100,000% return for Bain employee IRA participation.. calls it a complicated "scheme"

[SoCalDem]

This video explains a LOT about the IRA investment.....and why Mittens may not want it closely scrutinized

http://yhoo.it/MsT5YK

[lame54]

1. For every $10 they make a million?

[SoCalDem]

2. Watch the video.. the guy explains it .. Very tricky stuff..

[Vox Moi]

3. Why isn't this insider trading?

The interview stressed that what happened was not illegal but that it was a 'complicated scheme".
Well, I guess it better be complicated because the simple version is that the company making the deal creates a special class of stock, determines a very low share price and makes those shares available to the CEO/Owner and employees for their IRAs.
More than that, those special shares had a far better return than the company as a whole realized.
Why is Mitt advertising himself as a job creator when he can simply make money out of thin air?

[SDjack]

5. That money came from somewhere. My bet is that it came from the nearest

possible source: The common stock owners. This has to be fraud.

[SoCalDem]

6. pension funds of "appropriated" companies often went "poof"

maybe they are in play here too.

[muriel_volestrangler]

10. Not necessarily; what they may have done it split their own money into 2 classes

Say they had $1m to invest, and the IRA limit was $5,000; $995,000 goes into something like zero dividend preference shares that a redeemable after a fixed time for a fixed amount (effectively a loan, but which are theoretically tradeable), but are given priority on being redeemed, and the $5,000 into shares that get to earn all the capital gains (or income) above that, which they put into the IRA. If the total value doubles in 5 years, and the ZDP shares are redeemable for 110% of their initial value after 5 years, then the $995,000 turns into $1,094,500 (a gain of $99,500, on which they have to pay normal tax), and the $5,000 into $2,000,000 - $1,094,500 = $905,500 - 18,100% of their original value. And what this has done is put nearly all of the gain into the tax-friendly environment of an IRA.

Now, the question would be whether if it was justifiable to split the gains like that, and put the part expecting the high capital gains in an IRA. It wouldn't be fraud of other investors; but you might call it defrauding the IRS.

[renate]

11. well... maybe this is how he thought he could get away with it

You've explained it all as clearly as it could possibly be, and yet it all kind of turns into "wah wah wah" in my head when I try to read it. I know I'm kind of math-impaired, but they must have figured that a sizeable percentage of the electorate also hears "wah wah wah" and just kind of assumes that it must be legal if a company with lawyers like Bain's did it.

Thank you for your explanation, and I apologize for my dimness. I do think I understand the part about the gain going into a tax-friendly IRA.

[muriel_volestrangler]

12. Well, it's a guess, but it seems to bear some similarity to the WSJ video

I really don't know how it would sit with the tax laws of the USA. But that's the kind of thing that happens for rich people - they pay tax lawyers to look for loopholes allowing the most favourable tax treatment that is legal (or hideable ...).

[GardeningGal]

4. Very tricky indeed

Also sounded a bit like insider trading to me.

[Ruby the Liberal]

7. Great find!!

Thought this might be a part of it - investing in takeover targets, but it is really sneaky to allow this in their sheltered accounts.

Joining the chorus of insider trading suspicions here.

[Ruby the Liberal]

8. Just noticed - WSJ aired this March 29, 2012.

And it is JUST now getting some traction?

[Scuba]

9. Does Rupert know they did this?

Are those folks still employed?