“Blind Trusts Don’t Seem So Blind”: Where And How Does Mitt Romney Hide His Money?
Mitt Romney never wanted to release his tax returns. He refused disclosure in 1994 during his unsuccessful U.S. Senate bid, in 2002 when he won election as Governor of Massachusetts, and in his failed 2008 attempt to gain the Republican nomination for President. Last January Romney finally released his 2010 tax return and an estimate for 2011 after constant badgering by his Republican primary rivals.
Those documents revealed his offshore bank accounts and his tax rate, just shy of 15 percent, or less than what most middle-class Americans pay, despite his estimated worth of up to $250 million. As the Washington Post reported: “By offering a limited description of his assets, Romney has made it difficult to know precisely where his money is invested, whether it is offshore or in controversial companies, or whether those holdings could affect his policies or present any conflicts of interest.” Now journalist and author Nicholas Shaxson digs deeper in a new investigation published by Vanity Fair.
According to Shaxson, Romney is using every possible loophole to avoid paying more taxes. He takes his payments from Bain Capital as investment income, allowing him to pay at a rate much lower than the 35 percent he would owe if he had earned an “ordinary income” of salaries and wages.
But as Shaxson also points out, nobody even knows how much Romney should pay because nobody knows what his offshore accounts actually hold. He maintains accounts and entities not only in Switzerland, but in Bermuda and the Cayman Islands as well.
Consider the example of Sankaty High Yield Asset Investors Ltd., a Bermuda-based corporation set up by Romney in 1997. This entity wasn’t even disclosed in financial documents until 2010, and upon examining that return, Shaxon writes: “We have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates.” Furthermore, Bain Capital holds at least 138 funds in the Cayman Islands, with Romney having personal interests in at least 12 that are worth as much as $30 million. The Romney campaign has stated that his taxes would not be affected even if he included these interests, but there’s no way to confirm this because everything is hidden behind confidentiality laws.
Equally intriguing are the Romneys’ blind trusts, designed, as Shaxon explains, “to avoid conflicts of interest for those in public office by having politicians’ assets managed by independent trustees.” But in Romney’s case, the blind trusts don’t seem so blind. Their personal lawyer, Bradford Malt, was appointed to be the trustee, and in 2010, the Romneys invested $10 million in Solamere Founders Fund, which was founded by their son Tagg and former campaign fundraiser Spencer Zwick.
Shaxson also asks whether Romney used “blocker corporations” in the Cayman Islands and elsewhere to escape paying taxes on his retirement account, which is estimated to contain as much as $102 million. Offshore blocker corporations are used to avoid the Unrelated Business Income Tax.
The Obama campaign has hit Romney’s financial holdings hard in ads – and even created a world map showing the overseas locations where the Republican candidate holds accounts. Other Democrats have joined this line of attack. In an interview with The Huffington Post, former Ohio Governor Ted Strickland asserted, “Why would any person who aspired to be president, as Mitt Romney has for probably much of his life, open a Swiss bank account? What does that say about his political judgment and what does it say about his commitment to the United States of America?”
Illinois Senator Dick Durbin adds that there are only two reasons why one would want to hold a Swiss bank account: “Number one, you believe the Swiss franc is a stronger currency than the United States dollar. And that apparently was the decision the Romney family made during the Bush presidency.”
“And secondly, you want to hide something, you want to conceal something,” he said. “It is impossible for him to explain or defend owning a Swiss bank account.”
With Shaxson’s revealing piece, speculation over Romney’s handling of his money will no doubt continue. If the Romney campaign wants everyone to stop questioning his tax returns and offshore accounts, why not just disclose all of the information, as his father George Romney did during his own 1968 presidential run?
By: Lynn Zhong, The National Memo, July 4, 2012
“Why Bain Is Back”: The Folks On The Receiving End Of Capitalism’s Creative Destruction
A month ago, conventional wisdom had it that the Bain attacks on Mitt Romney were somehow failing terribly — notwithstanding the fact that they’ve been key parts of every other campaign Democrats and Republicans have run against Romney going all the way back to 1994. And yet all of a sudden, the Obama campaign is going full outsource/Bain attack on Romney at every opportunity. So they think it’s working great. New polling suggests they may be on to something. And in the most telling development, in the days leading up to the surprise Supreme Court ruling, the Romney campaign itself is mounting a mammoth pushback, signaling more clearly than anything that they think it’s working too.
So what happened?
Consider three basic factors. First, round one of the Bain Wars was almost entirely hashed out in what you might call the Acela corridor — an insular community, overwhelmingly affluent and educated, and decidedly not the audience for the message or the folks who find themselves on the receiving end of capitalism’s creative destruction.
Sen. Sherrod Brown (D-OH) visited TPM’s DC offices last week as part of our Newsmaker interview series and said basically: trust me, this message worked in Ohio. Maybe he was right all along. I suspect he was.
But there was another rhetorical dimension. ‘Private equity’ is a weird phrase. Most people have no idea what it does or doesn’t mean. And the Romney campaign through it’s surrogates was able to hit its opponents with something like ‘Hey, it’s poor form to be going all Nation magaziney and pretending that private equity isn’t awesome!’
And within that community, it worked. Thus Cory Booker, Bill Clinton, and a lot of other Democrats. ‘Private equity’ means a lot of different things. My own sense is that some parts of it are incredibly destructive while others create efficient allocations of capital. But who cares what I think? Wherever you come down on that question there’s simply no question that private equity is at the tip of the the spear of creative destruction in our society. So in a country where everybody gets to vote, it’s sort of crazy to think criticizing something like that would somehow be beyond the pale like attacking the Pope or crapping on motherhood and apple pie. But there it was.
‘Outsourcing’ though and ‘Offshoring’ — these are just more graspable words, more concrete concepts. Everybody understands them. Everybody knows what they mean. I’m pretty sure the Romney campaign wants to say something like, ‘C’mon, our whole economy today is based on stuff like this and we all know it and everybody accepts it so don’t pretend otherwise.’ But they can’t. And what really got them all boxed up was when they got themselves into this ridiculous debate over whether Mitt’s an ‘outsourcer’ or an ‘offershorer’. As I said Monday, that’s an argument you lose by winning. Or lose by losing. Whichever way, you lose.
Even really smart strategists manage sometimes to charge into a brown paper bag like this. But this was a bad move because it opened Romney up to that most lethal political weapons: ridicule and mockery. The Obama camp seemed to get this early and just decided to drive a freight train right through him. Holding out for this distinction seemed incredibly stupid and more than that wildly out of touch since the difference is basically immaterial to people who lose their jobs as a result of it. And, as always, weakness which invites attacks.
In a country afflicted for decades by loss of high-paying manufacturing jobs and chronically stagnant working class and middle class wages it’s crazy to think that Romney’s history as a private equity king — especially one working the lower tiers of the private equity world — wouldn’t be a liability for a lot of voters. But it was something that DC reporters were best positioned to miss.
By: Josh Marshall, Talking Points Memo, July 2, 2012
“Secrecy Shrouded Money”: What’s In Romney’s Offshore Accounts?
Mitt Romney has been very reluctant to release his tax returns. In all his previous campaigns he refused to release any of them. This time, under pressure, he has given us only the last two years.
But he must disclose more. If you want to know why, read Nicholas Shaxson’s piece in the new issue of Vanity Fair. In it, Shaxson raises important questions about some strange aspects of Romney’s financial history:
§ What is in Romney’s offshore accounts? He has sheltered much of his wealth in tax havens such as Bermuda, but he has not disclosed anything about those investments. For instance, Shaxson writes, “There is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as ‘a Bermuda corporation wholly owned by W. Mitt Romney.’ He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor…. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an ‘excepted investment fund’ that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates.”
§ Why is Romney still being paid by Bain Capital? He left the firm more than ten years ago. Given its varied investments, could the fact that he is still being paid by them create a conflict of interest in office? Shaxson writes, “Though he left the firm in 1999, Romney has continued to receive large payments from it—in early June he revealed more than $2 million in new Bain income. The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers.”
§ Why has Romney opened foreign bank accounts, such as a Swiss account with $3 million that appeared on his 2010 returns but not his 2011 returns? How much has he kept in offshore accounts in the past? Was he betting against the strength of the US dollar? How might such financial interests affect his policies as president?
§ Are Romney’s blind trusts really blind? Their trustee is Bradford Malt, his personal lawyer. Malt invested $10 million of Romney’s money in the Solamere Founders Fund, co-founded by his son Tagg and Spencer Zwick, a Romney campaign fundraiser. Malt’s and Romney’s claims that this is coincidental and Romney knew nothing of it strains credulity. If Romney knows what his blind trusts invest in, how might his investments influence his political decisions?
§ How much has Romney invested with Elliot Associates? Shaxson reports, “Elliott buys up cheap debt, often at cents on the dollar, from lenders to deeply troubled nations such as Congo-Brazzaville, then attacks the debtor states with lawsuits to squeeze maximum repayment. Elliott is run by the secretive hedge-fund billionaire and G.O.P. super-donor Paul Singer, whom Fortune recently dubbed Mitt Romney’s ‘Hedge Fund Kingmaker.’ (Singer has given $1 million to Romney’s super-pac Restore Our Future.) It is hard to know the size of these investments. Romney’s financial disclosure form lists 25 of them in an open-ended category, ‘Over $1 million,’ including Solamere and Elliott, and they are not broken down further.”
§ How did Romney build a $102 million Individual Retirement Account (IRA)? Did he avoid paying taxes in doing so? During Romney’s fifteen years at Bain Capital taxpayers were allowed to put only $2,000 annually into IRAs and $30,000 into another fund. Romney won’t say how his account generated such astronomical returns. The only explanation anyone has come up with, offered by Wall Street Journal reporter Mark Maremont, is that Romney stuffed his account with deliberately undervalued shares of Bain stock. Incidentally, Bain is still contributing to Romney’s and his wife’s IRAs.
§ Did Bain serve as a tax haven for foreign criminals? As Shaxson explains, “Private equity is one channel for this secrecy-shrouded foreign money to enter the United States, and a filing for Mitt Romney’s first $37 million Bain Capital Fund, of 1984, provides a rare window into this. One foreign investor, of $2 million, was the newspaper tycoon, tax evader, and fraudster Robert Maxwell, who fell from his yacht, and drowned, off of the Canary Islands in 1991 in strange circumstances, after looting his company’s pension fund. The Bain filing also names Eduardo Poma, a member of one of the ‘14 families’ oligarchy that has controlled most of El Salvador’s wealth for decades; oddly, Poma is listed as sharing a Miami address with two anonymous companies that invested $1.5 million between them. The filings also show a Geneva-based trustee overseeing a trust that invested $2.5 million, a Bahamas corporation that put in $3 million, and three corporations in the tax haven of Panama, historically a favored destination for Latin-American dirty money—’one of the filthiest money-laundering sinks in the world,’ as a US Customs official once put it.”
Shaxson does not allege that Romney or Bain has ever broken the law. But the public has a right to know about the ethics and probity, not mere legality, of Romney’s personal and professional financial history. Romney has made business experience the central pitch of his candidacy, so how can he claim that how he manages his money is irrelevant?
By: Ben Adler, The Nation, July 3, 2012
“Caught In Another Lie”: Mitt Romney Invested In Medical Waste Firm That Disposed Of Aborted Fetuses
Mitt Romney’s Bain problem just got a lot worse.
According to a new report by Mother Jones’ David Corn, Bain Capital made a $75 million investment in Stericycle — a medical waste disposal firm that has been attacked by right wing groups for disposing of aborted fetuses — while Romney was still actively involved in the company in 1999. This news is sure to upset social conservatives, and it also directly contradicts Romney’s account of when he left Bain.
Romney’s connection to Stericycle was first reported in January by The Huffington Post, but the story never gained traction because Bain Capital claimed that Romney left the firm to run the Winter Olympics in February of 1999 — meaning that he had nothing to do with the deal. According to SEC documents unearthed by Corn, however, Romney was still actively involved in the firm’s leadership through the end of that year:
The SEC filing lists assorted Bain-related entities that were part of the deal, including Bain Capital (BCI), Bain Capital Partners VI (BCP VI), Sankaty High Yield Asset Investors (a Bermuda-based Bain affiliate), and Brookside Capital Investors (a Bain offshoot). And it notes that Romney was the “sole shareholder, Chairman, Chief Executive Officer and President of BCI, BCP VI Inc., Brookside Inc. and Sankaty Ltd.”
The document also states that Romney “may be deemed to share voting and dispositive power with respect to” 2,116,588 shares of common stock in Stericycle “in his capacity as sole shareholder” of the Bain entities that invested in the company. That was about 11 percent of the outstanding shares of common stock. (The whole $75 million investment won Bain, Romney, and their partners 22.64 percent of the firm’s stock—the largest bloc among the firm’s owners.) The original copy of the filing was signed by Romney.
Another SEC document filed November 30, 1999, by Stericycle also names Romney as an individual who holds “voting and dispositive power” with respect to the stock owned by Bain. If Romney had fully retired from the private equity firm he founded, why would he be the only Bain executive named as the person in control of this large amount of Stericycle stock?
As Corn points out, the SEC documents have implications that reach farther than Stericycle. The Romney campaign repeated its assertion that Romney left Bain in February 1999 when rebutting a recent Washington Post story reporting that Bain acquired companies that outsourced jobs. According to these SEC filings, that is not true.
The issue here is not that Romney was investing with a company that disposed of aborted fetuses; after all, abortion is legal, something must be done with the medical waste produced by them, and according to Corn the investment was quite profitable for Bain and its investors.
The issue is that Romney has once again been caught in a lie about his past, and once again he has given voters a reason to be suspicious over his record at Bain — which he’s used as the central thesis of his campaign.
Romney is already having a difficult time talking about his tenure as governor of Massachusetts, given that he is now running against the signature achievement of his term. If voters reject his version of the Bain Capital story as well, then it is hard to see what his campaign’s message could be moving forward.
By: Henry Decker, The National Memo, July 2, 2012
“Where There’s Smoke, There’s Fire”: Mitt Romney’s Bain Timeline Doesn’t Add Up
It turns out that the implications of David Corn’s explosive scoop about how Mitt Romney misrepresentedhis role in Bain’s investment in a medical-waste firm that disposed of aborted fetuses goes far beyond that specific investment. The short version of that story is that while Romney claimed publicly to have had no role in the investment because it took place after he started working on the Salt Lake Olympics, he actually had an active role in the investment, according to legal documents obtained by Corn.
Where there’s smoke there’s fire, and as Salon’s Alex Seitz-Wald points out, if Romney lied about that investment, then he also appears to have lied in his official financial disclosure forms filed with the government.
Twice, first in 2007 during his earlier presidential bid and again this year, Romney filed personal disclosure forms with the Office of Government Ethics which explicitly state that Romney left Bain in early 1999. “Mr. Romney retired from Bain Capital on February 11, 1999 to head the Salt Lake Organizing Committee. Since February 11, 1999, Mr. Romney has not had any active role with any Bain Capital entity and has not been involved in the operations of any Bain Capital entity in any way,” his ethics filings from June state.
But as Corn’s report details, that timeline doesn’t add up. Romney personally signed documents after February of 1999 related to the human-waste disposal deal and SEC documents also indicate he was a key investor in the deal. Moreover, according to contemporaneous public reports from Bain and the Boston Herald, Romney did not sever all ties or management responsibilities when he assumed his job running the winter Olympics.
Bottom line: Romney’s story doesn’t compute, and given that the credibility of all the defenses he makes to Bain criticism depend on whether or not you take his word, he’s got a real problem developing—if the media is paying attention.
By: Jed Lewison, Daily Kos, July 2, 2012
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