Eduardo Saverin can escape the US, but he can’t escape Facebook.
“Everything I do in my personal life, in my professional life, it’s completely there,” said Saverin, a Facebook co-founder, in his first in-depth interview in conjunction with the company’s impending initial public offering. “A lot of what I do, what everyone does, is influenced by it.”
Alone among Facebook’s 900 million users, Saverin is special: a billionaire with only the vaguest of causes. He co-founded Facebook at age 21, then left two years later with a legal settlement that cut him off from Facebook but left him phenomenally wealthy. His stake will most likely be worth more than $3 billion (around Rs 16,500 crore) when Facebook goes public Friday.
Future plans: Saverin says he thinks of himself as a global citizen. (Getty Images)
Reports last week that Saverin, 30 and born in Brazil, had renounced the US citizenship he gained as a teenager led to considerable criticism that he was skipping out to avoid taxes. He has become a permanent resident of Singapore, which levies no capital gains taxes.
Saverin said he was misunderstood. He first filed to give up US citizenship in January 2011. It became official last September, and the government published the news at the end of April as part of a routine filing. Coming on the eve of the Facebook IPO, the news brought into sharp focus Saverin’s tax savings, which could easily exceed $100 million.
“I’m not a tax expert,” he said. “We complied with all the known laws. There was an exit tax.” That tax is based on the assets held by a citizen leaving America. The exit tax was designed to make sure the departing wealthy paid something before they decamped.
He professes ignorance about his taxes and refuses to discuss his finances. “This had nothing to do with taxes,” he insisted. “I was born in Brazil, I was an American citizen for about 10 years. I thought of myself as a global citizen.”
US tax lawyers say they think Saverin’s exit had more to do with estate and gift taxes than income tax. If he remained a US citizen, he would not have had to pay the US capital gains tax on his income until he sold his shares. Wealthy US shareholders often borrow against their shares and live tax-free off the unrealized appreciation for years.
When US citizens pass on their holdings to their heirs, however, it is subject to estate taxes, which are difficult to escape (as are gift taxes on assets given to relatives and heirs before death). So Saverin’s decision to leave could have been a wager that the cost of an exit tax now—15% of whatever valuation he could get the IRS to agree to—would be far less than the 35% or more in estate tax his heirs would face on whatever his holdings were worth when he died.
Two of Saverin’s Facebook co-founders, Mark Zuckerberg and Dustin Moskovitz, dropped out of Harvard to work on Facebook. A third, Chris Hughes, graduated from Harvard in 2006, and then worked at Facebook before leaving in 2007 to run social media for Barack Obama’s presidential campaign. Saverin received a degree in economics from Harvard in 2006, and in 2009 settled in Singapore while on a world tour with his freshman-year Harvard roommate, Andrew Solimine.
Today Zuckerberg runs Facebook. Moskovitz, who left Facebook in 2008, has a start-up called Asana, which makes corporate management software, based on software he designed at Facebook. Hughes has purchased and runs The New Republic magazine. Of all the founders, Saverin has had perhaps the greatest difficulty figuring out how to build on what is likely a once-in-a-lifetime experience. Saverin said that becoming a Singapore resident enabled him to engage in more sophisticated financial activities within that country. He said it also placed him squarely at the nexus of China, Indonesia and India, three of the world’s largest populations, where the effects of social networking are just being felt. What has gotten attention, though, is his billionaire playboy lifestyle in glittering Singapore. Thanks to the interconnected world Saverin helped to create, the Internet is full of people sharing photos and stories of him embraced by statuesque women and drinking expensive Champagne. “It’s a misperception, especially the playboy,” he said. “I do have a Bentley. I do go out. I’d rather not go into personal details.”
“I’m clearly very busy,” he said, with “friends, family, existing investments”. To date, his major investments have been in US companies that he thinks will have a global impact in a Facebook-connected world. One, Jumio, makes products for merchants to accept payments over a mobile phone.
Another, ShopSavvy, offers discounted deals in brick-and-mortar stores via smartphones. He has helped finance a few other US and Singaporean companies, but his investments in startups amount to less than 1% of what he will soon be worth.
He also said the depiction of him in the movie The Social Network was distorted. “It was more art than documentary,” he said. As to his purported betrayal by Mark Zuckerberg, chief executive of Facebook, the dramatic core of the movie, Saverin said: “There was no burning there. Mark is a phenomenal guy.”
More than anything, he said, he would like to get his head around his wealth. (He planned to quietly watch Facebook go public Friday —which will be the middle of the night in Singapore—with just a few friends around, he said).
And, he said, he would like to inspire young entrepreneurs to embrace the Facebook world, “where people are at the center of everything”.
“People look at my profile and say, ‘You can have all the options,”’ he said. “But really, everyone does.”
As for himself, good advice for the single young billionaire is harder to find. He said he had spoken with a number of people with tremendous wealth, “but every experience is unique. Certainly there has been no one who was a college kid and got it this fast.”
“What does this enable me to do? What am I provided with to help?” he asked. “Right now, I don’t know how to deploy the capital and the blessings.”
©The New York Times