Romney's Bain Capital under investigation for tax dodging

New York's attorney-general starts examining private equity firms

Bain Capital – the company formerly run by Republican presidential candidate Mitt Romney – is among a number of private equity firms being investigated for underpayment of taxes, according to a report in the Financial Times:

[New York's attorney-general, Democrat Eric] Schneiderman has issued subpoenas as part of an investigation into the “fee-waiver” strategy, in which executives invested management fees paid by investors back into one of the investment funds. Any profits on those fees would be taxed at the capital gains rate – a much lower tax rate than if it were treated as ordinary income. There is debate over whether the strategy is legal, aggressive or illegal. The strategy was risky and could have resulted in losses for the manager if the investment funds were not profitable.

The fact that Bain Capital is being investigated has led to some – including one "private equity executive" quoted by the FT – to brand the move as a political one, but other equity groups are being investigated as well, including KKR (part owners of Alliance Boots, amongst others) and Apollo Group (an education-focused firm which owns one of Britain's two private universities, BPP University College).

Bain is being roped into the investigation – run by the state's Taxpayer Protection Bureau – due to the hundreds of pages of the company's internal financial documents which were leaked by Gawker, which reveals that the Bain partners save more than $200m in federal income taxes and more than $20m in Medicare taxes.

The New York Times reports that there is widespread belief that the practice is not only legal, but ethically justifiable as well:

Tax lawyers have justified the arrangements by arguing that converting the management fees into carried interest, which could lose some or all of its value if a fund does poorly, entitles the managers to the lower capital gains rate, which is intended to help mitigate the risks taken by investors.

“They’re risking their management fee — they’re giving up the right to that management fee in any and all events,” said Jack S. Levin, a finance lawyer whose firm has represented Bain on some matters. Mr. Levin said he did not consider the practice risky or even aggressive.

“The I.R.S. has known that private equity funds have been doing this for 20 years,” he said.

If the move is politically motivated, it's likely to prove rather successful. Romney's tax status has been under examination since the day he made his first presidential bid, and he has been extremely unwilling to reveal anything but the barest minimum of information about it. The most compelling theory as to why is the suggestion that, in 2009, he may have taken advantage of an IRS amnesty into illegal Swiss bank accounts. And the status of Romney at Bain is similarly murky.

All of which is to say that the candidate has the whiff of financial impropriety floating around him most of the time, and it doesn't take much from, say, a Democratic attorney-general to make more bad news for him.

Obama and – Bane? Bain? Romney. Obama and Romney.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

PRIVATE COLLECTION/PRISMATIC PICTURES/BRIDGEMAN IMAGES
Show Hide image

Why can you change gender but not race?

Marina Benjamin on the curious logic of modern identity politics. 

At my daughter’s state girls’ school, many of the students see themselves as gender fluid. Some feel more like boys than girls. Others feel like boys on some days and girls on others. A lot of the girls are out, with many identifying as gay and quite a few as bi- or pansexual. No doubt, in time, a small minority of them will migrate across the gender spectrum entirely, crossing permanently from one side to the other.

Such freewheeling thinking about gender and sexual identity was unimaginable until just a few years ago, yet in this brave new world of gender mutability, most teens are as fluent as they are fluid. It is a testimony to the speed and success with which gender­queer and trans activists have challenged societal norms around masculinity and femininity, bringing about the kind of meltdown in gender roles that feminism was unable to achieve despite 50 years of trying.

This is a world in which, controversially, subjective feeling reigns supreme. If you feel male and wish to be known as “he”, then that is your prerogative, regardless of your sex. As Frank Browning points out in The Fate of Gender, US colleges (those ever-sensitive barometers of social change) now routinely ask students for their preferred personal pronoun. They provide “gender-neutral” toilets and free counselling for transsexual students. One elite college recently cancelled a production of The Vagina Monologues after some students protested that “not all women have vaginas”.

Browning’s interest is in the way “gender radicals” have “[upended] the routines, rituals and rules of gender”, leading to radical transformations in how we live. Like a disaster tourist travelling through an earthquake zone, he finds his eye drawn to “upheavals”: to kindergarten ­teachers in Oslo, dedicated to eradicating what they see as gendered behaviour in the very young children they teach; to same-sex couples negotiating new ways of parenting post-­surrogacy or adoption; to a voyeuristic drive-by past Naples’s femminielli – street-walkers famed “for their beautiful legs, their sumptuous breasts and their large penises”; to discussing masturbation with a middle-aged Shanghai sociologist who offers classes in self-stimulation to empower women.

The politics of the transgender movement skids in and out of the narrative but never moves centre-stage. Browning is more interested in gender equality at work, or how the Catholic Church is and isn’t adapting to gay marriage.

Browning spent many years working as a radio journalist and his book resembles nothing so much as a mid-morning magazine programme. There’s a bit of chat, a bit of travel, a sprinkling of interviews with academic experts and some sharp insights that get somewhat lost in the babble. The result is a loose collection of gender-busting exemplifications, rather than a tightly argued thesis. You could reorder half the chapters in the book and still enjoy the same mildly entertaining reading experience.

Some of the most fascinating subjects that Browning touches on remain underexamined. He notes, for example, that at least one in every 1,500 (some suggest the figure is more like one in 150) children born in the US and Australia is intersex: that is, they possess genitalia and a chromosomal identity that admit of ambiguity. Until very recently, doctors in the US would perform sex reassignment surgery on such newborns, at the risk of leaving them infertile and, just as dreadful, in bodies that they would often grow up believing to be wrongly sexed.

Browning doesn’t interview anyone who has had such an experience, or mine literary works for perspective, or link the intersex phenomenon into broader identity politics, or discuss the painful subterfuges that hermaphrodites such as the late Olympic track and field star Stella Walsh resorted to in order to “pass” – in her case, as female. Instead, he makes a rather tenuous link between the horrors of institutional surgical reassignment and tribal female genital mutilation. Cutting is cutting, of course, and always reprehensible, but readers never get to grips with what it means to be intersex.

It’s a shame, because, as Rogers Brubaker argues in his pacy and stimulating extended essay Trans, it is in the in-betweenness that our binaries break down, whether we are talking about nature v nurture (where discoveries in epigenetics are busy dissolving firm oppositions); male and female (those tired categories with which trans politics is playing havoc); or, most interestingly, black v white. Following social scientists such as Alondra Nelson of Columbia University, Brubaker takes up the case that race has little basis in genetics: it is an epiphenomenon, or, to use the lingua franca of anti-essentialists, a “social construct”.

Brubaker’s book was inspired by the media’s synchronous pairing of Bruce Jenner’s rebirth as Caitlyn and Rachel Dolezal’s outing as white in 2015. Dolezal had lived as a black woman for years, braiding her hair and darkening her skin. She identified as black and became head of her local chapter of the National Association for the Advancement of Colored People. Yet in most quarters her claim to be black met with angry ridicule. Her reception was in pointed contrast to Jenner’s, whose debut as Caitlyn was heralded by a sexy Vanity Fair cover and a reality TV series. If public legitimation could be ­extended to Jenner, why not to Dolezal?

Dolezal’s teacher memorably called her “a white woman with a black soul”, but this was not enough, Brubaker says, to counter the flurry of negative commentary about “passing, choice, authenticity, privilege and appropriation” – which are precisely the themes that animate his lively book. He makes a persuasive case that the trans movement belongs to “a much broader moment of cultural flux, mixture and interpenetration”, of a piece with the “burgeoning discussions of hybridity, syncretism, creolisation and transnationalism in the last quarter-century”. Simply put, Trans illus­trates a sharpened tension between the language of choice and that of givenness.

The nub of Trans’s argument is that we are culturally primed to be more receptive to transgender journeys, whether male to female or vice versa, because these are framed as identity or even civil rights issues, whereas racial identities are still categorical. In public discourse today, there is no such thing as a racial spectrum: you can’t be a bit black or a bit white. You have to choose and you certainly can’t cross over to the other side. As Brubaker sums it up: “Dolezal was living a lie; Jenner was being true to her innermost self.” Dolezal was guilty of “cultural theft” (in contrast to Michael Jackson, who was deemed a race traitor, she was a “race ­faker”); Jenner was fighting gender oppression.

I remember getting flamed on Twitter when I asked why the hell Dolezal couldn’t be considered black. The hot-button term, it turned out, was “transracial”. This expression emerged in adoption circles, where activists concerned that adoption “could lead to changes in racial identity – in particular to the loss of one’s authentic identity for want of social support for it”, sought to strengthen racial categories. I also received a dozen tweets telling me that Dolezal hadn’t suffered enough to be black – a line likewise pushed by some feminists critical of the territorial claims made by transgender women.

With respect to Jenner, I was sympathetic to views expressed with wicked humour by Germaine Greer, but more acceptably by ­Lionel Shriver, who, in response to Jenner’s claim to have a “female brain”, railed against the neo-essentialism of the trans movement for relying on and reinscribing outmoded gender stereotypes. Pointedly, Brubaker also notes “the remarkable power of the binary gender system to adapt to and reabsorb transgender people”. Better to make a show of taking in migrants than to acknowledge that your borders are fundamentally weak.

With its push-me-pull-you politics, gender fluidity understandably creates controversy. The irony is that, in theory at least, transracialism ought less to do so. Not only is there no genetic basis for racial difference, but the boom in genetic ancestry testing, which tests autosomal DNA (inherited from both parents, and accounting for the full, multi-stranded range of one’s genetic ancestry), often reveals complex mixtures of biogeographic lineage, thus leaving considerable room for what Alondra Nelson calls “affiliative self-fashioning”.

Genetic ancestry testing gives credence to the likes of Dolezal, who might wish to see herself as environmentally, psychologically, culturally, emotionally and intellectually black, even if the “technologies of migration” which support transgender journeys – institutionalised in legal, medical, social and activist bodies – are not yet in place for transracial journeys such as hers.

However mind-bending such ­determined migrations might seem, the brouhaha over race and gender shows that we are primed to understand categories of identity in ways that are legibly embodied. In this, we are not so different from our intellectual ancestors the ancient Greeks, who, as Adrian Thatcher reminds us in Redeeming Gender, championed a “one sex” theory on the basis of bodily homologies between men and women that saw female genitalia as mirroring male genitalia. Only inside out.

Marina Benjamin is the author of “The Middlepause: on Turning Fifty” (Scribe)

This article first appeared in the 22 September 2016 issue of the New Statesman, The New Times