Controversial reports about Bain Capital’s business practices continue to shadow Mitt Romney’s presidential campaign, with the latest installment a Los Angeles Times story published Thursday that documents how wealthy foreigners helped give the investment firm its start.
According to the Times report, when Romney launched Bain in 1984, he struggled at first to raise enough money. So he and his partners raised more than a third of their first $37 million investment fund from wealthy foreigners. Most of the foreign investors’ money came through corporations registered in Panama, then known for tax advantages and unusual banking secrecy.
The Times story added previously unreported details, documented in Massachusetts corporate filings and other public records, to earlier reports about Bain Capital’s long involvement in the complex, sometimes secretive world of international high finance.
The new details come as President Obama’s campaign has raised questions repeatedly about whether Romney sheltered money in Bain Capital’s offshore investments to avoid U.S. taxes and hide some of his wealth. The documents don’t indicate any wrongdoing, according to the Times report, which quotes experts as saying that such financial vehicles are common for wealthy foreign investors.
Romney has argued that his offshore investments are entirely proper, and that he has paid all the U.S. taxes that he owes.
The first outside investor in Bain was a leading London financier, Sir Jack Lyons, the Times reported, who made a $2.5 million investment through a Panama shell company set up by a Swiss money manager, further shielding his identity. Years later, Lyons was convicted in an unrelated stock fraud scandal.
About $9 million came from rich Latin Americans, including powerful Salvadoran families living in Miami during their country’s brutal civil war.
That first investment fund — used to invest in start-up companies and leveraged buyouts — paid out a stunning 173 percent in average annual returns over a decade, according to a prospectus prepared by an outside bank, the Times reported. It was the start of the private equity powerhouse that ultimately fueled Romney’s political career. He now cites his experience at Bain as a chief qualification for the White House.