“Standing Up To China, Romney Style”: MItt Invested In Chinese Company Fined Thousands For Selling Fake College Tests
In the latest Romney campaign reboot, the candidate has made a central theme of President Obama’s alleged softness on China. “Fewer Americans are working today than when President Obama took office,” the narrator of a Romney ad released last week intones. “It doesn’t have to be this way if Obama would stand up to China. China is stealing American ideas and technology.”
The 30-second ad, titled “Stand up to China,” says Obama failed on no fewer than seven occasions to stop China’s violations of intellectual-property laws. FactCheck.org notes that the ad mangles the facts, but beyond that, Romney’s whole focus on China carries perils, not least because he has invested in and profited off of Chinese companies known for violating American businesses’ intellectual property.
Romney’s recently released tax returns show that he invested in the parent company of Youku, a sort of Chinese YouTube that was a haven for pirated movies and TV shows, though the company is now apparently cleaning up its act.
Another notable Romney investment, which has so far gone unnoticed, was in a Chinese private education company that was cited repeatedly in the late 1990s for selling bootleg American graduate school entrance exams and was forced by a Chinese court to pay hundreds of thousands of dollars in fines in a landmark copyright case.
According to his 2011 personal financial disclosure form, Romney’s blind trust invested between $15,001 and $50,000 in New Oriental Education & Technology Group, the largest provider of private educational services in China, though his recent tax returns show he sold at least some of that position. Among other services, New Oriental helps Chinese students prepare for the tests needed to gain admission to American universities, like the Test of English as a Foreign Language (TOEFL), the GRE or the GMAT, the business school entrance exam. The company has said that as many as seven in 10 mainland-Chinese students who attended foreign universities have gone through one of the schools’ test-preparation classes.
A 2001 expose in the the Chronicle Of Higher Education reported that New Oriental, “like other Chinese test-preparation schools, has been pirating and selling Educational Testing Service publications — thus compromising their integrity and costing the testing service money by violating its copyrights.” Educational Testing Service (ETS) is the private nonprofit giant responsible for the TOEFL, the GRE and other tests.
ETS began to get suspicious of New Oriental in late 2000 when they saw “a surprising increase in Chinese student test scores,” University Wire reported at the time. In response, ETS sent a letter to American universities warning them to give extra scrutiny to Chinese students. In November of that year, Chinese authorities raided the school where they “seized thousands of illegal copies of the tests that were being sold logo and all in the bookstore of the New Oriental School,” as the AP reported at the time. The tests sold in the bookstore included “live questions” being used on current tests, leading ETS to believe that New Oriental had paid people to take the tests, memorize the questions, and later reproduce them. The school had already been caught hawking bootleg tests in 1996 and 1997, and despite apologies and promises to stop each time, it apparently did not.
In 2001, ETS and the Graduate Management Admission Council (GMAC), which administers the GMAT, sued New Oriental in Chinese court. In 2002, the school’s founder and president, who had developed a high profile as China’s leading expert on gaining admission to foreign universities, abruptly resigned. The Straits Times reported the resignation was due to the ETS piracy scandal, but the school denied this.
In 2003, a court in Beijing ruled in ETS and GMAC’s favor and forced New Oriental to pay about $1.2 million in fines, along with over $100,000 in legal fees, and required the school to turn over all illegal copies of ETS and GMAC materials, and publish an apology. New Oriental appealed, and while the decision was upheld, the fine was reduced to $774,000 in 2004.
The ruling became a landmark case in Chinese intellectual property law, as it was the first case argued after China joined the World Trade Organization and a rare win for a plaintiff. “This ruling should give international companies more confidence about operating in China and having their significant intellectual property rights recognized and enforced by the Chinese courts,” the president of GMAC said in a statement. The company has since changed its ways; in 2007, New Oriental and ETS made up when they entered into a licensing agreement.
Since September 2006, when New Oriental began trading on the New York Stock Exchange under the symbol EDU, the price has skyrocketed from just over $5 to $17.44 a share today.
It’s not clear from Romney’s personal financial disclosure forms when his trust purchased the position in New Oriental, and the Romney campaign did not respond to a request for comment. New Oriental did not respond to a request either, but has told Businessweek that it doesn’t comment on past litigation. As the campaign has often said of Romney’s investments, his trust, like that of most other politicians, is “blind,” meaning he has no control over how the money is invested and cannot see where his money is kept. While this is true, it still puts Romney in an awkward position to be making money off a company that has a poor record on intellectual property at the same time as he criticizes his opponent for being weak on intellectual property violators.
And while Romney now says that it’s not fair to criticize investments in his blind trust, he did just that in 1994 when running against the late Sen. Ted Kennedy. “The blind trust is an age-old ruse,” Romney said then. “You can always tell a blind trust what it can and cannot do. You give a blind trust rules.”
By: Alex Seitz-Wald, Salon, October 1, 2012
“No Daylight”: From “Opposition” To “Red Line”, Justification For Another MId-East War
Since Mitt Romney has decided, for reasons that are a bit obscure, to make foreign policy a major focus of his campaign at this sensitive moment of the presidential contest, it’s time once again to note a rather jarring contradiction nestled in the center of his and his party’s policies and rhetoric. It’s nicely presented once again in a Wall Street Journal op-ed signed by the Republican nominee himself.
It begins with the usual “American exceptionalism” rap: the world is safe if the United States not only walks tall, but walks alone in its status as the source of all virtue and power:
Since World War II, America has been the leader of the Free World. We’re unique in having earned that role not through conquest but through promoting human rights, free markets and the rule of law. We ally ourselves with like-minded countries, expand prosperity through trade and keep the peace by maintaining a military second to none.
But Obama doesn’t get it, and isn’t maintaining our towering-colossus position:
President Obama has allowed our leadership to atrophy. Our economy is stuck in a “recovery” that barely deserves the name. Our national debt has risen to record levels. Our military, tested by a decade of war, is facing devastating cuts thanks to the budgetary games played by the White House. Finally, our values have been misapplied—and misunderstood—by a president who thinks that weakness will win favor with our adversaries.
But what is the supreme example of Obama’s “weakness” and refusal to keep the United States the world’s sole supremely sovereign super-power? Refusing to outsource our Middle Eastern policy to Bibi Netanyahu:
The president began his term with the explicit policy of creating “daylight” between our two countries. He recently downgraded Israel from being our “closest ally” in the Middle East to being only “one of our closest allies.” It’s a diplomatic message that will be received clearly by Israel and its adversaries alike. He dismissed Israel’s concerns about Iran as mere “noise” that he prefers to “block out.” And at a time when Israel needs America to stand with it, he declined to meet with Prime Minister Benjamin Netanyahu.
In this period of uncertainty, we need to apply a coherent strategy of supporting our partners in the Middle East—that is, both governments and individuals who share our values.
So the first step Romney urges is “placing no daylight between the United States and Israel.” And that clearly includes a shift in U.S. policy towards Iran away from opposition to acquisition of nuclear weapons to the “red line” Netanyahu is demanding, acquisition of “nuclear capability,” which because of the vague nature of the definition of “capability,” means a pre-justification for military action against Tehran any old time now.
Put aside for a moment the arguments about Iran’s ultimate intentions and its alleged historically unique indifference to nuclear deterrence, or about the actual balance of military power in the Middle East. Forget if you can the calamitous consequences, not only to regional peace and stability, but to the U.S. and global economies, of war with Iran.
Think about this: Mitt Romney is running for president on a platform of indistinguishable and conjoined exceptionalism for the U.S. and Israel. And because Israel faces a vastly greater military threat, this means America would abandon its own independence of action and consign its fate to Bibi Netanyahu, a man whose views on peace and security are highly controversial in Israel itself.
Republican foreign policy thinking has had to go through a lot of twists and turns to arrive at this extraordinarily anomalous place. But the bottom line seems to be remarkably similar to the one embraced twelve years ago by George W. Bush and his advisors, who took office determined to wage war with Iraq, despite the cover of all the middle-school bully-boy talk of preventing war by plotting it constantly.
If Romney wins and the United States supinely follows Bibi into yet another, and this time vastly more dangerous, Gulf war, nobody can say we were not warned.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Anmal, October 1, 2012
“No, We Don’t Dig It”: What We Still Don’t Know About Mitt Romney’s Taxes
With the documents Mitt Romney released recently, we know a bit more about his taxes.
We know, for instance, that Romney paid a rate of 14.1 percent on $13.7 million in income on his 2011 tax return, which he achieved by purposely overpaying. Though he was entitled to deduct $4 million in charitable contributions, Romney deducted only $2.25 million to keep his tax rate above 13 percent.
(Romney, it has been pointed out, could file an amended return to claim the full deduction after the election. We’ve contacted the Romney campaign, and Michele Davis, a spokeswoman, assured us he would not do so.)
We know, according to a letter from his accountants at PricewaterhouseCoopers, that Romney has paid state and federal income taxes each year since at least 1990, which would seem to disprove Senate Majority Leader Harry Reid’s claim in July that Romney had not paid any taxes for a decade.
And we know that Romney’s tax rate since 1990 never dipped below 13.66 percent, according to his accountants. Romney paid an average effective tax rate between 1990 and 2009 of 20.2 percent.
But there’s still a lot we don’t know. “I think most of the major questions we had before [last Friday] are still out there,” said Brian Galle, a tax law professor at Boston College. Here are a few:
How much did Romney make before 2010?
While Romney has disclosed his average effective tax rate for the last two decades, he hasn’t said how much he earned in those years or how much — the dollar amount — he paid in taxes.
That’s an important distinction, said Daniel Shaviro, a tax law professor at New York University. Various tax-planning strategies may have enabled Romney to reduce his adjusted gross income in some years.
In 2008, for instance, investors everywhere lost money when the stock market tanked. Romney may have carried those losses forward, Shaviro said, and used them to reduce his adjusted gross income in 2009. While we know Romney paid at least 13.66 percent of the income he recorded on his taxes in a given year, we don’t know what percentage he paid of the money actually took home that year.
Why is Romney’s IRA worth so much?
Much of Romney’s wealth sits in his IRA, which is worth as much as $101.6 million. It’s a remarkable number, in part because Romney would have been able to contribute a maximum of $30,000 a year to his IRA while he was at Bain, from 1984 to 1999.
Galle, the Boston College tax law professor, said the most likely explanation for the outsized IRA is that Romney put in shares in Bain investments that swelled in value. According to the Wall Street Journal, Bain allowed employees to buy a special class of shares in the firm’s investments. The shares didn’t cost very much, but they could be extremely lucrative. In one deal, the Journal reported, “some Bain employees saw a 583-fold increase” in the value of their shares — an astronomical return. Because the shares were in IRAs, the profits could be plowed into new Bain deals without subtracting taxes.
Romney also may have beefed up his IRA by contributing “carried interest” — a share of the profits in funds managed by Bain. As Reuters reported earlier this year, any potential carried interest would “not be disclosed in his personal financial summary or on a federal income tax return.” In other words, even if Romney released all his tax returns, we still might not know exactly how he accumulated his huge IRA.
What about Romney’s investments offshore?
We know many of Romney’s IRA investments are based in foreign countries but it’s hard to know how much. He valued one account in the Cayman Islands at anywhere between $5 million and $25 million.
One thing we do know is that Romney pays a far lower tax rate overseas than he does here. According to Quartz, Romney paid only 2.4 percent in foreign taxes in 2011 on the $3.5 million he earned abroad.
We also know where Romney’s current overseas investments are held —Bermuda, the Cayman Islands, Switzerland, Luxembourg — and many of the firms he has invested in, including a state-owned Chinese oil company and a Chinese bank that Romney’s family trusts sold their stake in last year. But we don’t have a lot of other important documentation, including forms would show whether Romney had, as the New York Times has reported, “over the years declared all of his foreign income to the IRS in a timely manner.”
The Wall Street Journal has reported that Romney’s offshore IRA investments likely helped him avoid a little-known tax called the unrelated business income tax. The tax, “meant to discourage tax-exempt entities such as an IRA or college endowment fund from unfairly competing with for-profit, taxpaying entities by operating a business without paying taxes on it,” could have hit Romney at up to 35 percent.
The Romney campaign seems unlikely to release any more information about his finances, but that hasn’t kept reporters from digging it up. Bloomberg, for instance, analyzed securities filings to report last Thursday that Romney has set up a type of trust known as an “I Dig It” trust — a legal way for Romney to avoid estate and gift taxes and pass some of his fortune onto future generations.
By: Theodoric Meyer, Propublica, October 1, 2012
“Vagueness In, Vagueness Out”: Foreign Policy Is Hard For Mitt Romney
In today’s Wall Street Journal, Mitt Romney takes to the op-ed page to offer his vision for a new American policy in the Middle East. Apparently, the tragic recent events in Benghazi have convinced Romney and his advisors that something is going on over there, and though they aren’t sure exactly what, it’s definitely something, and therefore Romney ought to come and say something about it, to show everyone how wrong Barack Obama is. If you thought Romney was being vague about his domestic policy, that’s nothing compared to what he has to say about foreign policy.
The first half of the piece is the standard criticism of the Obama administration (he’s weak!), and here’s the part where Romney lays out in specific detail exactly what he’d do differently:
In this period of uncertainty, we need to apply a coherent strategy of supporting our partners in the Middle East—that is, both governments and individuals who share our values. This means restoring our credibility with Iran. When we say an Iranian nuclear-weapons capability—and the regional instability that comes with it—is unacceptable, the ayatollahs must be made to believe us.
It means placing no daylight between the United States and Israel. And it means using the full spectrum of our soft power to encourage liberty and opportunity for those who have for too long known only corruption and oppression. The dignity of work and the ability to steer the course of their lives are the best alternatives to extremism.
But this Middle East policy will be undermined unless we restore the three sinews of our influence: our economic strength, our military strength and the strength of our values. That will require a very different set of policies from those President Obama is pursuing.
The 20th century became an American Century because we were steadfast in defense of freedom. We made the painful sacrifices necessary to defeat totalitarianism in all of its guises. To defend ourselves and our allies, we paid the price in treasure and in soldiers who never came home. Our challenges are different now, but if the 21st century is to be another American Century, we need leaders who understand that keeping the peace requires American strength in all of its dimensions.
OK, so what do we have here? America needs to support our partners. We need to restore our credibility with Iran, by making them believe that we really, really don’t want them to have nuclear weapons. We need to place no daylight between ourselves and Israel. And we need to encourage liberty and opportunity. That line about “the dignity of work” is a little odd—maybe the problem they have in the Middle East is too many 47 percenters? So where’s the new policy again?
But in the next paragraph, he says he’s going to give us “a very different set of policies.” So here it comes, right? The answer is … “American strength in all its dimensions.” Ah yes. Strength. Resolve. If you ask “How, precisely, will you achieve these goals?” then you’re obviously a weakling who can’t grasp the full majesty of Mitt Romney’s chin, which when jutted in the direction of our adversaries will make them quake before us and submit to our demands.
I can muster a little bit of sympathy for Romney here. Middle East politics is hard! A permanent settlement between the Israelis and the Palestinians seems all but impossible, particularly given that the policy of the Israeli government essentially comes down to “the beatings will continue until morale improves.” The question of Iran’s nuclear aspirations offers nothing but bad alternatives. Romney keeps saying he wants America to “shape events” in the Middle East, but as president after president has discovered, that’s a tall order. You can certainly shape events by invading somebody, but that tends to come with some problematic repercussions.
But the real reason Romney seems incapable of offering any specific policies he wants to change is that he can’t quite figure out which Obama policies he objects to. His criticism is that Obama is “weak,” so the alternative he offers is that he’ll be “strong.” Vagueness in, vagueness out.
By: Paul Waldman, Contributing Editor, The American Prospect, October 1, 2012
“The Real Referendum”: The Legacy Of The New Deal, The Great Society And Obamacare
Republicans came into this campaign believing that it would be a referendum on President Obama, and that still-high unemployment would hand them victory on a silver platter. But given the usual caveats — a month can be a long time in politics, it’s not over until the votes are actually counted, and so on — it doesn’t seem to be turning out that way.
Yet there is a sense in which the election is indeed a referendum, but of a different kind. Voters are, in effect, being asked to deliver a verdict on the legacy of the New Deal and the Great Society, on Social Security, Medicare and, yes, Obamacare, which represents an extension of that legacy. Will they vote for politicians who want to replace Medicare with Vouchercare, who denounce Social Security as “collectivist” (as Paul Ryan once did), who dismiss those who turn to social insurance programs as people unwilling to take responsibility for their lives?
If the polls are any indication, the result of that referendum will be a clear reassertion of support for the safety net, and a clear rejection of politicians who want to return us to the Gilded Age. But here’s the question: Will that election result be honored?
I ask that question because we already know what Mr. Obama will face if re-elected: a clamor from Beltway insiders demanding that he immediately return to his failed political strategy of 2011, in which he made a Grand Bargain over the budget deficit his overriding priority. Now is the time, he’ll be told, to fix America’s entitlement problem once and for all. There will be calls — as there were at the time of the Democratic National Convention — for him to officially endorse Simpson-Bowles, the budget proposal issued by the co-chairmen of his deficit commission (although never accepted by the commission as a whole).
And Mr. Obama should just say no, for three reasons.
First, despite years of dire warnings from people like, well, Alan Simpson and Erskine Bowles, we are not facing any kind of fiscal crisis. Indeed, U.S. borrowing costs are at historic lows, with investors actually willing to pay the government for the privilege of owning inflation-protected bonds. So reducing the budget deficit just isn’t the top priority for America at the moment; creating jobs is. For now, the administration’s political capital should be devoted to passing something like last year’s American Jobs Act and providing effective mortgage debt relief.
Second, contrary to Beltway conventional wisdom, America does not have an “entitlements problem.” Mainly, it has a health cost problem, private as well as public, which must be addressed (and which the Affordable Care Act at least starts to address). It’s true that there’s also, even aside from health care, a gap between the services we’re promising and the taxes we’re collecting — but to call that gap an “entitlements” issue is already to accept the very right-wing frame that voters appear to be in the process of rejecting.
Finally, despite the bizarre reverence it inspires in Beltway insiders — the same people, by the way, who assured us that Paul Ryan was a brave truth-teller — the fact is that Simpson-Bowles is a really bad plan, one that would undermine some key pieces of our safety net. And if a re-elected president were to endorse it, he would be betraying the trust of the voters who returned him to office.
Consider, in particular, the proposal to raise the Social Security retirement age, supposedly to reflect rising life expectancy. This is an idea Washington loves — but it’s also totally at odds with the reality of an America in which rising inequality is reflected not just in the quality of life but in its duration. For while average life expectancy has indeed risen, that increase is confined to the relatively well-off and well-educated — the very people who need Social Security least. Meanwhile, life expectancy is actually falling for a substantial part of the nation.
Now, there’s no mystery about why Simpson-Bowles looks the way it does. It was put together in a political environment in which progressives, and even supporters of the safety net as we know it, were very much on the defensive — an environment in which conservatives were presumed to be in the ascendant, and in which bipartisanship was effectively defined as the effort to broker deals between the center-right and the hard right.
Barring an upset, however, that environment will come to an end on Nov. 6. This election is, as I said, shaping up as a referendum on our social insurance system, and it looks as if Mr. Obama will emerge with a clear mandate for preserving and extending that system. It would be a terrible mistake, both politically and for the nation’s future, for him to let himself be talked into snatching defeat from the jaws of victory.
By: Paul Krugman, Op-Ed Columnist, The New York Times, October 1, 2012
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