Posts Tagged ‘bill parish’

Note:  Mitt Romney Tax Return Analyzed in Separate Post

As an investment advisor I have found reviewing a company’s pension plan to be a good indicator of the sponsoring company’s quality of management.  These pension plans are all available for viewing at http://www.free5500.com via required  annual 5500 ERISA filings.  The filings show not only show total assets yet also investment vehicles used and key administrative rules.

What follows is an analysis of Bain Capital’s 2010 Profit Sharing plan, a plan that likely explains how Mitt Romney so effectively built his IRA into a balance some speculate could be as high as $100 million.

What they appear to be doing is using a “common collective trust” account at Merrill Lynch that likely has Bain Capital partnership related investments contributed at artificially low prices and then rolled out into IRAs each year by participants.  This explains in part why the current plan is so small in terms of total assets, it is essentially being flushed each year.  In 2010 almost a third of the entire plan was rolled into IRAs and the plan document does indeed clearly state that participants are entitled to do one rollover each year.


A few key financial facts followed by copies of key documents:

1)  Total assets were $28 million at 12/31/2010 with 719 participants.  Each participant can contribute up to $42K per year.

2)  60 percent of the investments are in the “collective trust”  held at Merrill Lynch.  The remaining 40 percent are in standard mutual funds.

3)   Total direct rollovers out of the plan into IRAs in 2010 was approx $9 million, representing almost a third of total plan assets.


1)  It looks like Bain is allowing employees to do the annual rollovers to avoid ERISA rules on annual  contribution limits of $42K and disguise gains on their portfolio securities contributed.  And would it not be interesting to compare subsequent IRA values for the same investments with the values rolled over previously?

2) Most plans allow rollovers only when a new plan is created or when an employee leaves the firm.  Bain again allows existing employees to do one rollover per year.

3)  The profit sharing plan is audited by Pricewaterhouse Coopers, also the auditor of record for Bain Capital.   This is the firm responsible for reviewing Bain’s carried interest charges, etc. as part of their audit.  If indeed Bain investments are included in the profit sharing plan, that would be a significant conflict of interest.  Bain generally charges carry fees of 30 percent, 50 percent higher than the industry standard 20 percent.

Bain Capital 2010  ERISA 5500 Filing

Bain Capital –  Total Participants 719

Collective Trust 60 Percent of Total Investments

Employees Direct Rollovers in 2010 Approx $9M

Existing Employees Can Do Annual Rollovers

Summary of Specific Investments

Audit Opinion by Pricewaterhouse Coopers

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One century ago Republican Theodore Roosevelt was elected president and instituted sweeping changes in government, including the establishment of an estate tax and the national park system.  What followed was an economic boom that lasted for years. Roosevelt knew the importance of circulating wealth in order to revitalize the economy by investing in key infrastructure, including the public education system.

Today fierce battle lines are drawn over whether or not the estate tax should be repealed.  On one side are Bill Gates Jr., Grover Norquist and the Wall Mart heirs and on the other side are Bill Gates Sr. and Chuck Collins.  This is certainly not a case of “like father like son.”

While Bill Gates Sr. has co-penned a book with Chuck Collins calling for increased exemptions but not abolishment of the estate tax, Bill Gates Jr. has been the prime funder of Grover Norquist as Norquist tours the country relentlessly advocating a complete repeal of the tax.  Like Bill Gates Sr., I believe the exemption should be raised to $5 million yet do not support a repeal.

I met Grover Norquist, the nation’s most ardent anti-tax advocate, here in Portland some years ago and was amazed at his persuasive skills, and also his ability to bend facts. When I asked Norquist what he would think if I told him Microsoft made more than $10 billion in one year without paying a penny of federal income tax he replied, good for them.

Norquist seems oblivious to the growing acknowledgment that tax equity or fairness is essential to healthy capitalism.  Even the Howard Jarvis tax institute, founded by his mentor, publicly stated that there were serious fairness issues related to Microsoft’s scheme.

Also participating in the debate is Warren Buffet, who like Bill Gates Sr. opposes any repeal of the estate tax, saying:

“We have come closer to a true meritocracy than anywhere else
around the world.  You have mobility so people with talents can be
put to the best use.  Without the estate tax, you in effect will have
an aristocracy of wealth, which means you pass down the ability to
command the resources of the nation based on heredity rather than merit.”                                                     [NYT, 2/14/01]

But Warren Buffet, like the younger Gates, has also been able to sell vast holdings within the structure of his foundation, thereby avoiding all taxes.  The Bill and Melinda Gates Foundation has sold all of its Microsoft shares, not even keeping 10% out of loyalty to the company’s employees.  Of course not a penny of tax was paid on any of these sales and today the Gates Foundation aggressively invests in activities ranging from private equity to currency speculations with all gains completely shielded from any tax consequence.

One simple reform to the system would be to allow tax exempt income status to foundations and endowments only for that portion of their investments invested in US government securities.  All other investments would be taxed at normal capital gain rates.  Perhaps this would help to stabilize the markets and eliminate the excessive risk-taking and speculation many of these tax exempt entities are engaged in, knowing they would have no tax liability on gains.

As the policy debates rage on regarding changes to the tax law, let’s hope that overall fairness has a strong seat at the table, whatever the outcome.

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With only two weeks until the election, it is truly disappointing that Senator John McCain has not reached out to independent competent economic advisors. Instead, he is using “Joe The Plumber” to articulate a message that is inaccurate and nonsensical.   History seems to be repeating itself for McCain.

It was in the 1980’s that McCain played the key role in promoting Charles Keating in what was a veritable factory of financial fraud in the Savings and Loan Industry.  Today 20 years later he has aligned himself with UBS Vice Chairman Phil Gramm at a time when UBS is a key player in several massive financial frauds ranging from selling fake municipal securities to affluent investors, so called auction rate securities,  in addition to numerous toxic derivative products to others.  UBS stock has plummeted as a result.

The contrast between McCain’s strategy and that of Barack Obama is striking.  While McCain is surrounded by incompetence and advocating Henry Paulson’s well known “I am the master of the universe” perspectives and lifestyle, Obama seems obsessed with binding himself to pure competence, as summarized in an excellent article in today’s Wall Street Journal by Monica Langley titled “Volcker becomes part of Obama brain trust.  Volcker is worshipped in financial circles, by both Democrats and Republicans alike.  They are pictured below.

by: Bill Parish

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