WASHINGTON -- Mitt Romney's involvement with anonymous accounts in offshore tax havens goes back to the 1984 founding of Bain Capital, which raised millions of dollars from wealthy foreigners through shell corporations in Panama, a nation notorious for tax avoidance schemes and money laundering, according to a report by The Los Angeles Times.

The Times story follows on Romney's recent acknowledgement to the National Review that he established funds in the Cayman Islands for the explicit purpose of helping wealthy investors avoid paying American taxes. Bain currently operates at least 138 shell companies headquartered in the Cayman Islands, which, like Panama, has long been associated with both legal and illegal tax machinations and money laundering.

"The so-called offshore account in the Cayman Islands, for instance, is an account established by a U.S. firm to allow foreign investors to invest in U.S. enterprises and not be subject to taxes outside of their own jurisdiction," Romney told National Review's Robert Costa on Wednesday. "So in many instances, the investments in something of that nature are brought back into the United States. The world of finance is not as simple as some would have you believe. Sometimes a foreign entity is formed to allow foreign investors to invest in the United States, which may well be the case with the entities that Democrats are describing as foreign accounts."

By taxes "outside of their own jurisdiction," Romney was referring to taxes imposed by the U.S. government.

"He's basically admitting here that the Bain funds are set up in the Cayman Islands to help people avoid tax," Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice, a nonprofit tax reform group, told HuffPost. "If you want to cheat on your taxes, boy, they're making it really easy."

According to the Times, family members of some of Bain Capital's first investors were tied to right-wing death squads in Latin America, while others were later convicted of various financial frauds unrelated to Bain.

These early Bain investors did not directly buy into Bain's funds, however. Instead, they established shell corporations in Panama, and those shell companies invested in Bain. Panama has long had extreme bank secrecy laws and lax corporate registration standards, which help shield the identities of global investors for both legitimate and illegitimate purposes.

Today, establishing a corporation and bank account in Panama costs less than $2,000, and any money that investors stash in these entities is not taxed. Panama's bank secrecy laws make it very difficult for the Internal Revenue Service to track transfers of funds to these Panamanian destinations from the United States. Small surprise, then, that Panama is home to nearly 400,000 offshore corporations, more than any other nation except Hong Kong.

While many of Bain's early investors lived outside the U.S., shell companies in Panama and the Cayman Islands can also help American taxpayers invest in U.S. companies without accruing a tax bill with the IRS. By establishing personal offshore entities, Americans can pose as foreign investors and avoid paying U.S. taxes on investments in American firms.

"Even a U.S. investor pretending to be a foreign investor, by using a Bermuda or Cayman Islands shell entity, can avoid U.S. tax this way," Wilkins said. "And we know that's going on. We know that U.S. investors are evading taxes by pretending to be foreigners."

The United States ratified a free trade agreement with Panama in 2011 which was negotiated by President George W. Bush and shepherded through Congress by President Barack Obama. The deal was heavily criticized by tax experts for preventing the U.S. from cracking down on improper tax schemes in Panama. Romney's trade policy platform calls for more agreements similar to the Panama pact.

Clarification: This post has been edited to state more precisely the Times reporting on the relationship between some Bain Capital investors and Salvadoran death-squads.

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  • Ron Paul

    "Politically, I think that would help him," Paul said in a interview with <a href="http://www.politico.com/news/stories/0712/78599.html#ixzz20w7ycTBE" target="_hplink">Politico</a>. "In the scheme of things politically, you know, it looks like releasing tax returns is what the people want."

  • Richard Lugar

    "I have no idea on why he has restricted the number to this point," <a href="http://www.cbsnews.com/8301-18563_162-57474352/pressure-mounts-on-mitt-romney-to-release-more-tax-returns/?tag=socsh" target="_hplink">Lugar said</a>.

  • George Will

    "I don't know why... he didn't get all of this out and tidy up some of his offshore accounts and all the rest," Will said on ABC's "<a href="http://www.huffingtonpost.com/2012/07/15/george-will-mitt-romney-bain_n_1674513.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+HP%2FPolitics+(Politics+on+The+Huffington+Post)" target="_hplink">This Week</a>." "He's done nothing illegal, nothing unseemly, nothing improper, but lots that's impolitic."

  • Bill Kristol

    "He should release the tax returns tomorrow. It's crazy," Kristol said on "<a href="http://www.huffingtonpost.com/2012/07/15/mitt-romney-tax-returns_n_1674325.html" target="_hplink">Fox News Sunday</a>." "You gotta release six, eight, 10 years of back tax returns. Take the hit for a day or two."

  • Robert Bentley

    "I just believe in total transparency," Bentley told <a href="http://abcnews.go.com/blogs/politics/2012/07/gop-governor-calls-on-mitt-romney-to-release-additional-tax-returns-and-show-he-has-nothing-to-hide/" target="_hplink">ABC News</a>. "In fact, I was asked today that question -- do you think that Governor Romney should release his tax returns? And I said I do. I said, I release my tax returns. I may be the only public official in Alabama that does, but I release mine every year and I just believe that people should release their tax returns. And if you get them out and just get past that, it just makes it so much easier."

  • Haley Barbour

    When asked on "<a href="http://www.nationaljournal.com/2012-presidential-campaign/barbour-romney-should-release-more-tax-returns-20120710" target="_hplink">The Situation Room</a>" if Romney should release more returns, Barbour said, "I would. But should it be an issue in the campaign? I don't think it amounts to diddly."

  • Michael Steele

    "If there's nothing there, there's no 'there' there, don't create a there,'" Steele said on MSNBC.

  • David Frum

    "Tax returns the next problem. Releasing returns under pressure: more weakness, more pain," Frum <a href="https://twitter.com/davidfrum/status/224509505973661696" target="_hplink">tweeted</a>.