Rummaging through the records of offshore havens turns up a fairly predictable list of assets — real estate, cash, multinational companies shifting earnings to low tax jurisdictions, hidden masterpieces by Picasso and other artists, antique cars, yachts and planes.
But musical memories? The songs that you danced to in your youth or at your son's or daughter's wedding? The summertime hit you sang driving down backroads or the reggae tune blasting at the beach? What are they doing offshore?
They're there for the same reason as other assets — tax advantages. Skipping taxes helps increase earnings from intellectual property — patents, copyrights, trademarks and trade secrets — as well as other holdings.
Files from the Appleby law firm office on the island of Jersey, in the English Channel, include a cache of music publishing rights, a stream of royalties to be collected for music produced by artists that included John Denver of Country Roads fame, Duke Ellington, Chubby Checker and Sheryl Crow.
It's a music catalogue, held until 2014 by a Jersey-registered company and originally managed by another company registered in Ireland. Why Jersey? Its standard corporate tax rate is zero.
Music publishing rights have retained value despite turmoil in the music industry that has eroded the worth of related rights, creating steep declines in royalties for sales of digital music or albums.
If the owner plays it right, music catalogues can be real money-makers.
"The music publishing industry generates around $6 billion [US] a year globally," according to a 2015 analysis in the Berklee College of Music's Music Business Journal.
Every time a song is used in a movie or on TV, in a video game, on the internet or sold as sheet music, the owners of those rights cash in.
There is "a global structure in the music industry with national laws that are very different from country to country," explains Luiz Augusto Buff, a Brazilian specialist on the industry. "But the users are global so that tends to make sense, with that much international transactions happening, to try to find a more efficient strategy tax-wise."
The Trammps' 1976 Disco Inferno was the Jersey catalogue's most profitable song in 2009 and 2010, producing royalties of more than $600,000.
The owner of the catalogue-owning Jersey company, First State Media Works Fund I, attracted investment from pension plans in North America, Europe and Australia. It created the Jersey subsidiary FS Media Holding Company (Jersey) Ltd. as an investment vehicle, which was managed by First State Media Group (Ireland) Ltd.(FSMG) acting as a publisher — the equivalent of a label for songwriters.
The steady income that can be drawn from a music catalogue is a lure for institutional investors.
"There is a burgeoning market for music catalogues among institutional investors who are looking for fairly reliable revenues in the future," said Chris Hayes, an economist at the research firm Enders Analysis, which specializes in media, entertainment and telecommunications.
Steve McMellon, former managing director of FSMG and now director of Southern Crossroads Music, did not respond to ICIJ's repeated requests for comment.
The subsidiary was set up in 2007 specifically to acquire music rights, buying a collection of songs from DreamWorks Music Publishing.
In July 2009, Crow sold the rights to 153 songs written between 1993 and 2008 to the Jersey company for about $14 million. The package included chart-topping hits All I Wanna Do and My Favorite Mistake.
Under this arrangement, Crow would still make the songwriter's share of the rights whenever her songs were performed at a concert or played in a gym or salon, but the company would take on the task of promoting her works and the rest of the royalty stream.
In time the catalogue owned by First Media grew to a collection of 26,000 songs from the last seven decades.
But changes of ownership and management of the catalogue in the years since 2014 have resulted in a decline in the value of many of the rights it held as less effort was put into marketing the songs.
In April 2010, FSMG, the Irish company managing the catalogue, was acquired by the U.K. media company Chrysalis PLC for about $16.8 million. The sale did not include the catalogue. The combined companies were acquired by Bertelsmann Music Group (BMG) less than a year later for $168.6 million. Steve Redmond, head of communications for BMG, said that the company had been offered the catalogue but did not acquire it.
"We merely inherited a company which had a deal to manage those assets on behalf of the owners."
The Jersey company continued to make money on royalties from Ellington's Day Dream, Bob Marley's Get Up Stand Up, Avril Lavigne's Nobody's Home, Kelly Clarkson's Because of You and others. From 2010 through 2012, it made on average $4.6 million a year in royalties.
And, in a 2013 overview written for its proposed sale, the catalogue was described as "one of the larger aggregations of copyrights to have been recently available on the market."
The review of the fund behind the music catalogue by the accounting firm KPMG also noted its tax advantages. In the first half of 2012, 68 per cent of the royalties earned by the publisher after paying writers, copyright collection societies, such as ASCAP and BMI, commissions and charges, came from the United States.
'We have assumed the tax structure position of the company as an offshore tax structure whereby no tax is payable on income generated by the catalogue' — KPMG
Yet, according to KPMG, the fund, an English limited partnership, paid no taxes in the United Kingdom and was not subject to U.S. federal income tax. Nor was there withholding tax associated with the catalogue.
"We have assumed the tax structure position of the company as an offshore tax structure whereby no tax is payable on income generated by the catalogue," the accounting firm observed.
KPMG declined to comment on details of these reports but underlined that "they were prepared not in connection with tax, but as a basis for the valuation of certain assets to be included in the company's financial statements."
Despite those savings, things weren't looking good for the catalogue sale. Making money also requires good marketing.
An even earlier analysis by accounting firm PwC in 2011 found that the portfolio dropped more than half of its value in a single year — to $75 million in 2010 from $153 million in 2009. The 2013 KPMG analysis confirmed a decline in value of the catalogue's assets, underlining that the biggest drop came from Crow's tunes, which suffered a 24 per cent downturn.
"Changes in ownership … over the past three years have led to a lack of marketing of the catalogue and the copyrights have been under-exploited as a result," according to a 2013 "teaser" to attract investors.
Documents show the fund was struggling to pay back $19 million still owed to the Royal Bank of Scotland on a loan taken out in 2009. The catalogue ended up being sold in 2014 to Reservoir Media Management Inc., which declined to comment. The company, an independent music publisher based in New York City but incorporated in Delaware, acquired it for $38 million — about a quarter of its value five years before.
It sold for a song.
CBC is part of the International Consortium of Investigative Journalists that produced this story but did not independently verify the specific allegations.