Tax Cheating Investigation Officially Looking At Bain Capital

The New York Attorney General’s office has begun to subpoena documents and records from over a dozen financial firms as part of a grand investigation on the illegal practice of Management Fee Conversions, according to a new New York Times report. One of the companies being given special focus is Mitt Romney’s firm, Bain Capital, which recently had hundreds of pages of tax information Gawker released last month. Other firms also under investigation include Kohlberg Kravis Roberts & Company, TPG Capital, Sun Capital Partners, Apollo Global Management and Silver Lake Partners.

The call for this came out of the New York Taxpayer Protection Bureau, which focuses on companies which defraud or cheat the government. With the TPB being a new agency, only begun in 2011, the strength of this investigation, or of the lawsuits already filed against firms such as Sprint/Nextel, remain unclear. However, with the New York’s powerful False Claims Act being in effect, it seems that the TPB will have some teeth with which to attack those firms it discovers having evaded their taxes.

Despite Mr Romney’s claims to the contrary, his tax returns reveal an 83(b) exception, which indicates a management or executive role within one of the Bain funds under investigation. Tax evasion is a serious crime, with the last impeachment for tax evasion being that of federal judge Harry Claibourne in 1984. Vice President Spiro Agnew was similarly charged with, and later admitted tax evasion, but resigned his position than face the impeachment and trial.

This is not the first tax evasion scandal associated with Mr Romney. In 1993 he was part of the Mariott Corp.’s board audit committee. It was during that time in which Mariott engaged in the infamous Son of BOSS tax evasion scheme, which resulted in the Marriott International Resorts, L.P. v. United States decision, where the courts agreed that Mariott had used the scheme. The IRS estimated that in total, companies used the Son of BOSS scheme to avoid paying an estimated $6 billion in taxes.

When Mr Romney was on the audit committee they considered the Son of BOSS perfectly legal. Romney has since been quoted as saying that he paid “only what the tax code requires.” Does this mark Romney a liar, or someone who is calculating and schemes to find ways to avoid paying back to society for the benefits with which society has granted him and his family?

No man is an island. We all live and work in a community. We do better when the community is thriving. Our nation did its best when we had a strong concept of community, of society. Those who made the most paid to support that system, paying ahead for the next generation. Those who fell behind are caught in the safety net and given a ladder with which to climb back out of the pit of poverty. The concept of greed and selfishness has sapped society of its strength. The pursuit of wealth at all costs has created a catastrophe in the making, for once enough people fall into poverty the consumer market will seize up. Once that happens, no money in the world will help those at the top as they find their empires crumbling beneath them.