US Election 2012: Mitt Romney fortune built with help from Robert Maxwell and Jack Lyons
Robert Maxwell and Jack Lyons, two of the most notorious figures in British corporate history, helped Mitt Romney build his $250 million (£160 million) fortune, it can be disclosed.
By Jon Swaine, Washington for the UK Telegraph
Maxwell, the late owner of Mirror Newspapers, invested $2 million in Mr Romney’s first private equity fund, which launched the controversial career in finance that the Republican presidential challenger now cites as proof of his ability to lead the US to prosperity.
He was recruited by Lyons, a late colleague of Mr Romney’s at Bain & Company and one of the “Guinness Four” who were convicted in 1990 over the infamous share-trading fraud at the drinks firm. Lyons and his family invested almost $3 million in Mr Romney’s fund.
Both Lyons and Maxwell kept their money in tax havens. The discovery of their financial links to Mr Romney comes amid mounting pressure on the former Massachusetts governor to disclose details of his own offshore holdings, including a Swiss bank account.
Amid an onslaught of attacks from Barack Obama, Mr Romney has repeatedly refused to release tax returns predating 2010.
Mr Obama’s campaign claims the documents may show that Mr Romney profited from the destruction of companies bought by his private equity firm, or paid even less than his current 15 per cent tax rate, thanks to his foreign accounts. The disclosure of the Lyons/Maxwell links also sheds light on one of the worst periods in the history of Bain, where Mr Romney was a senior management consultant. Its London office was ensnared in the Guinness scandal after being paid millions of pounds in fees for advising the drinks company.
In 1984, Mr Romney set up Bain Capital, the firm’s investment arm, overseeing fundraising from his Boston office. Corporate files obtained by The Daily Telegraph show that Lyons, whom Bain hired to help set up its British office, was his first investor, putting in $2.5 million via a front company in Panama.
Colleagues from the time said in interviews with The Daily Telegraph that the “unlamented” Lyons, the Yorkshire-born retail magnate and close ally of then-prime minister Margaret Thatcher, also reported back to Boston that he had signed up Maxwell, a friend and fellow City giant. “Jack took an interest in Bain almost as if we were his sons,” said one Bain executive based in London at the time. “He wanted us to succeed in the UK and he introduced us to a lot of people . . . I remember attending a luncheon in London with Robert Maxwell.”
Maxwell, an avowed socialist, invested through his British print firm, which was ultimately controlled by his secretive foundation in the tax haven of Liechtenstein. Lyons’s nephew, Graham, and a trust in his name, invested a further $225,000. Graham Lyons, now a barrister in London, declined to discuss Mr Romney’s fund, adding: “I’m not in finance.” He referred queries to Lyons’s son Jonathon, who did not respond.
A string of Bain partners invested about $12 million of their own money; Mr Romney putting up at least $160,000. Millions more came from investors in other tax havens including the Bahamas and Switzerland, and powerful families from El Salvador, some of whom were later linked to Right-wing “death squads” responsible for murders in their country’s civil war. The $37 million fund was a great success, funding among others the global expansion of Staples, the stationers. According to a prospectus, it yielded an average return of 173 per cent a year on stakes in 21 firms, making millions in profits for its investors. “Every couple of years I would get a cheque,” one recalled. “It was always a lot more than I had put into it”. One Bain executive said: “Bain Capital is now a multi-billion dollar fund, and it’s made Mitt very wealthy”.
Maxwell died in suspicious circumstances in 1991 at the age of 68. It emerged he had plundered hundreds of millions of pounds from employee pension funds to plug holes in company finances, prompting a partial bail-out by British taxpayers.
He had sold his British print firm at a vast profit. Its later owners did not respond to questions about what happened to the Bain Capital stake. Meanwhile Lyons found himself at the centre of the scandal at Guinness, which had paid Bain millions to help rescue its fortunes, in a deal approved by partners in Boston, such as Mr Romney.
Lyons, who was being paid $100,000 a year by Bain, agreed to join a group of Guinness allies buying up Guinness stock to boost its share price and make a 1986 takeover bid for rival firm Distillers more attractive. The takeover was successful, prompting Bill Bain, the firm’s founder and Mr Romney’s mentor, to write to Lyons from Boston: “We are all delighted and look forward to hearing the story of how you managed to pull it off.”
The truth was the deal secretly included £25 million in “success fees”, or bribes, for the allies to buy the stock, and guarantees of refunds for any losses – all illegal. Lyons and three others were convicted of theft and false accounting. While three were jailed, Lyons avoided prison due to ill health. He was stripped of his knighthood and CBE, and fined £4 million. He died aged 92 in 2008. There is no suggestion that Mr Romney, nor any of the partners in Boston had any knowledge of the wrongdoing.
A Bain colleague in London described the period as “traumatic”. Mr Romney avoided the fallout by focusing on Bain Capital. “Mitt was just another partner watching this thing unfold,” said the colleague. Another British former colleague described him as “bloodless”. He added: “He was the sort of person that you would admire rather than like, and I think that continues to bedevil his political career.”