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New York Atty. Gen. Playing Politics with Private Equity Firms

Posted by Steve Markowitz on September 3, 2012

New York Atty. Gen. Eric Schneiderman is investigating some of the Country’s largest private equity firms.  The timing and of the investigation smells fishy.  One of the private equity firms is Bain Capital, Republican presidential candidate Mitt Romney’s previous firm.  This, coupled with the facts that the practice in question has been occurring for 20 years and Schneiderman is a Democrat and supporter of President Obama, are troubling.

In essence the tax practice in question involves whether compensation to the private equity firms and their partners is considered capital gains, taxed at 15%, or ordinary income taxed at higher rates.  While the IRS has known of the practice for 20 years, it only began looking into the matter in 2007.  Some five years later the IRS is yet to make a ruling.  This brings into question the legitimacy of New York AG Schneiderman’s investigation, especially since he has no power to enforce federal tax laws.

While it is reported that Mitt Romney has not benefited from the tax practice in question, Schneiderman’s announcement this close to the election will paint the Republican presidential candidate with a negative brush.  This is no coincidence.  As they say, if it quacks like a duck it is not an elephant.

The politicization of federal and state prosecutors has been problematic long before Barack Obama entered the political scene.  However, Obama promised to change the way Washington did business.  This was but one of his many broken promises.  Instead, he has brought Chicago-style politics to a national level.  So much for hope and change.

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