Gothamist
A non-profit newsroom, powered by WNYC.
Gothamist
Listen Live
News
NY AG: Bain Capital & Others May Have Skirted Tax Law
By
Christopher Robbins
Published Sep 2, 2012
Modified Sep 2, 2012
Share
FacebookTwitterRedditEmail
Never miss a story
Email address
By submitting your information, you're agreeing to receive communications from New York Public Radio in accordance with our Terms .
Jake Dobkin with inspiration via
By
Christopher Robbins
Published Sep 2, 2012
Modified Sep 2, 2012
Share
FacebookTwitterRedditEmail
We rely on your support to make local news available to all
Make your contribution now and help Gothamist thrive in 2026. Donate today
Gothamist is funded by sponsors and member donations
New York Attorney General Eric Schneiderman has subpoenaed documents from several private equity firms, including Bain Capital, as part of an investigation into whether the firms circumvented tax law. The Times reports that the tax strategy of converting management fees into investments taxed as capital gains (at the rate of 15% instead of 35%) "came to light" when Gawker published a trove of Bain documents last month, but that the subpoenas predated the article. Bain partners were able to save more than $200 million in federal income taxes and more than $20 million in Medicare taxes using the strategy.
But because Schneiderman's office is unable to enforce federal tax law, executives at the firms speculated that he may be attempting to recoup funds owed to the state, or that it's a cynical, politically motivated investigation.
Romney's investment manager and attorney, R. Bradford Malt, told the paper that "neither he nor the trust has ever done [the tax strategy], whether before or after he retired from Bain Capital," despite records showing that Bain executives utilized the strategy. Though the tacic not uncommon, some private equity firms decline to wield it because it is extremely complex or considered unsavory.
In 2007 the IRS announced that it was looking into alleged tax evasion at private equity firms but no firms were ever prosecuted. At issue is whether or not the investment managers are taking a sufficient amount of risk when they covert the fees into investments to receive the capital gains rate of 15%. Victor Fleischer, a law professor at the University of Colorado, believes that in Bain's case, there wasn't.
“There is a tension between economic risk and tax risk that is supposed to be inversely proportional,” he says. “The way Bain set it up there’s not much risk at all, so it’s hard to see how this income should receive capital gains treatment.” In related Bain-bashing news, Matt Taibbi has written a scathing indictment of Romney's tenure at Bain Capital in the most recent issue of Rolling Stone, asserting that his campaign strategy of pounding the "debt drum" (and choosing Paul Ryan as his VP) is based on a fundamental lie:
By making debt the centerpiece of his campaign, Romney was making a calculated bluff of historic dimensions - placing a massive all-in bet on the rank incompetence of the American press corps. The result has been a brilliant comedy: A man makes a $250 million fortune loading up companies with debt and then extracting million-dollar fees from those same companies, in exchange for the generous service of telling them who needs to be fired in order to finance the debt payments he saddled them with in the first place.
It's worth noting that back in January, Taibbi told us that's Schneiderman's "impact remains to be seen. He still has an opportunity to prosecute banks that broke the law. But if nobody goes to jail, he's a failure and a fake." As far as we know, Schneiderman's mortgage crisis unit hasn't made waves since it was announced, with much fanfare, during the State of the Union.
Tagged
2012 election
bain captial
eric schneiderman
mitt romney
mortgage crisis
tax evasion
taxes
Christopher Robbins
Christopher Robbins is a New York City reporter covering transportation, affordable housing, local politics, and criminal justice. His work has also appeared in New York Magazine, The Village Voice and The New York Times. Chris is a graduate of Patrick Henry High School in Roanoke, Virginia, and enjoys biking to Fort Tilden in the summertime.
Read more
Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
MORE news
Queens man charged with hate crime at Jewish-owned bagel shop displaying Israeli flags
Prosecutors say the 22-year-old damaged property outside the Fresh Meadows shop twice in May.
By
Giulia Heyward
Published Oct 19, 2026 at 6:07 p.m. ET
MTA train yards are in such bad shape plants are growing out of the roof, watchdog says
In some cases, the damage was “clearly not recent."
By
Stephen Nessen
News
MTA train yards are in such bad shape plants are growing out of the roof, watchdog says
In some cases, the damage was “clearly not recent."
By
Stephen Nessen
High-ranking NYC officials to testify in ex-buildings boss Eric Ulrich's corruption trial
By
David Brand
Mamdani launches new team to help NYers keep SNAP, Medicaid benefits
By
Caroline Lewis
Riders at 53rd St. station where man was fatally shot say they worry about gun violence
By
Ramsey Khalifeh
Never miss a story
Catch up on the most important headlines with a roundup of essential NYC stories, delivered to your inbox daily.
Sign upEmail address
By submitting your information, you're agreeing to receive communications from New York Public Radio in accordance with our Terms .