Mitt Romney is not only one of the wealthiest presidential candidates in history, his finances are by far the most opaque. In April, the Washington Post reported that Romney “has taken advantage of an obscure exception in federal ethics laws to avoid disclosing the nature and extent of his holdings.”
By offering a limited description of his assets, Romney has made it difficult to know precisely where his money is invested, whether it is offshore or in controversial companies, or whether those holdings could affect his policies or present any conflicts of interest.
This is no accident. From what we do know, Romney has – or has recently had – some highly controversial investments in his extensive portfolio.
The New York Times reported that Romney was invested in China's state-owned gas company and a Chinese bank, even as he was calling out China's “unfair” trading practices on the campaign trail.
His trust “also invested in derivative securities linked to the Japanese stock market and to an index that includes stocks in every major country except the United States. It invested in a derivative that would profit if the dollar fell against a group of foreign currencies,” according to the Times.
While he calls Russia our “number one geostrategic foe,” he also invested in the politically influential Russian state oil company, Gazprom. Gazprom is one of Russia's "national champion" companies, which are expected not only to turn a profit but also to advance the country's national interests. It has long been seen as Vladimir Putin's "premier instrument of power," according to Foreign Affairs.
Andrew Kaczynski at Buzzfeed reported that while “Romney has often used Chinese piracy and intellectual property theft as an issue while attacking President Obama on China,” he had invested in “Youku, a Chinese version of YouTube” that “became a haven for downloading illegal American content.” He also invested in a Bain fund with a major stake in GOME, a Chinese electronics company that, according to the Boston Globe, “is being sued by Microsoft Corp. for selling computers with pirated versions of its Windows and Office software.”
A Bain Capital fund in which Romney was invested also stood to gain from Chinese political suppression. According to the New York Times, Bain “purchased the video surveillance division of a Chinese company that claims to be the largest supplier to the government’s Safe Cities program, a highly advanced monitoring system that allows the authorities to watch over university campuses, hospitals, mosques and movie theaters from centralized command posts.” The firm's “previous projects have included an emergency command center in Tibet that 'provides a solid foundation for the maintenance of social stability and the protection of people’s peaceful life,'” according to the company's website.
These investments are contradictory to many of Romney's stated values and should be politically damaging – along with the shadowy network of “investment entities” in offshore tax havens – but they have had very limited impact on the race. That's because the campaign has answered each and every question about these shady deals with the same response: that Mitt and Ann Romney's fortunes are in independently administered blind trusts, and they have no clue whatsoever where their loot is invested, much less any influence over how their portfolios are managed. It's an answer that, by and large, the political press has accepted.
But here is the problem: Mitt and Ann Romney do not have blind trusts, and this fact is not in dispute. It was reported last year by the very same mainstream political media that now blithely accepts the Romney-Ryan campaign's claims that the candidate is not responsible for any controversies that might arise from his holdings.
What the Romneys have might best be called visually impaired trusts – like trusts with cataracts.
Here are five reasons why reporters who accept the Romney campaign's claim that the candidate is truly insulated from his investments are guilty of media malpractice.
1. Visually Impaired Trust
Last December, Matthew Mosk of ABC News reported that the Romneys' “blind” trusts did not meet the minimal standards of independence associated with a blind trust. The problem is that the Romneys' trusts are administered by Bradford Malt, Mitt's personal attorney and “long-time associate.” Mosk reports that, “In addition to serving as the trustee for Romney's charitable foundation, Malt's law firm has represented Romney's interests in legal disputes, and Malt served as the primary outside counsel to Romney's company, Bain Capital.”
That's not a terribly independent trustee. Robert Kelner, a Republican election lawyer in Washington, D.C., told Mosk, "The Office of Government Ethics requires that a financial institution be appointed as the trustee and that the financial institution not be controlled by or have done business with the candidate... It would preclude you from hiring your favorite lawyer as the trustee."
Writing in Vanity Fair, Nicholas Shaxson noted that Malt is listed as a director and president of one of Romney's shadowy offshore investment vehicles:
There is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney’s personal lawyer. Romney failed to list this entity on several financial disclosures ...
2. Romney Campaign Says It's Not a Blind Trust
Here is the campaign's response to Mosk's report:
In an email to ABC News, Romney's campaign acknowledged the arrangement does not live up to the strict standards for blind trusts established by the federal Office of Government Ethics. But the campaign was also quick to note that those rules do not apply to candidates for office -- they apply only to federal office holders.
"The blind trust does NOT meet the exacting 'federal blind trust' standard," a campaign official wrote in response to questions from ABC News. "We have never called it a federal blind trust. If Governor Romney is elected president, that will change."
The campaign insists that the trusts do meet the state of Massachusetts' standards for independence. The only problem is that Massachusetts doesn't have its own standards, according to Mosk.
We may live in an era of polarized information, but when one camp acknowledges that their opponent's claim is accurate, that should be definitive.
3. Romney Set Up Visually Impaired Trust to Dodge Conflict of Interest Charges
According to an August report in the Telegraph, when Romney was governor of Massachusetts, he may have violated state ethics laws when his administration maintained a “lucrative” contract with a company in which he had a financial stake. According to Telegraph reporter Jon Swaine, “Massachusetts law requires that all state employees divest themselves of financial interests in private sector contracts with state agencies. At the time, failure to do so could have resulted in a $2,000 ... fine or a 2.5-year prison sentence.” He added that “the potential punishments are now stronger.”
The company, Imagitas, had been co-founded by a former executive at Bain and Co., with $5 million in backing from Bain Capital. Paul Ryan's brother, Toby, had also been a senior manager at Bain and Co., working in the same building as Romney, before leaving to become a vice president of Imagitas.
Romney didn't award the contract, but according to the Telegraph, “New state employees were obliged to prevent conflicts of interest with existing contracts. The following year, [Romney] began declaring that his holdings were in a so-called 'blind trust' controlled by his lawyer.”
But, again, experts said it wasn't blind enough:
Victor Fleischer, a law professor at the University of Colorado specializing in private equity, said it was “possible but unlikely” that Mr Romney could have completely prevented himself from benefiting from Imagitas.
4. Not All of His Controversial Investments Are in the Visually Impaired Trust
During the GOP primary, Newt Gingrich attacked Romney for holding real estate investments that he said helped crash the economy. Romney shot back: “First of all, my investments are not made by me. My investments for the last 10 years have been in a blind trust, managed by a trustee. Secondly, the investments that they made, we learned about this, as we made our financial disclosure, had been in mutual funds and bonds. I don't own stock in either. There are bonds that the investor has held through mutual funds.”
The argument went unchallenged, but a factcheck by the National Journal provides a case study in why reporters shouldn't blithely accept these kinds of claims:
Yet, according to Romney's financial disclosure forms, not all of his mutual funds were part of a blind trust.The Boston Globe reported in September that Romney owned between $250,001 and $500,000 in a mutual fund called the Government Obligation Fund that invests in debt notes of various government entities, including mortgage giants Fannie Mae and Freddie Mac, and he made between $15,001 and $50,000 in interest from those investments.
Since those assets were considered a charitable trust rather than a blind trust, Romney could have reviewed them himself.
5. Crony Trust
Cleta Mitchell, a Washington election lawyer, told ABC that a true blind trust shouldn't serve any goal but making money. "What you're saying to the government is, I don't have any control over this, my spouse doesn't, and neither do my dependent children ... The filer says, 'I don't know what's in it. I just get income from it.'"
But it appears that the Romneys' blind trusts have invested in strategic ways -- to help friends and family. Nicholas Shaxson writes, “It’s certainly true that under Malt the trusts don’t appear to be as blind as they might be: for instance, in 2010 the Romneys invested $10 million in the start-up of the Solamere Founders Fund, co-founded by their eldest son, Tagg, and Spencer Zwick, Romney’s onetime top campaign fund-raiser; Solamere is now in the Ann Romney blind trust.”
As Matthew Mosk notes, “it would be hard to explain how Romney's independent investment fund would orchestrate ... [an] investment with his son's firm without violating the terms of a standard blind trust -- terms that typically prohibit communication with family members.”
Romney Must Be Laughing
Romney spokeswoman Andrea Saul said that the candidate's limited disclosure “completely and accurately describes Governor Romney’s assets as required by the law.” But according to the Washington Post, “several outside experts across the political spectrum ... say Romney’s disclosure is the most opaque they have encountered, with some suggesting the filing effectively defeats the spirit of disclosure requirements.”
And yet, despite that fact -- and that the family's blind trusts don't appear to meet the necessary standard of independence -- political reporters, in the main, accept at face value the campaign's claims that he's fully insulated from his investments and that there can therefore be no conflicts of interest surrounding them.
Romney must be amused by their gullibility. During his 1994 senate race against Ted Kennedy -- who also claimed that he had no knowledge of how funds in his blind trust were invested -- Romney called him out for it, saying, “The blind trust is an age-old ruse.”