Before Ron Johnson
bought ran for Russ Feingold's Senate Seat and won, he was CEO of a small plastics company called Pacur. Johnson spent over $9 million running for the Senate, ostensibly out of his own pocket.
And like a miracle, $10 million showed up after his election in the form of a deferred compensation payment. Imagine that...just enough money to cover the cost of
buying his election running for the Senate and winning.
Johnson's plastics company paid him $10 million in deferred compensation shortly before he was sworn in as Wisconsin's junior senator, according to his latest financial disclosure report.
The first-term Republican declined to say how his Oshkosh firm, Pacur, came up with a figure that so closely mirrored the amount he personally put into his campaign fund.
"You take a look in terms of what would be a reasonable compensation package, OK?" Johnson said this week. "It's a private business. I've complied with all the disclosure laws, and I don't have to explain it any further to someone like you."
Attitude notwithstanding, he certainly should have to explain it to "someone like me," especially when this magical deferred compensation package was not an agreed-upon annual set-aside as most corporate deferred compensation packages are.
In fact, the person who set the amount of the payment was one guy - Ron Johnson.
In an interview this week, Johnson emphasized that he has not taken a salary from the plastics manufacturing company since he bought it in 1997.
Records show the Oshkosh businessman still had income of $1.3 million and $2.3 million annually from 2005 to '08 from capital gains, corporate earnings and real estate. In the first half of 2010, he received $650,000 in what he called "pass-through income" from a limited liability company that owned Pacur.
After the election, in which he defeated Democratic U.S. Sen. Russ Feingold, Johnson said he dialed down his active involvement with Pacur and received the deferred compensation package for serving as its CEO over the previous 13 years.
Unlike most deferred package deals, however, it appears that the company had not set aside a specified amount annually that would be paid out when he left the firm. Instead, Johnson said the $10 million payment was "an agreed-upon amount" that was determined at the end of his tenure with the company.
Agreed upon with whom?
"That would be me," he said.
About that claim that he hasn't taken a salary? Well, yes, and no. What he did is what a lot of small business owners do to defer taxes. He converted the corporation to a "pass-thru entity", then loaned himself $650,000 per year. Because payments to him were characterized as loans, he paid no federal or state income tax on them. But clearly, he was paid a handsome salary..er...loaned a handsome salary.
The interesting part comes when you look at his financial disclosures. He disclosed his ownership interest in Pacur, LLC as being worth $1-$5 million. Yet his ultimate deferred compensation payment was $10 million -- just enough to cover his campaign costs.
Of course, any other candidate (including Russ Feingold), would not be allowed to finance their campaign with corporate funds. Yet it appears that Ron Johnson has done just that, while availing himself of the lowered Wisconsin tax rate on wealthy citizens and corporations to maximize his tax savings.
To be clear, while it appears to get around the rules about corporate campaign financing, it doesn't mean anything illegal has occurred. At least, not overtly. The IRS could, if they wanted, challenge the $10 million payment as unreasonable compensation. They could decide that the loans to Johnson were really a way to dodge taxes rather than given as legitimate corporate loans to an officer. They could, but it's unlikely.
But it raises a larger issue. Any discussion and/or vote on tax reform in the Senate that Johnson participates in opens a huge conflict of interest. How can he possibly represent all of the citizens of Wisconsin when he clearly benefitted from corporate loopholes to finance his run for the Senate and to dodge income taxes on Pacur income for all of those years? It's hardly likely that this Senator who just managed to avoid paying taxes on $650,000 per year in income would vote to close loopholes on the wealthy or tighten corporate rules with regard to executive compensation, after all.