Jackson Free Press

In its Sunday edition, The New York Times is reporting that New York Attorney General Eric Schneiderman is investigating several private equity firms, including Bain Capital for possibly abusing a tax strategy "in order to slice hundreds of millions of dollars from their tax bills."

The attorney general, Eric T. Schneiderman, has in recent weeks subpoenaed more than a dozen firms seeking documents that would reveal whether they converted certain management fees collected from their investors into fund investments, which are taxed at a far lower rate than ordinary income.

Among the firms to receive subpoenas are Kohlberg Kravis Roberts & Company, TPG Capital, Sun Capital Partners, Apollo Global Management, Silver Lake Partners and Bain Capital, which was founded by Mitt Romney, the Republican nominee for president. Representatives for the firms declined to comment on the inquiry.

Mr. Schneiderman’s investigation will intensify scrutiny of an industry already bruised by the campaign season, as President Obama and the Democrats have sought to depict Mr. Romney through his long career in private equity as a businessman who dismantled companies and laid off workers while amassing a personal fortune estimated at $250 million.

The subpoenas, by a Democrat, went out before a huge document leak recently that raised questions about Bain Capital's practices:

The tax strategy — which is viewed as perfectly legal by some tax experts, aggressive by others and potentially illegal by some — came to light last month when hundreds of pages of Bain’s internal financial documents were made available online. The financial statements show that at least $1 billion in accumulated fees that otherwise would have been taxed as ordinary income for Bain executives had been converted into investments producing capital gains, which are subject to a federal tax of 15 percent, versus a top rate of 35 percent for ordinary income. That means the Bain partners saved more than $200 million in federal income taxes and more than $20 million in Medicare taxes.

The subpoenas, which executives said were issued in July, predated the leak of the Bain documents by several weeks and do not appear to be connected with them. Mr. Schneiderman, who is also co-chairman of a mortgage fraud task force appointed by Mr. Obama, has made cracking down on large-scale tax evasion a priority of his first term.

As a retired partner, Mr. Romney continues to receive profits from Bain Capital and has had investments in some of the funds that documents show used the tax strategy.

Be sure to read the entire article for a succinct explanation about the fees/interest practices of many financial firms. This ends the piece:

The leaked documents show that Bain has in recent years waived management fees in at least eight private equity and other funds, including one formed as early as January 2002. The documents stated that Bain executives had the right to decide either annually or each quarter whether to waive some or all of their management fees; they also had …

Yesterday was a very good day for the JFP staff, and especially our writers and designers.

During this 10th anniversary of the Bush invasion of Iraq, I remember well the week that the war started. The JFP was only a few months old and still making a name for ourselves. When we realized that Bush was actualy pushing ahead with the threatened Iraq campaign, we postponed our planned cover story (an interview with then JPD Chief Robert Moore) and published this "myths" of the Iraq War instead. (The other story ran the next week.) At the time, the war was popular, and supporters were lying through their teeth as we now know, even trying to convince Americans that attacking Iraq was, somehow, a way to go after Saddam Hussein (presumably because they had Islam in common).

This was one of those decisions we didn't have to make. We knew it wouldn't be a popular move to publish a cover story and a cover that was clearly against Bush's war, but we started this newspaper to tell the truth, no matter who it perturbs. So in one of our early "do the right thing and wait" moves (which publisher Todd Stauffer now calls stories like these), we put the issue out and waited for the other shoe to fall.

It didn't. The issue after this one had our biggest ad sales as of that time, and we only lost three distribution spots (one of which returned, and the other two are out of business).

The truth isn't always popular, but it is the Fourth Estate's responsibility to tell it. I'm fond of saying that my editorial decisions over the year have kept my conscience clear. This one was no exception.

May all of the soldiers, and civilians, who lost their lives in the Iraq War rest in peace. That includes my cousin, Josh Ladd, who died in Iraq believing he was fighting for a just cause.