Gawker and Bain and the Caymans
By Kevin D. Williamson @ National Review (August 23, 2012)
Gawker has an interesting headline up: “Inside Mitt Romney’s Tax-Dodging Cayman Schemes.” The gossip site also has released some 950 pages of material related to Mitt Romney’s investments, mostly having to do with Bain Capital. In Gawker’s own words: “Together, they reveal the mind-numbing, maze-like, and deeply opaque complexity with which Romney has handled his $250 million fortune.”
Most respectable publications maintain a fairly strict church/state division between the editorial side and the business side, and Gawker, a not very respectable publication, seems to do the same. Apparently, nobody thought to tell the boys on the Romney beat that Gawker Media is part of a shell company incorporated in the Cayman Islands. Gawker’s money lives in the same neighborhood as Romney’s money. Call it bipartisanship.
As John Cassidy relates in The New Yorker, Gawker’s finances are “organized like an international money-laundering operation.” For example: ‘Much of its international revenues are directed through Hungary, where [bossman Nick] Denton’s mother hails from, and where some of the firm’s techies are located. But that is only part of it. Recently, [Felix] Salmon reports, the various Gawker operations—Gawker Media LLC, Gawker Entertainment LLC, Gawker Technology LLC, Gawker Sales LLC—have been restructured to bring them under control of a shell company based in the Cayman Islands, Gawker Media Group Inc. Why would a relatively small media outfit based in Soho choose to incorporate itself in a Caribbean locale long favored by insider dealers, drug cartels, hedge funds, and other entities with lots of cash they don’t want to advertise? The question virtually answers itself, but for those unversed in the intricacies of international tax avoidance Salmon spells it out: “The result is a company where 130 U.S. employees eat up the lion’s share of the the U.S. revenues, resulting in little if any taxable income, while the international income, the franchise value of the brands, and the value of the technology all stays permanently overseas, untouched by the I.R.S.”’
So we have evil offshoring — exploiting those poor marginalized Hungarian nerds — baroque tax-minimizing schemes, assets that will not be repatriated because of U.S. taxes, and that favorite sin of the Left: hypocrisy. In my mind, hypocrisy is a lesser sin than stupidity, and it is sort of stupid to write up a breathless account about Romney’s doing the precise same thing your company does. Incidentally, there is nothing in the Gawker report or the accompanying documents suggesting that Romney or Bain did anything improper. And neither did Gawker, for that matter: U.S. tax practices create very powerful incentives to pursue avoidance strategies. Gawker’s owners apparently know that, even if its writers lack the guts or the intellectual capability to acknowledge as much.