Relevant and even prescient commentary on news, politics and the economy.

Does, or did, Romney own shares in the Bain fund that is an owner of HCA (which appears to be engaging in Medicare fraud)?*

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

HCA’s robust profit growth has raised the value of the firms’ holdings to nearly three and a half times their initial investment in the $33 billion deal. The financial performance has been so impressive that HCA has become a model for the industry. Its success inspired 35 buyouts of hospitals or chains of facilities in the last two and a half years by private equity firms eager to repeat that windfall.

HCA’s emergence as a powerful leader in the hospital industry is all the more remarkable because only a decade ago the company was badly shaken by a wide-ranging Medicare fraud investigation that it eventually settled for more than $1.7 billion.

Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with ways to reduce the cost of medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.

In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged.

HCA, which had lagged the industry for those high-paying categories, jumped ahead of its competitors and was reimbursed accordingly. The change, which HCA’s executives said better reflected the service being provided, increased operating earnings by nearly $100 million in the first quarter of 2009.

To some, HCA successfully pushed the envelope in its interpretation of existing Medicare rules. “If HCA can do it, why can’t we?” asked a hospital consulting firm, the Advisory Board Company, in a presentation to its clients.

In one instance, HCA executives said a private insurer, which it declined to name, questioned the new billing system, forcing it to return some of the money it had collected.

Let me speculate here: Might Romney’s tax returns for the few years preceding 2010 show an interest in the Bain fund that continues to own a large share in HCA even though HCA went public last year?*  

Just asking.

*The New York Times article explains:

In the spring of 2011, in one of the most closely watched public offerings since the financial crisis, HCA became a public company once again. Its three buyout owners each sold another $500 million worth of stock, allowing them to recoup all their initial investment.

Last fall, HCA agreed to buy back the stake held by Bank of America, which had purchased Merrill Lynch in 2009, for $1.5 billion, giving the bank a return of two and a half times its initial investment. And earlier this year, HCA paid out $900 million in dividends, of which $360 million went to K.K.R. and Bain.

The 40 percent stake in HCA still held by K.K.R. and Bain is worth about $4.8 billion at current levels, giving them a potential profit, with the dividends they have received, of three and a half times their initial investment of $1.2 billion each.

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Romney’s Rock & Hard Place: VP’s Tax Returns

If my name was Harry Reid I would be reserving one question for Romney’s announcement of his VP pick:

“Governor, how many years of tax forms did you request from Governor/Senator Jindal, Pawlenty, Portman?”

And August 27th is not that far away. Particularly if the idea is to announce the VP pick prior to the Convention itself.

Rock and hard place. Goose and gander. Pot and kettle. Scylla and Carybdis.

As Shakespeare might have said:
 “Double, double (standard), and trouble.
Fire burn and cauldron bubble”

I don’t see how Romney can chill this particular pot in time to keep it from burning him.

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What’s Romney Got to Hide? (Part III)

by Linda Beale

What’s Romney Got to Hide? (Part III)

In the last two posts, I explored a number of fairly simple questions that might be raised about Romney’s activities that would be clarified by seeing multiple returns (hobby versus investment/business losses; business versus passive activity losses; amounts of preferentially taxed income; income reported from Bain Capital and/or from foreign accounts) and some of the “squirrelier” possibilities that tax experts have raised (potential that Romney participated in the IRS voluntary disclosure “amnesty” program for reports on offshore accounts after the initiation of unraveling of Swiss banking secrecy as a result of the UBS scandal, in order to avoid weightier penalties, including potential criminal charges; contributions to IRAs that were undervalued, possibly by claiming zero value for partnership interests; use of aggressive tax sheltering transactions to ‘create’ capital losses to offset substantial capital gains, resulting in the net capital loss carryforward on the 2010 tax return).

Ed Kleinbard, a former partner at Cleary Gottlieb who served as chief of staff for the JCT and is now a law professor at Southern California, has joined with Peter Canellos, a prominent tax practitioner and former chair of the prestigious New York State Bar Association Tax Section, to address these issues regarding the importance of seeing multiple past years of Romney’s tax returns.  See Kleinbard & Canellos,Why won’t Romney release more tax returns?, CNN (July 18, 2012).  Hat tip Calvin Johnson.

So what do Kleinbard and Canellos add to this debate?  Perhaps most importantly, they note the importance of transparency in the vetting of presidential candidates :  as they say, “[t]he U.S. presidency is a position of immense magnitude and requires a thorough vetting.” (emphasis added)  Accordingly, they point out the advantage to the American public of the disclosure practice initiated by Romney’s father George Romney four decades ago and .

Since George Romney inaugurated the practice more than 40 years ago by releasing 12 years of tax returns in his bid for the Republican Party nomination, presidential nominees have been transparent with voters about their personal finances. For this reason, we have not suffered a significant tax scandal involving a nominee or sitting president since President Richard Nixon’s abuse of the tax code.
Disclosure goes to the heart of the truthfulness with which a nominee engages the American people, and it assures us that he in fact has comported himself before the election with the high moral character we associate with a future president.
What the American people deserve is a complete and honest presentation by Romney of how his wealth was accumulated, where it is now invested, what purpose is served by all the various offshore vehicles in which he has an interest and what his financial relationship with Bain Capital has been since his retirement from the company. These are all factors that go to the heart of his character and values.

Like the rest of us who have discussed this issue, Kleinbard and Canellos note that it is Romney’s abject refusal to follow his father’s example and disclose a decade’s worth of returns that “undermines the assumption” that would otherwise apply “that there cannot be any tax skeletons in his closet.”  Our only tool is to “reconstruct his financial record” from what he has released.  And that leads us to “red flags that raise serious tax compliance questions with respect to his possible tax minimization strategies in earlier years.”  Disclosure, they note, could “replace speculation with truth-telling.”

Kleinbard and Canellos go on to discuss some key issues (some already addressed in prior posts)

  • the Swiss bank account: Why would a presidential nominee be betting against the US dollar by speculating in Swiss Francs?  The account was closed in 2010, but was its income reported on earlier returns and were the FBAR reports timely filed as required? Did the Romneys participate in the 2009 partial tax amnesty for unreported offshore accounts?
  • the $100 million IRA: How could an account restricted to annual contributions of $30,000 grow to $100 million? Does it represent “unprecedented prescience in … Romney’s investment choices” or does it mean that “Romney stuffed far more into his retirement plans each year than the maximum allowed by law by claiming that the stock of the Bain company deals that the reitrement plan acquired had only a nominal value” (relying on a safe harbor rule about taxation of service partner’s receipt of such interests that is, however, inapplicable to contributions of those interests to a retirement plan)?
  • the Romney family trusts:  “Did Romney report and pay gift tax … or did he claim similarly unreasonable valuations, which likewise would have exposed him to serious penalties if all the facts were known?
  • the complexity of Romney’s assets:  even multiple years of returns won’t answer all these questions given the “complexity” and “arcane” and “opaque” nature of Romney’s financial affairs, so disclosure about specific issues, such as the $100 million IRA, will be needed
  • the low Romney tax rate:  a tax rate of 13.9% on $22 million is exceedingly low–lower than the rate paid by ordinary American wage-earners making 40-50 thousand a year.  How can we trust Romney to enact wise policy–which the vast majority of tax experts concur is to remove the super-preferential rate on the compensation income of private equity fund managers?  “Romney has not explained how, as president, he can bring objectivity to bear on this tax loophole that is estimated as costing all of us billions of dollars every year.”

Will Romney respond to these continuing calls for full disclosure about how his wealth has been built, where it is invested, and just what purpose the various offshore entities serve?  If he does not, we can only think the worst.
crossposted with ataxingmatter

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Romney to release tax returns Tuesday (finally)

by Linda Beale

Romney to release tax returns Tuesday (finally)

Romney’s bitter loss to Newt Gingrich in the Republican primary in South Carolina demonstrated that playing the patrician elite above the fray has its limits as a campaign strategy. Romney’s strategists had apparently thought that they could get away with not releasing tax returns–at least not any except his 2011 ones (maybe) when filed–but they hadn’t counted on vicious attacks from the GOP right that questions his vulture capital millions and his top1% effective tax rate.

That’s what happens when there is a campaigner who thinks that earning $370,000 from speeches given to meaningless conventions of some trade or another is “just a little money”, while admitting that the money he still earns from the vulture fund where he oversaw takeovers of companies (and layoffs of employees and offshoring of work) manages to be taxed at a preferential rate of merely 15%.

So after the loss to Gingrich (an odd man to try to claim a populist mantle when he had a $500,000 line of credit at Tiffany’s and disposes of old wives the way most people dispose of old socks), Romney has now announced that he will release returns plus an estimate of his 2011 taxes due. See Michael Shear, Romney to Release Tax Returns on Tuesday, The Caucus, New York Times (Jan. 22, 2012).

One does wonder why it will be Tuesday when they are released. Why not today? or six months ago? Will they be redacted? Will the accompanying schedules that show his income coming through tax haven “companies” located in the law offices that house 18,000 others in the Caymans be there? Questions that we will have fun examining on Tuesday, anyway.

Oh, and Mitch Daniels, current governor of Indiana and Bush assistant who helped preside over the real growth of the federal deficit as Bush pushed through huge tax cuts while increasing federal spending (especially on preemptive wars), will give the GOP response to the State of the Union message. The Tea Party has picked Herman CAin–the author of the infamous 9-9-9 plan who wanted to shift the tax burden brutally onto the backs of the working poor. The GOP seems to have tax cuts for the rich accompanied by increasing burdens for the poor in its blood, doesn’t it
originally published at ataxingmatter

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