GEORGE TOWN, CAYMAN ISLANDS — For the headquarters of more than 14,000 companies, Ugland House is a quiet place.
A few lawyers, accountants and secretaries wander into the five-story building each weekday morning, but by midafternoon the black marble lobby is about as busy as a bank on Sunday.
Ugland House is what's known as an "address of convenience" for many of the 70,000 U.S. and other foreign companies, limited partnerships and trusts that are based in this Caribbean locale.
"All offshore jurisdictions do is facilitate and ameliorate the conduct of global business," said Gus Pope, managing partner of law firm Maples & Calder, which occupies Ugland House and represents nonresident clients.
But in recent months, these "offshore" operations of U.S. companies have been under renewed scrutiny in Congress, where some lawmakers say the U.S. Treasury is losing millions of potential tax dollars.
Many U.S. firms have subsidiaries registered in the Cayman Islands. Big energy players such as El Paso Corp., Transocean Inc. and GlobalSantaFe Corp. have local subsidiaries. So do hotelier Marriott International Inc., aerospace giant Boeing Co. and food producers Sara Lee Corp. and Coca-Cola Co.
Most U.S. companies say they situate corporate units offshore for strategic, financial and tax reasons, and they make no attempt to hide them.
But a lingering taint from days when small islands were the refuge of tax evaders means that "anything that happens here is looked at more closely, because of the image of offshore," said Andy Stepaniuk, a Canadian and chairman of the Cayman chapter of the Alternative Investment Management Assn. He is also a partner with the local unit of KPMG International.
"The human capital is in the United States. How many people are making their living in the hedge fund industry in New York, paying income tax and purchasing goods and services?" Stepaniuk said of the benefits for the U.S. economy from the thousands of financial industry workers hired by companies with their offshore profits.
In all, according to the Cayman Islands Financial Services Assn., the 70,000 entities here have $1.4 trillion in assets in this "tax neutral" venue, if not so many employees. Most of them comprise only a post office box and a figurehead from a local law firm or consulting firm to represent them.
