The venerable Washington Post, the newspaper of Watergate and Woodward and Bernstein, has been criticised by the Cayman Islands government and senior figures in the local financial services sector over a recent article that suggested that Cayman was the world-leader in providing a haven to US tax cheats.
Although international newspaper articles suggesting Cayman harbours tax criminals and money launderers are nothing new, that the claims were made in the Post, one of the most respected and influential publications in the world, prompted an unusually strong official response from the Cayman Islands.
The article, titled "You paid your taxes? Sucker", contained what Cayman regarded as significant inaccuracies, persuading officials and executives to take the step of writing in complaint to the editor of the newspaper, Leonard Downie Jr.
The disputed article was written for the Post by Tom Cardomone, managing director of the Global Financial Integrity Program at the Centre for International Policy (CIP), which draws attention to what it regards as evidence of illegal financial flows. The independent CIP, for its part, was established as a human rights advocate in the wake of the Vietnam War and now campaigns on a wide range of US foreign policy matters.
Cardomone's primary point was that the value of financial assets that American individuals and corporations had placed in offshore financial centres like Cayman, the Bahamas, Switzerland and the Channel Islands had grown substantially between December 2003 and December 2006.
The article also claimed that by fa r the largest increase came in the Cayman Islands, where, the article said, the value of US-owned financial assets had grown by two-thirds in the three-year period, jumping from US$490 billion at the end of 2003 to US$822 billion by the end 2006.
The Bahamas (US$193 billion at the end of 2006), Switzerland (US$112 billion), Ireland (US$63 billion) and other jurisdictions enjoyed similar growth rates, albeit with far smaller values in comparison.
The article suggested that Cayman's "secrecy laws" and general regulatory environment permitted financial scandals such as those involving Enron and the Wyly brothers. It also claimed that companies could easily be set up in offshore centres on the Internet, "with just a few clicks of a mouse".
In response to the article, two separate and equally withering letters were dispatched from Cayman, one from Alden McLaughlin, the Cabinet minister responsible for the government's financial services policy, and the other from the Cayman Islands Financial Services Association (CIFSA), which challenges negative sub-Grisham perceptions of Cayman where they persist around the world.
Both letters made the same broad point, that Cayman's strong growth as a financial centre was founded on legitimate business, rather than tax crimes.
McLaughlin argued that the law enforcement, regulatory and tax information exchange channels between the Cayman Islands - some dating back 20 years - offered "no protection for Americans who commit tax crimes".
He pointed out that company formulation in the Cayman Islands was a regulated activity, requiring practitioners to comply with significant statutory obligations for due diligence - including collection of beneficial ownership information - reporting of suspicious activity and provision of assistance to authorities.
"A URL [uniform resource locator] and credit card will get you nowhere," the letter stated.
"The bottom line," McLaughlin went on, "is that the presence, not the absence, of laws and regulations has contributed to the Cayman Islands" growth as an institutionally-focused, specialised financial services centre over the past 40 years. We make no apologies for this growth or for the global economy it serves."
CIFSA's letter, co-signed by the association's board of directors, made a similar case, stressing that while "secrecy laws" did not exist in the Cayman Islands, many laws punishing tax crimes did.
"As an industry body, we can attest to the fact that the existence of world-class financial services professionals, a modern infrastructure and international standards of regulation are the reasons why the Cayman Islands continues to be a world leader in most areas of international financial services - not the attraction of evading taxes or money laundering," CIFSA said.
"Mr Cardomone's reference to abuse of the Cayman Islands by companies such as Enron ignores many relevant facts that would illustrate that the reasons for that debacle lie elsewhere and is no more than yet another opportunity to dramatise for readers' entertainment with overused phrases such as 'tax havens' and 'secrecy laws'."