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“Mitt’s Tax Calculation”: The Swiss Bank Guy Or The Swiss Bank Guy Hiding Something

His opponents and the press are turning up the heat and even one of his big-name supporters has publicly called on him to give in, but Mitt Romney is adamantly refusing to release new information about his taxes.

If this story line sounds familiar, it should: Romney was in a very similar spot six months ago, and it didn’t take him long to fold.

It was back in January that Romney tried to duck calls to release tax records, believing he could run out the clock at least until he’d secured the Republican nomination. But his personal finances were becoming an issue, with Newt Gingrich and Rick Perry depicting him as a “vulture capitalist” and stoking resentment among working-class Republicans, and his opponents suggested that Romney might be concealing embarrassing and politically damaging information.

“Listen,” Perry said in a debate just before the South Carolina primary, “here’s the real issue for us as Republicans: We cannot fire our nominee in September. We need to know now.”

Perry didn’t survive South Carolina, but when Romney was trounced by Gingrich, the pressure to release his taxes grew. In a debate, Romney was confronted with the example of his own father, who had released 12 years of returns in the run-up to his own 1968 presidential bid, explaining at the time that “one year could be a fluke.” Asked if he’d follow his father’s lead, Romney was evasive, prompting loud jeers and taunts from the live audience. The tax story was taking on a life of its own; even Chris Christie, one of Romney’s top primary season supporters, piped up to say that the candidate should produce his returns.

Finally, a week before Florida’s Jan. 31 primary, Romney gave in, releasing his 2010 returns and an estimate for 2011. It wasn’t nearly as comprehensive as what his father did, but it was something – and it became readily apparent why he’d been so reluctant. Among other things, the records showed that Romney had made $45 million in income over the past two years, even though he wasn’t actually working, and that his effective tax rate for 2010 had been just 13.9 percent. Investments in Swiss bank accounts and offshore holdings in the Cayman Islands and Bermuda were also revealed.

There was also the matter of speaking fees. Before releasing his returns, Romney had hinted that he paid a low effective tax rate, explaining that most of his income over the last 10 years had come from investments (which are subject to a 15 percent tax rate) and noting that “I get speakers fees from time to time, but not very much.” But it turned out he’d actually taken in $347,327.62 in speaking money from February 2010 to February 2011 alone, making the episode another “wealth gaffe” for Romney.

This wasn’t enough to stop Romney from winning his party’s nomination. His main competition came from Gingrich and Rick Santorum, so it would have taken a lot more to sink him. But it suggests a similar cave-in may be just around the corner now, with Romney’s taxes once again becoming a major issue.

The impetus this time is a series of media reports examining Romney’s complicated personal finances and raising questions about how much money he has parked offshore, and why. The Obama campaign has taken the new reporting and run with it, demanding that Romney release multiple years of tax records (and taunting him with the example of his own father). The official Romney line, of course, is that there’s nothing to see here and that he’s already provided ample disclosure, but not every Republican is reading from the same script. On Sunday, for instance, Haley Barbour said he’d release more information if he were in Romney’s shoes.

It’s hard to believe there’s anything in Romney’s tax history as sinister as some Democrats are suggesting. But it’s also hard to believe that if Romney were to release records for more years they wouldn’t feature the same sort of embarrassing revelations found in his 2010 return. Obviously, this is something his campaign would like to avoid. But as the story of Romney’s refusal gains traction, the Romney team may be faced with a new calculation: Is there more harm in looking like you’re hiding something than in just putting the information out there, suffering through a news cycle or two, and moving on?

Actually, in a way, there may be no harm at all for Romney in releasing more tax records. The Obama team already has all the material it needs to paint him as the Swiss bank account guy. At least this way, they won’t be able to say he’s the Swiss bank account guy who’s hiding something.

 

By: Steve Kornacki, Salon, July 11, 2012

July 12, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

“Shady Opportunism”: The Political Risks Of Mitt Romney’s Financial Skills

You can conduct byzantine transactions through opaque investment accounts and private corporations in offshore tax havens such as Bermuda and the Cayman Islands. Or you can credibly run for president at a time of great economic distress.

I don’t think you can do both.

Let me be clear that I have nothing against wealth. In fact, I have nothing against great wealth, which is how I would classify Mitt Romney’s estimated $250 million fortune. We can argue about the social utility of private- equity firms such as Bain Capital, but Romney isn’t responsible for distorting the system so that financiers are grossly overpaid. He just took advantage of the situation.

Increasingly, however, I have to wonder whether the achievement Romney touts as his biggest asset in running for president — his business success — might be seen by many voters as a liability.

The question isn’t whether people can relate to a candidate who has tons of money. It’s whether they will connect with a man who didn’t make his money the old-fashioned way — by building a better widget — but by sending capital hither and yon via clicks of a computer mouse to take advantage of arcane opportunities most people never even know about.

Most Americans, for example, do not have an individual retirement account valued at between $20 million and $101 million, as Romney stated last year in a financial disclosure report.

When Romney was running Bain and building up his IRA, the maximum annual contribution permitted by the tax code was $2,000. So how did Romney’s IRA get so huge? He won’t say. It’s possible that he rolled over some money that was originally in a 401(k) retirement plan of the kind offered by many employers. But annual 401(k) contributions were then capped at $30,000, including an employer match — in Romney’s world, chump change.

Analysts surmise that Romney may have placed his interests in various Bain investment partnerships in the IRA, taking advantage of Internal Revenue Service rules that allow these interests to be undervalued for IRA purposes. In some cases they can even be valued at zero, since partnership interests represent future income, not present income, and . . .

Okay, I know I’m losing you here — but you get the point. Individual retirement accounts were created as a way for middle-class Americans to save some tax-deferred money for their senior years. It isn’t clear exactly what Romney is using his gargantuan IRA for, but it’s certainly not what Congress intended.

Then there’s the question of a Bermuda-based company that Romney and his wife, Ann, own, Sankaty High Yield Asset Investors Ltd. According to the Associated Press, the company has been part of Romney’s portfolio for nearly 15 years, but it was not mentioned in any state or federal disclosure reports. It surfaced in Romney’s 2010 tax returns, which he reluctantly released earlier this year.

According to those returns, Sankaty is little more than an empty shell at the moment. But the AP reports that the company “served as Romney’s partnership stake” in a larger group of Sankaty-named funds that Bain once used to manage more than $100 million in investments. (Sankaty, by the way, is the name of a lighthouse on Nantucket.) Channeling private-equity and hedge-fund investments through offshore firms in places such as Bermuda and the Caymans can allow investors to avoid a tax on what is known as “unrelated business income.”

Romney’s campaign says that he pays every penny he is required to pay in taxes — although his income is taxed at about 15 percent, a lower rate than most middle-class Americans pay. Hey, I understand; if I could get away with paying less in taxes, I’d do it, too. And I suppose that if God didn’t want us to have offshore pass-through accounts in sun-drenched tax havens, he wouldn’t have invented them.

But one of the sources of anger and anxiety in this country — on the left and the right — is the sense that there are two sets of rules, one for the rich and powerful and one for everybody else. I don’t think voters want a “regular guy” as president; they want someone who is exceptional. But there is a point at which opportunism begins to shade into rapacity.

In making and managing his money, Romney appears to take every possible, conceivable, imaginable inch that the law arguably allows. That’s good finance. But I doubt it’s good politics.

 

By: Eugene Robinson, Opinion Writer, The Washington Post, July 5, 2012

July 6, 2012 Posted by | Election 2012 | , , , , , , , , | 1 Comment

“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

July 4, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

   

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