Mitt’s Big Secret

Is Romney Trying to Conceal a Massive Tax Fraud Scheme?

by DAVE LINDORFF

 

A lot of theories have been put forward to try and explain why Romney has allowed his campaign to become bedeviled by charges of tax dodging, but what if what he is hiding is felonious tax fraud?

Okay, so he’s taken the legal option of delaying filing his 2011 taxes, which every taxpayer is entitled to do without penalty and without having to give any explanation until October 15 this year (I agree it’s a little weird when a super-rich guy who pays accountants by the dozen does this, but hey). The nagging question though is why he hasn’t just responded to the demand that he release two years of tax returns like John McCain did in 2008 by simply releasing his 2009 tax filing, along with the 2010 return he already released?

The answer may well be that 2009 was the year that the Treasury Department decided to offer an amnesty from prosecution for tax fraud to any of the tens of thousands of millionaires who were known or suspected to have illegally hidden income abroad in the Cayman Islands or in Swiss banks — a felony, but one that people thought they’d never be caught at.

That year alone, some nearly 30,000 people, many of them no doubt prominent in society, politics and business, and customers of the finest accounting firms, reportedly voluntarily came forward to the IRS to admit that they had hidden some of the estimated $100 billion in income that crooked rich Americans have for years been secreting away in banks overseas. Under the terms of the program, they were able to just report their fraud, pay the taxes, penalties and interest on the money and then walk away scott free, with no charges and with their returns kept confidential by the agency.

That is, unless they decided to run for national office, where the expectation is that they have to release their income tax returns to the media for inspection.

As journalist Matthew Yglesias has written in Slate, “Romney might well have thought in 2007 and 2008 that there was nothing to fear about a non-disclosed offshore account he’d set up years earlier precisely because it wasn’t disclosed.”

But the scandal that exploded around Swiss megabank UBS, where a whistleblowing employee released some of the names of wealthy Americans who were being allowed to use the bank’s privacy protections to hide their income from the IRS, caused many of America’s super-rich, fearing the worst, to rush for an amnesty offered by the IRS, which was more interested in collecting the money than putting a lot of the country’s toniest people behind bars. The floodgates opened when the US sued UBS demanding the full list of tax criminals from the bank, and then offered an amnesty to those who came forward voluntarily, reported their fraud to the IRS, and paid the required interest and penalties.

Given Mitt Romney’s known predilection for avoiding taxes, it’s hard to imagine him not having taken advantage of the Swiss tax dodge, particularly when so many other people of his class were doing it. Hiding income overseas was, back in the early years of this gilded century, the thing to do–the stuff of mirthful asides over cognac at the Club after a bracing game of golf or polo.

But explaining paying lower taxes than your maid or gardner to the public is one thing. Explaining deliberately committing massive tax fraud is another. Plenty of Americans have gone to the slammer for years for defrauding the IRS of mere five-figure sums. Most live in a cultivated fear of the IRS, worrying that they made some mistake on a form or missed a filing deadline, and yet the wealthiest Americans, thanks to the 2009 and subsequent amnesties or partial amnesties, have gotten away with massive fraud, just having to pay penalties and interest, as if they had just inadvertently filed late or made a math error.

None of this is proof that Romney is guilty of felony tax fraud, of course. On the other hand, it is curious that John McCain would have gone for the loopy lady from Wassilla and rejected Romney as his running mate back in 2008. Mitt was seriously in the running as a candidate for the job of VP on the McCain ticket at one point, and the UBS scandal broke right when McCain was picking his running mate. It seems logical that McCain’s vetting team would have asked Romney if the scandal might touch him. Maybe they ruled him out of contention when they got the answer.

In any case, running for president is not for sissies, and there is no presumption of innocence in politics. If Romney did not commit tax fraud back in 2008 and earlier, and did not avail himself of the IRS’s 2009 tax amnesty program, he should have to prove it by releasing his 2007, 2008 and 2009 taxes, and, if the 2007 and 2008 filings turn out to have been belatedly corrected, he should have to show the original filings too.

No doubt the Obama campaign has figured all this out, which would explain why they are offering Mitt Romney a deal that says: “You release five years of your taxes, and we’ll shut up” about demanding even older ones.

It remains to be seen whether conservative and right-wing and libertarian Americans, famous for their loathing of taxes, will decide that Romney is simply doing what they’d all like to get away with doing, and give him a pass on all this tax dodging, or whether they will become so incensed at the idea of this richest of presidential candidates in history cheating on his taxes that they will demand that he prove he didn’t do it before he can have their vote.

Meanwhile, if Romney did commit tax fraud courtesy of a Swiss bank arrangement, and he stonewalls it through the campaign weeks ahead, he runs a huge risk that someone will leak the information. After all, federal employees have to realize that four years of a Romney/Ryan administration will be brutal on their job security, benefits and working conditions. And right now Obama is the boss of the federal government, with his own appointees at Treasury and the IRS.
Stay tuned.

Why Corporate Compliance is a Joke

An Interview With Patrick Burns

by RUSSELL MOKHIBER

 

Patrick Burns says what others know and refuse to acknowledge. Compliance is a joke. Burns is the communications director at Taxpayers Against Fraud.

“What do companies do to people who threaten their profit center – even and maybe especially if the profit center is one based on fraud? They move to isolate, to humiliate and to terminate,” Burns said last week. “And they do it every single time.”

“When I speak to compliance officers, I always ask one question right at the beginning. I raise my hand and say – any companies here ever made a whistleblower employee of the year?”

“Invariably, the room bursts out laughing. It’s treated as the opening of a comedy act when I ask that question.”

“And these are the compliance officers. Then I turn it around on them.”

“I ask them, at the end of this session, to go into their car and turn off the radio and not start the engine. And think for thirty seconds about this question – why was I hired at this company?”

“Was I hired because I am a fierce, tough, brave compliance officer?”

“Or was I hired because they sensed a weakness in me and they thought that I would be a compliant officer? An officer who would be useful to them to ferret out and finger anybody in the company who was actually going to blow the whistle, internally or externally, on massive fraud within the company.”

Does anybody object when you say that?

“They can’t.”

Because what you’re saying is that compliance is a joke?

“I have to say that it really is most of the time.”

Have you come across exceptions?

“No,” Burns said. “The compliance officers are great for the little stealing.”

“The compliance officer at Wal-Mart is there to stop employee theft. It’s to stop someone from bundling up a bunch of frozen meat in the trash bag and throwing it into the trash and then pulling it out thirty minutes later.”

“But some massive bribery scheme in Mexico, importing goods from China that have a made in America label sewed on to them – they won’t pay attention to that.”

“Not paying taxes on what they’re selling, none of that stuff, none of that is going to happen.”

“That is not what a compliance officer is supposed to do. The compliance officer is about twenty levels down within a company. He’s above the rent-a-cop in the lobby, but he’s not much higher than that most of the time.”

“And they are not able to challenge the people in the top executive suites. The never even meet those people most of the time.”

“This idea that a compliance officer is somehow a combination of the Fantastic Four meets the X-men – it’s just not true. It’s a lot closer to Barney Fife with his one bullet.”

And Burns has no illusions about the Justice Department’s war on fraud.

“If you go out to a farm field and you see 2000 pounds bulls standing behind a single strand of hot electric wire,” Burns said. “Those bulls have touched the wire once or twice. And after they touched that wire once or twice and got an immediate serious shock, they never touched it again.”

“That is not the way the Department of Justice works. The Department of Justice will take two, three, five, ten years to work a case.”

“Let me be explicit in what I’m saying here. The GlaxoSmithKline case was settled yesterday for three billion dollars. It’s the largest healthcare fraud case in US history.”

“Whistleblowers went to the company internally. The company did an internal investigation. The compliance officers in the company said – “yes we are indeed doing this fraud.”

“GlaxoSmithKline ran the numbers and decided that doing the fraud and delaying with its interaction with the Department of Justice was a better business plan than fessing up and paying up.”

“So they lawyered up and delayed.”

At the end of eleven years, they paid the three billion dollar fine. But during that time, they’ve collected billions and billions of dollars in profits.”

“Now here’s the perverse part of all of this. During that ten year period, people at GlaxoSmithKline were promoted, they were paid, they got bonuses and they got stock options based on this extravagant fraud scheme that involved nine different drugs, and was a virtual clown car of fraud.”

“All of the profits from this fraud were privatized. Private beach houses were bought. Private careers were made. Private bonuses were cashed. People sent their kids to private schools based on these frauds – this poisoning for profit.”

Burns doesn’t think jailing top corporate executives is likely. He says we need to exclude them from the industries in which they work.

“Putting people in jail we don’t think is very likely,” Burns said.

“The truth of the matter is a criminal prosecution requires a standard of evidence that is beyond a reasonable doubt. Companies will fund a full push back against the Department and there’s a very good chance that they will prevail.”

“The good thing about exclusion is that it can be done administratively.”

“Let me make it as simple as possible here. When you go to a dry cleaner and you put in a shirt or a tie and it comes back stained or ripped, you may get a little miffed. But you’ll talk to them about it, and maybe they’ll promise to never do it again.”

“But the next time you bring in a shirt or a tie and it comes back stained or ripped, you don’t say anything.”

”You just walk away and you never do business with them again.”

“We can do that. The US government is just like you. It is a consumer of goods and services. It can say – we’re done with you. If you continue to hire this person to run this dry cleaner, we will never go to this dry cleaner again.”

“We are not calling for more fines. We want America’s stolen money to be recovered, sure. But we need to disenthrall ourselves from the notion that money alone will change corporate behavior.”

“We also need to disenthrall ourselves that there is a single silver bullet solution. We need to recover America’s stolen billions, but at the same time, we need to make the pain personal within the fraudster companies.”

“That means that people who design frauds, who wink at these frauds, who operationalize these frauds, need to be made unemployed and unemployable.”

“Right now that penalty is only vested upon the whistleblower, the truth teller, the person who stands up to power for the good of all.”

“Being unemployed and unemployable is not something we do to the big fraudsters. We do not send them to jail.”

“We are not going to exclude big companies like Pfizer and Schering Plough and GlaxoSmithKline and McDonnell Douglas.”

“They employ too many people and they’re too central to healthcare and defense in this nation.”

“But if a company is too big to fail, and that may be true, there is no executive that is too big to jail. And certainly there is not an executive too big not to make unemployed and unemployable.”

Chamber of Commerce Accused of Tax Fraud

by Eric Lichtblau - Saturday, September 11, 2010 by the New York Times

WASHINGTON - With a war chest rivaling that of the Republican Party itself, the U.S. Chamber of Commerce has emerged in the last year as perhaps the Obama administration's most-well-financed rival on signature policy debates like health care and financial regulation.

Critics on the left have long complained about the chamber's outsize influence. But now they are taking on the business association directly, charging in a complaint filed Friday with the Internal Revenue Service that it violated tax codes by laundering millions of dollars meant for charitable work from a group with ties to the insurance giant A.I.G.

The complaint was brought by a group called U.S. Chamber Watch, which was created four months ago - with the strong financial backing of labor unions - to scrutinize the Chamber of Commerce's growing influence and provide a counterbalance.

But chamber officials said they had complied with all tax laws and dismissed the complaint as a political ploy.

A chamber spokeswoman, Tita Freeman, said its opponents "are desperately looking for opportunities to undermine the chamber's efforts to promote free markets and economic growth."

The I.R.S. refused to comment on the complaint, citing the confidentiality of taxpayer records.

I.R.S. regulators have often been wary of wading into political grievances, particularly after evidence emerged during the Watergate scandal that the Nixon White House had sought to use the agency for political purposes.

But in recent years the agency has occasionally gotten involved in politically tinged controversies. In one high-profile case in 2004, Republican complaints led it to open an investigation into the N.A.A.C.P.'s tax-exempt status after the group's leader criticized President George W. Bush in a speech. The I.R.S. concluded two years later that the remarks did not violate the group's nonprofit restrictions on political activity.

At issue in the complaint against the Chamber of Commerce is whether the group mixed funds for charitable and noncharitable political purposes in violation of tax codes.

The chamber, often using expensive mass-market radio and TV spots, has weighed in on many major public policy debates in recent months, including the Obama administration's health care policy, business regulations, campaign finance laws and Internet rules, as well as job creation and the threat of tax hikes. On many issues, it has pushed for less government regulation in favor of free-market incentives.

Now the chamber's political arm is turning to the November elections, and it expects to spend $50 million or more to push pro-business candidates, usually Republicans. As part of a wave of new commercials broadcast this week, the chamber's California affiliate attacked Senator Barbara Boxer - a Democrat running for re-election against Carly Fiorina, the former chief executive of Hewlett-Packard - and accused Ms. Boxer of "destroying jobs" by voting against business.

Cyrus Mehri, a Washington lawyer who brought the I.R.S. complaint on behalf of U.S. Chamber Watch, said in an interview that the chamber's current political activities were, in effect, being underwritten with money intended for charitable work.

The complaint focuses on loans and grants totaling about $18 million that were made beginning in 2003 to a nonprofit affiliate, the National Chamber Foundation, by the Starr Foundation, a charity started by the founder of A.I.G. and now led by Maurice R. Greenberg, the insurer's former chairman.

Lawyers for Chamber Watch said their research, based largely on public tax filings, found that none of the principal on some $12 million in loans had been paid back and that the money appeared to have been given to the chamber's foundation for unrestricted use.

The lawyers said that the money, in violation of nonprofit restrictions, was ultimately funneled to the chamber itself and used to finance broader political causes, including support for legal tort reform to shield companies like A.I.G. from liability. Mr. Greenberg himself had worked to promote restrictions on lawsuits, the complaint notes.

"You have millions of dollars improperly going to the chamber," said Mr. Mehri, who drafted the complaint with Gail M. Harmon, a Washington lawyer specializing in tax law. "This is not a technical violation."

But Stan Harrell, chief financial officer for the Chamber of Commerce, said in an interview Friday that the chamber's lawyers and its accountants at Ernst & Young had reviewed the Starr Foundation funding and found that it complied with all relevant tax law.

"We've never had an issue, period," Mr. Harrell said. He said that Chamber Watch, which was created by a federation of five unions called Change to Win, was simply trying to create trouble for the chamber because of its opposing political views.

"That's democracy. From time to time, people make allegations," he said. "If their real interest was proper accounting, they'd be talking to us. This is political."

Mr. Harrell said that the funding from the Starr Foundation was listed in tax documents as a loan only in the most technical sense and that it was never intended to be paid back. Instead, he said, the money was restricted for long-term use on educational and research projects as part of the chamber's capital plan and was invested by the chamber to ensure the Starr Foundation a set rate of return.

"We wanted to make sure we guaranteed the investment return," he said. "Legally, that has to be represented as a loan. This was all done very scrupulously. If anything, we overdisclosed the transaction" in the group's federal tax returns, he said.