.

After all, the job of a corporate risk executive is to find ways to transfer as much risk as possible from one company to another, at the lowest price, even if that means going offshore.

At a time when health-care premiums are rising at a double-digit clip risk executives like Paul Cutler, treasurer of the energy concern FPL Group, which owns the Caymans-registered captive Palms Insurance Col Ltd., are desperate to keep costs in cheek any way they can.

How would Cutler or Mark Bennage, director of risk management for the food distribution company McLane Co. Inc. which owns the Caymans-registered captive RDM Insurance Group Inc., react to the following passage:

"Secrecy is the radical arm of privacy. It is what privacy becomes when it seeks a haven or refuge from the state to preserve itself. It speaks strong about freedom, rights, and the individual, but it is of course a front for capital, for private ownership and its control of resources, and for corporations that secure immense profits offshore."