Report: Romney May Have Violated Ethics Laws Through Company Linked to Paul Ryan's Brother
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On Friday, the Telegraph reported that, as governor of Massachusetts, Mitt Romney may have violated state ethics laws when his administration maintained a “lucrative” contract with a company in which he had a financial stake.
The company, Imagitas, had been co-founded by a former executive at Bain and Co., with $5 million in backing from Bain Capital. Paul Ryan's brother, Toby, had also been a senior manager at Bain and Co., working in the same building as Romney, before leaving to become a vice president of Imagitas.
The contract was not awarded by Romney – Imagitas scored it just before he was elected. But according to Telegraph reporter Jon Swaine, “Massachusetts law requires that all state employees divest themselves of financial interests in private sector contracts with state agencies. At the time, failure to do so could have resulted in a $2,000... fine or a 2.5-year prison sentence.” He added that “the potential punishments are now stronger.”
According to the Telegraph, “New state employees were obliged to prevent conflicts of interest with existing contracts. The following year, [Romney] began declaring that his holdings were in a so-called "blind trust" controlled by his lawyer.”
Victor Fleischer, a law professor at the University of Colorado specialising in private equity, said it was “possible but unlikely” that Mr Romney could have completely prevented himself from benefiting from Imagitas.
Records at the Massachusetts commission of ethics show that Mr Romney did not make filings acknowledging the interest and claiming an exemption, as he was entitled to do.
It's worth noting that during his 1994 senate race against Ted Kennedy, who also claimed that he had no knowledge of how funds in his blind trust were invested, Romney attacked him for it, saying, “The blind trust is an age-old ruse.”
Imagitas, an advertising company, also secured contracts with several other states, including Wisconsin, where it was given work by then-Governor Scott McCallum, whom the Telegraph characterized as a “political ally” of Paul Ryan. According to sources cited by the Telegraph, Toby Ryan had been principally responsible for securing the contracts.
Swaine also notes that “Imagitas donated tens of thousands of dollars to the Republican Governors’ Association while it was chaired by Mr Romney. A former Imagitas investor and director donates to both Mr Romney and Paul Ryan, who also received thousands of dollars in contributions from his brother Tobin.”
Bain Capital invested in the firm in 2000, when several filings list Romney as Bain's chairman, president and CEO; the Romney campaign has since claimed that in 2002, he “retroactively retired” dating back to 1999, an issue that might be cleared up if the candidate released his tax returns for that period.
The story quotes a number of anonymous sources, and needs further confirmation. But if accurate, it could prove disqualifying for the Romney-Ryan ticket, undermining Romney's reputation as a self-made businessman and Ryan's core belief that government is a drain on private sector achievement. When it comes to their families' stakes in Imagitas, it appears that they “didn't build that” without an inside edge lobbying for fat government contracts. Imagitas was sold for $230 million in 2005, when Romney was still serving as the governor of Massachusetts.
Both Romney and Ryan owe their good fortunes to the public sector. When Romney's father, George, first moved to the United States from Mexico, the penniless family survived on government relief in Texas before moving to California. After his missionary work, Romney's father worked for 2 years as a staffer on Capitol Hill, then, after a failed business, he was hired as a lobbyist for Alcoa. He also lobbied for the Aluminum Wares Association, before becoming a spokesman and lobbyist for the automobile industry, a position that led to his appointment as CEO of the American Motors Corporation. He left that position to become Governor of Michigan. After a bid for the White House in 1968, George Romney was named Secretary of Housing and Urban Development by Richard Nixon.