Senate Judiciary Committee Democrats have sent letters to two wealthy businessmen and a major political activist requesting more information about undisclosed gifts to Supreme Court justices.

The letters, sent Tuesday by Sen. Sheldon Whitehouse, D-R.I., and Sen. Dick Durbin, D-Ill., the committee chair, seek more details about an undisclosed 2008 luxury fishing vacation Justice Samuel Alito took that was reported last month by ProPublica. The letters went to three people: hedge fund billionaire Paul Singer; mortgage company owner Robin Arkley II; and Leonard Leo, a longtime leader at the Federalist Society, the powerful conservative legal group.

All three men played a role in paying for or organizing Alito’s 2008 vacation, but the letters go beyond that trip. The senators requested Leo and the businessmen provide a full accounting of all transportation, lodging and gifts worth more than $415 they’ve ever provided to any Supreme Court justice.

“To date, Chief Justice Roberts has barely acknowledged, much less investigated or sought to fix, the ethics crises swirling around our highest Court,” Durbin and Whitehouse said in a joint statement. “If the Court won’t investigate or act, Congress must.” The senators’ committee has announced it plans to vote on July 20 on a bill that would tighten Supreme Court ethics rules.

A spokesperson for Singer said he had received the letter and was in the process of reviewing it. Leo declined to comment but previously said that Alito could never be influenced by a free trip. Arkley and the Supreme Court press office did not immediately respond to requests for comment.

ProPublica reported last month that Singer flew Alito on a private jet to a luxury Alaska fishing vacation in July 2008. Alito did not pay for the trip, including his stay at the fishing lodge, which was owned by Arkley, a significant conservative political donor. Leo helped organize the trip and asked Singer if Alito could fly on the billionaire’s jet. The justice did not disclose the gift of the private jet trip in his annual financial disclosure, which ethics law experts said appeared to be a violation of federal ethics law.

In the years following the trip, Singer’s hedge fund had cases come before the court at least 10 times. Alito did not recuse himself. He ruled with the court’s majority in favor of Singer’s hedge fund in a 2014 case that pitted the fund against the nation of Argentina.

Alito wrote in a Wall Street Journal op-ed published before the ProPublica story that he had not known Singer was affiliated with the hedge fund, and he maintained that disclosure rules didn’t require him to report the private jet flight. A spokesperson for Singer said last month that the billionaire had “never discussed his business interests” with the justice and that Singer had not organized the trip.

The letters sent Tuesday represent a new phase in the Senate investigation of Supreme Court ethics.

This spring, ProPublica reported that Justice Clarence Thomas received decades of unreported gifts from Dallas real estate billionaire Harlan Crow. Crow took Thomas on private jet flights and yacht cruises around the world, paid private school tuition for the justice’s grandnephew and paid Thomas money in an undisclosed real estate deal. The Senate Judiciary Committee launched an investigation and wrote a series of letters to Crow, demanding a full accounting of his gifts to Thomas and any other justices over the years.

Thus far, Crow has resisted the senators’ probe. The billionaire’s lawyers have argued that Congress does not have the authority to investigate the gifts and that the inquiry violates the separation of powers. Thomas has defended himself by saying he took family trips with friends. Crow has said he never discussed pending legal matters with Thomas or sought to influence him.

Leo also joined Crow and Thomas during at least one undisclosed trip to the billionaire’s private resort in the Adirondacks. A painting Crow commissioned depicts Leo at the resort alongside the justice and the billionaire. In the new letter, the senators asked the longtime Federalist Society executive to provide details about any travel he’s ever taken with any Supreme Court justice.

The expanded investigation comes as the Senate Judiciary Committee prepares to vote on Supreme Court ethics reform. Following the Alito report, Durbin and Whitehouse announced that the panel would vote on a reform bill this month.

“To hold these nine Justices to the same standard as every other federal judge is not a radical or partisan notion,” Durbin and Whitehouse said in a joint statement, adding, “The belief that they should not be held accountable or even disclose lavish gifts from wealthy benefactors is an affront to the nation they were chosen to serve.”

The bill, titled the Supreme Court Ethics, Recusal, and Transparency Act, would significantly tighten ethics rules but in many cases leave the details up to the court itself.

The bill requires the court itself to create and publish a code of conduct within 180 days but doesn’t lay out in detail what rules it should contain. Lower court federal judges are already subject to a code of conduct, but it does not apply to the Supreme Court.

In other areas, the bill is more specific: It would tighten recusal rules, including in cases when justices accept gifts from litigants at the court or affiliates of litigants. If the proposed law had been in place when Alito sat on Singer’s case against Argentina, it appears it would have required the justice to recuse himself.

The bill would also require the court to create an ethics complaint process. Members of the public could submit complaints and investigations would be carried out by a randomly selected panel of five appellate judges. The panel could recommend that the Supreme Court take disciplinary action. It could also publish reports of its findings.

Under current law, justices are not required to — and rarely do — explain themselves when they do or don’t recuse themselves from a case. It’s a long-standing parlor game among Supreme Court watchers to guess what conflict or potential conflict led a justice to recuse himself or herself. The bill would end that. It would require published written explanations of recusal decisions.

The bill would also tighten some rules around the disclosure of gifts and of the funding behind friend-of-the-court briefs that are filed by outside groups in many high-profile cases.

The bill is already facing steep opposition, with influential Republicans in both the House and Senate coming out against legislative reforms. Minutes after Durbin announced the committee vote, the Twitter account for the Republicans on the House Judiciary Committee responded: “And that’s as far as it will go. God Bless Justice Alito!”

The response among Republican lawmakers has not been uniform, however. Sen. Lisa Murkowski, R-Alaska, introduced a bill this year that would require the court to adopt a code of conduct and create a process for investigating potential violations of it. Other Republican senators have encouraged Chief Justice John Roberts to take action to tighten the court’s ethical standards himself.

Sen. Cynthia Lummis, R-Wyo., told The Hill following the recent Alito revelations that she believes it’s in the Supreme Court’s “best interests to address this issue to the satisfaction of the public and use the standards that should apply to anyone in the executive or legislative branch with regard to ethics.”

In early July 2008, Samuel Alito stood on a riverbank in a remote corner of Alaska. The Supreme Court justice was on vacation at a luxury fishing lodge that charged more than $1,000 a day, and after catching a king salmon nearly the size of his leg, Alito posed for a picture. To his left, a man stood beaming: Paul Singer, a hedge fund billionaire who has repeatedly asked the Supreme Court to rule in his favor in high-stakes business disputes.

Singer was more than a fellow angler. He flew Alito to Alaska on a private jet. If the justice chartered the plane himself, the cost could have exceeded $100,000 one way.

In the years that followed, Singer’s hedge fund came before the court at least 10 times in cases where his role was often covered by the legal press and mainstream media. In 2014, the court agreed to resolve a key issue in a decade-long battle between Singer’s hedge fund and the nation of Argentina. Alito did not recuse himself from the case and voted with the 7-1 majority in Singer’s favor. The hedge fund was ultimately paid $2.4 billion.

Alito did not report the 2008 fishing trip on his annual financial disclosures. By failing to disclose the private jet flight Singer provided, Alito appears to have violated a federal law that requires justices to disclose most gifts, according to ethics law experts.

Experts said they could not identify an instance of a justice ruling on a case after receiving an expensive gift paid for by one of the parties.

“If you were good friends, what were you doing ruling on his case?” said Charles Geyh, an Indiana University law professor and leading expert on recusals. “And if you weren’t good friends, what were you doing accepting this?” referring to the flight on the private jet.

Justices are almost entirely left to police themselves on ethical issues, with few restrictions on what gifts they can accept. When a potential conflict arises, the sole arbiter of whether a justice should step away from a case is the justice him or herself.

ProPublica’s investigation sheds new light on how luxury travel has given prominent political donors — including one who has had cases before the Supreme Court — intimate access to the most powerful judges in the country. Another wealthy businessman provided expensive vacations to two members of the high court, ProPublica found. On his Alaska trip, Alito stayed at a commercial fishing lodge owned by this businessman, who was also a major conservative donor. Three years before, that same businessman flew Justice Antonin Scalia, who died in 2016, on a private jet to Alaska and paid the bill for his stay.

Such trips would be unheard of for the vast majority of federal workers, who are generally barred from taking even modest gifts.

Leonard Leo, the longtime leader of the conservative Federalist Society, attended and helped organize the Alaska fishing vacation. Leo invited Singer to join, according to a person familiar with the trip, and asked Singer if he and Alito could fly on the billionaire’s jet. Leo had recently played an important role in the justice’s confirmation to the court. Singer and the lodge owner were both major donors to Leo’s political groups.

ProPublica’s examination of Alito’s and Scalia’s travel drew on trip planning emails, Alaska fishing licenses, and interviews with dozens of people including private jet pilots, fishing guides, former high-level employees of both Singer and the lodge owner, and other guests on the trips.

ProPublica sent Alito a list of detailed questions last week, and on Tuesday, the Supreme Court’s head spokeswoman told ProPublica that Alito would not be commenting. Several hours later, The Wall Street Journal published an op-ed by Alito responding to ProPublica’s questions about the trip.

Alito said that when Singer’s companies came before the court, the justice was unaware of the billionaire’s connection to the cases. He said he recalled speaking to Singer on “no more than a handful of occasions,” and they never discussed Singer’s business or issues before the court.

Alito said that he was invited to fly on Singer’s plane shortly before the trip and that the seat “would have otherwise been vacant.” He defended his failure to report the trip to the public, writing that justices “commonly interpreted” the disclosure requirements to not include “accommodations and transportation for social events.”

In a statement, a spokesperson for Singer told ProPublica that Singer didn’t organize the trip and that he wasn’t aware Alito would be attending when he accepted the invitation. Singer “never discussed his business interests” with the justice, the spokesperson said, adding that at the time of trip, neither Singer nor his companies had “any pending matters before the Supreme Court, nor could Mr. Singer have anticipated in 2008 that a subsequent matter would arise that would merit Supreme Court review.”

Leo did not respond to questions about his organizing the trip but said in a statement that he “would never presume to tell” Alito and Scalia “what to do.”

This spring, ProPublica reported that Justice Clarence Thomas received decades of luxury travel from another Republican megadonor, Dallas real estate magnate Harlan Crow. In a statement, Thomas defended the undisclosed trips, saying unnamed colleagues advised him that he didn’t need to report such gifts to the public. Crow also gave Thomas money in an undisclosed real estate deal and paid private school tuition for his grandnephew, who Thomas was raising as a son. Thomas reported neither transaction on his disclosure forms.

The undisclosed gifts have prompted lawmakers to launch investigations and call for ethics reform. Recent bills would impose tighter rules for justices’ recusals, require the Supreme Court to adopt a binding code of conduct and create an ethics body, which would investigate complaints. Neither a code nor an ethics office currently exists.

“We wouldn’t tolerate this from a city council member or an alderman,” Sen. Dick Durbin, an Illinois Democrat and chair of the Senate Judiciary Committee, said of Thomas in a recent hearing. “And yet the Supreme Court won’t even acknowledge it’s a problem.”

So far, the court has chafed at the prospect of such reforms. Though the court recently laid out its ethics practices in a statement signed by all nine justices, Chief Justice John Roberts has not directly addressed the recent revelations. In fact, he has repeatedly suggested Congress might not have the power to regulate the court at all.

“We Take Good Care of Him Because He Makes All the Rules”

In the 1960s in his first year at Harvard Law School, Singer was listening to a lecture by a famed liberal professor when, he later recalled, he had an epiphany: “My goodness. They’re making it up as they go along.”

It was a common sentiment among conservative lawyers, who often accuse liberal judges of activist overreach. While Singer’s career as an attorney was short-lived, his convictions about the law stayed with him for decades. After starting a hedge fund that eventually made him one of the richest people in the country, he began directing huge sums to causes on the right. That included groups, like the Federalist Society, dedicated to fostering the conservative legal movement and putting its followers on the bench.

Other guests on the trip included Leo, the Federalist Society leader, and Judge A. Raymond Randolph, a prominent conservative appellate judge for whom Leo had clerked, according to fishing licenses and interviews with lodge staff.

On another day, the group flew on one of the lodge’s bush planes to a waterfall in Katmai National Park, where bears snatch salmon from the water with their teeth. At night, the lodge’s chefs served multicourse meals of Alaskan king crab legs or Kobe filet. On the last evening, a member of Alito’s group bragged that the wine they were drinking cost $1,000 a bottle, one of the lodge’s fishing guides told ProPublica.

In his op-ed, Alito described the lodge as a “comfortable but rustic facility.” The justice said he does not remember if he was served wine, but if he was, it didn’t cost $1,000 a bottle. (Alito also pointed readers to the lodge’s website. The lodge has been sold since 2008 and is now a more downscale accommodation.)

The justice’s stay was provided free of charge by another major donor to the conservative legal movement: Robin Arkley II, the owner of a mortgage company then based in California. Arkley had recently acquired the fishing lodge, which catered to affluent tourists seeking a luxury experience in the Alaskan wilderness. A planning document prepared by lodge staff describes Alito as a guest of Arkley. Another guest on the trip told ProPublica the trip was a gift from Arkley, and two lodge employees said they were told that Alito wasn’t paying.

Arkley, who does not appear to have been involved in any cases before the court, did not respond to detailed questions for this story.

In the last decade, Singer has contributed over $80 million to Republican political groups. He has also given millions to the Manhattan Institute, a conservative think tank where he has served as chairman since 2008. The institute regularly files friend-of-the-court briefs with the Supreme Court — at least 15 this term, including one asking the court to block student loan relief.

Singer’s interest in the courts is more than ideological. His hedge fund, Elliott Management, is best known for making investments that promise handsome returns but could require bruising legal battles. Singer has said he’s drawn to positions where you “control your own destiny, not just riding up and down with the waves of financial markets.” That can mean pressuring corporate boards to fire a CEO, brawling with creditors over the remains of a bankrupt company and suing opponents.

The fund now manages more than $50 billion in assets. “The investments are extremely shrewdly litigation-driven,” a person familiar with Singer’s fund told ProPublica. “That’s why he’s a billionaire.”

Singer’s most famous gamble eventually made its way to the Supreme Court.

In 2001, Argentina was in a devastating economic depression. Unemployment skyrocketed and deadly riots broke out in the street. The day after Christmas, the government finally went into default. For Singer, the crisis was an opportunity. As other investors fled, his fund purchased Argentine government debt at a steep discount.

Within several years, as the Argentine economy recovered, most creditors settled with the government and accepted a fraction of what the debt was originally worth. But Singer’s fund, an arm of Elliott called NML Capital, held out. Soon, they were at war: a midtown Manhattan-based hedge fund trying to impose its will on a sovereign nation thousands of miles away.

The fight played out on familiar turf for Singer: the U.S. courts. He launched an aggressive legal campaign to force Argentina to pay in full, and his personal involvement in the case attracted widespreadmediaattention. Over 13 years of litigation, the arguments spanned what rights foreign governments have in the U.S. and whether Argentina could pay off debts to others before Singer settled his claim.

If Singer succeeded, he stood to make a fortune.

In 2007, for the first but not the last time, Singer’s fund asked the Supreme Court to intervene. A lower court had stopped Singer and another fund from seizing Argentine central bank funds held in the U.S. The investors appealed, but that October, the Supreme Court declined to take up the case.

On July 8 of the following year, Singer took Alito to Alaska on the private jet, according to emails, flight data from the Federal Aviation Administration and people familiar with the trip.

The group flew across the country to the town of King Salmon on the Alaska peninsula. They returned to the East Coast three days later.

In Alaska, they stayed at the King Salmon Lodge, a luxury fishing resort that drew celebrities, wealthy businessmen and sports stars. On July 9, one of the lodge’s pilots flew Alito and other guests around 70 miles to the west to fish the Nushagak River, known for one of the best salmon runs in the world. Snapshots from the trip show Alito in waders and an Indianapolis Grand Prix hat, smiling broadly as he holds his catch.

“Sam Alito is in the red jacket there,” one lodge worker said, as he narrated an amateur video of the justice on the water. “We take good care of him because he makes all the rules.”

“The exception only covers food, lodging and entertainment,” said Virginia Canter, a former government ethics lawyer now at the watchdog group CREW. “He’s trying to move away from the plain language of the statute and the regulation.”

The Alaska vacation was the first time Singer and Alito met, according to a person familiar with the trip. After the trip, the two appeared together at public events. When Alito spoke at the annual dinner of the Federalist Society lawyers convention the following year, the billionaire introduced him. The justice told a story about having an encounter with bears during a fishing trip with Singer, according to the legal blog Above the Law. He recalled asking himself: “Do you really want to go down in history as the first Supreme Court justice to be devoured by a bear?”

The year after that, in 2010, Alito delivered the keynote speech at a dinner for donors to the Manhattan Institute. Once again, Singer delivered a flattering introduction. “He and his small band of like-minded justices are a critical and much-appreciated bulwark of our freedom,” Singer told the crowd. “Samuel Alito is a model Supreme Court justice.”

Alito did not disclose the flight or the stay at the fishing lodge in his annual financial disclosures. A federal law passed after Watergate requires federal officials including Supreme Court justices to publicly report most gifts. (The year before, Alito reported getting $500 of Italian food and wine from a friend, noting that his friend was unlikely to “appear before this Court.”)

The law has a “personal hospitality” exemption: If someone hosts a justice on their own property, free “food, lodging, or entertainment” don’t always have to be disclosed. But the law clearly requires disclosure for gifts of private jet flights, according to seven ethics law experts, and Alito appears to have violated it. The typical interpretation of the law required disclosure for his stay at the lodge too, experts said, since it was a commercial property rather than a vacation home. The judiciary’s regulations did not make that explicit until they were updated earlier this year.

In his op-ed, Alito said that justices “commonly interpreted” the law’s exception for hospitality “to mean that accommodations and transportation for social events were not reportable gifts.”

His op-ed pointed to language in the judiciary’s filing instructions and cited definitions from Black’s Law Dictionary and Webster’s. But he did not make reference to the judiciary’s regulations or the law itself, which experts said both clearly required disclosure for gifts of travel. ProPublica found at least six examples of other federal judges disclosing gifts of private jet travel in recent years.

Meanwhile, Singer and Argentina kept asking the Supreme Court to intervene in their legal fight. His fund enlisted Ted Olson, the famed appellate lawyer who represented George W. Bush in the Bush v. Gore case during the 2000 presidential election.

In January 2010, a year and a half after the Alaska vacation, the fund once again asked the high court to take up an aspect of the dispute. The court declined. In total, parties asked the court to hear appeals in the litigation eight times in the six years after the trip. In most instances, it was Singer’s adversaries filing an appeal, with Singer’s fund successfully arguing for the justices to decline the case and let stand a lower court ruling.

The Supreme Court hears a tiny portion of the many cases it’s asked to rule on each year. Under the court’s rules, cases are only accepted when at least four of the nine justices vote to take it up. The deliberations on whether to take a case are shrouded in secrecy and happen at meetings attended only by the justices. These decisions are a fundamental way the court wields power. The justices’ votes are not typically made public, so it is unclear how Alito voted on the petitions involving Singer.

As Singer’s battle with Argentina intensified, his hedge fund launched an expansive public relations and lobbying campaign. In 2012, the hedge fund even attempted to seize an Argentine navy ship docked in Ghana to secure payment from the country. (The effort was thwarted by a ruling from the International Tribunal for the Law of the Sea.) Argentina’s president labeled Singer and his fellow investors “vultures” attempting extortion; Singer complained the country was scapegoating him.

In 2014, the Supreme Court finally agreed to hear a case on the matter. It centered on an important issue: how much protection Argentina could claim as a sovereign nation against the hedge fund’s legal maneuvers in U.S. courts. The U.S. government filed a brief on Argentina’s side, warning that the case raised “extraordinarily sensitive foreign policy concerns.”

The case featured an unusual intervention by the Judicial Crisis Network, a group affiliated with Leo known for spending millions on judicial confirmation fights. The group filed a brief supporting Singer, which appears to be the only Supreme Court friend-of-the-court brief in the organization’s history.

The court ruled in Singer’s favor 7-1 with Alito joining the majority. The justice did not recuse himself from the case or from any of the other petitions involving Singer.

“The tide turned” thanks to that “decisive” ruling and another from the court, as Singer’s law firm described it. After the legal setbacks and the election of a new president in Argentina, the country finally capitulated in 2016. Singer’s fund walked away with a $2.4 billion payout, a spectacular return.

Abbe Smith, a law professor at Georgetown who co-wrote a textbook on legal and judicial ethics, said that Alito should have recused himself. If she were representing a client and learned the judge had taken a gift from the party on the other side, Smith said, she would immediately move for recusal. “If I found out after the fact, I’d be outraged on behalf of my client,” she said. “And, frankly, I’d be outraged on behalf of the legal system.”

The law that governs when justices must recuse themselves from a case sets a high but subjective standard. It requires justices to withdraw from any case when their “impartiality might reasonably be questioned.” But the court allows individual justices to interpret that requirement for themselves. Historically, they’ve almost never explained why they are or are not recusing themselves, and unlike lower court judges, their decisions cannot be appealed.

Alito articulated his own standard during his Senate confirmation process, writing that he believed in stepping away from cases when “any possible question might arise.”

In his Wall Street Journal op-ed, Alito wrote of his failure to recuse himself from Singer’s cases at the court: “It was and is my judgment that these facts would not cause a reasonable and unbiased person to doubt my ability to decide the matters in question impartially.”

Critics have long assailed the Supreme Court’s practices on this issue as both opaque and inconsistent. “The idea ‘just trust us to do the right thing’ while remaining in total secrecy is unworkable,” said Amanda Frost, a judicial ethics expert at the University of Virginia School of Law.

For Singer, appeals to the Supreme Court are an almost unavoidable result of his business model. Since the Argentina case, Singer’s funds were named parties in at least two other cases that were appealed to the court, both stemming from battles with Fortune 500 companies. One of the petitions is currently pending.

Grey Goose and Glacier Ice

The month after Singer got home from the 2008 fishing trip, he realized he had a problem. He was supposed to receive a shipment of frozen salmon from the Alaska lodge. But the fish hadn’t arrived. So the billionaire emailed an unlikely person to get to the bottom of it: Leo, the powerful Federalist Society executive.

“They've escaped!!” Singer wrote. Leo then sent an email to Arkley, the lodge owner, to track down the missing seafood.

The only clear thread connecting the prominent guests on the trip is that they all had a relationship with Leo. Leo is now a giant in judicial politics who helped handpick Donald Trump’s list of potential Supreme Court nominees and recently received a $1.6 billion donation to further his political interests. Leo’s network of political groups was in its early days, however, when he traveled with Alito to Alaska. It had run an advertising campaign supporting Alito in his confirmation fight, and Leo was reportedly part of the team that prepared Alito for his Senate hearings.

Singer and Arkley, the businessmen who provided the trip to the justice, were both significant donors to Leo’s groups at the time, according to public records and reporting by The Daily Beast. Arkley also sometimes provided Leo with one of his private planes to travel to business meetings, according to a former pilot of Arkley’s.

In his statement, Leo did not address detailed questions about the trip, but he said “no objective and well-informed observer of the judiciary honestly could believe that they decide cases in order to cull favor with friends, or in return for a free plane seat or fishing trip.”

He added that the public should wonder whether ProPublica’s coverage is “bait for reeling in more dark money from woke billionaires who want to damage this Supreme Court and remake it into one that will disregard the law by rubber stamping their disordered and highly unpopular cultural preferences.”

Arkley is a fixture in local politics in his hometown of Eureka, California, known for lashing out at city officials and for once starting his own newspaper reportedly out of disdain for the local press. By the early 2000s, he’d made a fortune buying and servicing distressed mortgages and also become a significant donor in national GOP politics.

As his political profile rose, Arkley bragged to friends that he’d gotten to know one-third of the sitting Supreme Court justices. He told friends he had a relationship with Clarence Thomas, according to two people who were close with Arkley. And the Alito trip was not Arkley’s first time covering a Supreme Court justice’s travel to Alaska.

In June 2005, Arkley flew Scalia on his private jet to Kodiak Island, Alaska, two of Arkley’s former pilots told ProPublica. Arkley had paid to rent out a remote fishing lodge that cost $3,200 a week per person, according to the lodge’s owner, Martha Sikes.

Snapshots from the trip, found in the justice’s papers at Harvard Law School, capture Scalia knee-deep in a river as he fights to reel in a fish. Randolph, the appellate judge who was also on the later trip, joined Scalia and Arkley on the vacation, flying on the businessman’s jet.

Scalia did not report the trip on his annual filing, another apparent violation of the law, according to ethics law experts. Scalia’s travels briefly drew scrutiny in 2016 after he died while staying at the hunting ranch of a Texas businessman. Scalia had a pattern of disclosing trips to deliver lectures while not mentioning hunting excursions he took to nearby locales hosted by local attorneys and businessmen, according to a research paper published after his death.

Randolph, now a senior judge on the U.S. Court of Appeals for the D.C. Circuit, did not disclose the trip. (Nor did he disclose the later trip with Alito.) Randolph told ProPublica that when he was preparing his form for 2005, he called the judiciary’s financial disclosure office to ask about disclosing the trip. He shared his notes from the call with a staffer, which say “don’t have to report trip to Alaska with Rob Arkley & others / private jet / lodge.” Kathleen Clark, an ethics law expert at Washington University in St. Louis, said, “I don’t understand how the staff member came to that conclusion based on the language in the statute.”

On June 9, Arkley’s group chartered a boat, the Happy Hooker IV, to tour Yakutat Bay. On the way over, Scalia and Arkley discussed whether Senate Republicans, then in a contentious fight over judicial confirmations, should abolish the filibuster to move forward, according to a person traveling with them.

A photo captures Arkley and Scalia later that day gazing off the side of the boat at the famed Hubbard Glacier. At one point, a guide chiseled chunks off an iceberg and passed them to Scalia. The justice then mixed martinis from Grey Goose vodka and glacier ice.

It remains unclear how Scalia ended up in Alaska with Arkley. But the justice’s archives at Harvard Law School offer a tantalizing clue. Immediately before the fishing trip, Scalia gave a speech for the Federalist Society in Napa, California. The next day, Arkley’s plane flew from Napa to Alaska. Scalia’s papers contain a folder labeled “Federalist Society, Napa and Alaska, 2005 June 3-10,” suggesting a possible connection between the conservative organization and the fishing trip.

The contents of that folder are currently sealed, however. They will be opened to the public in 2036.

In 2008, Supreme Court Justice Clarence Thomas decided to send his teenage grandnephew to Hidden Lake Academy, a private boarding school in the foothills of northern Georgia. The boy, Mark Martin, was far from home. For the previous decade, he had lived with the justice and his wife in the suburbs of Washington, D.C. Thomas had taken legal custody of Martin when he was 6 years old and had recently told an interviewer he was “raising him as a son.”

Tuition at the boarding school ran more than $6,000 a month. But Thomas did not cover the bill. A bank statement for the school from July 2009, buried in unrelated court filings, shows the source of Martin’s tuition payment for that month: the company of billionaire real estate magnate Harlan Crow.

The payments extended beyond that month, according to Christopher Grimwood, a former administrator at the school. Crow paid Martin’s tuition the entire time he was a student there, which was about a year, Grimwood told ProPublica.

“Harlan picked up the tab,” said Grimwood, who got to know Crow and the Thomases and had access to school financial information through his work as an administrator.

Before and after his time at Hidden Lake, Martin attended a second boarding school, Randolph-Macon Academy in Virginia. “Harlan said he was paying for the tuition at Randolph-Macon Academy as well,” Grimwood said, recalling a conversation he had with Crow during a visit to the billionaire’s Adirondacks estate.

ProPublica interviewed Martin, his former classmates and former staff at both schools. The exact total Crow paid for Martin’s education over the years remains unclear. If he paid for all four years at the two schools, the price tag could have exceeded $150,000, according to public records of tuition rates at the schools.

Thomas did not report the tuition payments from Crow on his annual financial disclosures. Several years earlier, Thomas disclosed a gift of $5,000 for Martin’s education from another friend. It is not clear why he reported that payment but not Crow’s.

The tuition payments add to the picture of how the Republican megadonor has helped fund the lives of Thomas and his family.

“You can’t be having secret financial arrangements,” said Mark W. Bennett, a retired federal judge appointed by President Bill Clinton. Bennett said he was friendly with Thomas and declined to comment for the record about the specifics of Thomas’ actions. But he said that when he was on the bench, he wouldn’t let his lawyer friends buy him lunch.

Thomas did not respond to questions. In response to previous ProPublica reporting on gifts of luxury travel, he said that the Crows “are among our dearest friends” and that he understood he didn’t have to disclose the trips.

ProPublica sent Crow a detailed list of questions and his office responded with a statement that did not dispute the facts presented in this story.

“Harlan Crow has long been passionate about the importance of quality education and giving back to those less fortunate, especially at-risk youth,” the statement said. “It’s disappointing that those with partisan political interests would try to turn helping at-risk youth with tuition assistance into something nefarious or political.” The statement added that Crow and his wife have “supported many young Americans” at a “variety of schools, including his alma mater.” Crow went to Randolph-Macon Academy.

Crow did not address a question about how much he paid in total for Martin’s tuition. Asked if Thomas had requested the support for either school, Crow’s office responded, “No.”

Last month, ProPublica reported that Thomas accepted luxury travel from Crow virtually every year for decades, including international superyacht cruises and private jet flights around the world. Crow also paid money to Thomas and his relatives in an undisclosed real estate deal, ProPublica found. After he purchased the house where Thomas’ mother lives, Crow poured tens of thousands of dollars into improving the property. And roughly 15 years ago, Crow donated much of the budget of a political group founded by Thomas’ wife, which paid her a $120,000 salary.

“This is way outside the norm. This is way in excess of anything I’ve seen,” said Richard Painter, former chief White House ethics lawyer for President George W. Bush, referring to the cascade of gifts over the years.

Painter said that when he was at the White House, an official who’d taken what Thomas had would have been fired: “This amount of undisclosed gifts? You’d want to get them out of the government.”

A federal law passed after Watergate requires justices and other officials to publicly report most gifts. Ethics law experts told ProPublica they believed Thomas was required by law to disclose the tuition payments because they appear to be a gift to him.

Justices also must report many gifts to their spouses and dependent children. The law’s definition of dependent child is narrow, however, and likely would not apply to Martin since Thomas was his legal guardian, not his parent. The best case for not disclosing Crow’s tuition payments would be to argue the gifts were to Martin, not Thomas, experts said.

But that argument was far-fetched, experts said, because minor children rarely pay their own tuition. Typically, the legal guardian is responsible for the child’s education.

“The most reasonable interpretation of the statute is that this was a gift to Thomas and thus had to be reported. It’s common sense,” said Kathleen Clark, an ethics law expert at Washington University in St. Louis. “It’s all to the financial benefit of Clarence Thomas.”

Martin, now in his 30s, told ProPublica he was not aware that Crow paid his tuition. But he defended Thomas and Crow, saying he believed there was no ulterior motive behind the real estate magnate’s largesse over the decades. “I think his intentions behind everything is just a friend and just a good person,” Martin said.

Crow has long been an influential figure in pro-business conservative politics. He has given millions to efforts to move the law and the judiciary to the right and serves on the boards of think tanks that publish scholarship advancing conservative legal theories.

Crow has denied trying to influence the justice but has said he extended hospitality to him just as he has to other dear friends. From the start, their relationship has intertwined expensive gifts and conservative politics. In a recent interview with The Dallas Morning News, Crow recounted how he first met Thomas. In 1996, the justice was scheduled to give a speech in Dallas for an anti-regulation think tank. Crow offered to fly him there on his private jet. “During that flight, we found out we were kind of simpatico,” the billionaire said.

The following year, the Thomases began to discuss taking custody of Martin. His father, Thomas’ nephew, had been imprisoned in connection with a drug case. Thomas has written that Martin’s situation held deep resonance for him because his own father was absent and his grandparents had taken him in “under very similar circumstances.”

Thomas had an adult son from a previous marriage, but he and wife, Ginni, didn’t have children of their own. They pitched Martin’s parents on taking the boy in.

“Thomas explained that the boy would have the best of everything — his own room, a private school education, lots of extracurricular activities,” journalists Kevin Merida and Michael Fletcher reported in their biography of Thomas.

Thomas gained legal custody of Martin and became his legal guardian around January 1998, according to court records.

Martin, who had been living in Georgia with his mother and siblings, moved to Virginia, where he lived with the justice from the ages of 6 to 19, he said.

Living with the Thomases came with an unusual perk: lavish travel with Crow and his family. Martin told ProPublica that he and Thomas vacationed with the Crows “at least once a year” throughout his childhood.

That included visits to Camp Topridge, Crow’s private resort in the Adirondacks, and two cruises on Crow’s superyacht, Martin said. On a trip in the Caribbean, Martin recalled riding jet skis off the side of the billionaire’s yacht.

Roughly 20 years ago, Martin, Thomas and the Crows went on a cruise on the yacht in Russia and the Baltics, according to Martin and two other people familiar with the trip. The group toured St. Petersburg in a rented helicopter and visited the Yusupov Palace, the site of Rasputin’s murder, said one of the people. They were joined by Chris DeMuth, then the president of the conservative think tank the American Enterprise Institute. (Thomas’ trips with Crow to the Baltics and the Caribbean have not previously been reported.)

Thomas reconfigured his life to balance the demands of raising a child with serving on the high court. He began going to the Supreme Court before 6 a.m. so he could leave in time to pick Martin up after class and help him with his homework. By 2001, the justice had moved Martin to private school out of frustration with the Fairfax County public school system’s lax schedule, The American Lawyer magazine reported.

For high school, Thomas sent Martin to Randolph-Macon Academy, a military boarding school 75 miles west of Washington, D.C., where he was in the class of 2010. The school, which sits on a 135-acre campus in the Shenandoah Valley, charged between $25,000 to $30,000 a year. Martin played football and basketball, and the justice sometimes visited for games.

Randolph-Macon was also Crow’s alma mater. Thomas and Crow visited the campus in April 2007 for the dedication of an imposing bronze sculpture of the Air Force Honor Guard, according to the school magazine. Crow donated the piece to Randolph-Macon, where it is a short walk from Crow Hall, a classroom building named after the Dallas billionaire’s family.

Martin sometimes chafed at the strictures of military school, according to people at Randolph-Macon at the time, and he spent his junior year at Hidden Lake Academy, a therapeutic boarding school in Georgia. Hidden Lake boasted one teacher for every 10 students and activities ranging from horseback riding to canoeing. Those services came at an added cost. At the time, a year of tuition was roughly $73,000, plus fees.

The July 2009 bank statement from Hidden Lake was filed in a bankruptcy case for the school, which later went under. The document shows that Crow Holdings LLC wired $6,200 to the school that month, the exact cost of the month’s tuition. The wire is marked “Mark Martin” in the ledger.

Crow’s office said in its statement that Crow’s funding of students’ tuition has “always been paid solely from personal funds, sometimes held at and paid through the family business.”

Grimwood, the administrator at Hidden Lake, told ProPublica that Crow wired the school money once a month to pay Martin’s tuition fees. Grimwood had multiple roles on the campus, including overseeing an affiliated wilderness program. He said he was speaking about the payments because he felt the public should know about outside financial support for Supreme Court justices. Martin returned to Randolph-Macon his senior year.

Thomas has long been one of the less wealthy members of the Supreme Court. Still, when Martin was in high school, he and Ginni Thomas had income that put them comfortably in the top echelon of Americans.

In 2006 for example, the Thomases brought in more than $500,000 in income. The following year, they made more than $850,000 from Clarence Thomas’ salary from the court, Ginni Thomas’ pay from the Heritage Foundation and book payments for the justice’s memoir.

It appears that at some point in Martin’s childhood, Thomas was paying for private school himself. Martin told ProPublica that Thomas sold his Corvette — “his most prized car” — to pay for a year of tuition, although he didn’t remember when that occurred.

In 2002, a friend of Thomas’ from the RV community who owned a Florida pest control company, Earl Dixon, offered Thomas $5,000 to help defray the costs of Martin’s education. Thomas’ disclosure of that earlier gift, several experts said, could be viewed as evidence that the justice himself understood he was required to report tuition aid from friends.

“At first, Thomas was worried about the propriety of the donation,” Thomas biographers Merida and Fletcher recounted. “He agreed to accept it if the contribution was deposited directly into a special trust for Mark.” In his annual filing, Thomas reported the money as an “education gift to Mark Martin.”

Democrats on the Senate Judiciary Committee on Monday announced plans to hold a hearing in the coming days “regarding the need to restore confidence in the Supreme Court’s ethical standards,” citing ProPublica’s reporting on over 20 years’ worth of luxury travel accepted by Supreme Court Justice Clarence Thomas from a billionaire Republican megadonor.

The planned hearing is detailed in a letter to Chief Justice John Roberts and follows comments made by the committee chair, Illinois Sen. Dick Durbin, last week in which he called for an “enforceable code of conduct” for the justices.

If “the Court does not resolve this issue on its own, the Committee will consider legislation to resolve it,” the letter said.

Monday’s letter echoed a call from 22 Democratic lawmakers last week for Roberts to launch an investigation into Thomas’ trips and his failure to report them. That group included members of both the House and Senate judiciary committees.

In their separate letter to Roberts, those lawmakers — including Rhode Island Sen. Sheldon Whitehouse and Georgia Rep. Hank Johnson — wrote that as chief justice, Roberts is duty-bound to conduct a “swift, thorough, independent and transparent investigation” in order to “safeguard public faith in the judiciary.”

Both letters hinted at congressional action to strengthen the court’s rules around ethics and disclosure. The court “has barely acknowledged, much less investigated” the details reported by ProPublica, the lawmakers wrote Friday, citing their alarm over “allegations of unethical, and potentially unlawful, conduct at the Supreme Court.”

“Should the Supreme Court continue to refuse to act swiftly on these matters,” the letter added, “we will continue to press Congress to act to restore accountability and ethics at the highest Court in the land.”

The flurry of activity by the lawmakers comes in response to ProPublica’s report revealing that for years, Thomas had accepted luxury trips from Dallas billionaire Harlan Crow without disclosing them. The trips included international cruises on Crow’s superyacht, flights on Crow’s private jet and regular summer getaways at Crow’s private lakeside resort in the Adirondacks.

A Supreme Court spokesperson didn’t immediately respond to a request for comment on the letters.

In a brief statement on Friday, Thomas cited “guidance from my colleagues and others in the judiciary” that “this sort of personal hospitality from close personal friends, who did not have business before the Court, was not reportable.”

Crow previously told ProPublica that he and his wife never discussed a pending case with Thomas and had “never sought to influence Justice Thomas on any legal or political issue.” He also said that he is “unaware of any of our friends ever lobbying or seeking to influence Justice Thomas on any case, and I would never invite anyone who I believe had any intention of doing that.”

An ethics law passed after the Watergate scandal requires justices and other federal officials to disclose most gifts to the public. That law, legal ethics experts told ProPublica, clearly mandates that gifts of transportation, including private jet flights, be reported.

Urging the court to adopt stricter rules on Monday, Senate Judiciary Committee members noted that justices’ “ethical standards” have raised concerns before. They pointed to a series of articles in 2011 that revealed some of the close ties between Thomas and Crow.

“This problem could have been resolved then. Instead, according to ProPublica’s reporting, Mr. Crow’s dispensation of favors escalated in secret during the years that followed. Now the Court faces a crisis of public confidence in its ethical standards that must be addressed,” they wrote.

In the letter sent last week, the Democrats — whose ranks include Sen. Richard Blumenthal of Connecticut, Sen. Elizabeth Warren of Massachusetts, Rep. Jerry Nadler of New York and Rep. Adam Schiff of California — cited a pressing need for updated rules for the court. “It is well past time for the Supreme Court to align with the rest of government in a proper code of ethics enforced by independent investigation and reporting,” they wrote.

The lawmakers also questioned Thomas’ defense, noting that the so-called personal hospitality exemption to the law is “not meant to allow government officials to hide from the public extravagant gifts by wealthy political interests.”

And they raised concerns around the broader ethical implications of a Supreme Court justice taking undisclosed trips with other guests, calling for more robust disclosure and ethics rules for the court. In one instance detailed in ProPublica’s report, Thomas was joined at Crow’s Adirondacks resort by corporate executives, major Republican donors and one of the leaders of the American Enterprise Institute, a conservative think tank.

Whitehouse and others have already introduced a bill this year aimed at tightening the court’s rules, among other reforms.

Spokespeople for Ohio Rep. Jim Jordan, the Republican chairman of the House Judiciary Committee, and South Carolina Sen. Lindsey Graham, the ranking Republican on the Senate Judiciary Committee, did not immediately respond to requests for comment.

In late June 2019, right after the U.S. Supreme Court released its final opinion of the term, Justice Clarence Thomas boarded a large private jet headed to Indonesia. He and his wife were going on vacation: nine days of island-hopping in a volcanic archipelago on a superyacht staffed by a coterie of attendants and a private chef.

If Thomas had chartered the plane and the 162-foot yacht himself, the total cost of the trip could have exceeded $500,000. Fortunately for him, that wasn’t necessary: He was on vacation with real estate magnate and Republican megadonor Harlan Crow, who owned the jet — and the yacht, too.

For more than two decades, Thomas has accepted luxury trips virtually every year from the Dallas businessman without disclosing them, documents and interviews show. A public servant who has a salary of $285,000, he has vacationed on Crow’s superyacht around the globe. He flies on Crow’s Bombardier Global 5000 jet. He has gone with Crow to the Bohemian Grove, the exclusive California all-male retreat, and to Crow’s sprawling ranch in East Texas. And Thomas typically spends about a week every summer at Crow’s private resort in the Adirondacks.

The extent and frequency of Crow’s apparent gifts to Thomas have no known precedent in the modern history of the U.S. Supreme Court.

These trips appeared nowhere on Thomas’ financial disclosures. His failure to report the flights appears to violate a law passed after Watergate that requires justices, judges, members of Congress and federal officials to disclose most gifts, two ethics law experts said. He also should have disclosed his trips on the yacht, these experts said.

Thomas did not respond to a detailed list of questions.

In a statement, Crow acknowledged that he’d extended “hospitality” to the Thomases “over the years,” but said that Thomas never asked for any of it and it was “no different from the hospitality we have extended to our many other dear friends.”

Through his largesse, Crow has gained a unique form of access, spending days in private with one of the most powerful people in the country. By accepting the trips, Thomas has broken long-standing norms for judges’ conduct, ethics experts and four current or retired federal judges said.

“It’s incomprehensible to me that someone would do this,” said Nancy Gertner, a retired federal judge appointed by President Bill Clinton. When she was on the bench, Gertner said, she was so cautious about appearances that she wouldn’t mention her title when making dinner reservations: “It was a question of not wanting to use the office for anything other than what it was intended.”

Virginia Canter, a former government ethics lawyer who served in administrations of both parties, said Thomas “seems to have completely disregarded his higher ethical obligations.”

“When a justice’s lifestyle is being subsidized by the rich and famous, it absolutely corrodes public trust,” said Canter, now at the watchdog group CREW. “Quite frankly, it makes my heart sink.”

ProPublica uncovered the details of Thomas’ travel by drawing from flight records, internal documents distributed to Crow’s employees and interviews with dozens of people ranging from his superyacht’s staff to members of the secretive Bohemian Club to an Indonesian scuba diving instructor.

Federal judges sit in a unique position of public trust. They have lifetime tenure, a privilege intended to insulate them from the pressures and potential corruption of politics. A code of conduct for federal judges below the Supreme Court requires them to avoid even the “appearance of impropriety.” Members of the high court, Chief Justice John Roberts has written, “consult” that code for guidance. The Supreme Court is left almost entirely to police itself.

There are few restrictions on what gifts justices can accept. That’s in contrast to the other branches of government. Members of Congress are generally prohibited from taking gifts worth $50 or more and would need pre-approval from an ethics committee to take many of the trips Thomas has accepted from Crow.

Thomas’ approach to ethics has already attracted public attention. Last year, Thomas didn’t recuse himself from cases that touched on the involvement of his wife, Ginni, in efforts to overturn the 2020 presidential election. While his decision generated outcry, it could not be appealed.

Crow met Thomas after he became a justice. The pair have become genuine friends, according to people who know both men. Over the years, some details of Crow’s relationship with the Thomases have emerged. In 2011, The New York Times reported on Crow’s generosity toward the justice. That same year, Politico revealed that Crow had given half a million dollars to a Tea Party group founded by Ginni Thomas, which also paid her a $120,000 salary. But the full scale of Crow’s benefactions has never been revealed.

Long an influential figure in pro-business conservative politics, Crow has spent millions on ideological efforts to shape the law and the judiciary. Crow and his firm have not had a case before the Supreme Court since Thomas joined it, though the court periodically hears major cases that directly impact the real estate industry. The details of his discussions with Thomas over the years remain unknown, and it is unclear if Crow has had any influence on the justice’s views.

In his statement, Crow said that he and his wife have never discussed a pending or lower court case with Thomas. “We have never sought to influence Justice Thomas on any legal or political issue,” he added.

In Thomas’ public appearances over the years, he has presented himself as an everyman with modest tastes.

“I don’t have any problem with going to Europe, but I prefer the United States, and I prefer seeing the regular parts of the United States,” Thomas said in a recent interview for a documentary about his life, which Crow helped finance.

“I prefer the RV parks. I prefer the Walmart parking lots to the beaches and things like that. There’s something normal to me about it,” Thomas said. “I come from regular stock, and I prefer that — I prefer being around that.”

“You Don’t Need to Worry About This — It’s All Covered”

Crow’s private lakeside resort, Camp Topridge, sits in a remote corner of the Adirondacks in upstate New York. Closed off from the public by ornate wooden gates, the 105-acre property, once the summer retreat of the same heiress who built Mar-a-Lago, features an artificial waterfall and a great hall where Crow’s guests are served meals prepared by private chefs. Inside, there’s clear evidence of Crow and Thomas’ relationship: a painting of the two men at the resort, sitting outdoors smoking cigars alongside conservative political operatives. A statue of a Native American man, arms outstretched, stands at the center of the image, which is photographic in its clarity.

The painting captures a scene from around five years ago, said Sharif Tarabay, the artist who was commissioned by Crow to paint it. Thomas has been vacationing at Topridge virtually every summer for more than two decades, according to interviews with more than a dozen visitors and former resort staff, as well as records obtained by ProPublica. He has fished with a guide hired by Crow and danced at concerts put on by musicians Crow brought in. Thomas has slept at perhaps the resort’s most elegant accommodation, an opulent lodge overhanging Upper St. Regis Lake.

The mountainous area draws billionaires from across the globe. Rooms at a nearby hotel built by the Rockefellers start at $2,250 a night. Crow’s invitation-only resort is even more exclusive. Guests stay for free, enjoying Topridge’s more than 25 fireplaces, three boathouses, clay tennis court and batting cage, along with more eccentric features: a lifesize replica of the Harry Potter character Hagrid’s hut, bronze statues of gnomes and a 1950s-style soda fountain where Crow’s staff fixes milkshakes.

Crow’s access to the justice extends to anyone the businessman chooses to invite along. Thomas’ frequent vacations at Topridge have brought him into contact with corporate executives and political activists.

During just one trip in July 2017, Thomas’ fellow guests included executives at Verizon and PricewaterhouseCoopers, major Republican donors and one of the leaders of the American Enterprise Institute, a pro-business conservative think tank, according to records reviewed by ProPublica. The painting of Thomas at Topridge shows him in conversation with Leonard Leo, the Federalist Society leader regarded as an architect of the Supreme Court’s recent turn to the right.

In his statement to ProPublica, Crow said he is “unaware of any of our friends ever lobbying or seeking to influence Justice Thomas on any case, and I would never invite anyone who I believe had any intention of doing that.”

“These are gatherings of friends,” Crow said.

Crow has deep connections in conservative politics. The heir to a real estate fortune, Crow oversees his family’s business empire and recently named Marxism as his greatest fear. He was an early patron of the powerful anti-tax group Club for Growth and has been on the board of AEI for over 25 years. He also sits on the board of the Hoover Institution, another conservative think tank.

A major Republican donor for decades, Crow has given more than $10 million in publicly disclosed political contributions. He’s also given to groups that keep their donors secret — how much of this so-called dark money he’s given and to whom are not fully known. “I don’t disclose what I’m not required to disclose,” Crow once told the Times.

Crow has long supported efforts to move the judiciary to the right. He has donated to the Federalist Society and given millions of dollars to groups dedicated to tort reform and conservative jurisprudence. AEI and the Hoover Institution publish scholarship advancing conservative legal theories, and fellows at the think tanks occasionally file amicus briefs with the Supreme Court.

On the court since 1991, Thomas is a deeply conservative jurist known for his “originalism,” an approach that seeks to adhere to close readings of the text of the Constitution. While he has been resolute in this general approach, his views on specific matters have sometimes evolved. Recently, Thomas harshly criticized one of his own earlier opinions as he embraced a legal theory, newly popular on the right, that would limit government regulation. Small evolutions in a justice’s thinking or even select words used in an opinion can affect entire bodies of law, and shifts in Thomas’ views can be especially consequential. He’s taken unorthodox legal positions that have been adopted by the court’s majority years down the line.

Soon after Crow met Thomas three decades ago, he began lavishing the justice with gifts, including a $19,000 bible that belonged to Frederick Douglass, which Thomas disclosed. Recently, Crow gave Thomas a portrait of the justice and his wife, according to Tarabay, who painted it. Crow’s foundation also gave $105,000 to Yale Law School, Thomas’ alma mater, for the “Justice Thomas Portrait Fund,” tax filings show.

Crow said that he and his wife have funded a number of projects that celebrate Thomas. “We believe it is important to make sure as many people as possible learn about him, remember him and understand the ideals for which he stands,” he said.

To trace Thomas’ trips around the world on Crow’s superyacht, ProPublica spoke to more than 15 former yacht workers and tour guides and obtained records documenting the ship’s travels.

On the Indonesia trip in the summer of 2019, Thomas flew to the country on Crow’s jet, according to another passenger on the plane. Clarence and Ginni Thomas were traveling with Crow and his wife, Kathy. Crow’s yacht, the Michaela Rose, decked out with motorboats and a giant inflatable rubber duck, met the travelers at a fishing town on the island of Flores.

Touring the Lesser Sunda Islands, the group made stops at Komodo National Park, home of the eponymous reptiles; at the volcanic lakes of Mount Kelimutu; and at Pantai Meko, a spit of pristine beach accessible only by boat. Another guest was Mark Paoletta, a friend of the Thomases then serving as the general counsel of the Office of Management and Budget in the administration of President Donald Trump.

Paoletta was bound by executive branch ethics rules at the time and told ProPublica that he discussed the trip with an ethics lawyer at his agency before accepting the Crows’ invitation. “Based on that counsel’s advice, I reimbursed Harlan for the costs,” Paoletta said in an email. He did not respond to a question about how much he paid Crow.

(Paoletta has long been a pugnacious defender of Thomas and recently testified before Congress against strengthening judicial ethics rules. “There is nothing wrong with ethics or recusals at the Supreme Court,” he said, adding, “To support any reform legislation right now would be to validate these vicious political attacks on the Supreme Court,” referring to criticism of Thomas and his wife.)

The Indonesia vacation wasn’t Thomas’ first time on the Michaela Rose. He went on a river day trip around Savannah, Georgia, and an extended cruise in New Zealand roughly a decade ago.

As a token of his appreciation, he gave one yacht worker a copy of his memoir. Thomas signed the book: “Thank you so much for all your hard work on our New Zealand adventure.”

Crow’s policy was that guests didn’t pay, former Michaela Rose staff said. “You don’t need to worry about this — it’s all covered,” one recalled the guests being told.

There’s evidence Thomas has taken even more trips on the superyacht. Crow often gave his guests custom polo shirts commemorating their vacations, according to staff. ProPublica found photographs of Thomas wearing at least two of those shirts. In one, he wears a blue polo shirt embroidered with the Michaela Rose’s logo and the words “March 2007” and “Greek Islands.”

Thomas didn’t report any of the trips ProPublica identified on his annual financial disclosures. Ethics experts said the law clearly requires disclosure for private jet flights and Thomas appears to have violated it.

Justices are generally required to publicly report all gifts worth more than $415, defined as “anything of value” that isn’t fully reimbursed. There are exceptions: If someone hosts a justice at their own property, free food and lodging don’t have to be disclosed. That would exempt dinner at a friend’s house. The exemption never applied to transportation, such as private jet flights, experts said, a fact that was made explicit in recently updated filing instructions for the judiciary.

Two ethics law experts told ProPublica that Thomas’ yacht cruises, a form of transportation, also required disclosure.

“If Justice Thomas received free travel on private planes and yachts, failure to report the gifts is a violation of the disclosure law,” said Kedric Payne, senior director for ethics at the nonprofit government watchdog Campaign Legal Center. (Thomas himself once reported receiving a private jet trip from Crow, on his disclosure for 1997.)

The experts said Thomas’ stays at Topridge may have required disclosure too, in part because Crow owns it not personally but through a company. Until recently, the judiciary’s ethics guidance didn’t explicitly address the ownership issue. The recent update to the filing instructions clarifies that disclosure is required for such stays.

How many times Thomas failed to disclose trips remains unclear. Flight records from the Federal Aviation Administration and FlightAware suggest he makes regular use of Crow’s plane. The jet often follows a pattern: from its home base in Dallas to Washington Dulles airport for a brief stop, then on to a destination Thomas is visiting and back again.

ProPublica identified five such trips in addition to the Indonesia vacation.

On July 7 last year, Crow’s jet made a 40-minute stop at Dulles and then flew to a small airport near Topridge, returning to Dulles six days later. Thomas was at the resort that week for his regular summer visit, according to a person who was there. Twice in recent years, the jet has followed the pattern when Thomas appeared at Crow’s properties in Dallas — once for the Jan. 4, 2018, swearing-in of Fifth Circuit Judge James Ho at Crow’s private library and again for a conservative think tank conference Crow hosted last May.

Thomas has even used the plane for a three-hour trip. On Feb. 11, 2016, the plane flew from Dallas to Dulles to New Haven, Connecticut, before flying back later that afternoon. ProPublica confirmed that Thomas was on the jet through Supreme Court security records obtained by the nonprofit Fix the Court, private jet data, a New Haven plane spotter and another person at the airport. There are no reports of Thomas making a public appearance that day, and the purpose of the trip remains unclear.

Jet charter companies told ProPublica that renting an equivalent plane for the New Haven trip could cost around $70,000.

On the weekend of Oct. 16, 2021, Crow’s jet repeated the pattern. That weekend, Thomas and Crow traveled to a Catholic cemetery in a bucolic suburb of New York City. They were there for the unveiling of a bronze statue of the justice’s beloved eighth grade teacher, a nun, according to Catholic Cemetery magazine.

As Thomas spoke from a lectern, the monument towered over him, standing 7 feet tall and weighing 1,800 pounds, its granite base inscribed with words his teacher once told him. Thomas told the nuns assembled before him, “This extraordinary statue is dedicated to you sisters.”

He also thanked the donors who paid for the statue: Harlan and Kathy Crow.

One day in July 1985, three young men from Philadelphia, their lawyer and a burly Pinkerton guard arrived at a horse track outside Chicago carrying a briefcase with $250,000 in cash.

Running the numbers on a Compaq computer the size of a small refrigerator, Jeffrey Yass and his friends had found a way to outwit the track’s bookies, according to interviews, records and news accounts. A few months earlier, they’d wagered $160,000, gambling that, with tens of thousands of bets, they could nail the exact order of seven horses in three different races. It was a sophisticated theory of the racing odds, honed with help from a Ph.D. statistician who’d worked for NASA on the moon landing, and it proved right. They bagged $760,000, then the richest payoff in American racing history.

But that summer day, when they presented their strikingly long list of bets at the track window, they were turned away. Their appeal to the track owner got them ejected. Yass, just 27, then sued for the right to place the bets. The track’s lawyer fumed to a federal judge that the men were trying to corner the betting market “through the use of their statistics and numbers.”

Yass lost, but that year he and his friends repeated variations of the strategy at horse and greyhound tracks around the country. Then they decided to turn their focus from a world of hundreds of thousands of dollars to a world of billions: Wall Street.

Four decades later, the firm he and his friends founded, Susquehanna International Group, is a sprawling global company that makes billions of dollars. Yass and his team used their numerical expertise to make rapid-fire computer-driven trades in options and other securities, eventually becoming a giant middleman in the markets for stocks and other securities. If you have bought stock or options on an app like Robinhood or E-Trade, there’s a good chance you traded with Susquehanna without knowing it. Today, Yass, 63, is one of the richest and most powerful financiers in the country.

But one crucial aspect of his ascent to stratospheric wealth has transpired out of public view. Using the same prowess that he’s applied to race tracks and options markets, Yass has taken aim at another target: his tax bill.

There, too, the winnings have been immense: at least $1 billion in tax savings over six recent years, according to ProPublica’s analysis of a trove of IRS data. During that time, Yass paid an average federal income tax rate of just 19%, far below that of comparable Wall Street traders.

Yass has devised trading strategies that reduce his tax burden but push legal boundaries. He has repeatedly drawn IRS audits, yet has continued to test the limits. Susquehanna has often gone to court to fight the government, with one multiyear audit battle ending in a costly defeat. The firm has maintained in court filings that it complied with the law.

Yass’ low rate is particularly notable because Susquehanna, by its own description, specializes in short-term trading. Money made from such rapid trades is typically taxed at rates around 40%.

In recent years, however, Yass’ annual income has, with uncanny consistency, been made up almost entirely of income taxed at the roughly 20% rate reserved for longer-term investments.

Congress long ago tried to stamp out widely used techniques that seek to transform profits taxed at the high rate into profits taxed at the low rate. But Yass and his colleagues have managed to avoid higher taxes anyway.

The tax savings have contributed to an explosion in wealth for Yass, who has increasingly poured that fortune into candidates and causes on the political right. He has spent more than $100 million on election campaigns in recent years. The money has gone to everything from anti-tax advocacy and charter schools to campaigns against so-called critical race theory and for candidates who falsely say the 2020 election was stolen and seek to ban abortion.

ProPublica has pieced together the details of Yass’ tax avoidance using tax returns, securities filings and court records, as well as by talking to former traders and executives. (The former employees spoke on condition of anonymity, with many citing a desire to avoid angering Yass.)

Through a spokesperson, Yass declined to be interviewed for this article. The spokesperson declined to comment in response to a long list of questions for Susquehanna and the firm’s founding partners.

Gregg Polsky, a University of Georgia law professor and former corporate tax lawyer who was retained by ProPublica to review Susquehanna’s tax records, said the tax agency may have more to scrutinize. The strategies revealed in Yass’ records, he said, were “very suspicious and suggestive of potential abuse that should be examined by the IRS.”

More than 35 years after he was booted from the racetrack outside Chicago, Yass still lives to gamble. Not just on horses, but on poker and on the market. He sheepishly admitted, in a podcast discussion, that he has even placed wagers on his children’s sports games.

Asked to describe his approach to trading at Susquehanna, Yass once reached for a poker analogy. “If you’re the sixth-best poker player in the world and you play with the five best players, you’re going to lose,” he said. “If your skills are only average, but you play against weak opponents, you’re going to win.”

That philosophy along with, Yass freely admits, a lot of luck, has made him a billionaire many times over.

Compared to many of his fellow billionaires — he’s richer than Hollywood mogul David Geffen, retail brokerage king Charles Schwab and “Star Wars” creator George Lucas — Yass doesn't seem particularly interested in the trappings of extreme wealth.

Yass and his wife, Janine, raised four children in the leafy college town of Haverford, on the Main Line outside of Philadelphia. Their large but unremarkable house could easily be the home of a successful doctor rather than one of the richest men in the country. In his quarter-zip pullover sweater, Nikes and no-nonsense rimless glasses, he’d be impossible to pick out of a crowd at the suburban country club where he plays golf.

If Yass collects expensive art or maintains a megayacht, he has managed to do so in complete secrecy. What comes closest to an identifiable trophy asset is a house in the ultra-exclusive Georgica Association beach neighborhood of East Hampton on New York’s Long Island. Even that property, purchased for $12.5 million in 2005 and held through an LLC, is in an area known as “bucolic and understated.”

Those who have worked with Yass say he lives less for spending money than for the competition of the market and the thrill of taking calculated risk. Yass softens any impression of ruthlessness by deploying a practiced humility and comedic timing. “Some people like art history,” he once explained, “I like probabilistic analysis.”

Yet when it comes to his philosophical outlook, he eschews the jokes. He speaks of capitalism in religious terms. Making new markets, he likes to say, is a “mission from God.”

Like many religious stories, his begins with a conversion experience. Born in 1958 to two Queens CPAs, Yass said reading the economist Milton Friedman’s “Capitalism and Freedom” as a young man delivered him from an early flirtation with socialism.

By the time Yass graduated from the State University of New York at Binghamton in 1979, he was already captivated by trading. (His father had also helped nurture Yass’ love of horse racing by taking him to local tracks to see harness racing, according to Forbes.) Yass’ college thesis weighed whether the budding market in stock options could be justified as socially useful. “I concluded that it should exist,” Yass later cracked. “I got a B.”

After college, he moved to Las Vegas for a year and a half to play poker professionally. Then he returned to the East Coast and settled in Philadelphia, where he began trading options. The previous decade had seen a burst of academic interest in the financial instruments, including a pioneering model of how to more accurately price them. Yass later called the model, and its broader implications for how to make mathematically sound decisions, “the most revolutionary idea in a long, long time.”

A share of stock is a relatively simple concept: It’s a small ownership stake in a company. An option, by contrast, is a contract that confers the right to buy or sell a given stock at a particular price and time in the future.

Options attract mathematically minded traders since a complex set of variables, including the underlying stock price, volatility, time and interest rates, determine how much one of the contracts is worth.

Options are a versatile tool. They can appeal to the risk-averse: Traders can use them as insurance to guarantee they will be paid at least today’s price when they sell in the future. They are also useful to the risk-embracing — gamblers who want to place outsized bets on how a stock will perform. (Here’s how a speculator would use an option: In early June, shares of Netflix were trading at below $200. If the speculator thinks the company’s fortunes will improve dramatically this summer, they could pay just $4.50 each for options to buy the stock at $250 in mid-August. If the stock soars over that figure, they could make a mint.)

In options Yass found more than a financial instrument. He found a way to view the world. Everything — each decision, each interaction — can be judged based on how much it will cost in money, time or negative consequences and compared with the reward. Then action is taken or avoided accordingly. To Yass’ way of thinking, it’s always worth paying $19 for a 20% chance to win $100 but it’s never worth $21.

Along with his college friends, Yass founded Susquehanna, named after the river that connects Binghamton to Pennsylvania, in 1987. The firm benefited from explosive growth in options markets. Yass later played it down to the Philadelphia Inquirer: “We got lucky being in the right place at the right time.”

One of Susquehanna’s landmark moments — involving perhaps both skill and luck — occurred soon after the firm launched: the Black Monday stock market crash on Oct. 19, 1987. Thanks to an option bet that would pay out if stocks went down, Susquehanna was one of the few firms that made money on one of the worst days in stock market history.

From early on, Yass cultivated Susquehanna’s brand as a home for the biggest brains in finance, hiring Ph.D.s and top students. But the firm wasn’t just looking for raw IQ points. It also wanted instinct. It held poker tournaments to teach traders the idea that taking the measure of your opponents is as important as understanding the odds.

The Binghamton buddies ran a freewheeling office full of arguments and gamesmanship. The office had Super Bowl pools and an officewide lottery. Everyone bet on everything. One time, as recounted in Philadelphia magazine, traders bet on whether Yass could name the last Plantagenet king of England. They called Yass. He spat out “Richard III” and then, according to a witness, yelled, “Get back to work!” But he liked the hijinks.

Still, the firm had an inside vs. outside mentality. If you weren’t with the firm, you were the enemy. When traders left to join a competitor, Susquehanna often sued them for allegedly violating non-compete clauses. Susquehanna stood out for its aggressiveness in trading even by the standards of Wall Street. “If he thinks you’re dumb, he’s betting against you,” one former Susquehanna trader said of Yass. “That’s what makes his blood flow.”

Susquehanna developed a specialty in arbitrage, or finding low-risk profit opportunities in mismatched prices of securities, like stocks or bonds. An early adopter of computers to measure risk and test trading strategies, the firm flourished.

In addition to making his own bets, Yass built his firm into one that stands at the very center of the market and takes bets from other traders. On Wall Street, this job is known as market making.

At its simplest, making a market means offering to buy or sell a thing. The jewelry shop on the corner that will sell you a gold ring and has a “We Buy Gold” sign in the window is making a market in gold. If the store buys a gold coin from a customer for $300, then sells it for $320 to the next person who walks in, the store has made a quick $20.

Susquehanna does the same thing, but with securities. Running a market making firm isn’t always as easy as quickly matching a buyer and a seller. A market maker is expected to post its prices and buy and sell to all comers. If a particular stock has more sellers than buyers, the firm might find itself holding too much, exposing the market maker to losses if the stock price drops. It’s a business that thrives when there’s lots of trading volume but can be dangerous if markets crash.

The market making business in stock options, Susquehanna’s specialty, requires juggling a huge number of trades while constantly keeping an eye on all the various bets to make sure that the firm is protected from unexpected market moves.

In 1996, the year Yass turned 38, he made $71 million, tax records show. By then, the firm was employing hundreds of people. Not long before, Susquehanna staff had gathered in Las Vegas for an annual company celebration. Traders brought their families. The firm’s employees watched the Kentucky Derby together. A Marilyn Monroe impersonator interviewed Yass’ father with some tame double-entendres. The highlight was a skit with a junior trader performing as “Jeff Yass Gump,” after Forrest Gump. “Momma always said I was like the other kids,” the trader said. “But the other kids, they went to Harvard and Yale and the University of Pennsylvania and I said: ‘Momma, why am I at the SUNY Binghamton?’ She said it was because I was special.” The crowd roared, Yass the loudest of all.

Despite losing some star traders in the late 1990s, Susquehanna continued to produce massive profits. Yass and the other co-founders managed to keep their enormous wealth a secret. Even by 2005, when Yass had collected at least $1 billion of lifetime income, he was nowhere to be found in the Forbes list of the richest Americans.

That’s in part because Susquehanna is privately held and trades only its own money, meaning it doesn’t have to publicly disclose much about its business. Like many financial firms, Susquehanna itself is not a single company but a complex and shifting web of legal entities whose profits flow to Yass and a small set of partners.

It has been a remarkably consistent profit machine for the partners, except in 2008, the year of the global financial crisis. Yass alone lost $470 million that year, tax records show. Former Susquehanna traders believe the firm risked going out of business. The danger the firm faced “sent chills through everyone,” said one. Like other big trading complexes that did huge business with investment banks, Susquehanna benefited from the massive federal bailout of Wall Street, which propped up the giant firms that were among its biggest trading partners.

Yass, the free market true believer, now owed the survival of much of his fortune to the U.S. government. On a personal level, Yass also received an extra bonus from the government: a $2,000 child tax credit because he reported losing money that year.

Susquehanna quickly bounced back to profitability. In recent years it has supplanted major banks as one of the firms that sits in the middle of massive daily financial flows in stock and other markets. A Bloomberg profile in 2018 reported that Susquehanna trades 100 million exchange-traded fund shares daily. The firm is a prominent player in cryptocurrencies like bitcoin and, in a throwback to Yass’ origins, the exploding business of sports betting. Susquehanna has also branched out into venture capital. One of those investments came through spectacularly: a large stake in ByteDance, the Chinese company behind the social media app TikTok.

By the 2010s, Yass had become one of the richest Americans. But his ultralow profile meant that almost nobody knew that. At least two of Susquehanna’s other co-founders, Arthur Dantchik and Joel Greenberg, have each made billions of dollars themselves, according to ProPublica's analysis.

Yass hit a new milestone in 2012, pulling in more than $1 billion in a single year, according to tax records; by 2018, his income was $2 billion. In the six years ending in 2018, Yass had the sixth-highest average income in the entire country, according to IRS data.

Court filings and ProPublica’s analysis of tax records suggest that, as of 2018, Yass owned around 75% of Susquehanna, with co-founders Dantchik owning around 19% and Greenberg around 3%. (Greenberg retired in 2016.)

Yass was finally added to the Forbes list last year. The magazine put his worth at $12 billion, which would make him the 58th-richest American. ProPublica estimates his true wealth is likely at least $30 billion — based solely on his income over the decades and stake in ByteDance — which would place him in the top 25.

On a Friday afternoon in April 2010, a Susquehanna trader in Pennsylvania emailed his counterparts at Credit Suisse to make a big bet in the stock market. The email instructed the Swiss bank to buy about $70 million worth of shares in some of Switzerland’s biggest companies on Susquehanna’s behalf.

Three minutes later, the trader sent out a second email, this time to Morgan Stanley. He placed a second bet, now wagering against the exact same stocks in the exact same amounts he’d just ordered from Credit Suisse.

The payoff from such a trade might seem to be nothing at all. But there was a winner and a loser. The winner was Susquehanna. The loser was the U.S. government: Susquehanna had managed to slash its tax bill through the trade. The emails come from an ongoing U.S. Tax Court case filed in 2020. There are rules designed to block clever traders from using offsetting bets to conjure tax savings, and the IRS argues Susquehanna broke them. (More on that case later.)

The firm’s willingness to push the boundaries of tax law is not surprising to people who know Yass and his partners. One former Susquehanna executive recalled Yass acknowledging using a trading strategy in which a main goal was not to make profitable trades, but to avoid taxes. Taxes, according to Yass’ former colleagues, are an obsession for the billionaire. As one former employee put it, “They hate fucking taxes.”

It doesn’t matter how seemingly trivial it is. Susquehanna once petitioned the state of Pennsylvania to demand “a refund of taxes paid on repairs to ice machines.” The petition was denied.

Indeed, the firm has a habit of shaping deals that slash its tax bill and then daring the IRS to intercede. Sometimes, the agency successfully challenges them, as when Yass and his two main partners were hit with a total of $121 million in back taxes in 2019. That was the single biggest such payout in ProPublica’s database of IRS records, which includes thousands of audits of the wealthiest people in the country. Susquehanna paid only after losing a long-running battle with the agency, one the firm appealed all the way to the Supreme Court.

Despite periodically tripping IRS wires, the firm’s aggressiveness seems to have paid off. Susquehanna’s tax avoidance has gone on for years, resulting in a strikingly low tax rate for Yass and his partners, according to ProPublica’s analysis.

The strategy behind that trade back in 2010 is key to understanding how they’ve done it. Similarly to how Susquehanna has taken advantage of small differences in prices of options or stocks, it has found ways to exploit a gap in tax rates to save hundreds of millions of dollars in taxes every year.

For someone like Yass, the U.S. system offers an almost irresistible proposition. If you earn the wrong sort of income — the kind that comes from a short-term trade — you’ll pay a relatively high tax rate. But if you earn the right kind — gains on long-held investments — you’ll pay half as much in taxes.

But what is considered “long-term” involves a bright, arbitrary line. Hold a security for less than 366 days, and you are on the wrong side of that line.

The result is that by the arithmetic of the U.S. tax code, $100 made from a sale on the 365th day is worth around $60 after taxes. And $100 made on the 366th is worth around $80.

Short-term, high-frequency traders like Susquehanna often hold securities for less than 365 seconds. As the company itself put it in one recent court filing, the firm “trades securities, commodities, and derivatives, seeking to earn returns from short-term appreciation and arbitrage profits.” This has been the firm’s consistent self-description. Back in 2004, a staffer was more frank in testimony: “We are not, by our nature, into holding stocks.”

With such an approach, long-term gains should be forever out of reach.

And yet, Yass and his partners have managed, year after year, to report that the vast majority of their net income came in the form of long-term capital gains. In several recent years, 100% of their income was taxed at the lower rate.

How do they do it?

One strategy, in simplified form, works like this: Make two bets that should move in opposite directions. Think of, say, both betting on and against Coca-Cola’s stock. Towards the end of the year, one bet will be up, and one will be down. At 365 days, the last day a trade is considered short-term, sell the one that’s down. A day later, sell the one that’s up.

Of course, if you consider the trade as a whole, it makes no money. But that isn’t the point. You’ve found a risk-free way to generate two valuable commodities: short-term losses and long-term gains.

On their own, these losses and gains aren’t of much use. But to someone like Yass, who separately generates an enormous pile of short-term gains each year, they work a kind of magic.

That’s because of how taxes are calculated. Short-term and long-term results are accounted for in separate buckets: Short-term losses are applied first to short-term gains. So the losses from the Coke trade reduce the existing pile of short-term gains. The money made from the Coke trade, meanwhile, goes in the long-term bucket.

In the end, the trader has essentially transformed short-term gains into long-term gains, the type taxed at the special lower rate. From 2003 through 2018, the difference between the two rates ranged from 17 to 20 percentage points. So, for every $100 run through this process, the trader would net from $17 to $20 in tax savings.

So why isn’t everyone using this strategy?

Because as laid out here, it would be illegal.

For decades, traders have devised strategies that looked something like the Coke trade, known as a “straddle” because the trader is taking both sides. Over the years, Congress passed laws and the IRS imposed intricate rules to stop them, taking away the tax benefit of simultaneously betting for and against the same stock.

And yet, Yass and his partners built a machine that produced much the same result.

Since 2011, IRS records show, a partnership called Susquehanna Fundamental Investments has been the source of the majority of long-term gains for Yass and his partners. Every year, it channeled hundreds of millions in long-term gains to them, while also providing hundreds of millions in short-term losses.

Year after year, the gains and losses rose and fell roughly in tandem, as if one were a near reflection of the other. In 2015, for example, Susquehanna Fundamental produced $774 million in long-term gains and $787 million in short-term losses for Yass. In 2017 it was $940 million in long-term gains and $902 million in short-term losses.

Regulatory filings give a glimpse of the fund’s trading.

Susquehanna Fundamental has to disclose a snapshot of certain holdings with the Securities and Exchange Commission a few times each year, though many types of trades are exempt from disclosure.

Over several years, the fund’s disclosed positions resembled a complex version of the Coke trade. Instead of betting for and against a single stock, the firm bet for and against the entire market.

Susquehanna Fundamental held billions of dollars of individual stocks such as Google, Wells Fargo and, as it happens, Coca-Cola. These stocks were among the largest companies in the S&P 500 index.

Meanwhile, the fund also held a large bet against the S&P 500. In essence, it held a bet against many of those exact same stocks.

On its face, the fund actually lost money for Yass: Over eight years, it registered $5.4 billion in losses against $5 billion in gains — a net loss before taxes. But by transforming the tax rate on so much income, it delivered $1.1 billion in tax savings, and Yass came out way ahead.

It’s not clear whether the IRS has ever challenged the firm’s trading inside Susquehanna Fundamental Investments.

But the trading pattern has similarities to the 2010 Swiss stock trades, which involved betting for and against the exact same stocks. The IRS deems those to have been illegal under tax law.

Those trades were part of a larger deal worked out by Susquehanna and Morgan Stanley that called for the Philadelphia firm to buy $1.4 billion of the stocks and simultaneously bet against them, court records show. (Morgan Stanley declined to comment.) Over the next three years, the deal kicked out at least $365 million in low-rate income to the firm, while generating massive losses that could be used to wipe out other high-rate income, according to the IRS.

When IRS auditors scrutinized the deal, they found that Susquehanna had violated rules against betting for and against the exact same stocks. The agency demanded the firm pay tens of millions of dollars in back taxes.

Yass and his partners refused, arguing that the firm had broken no rules, and sued the IRS in U.S. Tax Court in 2020. They asserted that the deal was supposed to be profitable and wasn’t primarily intended to avoid taxes. But the firm also acknowledged the deal was tailored with an eye to “tax efficiency.” The case is still pending, with Susquehanna currently resisting requests to turn over more documents.

Susquehanna’s ability to manufacture the right kind of income has helped Yass and his partners minimize their taxes for decades. Since 2001, Yass hasn’t paid over 20% in a single year. In 2005, a year when he made what was for him the modest sum of $66 million, he paid $0 in federal income tax.

For Yass’ primary competitors, the story is far different. Citadel and Two Sigma are both huge firms that, like Susquehanna, do a mix of lightning-fast trading and market making. The heads of these firms, like Yass, reported incomes larger than almost anyone else in the country from 2013 to 2018.

But the tax returns of these Wall Street titans — Ken Griffin from Citadel, and John Overdeck and David Siegel from Two Sigma — have no mystifying source of low-rate income.

They also differ from Susquehanna in another telling respect. These firms voluntarily classify their trading activity as ordinary income, according to ProPublica’s analysis of tax records. Doing this makes sense for a firm that specializes in short-term trading and doesn’t expect to generate many long-term gains. That’s why many high-frequency firms make this “Section 475 election,” as it’s called in the tax jargon. If Susquehanna elected to treat its trading this way, its ability to generate long-term gains would be constrained.

Susquehanna also stands apart in how its taxes are prepared, ProPublica’s records show. Unlike his billionaire peers, Yass does not have his tax returns prepared by outside accountants. Instead, they’re prepared in-house at Susquehanna. Avoiding an outside accountant can offer more leeway in filing returns that test the boundaries of the law and might be challenged by the IRS later on, experts say. Several former employees told ProPublica that details of the firm’s tax strategy are closely guarded, even inside the company.

From 2013 to 2018, Griffin, Overdeck and Siegel paid average income tax rates ranging from 29% to 34%. (Representatives for the three men declined to comment.) Yass averaged 19%. ProPublica estimates that if Yass’ tax returns had resembled those of his competitors, he would have paid $1 billion more in federal income taxes during this period alone.

Yass does have one peer who achieved even lower tax rates and did so for years. Billionaire Jim Simons is one of the founders of Renaissance Technologies, one of the premier hedge funds known for high-frequency trading. His rates were often in the single digits between 2009 and 2018, never exceeding 14%. One reason Simons paid so little are deductions from charitable donations, averaging hundreds of millions of dollars each year; Yass doesn’t give nearly as much to charity. But another reason was Renaissance’s ability to create long-term gains over a decade.

That, however, didn’t last. A 2014 congressional investigation and IRS audit concluded the Renaissance scheme to generate such gains was illegal. Simons himself ultimately paid the IRS at least $670 million to resolve the case. Collectively, fund executives and investors paid an undisclosed amount, reportedly in the billions, in back taxes and penalties. A spokesperson for Simons declined to comment.

Having slashed his income tax bills, Yass has already taken steps to protect his fortune from the government for years to come.

He created special trusts designed to sidestep the estate tax when passing money to heirs at death, court records show. In using these grantor retained annuity trusts, or GRATs, Yass joins dozens of other billionaires, as ProPublica has reported.

That suggests that Yass’ adult children, two of whom work at Susquehanna, stand to someday inherit multibillion-dollar fortunes — tax-free.

Over decades of TV appearances and speeches promoting his libertarian gospel, Milton Friedman often liked to say he was “in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.” Friedman died in 2006. Today, Yass, who reveres the economist, is trying to bring Friedman’s ideas to fruition.

Yass has not only worked assiduously to lower his own taxes but has poured millions into political efforts to eliminate them for his class. In recent years he has given $32 million to the anti-tax stalwart Club for Growth. This money paid for TV ads attacking candidates who were seen as wobbly on Friedman’s tax-cuts-anytime-anywhere philosophy.

In Pennsylvania, where Yass is the richest person in the state and a kingmaker in local politics, his favored candidates have shaped tax policy. He is a longtime financial patron of a Democratic state senator, Anthony Williams, one of the creators of a pair of tax credits that allow companies to slash their state tax bills if they give money to private and charter schools. Susquehanna is, in turn, a major user of the tax credits. (Williams did not respond to requests for comment.)

The programs limited the state tax credits a single company could receive, but Yass and the others found a way to sidestep the limits. Yass, Dantchik and Greenberg simply applied for the tax credits through individual companies each had formed, the Philadelphia Inquirer reported in 2015. In all, the credits have saved Yass and the others at least $53 million in state taxes, records show.

Yass’ views on taxes, along with another stance inspired by Friedman, school privatization, seem to have informed his shifting opinion of Donald Trump.

Yass had opposed Trump during the 2016 Republican presidential primary, instead donating large sums to Rand Paul of Kentucky, the de facto leader of the party’s libertarian wing, and to Libertarian Party nominee Gary Johnson.

A week after Trump won the presidency that November, Yass took the stage at a theater in Philadelphia. Even though Trump had not been his candidate, Yass seemed to relish the long-odds election win, joking that those who “didn’t like Tuesday’s results” could move to Canada.

He used the rest of his remarks at the event, part of a local TED Talk-style series, to promote his passion for charter and private schools and attack Philadelphia teachers. “All we ever hear about is how underpaid they are and how abused they are,” Yass said. “Well, the shocking fact is that the average school teacher in Philadelphia with benefits makes $117,000 a year.” Yass acknowledged that a large chunk of that figure was from pension and health care costs. (That year, Yass made $1.26 billion, before benefits.)

Over the next four years, Trump delivered both a historic tax cut for the rich and an education secretary who was a champion of charter schools.

Yass has since backed a range of pro-Trump candidates. In Pennsylvania, he has poured money into this year’s Republican effort to take the open gubernatorial seat, which many expect, if successful, will lead to an abortion ban in the state. The Club for Growth also backed a losing candidate for the state’s open U.S. Senate seat, Kathy Barnette, whose campaign centered on her hard-line opposition to abortion, even in cases of rape. Yass is the second biggest donor to the Club (which did not return ProPublica’s requests for comment).

He is also the largest donor to the Rand Paul-affiliated Protect Freedom PAC, giving $2.5 million of his more than $12 million in recent donations just days after the 2020 election. The group’s website says of Democrats: “Of course, they stole the election.”

Yass is looking to harness discontent with public schools during the pandemic to push privatization of the system. He has given $15 million as the sole funder of a political action committee, the School Freedom Fund, that says “school closures, mask mandates, critical race theory, and more” have created “a unique opportunity to promote School Choice as the structural solution to dramatically improve education in America.”

If Yass came to politics motivated by his libertarian ideology, he now has an acute material reason — beyond taxes — to have a voice in Washington.

Late in the Trump administration, Susquehanna’s prize investment came under threat. President Trump announced on July 31, 2020, that he was considering banning TikTok in the United States. (Backers of the ban cited national security concerns over Americans’ private data being controlled by the Chinese firm behind the app, ByteDance.) Susquehanna's multibillion-dollar stake in ByteDance accounts for a major part of Yass’ fortune.

There’s no record of Yass having given to Trump before. But on Aug. 4, 2020, just a few days after the president’s TikTok announcement, Yass gave $5 million to the Club for Growth. Two days later, the group deviated from its normal practice of funding congressional races and announced an ad campaign in the presidential race: $5 million against Joe Biden. The group didn’t mention Yass, but the ads attacked Biden on Yass’ pet issue, charter schools. Later that month, Yass gave the group another $5 million, and more ads ran against Biden.

At the same time, Trump and other administration officials were personally involved in trying to broker a deal to avoid finalizing the TikTok ban. At one point in September, Trump publicly announced his support for a deal in which U.S. companies would buy stakes in ByteDance and a new board would be formed. Among the proposed members of the board: Dantchik, Yass’ partner at Susquehanna.

It’s not clear if Yass or Dantchik talked to the White House about the deal, which ultimately fell through. Courts later blocked the proposal to ban the app.

Yass hasn’t spoken much publicly about how he thinks about his engagement in politics. A rare glimpse came after the Jan. 6 riot, when a Philadelphia political activist named Laura Goldman emailed Yass to question his donations to the Club for Growth. One of the candidates the group backed, Sen. Josh Hawley, R-Mo., had objected to certifying the presidential election results just days earlier.

“To be clear — I don’t think the election was stolen,” Yass responded in a Jan. 15, 2021, email, first reported by the Guardian. “I gave the club money a year ago. Do you think anyone knew Hawley was going to do that? Sometimes politicians deceive their donors.”

Yass appears to have overcome any doubts about the Club for Growth, which has continued to back candidates who say the election was stolen.

Since he sent that email, he has given the group another $5.5 million.

It's well known, at least among tax lawyers and accountants for the ultrawealthy: The estate tax can be easily avoided by exploiting a loophole unwittingly created by Congress three decades ago. By using special trusts, a rarefied group of Americans has taken advantage of this loophole, reducing government revenues and fueling inequality.

There is no way for the public to know who uses these special trusts aside from when they've been disclosed in lawsuits or securities filings. There's also been no way to quantify just how much in estate tax has been lost to them, though, in 2013, the lawyer who pioneered the use of the most common one — known as the grantor retained annuity trust, or GRAT — estimated they may have cost the U.S. Treasury about $100 billion over the prior 13 years.

As Congress considers cracking down on GRATs and other trusts to help fund President Joe Biden's domestic agenda, a new analysis by ProPublica based on a trove of tax information about thousands of the wealthiest Americans sheds light on just how widespread the use of special trusts to dodge the estate tax has become.

More than half of the nation's 100 richest individuals have used GRATs and other trusts to avoid estate tax, the analysis shows. Among them: former Democratic presidential candidate Michael Bloomberg; Leonard Lauder, the son of cosmetics magnate Estée Lauder; Stephen Schwarzman, a founder of the private equity firm Blackstone; Charles Koch and his late brother, David, the industrialists who have underwritten libertarian causes and funded lobbying efforts to roll back the estate tax; and Laurene Powell Jobs, the widow of Apple founder Steve Jobs. (Powell Jobs' Emerson Collective is among ProPublica's largest donors.)

More than a century ago amid soaring inequality and the rise of stratospherically wealthy families such as the Mellons and Rockefellers, Congress created the estate tax as a way to raise money and clip the fortunes of the rich at death. Lawmakers later added a gift tax as a means of stopping wealthy people from passing their fortunes on to their children and grandchildren before death. Nowadays, 99.9% of Americans never have to worry about these taxes. They only hit individuals passing more than $11.7 million, or couples giving more than $23.4 million, to their heirs. The federal government imposes a roughly 40% levy on amounts above those figures before that wealth is passed on to heirs.

For her part, Powell Jobs has decried as “dangerous for a society" the early 20th century fortunes of the Mellons, Rockefellers and others. “I'm not interested in legacy wealth buildings, and my children know that," she told The New York Times last year. “Steve wasn't interested in that. If I live long enough, it ends with me."

Nonetheless, after the death of her husband in 2011, Powell Jobs used a series of GRATs to pass on around a half a billion dollars, estate-tax-free, to her children, friends and other family, according to the tax records and interviews with her longtime attorney. By using the GRATs, she avoided at least $200 million in estate and gift taxes.

Her attorney, Larry Sonsini, said Powell Jobs did this so that her children would have cash to pay estate taxes when she dies and they inherit “nostalgic and hard assets," such as real estate, art and a yacht. (At 260 feet, Venus is among the larger pleasure ships in the world.) Without the $500 million or so passed through the trusts, he said, Powell Jobs' heirs would have to sell stock that she intends to give to charity to pay her estate tax bill.

Sonsini said Powell Jobs, whose fortune is pegged at $21 billion by Forbes, has already given billions away to charity and paid $2.5 billion in state and federal taxes between 2012 and 2020. “When you look at an estate that may be worth multiple billions, and all the rest is going to charity, and you put it in perspective, what is the problem we're worried about here?" Sonsini asked. “This is not about creating dynasty wealth for these kids."

In a written statement, Powell Jobs said she supports “reforms that make the tax code more fair. Through my work at Emerson Collective and philanthropic commitments, I have dedicated my life and assets to the pursuit of a more just and equitable society."

Others whose special trusts ProPublica identified, including Bloomberg and the Kochs, declined to comment on why they'd set up the trusts or their estate-tax implications. Representatives for Lauder didn't respond to requests to accept questions on his behalf. Schwarzman's spokesperson wrote that he is “one of the largest individual taxpayers in the country and fully complies with all tax rules."

A typical GRAT entails putting assets, like stocks, in a trust that ultimately benefits a person's heirs. The trust pays back an amount equal to what the trust's creator put in plus a modest amount of interest. But any gains on the investments above that amount flow to the heirs free of gift or estate taxes. So if a person puts $100 million worth of stock in a GRAT and the stock rises in value to $130 million, their heirs would receive about $30 million tax-free.

In 1990, Congress accidentally created GRATs when it closed another estate tax loophole that was popular at the time. The IRS challenged the maneuver but lost in court.

“I don't blame the taxpayers who are doing it," said Daniel Hemel, a professor at the University of Chicago Law School. “Congress has virtually invited them to do it. I blame Congress for creating the monster and then failing to stop the monster once it became clear how much of the tax base the GRAT monster would eat up."

Users of the trusts extend well beyond the top of the Forbes rankings, ProPublica's analysis of the confidential IRS files show. Erik Prince, founder of the military contractor Blackwater and himself heir to an auto parts fortune, used the shelter. Fashion designer Calvin Klein has used them, as have “Saturday Night Live" creator Lorne Michaels and media mogul Oprah Winfrey.

“We have paid all taxes due," a spokesperson for Winfrey said. A representative of Klein did not accept questions from ProPublica or respond to messages. A spokesman for Michaels declined to comment.

Prince also did not answer questions. “Hey if you publish private information about me I'll be sure to return the favor," he wrote. “Go ahead and fuck off."

The GRAT has become so ubiquitous in recent decades that high-end tax lawyers consider it a plain vanilla strategy. “This is an off-the-shelf solution," said Michael Kosnitzky, co-leader of the private wealth practice at law firm Pillsbury Winthrop Shaw Pittman. “Almost every wealthy person should have one."

ProPublica's tally almost certainly undercounts the number of Forbes 100 members who use shelters to avoid estate taxes. ProPublica counted only those people whose tax records or public filings explicitly mention GRATs or other trusts commonly used to dodge gift and estate taxes. But a wealthy person can call their trusts whatever they want, leaving plenty of trusts outside of ProPublica's count.

This month, the House and Senate are hammering out proposals to raise revenue to help pay for the Biden administration's plans to expand the social safety net. The legislative blueprint released by House Ways and Means Committee Chairman Richard Neal, D-Mass., would defang GRATs and other trusts, which would still be legal but no longer be as useful for estate tax avoidance. If the provision makes it into law, “it would put a major dent in GRATs," said Bob Lord, an Arizona attorney who specializes in trusts and estates.

Senate Budget Committee Chairman Bernie Sanders, I-Vt., has proposed going further in undercutting estate tax avoidance tools. But the prospect of any reform is uncertain, as Democrats on Capitol Hill struggle to find the votes to pass the package of spending and tax changes.

GRATs are commonly described by tax lawyers as a “heads I win, tails we tie" proposition. If the investment placed in the GRAT soars in value, that increase passes to an heir without being subject to future estate tax. If the investment doesn't go up, the wealthy person can simply try again and again until they succeed, leading many users to have multiple GRATs going at a time.

For example, Herb Simon, founder of the country's biggest shopping mall empire and owner of the Indiana Pacers, was one of the most prolific GRAT creators in records reviewed by ProPublica. Since 2000, he has hatched dozens of the trusts, often more than one a year. In an interview with The Indianapolis Star in 2017, the octogenarian Simon said, “It's always a big tax problem" for the next generation when someone dies, “but we've worked that tax problem. We won't have a problem with that."

A spokesperson for Simon didn't respond to questions for this article.

Mentions of these trusts have periodically surfaced in the press after being disclosed in securities filings, as was the case with trusts held by Facebook co-founders Mark Zuckerberg and Dustin Moskovitz and Chief Operating Officer Sheryl Sandberg. In 2013, Bloomberg News published a groundbreaking series on GRATs, mining securities filings and other records to reveal how the mega-rich, including casino magnate Sheldon Adelson and such families as Walmart's Waltons, had perfected the use of the device.

ProPublica's data shows that Michael Bloomberg, the majority owner of the company that bears his name and No. 13 on Forbes' list of the wealthiest Americans, is himself a heavy user of GRATs. Over the course of a dozen years, he repeatedly cycled pieces of his private company in and out of the trusts — often opening multiple GRATs in one year. During that time, hundreds of millions of dollars in income flowed through Bloomberg's GRATs, giving him opportunities to shield parts of his fortune for his heirs.

ProPublica described the transactions (but not the name of the person engaging in them) to Lord, the trusts and estates attorney. The GRAT is “the perfect loophole to avoid estate and gift tax in this situation," said Lord, who is also tax counsel for Americans for Tax Fairness and an advocate for estate tax reform.

When Bloomberg ran for president in 2020, he vowed to shore up the estate tax. “Owners of the biggest estates are expert at gaming the system to reduce what they owe," a campaign fact sheet for his tax plan said. Bloomberg vowed to “lower the estate-tax threshold, so that more estates are taxed," and to “shut down multiple estate-tax avoidance schemes." His fact sheet offered few details as to how he would do that, and it didn't mention GRATs.

The legislation Congress is now considering to curtail GRATs would leave open other options for estate tax avoidance, including a cousin to the GRAT known as a charitable lead annuity trust, or CLAT, which contributes to charity while passing gains from stocks and other assets on to heirs. And the legislation would grandfather in existing trusts, meaning that those who have already established trusts would be able to continue to use them to avoid paying estate taxes.

That has set off a predictable push by tax lawyers to get their clients to create tax-sheltering trusts before any new legislation takes effect.

Porter Wright, a law firm that offers estate planning services, told existing and potential clients it was “critical" to evaluate opportunities because “the window may close very soon. There are important and time sensitive issues which could substantially impact the amount of wealth you are able to transfer free of estate and gift tax to future generations."

Legislation currently making its way through Congress would take a sledgehammer to the massive individual retirement accounts built up tax-free by a select group of the ultrawealthy.

The proposal, which is part of the infrastructure and tax package advancing in the House, targets the jaw-dropping IRAs accumulated by multimillionaires and billionaires such as tech investor Peter Thiel, which were first reported by ProPublica earlier this year. Those accounts — Thiel's alone was worth $5 billion in 2019 — have allowed some super-wealthy Americans to turn their Roth IRAs, tools meant to incentivize middle-class retirement saving, into supersized tax shelters.

The proposed reform, put forward by House Ways and Means Chairman Richard Neal, D-Mass., would effectively cap the total amount someone could hold in a Roth at $20 million and compel the holders of the giant accounts to withdraw anything over that limit. Separately, individuals would have to add up the balances of their retirement accounts — including Roths, traditional IRAs, 401(k)s and 403(b)s — and every year withdraw half of any amount over $10 million. The provisions would only apply to individuals with taxable income of over $400,000 or couples making over $450,000.

The reform wouldn't affect the overwhelming majority of Americans, whose retirement savings (if they have any) are far more modest — the average Roth was worth just $39,108 at the end of 2018.

“Incentives in our tax code that help Americans save for retirement were never intended to enable a tax shelter for the ultra-wealthy," Neal said earlier this year. “We must shut down these practices."

Should the bill pass, it could have profound implications for PayPal founder Thiel, whose gargantuan Roth stunned lawmakers, spurring Neal to vow a crackdown. Thiel wouldn't owe any tax up front and no early withdrawal penalties would apply, but he'd be required to move billions out of the tax-advantaged account. And any gains on investments made with that money would no longer be sheltered from taxes, potentially creating hundreds of millions of dollars in future tax liabilities.

The great appeal of the Roth IRA is that once money is inside it, any income generated — such as capital gains from selling a stock, investment interest or dividends — is tax-free, as long as the holder waits until he or she is 59 and a half to withdraw it. (Thiel hits that mark in 2027.) In a traditional IRA, by contrast, money that's withdrawn counts as income and is taxed.

The IRA reforms are part of a slate of proposals designed to eliminate loopholes and boost tax rates on rich individuals and corporations.

Several of the changes address revelations contained in The Secret IRS Files, a series of ProPublica stories published this year that are exploring the ways the very richest Americans avoid paying taxes. Usually such efforts remain secret, but ProPublica has obtained a trove of tax records covering thousands of the country's richest people. The records reveal not only the diverse array of tax-avoidance techniques used by the rich, but also that some of the very richest have consistently found ways to avoid taking income, so they pay little or no taxes, even as their wealth multiplied to historic levels.

The current House plan falls short of President Joe Biden's more ambitious proposals to combat wealth inequality through the tax code. But experts say it would significantly increase the taxes paid by high-income Americans. Among other things, it would all but eliminate a major deduction created by President Donald Trump's 2017 tax law that, as ProPublica recently reported, showered massive tax breaks on some of the richest families in the country.

Given the stakes for a small group of wealthy and powerful Americans, it's unclear whether the IRA proposal, along with the rest of the package, will become law. It must pass the House and make it through the Senate, where it will likely need the votes of all 50 Democratic senators to pass. Capitol Hill staffers say the bill remains fluid and provisions could still be cut, added or modified.

For now, however, the proposal has alarmed those who stand to lose the most. Three tax lawyers told ProPublica that clients with giant IRAs have reached out to them, worried about the potential reforms. Already a lawyer and an accountant are offering a paid webinar that pitches strategies to help owners of large IRAs get around the proposed rules.

A spokesman for Thiel didn't respond to a request for comment.

The tax proposals have drawn opposition from Republicans on Capitol Hill. “This is very bad news for the U.S. economy," said Ways and Means Committee ranking member Rep. Kevin Brady, R-Texas, in an interview this week.

A budget analyst at the anti-tax Heritage Foundation specifically criticized the IRA reform proposals as “stifling retirement savings and decreasing the economy-wide investment in future productivity."

Neal announced his plans to curb the size of mega IRAs in July following ProPublica's story revealing how Thiel and other billionaires had amassed giant retirement accounts using techniques largely unavailable to most taxpayers. Other wealthy investors with giant retirement accounts included financier Michael Milken, Warren Buffett and executives from investment giant Bain Capital.

Neal joined his Senate counterpart, Ron Wyden, D-Ore., who had been pushing for reform of mega IRAs for years without much support from his peers.

With a multibillion-dollar tax-free account on the line, a wealthy investor might try to keep his income below the $400,000 threshold set by the proposal. In Thiel's case, it's not clear if that would be possible, given that he's long reported tens of millions of dollars on his tax returns from capital gains, interest and dividends on investments he holds outside of his Roth IRA. And even if he has to withdraw billions from his Roth, he will never have to pay taxes on years of growth inside the account.

ProPublica has previously reported that several billionaires have had very little taxable income in certain years, including Jeff Bezos and Elon Musk. Musk did not respond to questions for that story and Bezos' representatives would not designate someone to accept questions related to that story.

The proposal would also add restrictions in areas that congressional investigators have said are ripe for abuse by the wealthy: The owners of IRAs would be barred from using the accounts to either purchase certain nonpublic investments or buy stakes in companies in which they are an officer.

Thiel launched his Roth IRA by purchasing so-called founder's shares of PayPal in 1999 when he was chairman and CEO of the company, according to tax records and a financial statement Thiel included in his application for residency in New Zealand. Securities and Exchange Commission records show he bought 1.7 million shares for $1,700, or a tenth of a penny per share. (The maximum contribution to a Roth that year was $2,000.) PayPal later told the SEC the shares were sold “below market value."

The practice has become popular among the founders of Silicon Valley companies, who tuck shares of their startups into IRAs, often after buying them at bargain prices. This can sidestep IRA contribution limits and generate massive tax-free growth if the value of their companies explodes.

The proposal would also shut down the so-called backdoor Roth. ProPublica found that billionaires like Buffett had taken advantage of a maneuver, known as a conversion, that allows the wealthy to sidestep existing income caps to create a Roth IRA. In a conversion, the owner of a traditional IRA can transform it into a Roth by paying one-time tax on the money. Once the account is converted into a Roth, no additional income taxes are ever due. The new provision would bar conversions for individuals with income over $400,000, though the ban would not go into effect until 2031 for budgetary reasons. (Buffett previously didn't respond to questions about his IRA.)

The proposal also has implications for the holders of giant traditional IRAs, who could suddenly owe a hefty tax bill. Money withdrawn from a traditional IRA counts as taxable income. Milken, the 1980s junk bond king who went to prison for fraud and was later pardoned by Trump, had traditional IRAs valued at $509 million at the end of 2018, according to tax records. If the law passed, Milken could face a tax bill of roughly $100 million, depending on the current size of his account. A spokesperson for Milken declined to comment.

Separately, another part of the bill would tackle the generous business income deductions granted by Trump's 2017 tax law.

As ProPublica previously reported, the drafting of the deduction was marked by last-minute changes and a rush of lobbying dollars from corporations and the superrich. The result of its passage, confidential tax records show, was a windfall for billionaires such as media mogul Michael Bloomberg, packaging tycoons Dick and Liz Uihlein, and the Bechtel family, owners of a global engineering and construction firm.

Bloomberg received a deduction of roughly $183 million in 2018 alone as a result of the provision, while the Uihleins netted around $118 million.

Under the House proposal, the deduction would be capped at $400,000 for an individual and $500,000 for a couple, virtually wiping it out for the very rich. If such a cap had been in place in 2018, for example, the Uihleins would have gotten a deduction worth just $500,000 instead of $118 million. A competing Senate proposal unveiled by Wyden in July would go even further. A spokesperson for the Uihleins declined to comment on the proposed reforms.

On a broader level, the House plan would spell a significant tax hike on Americans earning more than $400,000, raising their individual income tax rates as well as bumping up the corporate tax rate, the first such hikes in a decade.

But despite the proposal's ambition, critics say it misses a rare opportunity to capture the massive untaxed wealth of some of the richest individuals in history, including Bezos and Musk, who have often found ways to keep their income low.

As ProPublica reported, they and other billionaires have managed to pay little to no taxes in the past. Some have done so by pursuing the so-called buy, borrow, die strategy. By holding on to his Tesla stock but borrowing money to finance his lifestyle, Musk, for example, can avoid income that is taxable under current law. If he sticks to this strategy till death, the income tax liability on his fortune will evaporate for his heirs.

Some Democrats and policymakers had aspired to even bolder tax code changes that would have targeted the stratospheric increases in the ultrawealthy's riches. One idea, championed by Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., would be to levy a so-called wealth tax on billionaires' overall holdings. Another, pushed by Wyden, would tax the annual gains billionaires logged, even if they hadn't sold the assets. Both ideas foundered, with concerted opposition from billionaires and skittishness from Democratic centrists. Some critics point out that wealth taxes have often failed in other countries. And many policymakers believe it would be too logistically difficult to measure assets properly and enforce such a sweeping rule on gains.

In the months after President Donald Trump signed the Tax Cuts and Jobs Act in December 2017, some tax professionals grew giddy as they discovered opportunities for their clients inside a law that already slashed rates for corporations and wealthy individuals.

At a May 2018 conference of financial advisers, one wealth planner told the room that a key provision of the new law “leaves a gaping hole in the tax code." As he put it, “The goal by the end of the presentation today is to make you guys the bus drivers, or the truck drivers, to drive right through that hole with your clients."

Among the tax-saving opportunities offered by the law: Taxes on profits from certain types of businesses were cut dramatically, while the rate on salaries those businesses paid was reduced only slightly.

That created an alluring opportunity. People who were both owners and employees of a company could make the same amount of money but change how they label it, by lowering their salaries and in turn increasing the company's profits, which they shared in. That would reduce their tax bill by moving money from a high-tax category to a lower one: Wages are taxed at a top rate of 37% plus an additional 3.8% Medicare levy, while profits, under the new law, are taxed at a top rate of 29.6% (with no Medicare tax). Proponents of this provision claimed it would foster increased investment in American businesses (economists say it's too early to determine whether that's true). But even before the bill passed, prominent tax academics warned, in an article titled “The Games They Will Play," that the tax break would be abused.

Their fears appear to have materialized. Secret IRS data shows multiple instances in which salaries for top executives and owners suddenly and inexplicably dropped in the first year after the Trump tax cut, reducing their tax bills even as their companies appeared to thrive. The mysterious pay cuts played out across industries, from logistics companies to real estate firms to makers of bathtubs, and among executives of varying degrees of prominence. The salary for one construction firm executive dropped from more than $4 million in 2017 to $105,000 in 2018.

The wages for car accessory manufacturer David MacNeil, whose WeatherTech floor mats are featured in a Super Bowl ad each year, fell from $68 million in 2017 to $47 million in 2018.

The salary of Jeffrey Records, CEO of Oklahoma City-based MidFirst Bank, plummeted from $8.6 million to $1.8 million.

And the wages of Dick Uihlein, the Republican megadonor and chairman of shipping supplies behemoth Uline, sank from $5.1 million to $2.1 million.

It's impossible to say how much money was reclassified as a result of the new law, but consider this: The loophole already existed, in much smaller form, before the Trump tax overhaul. A government report in 2009 estimated the U.S. Treasury was losing billions to this strategy. Back then, an owner could save the Medicare tax by counting a dollar as profits rather than salary. But after the Trump law, the tax savings roughly tripled, to about 11%.

The revelations about the wage maneuvers come from a trove of IRS records obtained by ProPublica covering thousands of the wealthiest Americans. Previous articles in “The Secret IRS Files" series have detailed how the wealthy avoid paying taxes legally, including a story last week exploring the massive benefits the Trump tax overhaul provided billionaires.

The sudden shifts in compensation revealed in the tax returns of wealthy business owners show how they may be gaming federal law to further slash their taxes. They also highlight how, unlike most Americans, whose taxes are automatically taken out of each paycheck, wealthy business owners have a menu of avoidance techniques afforded to them by the tax code.

The tax benefits of shifting wages to profits can be significant. MacNeil, for example, saved an estimated $8 million in the first two years, according to a ProPublica analysis of the IRS records.

MacNeil defended his wage drop and said he used the tax savings to create more jobs: “You want me investing in my country — my fellow Americans? Get out of my pocket."

ProPublica analyzed years of wage and profit data and found that for each of the companies named in this story, company profits rose even as wages were cut.

Unlike publicly traded corporations, private companies are not required to publicly report profits, salaries for top executives or their rationales for compensation decisions. But experts who spoke to ProPublica said that, if audited, these executives would have to justify why the value of their labor plunged in a given year. The secret tax data does not answer that question.

Taking an unreasonably low salary in order to avoid taxes is illegal. But the IRS' definition of “reasonable" is vague, and the vast majority of business owners will likely never have to justify the salary cuts. Only a tiny fraction of such companies have their salaries examined by the IRS. Karen Burke, a tax law professor at the University of Florida, said, “For a business owner, there's every incentive to do this and every reason to believe you'll get away with it."

David MacNeil enjoys being the boss. A table reserved for him at the cafeteria of his sprawling production plant has a placard that warns: “Don't even think about sitting here." He compliments one of his 1,700 employees about the company pickup truck he's driving, then adds, “It's mine." As he walks among the whirring machines pumping out his custom car mats, he revels in the fact that he built a flourishing manufacturing empire without offshoring, creating hundreds of jobs.

“This is why they give us a tax break," he said, “so we can make shit happen."

After ProPublica contacted him, MacNeil invited two reporters for a daylong tour of his factory complex in Bolingbrook, Illinois. A former car salesman, he founded WeatherTech, a top U.S. manufacturer of car accessories, in 1989 and now regularly generates $100 million in annual profit. MacNeil owns a super-yacht, a private jet, a Florida equestrian estate and a collection of antique cars.

He describes himself as “the kind of man America needs, a man that believes in the great American worker." As he led the tour of his plant, he took his phone out to read emails from employees praising his generosity and showed photos of himself removing trash from the ocean in his free time.

MacNeil backed Trump, donating $1 million to his inauguration and hundreds of thousands to Republican candidates and causes. Trump's tax law would have cut the magnate's taxes no matter what. But the IRS records indicate MacNeil may have taken steps to further boost those savings.

For 16 years, the records show, MacNeil's wages climbed every year: from $1.1 million in 2008 to $10.1 million in 2012 and almost $68 million in 2017. But in 2018, that trend suddenly reversed. He cut his salary to $47 million. Then in 2019, he slashed it even more aggressively, bringing it down to $17 million — 75% lower than two years earlier.

MacNeil's CEO title hadn't changed. He hadn't stepped back. “I bust my ass seven days a week," he said.

As MacNeil's salary fell, the company's profits, which are taxed at a lower rate, surged. In 2018, after four years in which profits hovered around $100 million a year, they suddenly jumped to $121 million. The $21 million increase mirrored the amount that MacNeil lowered his wages that year.

With his (higher-taxed) wages dropping and his (lower-taxed) profits rising, MacNeil avoided an estimated $8 million in taxes.

MacNeil first said he was unaware that his wages had been cut 75% until ProPublica asked him about it. “I had no idea," he said, asserting the decision was made by his accountants. Later, MacNeil told ProPublica that his wage decrease stemmed from his decision to begin reinvesting almost all of his profits back into the company, leaving him less cash to pay himself in wages.

Experts told ProPublica that increased capital investments by an owner could help justify lower wages, if they result in the owner having less cash left over.

Still, the tax data shows MacNeil's profits soaring during the years his wages dropped. The data does not indicate how much money MacNeil put back into the business. Asked to provide specific figures outlining his annual cash flow and reinvestment, MacNeil declined.

MacNeil also cited the vagueness of the IRS' definition of “reasonable compensation." Most important, he said, the estimated $8 million in taxes he avoided by dropping his wages allowed him to buy an $8 million machine that would generate many multiples of that in tax revenue in the years to come, because it would make his business more profitable.

In a series of text messages in the days that followed, MacNeil continued to defend himself, telling a ProPublica reporter that he didn't understand “the real world" and “it's time to grow up and get a real job."

“Break it up anyway you want, you saw there was a half billion dollars in investment with your own eyes," he wrote. “We've paid hundreds and hundreds of millions of dollars in taxes since 2012. How much have you paid? Chump change for sure. Enjoy!"

MacNeil's company, like all of the ones discussed in this article, is organized as a pass-through, a tax structure that is quite common but not popularly understood.

To understand pass-throughs, it's first useful to know how their corporate cousin, the C corporation, is taxed. Most large publicly traded companies, the ExxonMobils and Nikes of the world, are C corporations. When these companies end the year, they must pay the IRS corporate income tax on any profits they have earned. Shareholders receive money, and then owe taxes, only if they decide to sell their holding at a gain or if the companies issue a dividend.

Most businesses in the U.S. are not C corporations, but pass-throughs. They include everything from a small corner deli to a hedge fund to a multinational construction company. Most are privately held. When one of these businesses makes a profit, they do not pay the corporate tax. Instead, that money “passes through" directly to the owner and is reflected on the owners' personal tax returns. It is therefore taxed only once, and individual income tax rates apply.

One popular type of pass-through is called an S corporation, named after the section in the tax code. They were created in the Eisenhower era as an option for small businesses who wanted to face only a single layer of tax. Since then, many large companies have structured themselves as S corporations for the tax benefits they can bring.

The IRS requires that S corporations pay reasonable salaries — they “should not attempt to avoid paying employment taxes by having their officers treat their compensation as cash distributions" — but the agency has been vague about what those words mean. Factors cited for what makes a salary reasonable include the individual's training and experience, job responsibilities and what comparable businesses pay for similar roles.

To offer more clarity, the IRS has publicly cited court cases it fought against business owners. In one, from 2001, a Pennsylvania veterinarian took all of his compensation as business income, paying himself no wages even though he spent more than 30 hours a week doing surgeries and other tasks. The veterinarian lost and was forced to pay back taxes.

In another case, an Iowa accountant was paid a salary of $24,000 a year, while taking profits of about $200,000. The accountant, David Watson, specialized in advising clients on tax issues involving pass-through companies. The court ruled against Watson, forcing him to pay back taxes and penalties, after it found that the market rate for his services at the time would have been over $90,000.

The issue has at times become a more public flashpoint. Former Democratic presidential nominee John Edwards was criticized for taking a small salary from the law practice he owned, and former Republican House Speaker Newt Gingrich took heat for doing the same from companies he created that profit from his speeches and other appearances. More recently, The Wall Street Journal reported that Joe Biden exploited the tactic in the years before he became president with his book and speech income. Gingrich, Edwards and Biden have all defended their handling of their tax affairs.

A 2009 report from the Government Accountability Office estimated that in 2003 and 2004, about 13% of S corporations paid artificially low wages, resulting in about $3 billion in lost tax revenue. IRS officials complained to investigators that making the case that a salary is artificially low can be difficult and time consuming. From 2006 to 2008, the IRS examined only 0.5% of S corporations, and in less than a fourth of those cases was compensation looked at. By 2019, the audit rate for S corporations had fallen even lower, to 0.2%.

As the Trump tax cut was being hammered out, lobbyists for industry groups and specific companies pushed to make sure they were eligible. Engineering, real estate and manufacturing were granted the deduction. Lawyers and companies performing “financial services," for example, were not.

Despite that, banks lobbied successfully to be eligible for the deduction. One of the banks that pushed for that eligibility was MidFirst. That year, even as the CEO's salary dropped from $8.6 million to $1.8 million, his share of the profits jumped more than $16 million. In 2019, Records' salary rebounded to $6.5 million, but it remained lower than it had been in the year before the Trump tax law.

Representatives for Records declined to answer questions for this article.

Dick and Liz Uihlein also appear to have benefited. The co-founders of Uline gave millions to support Sen. Ron Johnson, the Wisconsin Republican who became the champion of the pass-through provision in the Trump tax overhaul.

Before the law passed, the salaries for the Uihleins had fluctuated. But in 2018 they dropped dramatically, from a total of $10.5 million to $4.2 million. Their wages had not been that low in more than a decade.

The business reasons for the pay cut are not clear from the available records, and a spokesman for the Uihleins declined to answer questions from ProPublica. Dick remained chairman, and Liz was president. Liz Uihlein said publicly in 2020 that the couple was still heavily involved in running the company.

Their business was booming in the year their wages fell. Profits rose from about $721 million in 2017 to $937 million in 2018, ProPublica's analysis of the company's tax data shows. The company remained North America's leading distributor of shipping and packaging supplies. “Business is great," Uline's Chief Human Resources Officer Gil De Las Alas told the Kenosha News in November 2018. “We just keep growing, growing, growing."

Two members of Congress who have long been responsible for shaping federal laws on retirement savings are considering major reforms after ProPublica exposed how the ultrawealthy are turning retirement accounts into gargantuan tax shelters.

Rep. Richard Neal, the Massachusetts Democrat who chairs the powerful House Ways and Means Committee, told ProPublica that he has directed the committee to draft a bill that “will stop IRAs from being exploited."

The committee is considering “limiting the total amount of money that can be saved in tax-preferred retirement accounts," Neal said in a written statement.

“Incentives in our tax code that help Americans save for retirement were never intended to enable a tax shelter for the ultra-wealthy," Neal said. “We must shut down these practices."

In addition, Sen. Ben Cardin, a Maryland Democrat who has co-authored a series of changes to retirement savings laws in the past decade, is also in favor of reforms that his spokesperson said would “prevent the type of massive abuses exemplified by the ultra-wealthy."

But provisions lurking deep in unrelated legislation currently wending its way through Congress could undermine those efforts.

In its June 24 story, ProPublica detailed that one technique investors have used to sock hundreds of millions of dollars — even billions — away in their IRAs is to fill the accounts with bargain-basement shares in companies that are not publicly traded, so they have no clear valuation. Then, when the companies go public or are sold, their accounts explode in value — with all of the gains tax-free.

Cardin's spokesperson told ProPublica that the senator now supports banning such transactions, which would be one of the biggest reforms in decades to the rules governing the accounts. The Internal Revenue Service recommended a similar change more than a decade ago. Congressional investigators wrote that an IRS team in 2009 had suggested “limiting the types of investments IRAs can make to publicly traded or otherwise marketable securities with a readily ascertainable fair market value."

Cardin is “considering reforms, such as banning the use of IRAs to purchase nonpublic investments," calling it “a good starting point while protecting IRAs for every day Americans to save for their retirement," his spokesperson wrote in an email.

The growing interest in changing the system gives momentum to the plans of Oregon Sen. Ron Wyden, chair of the Senate Finance Committee, who last month declared that he was eyeing a similar crackdown on giant IRAs.

Wyden's move came after ProPublica detailed how the Roth IRA, a ho-hum retirement account designed to help the middle class save for retirement, had been hijacked by the ultrawealthy, who used it to create gigantic onshore tax shelters. Tax records obtained by ProPublica revealed that Peter Thiel, a co-founder of PayPal and an early investor in Facebook, had a Roth IRA worth $5 billion as of 2019. As long as Thiel waits until he is six months shy of his 60th birthday, he will be able to withdraw his fortune tax-free.

Thiel made an end run around the strict limit on what can be put into a Roth IRA by purchasing so-called founders' shares of PayPal in 1999 when he was chairman and CEO of that company, according to tax records and a financial statement Thiel included in his application for citizenship in New Zealand. Securities and Exchange Commission records show Thiel bought 1.7 million shares for $1,700 — a price of a tenth of a penny per share. PayPal later told the SEC that the shares were among those sold at “below fair value."

When PayPal took off and Thiel's shares ballooned in value, he sold them and used the proceeds — still within his Roth — to invest in other startups, including Facebook, long before they went public, according to court records and Thiel's financial statement filed in New Zealand. He never had to make another contribution to his Roth again. The account's stratospheric growth all stemmed from a private stock deal available only to a handful of people.

This is the type of nonpublic IRA investment that Cardin is considering banning. A spokesperson for Thiel did not respond to requests for comment.

But this new appetite for reining in the accounts may be too late to slow contrary bipartisan legislation already rolling through Congress. Buried deep inside two complex and sweeping bills — each more than 140 pages long — are provisions that could make it harder for the IRS to crack down on the ultrawealthy who dodge tax rules.

Those bills, paradoxically, are co-sponsored by Cardin and Neal, two of the lawmakers who are now calling for reining in giant retirement accounts.

The House and Senate bills were introduced before ProPublica launched its ongoing series last month exposing how the country's richest citizens sidestep the nation's income tax system. ProPublica has obtained IRS tax return data on thousands of the wealthiest people in the U.S., covering more than 15 years, allowing it to conduct an unprecedented examination of how the ultrawealthy employ tricks to avoid taxes in ways that most Americans cannot.

The bills are being pitched as helping ordinary Americans save for retirement, including automatic enrollment of workers in employer-sponsored retirement plans. But they also include perks for retirement and financial industries, such as relaxing certain rules in ways that are seen as a boon for insurers.

Deciphering the handouts is nearly impossible without a background in the intricacies of retirement plan tax laws and the help of experts. The bills hide critical changes in language most laypeople would never understand. For instance, a key piece of the Senate bill reads, “Paragraph (2) of subsection (e) of section 408 is repealed." But the scope of that change only makes sense when layered with this: “Section 4975(c)(3) is amended by striking 'the account ceases to be an individual retirement account by reason of the application of section 408(e)(2)(A) or if'."

ProPublica had to reverse-engineer the meaning of that series of numbers and letters to determine that it would take away one of the most potent weapons in the IRS' arsenal: the ability to strip an entire IRA of its tax-favored status.

Complicated IRS and Department of Labor rules prohibit IRA investments that involve conflicts of interest or self-dealing. That can be a particular concern with nontraditional IRA investments, such as purchases of real estate or of shares of companies that are not publicly traded. Under the current law, if the IRS determines that a retirement account has engaged in a prohibited transaction, the agency can blow up the entire account — an event that Warren Baker, a tax attorney whose practice focuses on IRAs, likens to “Armageddon." The whole account then ceases to be an IRA, and the owner has to pay income taxes on it.

The two bills propose defusing that bomb. In the House bill, the tax benefits would only be stripped from the part of the account involved in the forbidden transaction. The Senate bill would loosen the rules even more, applying a 15% excise tax on the part of the account involved in the prohibited transaction without blowing up the account. A spokesperson for Cardin said, “The penalty jumps to 100% if not corrected in a timely manner."

Still, someone who violates the rules suddenly would have a “massive long-term upside benefit" of tax-free growth, Baker said, while “your downside risk is a penalty that is smaller than the capital gains rates," the federal tax on the income that's generated when stocks or other assets are sold.

Bob Lord, a tax attorney and tax counsel to Americans for Tax Fairness, said he has represented clients who settled Roth IRA cases because the threat of losing the tax benefits of their entire accounts was “leverage the IRS had." He was stunned when he read the bills and saw that power stripped from the IRS.

“These changes will lead to more aggressive transactions that lodge greater wealth in Roth IRAs, with less risk if the IRS audits," Lord said.

The proposed Senate bill, experts say, makes another concession to IRA owners who might be tempted to dodge the rules. Under current law, an IRA account holder who violates rules is never totally in the clear. That's because the current statute of limitations for violations is a bit of a gray area, experts say. The IRS, “could virtually go back indefinitely," said Jeffrey Levine, a CPA and chief planning officer at Buckingham Wealth Partners.

The Senate bill proposes stopping the clock at three years. Yet, it can take more than three years for some nontraditional investments to balloon. If the IRS were to discover something amiss, under the bill's proposed statute of limitations it would be too late to act.

“For the little guy this makes all the sense in the world," Levine said. But for the ultrawealthy with huge accounts and squadrons of lawyers, he said, the changes could incentivize bad behavior. “Someone with all the resources in the world could say, 'I'll do this now that my risk-reward calculation is different and I'm looking at getting through three years and then I'm kind of home free.' That, you know, is a real boon for those who want to take advantage of the system."

The House bill is co-sponsored by Neal and Rep. Kevin Brady, a Texas Republican, and the Senate bill is co-sponsored by Cardin and Sen. Rob Portman, an Ohio Republican.

A spokesperson for Portman defended the legislation, which she said was “borne out of contact from our constituents — including innocent middle class savers who had their retirements wrecked by innocent and minor errors." ProPublica asked aides to Portman and Cardin for examples, but neither provided any. A Cardin spokesperson wrote in an email that “there usually is not litigation when this happens, and non-public examples are confidential taxpayer information."

In a joint statement, the offices of Portman and Cardin defended the Senate bill, saying it would help small businesses offer 401(k) retirement plans, expand access to savings for low-income Americans and “allow people who have saved too little to set more aside for retirement." The new legislation, they added, included measures to prevent Americans from inadvertently losing their IRAs while “implementing safeguards to prevent abuse."

Brady's communications director asked for questions in writing, then did not respond.

A staffer with Neal's Ways and Means Committee said the House bill had broad support and touted many provisions, including the automatic enrollment of employees in retirement plans, a national lost-and-found to locate retirement plans from prior jobs and a requirement that employers let certain long-term, part-time workers enroll in 401(k) plans.

The House bill, she noted, doesn't repeal the prohibited transaction rules; it limits the impact to the inappropriate purchase. She described Neal as “very committed to maintaining these important rules and believes that full sanctions should apply when violated."