Economic Development Commission

The Economic Development Commission is the board of the Virgin Islands Economic Development Authority that grants tax-incentive certificates to companies operating in the U.S. Virgin Islands, trading large reductions in territorial income, gross-receipts, excise, and withholding taxes for local employment and investment. It certified Jeffrey Epstein's Financial Trust Company from 1999 and his Southern Trust Company from 2013, and his companies kept their benefits after his 2008 Florida conviction, his 2010 registration as a sex offender in the territory, and a January 2015 internal query about "current media discussions surrounding a principal of Southern Trust Company." The future governor Albert Bryan chaired the commission when it issued Southern Trust's certificate in January 2014, and the future congressional delegate Stacey Plaskett was its general counsel from 2007 to 2014. A consultant retained by JPMorgan Chase put Epstein's total benefits at about 300 million dollars.¹²³

Structure and the Incentive Program

The commission is a subsidiary of the Economic Development Authority, a semi-autonomous territorial instrumentality created and governed under Title 29, section 1101 of the Virgin Islands Code. Beneficiaries apply, present their business at a public hearing, and receive a certificate setting the term, the percentage exemptions, and the employment, residency, and charitable-giving conditions they must meet. The authority's compliance staff then review annual reports submitted by the certificate holders.¹²

Its general counsel from 2007 to 2014 was Stacey Plaskett, who had worked for the St. Thomas attorney Erika Kellerhals before her election as the territory's delegate to the U.S. House of Representatives. Kellerhals represented Epstein before the commission. The attorney Henry Smock, who assisted Epstein in the 1998 purchase of Little St. James, served for years as counsel to the authority's board. Plaskett, like the other officials named in the Epstein files, has denied wrongdoing.³

Financial Trust Company, 1999 to 2012

Epstein bought Little St. James in 1998 and incorporated Financial Trust Company in the territory on November 6, 1998. The commission granted it benefits beginning in 1999. The authority did not audit Financial Trust until 2008, nearly ten years after the original grant. Asked in a May 2023 deposition whether it would be unusual for a certificate holder to go nine years without a compliance report, the compliance officer Sandra Bess answered, "It is, should not be unusual but it maybe has happened in one or two cases." Financial Trust reported assets of 212 million dollars on its last public balance sheet, filed in 2012.¹²

Cecile de Jongh, the wife of Governor John de Jongh, was office manager of Financial Trust from 2007 and dealt with the authority on the company's compliance; Bess identified her as the company's "compliance person." When a Washington reporter asked Government House in 2012 whether she had helped the company obtain its benefits, she proposed a response to Epstein: "Cecile de Jongh currently works for Financial Trust Company in the capacity of office manager. She had nothing to do with Financial Trust Company receiving EDC tax benefits." Epstein wrote back, "I would simply state that you are an office manager," and she replied, "That's what John went with."²⁴⁵

Southern Trust Company, 2012 to 2019

Southern Trust was incorporated on November 18, 2011 as Financial Informatics, Inc., and renamed in September 2012; most of Epstein's territorial companies were created in 2011 and 2012, after his 2010 registration as a sex offender. It applied to the commission in October 2012. At a public hearing on November 15, 2012, Epstein and Kellerhals testified under oath that the company provided "cutting edge consulting services" in "biomedical and financial informatics." According to the hearing transcript, no one asked Epstein about his conviction or registration.¹²

The commission granted Southern Trust a ten-year package running from February 1, 2013 to January 31, 2023, with a 90 percent exemption from income taxes and 100 percent exemptions from gross-receipts, excise, and withholding taxes. The certificate is dated January 24, 2014 and signed by Bryan, as chairman, and Epstein, as president. That day Cecile de Jongh asked Epstein to match 15,000 dollars she had raised for her husband's final State of the Territory reception, and an hour later asked Epstein's accountant Richard Kahn to "prepare a check for $15,000 made payable to Governor's Special Events Fund." Bryan and Governor de Jongh both signed off on an extension of the Southern Trust benefits, and Bryan was serving as commission chairman and as the territory's Commissioner of Labor at the same time in 2013.¹²³

Between 2013 and 2019 Southern Trust employed thirteen people besides Epstein, eleven of them in administrative or support roles. The territory later alleged that its information-technology manager, reported as a Virgin Islands resident, held a Florida driver's license with a Miami address and served as Epstein's driver; that an "executive assistant" lived at 301 East 66th Street in Manhattan, a building Epstein's address book listed as an "Apt. for models"; and that another employee was represented by Kahn as an interior designer and a dentist. Southern Trust affirmed to the commission that it had no non-resident employees while employing non-residents, had no visible clients, and held no investments for others.¹

The Money

Southern Trust reported net income of 50.3 million dollars in 2013, 67.5 million in 2014, 52.8 million in 2015, 4.8 million in 2016, and 17.1 million in 2017, and about 184 million dollars in revenue for 2013 to 2017. Bank records showed that "virtually all" of its income came from a single source, which the territory's complaint did not name. "In all, the single source paid $158 million to Defendant Southern Trust Company from 2013 to 2017, which constitutes 85% of the total revenues reported by Southern Trust Company. These funds appear to have not been used to pay for informatics or datamining services." The money moved through other Epstein entities and personal accounts, with Darren Indyke as signatory on the company's primary account and Kahn as treasurer. An independent review commissioned by Apollo Global Management found that the Apollo co-founder Leon Black paid Epstein about 158 million dollars between 2012 and 2017 for tax and estate-planning advice.¹⁶

For 2013 through 2017 Southern Trust received tax exemptions of 73.6 million dollars, and after it elected S-corporation status Epstein's personal income-tax exemption for the period was 71.3 million dollars. Including gross-receipts taxes, the territory estimated that the certificate allowed Epstein to avoid 80,576,236 dollars in taxes. Southern Trust had assets of about 391 million dollars by 2015. The authority's records show Epstein's companies received 144.9 million dollars in incentives between 2013 and 2019 alone, according to filings by the Virgin Islands Department of Justice.¹⁵

Oversight

Bess testified that compliance review consisted of checking that the figures on the summary page of a beneficiary's annual report matched the supporting pages, "many of which were authored by the company itself": "I would look at the presentation and what was presented at the back and ensure that the numbers total." Asked whether any part of her job involved "reviewing the character of the people who are the owners of the companies receiving tax benefits," she said no, and said such review "would usually come from the application side."²

In January 2015 the authority's director of compliance requested an assessment of the impact on Southern Trust's business "in light of current media discussions surrounding a principal of Southern Trust Company." Southern Trust kept its benefits for five more years. On July 10, 2019, four days after Epstein's arrest in New Jersey, authority spokeswoman Shanell Petersen advised the authority's "Business Ambassador," Governor Bryan's wife Yolanda Bryan, about two press inquiries concerning "Jeffrey Epstein being an active EDC Beneficiary": "I recommend contacting Southern Trust and IYG (companies which he has ownership interest) to update them that we have provided public information based on the Sunshine Act... Informing them will allow them to prepare their PR team." Smock was part of the authority's nine-step protocol for answering press inquiries after the arrest. In October 2019, when a New York Times reporter asked about oversight of Epstein's companies, managing director Margarita Benjamin forwarded the query to colleagues: "I personally think the questions are opening us up to public scrutiny."²³

Litigation and Aftermath

In its January 2020 civil action against the Epstein estate, the territory alleged that Southern Trust fraudulently induced the commission to grant its benefits. The November 2022 settlement returned "more than $80 million in economic development tax benefits that Epstein and his co-defendants fraudulently obtained." In the territory's 2022 suit against JPMorgan, the bank's consultant Carlyn Irwin found that "the EDC did not investigate or question" Epstein's claims, including "computer generated solutions for medical problems"; that the territory, expecting 1.30 dollars in economic benefit for each dollar of tax benefit, received a return of pennies on the dollar; and that "giving Mr. Epstein $300 million in benefits made no economic sense." Irwin also found that Epstein "funneled a $15,000 donation from Southern Trust to Ms. Plaskett and a $10,000 donation to the Mapp-Potter Inaugural committee." Plaskett acknowledged in a May 2023 deposition receiving about 30,000 dollars in campaign contributions from Epstein and his employees.³⁵⁷

The Virgin Islands Department of Justice answered JPMorgan's account of the program through its spokesperson Venetia Velazquez, who said that "the USVI identified and addressed deficiencies in Southern Trust's and Financial Trust's compliance with the federal tax incentive program." As of June 2023 the territory had not amended its law to bar registered sex offenders from obtaining incentive certificates. Companies affiliated with the investor Stephen Deckoff, who bought Little St. James and Great St. James from the Epstein estate in 2023, have held commission benefits since 2012.²⁵⁸