Chapter 8

Elsa and Lara met me at the airport and took me home. It was good to be back! I couldn’t wait to get out of my winter clothes and into something cooler to wear. Getting out of my clothes was no problem, Lara helped. There was a delay however before I put on my cooler clothes. Lara and I both enjoyed the delay!

I kicked back and relaxed for the rest of the day. I told myself I needed to acclimate myself to the warmer weather. At dinner that night, I had the opportunity to dine on our new cook’s culinary delights. She had still been in the process of setting up the kitchen and obtaining the food, herbs, and spices necessary to prepare the dishes she was known for when I left.

The next day, I stopped by Smith-Adler Enterprises to let Casey know I was back. I let him know that I intended to work full time as the CEO until I had to return to the States, and he gave me a status briefing.

I discussed Harry and Sam’s concerns with Elsa. She immediately set up a conference call with them and explained how she intended to utilize their expertise after the reincorporation was complete. She planned for them to represent her Cayman corporation’s interests in the US. I knew Elsa planned to expand the US businesses over the next couple of years, so the expansion would mean more business for Harry and Sam than they were currently handling.

The reincorporation of the companies was almost complete ... other than the California companies. Elsa and I applied for citizenship in the Cayman Islands and it was granted to us the following week. We would be able to retain our US citizenship.

We also took care of our banking. My Pueblo checking account was stable at about a hundred thousand dollars. Elsa’s bank balance was increasing due to the profits from her businesses being deposited to her Pueblo account. Elsa made arrangements for future deposits of the profits to be made to her Cayman checking account. Sam told her what he calculated as her income tax for the year, and she sent an interim payment for that amount to the IRS. She then transferred the excess funds in her Pueblo account to her Cayman checking account. Excess being defined as the funds she didn’t need to meet her day-to-day expenses in the US.

Elsa and I discussed her Pueblo checking account. I suggested that she talk with Sam to find out if she needed to keep it open after her house was sold and the reincorporation was complete. She called Sam and Sam told her she may need it in the future so it would be advisable to keep it open with a balance of a couple thousand dollars. She agreed for now.

Once the reincorporation of a US company was complete, Elsa’s subsidiary corporation would have to pay corporate income tax to the IRS and to the State in which the corporation’s assets were located. However, Elsa’s subsidiary corporations were owned and managed by Smith-Adler Enterprises. Smith-Adler Enterprises charged its subsidiary corporations for the support they provided to the subsidiary corporations at a very high hourly rate. The subsidiary corporations added their management costs for managing their US assets, which were also high, to Smith-Adler Enterprises’ management costs. The net result was, a significant reduction in the income tax the subsidiary corporations paid to the IRS and States in respect to the taxes Elsa’s companies had paid prior to the reincorporation.

The last thing of interest that happened before I returned to the US to sign dissolution papers was that Elsa made a new Will and registered it in the Cayman Islands. Except for a few relatively minor bequests that totaled less than twenty million US dollars, she left her entire estate to me.

Smith-Adler Enterprises and all of its subsidiaries were Cayman corporations. The Will was made by a Cayman citizen and filed in the Cayman Islands. The Will would be probated here in the Caymans, and there would be no inheritance tax paid to the US and Cayman Governments. Elsa would get what she wanted without violating any of the US’s inheritance laws.

However as US citizens, we were required to pay income taxes to the IRS even though we resided in the Caymans and earned our income there. Since I didn’t qualify for any significant itemized tax deductions, after I inherited Elsa’s estate my personal income tax bill would be immense. I would be left with a choice of paying the taxes, hiding my income, reinvesting the corporation’s income in the corporation, or surrendering my US citizenship. That was a decision for another day.

However on further consideration, I found that I liked the idea of reinvesting the profits in the corporation. It seemed to be the best of the four options, and I would only have to pay taxes on my salary and dividends. I was a very wealthy man and already had more money than I would ever need to support myself. If I wanted to avoid paying personal income taxes to the US, then I could reduce my salary to something like a dollar a month and reduce my corporate stock dividends to zero. I liked the idea of paying no tax and would have to check with Sam to ensure the approach would accomplish what I wanted without violating any US laws. If it was legal to do so, I would suggest that Elsa start reinvesting the profits in the corporation now, as neither of us needed the income. It would also prevent the IRS from charging me with attempting to avoid income taxes, which they would if I did it after Elsa’s death.

As the CEO of Smith-Adler Enterprises, I was happy with the progress that was being made. Elsa and I discussed what to do with the subsidiary corporation’s profits and we decided reinvesting them in the subsidiary corporations was the best thing to do.

Elsa said the IRS was in for a shock! She was all smiles when she said that to me. According to Sam, Elsa’s companies were physically located in the US, but they were incorporated in the Cayman Islands. So after being reincorporated, it was the subsidiary corporations that were required to pay the tax on the companies’ profits. By the subsidiary corporations reinvesting all of their profits in themselves, the subsidiary corporations would not owe income taxes to the IRS. When I realized how Elsa had structured her corporations to cut out the IRS, I had to smile. The money reinvested in the subsidiary corporations could be used to purchase other companies in the US or elsewhere. Those companies would become assets of the subsidiary Cayman corporations. The profits from the new assets would be reinvested in the subsidiary companies. The IRS would not receive further tax dollars from Elsa’s businesses.

When I started working as a full-time CEO at Smith-Adler Enterprises, I learned that Elsa foresaw two new problems, and had resolved them both by creating another subsidiary corporation: Ocean Business Loans.

Elsa knew that the exorbitant management charges Smith-Adler Enterprises levied on its subsidiary corporations for administrative services would result in very high profits. She used the corporation’s profits and the money she received from selling some of the bullion to fund Ocean Business Loans.

Elsa also knew that the profit each subsidiary made would not be sufficient for it to purchase additional assets in the US without additional capital. They would need a business loan. Ocean Business Loans loaned the subsidiaries the money they needed to acquire the assets and charged a twenty percent interest rate. Needless to say, Ocean Business Loans made immense profits for Smith-Adler Enterprises and Elsa reinvested the profits in Ocean Business Loans and in other subsidiaries that she created. One of the subsidiaries she created was a small chain of authentic Tex-Mex restaurants. Elsa and I loved the Tex-Mex style of Mexican food.

A little over a month after I returned to the Caymans, Sam called to let me know it was time for me to sign the dissolution papers for the remainder of Elsa’s companies, except for the California companies. Two days later, I flew to Houston, Texas to begin the process of signing the papers.

When I finished signing the paperwork in New England, I returned to Pueblo to meet with Harry and Sam. After checking into my hotel, I called them and we agreed to meet the following morning. During the meeting, I turned the copies of the dissolution documents over to them, as I had done previously. Then we discussed the status of the reincorporation process. Once they finished with what they had to do with the documents, they would forward them to Smith-Adler Enterprises.

Sam said, “Paul, we had to modify the schedule for completing the reincorporation of the California companies. Based on the speed the Patent Office has been working at, we believe it will be a minimum of another four months before all of patents have been transferred to Smith-Adler Enterprises. During that period, the companies will continue the reincorporation process. We expect their part of the effort will be finished before all of the patents have been transferred. We will notify you when that has happened, so you can return to California and sign all of the dissolution papers. Once you do that, all of Elsa’s companies will be incorporated in the Caymans and owned by Smith-Adler Enterprises.”

“Thank you, Sam. I know Elsa wants to complete the process as soon as possible. This long of a delay will disappoint her, but I know she expected a delay from the conversations we’ve had.”

We completed our meeting, and I called Elsa’s real estate agent. While I had been in New England, she had contacted Elsa about an offer she had received for the house. Using the information provided to her, Elsa had a background investigation done on the potential buyers. She learned they were a young couple that would be getting married next month, they were both employed by stable reputable companies, and they were having problems arranging for a loan at a reasonable interest rate. Elsa felt they were her ideal buyers. I asked the real estate agent to arrange a meeting between us, the couple, and their agent for tomorrow morning. She called my hotel ten minutes later to let me know the meeting was scheduled for ten o’clock.

I arrived at the real estate office well before the meeting and briefed Elsa’s agent on how she was to conduct the meeting and what would take place during the meeting. The couple and their agent arrived on time, and we began the meeting after introductions had been made.

Elsa’s agent said, “I am happy to tell you that the property owner has rejected your offer, and Mister Adler will explain why.”

The couple and their agent were surprised by Elisa’s agent being happy about rejecting their offer.

I said, “The current owner — Missus Elsa Smith — is an extremely wealthy woman. She does not need the profit that selling her home at market value would provide to her. Instead, Missus Smith wants the home sold to a young couple who are just starting their lives together at a price they can easily afford. To ensure that the proper couple buys her home, she took several actions.

“First, the home should appraise at about five hundred thousand dollars, so she set a price of seven hundred and fifty thousand dollars on the property. She knew no one in their right mind would agree to that price, but it gave her control over who she would allow to buy her home.

“Second, she knew people would submit offers at or less than the fair market value of the home. Before putting the property on the market, she had explained the type of couple she wanted to buy the house to her agent. When an offer is submitted on the property, Missus Smith is told if the potential buyers appear to be the type of people she wants to own her home. If they are, Missus Smith conducts a background investigation to ensure they are the type of buyer she is looking for.

“Congratulations, your background investigation showed you are the type of buyer Missus Smith wants. That is why she rejected your offer. Missus Smith has taken the liberty of having her agent prepare an offer letter for you, and all you have to do is sign it.

“The sale price is to be one hundred thousand dollars. Your background investigation showed you were having trouble locating suitable financing. Missus Smith has agreed to extend a loan to you for the full purchase price at one-half of one percent interest. There is one stipulation. That is, you cannot sell the house for ten years without her permission. Missus Smith is quite elderly and she doubts she will live that long. If she passes away before the ten-year period expires, I will inherit the loan and you still will not be able to sell the home without my permission. All of this will be defined in the contract you will sign at Closing. I handed the offer letter to their agent, and he reviewed it.

He said, “Everything is in order. I recommend that you sign the letter.”

They signed and dated the letter and then he handed it to me. I signed as Elsa’s agent accepting their offer and handed it to Elsa’s agent. I don’t know who was shocked the most by what had just happened, the couple or their agent. This type of deal was a fairy tale that people dream about knowing it will never happen.

Elsa’s agent looked at the other agent and said, “Missus Smith has authorized me to tell you that she will pay the standard commission rates, as if the sale price was five hundred thousand. She did not think it was right for us to suffer financially because of her generosity.

“I will submit the necessary papers to the Title Company. You can expect the closing to occur in about three weeks if there are no problems with the title.”

I could see the couple were over their initial shock and were just starting to show their excitement at getting a dream deal on the house. Their agent was happy that he wouldn’t lose part of his commission due to the low sale price. I offered to take everyone to lunch and they accepted.

During lunch the young man buying the house said, “We are ecstatic at being able to buy the house at such a low price. Are you sure this won’t harm Missus Smith financially?”

I smiled at him and said, “Missus Smith has businesses and investments that are worth a couple of billion dollars.”

That piece of information surprised everyone at the table. As we were finishing lunch, I said, “When we leave, I want the two of you to follow me out to the house. The house has a valuable feature that was not listed in the property description that you need to be aware of. Missus Smith felt you may not want this feature to be known to the general public, so she did not put it in the description. I will show it to you when we get there.”

When we got to the house, I took them down to the basement, and showed them how to open the concealed door that led to the shelter and how to turn on the lights and ventilation fans.

After we walked through the tunnel and reached the shelter, I said, “Missus Smith isn’t sure how you will use this shelter. Her husband used it as a private workroom. It would make a good storage room for your valuables. It could also be used as a safe room where you could hide if someone was trying to break into your home. If you choose to use it for that purpose, I suggest you stock the room with enough food and water for a short stay and install some comfortable furniture. Cell phones won’t receive a signal when you are in the shelter, so it would be a good idea to install a telephone extension so you can talk with each other if one of you is in the house, or so you can call for help if you are hiding here in the shelter.

When you are not home, the house will be vulnerable to thieves. You could install a video monitoring system here in the shelter with cameras inside and outside of the house. The system would allow you to record and observe what is happening in the house and the surrounding area. If you do that, I recommend that you post the necessary notices, so the recordings can be used to prosecute anyone you file charges against.”

When we were through, I locked up the house and returned to my hotel. I had finished everything I had to do during this trip, and I was looking forward to returning to the Caymans. I had a charter flying out in the morning. I left my car and keys with Harry and he gave me a ride to the airport.

After I got home, Elsa and I sat down in my home office and shut the door. We wanted to have a private discussion about the tasks she had asked me to do.

“Paul, I asked you to do three tasks for me.

“The first task was to help me dispose of the bullion that Hans and I concealed in our bomb shelter. You completed your part of that task by recasting the ingots. My contact divided the bullion into six lots. A couple of months ago, he sold the first lot, and a little over thirty two million US dollars was wired to my checking account. I transferred the money into a new business checking account and used the funds as the initial funding to create Ocean Business Loans. As he sells the remaining lots of bullion, part of the funds I receive will be used as additional investment capital for Ocean Business Loans and I will use the rest of the funds to create additional subsidiaries.

The second task was to use the proceeds from my European businesses to aid those harmed by the Nazi Party. When you helped me create the charitable trust, you completed all aspects of the second task I asked of you.

The final task was to return the stolen property that is still hidden in Europe to the rightful owners. Have you given any consideration to how that task can be done?”

“I thought about it some, Elsa, but not much. I will locate an organization that deals with the recovery of stolen items and give them one of the packets. I will notify the media about them doing the task, and I will follow the reports of how they accomplish the task. If I find their approach and the results satisfactory, I will turn over the remaining eight packets to them.”

“That sounds like a reasonable approach, Paul. However, you will encounter the same problems that Hans and I had. Organizations like the Monuments Men that used to perform the task of returning Nazi war loot to the proper owners are no longer in operation.”

“Oh Shit! I don’t know how, Elsa, but I’ll take care of that task for you as soon as I can find a safe way to do it.”

“That’s okay, Paul. We have enough time to devise a plan for accomplishing that before I die. We can talk about that later. Remember, the only sure way to keep this a secret is to not tell anyone, not even Lara, about what you are doing.”

A lot has happened in the past three and a half years. We finished the reincorporation. Smith-Adler Enterprises is now a stable company, and we are having our subsidiary corporations reinvest their profits in themselves. The profits are being used to expand the corporations and to provide their employees with higher salaries and better benefits. Three of the subsidiaries purchased new businesses and are upgrading all of their US equipment and facilities. The other subsidiaries are upgrading their US equipment and facilities, and they have plans for purchasing new companies. We also created a new subsidiary corporation, which will be managed by a new Division.

In the US, the people raising beef, chickens, pigs, and other animals for sale to the companies that process the animals and sell the meat to the distribution chains were having a problem making a reasonable profit. A few were actually losing money.

Our analysts investigated the situation and recommended that we go into the meat packing industry. Their financial projections showed a typical business’s financials, and how the cost of doing business could be minimized. This would allow them to pay their suppliers higher prices, and make the same or slightly higher profits. A subsequent study proved their projections to be accurate.

We looked for and purchased an older meat packing plant that was in a good location and badly in need of an equipment upgrade. The owners of the plant had died, and following their parents’ death, their children had taken the profits out of the business without making any equipment upgrades. The existing equipment was inefficient and frequently broke down. Because of their poor management practices, the owners’ children couldn’t get a loan for upgrading their equipment. Because of their foolishness, we were able to buy the facility at an extremely low price.

We continued doing business with the old equipment while we made plans for gutting and expanding the building and installing new equipment. The building’s expansion would allow us to add additional meat processing lines, so we could simultaneously process beef, pork, and poultry. We installed the best and most efficient equipment that money could buy, and we completed the upgrade in a little over nine months, a year ago. The business was now providing us with a nice profit that was projected to gradually increase over the next few years. The new subsidiary corporation was already looking around for another plant to buy.

Lara and I married six months after I signed the final corporate dissolution papers, and we now have a beautiful daughter, Cara. Lara is pregnant again and we expect her to deliver us a son in six months. Grandma Elsa dotes over Cara all the time, and she has become a very precocious young lady. Lara and I say spoiled, and Elsa just tells us it is never too early to begin teaching your children about the finer things in life. Personally, I don’t see candy, cookies, and ice cream as the finer things in life, even if Cara does like them.