washingtonpost.com  > Politics > Elections > 2004 Election > White House 2004 > John Kerry

Kerry Donors Include 'Benedict Arnolds'

Candidate Decries Tax-Haven Firms While Accepting Executives' Aid

By Jim VandeHei
Washington Post Staff Writer
Thursday, February 26, 2004; Page A01

Sen. John F. Kerry (Mass.), the front-runner for the Democratic presidential nomination, frequently calls companies and chief executives "Benedict Arnolds" if they move jobs and operations overseas to avoid paying U.S. taxes.

But Kerry has accepted money and fundraising assistance from top executives at companies that fit the candidate's description of a notorious traitor of the American Revolution.


Democratic front-runner John F. Kerry is off to Minneapolis to campaign for Super Tuesday. (Jim Bourg -- Reuters)


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Executives and employees at such companies have contributed more than $140,000 to Kerry's presidential campaign, a review of his donor records shows. Additionally, two of Kerry's biggest fundraisers, who together have raised more than $400,000 for the candidate, are top executives at investment firms that helped set up companies in the world's best-known offshore tax havens, federal records show. Kerry has raised nearly $30 million overall for his White House run.

Kerry has taken aim at "Benedict Arnold" companies as part of a much broader political and policy debate over stemming the flow of well-paying U.S. jobs overseas, a chief cause of unemployment, especially in the hardest-hit manufacturing sector. Kerry's solution, detailed in a speech yesterday in Toledo, is to enforce trade agreements, track and slow the outsourcing of U.S. jobs, and stop government contracts and tax incentives from going to companies that move operations or jobs offshore.

Kerry has come under attack from President Bush, as well as some Democrats, for criticizing laws he voted for and lambasting special interests after accepting more money from paid lobbyists than any other senator over the past 15 years. Some Democrats worry that Kerry is leaving himself open to similar attacks on the latest issue.

Given the vast sums raised during the presidential campaign as well as the growing number of companies with offshore operations, it seems almost inevitable that candidates would receive contributions from some of them.

Bush has taken exponentially more from these companies than Kerry, though the president has not made a major campaign issue out of clamping down on them.

On Monday, Kerry was asked why two of his biggest fundraisers were involved with "Benedict Arnold" companies. "If they have done that, it's not to my knowledge and I would oppose it," Kerry told a New York television station. "I think it's wrong to do [it] solely to avoid taxes."

Then he sought to clarify his position: "What I've said is not that people don't have the right to go overseas and form a company if they want to avoid the tax. I don't believe the American taxpayer ought to be giving them a benefit. That's what I object to. I don't object to global commerce. I don't object to companies deciding they want to compete somewhere else.''

David Roux, who has raised more than $250,000 for Kerry since 2002, is co-founder of a California company that helped purchase Seagate Technology Inc. four years ago and incorporated it in the Cayman Islands, one of the world's best-known tax havens. Roux described himself in an interview last fall as the "anchor tenant in John Kerry's fundraising mall."

While the State Department lists Seagate as among the companies that reincorporated offshore to save on taxes, Roux said yesterday that he works for a "global" company forced to make "thoughtful" business decisions about where to locate its offices and jobs. Roux said he does not consider Seagate or himself a "Benedict Arnold." That term, Roux said, "is, like many things in politics, a label that [is] meant to cover a lot of sins."

Stephen J. Luczo, chief executive of Seagate, has contributed $4,000 to Kerry, the maximum allowed under law, and $2,000 to the candidate's legal defense fund. Luczo was on vacation and not available for comment, according to his assistant.

Thomas F. Steyer, who said he has raised around $200,000 for Kerry, is a partner at a California investment firm called Hellman & Friedman LLC that helped set up an insurance company in Bermuda, another popular tax haven. The insurance company -- Arch Capital Group Ltd. -- stated in a 2000 Securities and Exchange Commission filing that it was sinking roots in Bermuda to reduce its U.S. tax bill.

Steyer said that it "wasn't my decision" to set up the company in Bermuda and that he now spends less than 10 percent of his time at Hellman & Friedman. "I believe American citizens should pay their American taxes," Steyer said. He said he "absolutely" does not consider himself part of a "Benedict Arnold" enterprise.

Steyer and Roux have hosted fundraisers for Kerry and are listed by his campaign as among three dozen supporters who have "bundled" $100,000 or more each, which means they get credit for packaging individual donations to reach that total.

When asked for the definition of a "Benedict Arnold" company or CEO, Stephanie Cutter, Kerry's spokeswoman, said: "Companies that take advantage of tax loopholes to set up bank accounts or move jobs abroad simply to avoid taxes." She pointed to a list compiled by Citizen Works, a tax-exempt nonprofit group that monitors corporate influence, as a source on the companies that fit the candidate's definition.

According to federal election records, Kerry has received $119,285 from donors employed at what Citizen Works describes as the "25 Fortune 500 Corporations With the Most Offshore Tax-Haven Subsidiaries." The list does not include nearly all of the companies that shave their tax bill by moving jobs and operations overseas, so Kerry has actually raised substantially more from firms qualifying as "Benedict Arnolds."

Kerry has also received $20,100 in donations directly from individuals at companies with mailing addresses offshore to avoid paying U.S. taxes, records show.

"Senator Kerry has made it crystal clear that he's going to close these loopholes, forever," said Chad Clanton, a Kerry spokesman. "Nothing will stop him. Period."

Sen. John Edwards (D-N.C.), whose campaign gets most of its money from trial lawyers, has not described these companies in such harsh terms and has received less from them, Federal Election Commission records show. Edwards took in $500 from a Tyco International Ltd. employee and $75,000 from the 25 Fortune 500 companies with the most offshore-tax-haven subsidiaries.

Staff writer Dan Balz and researcher Lucy Shackelford contributed to this report.


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