How Jeb Bush’s ﬁrm made him rich — and created a nest egg for his family
Backers Of Bush Nonprofit Include Banks, Schools, Lottery.
Shortly after Jeb Bush left the Florida governor’s office in 2007, he established his own firm, Jeb Bush & Associates, designed to maximize his earning potential as one of the country’s more prominent politicians. In the tax returns he released Tuesday, GOP presidential candidate Jeb Bush reported large deductions for payments to “pension and profit-sharing plans.” The payments averaged $350,000 a year for the past five years, far more than most people could contribute to an individual retirement account or 401(k) plan.Jeb Bush’s tax returns take us back to the time when it was a point of pride for high-income earners to buy a piece of a Panamanian gold mine, a Hollywood movie, a Texas oil well or a California alpaca farm.WASHINGTON (AP) — Big-time donors to a nonprofit educational group founded by Jeb Bush, disclosed for the first time Wednesday, highlight the intersection between Bush’s roles in the worlds of business, policy and politics years before he began running for president.
Tax returns disclosed this week by the Republican’s presidential campaign revealed that the business not only made him rich but also provided a steady income for his wife and one of his sons. But if that’s really the case, why is he continuing to obfuscate some of his most lucrative and potentially controversial business dealings he had before announcing his candidacy, like his work as an “adviser” for investment bank Lehman Brothers?
The family salaries were among the new information to emerge from this week’s disclosures, which provided the most detailed picture yet of the structure and finances of the firm that formed the core of Bush’s private-sector work during the past eight years. Not much is known about what Bush actually did for Lehman—the firm that went belly-up in 2008 and sparked the wider financial crisis, and Barclays, the bank that purchased Lehman out of bankruptcy and continues to work out of its midtown Manhattan headquarters. The returns show that the company set up a generous and well-funded pension plan now rare in corporate America, allowing Bush to take large tax deductions while he and his wife built up their retirement portfolio. Bush released 33 years of returns on Tuesday, and his effective tax rate of 40 percent in 2013 contrasts notably with that of the last Republican presidential nominee, Mitt Romney, who disclosed an effective rate of 13.9 percent in 2010.
He began working for the former after his term as Florida governor ended in 2007, and continued working for the latter until the end of 2014, when he decided to run for president. While he may have made millions after leaving the Florida governor’s mansion, Jeb wrote, he didn’t debase himself by doing any lobbying. “That was a line I drew and it was the right one.
They also illustrate how Bush — who has touted his business experience on the campaign trail — relied on his public persona and political connections to rapidly increase his net worth. Supporters in each of those stages of his career contributed to his educational foundation — which, in turn, sometimes supported causes benefiting its donors.
The two banks were his biggest sources of income in recent years: Bush earned more than $14 million working for Lehman and then Barclays, which based on my understanding of simple math accounted for nearly half of the $29 million he made after he left government. They include Rupert Murdoch’s media giant News Corp., GOP mega-donor Paul Singer’s foundation, energy companies such as Exxon Mobil, even the Florida Lottery. The narrative aspires to help Bush stand out among the crowded GOP Republican field provide a contrast with Democratic candidate Hillary Rodham Clinton. Bush’s dealings in real estate allowed him to pay almost no income tax, even when he earned considerable wages and had little to no risk of economic loss on his investments. She has faced criticism about using a private email server and accepting donations from foreign governments through her family’s nonprofit while secretary of state.
Bush might surprise us, but if I had to guess I’d say this is something he’ll pay lip service to during the campaign, but then do little or nothing about if he actually becomes president. The tax records indicate that Bush’s wife, Columba Bush, was collecting an annual salary that averaged about $31,500 — totaling more than $220,000 over seven years.
A spokeswoman for Bush declined to provide specifics about his work for the banks other than point to various media accounts, including those by this reporter. He’d be following a well-worn path if he does — candidates always say they’re going to change Washington’s culture and reduce the power of special interests, but somehow they never do. She said Bush is “committed to the highest levels of transparency.” Until recently, the Foundation for Excellence in Education revealed the names of its donors only from 2012 to 2014. But Bush, according to people with direct knowledge of his activities, helped the firm look for business from well-heeled clients, including everyone from hedge funds to billionaire investors like Carlos Slim Helu, the Mexican business magnate widely regarded as the world’s richest man.
That’s in large part because the institutions, norms, and relationships of Washington, D.C., are so firmly entrenched that one administration can’t do too much about them. In response to an Associated Press request seeking the full list dating to 2007, the foundation released nearly every donor during its existence, encompassing 428 contributions, with just one or two of the 187 donors still remaining anonymous. “Over the last eight years, we raised $46 million to advance proven reform policies at the state level to give more children the opportunity to rise up and achieve success in school and life,” Bush wrote this week as part of his tax return disclosure. “There is no issue more critical to our long-term success as a nation than transforming America’s education system, and I’m proud of the work my foundation has done to advance meaningful reforms to put us on the right path.” The documents provided to The Associated Press show donors listed by range of contribution broken into eight categories — with $5,000-$10,000 at the low end and $1 million and over at the top.
And whatever kind of reform a president might have in mind, it’s always secondary to the policy goals any administration has, so it’s easy to put it to the side in favor of more pressing issues. But he paid no regular income tax and paid less than $2,000 in alternative minimum tax, thanks to his business partnership with Armando Codina, a Miami real estate developer.
Bush was supposed to be providing high-level insight into economic issues for the big hedge fund, which was one of a handful that correctly predicted the mortgage meltdown that eventually led to Lehman’s collapse. The drop may be due to any number of reasons, but one lobbyist friend told me he was leaving the business because a divided government means there just aren’t enough bills being passed to lobby about. Lax described the most common user of the tax strategy as a small-business owner or self-employed professional, such as a doctor, looking to save as much pretax income as possible for retirement. One of Bush’s first consulting clients was InnoVida, a Miami-based company that marketed prefabricated housing materials for use in disaster zones, whose chief executive was ultimately convicted of fraud.
According to former Lehman executives and various news reports, Bush met with Slim to ask him to make an investment in the firm in the summer of 2008. On the flip side, there are public-spirited people who claim they have been shut out by the administration for being the kind of registered lobbyists we would presumably want more of. With Jeb Bush in office, Becker was among supporters writing the governor seeking appointments or funding, the AP reported earlier this year. “It seems whenever I am in touch with you it is for a favor and I hate to have to do so again,” Becker wrote in 2006, seeking citrus industry funding. It was regarding a specific telecom project,” she said in an email. “It was not regarding [a] general Carlos Slim infusion of cash to save Lehman Brothers.” She would not deny, however, that this investment could in some way have helped prop up Lehman Brothers.
In fact, Campbell also refused to outright deny past media reports, including this one in The New York Times, which cites emails explaining how Bush was involved something called “Project Verde,” a firm-wide effort to get an investment from Slim and potentially help save Lehman from collapse in 2008. The most generous organization was the Walton Family Foundation, formed by Wal-Mart’s founders, which gave from $3.5 million to more than $6 million.
Would you rather that labor unions, environmental groups, and civil rights organizations had the ear of the government, or oil companies, anti-abortion groups, and the NRA? Occasionally, the former governor was a keynote speaker at dinners with chief executives and senior managers of companies doing business with Barclays. Don’t expect to find any of what I’m reporting here when Bush releases a more detailed financial disclosure forms in a few weeks with federal election officials.
It’s of course hard to argue that Bush shouldn’t earn a living from his contacts in business that he made in government (Bush stated he never lobbied on behalf of a company) or inherited through his family connections. This is especially true when you consider the hyper-sleaze of Hillary Clinton, the likely Democratic nominee, who became a mega millionaire almost overnight by constructing possibly the most conflicted political-business-charity machines in modern political history. But as an avowed small-government conservative, you would think Bush would know all about corrosive effects of crony capitalism, where executives at the big banks sit at its epicenter, ready to call in favors from politicians who in turn can help make those executives make a lot of money.
Among the company’s clients were the online education firm Academic Partnerships, the asteroid-mining company Planetary Resources, and the health-care companies Clinical Medical Services and All-Med, campaign officials said. Bush told reporters he made a commitment not to take a public pension when he was elected Florida governor. “Had I taken my pension I would have started getting it this year,” he said. “Someone asked about this and I had totally forgotten that I had not taken the pension and I would instead be receiving something like $29,000 a year. So were financial groups and big businesses, with the Charles and Helen Schwab Foundation giving from $1.6 million to $3.25 million and the SunTrust Bank Foundation $300,003 to $750,000.
When you have a particular interest in something — let’s say you’re a defense contractor who really wants the government to fund your new fighter plane — you’re going to marshal all kinds of resources to make it happen. A large share of the retirement contributions went to a defined-benefit plan for just two employees, according to records the firm filed with the Labor Department. Bush’s pension isn’t nearly in the same league as the IRA held by Mitt Romney, the GOP’s 2012 presidential nominee, who in filings reported his retirement fund held between $20.7 million and $101.6 million. While Hillary Clinton played a leading role in an organization that accepted millions of dollars from foreign entities, Bush’s group accepted money from just one international source. British-based Pearson PLC, which has a subsidiary in the United States, donated between $125,004 and $250,000, according to information provided by Bush’s team.
That leaves unknown the source of over $2.3 million given from 2011 to 2013 to a group formed “to make Florida’s education system a model for the nation.” Bush, the maximum that could go into a 401(k) plan this year is $59,000 including the employer’s contribution and the current limit on IRA contributions is $6,500. Bush earned about $49,000 in wages and an additional $28,000 in capital gains, but he showed an adjusted gross income of negative $80,000, again thanks to losses from his real estate deals. Bush was hardly alone in taking advantage of tax rules that had become so riddled with loopholes that paying income tax was, for many wealthy people, optional.
One set of rules, known as the at-risk rules, provided that taxpayers could not take losses in excess of the amount that they had placed at risk in an investment. Meanwhile, the real estate market crash led to the failure of many banks, including Broward Federal Savings and Loan, the holder of the second mortgage on the building. Bush did report a gain of $888,192 from 1390 Brickell alongside a loss of $328,623, with the gain presumably reflecting a portion of the taxable income arising out of the settlement.
Bush reported losses of more than $22,000 from Brickell, but classified $21,931 as loss from a nonpassive activity, and thus not subject to limitations. News reports at the time indicated that the partnership sold the building for $8 million in 1991, or about $1 million more than the existing mortgage.
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