Mitt Romney’s Offshore Accounts (Encore)

While introducing Paul Ryan, whom he chose for his “ticket” for America’s presidential election in November, Mitt Romney denounced the pettiness of his opponent, Barack Obama, which he claimed was intended to distract voters from the real issue: America’s economic recovery. Romney cited the Democratic campaign’s latest attack on his past with Bain, the private equity firm he ran from 1984 to 1999. The attack by Obama’s campaign was indeed in very bad taste, but it is a typical example of the negative tone the campaign has begun to take, going beyond discussions of the candidates’ programs.

Behind these attacks are the “super PACs,” so-called “political action committees,” which are in reality fundraising organizations taking advantage of their constitutional right to “free speech” in order to launch the most defamatory attacks against the opponent. On both sides, the campaign ads financed by these PACs freely engage in the lowest attacks. In one case, Obama’s side insinuated that Mr. Romney had almost caused a woman’s death! In the ad, a man named Joe Soptic described having worked for a steel company when Bain bought it out and fired him. He lost his health insurance as a result, which had also covered his wife. Having contracted cancer, with no health insurance, she eventually succumbed to the disease. QED: Were it not for Mr. Romney, Mrs. Soptic would still be alive. The Republican team immediately denounced the ad as a lie, since the widower’s wife died seven years after her husband’s layoff.

May we each draw our own moral and political lessons from this drama and how it was used. But it would seem that the ex-fund manager is still haunted by his past. For even if political marketers consider the American voter to be more sensitive to emotional rather than rational arguments, we don’t need to rely on petty assertions to ask uncomfortable questions about the Republican candidate on the subject he is avoiding: the taxes he has paid since he left Bain Capital and the wealth he has stashed away in funds in the Cayman Islands and Bermuda.

The Tax Justice Network (TJN), an international network of economists and lawyers, has just released a report called “The Price of Offshore Revisited,” which estimates the amount of financial wealth deposited in tax havens by private equity funds — such as the one Mr. Romney managed and in which he still holds assets — as being between $21 trillion and $32 trillion.

According to the TNJ, which studied 139 countries using public information available form the World Bank, the IMF and the Bank for International Settlements, these funds represent about 10 million people. Put another way: .0014 percent of the population holds 10-15 percent of the world’s financial wealth in places that are so “heavenly” that they enable them to avoid paying taxes on that wealth. And Mitt Romney is one of these people. However, he doesn’t seem to belong to the elite group of 100,000 mega-super-rich who among them hold between a third and half of the deposited funds ($10 trillion).

James Henry, the business lawyer who authored TNJ’s report, was once chief economist with the consulting giant McKinsey & Company — where, by coincidence, Romney got his start. As the director of Sag Harbor Group, a business strategy consultancy, his clients have included such companies as Merrill Lynch, UBS Warburg, ABB Amro, AT&T and IBM. Previously, he served as a consultant for the Task Force on Caribbean Havens, an organization put in place by the FBI and Scotland Yard. And more than 50 governments have used his services to combat money laundering. Is it this experience that led him to specialize in the extensive use of certain offshore sites by private equity funds? Interviewed on television regarding Mitt Romney’s candidacy following the publication of his report, Mr. Henry said that it was unthinkable for the Republican candidate to refuse to reveal his financial relationship with offshore tax havens. Of course, he stated, there are “a lot of Mitt Romneys” in the U.S. who avoid paying taxes this way, but if he were elected, he would be “the first president in history who, you know, has really had offshore accounts like this.”

The economist lifted the veil on what motivates him. For him, the stakes go beyond the election. With the Republican candidate, the U.S. could find itself in “a situation where you have essentially representation without taxation.” For a number of Americans, the reference is clear, as Mr. Henry puts a twist on a famous historical precedent. “No taxation without representation” was the slogan of revolutionaries in the 1750s and 1760s who launched the revolt against British colonial power, refusing to pay taxes as long as they didn’t have any political representation.

Today, Mr. Henry warns, America is threatened by the opposite situation: The highest political office cannot be held by a man who, thanks to tax havens, evades taxes. Is it possible to elect a president who has made a career out of tax evasion? Avoiding this outcome is “vital to democracy,” he believes.