Oklahoma billionaire George Kaiser has been in the headlines in recent months thanks to his role as a major investor in Solyndra LLC, the now-bankrupt California solar panel maker hailed by President Obama as a model for America's "clean energy future."
Congress is investigating why the Obama administration gave Solyndra a $535 million loan guarantee despite multiple warnings from career bureaucrats and private sector investment experts that the company was a poor risk, lacked a realistic business model and was likely to go bankrupt as a result.
Other investigations are being conducted by the FBI and the Treasury Department's Inspector-General, and the issue is likely to remain on the public mind throughout the 2012 presidential campaign as Republicans claim Solyndra's failure demonstrates that government "cannot pick winners and losers in the marketplace."
Because Kaiser was a campaign "bundler" - an individual who collects contributions to a candidate from others that are then simultaneously given to the candidate - who raised about $250,000 for Obama during the 2008 campaign, congressional Republicans and media analysts have speculated that the Solyndra loan guarantee was nothing more than using tax dollars to reward a political supporter.
But the Solyndra scandal is far from Kaiser's first brush with political controversy. As the Sunlight Foundation's Bill Allison reports today, Kaiser has become extraordinarily wealthy by taking advantage of the federal tax code in ways that some tax experts - including the IRS - believe to be illegal.
As Allison describes it in his Sunlight post today, "in one six year period, during which he increased his net worth enough to land him on the Forbes list of the 400 wealthiest Americans, Kaiser reported taxable income to the Internal Revenue Service just once, totaling $11,699--equivalent to a full-time hourly wage of $5.62."
During the 1980s bust in the oil industry in Oklahoma and Texas, Kaiser bought up struggling energy companies whose losses provided him with tax deductions that effectively hid his own income.
As an example, Allison points to Kaiser's purchase of Waterford Energy, "which had all of $7 million in assets and some $151 million in losses on its books. The losses were valuable--under the Internal Revenue Code, a company can use past losses as credits, known as net operating losses, to reduce their tax burden in profitable years."
That acquiring the firm's losses for his tax use was a key reason for Kaiser's purchase of Waterford was acknowledged when the firm "filed a plan of reorganization in a Texas bankruptcy court that stated that one of the principal motivations of the plan was to 'preserve the tax attributes of the debtor in order to allow the debtor to realize the benefits of the tax attributes,'" according to Allison.
But in 1997, the IRS rejected the Waterford losses, Allison reports, saying "losses resulting from acquisitions made to evade or avoid income tax are prohibited." Kaiser challenged the IRS in court and ultimately settled with the tax agency for $3.7 million, or 15 cents on the dollar.
Taking advantage of tax loopholes is, of course, legal, and Kaiser is far from unique among wealthy investors in doing so. Even so, critics across the political spectrum to point such cases as evidence the tax code encourages evasion, influence peddling and other forms of political corruption.
Allison is a veteran newspaper investigative reporter who first examined Kaiser in a 2001 book co-written with Charles Lewis of the Center for Public Integrity, entitled "The cheating of America." For more on Kaiser, go here on the Sunlight web site.
I suppose we should talk about that Doritos ultrasound ad
Daniel J. Mitchell - The War against Cash, Part I
Kurt Schlichter - The Case for Donald Trump
CNN's Carol Costello weighs in on the Doritos 'fetus' ad
Did Travis Haley Have A Negligent Discharge?
The Remainderman | Human Events
Feminists vs. The Super Bowl Commercials | RedState