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Porn, Tax Dodging and Exploitation
In 2012, one of Irelandâs leading law firms, Arthur Cox, helped to bring the worldâs largest pornography company, Manwin, to Dublin. It was an extraordinary move for a firm that is one of the most respectable in Ireland.
Arthur Cox has been linked to the political elite since its very foundation. The company was started in 1920 in the maelstrom of the Irish Revolution when tens of thousands took up arms against the British Empire. Its founder, âold man Arthurâ, had little interest in such subversive activity, but had an eye on securing a privileged position within the new state. Schooled at the exclusive Belvedere College by the Jesuits, he mixed in the social circles of conservative nationalists, and when they took power, Cox knew that his day had come.
In the words of his admiring biographer, âperhaps no individual outside the cabinet benefitted more from this shift than Arthur Coxâ.1 Legal contracts, paid from the Free Stateâs coffers, soon came his way, but so too did commissions from foreign firms eager to have an inside track on the newly independent Irish regime. One significant detail illustrates how embedded Arthur Cox was among the âBelvedere boysâ who came in to run the state. In 1940, he married Brigid OâHiggins, widow of the assassinated Free State Justice Minister, Kevin OâHiggins. OâHiggins had been the strong man inside that early regime and had secured his position by ordering reprisal executions on anti-Treaty republicans during the Irish Civil War. For the rest of his life, Cox referred to his new wife as âMrs OâHigginsâ, as in, for example, âItâs time Mrs OâHiggins and I went to bedâ.2
His legal firm duly prospered in an Ireland that was proud of its adherence to Catholicism. At the time, the Irish were celebrated â or rather celebrated themselves â as the most Catholic people in the world â a beacon that shone through global darkness â ever ready to pray for the conversion of godless Russia or pagan England. The new state put unmarried mothers into Mother and Baby Homes, banned foreign âindecentâ films lest they become âoccasions of sinâ and even clamped down on jazz as a threat to Irish civilisation and morality. The key figure behind this shadow theocracy was John Charles McQuaid, Catholic Primate of Ireland and Archbishop of Dublin. And it was to him, at the ripe old age of 70, that Arthur Cox went to become a Catholic priest, just after Brigid OâHiggins had died. Becoming a Jesuit normally required spending 14 years in training, but in a tribute to his piety, loyalty and respectability, McQuaid allowed old Arthur to do the training in just two years. He then set off as a missionary to Northern Rhodesia to convert African babies.
How times change! Ireland, a country once renowned for its rigid Catholic morality, was now welcoming the biggest porn firm in the world and a company founded by a late entrant to the priesthood was its legal agent. Arthur Cox teamed up with another law firm, A&L Goodbody, to allow Manwin to establish subsidiaries in Dublin. They were housed in a building used by Grant Thornton on the river Liffey, but no signage was ever displayed. The legal work was complex and costly because Manwin had just merged with another US porn operator, RK Netmedia, and the merger had to be approved by the Irish Competition Authority. The Minister for Jobs, Enterprise and Innovation has the power to block any deal deemed to be against the public interest, so to make sure it got over the line, Arthur Cox and A&L Goodbody stood ready to deal with any complications. Then there was Manwinâs practice of setting up complex corporate structures. It wanted a holding company â a legal entity often used to strategically place intellectual property in a tax haven â to hold its shares and ultimately reduce its taxes. But it also wanted a billing company and a content company which had the rights to use its pornographic movies. In all, a schedule of 60 pages of titles that Irish Manwin subsidiaries could use was lodged in the Irish Companies Registration Office (CRO).
Porn is big business and MindGeek, the name which Manwin adopted a year after its registration in Dublin, is the largest corporation within the industry. It seeks to normalise pornography as a way of making it more accessible and profitable. This involves a number of dubious techniques, including paying for clips of its videos to be inserted as product placements into the American film Don Jon (2013). Or organising a âfamily friendly, non-pornographic design contestâ for potential advertisers and running a campaign to plant trees. The last enterprise was billed as âgiving America some serious woodâ, because MindGeek would plant a tree for every 100 users of its âBig Dick categoryâ. It has even offered a $25,000 scholarship to students who wrote the best essay on âHow do you strive to make others happy?â3 The aim of all this, to quote the Vice President of Pornhub, Corey Price, is âto make porn acceptable to talk aboutâ.4
One does not have to be an evangelical fundamentalist or a sexual prude to see something distinctly unpleasant about this enterprise. The porn industry presents itself as a liberator of sexual pleasure and desire, but it arguably has about as much relationship to genuine sexual desire as McDonaldâs has to nutritious food.5 Pornography treats sex as a commodity, packaged with fantasies of domination and violence. Many of the scenes in the top-rented pornographic films contain physical and verbal abuse, with one study of the best-selling porn videos finding that 88 per cent of scenes contained physical violence, usually by men against women and often where women appeared to enjoy it.6
MindGeekâs commercial success arose from encouraging porn users to load their favourite films onto its portals for free, spreading them throughout the World Wide Web like wildfire. The pay-off for its owners comes from the sales of advertising and the enticement of customers on to paying services. Through this strategy, the company has grown into a global behemoth, and its control over studios has had some seriously negative effects. For one thing, there has been a decline in the wages paid to many of the women involved. The sexual activity has also been âspiced upâ with increasingly risky behaviour, including more extreme rape scenes and âgonzoâ porn. Katrina Forrester describes the pattern,
Riskier acts are incentivized. According to one analysis of an industry talent database, women entering the business now will do more, and more quickly, than they once did: in the nineteen-eighties, they would wait an average of two years before a first anal scene; now itâs six months.7
Behind an industry based on the exploitation of women are men in suits, the respectable figures of capitalist enterprise, whose only motivation is the profitability of the bottom line. MindGeek was originally owned by a German tech geek named Fabian Thylmann, who used his software engineering skills to set up the algorithms to power his customer base. He expanded his business by linking up with a Wall Street hedge fund that gave him a high interest loan of $362 million. The trustee for this loan was CB Agency Services, which was based in Delaware, a US state famous for being a tax haven and, coincidently, a state that gave rise to the US President, Joe Biden. Behind it lay a controlling company, Colbeck Capital Management, led by two former Goldman Sachsâ employees, Jason Colodne and Jason Beckman, who operated out of an exclusive office just off Central Park, New York. To spread the risk on their loan, they sold it off in tranches to other financial sharks anxious to get a slice of the action. One of the buyers was the Fortress Investment Group, run by former Princeton graduates, who were directors of UBS and former partners of Goldman Sachs.
Meanwhile, the original founder of MindGeek landed himself in trouble when he was unceremoniously arrested and extradited from Belgium to Germany to face charges of tax evasion and only escaped prison by agreeing to pay a âŹ5 million fine. Worried that his legal difficulties and his association with the porn industry would leave him with âa mark on his backâ, he sold his shares to a senior management team based in Montreal, Canada.8 The new owners of the company are Feras Antoon and David Tasillo and their only concern is making money.
This brings us back to why MindGeek hired Arthur Cox to help set up its operations in Dublin. The clue lies in the complex corporate structure that has been set up by MindGeek. The address for its global headquarters is 32 Boulevard Royal, 2449 Luxembourg, an inauspicious building with no signage to indicate the nature of its business. A journalist from La Presse describes her visit,
On the intercom, a receptionist tells us that no leader of MindGeek is on site. Not today nor tomorrow. âNobody works here, nobody works from here,â she says. On the fourth floor, where the groupâs head office is officially located, there is flat calm in the middle of the afternoon. The silence is total.9
The real headquarters for MindGeek is actually 5700 km away, along the DĂ©carie Expressway in Montreal, where 900 people are employed. It is a Canadian company with an offshore financial structure and the reason for this curious anomaly is that MindGeekâs main interest, aside from porn, lies in dodging tax. It chose Luxembourg for its fictional headquarters because it is a tax haven with a notional tax rate on profits of 29 per cent, but where most foreign companies never pay anything near that. Instead, the multinationals meet with state officials to effectively set their tax rate as close to zero as possible through a host of incentives they can avail of. Dividends or interest payments received from loans, for example, are not subject to corporate income tax, while income derived from intellectual property is exempt from any form of wealth tax. No wonder that hundreds of North American companies have located themselves in Luxembourg or that in 2014 alone $416 billion in investment flowed there.10
MindGeek arrived in Ireland for the same reason it went to Luxembourg â it wanted another tax dodging paradise, connected to a wider network such as the Netherlands, the Cayman Islands or Bermuda. Using a series of tax treaties that link these countries together, a multinational like MindGeek can structure its operations so that it pays hardly any tax in any of them. They merely have to contact legal agents such as Arthur Cox and some expert âtax plannersâ for a little help. A description of MindGeekâs corporate structure shows how this all works. MG Content Limited was set up as a subsidiary of MindGeekâs Ireland Holding Company which, in turn, is a subsidiary of its Luxembourg headquarters. In 2014, it recorded a profit of $23 million for the distribution of its porn around the web, but it claimed these profits were eaten up by $20 million in âadministrative expensesâ much of which were paid to other subsidiaries within its empire.11 As a result, it only paid $253,426 in tax, or an effective rate of 1.2 per cent on its original profit.
Another company, MG Billing, takes in subscriptions from paying customers. In 2015, it earned a staggering $427 million in revenue and declared a profit of $234 million, yet it paid a mere $145,301 in tax â an effective rate of...