Virgin Islands Economic Development Authority

The Virgin Islands Economic Development Authority is a semi-autonomous public corporation of the U.S. Virgin Islands, created under Title 29, section 1101 of the Virgin Islands Code, whose board, the Economic Development Commission, grants tax-incentive certificates to companies that locate in the territory. Through the commission and its predecessor, the Industrial Development Commission, it certified Jeffrey Epstein's Financial Trust Company from 1999 and his Southern Trust Company from 2013, and continued the benefits after his 2008 conviction and his 2010 registration as a sex offender in the territory. The future governor Albert Bryan chaired the authority while serving as Commissioner of Labor, the future congressional delegate Stacey Plaskett was its general counsel, and the attorney who helped Epstein buy Little St. James, Henry Smock, was long counsel to its board. A consultant retained by JPMorgan Chase put Epstein's total benefits at about 300 million dollars.¹²³

Structure and Legal Basis

The authority is a semi-autonomous territorial instrumentality, with the Economic Development Commission as its subsidiary tax-benefit board. Section 934 of the Internal Revenue Code provides that income tax owed to the Virgin Islands may not be reduced "by any law enacted in the Virgin Islands" except as to "income derived from sources within the Virgin Islands or income effectively connected with the conduct of a trade or business within the Virgin Islands." Beneficiaries apply, present their business at a public hearing, and receive a certificate setting the term, the exemptions and the employment, residency and charitable conditions they must meet; the authority's compliance staff then review annual reports.¹⁴⁵

The Epstein Certificates

Documents the authority released in February 2020 show that the Industrial Development Commission, the authority's predecessor, first granted tax benefits to Financial Trust Co., Inc. in 1999, in a certificate signed by its director, Frandelle Gerard, with a 90 percent exemption from income tax and 100 percent exemptions from gross-receipts and excise taxes. Kenneth Mapp, governor from 2015 to 2019, had earlier been an assistant director of the Industrial Development Commission. The certificate was amended in 2012 over the signature of Bryan as commission chairman. In January 2020 the authority's assistant chief executive, Wayne Biggs Jr., told the Virgin Islands Daily News that Epstein "was in the program before he was convicted of any sex crimes under Financial Trust. And he changed from Financial Trust to Southern Trust"; authority officials declined to disclose how much any of the commission's 72 beneficiary companies received each year.²⁶

On September 21, 2012 Epstein's accountant Harry Beller wired Southern Trust's 5,000 dollar application fee to the firm of the St. Thomas lawyer Erika Kellerhals, whose practice advised clients "on obtaining economic development incentives from the U.S. Virgin Islands Economic Development Commission." At the public hearing on November 15, 2012 Epstein and Kellerhals described Southern Trust as providing "cutting edge consulting services" in "biomedical and financial informatics," and no one asked about his conviction. The certificate, running from February 1, 2013 to January 31, 2023, was dated January 24, 2014 and signed by Bryan, then both chairman and Commissioner of Labor under Governor John de Jongh, whose wife, Cecile de Jongh, was office manager of Epstein's companies. Bryan and de Jongh both signed off on an extension of Southern Trust's benefits. Plaskett, the commission's general counsel from 2007 to 2014, had worked for Kellerhals. The territory later estimated that the Southern Trust certificate let Epstein avoid 80,576,236 dollars in taxes, and the authority's records put the incentives received by his companies between 2013 and 2019 at 144.9 million dollars.¹³⁵⁷⁸

In July 2016 Governor Mapp asked Epstein whether he would lend the territorial government 275 million dollars, and in the ensuing exchange wrote: "Coffee, maybe subject to your EDC certificate. If we did a pvt placement bond, a greater portion would be triple tax exempt."⁹

Compliance

The authority did not audit Financial Trust until 2008, nearly ten years after the original grant. The compliance officer Sandra Bess testified in May 2023 that her review consisted of checking that the summary figures in a beneficiary's annual report matched its supporting pages, and that no part of her job involved "reviewing the character of the people who are the owners of the companies receiving tax benefits." In January 2015 the authority's director of compliance requested an assessment of Southern Trust's business "in light of current media discussions surrounding a principal of Southern Trust Company"; the company kept its benefits.¹⁵

On July 10, 2019, four days after Epstein's arrest, the authority's spokeswoman Shanell Petersen advised its "Business Ambassador," Bryan's wife Yolanda Bryan, about two press inquiries concerning "Jeffrey Epstein being an active EDC Beneficiary," and a notation recommended "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," adding that "Informing them will allow them to prepare their PR team." The Business Ambassador post was created after Bryan took office in 2019. Smock took part in the authority's nine-step protocol for press inquiries after the arrest. In October 2019 the managing director, Margarita Benjamin, forwarded a New York Times reporter's questions to colleagues with the comment, "I personally think the questions are opening us up to public scrutiny."³⁵

Henry Smock

Smock, who assisted Epstein in the 1998 purchase of Little St. James, served for years as counsel to the authority's board and to the board of the University of the Virgin Islands. In an October 19, 2011 email to Epstein headed "UVI Park Directors," Cecile de Jongh profiled board candidates for the university's research and technology park, one of the incentive programs on which Kellerhals advised clients, noting of the university's president, "DO NOT KNOW HIM THAT WELL AND HE IS NEW TO THE VI," and of Smock, a former judge of the Territorial Court from 1987 to 1993, former chairman of the Law Revision Commission and former president of the Virgin Islands Bar Association: "FRIEND." According to FBI notes of a 2023 interview with the former Attorney General Denise George, Bryan told her to settle the territory's case against the Epstein estate for 80 million dollars and to "select Henry Smock" as mediator; Smock later represented Bryan in his 2023 divorce, the records of which were sealed at his request.³¹⁰

Aftermath

The estate settled the territory's case in November 2022 for more than 105 million dollars, returning "more than $80 million in economic development tax benefits that Epstein and his co-defendants fraudulently obtained." In the territory's suit against JPMorgan, the bank's consultant Carlyn Irwin reported that "the EDC did not investigate or question" Epstein's business claims and that "giving Mr. Epstein $300 million in benefits made no economic sense." As of June 2023 the territory had not amended its law to bar registered sex offenders from receiving certificates. Companies affiliated with Stephen Deckoff, who bought Little St. James and Great St. James from the estate in 2023, have held commission benefits since 2012.³⁵¹¹¹²