How fitting that as we celebrate what makes America great, news is trickling out about Mitt Romney’s foreign holdings, especially tax sheltered assets in Bermuda and the Cayman Islands.
Romney’s refusal to fully disclose all of his financial holdings and income raises red flags. There are no allegations of illegality, but there are an awful lot of questions. Romney still receives residual income from Bain and its holdings though he officially (though apparently not literally) left years ago. His Bain income and holdings are the most cloaked, and considering that Bain profits by moving money around in clever ways, the most sought-after.
Even as governor, Romney held his financial cards as close to his vest as Massachusetts law allowed. One day before he was sworn in as Governor of Massachusetts in 2003, Romney transferred to his wife’s blind trust ownership of Bermuda-based Sankaty High Yield Asset Investors, Ltd. Sankaty is a hedge fund created by Bain in 1977 to facilitate its Domino’s Pizza acquisition. A Bermuda shell corporation like this allows investors to avoid U.S. taxes on earnings (and can facilitate money laundering). By Massachusetts law, once it was in the blind trust, he did not have to disclose ownership or control of Sankaty.
Public officials use blind trusts to avoid the appearance (and fact) of conflict of interest. A blind trust is supposed to be run by an independent trustee and its contents unknown to the owner. Thus, the official is not aware whether he owns part of any company that the government is doing business with. The trustee for the Romney blind trust is Mitt’s personal lawyer.
The Sankaty shell company remained undocumented until Romney released his 2010 tax returns recently. Funny thing, but in the 2010 tax return, Sankaty was listed as directly owned by both Romneys, not by Ann’s blind trust.
Romney did not disclose ownership of Sankaty on his presidential campaign filings because it did not meet the minimum $1000 value required in campaign disclosures. Mitt’s tax returns confirm that Sankaty was valued at zero. However, it was not a worthless company. Its assets and its debts were each $10,000. Knowing how Bain killed companies it bought–by loading them up with debt—it is easy to see that Sankaty is still a useful business tool. It is also worthwhile to remember that shifting debt among real and shell companies and not reporting it accurately was what got Enron in trouble. With a fortune and legal and accounting team the size of Romney’s, there could be any number of things going on behind his financial veil.
Sankaty is just one example. Now consider:
- Bain Capital has at least 138 funds in the Caymans alone, and Romney is known to have interest in at least 12.
- 55 pages of Romney’s 2010 tax return cover his foreign dealings.
- Last month, Bain paid Romney $1.9 million—not as annual income but as “catch up”—the difference between Romney’s estimated earnings from Bain and his actual earnings.
There are opaque blind trusts, income from unclear sources, and unexplained earnings. In short, each worm unearthed seems to open a new can of worms.
In addition to shielding investment money from U.S. tax eyes, another use of offshore tax havens is to “park” money earned by foreign companies (including American businesses with a foreign incorporation address). Until this money is brought into the U.S. officially, it is not taxable in the U.S. In 2005, President George W. Bush declared a tax holiday, meaning that all the offshore money could be brought into the U.S. for a special low, low rate of 5.25%. $312 billion came into the country under the tax holiday. That gave us an extra $16 billion in tax that year, but think how much was lost.
If the term tax holiday feels more recent than 2005, it is because a year ago, corporations were lobbying hard for another tax holiday. “Foreign corporations” like Apple, Microsoft, and Google have billions offshore, and Mitt Romney? Who knows how much he has. His financial disclosure lists 25 investments as simply “worth more than $1 million.” Do you suppose President Mitt Romney would be in favor of a tax holiday?
Since 1967, presidential candidates have voluntarily disclosed years of tax returns. The first to do so was George Romney, Mitt’s father. The first since then to refuse is Mitt Romney.