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Romney's Tax Secret: 1500 Percent Profit Using TARP Funds to Ship Delphi Jobs Overseas

11/02/2012 03:05 pm ET | Updated Jan 02, 2013

Mitt Romney apparently violated the Ethics in Government Act in 2009 by burying an investment in his wife's name, according to a coalition of non-profits and unions. The investment didn't surface through much of the campaign because Romney refuses to release his 2009 tax returns.

The investment in Singer Associates LP used TARP funds in part to ship at least 25,000 jobs overseas and short-change pensioners. Republicans then blamed it all on the Obama Administration, while Romney himself insisted the auto industry be allowed to go bust.

The profits were realized in 2009. Romney has not released his family's tax returns for that year and refused many calls to do so, apparently in part because they would have revealed the investment.

Many have speculated that releasing his 2009 tax returns would also have revealed that he took advantage of a 2009 IRS amnesty program for American investors who had used offshore accounts to dodge taxes. If he had used such accounts that way and hadn't taken the amnesty, Romney would have been guilty of a felony.

The group sent its letter to Don W. Fox, General Counsel of the Office of Government Ethics, on Nov. 1 , claiming that an investment of at least $1 million, made in Elliott Associates L.P. in Ann Romney's name, is a violation of the Ethics in Government Act because "Romney's June 1, 2012 Public Financial Disclosure Report to your office did not... disclose the underlying holdings of his private equity and limited partnership funds."

The investment was used to buy up the debt of Delphi Automotive. Elliott is a hedge fund run by Paul Singer, a man with a reputation for what Fortune magazine called "strong-arming his way to profit." According to an Oct. 18 article in The Nation by Greg Palast -- itself based on a recent Palast book that was referred to in the letter -- Elliott used the Delphi debt, bought for pennies on the dollar, to gain control of the company for an average of $0.67 per share.

Once in control, Singer and his associates used a March 2009 meeting to force GM and the U.S. Treasury to pay Delphi $350 million. If not, says Steven Rattner, who chaired the meeting as head of President Obama's Auto Task Force, Singer promised to shut down the bailout by stopping all supplies to GM. Among other things, Delphi supplies GM with steering columns.

Rattner, who described the meeting in his memoir, Overhaul, compared Singer's demands to "extortion demands by the Barbary pirates." His account has been corroborated by Delphi's chief financial officer, John Sheehan.

Singer later offloaded Delphi's pension liabilities to the Pension Benefit Guarantee Corp. (PBGC) and shipped at least 25,000 jobs overseas. Pensions taken on by the PBGC are cut anywhere from 30 percent to 70 percent. Delphi, which now has only 5,000 workers in the United States, has an overseas workforce of 100,000.

Later -- after taxpayer-owned General Motors forgave Delphi $2.5 billion in debt -- Elliott and its partner took Delphi public at $22 a share. At this writing, Delphi is trading at $33.24.

The exact amount of the Romney investments -- and the profit it earned -- has not been disclosed; disclosure laws don't require more than what Mrs. Romney made public -- that she invested "at least" $1 million and earned "at least" $15 million. This is the minimum disclosure required by a law that was subject to much lobbying when it was being written and passed.

The Nation's story and the group's letter have attracted media attention in Ohio -- Delphi's home -- but the Romney campaign slammed the reports to the Dayton Daily News, claiming they resulted from a "partisan, left-wing study meant to distract from the $1 billion of taxpayer funds the Obama Administration handed over to the UAW in the Delphi bankruptcy."

The group includes Citizens for Responsibility and Ethics in Washington, People for the American Way, Public Campaign, Public Citizen, SEIU, UAW and The Social Equity Group.