This article was reported in partnership with The Investigative Fund at The Nation Institute, with support from The Puffin Foundation.
Marc Leder, a wealthy investor, played host to Mitt Romney last May at a private fundraiser at his $4 million home in Boca Raton. Little did Leder know at the time, however, that someone would videotape the event and later leak it to the world, revealing the GOP standard-bearer in the act of caustically dismissing 47 percent of the country as too “dependent upon government” even to consider voting for him this year.
Leder attempted to duck the ensuing storm of media attention, telling Fortune that he had simply “hosted a fundraiser for an old friend.” But Leder’s ties to the candidate run deeper than campaign contributions or an old friendship. As an investor, he is part of a network of links to the Romney family business empire that will acquire enormous relevance if the GOP nominee manages to ascend to the White House.
In 2008, soon after Romney ended his first bid for the presidency, his eldest son Tagg and his chief fundraiser, Spencer Zwick, formed Solamere Capital, a private equity firm named after the exclusive community in Utah where Romney owned a vacation ski lodge.
What Tagg lacked in experience in the world of high finance, he made up for with a vast network of political connections forged through his father, who seeded the firm with $10 million and was the featured speaker at its first investor conference in January of 2010. Romney also reportedly gave strategic advice to the company, which secured prominent campaign donors as some of its first investors.
Unlike most private equity firms dedicated to analyzing and buying companies, Solamere specializes in something else: billing itself as a “fund of funds” with “unparalleled networks,” it provides investors with “unique access” to an elite set of other private equity firms and hedge funds. Sun Capital Partners, the fund founded by Leder, is one of at least thirteen Romney-linked firms in Solamere’s network, according to a prospectus circulated among potential investors and uncovered by The Boston Globe last year. Solamere also has an investment relationship with Bain Capital, the pioneering fund founded by Mitt Romney.
Solamere, a firm predicated on its founders’ relationship with Romney, presents a channel for powerful investors to influence the White House if he wins. Private equity executives looking to lobby a Romney administration may very well have a leg up if they are already doing business with the firm that the president created for his son.
Requests for comment from a Solamere representative for this article were not answered.
The looming conflicts range from general matters that affect all private equity firms—such as tax changes or the new rules mandated by the Dodd-Frank financial reform bill—to more specific concerns relating to businesses owned or controlled by Solamere’s partner firms. Many of these businesses, in fact, depend on government contracts; indeed, some have been accused of fleecing taxpayers (which is ironic given that many private equity titans claim to support Romney for his unabashed belief in small government and free enterprise). A Romney administration could directly affect the profitability of these companies—and, by extension, potentially the success of Tagg’s venture.
“It’s absolutely a conflict of interest,” says Adam Smith, the communications director for the group Public Campaign, which works on issues concerning money in politics. “Romney can’t un-know that his son’s investment company could benefit financially from his policies. And the other investors—many of whom are likely Romney campaign donors—will have extra access and influence in a Romney administration.”
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Take Leder, Romney’s Boca Raton host, whose Sun Capital firm bought a stake in the Scooter Store last year. The company, known for its ubiquitous television ads promising seemingly free motorized wheelchairs for Medicare beneficiaries, has struggled as the Centers for Medicare and Medicaid Services, the federal agency that governs the programs, implements rules to curb rampant billing fraud. As a CMS report noted last year, 80 percent of the claims for scooters and power wheelchairs did not meet Medicare requirements, meaning that $492 million a year is being improperly spent.