“Disclosure For Thee But Not For Me”: Romney Using Ethics Exception To Limit Disclosure Of Bain Holdings
Republican presidential front-runner Mitt Romney, whose wealth has become a central issue in the 2012 campaign, has taken advantage of an obscure exception in federal ethics laws to avoid disclosing the nature and extent of his holdings.
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.
In 48 accounts from Bain Capital, the private equity firm he founded in Boston, Romney declined on his financial disclosure forms to identify the underlying assets, including his holdings in a company that moved U.S. jobs to China and a California firm once owned by Bain that filed for bankruptcy years ago and laid off more than 1,000 workers.
Those are known only because Bain publicly disclosed them in government filings and on the Internet. But most of the underlying assets — the specific investments of Bain funds— are not known because Romney is covered by a confidentiality agreement with the company.
Several of Romney’s assets — including a large family trust valued at roughly $100 million, nine overseas holdings and 12 partnership interests— were not named initially on his disclosure forms, emerging months later when he agreed to release his tax returns.
There is no indication that Romney is violating any rules, and his advisers note that his reports have been certified by the Office of Government Ethics, which reviews the disclosures required of presidential candidates.
Romney spokeswoman Andrea Saul said the disclosure “completely and accurately describes Governor Romney’s assets as required by the law.” She said Romney does not know the details of his investments since he turned them over to a trustee to manage, and that ethics officials confirmed that “everything … was reported correctly” and completely.
Several outside experts across the political spectrum, however, say Romney’s disclosure is the most opaque they have encountered, with some suggesting the filing effectively defeats the spirit of disclosure requirements.
“His approach turns the whole purpose of the ethics statute on its ear,” said Cleta Mitchell, a Republican lawyer who has represented dozens of candidates and officials in the disclosure process, including Romney’s leading challenger for the GOP nomination, Rick Santorum.
Romney’s fortune and his association with Bain are frequent topics in the presidential campaign, with opponents charging that the way he accumulated much of his wealth — through leveraged buyouts that in some cases ended in bankruptcy and layoffs — is at odds with the interests of working-class Americans.
The ties to Bain, a private firm known for its reticence, put Romney in a rare category exempting him from the transparency rules that apply to most candidates.
Like all nominees for federal office, Romney is covered by the statute that mandates disclosure of assets. But since the 2004 campaign — when Democratic presidential candidate John Kerry declined to disclose some of his wife’s holdings — the Office of Government Ethics has permitted nominees and presidential candidates to postpone revealing underlying assets in investment accounts that have a legally binding confidentiality agreement.
Bain routinely asks its investors to sign such agreements.
But after a nominee is in office, the ethics agency requires that any undisclosed assets be sold as a way to meet conflict-of-interest requirements.
The implications for Romney, if elected, are uncertain because sitting presidents are not subject to the conflict-of-interest sections of the ethics law. Although still subject to the disclosure requirements, a president cannot be compelled by OGE to sell undisclosed assets, according to an OGE official. Romney’s would be the first presidency to face this circumstance, according to the official, who spoke on condition of anonymity because of the sensitivity of the topic in an election year.
Romney does disclose underlying assets in his accounts held by financial firms other than Bain, such as Goldman Sachs. But his advisers say Bain holdings, the source of most of his wealth, are kept confidential at the request of Bain management for proprietary business reasons. Romney’s attorneys asked Bain officials to release information about the funds, but the request was denied, according to Saul.
When he talks about Bain, Romney promotes the image of a jobs generator spawning megastores such as Staples and Sports Authority , which serve as emblems of Bain’s extraordinary financial success.
But some other Bain-affiliated companies have a history of controversy. Romney is invested, for example, in DDI, a company in California once owned by Bain that filed for bankruptcy in 2003 and laid off more than 1,000 workers.
Company chief executive Mikel Williams said the firm has returned to profitability and is expanding, in part because of recent support from Bain and others.
Romney also has holdings in Sensata Technologies, a high-tech sensor control firm that has moved U.S. manufacturing jobs to China. A Sensata spokesman declined to comment.
Most of Romney’s holdings in Bain accounts are impossible to identify because of the confidentiality rules imposed by Bain, but his investments in Sensata and DDI were revealed through Securities and Exchange Commission filings.
Saul said it is unfair to link the candidate to such firms because “Governor Romney has not had any role at Bain Capital since he left over a decade ago,” and has turned over “control and overall management” of his investments to a trustee.
Ethics office’s ‘double standard’
Under pressure, Romney recently released hundreds of pages of tax returns for 2010 and estimated returns for 2011. A comparison of those returns with his federal and state “personal financial disclosure” reports and corporate filings at the SEC revealed dozens of discrepancies – and provided a window into what might emerge if Romney revealed the assets he holds in Bain accounts.
“I don’t know what legal authority exists for the federal ethics office to allow Mitt Romney not to disclose these assets,” said Mitchell, the Republican campaign lawyer. “The statute intends for presidential candidates to publicly disclose underlying assets.”
She said she views the OGE’s exception as a “double standard” that allows very wealthy candidates to avoid disclosure because they are more likely to have their assets in accounts covered by a confidentiality agreement.
By comparison, she said, her congressional clients are required to report every asset unless they qualify for one of the few exceptions described in the law.
One indication of the lack of specificity in Romney’s disclosures is the size of his report. In 2011, it ran 27 pages, compared with 123 pages filed by Ross Perot before he announced his presidential bid in 1992 and 51 pages filed by Henry Paulson, former chief executive of Goldman Sachs, when he was nominated as Treasury secretary in 2006.
Steve Pagliuca, a current Bain managing director who sought election to the U.S. Senate in 2009, and filed a 94-page disclosure. He too was denied permission to release underlying assets in Bain accounts, according to a source familiar with the matter, who spoke on condition of anonymity because he was not authorized to speak on the topic.
Romney is not the first presidential candidate to say he is unable to list underlying holdings in a private equity account. But he is the first to do so for such a large portion of his overall assets.
“I have never seen anything like this,” said Joe Sandler, a Democratic Party lawyer who has shepherded candidates and nominees through the disclosure process for 26 years. “Romney’s approach frustrates the very purpose of the ethics and disclosure laws,” he said. Sandler served as general counsel to the Democratic National Committee when Kerry ran for president.
As a senator, Kerry continues to say he cannot list assets in a Bain account held by his wife, Teresa Heinz Kerry, which his staff says is in compliance with Senate rules.
When he was running for president, Kerry did not list assets in Bain and half a dozen other private equity and hedge fund accounts — some valued over $1 million. A Kerry aide, who spoke on condition of anonymity because she was not part of the presidential campaign, said, “In this case, Senator Kerry wasn’t a beneficiary of Heinz family trusts, had no role in their management, and preexisting confidentiality agreements governing proprietary information were a unique issue.”
New Jersey Sen. Frank Lautenberg (D) does not list underlying investments in several private equity accounts his wife owns — and he provided no explanation with his disclosure report. His chief of staff, Dan Katz, said information on accounts owned by trusts connected to Lautenberg’s wife have proved unobtainable so far, but the senator has been told he is in compliance with Senate rules.
Senate Ethics Committee officials said they could not comment on individual members.
When he ran for the Senate from New Jersey in 2000, Jon Corzine, a former chief executive at Goldman, initially declined to release tax returns, citing confidentiality obligations to his firm. William Canfield III, a former Republican counsel to the Senate Ethics Committee, said at the time that the New Jersey millionaire had a special obligation to disclose, in part because of his extraordinary wealth.
“Mr. Corzine has to understand, while he retains some privacy rights, he has given up a substantial number of them in holding himself out for public office,” Canfield said at the time. Canfield has gone on to private practice and advised federal candidates, including Texas Gov. Rick Perry.
A spokesman for Corzine, who ultimately released his tax returns, declined to comment.
The purpose of disclosure
The 1978 Ethics in Government Act requires candidates to publicly disclose their wealth in broad ranges and to list the assets in most partnerships, trusts and pooled investment funds.
The purpose is to allow the public to identify potential conflicts of interest and the personal economic priorities of candidates and elected officials, said Fred Wertheimer, the longtime advocate who worked to enact the measure in the aftermath of the Watergate scandal.
Mitchell and several other Washington campaign lawyers say they advise candidates to reveal underlying assets, divest them if they cannot be disclosed or choose not to seek public office.
“My clients have had fund managers squawk about their ‘proprietary information’ and I’ve always been told, ‘There is no choice — the law requires disclosure,’ ” Mitchell said.
Canfield, the former Senate ethics lawyer, will not comment on Romney’s assets. But, he said, “I always counsel my clients to err on the side of disclosure” and to note on ethics forms “the same description of assets they would disclose to the IRS.” Doing so, he said, is in keeping with the spirit of the law and prevents embarrassing questions about discrepancies.
Romney’s tax forms showed holdings in a Swiss bank account, a real estate trust and nine offshore accounts not named on the public disclosure reports. In addition, 12 Bain accounts described as “fund” investments on the disclosure were identified as “partner” investments to the IRS.
Romney’s attorneys subsequently amended the disclosure to acknowledge the Swiss bank and the real estate accounts. The other assets, Romney aides said, were too small to report or had been listed, under other names, on the public disclosure. The general explanations were accepted by government ethics reviewers as were the amendments.
“Any document with this level of complexity and detail is bound to have a few trivial inadvertent issues,” Saul said at the time.
In his disclosure reports, Romney’s lawyers noted that he retired from Bain in 1999, is now a “passive investor” and “has not had any active role with any Bain entity.”
Romney’s tax returns indicate that he and his wife received “carried interest,” a controversial form of compensation that provides a share of profits to Bain managers and is taxed at the lower capital gains rate.
Romney’s compensation from ongoing Bain deals results from a retirement agreement when he left the company in 1999 allowing him a stake in Bain’s new investment funds for a decade after.
By: Tom Hamburger, The Washington Post, April 5, 2012
“Not So High Standards Of Conduct”: Federal Judge’s Racist Email May Have Violated U.S. Ethics Code
A racist email sent around by Richard Cebull, the chief US district court judge in Montana, not only showed blatant disrespect for the president of the United States but also may have broken federal ethics rules. Cebull, who was appointed to the court by George W. Bush in 2001 and became chief judge in 2008, appears to have violated the US Code of Judicial Conduct on at least one count with his behavior, legal experts say.
Cebull sent the nasty email about President Obama on Feb. 20 to six of his “old buddies,” as he put it. The subject line read: “A MOM’S MEMORY.” He used his official court email account, according to the Great Falls Tribune, which first exposed the email on Wednesday. “Normally I don’t send or forward a lot of these,” he wrote, “but even by my standards, it was a bit touching. I want all of my friends to feel what I felt when I read this. Hope it touches your heart like it did mine.” The enclosed “joke”—suggesting that the racially mixed president is the spawn of a dog—read:
“A little boy said to his mother; ‘Mommy, how come I’m black and you’re white?’
“His mother replied, ‘Don’t even go there Barack! From what I can remember about that party, you’re lucky you don’t bark!'”
Cebull denies he’s a racist, and says that the email wasn’t intended to be public. But on Wednesday he admitted publicly that the email was both racist and motivated by partisan politics. “The only reason I can explain it to you is I am not a fan of our president, but this goes beyond not being a fan,” he said. “I didn’t send it as racist, although that’s what it is. I sent it out because it’s anti-Obama.”
The US Code of Judicial Conduct mandates that a judge “should personally observe high standards of conduct so that the integrity and independence of the Judiciary are preserved.” It also says that a judge “should avoid impropriety and the appearance of impropriety in all activities”—which applies to both professional and personal conduct. With regard to politics, it says judges “should refrain from partisan political activity” and “should not publicly endorse or oppose a partisan political organization or candidate.”
Where to draw the line between appropriate and inappropriate speech by judges is a complicated matter, says Jeffrey M. Shaman, a judicial ethics expert at DePaul University College of Law. But there seems to be little doubt that Cebull crossed over the line. “Offensive, racist speech such as this clearly diminishes public confidence in the integrity and impartiality of the judiciary, and therefore should be considered a violation of the Code of Judicial Conduct,” Shaman told me. “Judge Cebull ought to know better, and his circulation of such a disgusting message makes one wonder if he is competent to serve as a judge.”
What might the consequences be for Cebull?
“While I certainly see why this type of joke raises serious and legitimate concerns, I am not convinced that it warrants punishment beyond the current (and justified) public criticism,” wrote George Washington University legal scholar Jonathan Turley on Thursday. “The judge is claiming that he thought he was sending this to a handful of friends. It would be akin to a bad joke at a party being repeated later.”
Turley notes that in 2009 a judicial council cleared Chief Judge Alex Kozinski of the 9th US Circuit Court of wrongdoing after an investigation into sexually explicit materials (involving farm animals) found on the judge’s personal website. But the council did officially find that Kozinski had acted with “carelessness” and was “judicially imprudent.”
In Cebull’s case, Turley concedes that the Montana judge clearly failed to adhere to a tenet of the Code of Judicial Ethics, that a judge “must expect to be the subject of constant public scrutiny and accept freely and willingly restrictions that might be viewed as burdensome by the ordinary citizen.”
Shaman sees a serious offense. “It is very difficult to predict what sanctions a reviewing authority will apply in any given case,” he says. “But I certainly think that at least a reprimand is appropriate here.”
Update, 3pm PST: AP reports that the 9th U.S. Circuit Court of Appeals will carry out a judicial misconduct review. The complaint process apparently was initiated by Cebull himself, who says he also plans to send President Obama a formal apology.
By: Mark Follman, Mother Jones, March 1, 2012
Newt Gingrich’s Revisionist History
For a man who likes to tout his expertise as a historian, Republican presidential candidate Newt Gingrich has a decidedly revisionist approach when it comes to his own history.
In 1997, Gingrich became the only speaker in history to be reprimanded by the House of Representatives. He agreed to pay $300,000 to settle the matter, which involved using charitable groups to promote his political views and submitting misleading documents to the House ethics committee.
The ethics charges sound like ancient history. They involve dreary matters of tax law. But the episode is worth revisiting because it offers insights into Gingrich’s bombastic, push-the-boundaries style. More troubling, in recent days, Gingrich has been blatantly dishonest in his self-interested rewriting of this history, dismissing the ethics sanction as the action of “a very partisan political committee.”
As Gingrich relates the story, “The Democrats filed 84 charges against me; 83 were dismissed. The only one which survived was the fact that my lawyers had written a letter inaccurately and I signed it.”
Referring to California Democrat Nancy Pelosi, who served on the panel, Gingrich said last week, “If she was in the middle of it, how nonpartisan and just do you think the process was?”
How partisan? The ethics panel, split evenly between Democrats and Republicans, voted 7 to 1 in favor of the reprimand. The dissenting Republican, Lamar Smith of Texas, said Gingrich had made “real mistakes” but called the penalty “way too severe.”
The House agreed to the reprimand by a similarly overwhelming margin, 395 to 28. “The penalty is tough and unprecedented,” the committee chairman, Connecticut Republican Nancy Johnson, said on the House floor. “It is also appropriate.”
Another Republican on the ethics panel, Porter Goss of Florida, said he found “the fact that the committee was given inaccurate, unreliable and incomplete information to be a very serious failure on [Gingrich’s] part.” Indeed, Gingrich’s own lawyer told the ethics committee that the speaker “recognizes the serious nature of the charges and the seriousness of his admission.”
The ethics investigation stemmed from a Gingrich-inspired enterprise during the early 1990s to spread his conservative message — and engineer a Republican takeover of Congress — through a satellite broadcast and a college course that would also be televised.
Both efforts were connected with GOPAC, a political action committee that Gingrich then headed, and were funded by tax-deductible contributions to various nonprofit groups.
For example, the Abraham Lincoln Opportunity Foundation, originally designed to help inner-city youth, served as the vehicle to fund the satellite broadcast. GOPAC lent money to the Lincoln foundation to take over the program, then steered its donors to the foundation and was ultimately repaid by the charitable group.
In Gingrich’s defense, the Internal Revenue Service concluded that the Progress and Freedom Foundation, which underwrote the college course, should not lose its charitable status. After initially revoking the tax-exempt status of the Lincoln foundation, the IRS agreed to reinstate it.
Yet the tax questions show Gingrich’s characteristic willingness to skirt close to the edge, if not beyond. Having been involved in a previous case about the permissible use of charitable groups, Gingrich “had ample warning that his intended course of action was fraught with legal peril,” the committee’s report found. The speaker’s own tax lawyer said he would have advised against the “explosive mix.”
The ethics committee ultimately concluded that Gingrich was, at the very least, reckless in not seeking tax advice.
Then there was the matter of repeated incorrect statements made to the committee as part of the effort to persuade it to dismiss the case. Gingrich twice assured the committee — incorrectly — that GOPAC played no role in developing or financing the college course.
Gingrich blamed the inaccurate statements on his lawyer and said he did not review the letters carefully enough. The four members of the investigative subcommittee found that there was “reason to believe” that Gingrich knew the information was wrong. But they settled for Gingrich’s admission that he “should have known” it was false.
“The violation does not represent only a single instance of reckless conduct,” the report found. “Rather, over a number of years and in a number of situations, Mr. Gingrich showed a disregard and lack of respect for the standards of conduct that applied to his activities.”
This is the bipartisan judgment of his peers. Is Gingrich really the man Republicans want to be their nominee?
By: Ruth Marcus, Opinion Writer, The Washington Post, December 13, 2011
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