South Dakota's role as a destination for wealthy people to store billions of dollars in trust funds — revealed in greater detail this week by a massive document trove called the Pandora Papers — is no accident.
For decades, South Dakota has sought to maintain its stature as the premier trust jurisdiction in the United States. One task force made up of trust industry officials crafts a bill every year meant to keep the state’s trust laws favorable.
Republican state Sen. Tim Johns sponsored the annual bill last session. He describes members of the committee.
“Recognized as experts in their field. They are appointed by our governor,” Johns said during a Senate Commerce and Energy committee meeting on Jan. 26. “This body has been assembled with the goal of establishing and maintaining South Dakota’s stature as the premier trust jurisdiction in the United States.”
Johns did not immediately return requests for comment Monday.
The task force meets periodically and does not publicly advertise its meeting. Members look at changes to trust law in federal law, other states and in the courts. It provides the Governor with an annual report detailing its recommendations, by November 1 each year.
The results are 105 independent trust companies in South Dakota, as well as state-chartered banks employing about 500 people.
Republican State Sen. Lee Schoenbeck said those jobs are important to South Dakota, and he wants to keep the trust industry here despite criticism generated by the Pandora Papers.
“Or, as opposed to hiding it in Granada or Cancun or somewhere?” Schoenbeck said. “Those people that are throwing those rocks all the time—half of them want the business moved to their states. The other half just like to throw rocks.”
According to new reporting this week from the Washington Post and the International Consortium of Investigative Journalists, South Dakota is the go-to state for financial secrecy.
One such trust holds the personal wealth and company shares of family members of the former vice president of the Dominican Republic, who once led one of the largest sugar producers in the country. The Washington Post reports that company is accused of human rights and labor abuses, including bulldozing homes of impoverished families to expand plantations.
“We’re playing with the big boys. They’re certainly not as innocent as the trust industry certainly likes to portray itself as being," said former Democratic state lawmaker Susan Wismer.
For years in the statehouse, Wismer was vocal against the trust industry and the routine bill that came every session. She said the trust industry is complicated, but the presentation by attorneys from the task force during committee meetings is simplistic.
“Legislators do not have a clue what it is that they are really voting on other than that these attorneys that deal with big money are telling them that it’s good for South Dakota’s economy to do this," Wismer says.
The Pandora Papers document trusts in South Dakota have more than quadrupled over the past decade to $360 billion in assets. That’s an increase of $100 billion in the last three years.
