Gawker’s John Cook got hold of 950 pages of confidential Bain Capital documents related to Mitt Romney and put them online, writing that, “The documents are exceedingly complicated. We don’t pretend to be qualified to decode them in full, which is why we are posting them here for readers to help evaluate—please leave your thoughts in the discussion below.”
The he NYT took an early stab at reporting what’s in the documents:
Bain private equity funds in which the Romney family’s trusts are invested appear to have used an aggressive tax approach, which some tax lawyers believe is not legal, to save Bain partners more than $200 million in income taxes and more than $20 million in Medicare taxes…
A typical private equity or hedge fund pays its managers in part with a management fee based on the size of the fund, and in part with a share of the profits earned by the fund. Those profits are considered “carried interest” and taxed at capital gains rates, which in recent years have been 15 percent, assuming that the underlying investment profits qualified for that treatment.
The tax strategy Bain appears to have used is intended to convert the remaining management fee — the part not based on investment profits — into capital gains. Mr. Romney appears to benefit from the carried interest structure in these funds, but it is not clear from the documents made public whether he also benefits from the fee waiver. The Romney campaign declined to comment.
Bloomberg puts it this way:
The newly released records show that Romney put money in a web of funds run by his former firm that used investing and tax strategies beyond the reach of ordinary savers. One tactic employed by Bain and other firms to achieve the lower tax rate for some compensation is known as management-fee conversions or fee waivers.
Bain Capital Fund VII LP disclosed in a 2009 report that the general partner in the fund had in the past waived management fees and converted those fees into an interest in the fund called a “priority profit share.” That had the effect of turning fees that would be taxed at ordinary income rates, as high as 35 percent, into capital gains, taxed at a rate of 15 percent.
— Billboard reports that a five-year-old study that found, ludicrously, that file sharing increased record sales, has been debunked:
An influential 2007 academic paper that found a positive link between file sharing and CD purchases has been debunked after a professor from Australia has taken the same data set and come to an opposite conclusion.
As blogger and lawyer Barry Sookman explains, Professor George Barker of the College Of Law, Australian National University took the same data, corrected for “two fundamental errors” and found a “negative association between P2P downloading and CD demand.” In terms of damages done, Barker estimates a 10% increase in P2P demand reduced CD demand around 0.4%.
Ferguson’s critics have simply misunderstood for whom Ferguson was writing that piece. They imagine that he is working as a professor or as a journalist, and that his standards slipped below those of academia or the media. Neither is right. Look at his speaking agent’s Web site. The fee: 50 to 75 grand per appearance. That number means that the entire economics of Ferguson’s writing career, and many other writing careers, has been permanently altered. Nonfiction writers can and do make vastly more, and more easily, than they could ever make any other way, including by writing bestselling books or being a Harvard professor. Articles and ideas are only as good as the fees you can get for talking about them. They are merely billboards for the messengers.
That number means that Ferguson doesn’t have to please his publishers; he doesn’t have to please his editors; he sure as hell doesn’t have to please scholars. He has to please corporations and high-net-worth individuals, the people who can pay 50 to 75K to hear him talk…
Civilization actually contained a section called “The Six Killer Apps of Western Power,” which may be the purest expression of pandering to the speaker’s agencies I’ve ever read.
— I like this Wall Street Journal Marketplace story on Tootsie Roll Industries Inc., which is apparently a public company and has been run for fifty years by a now-92-year-old man and his now-80-year-old wife.
The Journal had to write around the company here:
How many licks does it take to get to the center of Tootsie Roll Industries?
No one really knows. The 116-year-old company, run by one of America’s oldest CEOs, has become increasingly secretive over the years, severing nearly all of its connections to the outside world. Tootsie Roll shuns journalists, refuses to hold quarterly earnings calls, and issues crookedly-scanned PDFs for its earnings releases. The last securities industry analyst to maintain coverage of the company stopped last year because it was too hard to get information.
The Journal was able find one person to talk to:
“Their age is no concern, none whatsoever,” said Jerry Schmutzler, 70, who works the midnight shift in the boiler room of Tootsie Roll’s Chicago factory.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at email@example.com. Follow him on Twitter at @ryanchittum. Tags: file sharing, free culture, Newsweek, Niall Ferguson, The Wall Street Journal