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Gawker Releases Trove of Records on 21 Romney-Owned Bain Caymans Entities (Updated)

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As a public service, I’m pointing to an important post at Gawker on some Mitt Romney investments that he has until now managed to shield from scrutiny. I hope qualified NC readers will put some of the pieces together and share your conclusions with Gawker as well as with NC readers in comments. This is the overview:

Today, we are publishing more than 950 pages of internal audits, financial statements, and private investor letters for 21 cryptically named entities in which Romney had invested—at minimum—more than $10 million as of 2011 (that number is based on the low end of ranges he has disclosed—the true number is almost certainly significantly higher). Almost all of them are affiliated with Bain Capital, the secretive private equity firm Romney co-founded in 1984 and ran until his departure in 1999 (or 2002, depending on whom you ask). Many of them are offshore funds based in the Cayman Islands. Together, they reveal the mind-numbing, maze-like, and deeply opaque complexity with which Romney has handled his wealth, the exotic tax-avoidance schemes available only to the preposterously wealthy that benefit him, the unlikely (for a right-wing religious Mormon) places that his money has ended up, and the deeply hypocritical distance between his own criticisms of Obama’s fiscal approach and his money managers’ embrace of those same policies. They also show that some of the investments that Romney has always described as part of his retirement package at Bain weren’t made until years after he left the company…

When Romney left in 1999, he and his wife retained significant investments in many of those Bain vehicles—he claims they are “passive investments” and that they are managed in a blind trust (though the trustee isn’t blind enough to meet federal standards of independence). But aside from disparate snippets of information contained in his federal and Massachusetts financial disclosure forms, his 2010 tax returns, and SEC filings, the nature of those investments has been obfuscated by design.

The full text of the post is here and the documents, here. Have fun!

Update 3:30 AM 8/24. As reader Willard Mitt Sutton pointed out in comments yesterday afternoon, law professor Victor Fleisher takes a dim view of the treatment of the management fee in some of the deals:

In the 2000s it became common for private equity fund managers to “convert” their management fees into carried interest. There are many variations on the theme, but here’s how many deals worked: each year, before the annual management fee comes due, the fund manager waives the management fee in exchange for a priority allocation of future profits. There is minimal economic risk involved; as long as the fund, at some point, has a profitable quarter, the managers get paid. (If the managers don’t foresee any future profits, they won’t waive the fees, and they will take cash instead.) In exchange for a minimal amount of economic risk, the tax benefit is enormous: the compensation is transformed from ordinary income (taxed at 35%) into capital gain (taxed at 15%). Because the management fees for a large private equity fund can be ten or twenty million per year, the tax dodge can literally save millions in taxes every year.

The problem is that it is not legal. Because the deals vary in their aggressiveness, there is some disagreement among practitioners about when it works and when it doesn’t. But in my opinion, and the opinion of many tax practitioners, the practices that were common in the private equity industry in the 2000s became very, very questionable, and it’s unlikely that they would have stood up in court.

Fund VII. Gawker today posted some Bain documents today showing that Bain, like many other PE firms, had engaged in this practice of converting management fees into capital gain. Unlike carried interest, which is unseemly but perfectly legal, Bain’s management fee conversions are not legal. If challenged in court, Bain would lose. The Bain partners, in my opinion, misreported their income if they reported these converted fees as capital gain instead of ordinary income.

Our PE insider and guest poster Nanea adds:

In order for these structures to have a prayer of passing IRS muster, the repayment of the waived fees must be from actual economic profits, which in every case I have ever seen (and I have seen many), they are not.

Floyd Norris of the New York Times has an article keying off the Fleisher discussion and also mentions:

A 2009 document concerning Bain Capital Asia, one of the firm’s overseas private equity funds, for example, refers to three “blocker” corporations used to invest in D&M Holdings, a Japanese electronics company.

Blocker corporations, typically set up in tax havens like the Cayman Islands, can help investors avoid a levy known as the unrelated business income tax, which was created to prevent nonprofit groups from undertaking profit-making ventures that compete with taxpaying companies.

The documents also showed that some of the funds owned equity swaps, which have been used to avoid taxes that would otherwise be owed on dividends paid by American companies to foreign-based investors, like funds based in the Caymans.

I had taken a discussion of blocker entities out of Nanea’s materials for NC’s inaugural PE post as being MEGO (My Eyes Glaze Over) inducing and relegated it to in one of our next pieces. Whoops.

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62 comments

  1. readerOfTeaLeaves

    Wow, Yves.

    I’d strongly encourage NCers to read the full Gawker piece, including this:

    Bain isn’t a company so much as an intricate suite of steadily proliferating inter-related holding companies and limited partnerships, some based in Delaware and others in the Cayman Islands, Luxembourg, and elsewhere, designed to collectively house roughly $66 billion in wealth in its many crevices and chambers…[italics mine]

    As to why “Delaware” would be important (along with the Caymans, Luxembourg, etc), here’s a link to a post at Nicholas Shaxson’s TreasureIslands.org blog that gives more than a hint:
    http://treasureislands.org/quote-of-the-day-aig-and-delaware/

    1. digi_owl

      I seem to recall Delaware being the US state to incorporate, thanks to a race to the bottom between states to provide the most lucrative corporate laws.

          1. MacCruiskeen

            Some of my best friends are corporations, but I wouldn’t want my daughter to marry one.

          2. Ian Olmann

            > If corps are peeps, DE does not have enough representatives in the house

            All in good time, my friend!

    2. Richard Kline

      I get the strong impression that Bain was a money-laundering shop for dirty plutocrats to stash a nest egg outside regulatory and tax scrutiny. The actual ‘investments’ were the nominal show. The real action was in the offshore stashes (and likely leverage worked against them in turn). The key wasn’t ‘profits’ but ‘secrecy.’ Hmmm. So the CEO of the new, downsized BCCI wants to be POTUS? While his VP wants to assign what future taxes are collected by the Feds to the oligarchs in the form of kick-back ‘tax breaks?’ This is it, folks: Neo-Feudalism, the trial model. Yeah it’s squeaky and jokey now, but down the pike the training wheels come off and some bodies with real competance take it for a spin at public expense because at least 40% of the electorate really _are_ that dumb.

      1. readerOfTeaLeaves

        Well, now that you put it that way….

        In Nicholas Shaxson’s “Treasure Islands: Tax Havens and the Men Who Stole the World”**, he explains the psychology of people engaged in advocating for tax havens. I don’t want to misquote or mischaracterize what Shaxson explains, because it is both too important — and too interesting — to misquote. However, my own interpretation is that tax haven advocates claim that offshoring and havens “make governments more ‘efficient’ because they make goverments more ‘competitive’ by ‘forcing them into competition’ (with one another).”

        In other words, they claim that tax havens help create ‘efficiencies’ between say, Dafur, Angola, and your local municipal government. Nevermind the fact that your local city probably has fire protection, police protection, a court system, a jail, a safe water supply, libraries, public schools, a public hospital, clean and safe roadways, reliable electric power, etc, etc — for the tax haven advocates, your city is not ‘efficient’ unless it is ‘competing’ with Dafur.
        I am not making this up!

        In other words, the advocates of tax havens (and I include Romney in that group) completely misapply the concept of ‘economic efficiency’ in an extremist Mad Hatter, Through-The-Looking-Glass fashion that is chillingly bonkers, but has a certain superficial pseudo-logic and conjures up familiar, soothing terms like ‘efficiency’ and ‘competition’. But when you unpack their statements and ideas, well… crikey, they’re a deadly, dangerous set of ideas.

        ————————-
        ** “Treasure Islands” is due out in paperback in US on Sept 4th — I happened to check at my local bookshop, as I know several people who have been waiting for the paperback edition.

        The book is also available on audible.com; if readers have an Audible.com app on their smart phones or tablets, it’s very easy to listen to — extremely enlightening.

        1. readerOfTeaLeaves

          Apologies – I forget that Yves has an international readership.
          The audible.com version of “Treasure Islands” is English only, but the book is printed in multiple languages.

          Great to see Yves giving Gawker’s work more visibility — this is going to make the NC PE series all the more timely and engaging, IMVHO.

    3. JamesW

      Outstanding points with great link!!!

      And, “The problem is that it is not legal.”

      This is exactly like those private equity firms like Fortress and Blackstone Group going public, being illegally continuing to be taxed at capital gains’ tax rate instead of the corporate tax rate (e.g., Blackstone Group’s legal charade of selling “chunks of whatever” instead of actual stock — is pure, unadulterated bullcrap!

      It’s just all financial fraud — plus, the points about Delaware — exactly why and the what-for for the Du Pont family involving itself in Delaware politics (and they own that state as well).

      Let us not forget that it was the Du Ponts who financed Newt Gingrich’s “contract on America” back in the 1990s.

  2. Peripheral Visionary

    I’ll take a closer look, but I’m prepared to be underwhelmed. From a brief initial review, these appear to be private fund holding companies with relatively vanilla portfolios. The structure – as Delaware and Cayman Islands entities – is absolutely standard in the hedge fund industry. If anything, the funds are distinctive only in how utterly typical they are. Any financier who pretends to be shocked by any of this is putting on a show.

    One issue that bears clarification – there’s a reason all these funds are based in offshore financial centers. They aggregate investments from a wide variety of investors, with widely varying tax profiles. Thanks to the long arm of the IRS, U.S. individuals will end up paying taxes on returns from them, albeit at a reduced rate (as Romney has done), whether the funds are onshore or offshore.

    The most significant clients that demand they be offshore are not individuals, though – they are tax-exempt institutions, like pension plans and college endowments. Also, foreign investors have a strong preference for funds domiciled in offshore financial centers – both because they don’t care for U.S. taxes, and because (how to put this delicately) their local tax authorities are not as rigorous as the IRS.

    In other words, the domiciling of private funds in offshore tax centers is not all that relevant to the level of taxes paid by high net worth U.S. residents such as Mitt Romney – he would be paying those taxes whether they were onshore or offshore. What it is germane to is deep problems with the U.S. tax code that adversely impact institutions and foreign investors, and which consequently drive investments out of the country.

  3. Ed

    This is another instance of people having to go to sites like Gawker for hard news. I remember when Gawker was supposed to be just a gossip site.

    Its also an example of how much the entire Romney campaign is some sort of absurd anti-capitalist performance art. The entire problem with American politics is how much elected officials enable this sort of sleazy corporate behavior. So at the height of the crisis we have the candidacy of one of the guys who are doing the sleazy corporate behavior! If it weren’t for the fact that Romney is a prude due to his religious beliefs, comparisons to Berlusconi would be in order.

    1. Up the Ante

      “Its also an example of how much the entire Romney campaign is some sort of absurd anti-capitalist performance art. ”

      And anti-religion performance art.

    2. Bev

      More hard news:

      http://www.gregpalast.com/how-bain-capital-helped-bpblow-up-the-deepwater-horizon/

      How Bain Capital helped BP
      blow up the Deepwater Horizon

      Saturday, June 9, 2012

      A Book Review by Greg Palast, for FireDogLake.com
      on Poisoned Legacy: the Human Cost of BP’s Rise to Power (St. Martin’s Press) by Mike Magner.

      Here’s my bead on Magner’s book….

      I almost fell off the barstool when I read that it was Bain Capital (Mitt Romney, former CEO), that told oil giant BP it was a good idea to cut costs. The cuts would lead to death, mayhem and the destruction of the Gulf Coast (not to mention BP’s poisoning of Alaska, Africa, Central Asia and Colombia).

      In 2007, after BP’s criminal negligence and penny-pinching led to the explosion at the BP oil refinery on the Gulf Coast, in Texas City, Texas, the company brought in industry pooh-bah James Baker, their lawyer and former Secretary of State, to write a report. Baker is Big Oil’s BFF, but in this case, he was horrified, and told BP to get its act together and spend some real money on operating safety.

      BP didn’t like Baker’s recommendation nor did it like another report by its own consulting firm, Booz Allen Hamilton which advised the company to …get its act together and spend money on safety.

      When two respected industry voices agree that you’d better start spending and thinking while you’re operating in a deadly business, a corporation’s CEO has only one choice: find a consulting house of ill repute to contradict the others and tell you what you want to hear.

      That’s what BP’s CEO Tony Hayward did. In 2008, he hired Bain Capital to say the company would be better managed if it spent less money. Bain used consulting BS terms like reducing “complexity,” but it all meant the same thing: cut, cut, cut.

      After all, Bain’s motto is, “We like to fire people.” The oil company then fired 5,000 employees in response to the Bain report.

      To hell with safety.

      BP read Bain’s recommendations as the green light to chop funding. Of course, it was all done with Hayward’s PR pronouncement that the company would now “focus like a laser on safety”. (A laser, I’d note, is a thin beam surrounded by darkness.)

      BP’s Bain-blessed, deadly, insouciant cost-cutting was the deadly habit that federal regulators identified as a cause of the Deepwater Horizon blow-out.

      That’s just one of the ill-making stories in Magner’s book which takes you through BP’s poisonous history before, during and after the 2010 Deepwater Horizon blow-out.

      Much of Magner’s opus centers on the Texas City refinery explosion that was a loud, flaming warning about allowing BP to play with matches and oilrigs. He begins and ends with the story of another refinery, Amoco’s long-closed plant at Neodesha, Kansas.

      more

  4. lambert strether

    I’ve been a big gawker fan for the writing; I could take lessons in snark from them (oh noes!).

    But now they’re more than a guilty pleasure! Funny thing, there’s a demand for hard news….

    1. anewman

      Bravo.
      The rhetoric of religion that people like Mitt Romney co-opt are very clearly drawn into light when the hypocrisy is spelled out in the simplest of terms. He shucks and jives with the best of them with pathetic, contrived morality, yet in reality he and his ilk are operating religion as business and most likely funneling most of the money culled from the blind believing masses into these very off-shore accounts being exposed.
      How Dark the con of man.
      The hurricane thats about to flood the republican national convention will be another divinely motivated retribution, signaling all of creations absolute disapproval for what these con artists are doing. They foolishly think there is no real Creator. As dark wizards of deception, much like the imagery in Lord of the Rings, they perpetuate evil empires, all the while with hubris sealing their fate. Little do they know, there is in fact a guiding force of love. We must look no further than the blisses of orgasm we are all created by for proof.
      In a very real way, this life is a testing ground. For the heart to love and be honest and create more strength and goodness, or be proven useless to life and be shed.
      Justice is swift upon us, let every hearts fuel be known. Romney et associates, you have no where to hide. The Flood will consume your wicked ways.

  5. Crazy Horse

    One should not forget how Bain got its seed capital. Romney was shopping the concept of a company specializing in predatory private equity operations, but found insufficient risk takers among his contacts in the US business class of the era. His salvation came through a large investment from the ruing families of El Salvador. Investing in Bain enabled them to launder money to finance the death squads and reign of terror with which they were counteracting the popular insurgency in their fiefdom. Through the use of death squad money,Bain not only was able to finance its first predatory take-overs of US companies, but support the unofficial US policy of terror in Central America. To this day those same Salvadorian oligarchs remain major investors in and beneficiaries from our future president’s company.

      1. Warren Celli

        “In 1983, Bill Bain asked Mitt Romney to launch Bain Capital, a private equity offshoot of the successful consulting firm Bain & Company. After some initial reluctance, Romney agreed. The new job came with a stipulation: Romney couldn’t raise money from any current clients, Bain said, because if the private equity venture failed, he didn’t want it taking the consulting firm down with it.

        When Romney struggled to raise funds from other traditional sources, he and his partners started thinking outside the box. Bain executive Harry Strachan suggested that Romney meet with a group of Central American oligarchs who were looking for new investment vehicles as turmoil engulfed their region.

        Romney was worried that the oligarchs might be tied to “illegal drug money, right-wing death squads, or left-wing terrorism,” Strachan later told a Boston Globe reporter, as quoted in the 2012 book “The Real Romney.” But, pressed for capital, Romney pushed his concerns aside and flew to Miami in mid-1984 to meet with the Salvadorans at a local bank.

        It was a lucrative trip. The Central Americans provided roughly $9 million — 40 percent — of Bain Capital’s initial outside funding, the Los Angeles Times reported recently. And they became valued clients.”

        More here…

        http://www.huffingtonpost.com/2012/08/08/mitt-romney-death-squads-bain_n_1710133.html

        Deception is the strongest political force on the planet.

    1. Bev

      link:

      http://markcrispinmiller.com/2012/08/romney-started-bain-with-dough-from-salvadoran-families-tied-to-death-squads/

      Romney started Bain with dough from Salvadoran families tied to death squads

      Romney’s Death Squad Ties: Bain Launched with Funds from Oligarchs Behind Salvadoran Murders

      Amy Goodman, Video Report: After initially struggling to find investors, Romney traveled to Miami in 1983 to win pledges of $9 million, 40 percent of Bain’s start-up money. Some investors had extensive ties to the death squads responsible for the vast majority of the tens of thousands of deaths in El Salvador during the 1980s. We’re joined by Huffington Post reporter Ryan Grim, who connects the dots in his latest story, “Mitt Romney Started Bain Capital With Money From Families Tied To Death Squads.”

      :: link ::

      http://www.nationofchange.org/romney-s-death-squad-ties-bain-launched-funds-oligarchs-behind-salvadoran-murders-1344613731

      http://www.democracynow.org/2012/8/10/romneys_death_squad_ties_bain_launched

      Romney’s Death Squad Ties: Bain Launched with Funds from Oligarchs Behind Salvadoran Murders

      Amy Goodman

      Democracy Now! / Video Report

      Published: Friday 10 August 2012

      “Some investors had extensive ties to the death squads responsible for the vast majority of the tens of thousands of deaths in El Salvador during the 1980s.”

      1. Crazy Horse

        We shouldn’t be so hard on Mitt. After all he was just facilitating the national policy of supporting terror in Central America as a counterpoise to liberation movements. Better Dead than Red.

    1. Pearl

      I don’t truly know what this is, but I’ll post for you folks who seem to know what you’re talking about. It’s from November 2009 and I think it has to do with wealthy folks off-loading crappy assets on to a market that thinks they’re too crappy to buy? Maybe?

      (Maybe Romney is secretly broke!)

      See reference to Bain and Sankatay Advisors, and change the 3 “dots” with actual dots:

      http://wwwdotnortherngpdotcom/documents/FG/ngp/press/791_PE_Insider_11_Nov_09dotpdf

      “Feeder-Fund Sales At Pricing Impasse
      Secondary-market players are trying to solve a new puzzle:
      pinpointing appropriate prices for a slew of stakes in so-called
      feeder funds that have suddenly gone up for sale.
      Right now, there’s no common ground, with sellers expecting discounts of up to 30% and buyers offering far less. “There
      has been a lot of bidding, and sellers are just about getting
      more realistic about price, but there’s no market just yet,” said
      Jeff Bollerman, a director at illiquid-asset exchange
      SecondMarket.
      The offerings are coming from feeder-fund sponsors,
      including Citigroup and Bain Capital affiliate Sankaty Advisors.
      The goal is essentially to replace certain limited partners such
      as endowments, family offices and wealthy individuals that
      have run short on cash. Potential buyers include other wealthy
      individuals, as well as small or mid-size secondary-market
      funds interested in buying several stakes at time.”

  6. Enraged

    Hopefully Assange will be able to publish all that info before election day… although if he waited until AFTER election day, that might make things really, really interesting!

  7. Willard Mitt Sutton

    Victor Fleischer: I am a Professor of Law at the University of Colorado Law School. I have taught a range of tax and transactional courses in the past, including Deals, Federal Income Tax, Corporate Tax, Partnership Tax, Tax Policy, Venture Capital & Private Equity, and various seminars.

    Romney’s Management Fee Conversions

    Fund VII. Gawker today posted some Bain documents today showing that Bain, like many other PE firms, had engaged in this practice of converting management fees into capital gain. Unlike carried interest, which is unseemly but perfectly legal, Bain’s management fee conversions are not legal. If challenged in court, Bain would lose. The Bain partners, in my opinion, misreported their income if they reported these converted fees as capital gain instead of ordinary income.

  8. econ

    It will be of import if and when the corporate national media in USA (or wherever else) take this 950 pages and investigate and report on their findings to the American electorate before the November date. The Wall Street Journal tag in 1995 on Canada as a”a banana republic” will neatly fit the USA quite nicely.

  9. .Doug Terpstra

    It evokes a sense of awe to grasp the complex gyrations and contortions a determined criminal will perform in order to secrete his loot and evade taxes. Before the internet and sites like NC, these docs would have remained entombed in the catacombs; they may now spontaneously combust under UV light.

    So who to vote for, Tweedledee or Tweedledum? The moral imperative: vote for Rocky Anderson or Jill Stein.

  10. oops

    Much of its international revenues are directed through Hungary, where [bossman Nick] Denton’s mother hails from, and where some of the firm’s techies are located. But that is only part of it. Recently, [Felix] Salmon reports, the various Gawker operations—Gawker Media LLC, Gawker Entertainment LLC, Gawker Technology LLC, Gawker Sales LLC—have been restructured to bring them under control of a shell company based in the Cayman Islands, Gawker Media Group Inc.

    Why would a relatively small media outfit based in Soho choose to incorporate itself in a Caribbean locale long favored by insider dealers, drug cartels, hedge funds, and other entities with lots of cash they don’t want to advertise? The question virtually answers itself, but for those unversed in the intricacies of international tax avoidance Salmon spells it out: “The result is a company where 130 U.S. employees eat up the lion’s share of the the U.S. revenues, resulting in little if any taxable income, while the international income, the franchise value of the brands, and the value of the technology all stays permanently overseas, untouched by the I.R.S.”

      1. Ms G

        Denton’s company is, however, producing news coverage of the candidates who are running. And you are reading that coverage. Does the relevance/importance of Gawker’s interesting transnational corporate structure seem any clearer now?

  11. Warren Celli

    “Why would a relatively small media outfit based in Soho choose to incorporate itself in a Caribbean locale long favored by insider dealers, drug cartels, hedge funds, and other entities with lots of cash they don’t want to advertise?”

    Why do cops go under cover and engage in crime?

    Deception is the strongest political force on the planet.

  12. Bryan Sean McKown

    For a detailed overview of how Limited Partnerships operate in the Cayman Islands, see Conyers Dill & Pearman’s April 2011 memo, “Cayman Islands Exempted Limited Partnerships”.
    http://www.conyersdill.com/pulications-files. Just Google it. Note Item #10, their one sentence summary of audit requirements for these limited partnerships, “There is no statutory requirement that the accounts of an exempted limited partnership be audited” in this tax free haven. Conyers Dill is a 600 person operation with a 150 lawyers. Note also, the heavy disclaimers.

  13. Crazy Horse

    I was recently in both the Caymans and Panama. In Panama there is an entire army of cranes building row after row of 40 story towers to service the fourth largest banking center in the world. By contrast the banks in Grand Cayman are a cottage industry of post office boxes posing as corporate headquarters. In Panama they can’t be bothered to count the money arriving by the truckload— they just weight it. (slight exaggeration)

    A Panamanian blind trust is far more impenetrable than a Swiss bank account, and can in turn invest in any US business (like amassing inventories of foreclosed properties to rent to the dispossessed x-middle class). The reported 13 trillion in untaxed black pool funds generated from hedge funds and “banks” gambling in the derivatives casinos and drug cartel operations has to go somewhere.

    1. Lambert Strether

      So in Romney’s mind he used relatively clean little cottage industry in the Cayman’s, instead of the slaughterhouse-filthy factory in Pananam, and now he’s going to be pilloried for it!

      Ha ha, the irony is almost too rich.

      1. LucyLulu

        Have any records more recent than 2010 been released? Perhaps Romney has Panamanian accounts now. Wasn’t Panama’s money-laundering financial system only opened up to US citizens in the last year or so with passage of free trade with Panama?

        Yeah, Panama is much sleazier than Grand Cayman. Panama proudly advertises they will take anybody’s money and offer their customers the utmost discretion. Why wouldn’t we want them as trade partners. Or maybe it was just their bananas…

  14. Sidney18511

    The cheering on of the Romney campaign has removed any doubt that the republican voters are complete hypocrites and most likely racist. Romney is everything they say they are against. The GOP could very well run Charlie Manson, and he would get just as many votes as Romney will. Remember over 60 million voted for Sarah Palin.

  15. Accrued Disinterest

    If ones listens closely…filtering the din-that one remaining lonesome sound is Nero fiddling. It’s a blues tune.

  16. rotter

    “In other words, they claim that tax havens help create ‘efficiencies’ between say, Dafur, Angola, and your local municipal government. Nevermind the fact that your local city probably has fire protection, police protection, a court system, a jail, a safe water supply, libraries, public schools, a public hospital, clean and safe roadways, reliable electric power, etc, etc — for the tax haven advocates, your city is not ‘efficient’ unless it is ‘competing’ with Dafur.
    I am not making this up!”

    A fine example of some of the unbelieveably-beyond – idiotic American capitalist-markets religion dogma. Our whole cutlure has internalized this kind of delusional not-thinking – ie., capitalism is about “competition”, “markets” etc.,etc., and your quote is a fine example of that kind epic, monumental stupidity. Mitt romney and barrack obama are walking sandwich boards for it. Capitalism for the past 40 years has been all demanding ever increasing ransoms(rents) and providing less and less in return for it all the time. This is now called “profit” in capitalist societies. Competition, where it happens to exist, is tangential to the main monkey business of buying, stealing and otherwise accumulating the political power to rob the rest of the world.

  17. Paul Tioxon

    Gee, I wonder how Harry Reid has the nerve to say he knows for a fact what’s what in the Romney off shore multi billion dollar tax avoidance racket, all legal of course. Maybe, the Senate has investigated all of this ad nauseum, but it’s so boring to hear tax code and loophole, that the left just snoozes and dreams about the jack boot of oppression bombing and water boarding nameless victims somewhere in the world. Here are some of the government reports, the likely source of Harry Reid’s accusations.

    https://docs.google.com/viewer?a=v&q=cache:x0xABFaeF4YJ:www.fas.org/sgp/crs/misc/R40623.pdf+us+senate+hearings+on+delaware+as+a+tax+haven&hl=en&gl=us&pid=bl&srcid=ADGEESgp2a8XEr8VIQuFjaojhqcWyag5oUAAVvtim1AXlR8oUnI1q4iPR5rv8DUEVT8F40C5tkRyFwK8Uv9SPUTIVnHgolkj3-HF-W5bM-zopf_CTjwSPnKavFhWZDLGXJCMnmmd0rUY&sig=AHIEtbScS7AXqmvf-v96CYMyBDQj83R9xQ

    http://www.levin.senate.gov/newsroom/press/release/summary-of-the-stop-tax-haven-abuse-act-of-2011/?section=alltypes
    Summary of the Stop Tax Haven Abuse Act of 2011
    Tuesday, July 12, 2011

    This is a summary of the Stop Tax Haven Abuse Act, 1346. Read a press release about the bill here. Access the bill as introduced here. Read Levin’s floor statement on the introduction of the bill here.

    Targeting $100 billion in lost revenue each year from offshore tax dodges, the bill would:
    AUTHORIZE SPECIAL MEASURES TO STOP OFFSHORE TAX ABUSE (§101) by allowing Treasury to take specified steps against foreign jurisdictions or financial institutions that impede U.S. tax enforcement.
    STRENGTHEN FATCA (§102) by clarifying under the Foreign Account Tax Compliance Act when foreign financial institutions and U.S. persons must report foreign financial accounts to the IRS.
    ESTABLISH REBUTTABLE PRESUMPTIONS TO COMBAT OFFSHORE SECRECY (§102) in U.S. tax and securities law enforcement proceedings by treating non-publicly traded offshore entities as controlled by the U.S. taxpayer who formed them, sent them assets, received assets from them, or benefited from them when those entities have accounts or assets in non-FATCA institutions, unless the taxpayer proves otherwise.
    STOP COMPANIES RUN FROM THE UNITED STATES CLAIMING FOREIGN STATUS (§103) by treating foreign corporations that are publicly traded or have gross assets of $50 million or more and whose management and control occur primarily in the United States as U.S. domestic corporations for income tax purposes.
    STRENGTHEN DETECTION OF OFFSHORE ACTIVITIES (§104) by requiring U.S. financial institutions that open accounts for foreign entities controlled by U.S. clients or open foreign accounts in non-FATCA institutions for U.S. clients to report the accounts to the IRS.
    CLOSE CREDIT DEFAULT SWAP (CDS) LOOPHOLE (§105) by treating CDS payments sent offshore from the United States as taxable U.S. source income.
    CLOSE FOREIGN SUBSIDIARY DEPOSITS LOOPHOLE (§106) by treating deposits made by a controlled foreign corporation (CFC) to a financial account located in the United States, including a correspondent account of a foreign bank, as a taxable constructive distribution by the CFC to its U.S. parent.
    REQUIRE ANNUAL COUNTRY-BY-COUNTRY REPORTING (§201) by SEC-registered corporations on employees, sales, financing, tax obligations, and tax payments.
    ESTABLISH A PENALTY FOR CORPORATE INSIDERS WHO HIDE OFFSHORE HOLDINGS (§202) by authorizing a fine of up to $1 million per violation of securities laws.
    REQUIRE ANTI-MONEY LAUNDERING PROGRAMS (§§203-204) for hedge funds, private equity funds, and formation agents to ensure they screen clients and offshore funds.
    STRENGTHEN JOHN DOE SUMMONS (§205) by allowing the IRS to issue summons to a class of persons that relate to a long-term project approved and overseen by a court.
    COMBAT HIDDEN FOREIGN FINANCIAL ACCOUNTS (§206) by allowing IRS use of tax return information to evaluate foreign financial account reports, simplifying penalty calculations for unreported foreign accounts, and facilitating use of suspicious activity reports in civil tax enforcement.
    STRENGTHEN PENALTIES (§§301-302) on tax shelter promoters and those who aid and abet tax evasion by increasing the maximum fine to 150% of any ill-gotten gains.
    PROHIBIT FEE ARRANGEMENTS (§303) in which a tax advisor is paid a fee based upon the amount of paper losses generated to shelter income or taxes not paid by a client.
    REQUIRE BANK EXAMINATION TECHNIQUES (§304) to detect and prevent abusive tax shelter activities or the aiding and abetting of tax evasion by financial institutions.
    ALLOW SHARING OF TAX INFORMATION (§305) upon request by a federal financial regulator engaged in a law enforcement effort.
    REQUIRE DISCLOSURE OF INFORMATION TO CONGRESS (§306) related to an IRS determination of whether to exempt an organization from taxation.
    DIRECT THE ESTABLISHMENT OF STANDARDS FOR TAX OPINIONS (§307) rendering advice on transactions with a potential for tax avoidance or evasion.

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