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NY's Attorney General is probing whether more than a dozen private equity firms abused a tax avoidance strategy.
The New York Attorney General's office is launching an investigation into the tax strategies of Bain Capital, the private equity firm founded by Republican presidential nominee Mitt Romney, an official familiar with the probe told the Associated Press on Sunday.
Attorney General Eric Schneiderman issued subpoenas to more than a dozen of the nation's top private equity firms to investigate whether they abused a tax strategy to cut hundreds of millions of dollars from their tax bills, reports the New York Times.
The subpoenas were issued in July and do not appear to be related to the hundreds of pages of leaked financial documents from Bain Capital that were posted online.
The leaked reports indicate at least $1 billion in executives’ management fees were converted to investments, which are taxed at 15 percent, rather than the 35 percent rate for ordinary income, reports the Boston Globe.
The move would have saved Bain partners more than $200 million in federal income taxes and more than $20 million in Medicare taxes, according to the NY Times.
Bloomberg News reports that the Obama campaign and its allies have aired more than 1,000 TV ads that are critical of Romney’s stewardship of the private-equity firm.
The pro-Obama Super-PAC, Priorities USA Action, ran an ad featuring an ex-employee of GS Steel in Kansas City, formerly owned by Bain Capital.
“This was a booming place,” the former employee, Donnie Box, says in the ad, “and Mitt Romney and Bain Capital turned it into a junkyard, just making money and leaving.”
Romney continues to fire back saying his time at Bain was used to create jobs and stimulate the private sector.
The investigation does not focus on the time that Romney ran the company, though he continues to collect benefits as a retired partner.
“Investing fee income is a common, accepted and totally legal practice,” R. Bradford Malt, a lawyer for Mr. Romney who manages his family’s investments and trusts, told the NY Times.
“However, Governor Romney’s retirement agreement did not give the blind trust or him the right to do this, and I can confirm that neither he nor the trust has ever done this, whether before or after he retired from Bain Capital.”