Is Romney a Habitual Liar? Or Is He Instead Something Even More Dangerous: God-Awful Stupid? [Updated]
by Linda Beale
Whistleblower gets millions: good for compliance improvement (and makes us ask again–did Romney get amnesty?)
Bradley Birkenfeld, the UBS whistleblower who helped jumpstart the IRS’s enforcement of foreign bank account reporting and helped catch criminal tax evaders, ended up serving a relatively short prison term (for failure to be entirely forthcoming, in the case of one of UBS’s private banking customers) but also go a significant $104 million whistleblower award. See David Kocieniewski, Whistle-Blower awarded $104 Million by I.R.S., New York Times (Sept. 11, 2012); Whistleblower Brad Birkenfeld Rewarded Record $104M for Exposing How UBS Helped Rich Evade Taxes, DemocracyNow.org (video available); Exhaustive Study Finds Global Elite Hiding Up to $32 Trillion in Offshore Accounts, DemocracyNow.org (July 12, 2012) (video or transcript available); Birkenfeld’s bonanza, The Economist (Sept. 11, 2012).
As Birkenfeld’s attorney put it:
“Today is a great day for all the honest Americans out there who work their job and pay their taxes. Today is a great day for tax fairness. Today is a terrible day for big-time tax cheats.” Birkenfeld’s bonanza, The Economist (Sept. 11, 2012).
The very public and very large whistleblower award should do two things:
1) encourage other insiders who are aware of egregious company or individual tax-evading behavior to blow the whistle and
2) discourage other insiders and companies from egregious company or individual tax evading behavior.
There have always been anonymous brown-envelope tips to the IRS from those who know what is going on but don’t want to participate in it and don’t want their competitors to gain a competitive advantage because they do. But whistleblowers generally have access to inside information that can break the dam on enforcement. That certainly was the case with Birkenfeld, whose information– about smuggling diamonds for UBS’s private banking clients and other means taken to help such clients avoid reporting their assets to the US government–was instrumental in increasing awareness about tax crimes and increasing the fear of God (or rather, the fear of the “revenuer”) in sophisticated, wealthy taxpayers who had been able to hide some of their assets and wealth relatively easily before.
By the way–we still do not know whether GOP presidential candidate Mitt Romney participated in the amnesty program that was introduced in the wake of the UBS exposure of banking secrecy’s connection to tax evasion by wealthy Americans. As most Americans know by now, Romney refuses to release his tax returns for the relevant years when he might have participated in the amnesty program to avoid criminal prosecution.
Until he does release his returns back to 2003 o4 so, there will continue to be questions regarding his taxes, as the wealthiest nominee ever with offshore holdings galore and his sole business experience being a hedge fund with numerous offshore entities and blocker corporations. Specifically, Americans will wonder how his self-proclaimed patriotism and love of nation plays out in his ordinary decisions. His hedge fund, Bain Capital, has also made the news as a participant in a claimed conspiracy of hedge funds to deflate the prices they pay for companies they acquire. See Lichtblau & Lattman, Equity Firms Like Bain Are Depicted as Colluding, New York Times (Sept. 11, 2012).
Both tax evasion and price-rigging are criminal activities, so it behooves Romney to release his returns and ancillary information so Americans can assess how he practices what he preaches in terms of love of country and rule of law. Did he report his foreign assets as required all along? Did he invest abroad (so that any purported “job creation” activity didn’t benefit us)? Was he still influential in Bain during the period that it began, or carried on, price-fixing agreements with other powerful hedge funds? Americans deserve to know.
Will this lead to better compliance in the future? One suspects that there will always be those who enjoy the game of avoiding taxes so much that they will be willing to pay to play the tax evasion games even on the harder-to-manipulate playing field created by the crackdown on banking secrecy and offshoring of funds. But hopefully they will be fewer, and less successful!
cross posted with ataxingmatter
Government documents prove the candidate’s mythology is just that
by: Tim Dickinson
Mitt Romney likes to say he won’t “apologize” for his success in business. But what he never says is “thank you” – to the American people – for the federal bailout of Bain & Company that made so much of his outsize wealth possible.
In fact, government documents on the bailout obtained by Rolling Stone show that the legend crafted by Romney is basically a lie. The federal records, obtained under the Freedom of Information Act, reveal that Romney’s initial rescue attempt at Bain & Company was actually a disaster – leaving the firm so financially strapped that it had “no value as a going concern.” Even worse, the federal bailout ultimately engineered by Romney screwed the FDIC – the bank insurance system backed by taxpayers – out of at least $10 million. And in an added insult, Romney rewarded top executives at Bain with hefty bonuses at the very moment that he was demanding his handout from the feds.
Under normal circumstances, such ample reserves would have made liquidating Bain an attractive option: Creditors could simply divvy up the stockpiled cash and be done with the troubled firm.
What’s more, the bonus loophole gave Romney a perverse form of leverage: If the banks and the FDIC didn’t give in to his demands and forgive much of Bain’s debts, Romney would raid the firm’s coffers, pushing it into the very bankruptcy that the loan agreement had been intended to avert. The losers in this game would not only be Bain’s creditors – including the federal government – but the firm’s nearly 1,000 employees worldwide.
The FDIC considered finding a buyer to take over its loans to Bain, but analysts concluded that “Bain has no value as a going concern.” And the government wasn’t likely to get much out of Bain if it allowed the firm to go bankrupt:
How had Romney scored such a favorable deal at the FDIC’s expense? It didn’t hurt that he had close ties to the agency – the kind of “crony capitalism” he now decries. A month before he closed the 1991 loan agreement, Romney promoted a former FDIC bank examiner to become a senior executive at Bain. He also had pull at the top: FDIC chairman Bill Seidman, who had served as finance chair for Romney’s father when he ran for president in 1968.
The federal documents also reveal that, contrary to Romney’s claim that he returned full time to Bain Capital in 1992, he remained involved in bailout negotiations to the very end….
This story is from the September 13, 2012 issue of Rolling Stone.
(Hat tip Barry Ritholtz via Spencer)