The Financial Times has an unusual story featured prominently today. As Jeb Bush has made a soft launch of his presidential campaign, the pink paper has published a surprisingly long list of financial relationships that do not put the Florida governor in a particularly good light.
The intriguing part isn’t so much a history of dubious-looking complicated money dealings. It’s the fact that many of them are live. Jeb apparently couldn’t be bothered to clean them up. That strategy didn’t work too well for Mitt Romney, who was forced effectively to admit that his wife Ann Romney’s Olympic horse Rafalca was not a business and hence not a permissible deduction on the Romney tax returns. There was also the consternation over his failure to release five years of tax returns as would have been customary. Some theorized that it was because Romney paid no taxes in those years, but the guess among tax experts was that Romney had declared a formerly secret Swiss bank account under an amnesty program. One of the conditions of getting amnesty was refiling prior year tax returns. Those returns would be “stapled,” as in they would clearly show that the returns had originally been filed not showing the Swiss bank account, and then had been amended to included it.
The issue revealed by the Romney tax return debate, as well as the consternation about his remarks at a supposedly closed-door speech where he derided the non-income-taxpaying 47% of the US (which includes the unemployed, students and people who make too little income to be subject to income taxes but nevertheless pay FICA and sales taxes) is that even rich Republicans are not immune from scrutiny as to their financial conduct and their implicit or explicit attitude towards the non-wealthy. Despite the stereotype, not all Republican voters are rich. For instance, evangelical Christians are not the power in the party that they once were but are still far more inclined to vote Republican than Democrat.
So the issue with Jeb isn’t who he’s been in bed with financially, per se, but that he couldn’t be bothered to tidy up his record.
For my money, the stunner comes late in the article: Jeb is currently an advisor to Barclays. These big misbehaving banks tend to become all of a muchness over time, so to refresh your memory, Barclays was a central actor in the Libor price-rigging scandal. Its efforts to defy the Bank of England and implicate Paul Tucker, the heir apparent to the Governor Mervyn King’s job, led the Bank of England to force the resignation of the top three officers at Barclays, its chairman, CEO, and president. The UK’s Serious Fraud Office has filed criminal charges against three Barclays officers; one of them has been indicted in the US. The SFO is also investigating a 2008 equity infusion from the Qatar sovereign wealth fund that Barclays used to just escape a taxpayer rescue. The allegation is that Barclays paid fees to Qatar that were really tantamount to bribes and that the sovereign wealth fund and Challenger, the prime minister’s investment company, worked with Barclays to misrepresent its financial condition to regulators and the public.
But this should come as no surprise, given that Jeb was also an advisor to Lehman, and managed to dodge the bullet of being asked to intervene with his brother the President on behalf of the floundering investment bank (Dick Fuld apparently considered it when Barclays was ready to throw a lifeline but the board had imposed conditions that the Fed and Treasury weren’t prepared to meet).
As juicy but less easy to pick apart are the Jeb Bush private equity dealings, which he appears to have tried to hide as opposed to exit. BusinessWeek broke the story:
Documents filed with the U.S. Securities and Exchange Commission on Nov. 27 list Bush as chairman and manager of a new offshore private equity fund, BH Global Aviation, which raised $61 million in September, largely from foreign investors. In November the fund incorporated in the United Kingdom and Wales—a structure, several independent finance lawyers say, that operates like a tax haven by allowing overseas investors to avoid U.S. taxes and regulations.
BH Global Aviation is one of at least three such funds Bush has launched in less than two years through his Coral Gables, Fla., company, Britton Hill Holdings. He’s also chairman of a $26 million fund, BH Logistics, established in April with backing from a Chinese conglomerate, and a $40 million fund involved in shale oil exploration, according to documents filed in June and first reported on by Bloomberg News. His flurry of ventures doesn’t suggest someone preparing to run for president, according to a dozen fund managers, lawyers, and private-placement agents who were apprised of his recent activities by Bloomberg Businessweek. Most private equity funds have a life span of 10 years. While it isn’t impossible that Bush could bail on his investors so soon after taking their money, “that would be unusual,” says Steven Kaplan, a private equity expert at the University of Chicago Booth School of Business. One fundraiser for private equity adds that normally you’d be winding down such businesses, rather than expanding them, if you were going to run.
A trawl through corporate filings in Florida and Delaware show that Mr Bush and his partners have launched more than a half dozen investment entities under the “Britton Hill” or “BH” moniker (named after the highest point in the state of Florida) since 2008, several of which have only been set up in the past two years.
Almost all are registered at the same address at the Biltmore hotel in Coral Gables, Florida, where Mr Bush has long held an office.
While details of the total amount of money raised and the funds’ activities remain scarce, as private companies, what is publicly available show Britton Hill-linked investments have included natural gas and aviation, some in tandem with foreign investors.
Mr Bush is also a partner in “Three B Partners” with former General Motors executive Lawrence Burns, one of the leading advocates of the transformative potential of driverless cars.
While none of Mr Bush’s private equity ventures are of the size and scale that are likely to leave him vulnerable to the same kinds of charges Mr Romney faced over asset stripping and job destruction, Republican strategists have expressed concerns over his failure to close down such an obvious avenue of attack.
“Why wouldn’t you just clean this up in advance, after what happened to Mitt?” said one. “It just seems foolhardy.”
Mind you, these events come after Jeb Bush is believed to have had to defer as presidential candidate to his less-favored-within-the-family brother George, with the causes believed to be having the government pick up most of the tab on a bad real estate loan made via a savings and loan that failed* and his wife’s failure to declare to Customs her haul from a $20,000 shopping spree in Paris.
Notice that the dismay comes from the Republican camp. Mind you, it isn’t as if prominent Democrats are clean as the driven snow. It is remarkable that Turbo Timmy not only failed to clean up his non-reporting of IMF income prior to his nomination to the Treasury Secretary post, but then was cheeky enough to not pay back the underpayment that was past the statute of limitations. Played like the banker he is. And is is hard to beat Hillary Clinton’s astonishing success as a novice commodities trader in parlaying a $1000 stake into $100,000.
We’ll see in the coming months whether these improprieties make a dent in Jeb Bush’s prospects. But they are own goals and suggest a lack of seriousness about his campaign, or that Jeb assumes that the Bush name gives him more advantage than it actually does. If so, that attitude will probably show up in other gaffes.
* The controversy was not that the bailout was made on sweetheart terms but that the original loan was, leaving the FDIC in receivership no leverage to force a better deal. The FDIC sued over the original loan.