Paradise Papers: Duke has ‘minute’ share in offshore blocker corporation, official says

Paradise Papers: Duke has ‘minute’ share in offshore blocker corporation, official says

Following the release of the Paradise Papers, an official said Duke's investments tied to the Brazilian iron mining industry are "minute."

Above: Members of Duke’s Advisory Committee on Investment Responsibility during its annual meeting following the release of the Paradise Papers. Photo by Julia Donheiser.

Following a document leak tying Duke’s endowment investments to iron mining in Brazil, an official said the university only has “minute” holdings in an offshore blocker corporation — which is tied to an industry known for its human and environmental rights violations.

“We have an extremely small position at Ferrous Resources. It was started in 2007, and has been reducing very substantially to the point where we have a minute part in it,” said Lawrence Baxter, chair of the Advisory Committee on Investment Responsibility (ACIR) at its annual meeting Tuesday. “And I don’t mean small, I mean minute.”

Ferrous is a company based in the Brazilian Isle of Man. As first reported by the New York Times in its coverage of the “Paradise Papers,” Duke invested in Ferrous through a blocker corporation — an offshore feeder corporation that allows tax exempt investors, such as private universities, to invest in hedge funds or private equity while also avoiding U.S. income tax.

Although the meeting was not a direct reaction to the Paradise Papers, students pushed for more transparency both in the university’s investments and in making such meetings more accessible. The meeting took place during an off-campus basketball game against Michigan State University.

“What are the future plans of this committee to help improve transparency so we don’t have to get our information about the things Duke is doing through leaks? What is the plan going forward with Ferrous Resources?” said Syd Roberts, chair of the Duke Chronicle editorial board.

Baxter said that when it comes to whether the mining is reprehensible, “I’m not sure I would jump to the answer that it is, but you know more about that than I do.” He also said he only became aware of Duke’s involvement with Ferrous as recently as Roberts.

However, human and environmental rights violations in Brazil’s mining industry are well documented by both International Federation for Human Rights and United Nations.

The university does not make its investments public for multiple reasons, Baxter said. First, public investments would mean a lot of pushback from students in a capacity that ACIR wouldn’t be able to handle.

Duke makes many investments through hedge funds or private equity. Many of these groups would not be willing to work with Duke were such information to be publicly available. Also, the university’s investments through such corporations are constantly changing, and it would be impractical for Duke to keep a publicly updated list of where its endowment is invested, Baxter said.

Dartmouth is Duke’s only peer institution that publicly shares a list of its direct investments, Baxter said. It does not share information about investments through hedge funds, private equity or blocker corporations.

This meeting was the second largest in recent history, according to the ACIR board, following only a meeting when investments in Darfur were being questioned. Fewer than half of the seats in the room were filled.

Baxter said FCIR would work on both holding more meetings and making them more accessible. The minutes for the meeting will be posted on the ACIR website in coming days.

Julia Donheiser
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