Bloomberg – At the Deep End Bar, a poolside grill in St. Croix just steps from the Green Cay Marina, a handful of money managers and investors sip Cruzan rum from a local distillery and reach forcomplimentary bug repellent as dusk brings out the no-see-ums.
Warren Mosler, who opened a hedge fund firm in St. Croix five years ago, is having what’s become the usual conversation with people who were lured to the U.S. Virgin Islands in 2001 by the prospect of legally cutting their tax bill by 90 percent. Almost half of the 49 funds that set up shop in the islands have fled in the past two years.
Mosler complains that hedge funds were chased away by federal tax law changes and an Internal Revenue Service that says it suspects rampant fraud by those that signed up for the tax incentive.
“It’s kind of like what happens to a community when a big company or an army base pulls out but on a smaller scale,” says Mosler, a founding member and manager of the III Funds, which manages $3.5 billion. He now advises the fund in Christiansted, one of two Danish colonial settlements on St. Croix.
He’s surveying the sparse happy-hour crowd. “Unfortunately, the fear is causing a case of running away from the police when you’re not guilty,” he says.
