Where Did Bain Seed Money Come From?

Vanity Fair has a detailed investigation — as detailed as it can be given the secrecy involved — of Mitt Romney’s finances, which include lots and lots of offshore accounts in tax havens like the Cayman Islands, Switzerland and Bermuda. And it’s near-impossible to find out where those accounts came from or what they do:

To give but one example, there is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney’s personal lawyer. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an “excepted investment fund” that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates. While the Romneys’ spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in “jurisdictions where there is virtually no tax and virtually no compliance,” as one Miami-based offshore lawyer put it.

That’s not the only money Romney has in tax havens. Because of his retirement deal with Bain Capital, his finances are still deeply entangled with the private-equity firm that he founded and spun off from Bain and Co. in 1984. Though he left the firm in 1999, Romney has continued to receive large payments from it—in early June he revealed more than $2 million in new Bain income. The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers. Again, the Romney campaign insists he saves no tax by using them, but there is no way to check this.

Of particular interest, I think, is the problem of identifying where the initial money for Bain Capital came from:

One cannot properly understand Wall Street’s size and power without appreciating the central role of offshore tax havens. There is absolutely no evidence that Bain has done anything illegal, but private equity is one channel for this secrecy-shrouded foreign money to enter the United States, and a filing for Mitt Romney’s first $37 million Bain Capital Fund, of 1984, provides a rare window into this. One foreign investor, of $2 million, was the newspaper tycoon, tax evader, and fraudster Robert Maxwell, who fell from his yacht, and drowned, off of the Canary Islands in 1991 in strange circumstances, after looting his company’s pension fund. The Bain filing also names Eduardo Poma, a member of one of the “14 families” oligarchy that has controlled most of El Salvador’s wealth for decades; oddly, Poma is listed as sharing a Miami address with two anonymous companies that invested $1.5 million between them. The filings also show a Geneva-based trustee overseeing a trust that invested $2.5 million, a Bahamas corporation that put in $3 million, and three corporations in the tax haven of Panama, historically a favored destination for Latin-American dirty money—“one of the filthiest money-laundering sinks in the world,” as a U.S. Customs official once put it.

Bain Capital has said it did everything required by the U.S. government to check that the investors were not associated with unsavory interests. U.S. law doesn’t require Bain to enforce the tax laws of its investors’ home countries, but the presence of Swiss trustees, Bahamas trusts, and Panama corporations would raise red flags with any tax authority.

This should all raise red flags with anyone.

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  • Randomfactor

    W. Mitt Romney

    Prounounced, of course “Dubya Mit R Money.”

  • slc1

    The question is, will the lame stream media cover this? Will it demand that Romney make a full disclosure of his finances? Will those, including some who comment on this blog and scream that they won’t vote for that no good bum, Obama, rethink their position, particularly if they live in states like Virginia, Florida, Indiana, and Ohio? Probably not.

  • wscott

    A relative of mine posted the other day: “Apparantly I’m supposed to be more angry over what Romney did with his money than what Obama did with mine.” Which I’ll grant is pithy and amusing. But yes, you should be.

  • raven

    Again, the Romney campaign insists he saves no tax by using them, but there is no way to check this.

    he saves no tax by using them,.

    So then why use offshore secret accounts in opaque tax havens like Switzerland, Bermuda, or the Caymans?

    This simply isn’t a believable statement.

  • oranje

    After reading the fake terrorist blurb down the blog, I read that as “Where did Bah-een See-Ed Money Come From?”

    The (primarily Palestinian) students at my former college would fall out of their chairs laughing and never let me hear the end of that one.

  • Cliff Hendroval

    You should ask your relative exactly what Obama did with his money. Current federal tax rates for all income groups are at near-historic lows.

  • oranje


    What kills me is that a decent chunk of economists point out that when you have households contracting their spending (debt overload), government spending HAS to kick in for the short-term to compensate and avoid a complete economic contraction. Paul Krugman co-authored a piece in the Financial Times along these lines last week. This has to be followed by medium & long-term fiscal discipline, but this “Obama wasted my money” nonsense angers me that people can vote on an issue and fundamentally not understand/address it.

  • sc_10f6570233dbf550a2666a74fd6de552

    @wscott: I’d ask your cousin how much exactly Pres Obama has taking out of his paycheck? The loss of value of his/her IRA or investments? That didn’t happen on his watch? The payroll tax break that actually put money back in the paycheck?

    @raven: the media or the democratic party should take Romney to task: If there’s no tax avoidance and everything was legal, then he should move everything back to the US. This would put money back into the US economy, and would show Romney’s real value.

  • d cwilson

    Romney loves America. Just not as much as he loves his money.

  • The dems could play dirty and use the Glenn Beck “I’m just asking questions” routine: Did Bain’s seed money come from Al-Qaeda? In 1984, did the Soviet Union (COMMIES!!!!) give Romney to raid US companies? Did he get his wealth from Planned Parenthood? We are not saying he did, we are just asking questions about the source of his money…

  • Jordan Genso

    I think a point that needs to be vocalized is that even if what he has done is not illegal, it should be. Yet if he is elected President, he is going to make even more of these unethical financial instruments legal.

    Mitt Romney has been the beneficiary of a system tilted in favor of the very wealthy, and rather than leveling the playing field, his policies will only tilt things further in favor of the 1% at the expense of the 99%.

    Basically, when his campaign says that his actions were legal (as if it therefore makes it ok), the media should follow up by asking whether or not Mitt Romney thinks those actions should be legal.

  • raven

    the media should follow up by asking whether or not Mitt Romney thinks those actions should be legal.

    Well he is creating jobs.

    There are people living in Bermuda, the Caymans, Switzerland, and Panama. They need to eat too.

  • I wonder if there could be a problem for Romney regarding this year’s tax return (he says he’ll release it when it’s done, but he filed for an extension and has until October 15th to file.

    As a British ex-pat, I still have several UK accounts, all of which have to be disclosed to the US Treasury every year (including account numbers and maximum values of each) because I have over $10k invested in them.

    The form (TD F 90-22.1, or FBAR for short) is filed separately from your tax return, but this year–for the first time–you have to disclose pretty much the same information with your tax return too (it’s a real pain, I can tell you). That means, if Romney was to fully release his tax return for 2011, we would see just how much he has invested overseas, and where.

    Now, I don’t believe for one second that he will do this — he’ll probably leave that form out, but I hope that the press at least knows enough to ask the right questions about the omitted form.

    Oh, and imagine the hysteria about him being a treasonous traitor if Obama was doing the same thing. We’d all be deaf by now.

  • netamigo

    “the presence of Swiss trustees, Bahamas trusts, and Panama corporations would raise red flags with any tax authority.” Let’s hope that this information raises red flags with the voters come November.

  • he saves no tax by using them,.

    So then why use offshore secret accounts in opaque tax havens like Switzerland, Bermuda, or the Caymans?

    It’s just a “hobby.” Really.

  • Emptyell

    “he saves no tax by using them,.

    So then why use offshore secret accounts in opaque tax havens like Switzerland, Bermuda, or the Caymans?”

    There’s no tax savings because they’re non-taxable and so there’s no tax to be saved 😉

  • iangould

    There are legitimate non-tax-evasion-related reasons for merchant banks and private equity companies to do business in Switzerland, the Caymans etc.

    Those countries provide fast and cheap corporation formation, corporate mergers, transfers of ownership etc.

    So, let’s say you’re planning to bid for a company. You get word Friday that another company will go public with a bid Monday.

    You call your guy in the Caribbean and by Monday you have a joint venture company set up between yourself and your backers in the bid, your existing stake in the target has been transferred into the bidding vehicle and so has access to the bid funds.

    Try that in the US and it’ll likely take a week.

  • jnorris

    Am I the only one who remembers the Republican’s Special Prosecutor, Kenneth Star, who investigated Hillary Clinton and WhitewaterGate?