Romney Invests Wealth in the Cayman Islands

by John M. Curtis
(310) 204-8700

Copyright January 19, 2011
All Rights Reserved.                                         

               Just as things looked up in South Carolina, former Mass. Gov. Mitt Romney had to do some fancy footwork to explain ABC News’ latest revelation about sheltering part of his estimated $250 million fortune in the Cayman Islands.  Known for offshore-betting and tax shelters, the Caymans are known for more than pirate shipwrecks and buried treasure.  Romney’s wealth could be his Achilles Heal, as more voters get a free X-ray into his financial dealings.  “His personal finances are a poster child of what’s wrong with the American tax system,” said Washington lawyer Jack Blum, an expert in tax enforcement and offshore banking.  Romney, whose close win in the Jan. 4 Iowa Caucuses may have been reversed today, already has an image problem, especially with conservative voters.  They don’t like his liberal leanings, especially on health care, while Massachusetts’ governor.

            Under pressure from presidential campaign dropout Texas Gov. Rick Perry, Romney revealed he pays 15% on his earned income, the exact amount designated for capital gains on investment income.  While there’s nothing illegal about Romney’s tax write-offs, it doesn’t sit well with ordinary voters that he pays less taxes than his limo driver.  “I can tell you we follow the tax laws,” said Romney on the campaign stump, explaining how he, like most Americans, takes advantage of existing loopholes.  Investing in at least 12 funds in the Cayman Islands, Romney has at least $8 million invested in the Caribbean.  “And if there’s an opportunity to save taxes, we like anybody else in this country will follow that opportunity,” said Romney, opening up a can of worms for the two-time, 64-year-old candidate.  Admitting that he takes every available tax loophole looks cheesy.

            Romney co-founded Bain Capital in 1984, a private equity group that has some 138 secretive offshore accounts in the Caymans.  Romney reportedly has other investments totaling between $5 and 25 million in the Caymans.  He justifies his offshore investments as an attempt to encourage foreign capital investment in the Caymans, something very odd for someone touting his business savvy as his greatest asset for president.  While at Bain Capital, Romney was a turnaround expert, acquiring various distressed companies, often laying-off workers to make companies more profitable and eventually sellable.  Leveraged buyouts, mergers and acquisitions made Romney millions at Bain but frequented resulted in tough business decisions, including laying off hundreds, if not thousands, of workers.  Why Romney would encourage capital investments in the Caymans is anyone’s guess.

                 Tax experts estimate that offshore investments cost the U.S. Treasury about $100 billion a year in lost tax revenue, around the amount needed to fund President Barack Obama’s health care program.  Romney often calls Obama the “jobs killer,” failing to admit the country under Barack has added 2.6 million jobs since June of 2010.  He likes to ask voters on the stump, quoting the late President Ronald Reagan, whether they’re better off than they were four years ago,” ironically less that three years into Obama’s term.  Romney likes to pin the country’s economic woes on Obama but gives him no credit for taking the Dow Jones Industrials from 8,000 when taking office Jan. 20, 2009 to its close Friday of 12,625, a whopping 58% increase.  With Texas Gov. Rick Perry dropping out, Romney finds himself battling former House Speaker Newt Gingrich for South Carolina.

            Romney would have been grinning ear-to-ear heading into tonight’s GOP debate in Charleston, S.C. because of Newt’s skeletons flying from his closet.  His ex-wife Mairanne’s explosive allegations that Newt sought an “open relationship” during his affair his Congressional aid Callista, Newt’s current wife.  Romney was sailing into South Carolina until Perry pressured him to open up about his taxes.  Revelations about his taxes and offshore financial dealings opened up a can of worms.  “It helps investors avoid U.S. tax,” said tax policy expert Rebecca Wilkins with the Washington-based Tax Policy Institute.  Romney needs to do more than blame his offshore strategy on bringing investments to the Caymans.  He could tell voters he’s willing to reconsider things, including instructing his advisors to return his investments, regardless of tax consequences, back to the States.

            Heading into Saturday’s S.C. primary, the press wants to make a horse race out of an otherwise banal primary season, eventually anointing Romney as the Party’s seal-bearer.  With Perry bailing out, a Rep. Ron Paul (R-Texas) repeating himself, former Sen. Rick Santorum (R-Penn.) pandering to evangelicals and former House Speaker Newt Gingrich mired in salacious gossip, only Romney, with all his financial baggage, remains a viable candidate.  Instead of apologizing for his tax rates and investments, Mitt should commit himself to fixing what most describe as a broken system, leaving too much wealth concentrated into too few hands.  Some good old fashion middle class values would redirect voters away from his prodigious wealth back to what drives the economy and American Dream.  Romney’s wealth shouldn’t be a handicap unless he’s seen as shortsighted and selfish.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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