With the release of Republican presidential candidate Mitt Romney's tax returns, most of the attention has focused on the candidate's wealth–and his low tax rate, which fell below 15 percent. But there may be other "red flags" in Romney's 500 pages of returns yet to be exploited by rivals on the campaign trail, and one of them is Romney's use of blind trusts.
Romney, like many wealthy politicians, put much of his fortune into blind trusts as a way of walling off his financial interests–a move designed to eliminate any appearance of conflict of interest. But are blind trusts truly blind? Back in 1994, when Romney ran for Senate against Sen. Ted Kennedy, Romney knocked Kennedy's blind trusts as "a ruse," saying anyone who wanted to could easily determine where their money was going.
Fortune senior editor Dan Primack said Romney's words then were essentially correct, and here's how one can "see through" the "blind" trust:
According to Romney's financial disclosure and tax forms, a majority of his investment income is derived from private equity funds (and related affiliate funds). And, within his private equity portfolio, most of the funds are managed by Romney's old colleagues at Bain Capital.
Romney hasn't been managing his Bain interests since creating the blind trusts, but he obviously knows about them. After all, they're based on a retirement package he negotiated upon leaving the firm in 1999. And he also knows about Bain's largest underlying investments in those funds. Portfolio companies like Clear Channel and Dunkin Brands (DNKN) and hospital chain HCA (HCA).
Or at least I assume he knows, because I assume he occasionally picks up The Wall Street Journal or just about any other newspaper that reported on Bain's purchases of those massive companies.
Could Romney's own words come back to haunt him as he campaigns in Florida and beyond? On CNN's Erin Burnett OutFront, Wall Street Journal senior economics writer Stephen Moore said Romney's 1996 words–and his 2010 tax form raises questions. "It's a problem."