New questions about Mitt Romney’s overseas investments have dogged the GOP presidential contender all week. Many arose from a report in the latest issue of Vanity Fair. It describes how the day before Romney was sworn in as governor of Massachusetts, he put a corporation he’d set up in Bermuda in a blind trust held by his wife, Ann. Romney insists he did nothing wrong.
That investment account, called Sankaty, was established 15 years ago. Romney first revealed his ties to this offshore entity in the 2010 tax return he released in January. Earlier this week on Fox News Radio, he defended his actions.
“I have followed the law. I have paid my taxes as due,” he said. “I have also disclosed through all of the requirements of the government every asset which I own, fairly and honestly.”
So what was the advantage of setting up Sankaty High Yield Assets Investors Ltd.? The American lawyer who set up Romney’s corporation in Bermuda declined to comment for this report. So did Romney’s longtime associate, Brad Malt, who administers the trust where it’s now held.
Bermuda may be tiny, but it’s got loads of lore. Two centuries ago, the British hatched plans here for the War of 1812. These days, Bermuda attracts cruise ships as well as foreign money.
“If it’s registered here, it’s registered here for a reason … maybe to the benefit of the shareholders of that company,” policeman Andy Morgan says of Romney’s investment.
For a $20 fee, you can check out the documents that established Romney’s own corporation at Bermuda’s Registrar of Companies. The folder is slim — just 10 pages.
Romney’s name does not appear anywhere. The entity he created in October 1997 is described as a holding company initially authorized to have 12,000 shares worth $1 each. Within three years, seven other Sankaty investment funds were also established in Bermuda.
U.S. records show at least $25 million worth of stock — most of it for Domino’s Pizza — was sold from Romney’s holding company while he was governor of Massachusetts.
Here in Bermuda, government officials seem extremely reluctant to discuss Romney’s investment.
“Bermuda doesn’t want to get too drawn into — we don’t want to get drawn in at all,” says Nea Talbot, public affairs officer at the Department of Communication and Information.
Bermuda’s Bad Rep
The law firm that has the Bermuda address for Romney’s holding company doesn’t want to get involved either. It’s located in a gleaming, five-story building known as Thistle House in the heart of Hamilton, Bermuda’s bustling capital.
In the marble-floored lobby of this building that appears to be home in name alone to Romney’s Bermuda account, corporate finance lawyer Steven Rees Davis is getting a coffee. He won’t say which firm he works for because he says his opinions are his own, but he says he’s annoyed that Romney’s business in Bermuda is now making waves.
“It’s the American politicians that make it out to their public that … anybody who does business with Bermuda is like a dirty old man dealing with pirates,” he says.
As Rees Davis notes, U.S. law actually lets Americans lower their tax bills by parking investments in Bermuda, which has no income tax.
“Why would you operate in a certain manner and pay a certain amount of tax when legally you could just change that and do something differently and pay less tax?” he says. “So why would you buy bottles of Goslings Rum duty-free when you leave the country when you could go buy it at front street and pay full duty for it? … Well, because we get it duty-free. Everybody does it.”
Experts say Romney appears to have set up a retirement account in Bermuda with hedge fund-type investments that would otherwise be taxed in the U.S. James Hines is an international tax expert at the University of Michigan.
“We don’t have full knowledge of Gov. Romney’s tax situation, so we can’t say for sure, but yeah, it looks like … you can call it tax avoidance,” he says. “You can call it facilitating investments that otherwise wouldn’t be … profitable.”
Anyone else who had enough money to buy a company, Hines says, could do it too.