Obama's investments and Caymans trust

[Will E Worm]

Says Barack Obama has pension investments that include Chinese firms, and "investments through a Caymans trust."

Romney says Obama also has investments in Chinese companies and through a Cayman Islands trust

One of the many tense moments in the second presidential debate turned on a new topic in the race: President Barack Obama’s pension account.

Here’s how it came up: Early in the face-off, Obama scoffed at Mitt Romney’s pledge to crack down on unfair trading practices by China, saying Romney is currently invested in companies "that are building surveillance equipment for China to spy on its own folks."

Romney later explained that, yes, he understands that his blind trust has invested in foreign firms, including companies in China. Then he confronted Obama.

Romney: "Mr. President, have you looked at your pension? Have you looked at your pension?"

Obama: "You know, I don’t look at my pension. It’s not as big as yours so it doesn’t take as long. I don’t check it that often."

Romney: "Let me give you some advice. Look at your pension. You also have investments in Chinese companies. You also have investments outside the United States. You also have investments through a Caymans trust."

The exchange was a role reversal: An Obama campaign ad in July 2012 claimed Romney had millions in the Cayman Islands, among other "tax havens." We rated that True, noting that nothing was illegal or improper about the investments through his blind trust.

We also reviewed an Obama claim from an ad in September 2012 that said, "Even today part of Romney’s fortune is invested in China."

We rated that Mostly True, noting that Romney had money invested in funds that owned shares in two Chinese firms, but that Obama’s claim suggested Romney had more to do with the investment decision than is the case. (We further noted that the New York Times reported that one of the funds had invested in a Chinese video surveillance company that supplies cameras to police for watching public spaces.)

Okay, so what about Romney’s debate description of Obama’s pension investments?

The Romney campaign told us it was referring to investments made by the Illinois State Board of Investment on behalf of the state employees’ retirement system there.

Obama, you may recall, was an Illinois state senator from 1997 to 2004 before winning election to the U.S. Senate. He is a participant in the General Assembly Retirement System in Illinois, said William Atwood, executive director of the Board of Investment, who confirmed that for us.

The Romney campaign pointed us to that pension fund’s holding in an entity that is part of Advent International. Advent has described itself as "one of the world’s most global private equity firms" and has buyout offices in 16 countries.

Atwood confirmed that the pension fund has invested $30 million in one of Advent’s limited partnerships, Advent International GPE VI-A. That partnership was organized in the Cayman Islands, Atwood said. Public filings back that up.

What about Romney’s broader claims, about Obama’s foreign investments?

The Illinois pension fund also has numerous foreign investments, including in Chinese companies, as part of its diversified portfolio, Atwood said.

The Obama campaign has connected Romney’s overseas investments in the Caymans to methods for avoiding U.S. taxes. But there’s no evidence Obama receives any tax advantage from his overseas pension investments.

David S. Miller, a tax attorney with Cadwalader, Wickersham & Taft LLP in New York, reviewed public filings by Advent and said it was highly unlikely Obama got any tax advantage from the pension fund’s investment in the Advent partnership.

Atwood went further, saying: "There is no tax advantage to any (pension) plan participant" from that investment.

Miller offered this analysis: "There is no evidence that the fund helped the Illinois pension fund avoid any taxes – in this respect, the Illinois pension fund would have been treated identically had the fund been organized as a domestic (U.S.) partnership. However, the fact that it was organized as a Cayman partnership might have allowed some taxable investors to defer some tax on foreign (non-U.S.) portfolio companies purchased by the Fund."

Atwood emphasized that neither Obama nor any other participant in the retirement system has anything to do with selecting investments for the fund.

Miller concurred with that, and added that Romney legitimately can claim that he has similar distance from foreign investments made through his individual retirement accounts.

It’s "entirely accurate" for Romney to say that Obama’s pension plan has investments in foreign companies and through a Caymans trust, Miller said. Technically, it’s a Cayman-based partnership, but that’s a trivial difference, he added.

Our rating

Romney told Obama: "You also have investments in Chinese companies. You also have investments outside the United States. You also have investments through a Caymans trust."

It’s an accurate set of statements when you consider investments made by managers of the Illinois pension fund in which Obama has an account.

As we noted in reviewing previous claims about Romney’s investments in China, the investments involved are indirect and -- as far as anybody has said -- made without the knowledge of the account holder.

With that clarification, we rate Romney’s statement Mostly True.

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[Will E Worm]

Pension Envy: Who Has More—Obama or Romney?

When it comes to the presidential candidates' pensions, size matters in more ways than one.

Retirement packages sparked one of a series of confrontations during the Tuesday debate between President Obama and Republican challenger Mitt Romney.

The exchange took place during a discussion of China policy, with the president accusing the former Massachusetts governor of hypocrisy when it came to tough talk against the nation that boasts the world's second-largest economy.

Romney conceded that a blind trust that manages his money does have investments in China, but countered that he wasn't alone.

"Mr. President, have you looked at your pension? Have you looked at your pension? Mr. President, have you looked at your pension?" Romney challenged.

In one of the debate's lighter moments, Obama countered, "I don't look at my pension. It's not as big as yours so it doesn't take as long. I don't check it that often."

The remarks sparked some audience laughter — and yet another Romney rebuke.

"Let me give you some advice: Look at your pension. You also have investments in Chinese companies, you also have investments outside the United States," he said.

On that score, Romney is likely correct.

Many public pension funds have a diversified foreign investment portfolio that includes China. For instance, the California Public Employees Retirement System, or CalPERS, recently announced a $530 million investment in two real estate funds that target China.

Most other public pension funds have directed increasing allocations to emerging markets and alternative investment classes to generate returns and bridge exploding funding gaps.

As far as size?

From the standpoint of a public pension, Obama is well-heeled.

As president, he will receive $191,300 annually for life — win or lose in next month's election — and receives a travel allotment as well as mailing privileges. Should Obama lose, his presidential pension kicks in immediately after leaving office.

Given that the president enjoys a normal life span, the pension allotment would be worth upwards of $6 million.

The federal budget spends about $3 million annually for the four living ex-presidents. Obama also will get Secret Service protection.

In addition, Obama may be due a nice pension for the eight years he served in the Illinois Legislature as a state senator.

Illinois is infamous for its lavish pension plan for former lawmakers. A Freedom of Information Act request for Obama's pension amount submitted Wednesday to the General Assembly Retirement System of Illinois was not immediately answered, nor was a call to the Obama campaign.

But what about Romney?

It's extensively documented that Romney is, well, a rich guy. He earned untold millions —though famously circumspect about releasing tax returns — while leading private equity giant Bain Capital and has a substantial retirement plan.

His Individual Retirement Account could be worth in the neighborhood of $87 million, as documented in an extensive report from the Washington Post.

But as for a strictly public pension? Zip, zero.

Romney only served one term as governor of the Bay State and did not take a salary, so he is eligible for nothing.

So while Romney appears headed for a happier retirement financially, he'll be footing his own bill — unless, of course, he wins next month. In that case, his nest egg will be even that much bigger than Obama's.

UPDATE: PolitiFact, the fact-checking arm of the Milwaukee Journal Sentinel, has confirmed that Obama does participate in the Illinois pension fund, which was organized in the Cayman Islands and has interests in China.

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[Mayhem]

Thanx Will. I'm left wondering if you read the article before posting it. But.....thanx. :hatsoff:

 

[Rey C.]

Every person on this board who has a 401K, an IRA full of ETF's or mutual funds or a pension may have investments in various places and different types of businesses. You have little to no control over the individual companies, equities or debt that those plans invest in. What Romney is conveniently leaving out here is that although his retirement investments may now be in a blind trust, over which he is not supposed to have any direction, that has not always been the case. While at Bain, Mitt had a SEP-IRA (Simplified Employee Pension Individual Retirement Arrangement). This, not the current blind trust, is the vehicle that he used to amass most of his current wealth, which is shielded from most taxes. And this vehicle allowed him (and his partners at Bain) to choose and direct those investments, whether in China, the Cayman Islands or any other place.

As I mentioned in a previous post, the way that Romney used the SEP-IRA was very slick. If I had the means, I would do it myself. But one would not compare the benefits of a (super) SEP to a public pension, 401K or even a regular (self-directed) IRA. That's truly an apples and bowling balls comparison. So the way that Romney is trying to compare his retirement plan to a public pension plan suggests that he is ashamed of his own plan for some reason.

The Secret Behind Romney’s Magical IRA

Bloomberg Financial News:

The most mysterious of the unexplained mysteries about Mitt Romney’s considerable wealth is how he was able to amass between $21 million and $102 million in his individual retirement account during the 15 years he was at Bain Capital LLC.

How did he do it, given the relatively small amounts that the law permits to be contributed to such a plan on an annual basis? Romney has not explained this conundrum, and seeing as he wants to become president, he would be wise to start talking -- if for no other reason than there might be many Americans who would like to emulate what he did.

During Romney’s tenure at Bain Capital -- from 1984 to 1999, although a recent Boston Globe article uncovered Romney having a role at Bain until 2002 -- the firm used a so-called SEP-IRA, which is like a 401(k) retirement plan but is funded entirely by the employer and has a much higher maximum contribution: about $30,000 annually during the period Romney was at Bain. Assuming Romney maxed out these tax-deferred contributions, he would have invested roughly $450,000 in his SEP-IRA during his years at Bain.

Hey, $450K ---> $102 million (or whatever) ain't bad, is it? But he didn't do that by investing in Fidelity mutual funds. And what he did would not be available to you, me or most other Americans. And that's the part that he doesn't want to talk about.

 

[acenipplelicker]

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