Hide the Ball: Romney's Long History of Hiding His Exorbitant, but Questionable, Business Practices
Dina Rasor and Jason Leopold, Truthout | News Analysis
How is it possible that, for two decades now, Mitt Romney has successfully avoided revealing any details about his vast wealth, has been able to manipulate and stash wealth overseas with no public accountability, has not been held to account for his complete lack of transparency, has painted himself as a creator of thousands of jobs even though the public record shows business decisions he presided over resulted in the loss of jobs because of mass wealth being scooped out of the assets of these same companies?
Since he launched his political career in the mid-1990s, through three previous campaigns, Romney has faced the same exact questions that he is now facing as a candidate for the highest office in the land and, just as he is doing now, he has not been forthcoming in his responses.
A familiar story from Romney that has emerged over the years is that he is responsible for all of Bain's successes, but none of its failures (he took a leave of absence, he says, when questions arose about the company's deal-making or he "retroactively" retired from the firm while not disclosing that he was still receiving large yearly compensations from the company). This is hauntingly similar to many businesses that use the government so they can privatize the profits and socialize the risks and then say they made it on their own while denouncing big government.
he himself has ridiculed in 1994 saying: "The blind trust is an age old ruse, if you will, which is to say, you can always tell a blind trust what it can and can not do. You give a blind trust rules."Truthout reviewed hundreds of news reports published between 1994 and 2002, the year Romney mounted a senatorial challenge against the late Edward Kennedy, and the year of a successful Massachusetts gubernatorial run, respectively. What we found is not only hard evidence of a man with questionable business acumen, but an individual who appears to see himself as privileged and not above skirting the edge of the law. He has taken most of his vast wealth and hid it in "blind trusts" that
Romney has also taken parts of his wealth and stashed it overseas in numerous but undisclosed bank accounts, while claiming it was to help foreign investors invest in America (and help these same companies to beat paying taxes to the US). The foreign bank accounts have put him as a member of a frightening international investor class that has hidden assets around the world.
Tax Justice Network, a British-based group supported by a coalition of nonprofit foundations and good-government groups, is about to publish a startling study about the use of tax havens around the world. They gave a pre-publishing exclusive to The Guardian UK, which reports on the overall findings of the study:
A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore - as much as the American and Japanese GDPs put together - according to research commissioned by the campaign group Tax Justice Network.
James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.
He shows that at least £13tn [US$20 trillion] - perhaps up to £20tn [US$31 trillion] - has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, "protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy." According to Henry's research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn [US$6 trillion] in 2010, a sharp rise from £1.5tn [US$2.3 trillion] five years earlier....
The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry's calculations, £6.3tn [US$9.7 trillion] of assets is owned by only 92,000 people, or 0.001% of the world's population - a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
According to Romney's limited release of a partial 2010 tax returns and other reporting, he is part of that 0.001 percent world population. Romney claims to know nothing about these accounts, which countries they are in and who they may be promoting or influencing in world politics. Is he, as he said in 1994, playing us with his blind trust "ruse?" It has also been discovered by The Huffington Post that when he released his 2010 tax returns, he mentioned a Swiss bank account in the main form, but did not release another form called Foreign Bank and Financial Accounts or FBAR that gives greater detail of the foreign account. On Monday, a Mobil Oil executive was found by the courts to have willfully not filed FBARs on his foreign bank accounts and now faces a large fine. One would think that Romney's tax professionals would make sure that he filed these forms with the IRS on his numerous foreign bank accounts and only withheld the forms from the public in his release of his tax returns but, once again, he leaves the public only guessing. This is just another tactic and game of "hiding the ball" from the public.
In a under-recognized article from 2007 Los Angeles Times reporter Bob Drogin, Romney used his accounts to help him attract foreign business investment:
While in private business, Mitt Romney utilized shell companies in two offshore tax havens to help eligible investors avoid paying US taxes, federal and state records show.
Romney gained no personal tax benefit from the legal operations in Bermuda and the Cayman Islands. But aides to the Republican presidential hopeful and former colleagues acknowledged that the tax-friendly jurisdictions helped attract billions of additional investment dollars to Romney's former company, Bain Capital and thus boosted profits for Romney and his partners.
... Under his retirement agreement, Romney retains a share of the profits at Bain Capital, as well as the right to make new investments in Bain funds through his trust, until February 2009.
Malt [Brad Malt who ran Romney's trust] said he had repeatedly increased Romney's stake in the Cayman fund since 2003. He said he was unaware of the specific figures, but added that he knew he "wrote a lot of checks," and that it paid a return of 20% to 30% a year.
Malt said he was "pretty confident" that he had invested in additional offshore funds for Romney since taking over the trust. "I don't care whether it's the Caymans or Mars, if it's organized in the Netherlands Antilles or the Jersey Islands," he said. "That means nothing to me. All I care about is whether it's a good fund or a bad fund. It doesn't affect his taxes."
Drogin should get credit for his groundbreaking investigation on Romney in 2007 where he broke the story on Romney's delayed retirement and Romney's use of foreign bank accounts years before the most recent Romney stories. Now an editor with The Los Angeles Times Washington bureau, Drogin told Truthout in an interview that, unfortunately, his 2007 in-depth research was given to another reporter when he was transferred and then thrown away.
A recent Vanity Fair story further shows how Romney used foreign bank accounts to raise the initial money for a fledgling Bain Capital:
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 US Customs official once put it.
Romney's campaign claims that he has done everything within the law, but at times, it looks more like exploiting the law and being right on the edge.
If there were more transparency with the information on his business life, the public could be surer that it was all square and legal and not have to take his word for it. With all this secrecy in his life, could he pass a security clearance check or a Congressional confirmation hearing? No Congress would pass him for a presidential appointment or give him a special access security clearance with this much secrecy and especially with all these hints of undisclosed foreign money.
One of the reasons people who want to serve in these positions have to have so much of their financial and personal information released is to prevent a situation where they could be unduly influenced or blackmailed, especially with their money investments and particularly if that money is stashed around the world. Romney is asking us, as in a job interview, to hire him and trust him with our most important secrets, but he is not willing to trust the public with his.
Is this really who 43 percent of the public wants to see in the White House? This is a man of privilege and international wealth whose message for voters in 2002 when he was campaigning for governor of Massachusetts was, "I speak the language of business," according to an October 2002 report in the Boston Globe, which noted that Romney's only selling point, as it is today, is that he made a lot of money.
The "the language of business" that Romney claims to speak makes for interesting and disturbing reading.
For example, here's what Romney did not say when he was confronted with questions about a "criminal scheme to defraud Medicare in 1993" by Damon Corp., whose board he was a member of, according to an October 11, 2002, report in The Boston Globe. Romney claimed, at a news conference in 2002, he and other board members uncovered the crimes and took "corrective action," instead of reporting it to the federal government, which he was required to do. The Globe, however, determined, "Romney's comments are contradicted by federal court records and Damon's [Securities and Exchange Commission (SEC)] filings."
"Other court records, including Damon's blood testing records, show that the practice that was found to be criminal continued until August 1993, many months after Romney said he and the board put an end to it," the Globe reported. "Romney also said the reporting of the billing problems was made public to the SEC in letters sent by Damon to its shareholders in July 1993, urging them to accept an offer by Corning to buy the firm. But the letters, which [Romney's campaign] provided the Globe, state only that federal authorities were engaged in an investigation of potentially fraudulent billing practices at a number of clinical laboratories and make no mention of any particular problems at Damon."
More Hide the Ball
Remember how Romney has said he was "on leave" from Bain in 1999 during a series of bankruptcies that took place at Bain-owned companies even though SEC documents show he was listed as CEO until 2002? Well, he said the same thing when pressed about layoffs that took place at two Bain-owned companies in 1994 when strikes were held by workers at Ampad's Indiana plant, which later closed; and in 2001, when GST Steel's plant in Kansas City laid off workers and closed. It is worth reminding readers again that a year after Bain took over a controlling interest in Ampad, the firm laid off one-fifth of the Indiana plant's employees, scrapped the retirement plan and gutted health benefits and wages.
Although the Romney campaign got Mark Essig, the former chief executive of GST Steel, to produce a letter in 2002 clearing Romney of playing a role in the plant's closing, Charles Hanson III, the former CEO of Ampad, was quoted by the Boston Globe in an October 29, 2002, report as saying, "any significant direction we received would have certainly been authorized by [Romney]."
But another Boston Globe report, under the headline "Questions Romney Shouldn't Dodge," published a week earlier in 2002, noted that while Romney tried to distance himself from "the Ampad controversy," a former Bain executive, Mark B. Wolpow, who formerly worked for the infamous junk bond firm Drexel Burnham, said, "I reported directly to Mitt Romney ... You can't be the CEO of Bain Capital and say, 'I really don't know what my guys were doing ...' My job was to maximize the profits to Bain Capital's partners from the Ampad transaction."
Here is another great business decision Romney spearheaded: in a speech in July 2002, as reported by The Boston Globe, Romney criticized corporations that used the same firms for auditing and consulting work because of a potential conflict of interest. However, that criticism was forgotten by Romney when, as a member of the Marriott International board's auditing committee, "Romney approved $31.3 million in fees to Arthur Andersen in 2000, only $1.1 of it for auditing, the balance of it for consulting."
Arthur Andersen, if you recall, is the disgraced auditing firm that surrendered its license and was found guilty of obstruction of justice for shredding documents related to its auditing of Enron Corp. Romney took part in "preliminary discussions, post-Enron, on the implications for Marriott and their relationship with Arthur Andersen," the Globe added.
"Marriott disclosed $85 million in losses on bad loans, guarantees and equity investments tied to 15 of its hotels" in February 2002, the Boston Globe reported on August 1 of that year. "Rather than placing the loans on its official off balance sheets, Marriott instead disclosed them in footnotes to financial statements on file with the" SEC, a controversial practice.
More Hide-the-Ball Business Practices
When he was being called upon to release his tax returns in the 2002 gubernatorial election in Massachusetts, Romney and his running mate refused. "Mitt Romney and Kerry Murphy Healey will complete all the financial disclosure forms required by law of candidates for public office," said Eric (Etch a Sketch) Fehrnstrom, Romney's deputy campaign manager for communications, in April 2002. "They do not plan to release their actual tax returns. It's not required and they both value their privacy."
Questions about transparency in Romney's tax returns have been going on for years. There were questions about whether Romney could legitimately run for governor of Massachusetts. In 1999 and 2000, Romney declared himself a resident of Utah and received a $54,000 tax break on his $3.8 million Park City home because he listed his residence there as his primary one. He had insisted for weeks that he had filed Massachusetts tax returns for 1999 and 2000.
But after The Boston Globe revealed details about the tax break Romney called a news conference. Here's the lede from the June 7, 2002 Globe report:
Republican gubernatorial hopeful Mitt Romney contradicted his previous public statements yesterday and said for the first time that he did not file Massachusetts income tax returns for 1999 and 2000 as a resident of the state.
Romney told reporters at the news conference that he filed as a "part-year resident for 1999 and a non-resident for 2000. He amended those returns, claiming Massachusetts resident status, on April 2 , a week after he announced he was running for governor of Massachusetts and four days before the state Republican convention that endorsed his candidacy."
A week later, Phillip W. Johnston, Massachusetts Democratic Party chairman, said Romney told a "bald-faced lie" when he "originally told reporters he filed income tax returns as a resident of Massachusetts when living in Utah," the Globe reported.
As for the tax break Romney received while living in Utah? He claims he was unaware of it. Despite his denials, the Globe reported, "Summit County, Utah, tax assessors sent Romney a 'notice of property valuation and tax changes' for each of the three years, spelling out that he was getting a primary resident tax cut on his $3.8 million home," the Globe reported on June 7, 2002, which added that the Summit County assessor's office blamed the classification of Romney's Utah home as his primary residence on a "clerical error."
Romney's changing story about his tax filings earned him the nickname "Slick Willard" from The Globe. "Slick Willard," the newspaper said, was Romney's "elusive alter ego" who "said he had filed his taxes as a Massachusetts resident for the years he was in Utah running the Winter Olympics - only to subsequently reveal that he had amended his returns to claim that status after deciding to run for governor."
A familiar pattern will no doubt emerge if Romney were elevated to the White House. As someone who prides himself as a cutthroat business executive, Romney seems to be in the dark about a number of things that positively impact his bottom line. It is this type of muddle that probably made him reluctant, then and now, to release any more of his tax records.
Besides the obvious secrecy and decades-long attempts at hiding the ball, there is a unique history of him doing this in all his campaigns for public life with not enough exposure of his past ruses. We need a version of journalism "Ground Hog Day," with constant exposure in the next four months by the mainstream media and Internet news sites about Romney's ruses. It will not be seen as credible to the public if they only hear about these decades-long problems in a campaign ad from the Obama campaign. The media needs to continually dig and the public need to repeatedly insist that Romney releases at least as many records as Obama did (ten years) in his campaign or honor the memory of his father and release 12 year of taxes.
Unfortunately, Romney has spent most of his adult life working in a closed and secretive business climate where he controlled access to most aspects of his life and fortune. Businesses are notoriously proprietary with their information, especially when it comes to investments and foreign accounts. This look at the past two decades of Romney trying to transition into public life shows that he is still in the secret-business mode and may bring that mindset into the White House. If we wait until he is possibly elected, it will be too late for our country to find out his true convictions. He has so much trouble remembering what he claimed from campaign to campaign that, in May, he gave this now-famous quote when commenting on Reverend Wright:
I'm not familiar precisely with what I said, but I'll stand by what I said, whatever it was.
No, Mr. Romney, we need to see your documents and tax forms because the public needs to see what you did, not what you say, before we hire you.
Jason Leopold is lead investigative reporter of Truthout. He is the author of the Los Angeles Times bestseller, News Junkie, a memoir. Visit jasonleopold.com for a preview. His most recent investigative report, "From Hopeful Immigrant to FBI Informant: The Inside Story of the Other Abu Zubaidah," is now available as an ebook. Follow Jason on Twitter: @JasonLeopold.
Dina Rasor is an investigator, journalist and author. Rasor has been fighting waste while working for transparency and accountability in government for three decades. In 1981, Rasor founded the Project on Military Procurement (now called the Project on Government Oversight, or POGO) to serve as a nonprofit, nonpartisan watchdog over military and related government spending. Rasor's most recent book, "Betraying Our Troops: The Destructive Results of Privatizing War," chronicles first-hand accounts of the devastating consequences of privatized war support for troops and the overall war effort in Iraq. She also founded the Bauman & Rasor Group that helps whistleblowers file lawsuits under the federal qui tam False Claims act and has been involved in cases which have returned over $100 million back to the US Treasury.