Mitt Romney's Ethics Problem: Blind Trust Edition
On its face, this would indicate that not only does Mitt Romney have no problem hiding his tax returns from voters, but he also has reasons to hide his tax returns from voters.
When is a blind trust not a blind trust?
A blind trust is not a blind trust when there is direct or indirect control over investment decisions. While Romney has nominally placed his investments in a trust which is managed by someone else, the person he has chosen to manage those investments is his close associate and personal attorney. That is not a blind trust under federal law. It is a trust managed by a close personal friend and advisor.
This is important because it means Romney can coordinate investment decisions which on their face might be potential conflicts of interests. Here's an example. In March, the Obama campaign hammered Romney about his "tough-on-China rhetoric", after Romney started criticizing the administration over it's alleged "softness" on Chinese human rights abuses.
Yet even as he was proclaiming that, he had a six-figure investment in a Bain Capital fund which owns Chinese video surveillance company.
Either way you cut it, there's a conflict. On the one hand, Romney is full of puffery over his indignation at human rights abuses in China and on the other, he's got a substantial investment in a company which enables human rights abuses.
Another example of Romney's hypocrisy with regard to China is the relationship between his investments and his policy declarations. A look at Romney's record alongside his financial disclosures indicates that he was for China before he was against them, and his investment record aligns with that. In late 2011, Romney's campaign rhetoric took a hard turn against Chinese trade practices. Just before that, he divested himself of $1.5 million in Chinese investments.
It is not a blind trust when one decides to make a policy stand but unloads one's investments just ahead of that stand. And it's here that I will note Romney's modus operandi. "I'm running for office, for Pete's sake! I can't have [illegal immigrants, Chinese investments, etc] working for me!"
When a blind trust is really a blind trust
Under federal law, Mitt Romney has two options with regard to his assets. He can either create a blind trust which actually creates a firewall between Romney and his money by putting all of his assets under the management of a completely unrelated third party with no conflict of interest or relationship with Romney, or he can liquidate all of his investments and place them in neutral investments such as Treasury notes.
Divestiture is the route President Obama appears to have taken. According to his financial disclosures at Open Secrets, the bulk of his money was invested in Treasury bonds, with some retirement funds held in index mutual funds, which are permissible because he has no control over how those mutual funds are invested. Those disclosures go all the way back to his initial candidacy filing and are consistent.
Mitt Romney, on the other hand, promises to create a federal blind trust if he is elected. Until then, he'd like for everyone to believe he is not accountable for Bain Capital's actions because, well, he had everything held in a blind trust. Right?
About that Bain Capital Relationship...
Romney's newly-released financial disclosures indicate that he received almost $2 million in income from Bain Capital which were treated as "carried interest" payments. Carried interest payments, you might recall, are taxed at a rate of 15 percent, unlike other income which has a maximum tax rate of 28 percent.
In his latest federal financial disclosure, filed last week, Romney's trustee revealed that the candidate made $1.9 million from a single "Bain Capital Inc." payment as well as more than $200,000 from three other Bain entities. Although Romney's retirement agreement with Bain expired in 2009, the trustee said the income came in the form of "true-up" payments -- in essence, catch-up payments made to make up for earnings not provided to Romney before the entities ceased operation.
None of the Bain entities had previously been listed on Romney's 2011 financial disclosure.
So here's what we're being asked to believe. First, Romney's relationship with Bain ended in 1999 and there was no arrangement for any further consulting or other services with them. Second, Romney's retirement agreement expired in 2009 and with it, all preferred tax treatment on Bain Capital distributions, since Romney would ostensibly have provided no services to Bain to justify giving him a "piece of carry", which is how it's referred to. Third, suddenly two investments pop up out of nowhere with Bain which do not cause any prior year's tax returns to be amended or disclosures changed, but payments from them represent some sort of adjustment for prior services which are as yet undisclosed.
Isn't the simpler explanation that Romney still has an active, vibrant ongoing relationship with Bain Capital, and that his current investments are not being held in a trust with any sort of firewall standing between Romney and investment decisions for those trusts? And if that is the explanation, then we also have to understand that Mitt Romney has many, many conflicts of interest, that he should be accountable for Bain Capital's vulture capitalism activities, and most importantly, Mitt Romney wouldn't know the truth if it stood in front of him with a big sign painted on its chest.
This is the wonky installment of Mitt Romney's Ethics Problems. Stay tuned for the creepy installment, which will be coming shortly.
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