Gawker Publishes Romney Tax Haven Records

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    Aug 24, 2012 6:27 AM GMT
    Published on Thursday, August 23, 2012 by Common Dreams

    Gawker Publishes Romney Tax Haven Records

    - Common Dreams staff


    John Cook at Gawker.com published 950 pages of Presidential candidate Mitt Romney's financial documents for at least 21 funds in which Romney personally invested, including several overseas 'tax haven' accounts, on Wednesday. The funds revealed in the documents are also affiliated with Bain Capital, Romney's former firm.

    Gawker has not yet said how it obtained the documents, but asked "readers to help evaluate" the finances, and has financial lawyers currently filing through the dense paper work.

    Romney has so far only released two years of partial tax returns, coming under fire for denying transparency regarding his personal finances, with some Democratic leaders claiming that in some years, he did not pay any taxes.

    The Guardian reports today that the documents published by Gawker, make clear that tax avoidance is a primary aim of some of his investments.

    Romney and his wife, Ann, are both investors in a Cayman Island-based fund called Bain Capital Fund VIII. The Bain fund contains assets worth up to $3.7bn and according to the documents, "intends to conduct its operations so that it will not be engaged in a United States trade or business and, therefore, will not be subject to United States federal income or withholding tax on its income from United States sources".

    Bain controls at least 138 funds in the Caymans, and Romney personally has $30m invested in the Cayman Islands alone, according to an earlier report by Vanity Fair.
    Romney has not yet commented on the new documents.

    Cook writes today:


    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.



    Anyone found copies/info on this ?
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    Aug 24, 2012 12:16 PM GMT
    I read the Guardian report. It seems the reports of Romney squirrelling away millions in offshore accounts is accurate.

    http://www.guardian.co.uk/world/2012/aug/23/gawker-mitt-romney-offshore-accounts
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    Aug 24, 2012 1:19 PM GMT

    Mitt Romney: I Can't Release Tax Returns Because It's Against My Religion
    "Our church doesn’t publish how much people have given. This is done entirely privately. One of the downsides of releasing one’s financial information is that this is now all public, but we had never intended our contributions to be known. It’s a very personal thing between ourselves and our commitment to our God and to our church." - Mitt Romney, coming up with a new excuse in an interview with Parade Magazine.

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    Aug 24, 2012 3:10 PM GMT
    Upper_Cdn said
    Mitt Romney: I Can't Release Tax Returns Because It's Against My Religion
    "Our church doesn’t publish how much people have given. This is done entirely privately. One of the downsides of releasing one’s financial information is that this is now all public, but we had never intended our contributions to be known. It’s a very personal thing between ourselves and our commitment to our God and to our church." - Mitt Romney, coming up with a new excuse in an interview with Parade Magazine.





    GOOD TRY ROMNEY !!! but its more likely he needs to hide the following:



    Wednesday, August 08, 2012
    Did Mitt Romney Take the 2009 Swiss Bank Account Amnesty?

    From a 2009 LA Times piece:


    Wealthy U.S. taxpayers, concerned about an Internal Revenue Service crackdown on the use of secret overseas bank accounts as tax havens, are rushing to meet a Thursday deadline to disclose those accounts or face possible criminal prosecution. The concern was triggered this summer when Switzerland's largest bank, caught up in an international tax evasion dispute, said it would disclose the names of more than 4,000 of its U.S. account holders.
    The decision shattered a long-held belief that Swiss banks would guard the identities of its American customers as carefully as they did their money, and it raised concern that other international tax havens might be next. Under an amnesty program, the IRS is allowing taxpayers to avoid prosecution for having failed to report their overseas accounts. As a result, tax attorneys across the nation have been besieged by wealthy clients who are lining up to apply even though they will still face big financial penalties.


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    Aug 25, 2012 4:41 AM GMT
    Mitt Romney Tax Returns May Have Employed Legally Dubious Maneuvers, Tax Experts Say

    WASHINGTON -- Tax experts who have begun to examine the Bain Capital documents released Thursday by Gawker are raising questions as to whether presumptive GOP presidential nominee Mitt Romney has paid all the taxes he owed.

    At issue are two tax-avoidance techniques employed by Bain Capital, the firm founded by Romney, which have been commonly used in the private equity world but have come under increasing legal scrutiny.

    The first scheme involves owning U.S. dividend-paying stocks in an offshore account and pretending, for accounting purposes, not to own the stock. Instead, the taxpayer tells the Internal Revenue Service that he owns a derivative product that is identical in every way to the stock -- except it isn't the stock, so therefore no U.S. taxes are owed. It's called a "total return equity swap," because the buyer still gets the benefit -- the "total return" -- of owning the stock, or equity.

    "This use of total return equity swaps, such as to avoid the U.S. dividend withholding tax, was very widespread for more than a decade, and may not be dead yet, although the IRS issued a shot-across-the-bow Notice concerning the practice in 2010," writes Daniel Shaviro, the Wayne Perry Professor of Taxation at New York University School of Law. "But taxpayers who engaged in it to avoid the dividend withholding tax were coming perilously close to committing tax fraud, in cases where the economic equivalence to direct ownership was too great."

    The second technique is "not legal," according to Victor Fleischer, a tax expert and professor of law at the University of Colorado. A taxpayer saves substantial amounts of money by pretending that regular income received as a management fee for running a private equity firm is not income, but is instead a capital gain. That drops the tax rate on that income from 35 percent to 15 percent.

    Citing the Gawker documents, Fleischer notes that Bain engaged in the management-fee maneuver to reduce the tax bill of its investors. "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," he writes.

    Shaviro, meanwhile, notes that Bain employed a version of the total return equity swap and says that taxpayers who engage in the practice have little legal justification for doing so. "[T]he only leg that taxpayers had to stand on in some of these cases was common practice and the apparent lack of IRS enforcement (not a very strong leg if the correct application of the law was clear)," he writes. "How far out on the limb were Bain-affiliated foreign entities that were making money through total return equity swaps, and claiming not to owe U.S. withholding tax? And what should we make of this, for purposes of the presidential campaign, if what they were doing, while legally dubious, was common practice?"

    "The unauthorized disclosure of a number of confidential fund financial statements is unfortunate," said Charlyn Lusk, a spokeswoman for Bain Capital. "Our fund financials are routinely prepared by auditors and demonstrate a commitment to transparency with our investors and regulators, and compliance with all laws."

    Michele Davis, a spokeswoman for the Romney campaign, said that Romney is not responsible for whatever tax strategy employed. "As we have said many times before, Governor and Mrs. Romney's assets are managed on a blind basis. They do not control the investment of these assets, the investment decisions are made by a trustee," he said.

    But if Bain used improper tax-avoidance techniques, the Romneys would be required to amend their returns regardless of the blind nature of the investments.

    Private equity managers already get the vast majority of their income from capital gains, which are taxed a lower rate, but also take a fee -- typically 2 percent -- off the top. That management fee is income. But some private equity managers have claimed to "waive" that fee in exchange for future capital gains.

    "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," writes Fleischer. "The problem is that it is not legal."

    The IRS says the fee cannot be waived in exchange for capital gains if the income "relates to a substantially certain and predictable stream of income from partnership assets." In other words, Bain investors would need to convince a judge that their revenue stream was risky and not "substantially certain and predictable."

    Fleischer says he doesn't think the tactic would hold up in court. "Because the deals vary in their aggressiveness, there is some disagreement among practitioners about when it works and when it doesn’t," he writes. "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."

    But did Romney himself benefit from these maneuvers? And is Romney responsible for the legally dubious tax avoidance strategies Bain employed? Yes, Fleischer concludes:

    Yes, Romney left Bain in 1999 or 2002. But as part of his severance agreement, he continues to receive interests in these funds, which he has reported on his financial disclosures. In the usual case, a departing partner would receive an economic stake in the GP (Bain Capital Partners X, LP), rather than an economic stake in the LP (Bain Capital Fund X, LP) — representing a payment for the management services he provided in the past. Indeed, because he filed an 83(b) election, we can be sure that he received GP interests as part of his severance agreement, and that he therefore benefited personally from management fee conversions.
    [...]

    Romney here is not like a passive mutual fund investor. He helped engineer the funds in the first place. For at least some of the funds, the fee conversion was set in place at the time of the fund’s formation — in the case of Fund VII, when Romney was the sole shareholder of the management company that actually waived the fees (2000). It seems reasonable to infer that fee conversions were in place for earlier vintages of Bain Capital funds as well. I haven’t yet reviewed all of the Gawker documents, but we are talking hundreds of millions of dollars in tax liability on these funds — one hundred million in Fund IX alone (20% of the $500 million converted), another $70 million in fund X. It is unthinkable that in the 1990s through 2002, when Romney was putting together funds, that he was unaware of the fee conversion strategy, or that he was unaware that he continued to benefit from it today.


    UPDATE: 12:30 p.m. -- Rep. Sandy Levin of Michigan, the top Democrat on the tax-writing House Ways and Means Committee, questioned the fee conversion strategy in a statement.

    “[R]eports today indicating that Bain managers converted even their regular management fees into additional carried interest income that is taxed at capital gains rates is a particularly egregious example of how wealthy fund managers are able to avoid paying the same tax rates on their compensation as other Americans," he said. "This is a stark reminder of why Congress needs to act to close this loophole."
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    Aug 25, 2012 5:19 AM GMT
    Upper_Cdn said
    Mitt Romney: I Can't Release Tax Returns Because It's Against My Religion
    "Our church doesn’t publish how much people have given. This is done entirely privately. One of the downsides of releasing one’s financial information is that this is now all public, but we had never intended our contributions to be known. It’s a very personal thing between ourselves and our commitment to our God and to our church." - Mitt Romney, coming up with a new excuse in an interview with Parade Magazine.

    After all these months of this tax return controversy, only now this becomes the reason in an interview that will be released Sunday? His dad never used that excuse.
  • Webster666

    Posts: 9217

    Aug 25, 2012 6:01 AM GMT
    I smell a rat...