Not So “Friendly’s”: Tax Avoidance, Government Dependency, And Mitt Romney’s Boca Raton Host
Amid the ongoing uproar over Mitt Romney’s snooty remarks at a Florida fundraiser concerning the “47 percent” who pay no federal income taxes, the party’s high-rolling host hasn’t drawn quite as much attention as he deserves. As the head of private equity firm Sun Capital Partners, Marc Leder is a longtime associate of the Republican nominee – and a practitioner of the same dubious behavior that has smudged Romney’s reputation.
Lately Leder has been dogged by tabloid headlines recounting his nasty divorce and wild partying (replete with reported nudity and public sex around the pool at a summer house he rented on Long Island’s East End for $500,000). What he has in common with Romney, however, isn’t a taste for bacchanalian revels, of course, but a record of business and taxation practices that working Americans might find troubling.
At the moment, Leder is under investigation by New York State Attorney General Eric Schneiderman, who subpoenaed internal records from Sun Capital, Bain Capital, and several other private equity giants last July. Issued by the Attorney General’s taxpayer protection bureau, the subpoenas were evidently designed to probe whether Leder and other executives had misused “carried interest,” a method of reducing tax liability by converting management fees into investment income — which is taxed at the lower capital gains rate of 15 percent that keeps Romney’s taxes lower than the rate paid by many middle-income families. (Tax analysts say that Bain Capital records released last August indicate that the firm may have saved more than $200 million in federal taxes thanks to the carried-interest maneuver.)
If Leder did benefit from such aggressive practices, he would merely be typical of an industry where tax manipulations are not just widespread, but fundamental.
Equally common in private equity is profiting from bankrupted companies in which other stakeholders – especially workers and government – are left to cope with the loss. During the Republican primaries, Romney’s rivals helped to make Bain notorious for such practices – and his fundraiser Leder seems no different.
Although roughly 25 firms held by Sun have gone bankrupt, perhaps the best known example involves Friendly’s, the family restaurant and ice cream chain that went under at the hands of Sun Capital in 2010 after more than 70 years in business. After acquiring Friendly’s in 2007 for a premium price, Sun took the company into bankruptcy only three years later, supposedly due to rising milk prices.
But the Pension Benefit Guaranty Corporation – the federal agency that insures benefits to workers victimized by failed corporate pension plans – accused Sun of sinking Friendly’s to dump pension costs onto the government. By pushing the company’s pension burden onto federal taxpayers, who fund the PBGC, Sun could then reorganize Friendly’s in bankruptcy, get rid of laid-off workers and less profitable restaurants, and – as Romney likes to say – give the company a “turnaround.” So far, that is precisely what Sun appears to doing, and getting away with it.
So there on the videotape shot in Leder’s huge Boca mansion stood Romney, complaining about the income taxes that the working poor don’t pay and their dependence on government assistance, while the host surely nodded in agreement. At $50,000 a plate, the lobster was garnished with a nice helping of irony.
By: Joe Conason, The National Memo, September 24, 2012
“Bain-Like Bonuses”: A Leveraged Romney Campaign With Nothing For The Troops
Mitt Romney’s campaign is in a bit of trouble. No, not poll numbers, or internal disputes, or the candidate himself, though those are all problems too. Rather, the Romney campaign, which outraised President Obama for four consecutive months this summer, is in money trouble. Campaign finance disclosures released yesterday show the campaign has only $35 million in the bank — a relatively low amount this close to the election — and is $15 million in debt. The campaign has been forced to scramble to find new big donors, something you don’t want to have to do this late in the game, because its other donors are maxed out.
The problem is not Romney’s fundraising abilities — he’s unquestionably adept at bringing in big checks — but rather with quirks in campaign finance law, his reliance on big donors, and perhaps some mismanagement. The loan was needed as a bridge before he could access his general election fund, which candidates can’t touch until after their nominating conventions. The low cash on hand is because much of the money he raised went to the Republican National Committee to help pay for other races and not to the Romney campaign (he redistributed the wealth, if you will). And the need for new contributors is a byproduct of relying on high-dollar donors, who max out after contributing $2,500 and thus can’t be returned to for a consistent money stream throughout the campaign like smaller donors (John McCain had the same problem in 2008).
Given all that, not to mention the other problems the campaign is facing, this is a bit unexpected. The Washington Post’s Dan Eggen:
Mitt Romney’s campaign handed out more than $200,000 in bonuses last month to senior staffers, according to new disclosure records filed Thursday. Richard Beeson, Romney’s national political director, received a $37,500 payment on Aug. 31 in addition to his salary, according to records filed with the Federal Election Commission. In addition, records show at least six other top staffers each received $25,000 bonuses on the same date: campaign manager Matt Rhoades, general counsel Kathryn Biber, policy advisor Lanhee Chen, communications director Gail Gitcho, digital director Zach Moffatt and advisor Gabriel Schoenfeld. Two other employees received $10,000 bonuses.
“Win bonuses” are pretty common on political campaigns, though President Obama’s campaign did not hand out any after its convention this year. And $200,000 isn’t a ton of money for a campaign that will spend close to a billion dollars. But one has to wonder if it’s really a good idea for a struggling campaign that’s already in debt to hand out cash to its top executives while the candidate is fighting a perception of being a corporate raider .
The comparison to Bain Capital, though imperfect, is almost too obvious to make. Bain often bought companies, leveraged them with massive debt, and then paid the executives big bonuses regardless of whether the company succeeded. Something not entirely dissimilar happened to Bain & Co., the consulting firm that Bain Capital spun off of, when Romney went to rescue it.
And while the very top echelon of his campaign got bonuses, there was nothing for the ground troops. The field staffers who work too many hours manning lonely remote offices for the reward of meager pay and doors getting slammed in their faces didn’t get a bonus. Neither did drivers or clerks or janitors or opposition researchers forced to cable news 24 hours a day.
Again, this isn’t entirely unusual for any political campaign. People sign up knowing they’ll be worked hard for no money because they believe in their candidate and maybe hope they have a shot at a job if their guy or gal wins. But one can’t help wondering if the bonus model sheds some light on Romney’s view of the world and how businesses are run. It’s the people at the top who make it happen and deserve the bonuses, not the ones down below who are actually doing the work.
By: Alex Seitz-Wald, Salon, September 21, 2012
“Trust Me, Trust Me Not”: Mitt Romney’s Bain Capital Under Investigation For Tax Avoidance
The New York Times is reporting that Bain Capital, the private equity firm founded by GOP presidential nominee Mitt Romney, is among a number of firms being investigated by New York Attorney General, Eric Schneiderman, for failing to pay taxes.
The New York AG’s Taxpayer Protection Bureau has issued subpoenas to at least twelve financial firms, including Bain, looking into whether the companies converted management fees (taxed as ordinary income) paid by investors into fund investments which are taxed at a dramatically lower rate.
The controversial tax avoidance scheme came to light last month when Bain Capital internal financial information was published online by Gawker.com , however the investigation had reportedly commenced prior to the publication and is not believed to be tied to the document dump.
The tax strategy — which is viewed as perfectly legal by some tax experts, aggressive by others and potentially illegal by some — came to light last month when hundreds of pages of Bain’s internal financial documents were made available online. The financial statements show that at least $1 billion in accumulated fees that otherwise would have been taxed as ordinary income for Bain executives had been converted into investments producing capital gains, which are subject to a federal tax of 15 percent, versus a top rate of 35 percent for ordinary income. That means the Bain partners saved more than $200 million in federal income taxes and more than $20 million in Medicare taxes.
While Governor Romney has not been active at Bain Capital for quite some time, he does continue to receive profits from the company and held investments in some of the funds that utilized the tax avoidance strategy.
The Romney campaign issued a statement indicating that the Governor had not benefited from the practice.
R. Bradford Malt, an attorney for Governor Romney who manages the Governor’s investments and trusts, argued that investing fee income is a common, accepted and totally legal practice. “However, Governor Romney’s retirement agreement did not give the blind trust or him the right to do this, and I can confirm that neither he nor the trust has ever done this, whether before or after he retired from Bain Capital.”
According to Jack S. Levin, a finance lawyer who has represented Bain Capital, the practice has been in use by investment firms for twenty years and is something the IRS knows about.
The investigation will, inevitably, raise questions as to whether or not Attorney General Schneiderman, who has strong contacts to the Obama Administration, is attempting to embarrass Romney as we head towards the November election.
Still, prominent investment firms, including Blackstone Group and The Carlyle Group, have noted in regulatory filings that they have not participated in diverting management fees into investments in their funds.
By: Rick Ungar, Contributor, Forbes, September 1, 2012
“A Journey To Nowhere”: Mitt Romney’s Etch A Sketch Speech, Thin On Ideas And Policy
Finally, Mitt Romney shook the Etch a Sketch.
Having given conservatives everything they had asked for — from switching his positions on abortion and immigration to picking their favorite as his running mate — Romney turned Thursday night to his essential task: converting some President Obama’s 2008 supporters into Republican voters.
At a convention where the rhetoric was harsh and often indifferent to facts, Romney took the path of quiet persuasion. For the most part, he chose not to speak to the fervor and anger of political activists on the Right. He addressed instead less-partisan voters he hopes will be open to his candidacy by virtue of their disappointment with the man who had inspired them four years ago.
“Hope and change had a powerful appeal,” Romney said in the speech’s key passage. “But tonight I’d ask a simple question: If you felt that excitement when you voted for Barack Obama, shouldn’t you feel that way now that he’s President Obama? You know there’s something wrong with the kind of job he’s done as president when the best feeling you had was the day you voted for him.”
In a sense, the appeal Romney re-launched here was the argument he had hoped to make from the beginning — that the election was primarily an exercise in judging the incumbent’s stewardship and, in particular, a painfully slow economic recovery.
Romney’s turn had been promised last March by his veteran aide Eric Fehrnstrom, who provided his boss’s foes with a useful metaphor for describing the ease with which the candidate has altered his positions on a long list of issues.
After the primary campaign, Fehrnstrom argued, “everything changes,” and he added: “It’s almost like an Etch a Sketch. You can kind of shake it up and we start all over again.”
Romney knew that what he most had to shake was a personal image tainted by an impression of inconstancy on issues; attacks on his record in business both by his primary foes and the Obama campaign; and off-the-cuff comments that suggested a great distance between his own experience and the lives of most of the voters whose support he needs.
Speaking a few hours before Romney’s address, Andrew Kohut, head of the Pew research Center, said the surveys pointed to three imperatives for Romney: He had to make himself more likable, more credible and more empathetic.
Thus the unusual amount of detail Romney provided about his family and history. Thus the long narrative about Bain Capital, aimed at changing the impression of a heartless business past that has reduced Romney’s appeal to blue collar voters. Such voters do not celebrate investors and employers with the same ebullience that greeted every mention of the private sector at this convention. The burden of having to tell his personal story fell heavily on this speech: It took up space and time and left the speech very thin on ideas and policy.
Romney hit few ideological hot buttons, and he broke little new ground. His philosophical core is clearly defined by his promise of a pro-business administration that would seek to create jobs by giving investors and CEOs what they want. He continued to paint Obama as lacking understanding of private sector. “Jobs to him are about government,” he said.
Once again, Romney showed that his campaign will launch attacks with little regard for their veracity. “Unlike President Obama,” he said, “I will not raise taxes on the middle class.” While the definition of the “middle class” is flexible, Obama has in fact asked Congress to retain current tax rates for families earning less than $250,000 a year.
“I will begin my presidency with a jobs tour,” Romney also said. “President Obama began with an apology tour.” There was no apology tour. And Romney suggested that Republicans had been initially eager to work with the president, when in fact the party was determined from the beginning to oppose virtually all of Obama’s initiatives.
Romney’s was not a great speech, but it did at least familiarize those who heard it with aspects of his personal journey of which they were unaware. He is likely to get some bounce out of his convention, but it will be short-lived as media attention shifts abruptly to the Democrats’ conclave in Charlotte right after Labor Day.
And there will be a jarring contrast between the Romney who spoke of uniting the nation and his exceptionally harsh, relentless and divisive advertising campaign that includes factually-challenged spots on welfare plainly aimed at stirring resentment.
The stark disjunction will inevitably keep alive the question that his convention speech did not answer: Who is the real Romney?
By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, August 31, 2012
“Empty Chair, Empty Promises”: GOP Convention Fails At Principal Political Goal
Going into the Republican Convention, Mitt Romney had one major political mission: to convince swing voters that he isn’t just the guy who fired their brother in law – that he understands their lives and is on their side.
Given his record as Governor of Massachusetts – 47th among the 50 states in job creation – and his history at Bain Capital – Romney can’t really make the case he has any experience creating jobs.
But the thing that really stands between Romney and swing voters is the perception that he has zero empathy – no comprehension of what life is like for everyday Americans.
So the Republicans tried very hard to tell stories that humanized the otherwise robot-like Romney. But here is the bottom line: when multiple speakers have to testify how authentic you are – you’re not.
The first night of the Convention did feature Ann Romney delivering a simple message: you like me, I love Mitt – so he must not be so bad.
But it also featured a cast of Governors doing auditions for 2016 – saying very little about Romney – and a great deal about their own “successes”. When Chris Christi gave the Convention’s Keynote address he didn’t even mention Romney until the very end of his speech.
Night two featured Paul Ryan whipping up the right wing base and delivering brazen lies about the Obama record. Ryan’s speech was a feast for fact checkers. From his assertion that Obama failed to prevent the shutdown of the GM plant at Janesville – which was closed before Obama took office – to his attack on the Obama for failing to take seriously recommendations from the Debt Commission which he himself voted to oppose.
Most egregious was Ryan’s claim that ObamaCare “cut” Medicare by over $700 billion. In fact, of course, far from “cutting” Medicare benefits, ObamaCare actually improved Medicare benefits and achieved $700 billion of savings for the Medicare program by cutting huge overpayments and subsidies to big insurance companies. Not one Medicare recipient has had his or her guaranteed benefits cut by ObamaCare – and Ryan knows it.
Of course, all the while Ryan was lying about the fake “ObamaCare” cuts in Medicare, he and Romney are planning to eliminate Medicare. They have made clear they want to replace it with a voucher program that would provide a fixed amount of money per person and require that seniors shop for coverage on the private insurance market. Their plan will raise out of pocket costs by $6,400 and eliminate the guaranteed benefit that defines Medicare and has meant that American retirees haven’t had to worry about their health care costs for over half a century.
The final night of the Convention, the Republicans made a concerted effort to “humanize” Mitt Romney. They put up a string of former friends and associates to tell stories aimed at trying to make him seem more caring and human.
Then, Bob White, the Chairman of Romney for President, and former Partner in Bain Capital talked about his business experience. White told the story of how Romney was asked to come back from Bain Capital and return to Bain Consulting to save it from collapse. Of course White ignored the fact that, as a new article in Rolling Stone indicates, he achieved that recovery through a federal bailout.
The essential role of the government, by the way, is a consistent, though never mentioned, theme that continued when it came to Romney’s “turn around” of the Salt Lake Olympics that receive a larger federal subsidy — $1.3 billion – than all of the previous Olympics combined.
Then came Tom Stemberg, the CEO of Staples, that had been funded by Bain Capital who argued – in one of the stiffest, least “everyman” speeches ever – that when the Obama campaign contends that Romney is out of touch with ordinary people, “they just don’t get it”. In fact, Tom led the assembled delegates in the chant: “they just don’t get it”. Multi-millionaire Tom Stemberg is a strange choice to serve as cheerleader for how Mitt Romney understands ordinary people.
Ray Fernandez, the owner of Vita Pharmacy, who told everyone how important Bain Capital was in creating his business, followed Stemberg. By this time the Convention was beginning to sound like a business development seminar.
Then came Kerry Healey, Romney’s former Lt. Governor of Massachusetts, to tell us about Mitt’s Massachusetts record. No mention of the three quarters of a trillion dollar increase in fees on everyday people. No mention of the fact that on his watch Massachusetts was 47th out of the 50 states in job creation. No mention of RomneyCare. No mention that his policies increased student class sizes, or that when he left office, Massachusetts had the highest debt per capita in America.
Next was Jane Edmonds, Romney’s former Massachusetts Director of Workforce Development, who testified to Romney’s “authenticity”. Edmonds went on to argue that Mitt believed in promoting women – particularly to “senior” positions. No mention of his refusal to endorse laws that would require equal pay for equal work.
Edmonds tried to convince us that Romney was not one of those leaders who “focused only on his own success” – but rather would work hard – selflessly — to make life better for other people. Now there is a tough sell.
Then came Olympic athletes to testify about how Romney turned around the Salt Lake Winter Olympics. Forgot to mention those Federal subsidies.
There were videos and home movies. Romney saying that when he traveled a lot, he would call home and find Anne exasperated from five active little boys. Caring guy, he told Anne: “Just remember that what you’re doing is more important than what I’m doing.” Really?
After the videos, we were treated to a “surprise” guest — Clint Eastwood — who argued that the Obama Administration failed to do “enough” to eliminate unemployment. Clint forgot about the fact that when Obama first took office, he confronted the worst economic disaster in 60 years. He forgot that Obama staunched the loss of 750,000 jobs per month that had resulted from the failed trickle down policies of the Bush Administration and that Mitt Romney hopes to revive. He forgot about the last 29 consecutive months of private sector job growth — over 4 million jobs – and, most importantly, forgot that the Republicans in Congress have done everything they can to sabotage the economy including refusing to pass the American Jobs Act that independent economists say would have created another million plus jobs.
Then Eastwood rambled through a bazar, awkward dialogue with a faux Obama during the first fifteen minutes of live primetime network Convention coverage. His presentation will be the most talked about event of the convention. And the Republican Party put out a statement distancing itself from Eastwood’s strange presentation just minutes after the Convention adjourned.
When Eastwood finally withdrew, Florida Senator Marco Rubio introduced Romney recanting stale rightwing bromides – whipping up the Republican hard core. Never a mention of the need for immigration reform, or the fact the Mitt Romney vowed to veto the Dream Act, and is the most anti-immigration candidate for President that of a major party in modern history.
Finally, came Romney – stiff and awkward as ever. Touting his record at Bain as a “great American success story”. Once again he blamed Obama for presiding over the “worst economic recovery since the Great Depression.” Let’s remember that the policies that he and Paul Ryan want to reinstall in Washington – tax cuts for the rich and letting Wall Street run wild – caused this economic catastrophe. Romney reminds you of an arsonist complaining that the fire department hasn’t done a good enough job putting out the fire. And in the course of his speech he never offered one idea to create jobs other than reinstating the failed Bush economic program.
Romney went on to attack the Obama foreign policy – apparently forgetting about his own recent disastrous foreign policy tour.
But most importantly, Romney did nothing to “Etch-a-Sketch” his image of the out of touch, prep school educated, son of a corporate CEO.
At the close of this Convention the most memorable stories that everyday people remember about Mitt Romney the person still have to do with a dog strapped to the roof of his car, or the way that, as an 18 year old, he led a gang of teenagers to bully another student. The most memorable facts about Mitt Romney remain that fact that he “likes to fire people” and did exactly that as CEO of Bain Capital.
Mitt’s convention fell short in its attempt to convince everyday Americans that he understands who they are and how they live and that he’s on their side. That is one of the major reasons, that those ordinary Americans will not elect him President of the United States.
By: Robert Creamer, The Huffington Post Blog, August 30, 2012
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 