WASHINGTON — Mitt Romney’s involvement with anonymous accounts in offshore tax havens goes back to the 1984 founding of Bain Capital, which raised millions of dollars from wealthy foreigners through shell corporations in Panama, a nation notorious for tax avoidance schemes and money laundering, according to a report by The Los Angeles Times.
The Times story follows on Romney’s recent acknowledgement to the National Review that he established funds in the Cayman Islands for the explicit purpose ofhelping wealthy investors avoid paying American taxes. Bain currently operates at least 138 shell companies headquartered in the Cayman Islands, which, like Panama, has long been associated with both legal and illegal tax machinations and money laundering.
“The so-called offshore account in the Cayman Islands, for instance, is an account established by a U.S. firm to allow foreign investors to invest in U.S. enterprises and not be subject to taxes outside of their own jurisdiction,” Romney told National Review’s Robert Costa on Wednesday. “So in many instances, the investments in something of that nature are brought back into the United States. The world of finance is not as simple as some would have you believe. Sometimes a foreign entity is formed to allow foreign investors to invest in the United States, which may well be the case with the entities that Democrats are describing as foreign accounts.”
By taxes “outside of their own jurisdiction,” Romney was referring to taxes imposed by the U.S. government.
According to the Times, family members of some of Bain Capital’s first investors were tied to right-wing death squads in Latin America, while others were later convicted of various financial frauds unrelated to Bain.
These early Bain investors did not directly buy into Bain’s funds, however. Instead, they established shell corporations in Panama, and those shell companies invested in Bain. Panama has long had extreme bank secrecy laws and lax corporate registration standards, which help shield the identities of global investors for both legitimate and illegitimate purposes.
Today, establishing a corporation and bank account in Panama costs less than $2,000, and any money that investors stash in these entities is not taxed. Panama’s bank secrecy laws make it very difficult for the Internal Revenue Service to track transfers of funds to these Panamanian destinations from the United States. Small surprise, then, that Panama is home to nearly 400,000 offshore corporations, more than any other nation except Hong Kong.
“Even a U.S. investor pretending to be a foreign investor, by using a Bermuda or Cayman Islands shell entity, can avoid U.S. tax this way,” Wilkins said. “And we know that’s going on. We know that U.S. investors are evading taxes by pretending to be foreigners.”