If Bank of New York Mellon Has So Many Tax Shelters It Doesn’t Pay Taxes, How Is It NY’s “Main Street”?

Update: Kelly just stepped down, citing “differences in approach.”

A number of outlets have carried the report on the number of CEO’s getting paid more than their companies paid in taxes last year, but few have linked to the actual report, which means just the usual suspects, like GE’s Jeff Immelt, are getting the bulk of the focus.

Yet if you look at the appendices (pages 31-33–click the picture to the right to enlarge it), the report not only lists all the companies paying their CEOs more than they pay Uncle Sam, but provide details like the company’s political spending.

Among those listed in the report not getting much attention is Bank of New York Mellon’s CEO Robert Kelly, who got millions while his company got a $670 million tax refund.

Bank of New York Mellon CEO Robert Kelly took home $19.4 million in 2010. The bank, the same year, claimed a $670 million federal tax refund, despite $2.4 billion in U.S. pre-tax income.

Kelly’s compensation has skated above $10 million during each of the past three years of financial crisis. The CEO artfully managed to avoid the salary limits President Obama’s “pay czar” imposed on bailed-out banks by making sure Bank of New York Mellon repaid the taxpayer funds before those restrictions went into effect.27 The bank raised the money to pay back its $3 billion in TARP assistance by taking on uninsured debt, slashing dividends, and issuing new stock.28

The Bank of New York Mellon, with 10 subsidiaries in tax havens, did not pay a dime in federal taxes in 2010. However, the banking giant did devote $1.4 million to lobbying over the year. The bank’s lobbyists worked diligently to exempt currency trading from new transparency and oversight rules.29 In related news, officials from eight U.S. states are conducting inquiries or pursuing litigation against Bank of New York Mellon for ripping off state pension funds by overcharging for currency trades. The Securities and Exchange Commission and Justice Department are also investigating the allegations.

Screwing pension funds on currency trades is not the only anti-social behavior the federal government gave BNYM a refund to engage in. They’re also the trustee on the controversial Bank of America settlement.

That’s relevant because of the terms the settlement’s chief defender, Kathryn Wylde, has used to defend it, particularly in the face of Eric Schneiderman’s lawsuit to stop it.

The lawsuit angered Bank of New York Mellon, and as Mr. Schneiderman was leaving the memorial service last week for Hugh Carey, the former New York governor who died Aug. 7, an attendee said Mr. Schneiderman became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public. Ms. Wylde, who has criticized Mr. Schneiderman for bringing the lawsuit, is also chief executive of the Partnership for New York City.

[snip]

Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

Now, as I’ve already pointed out, it’s sort of odd for Wylde to defend Bank of America, a North Carolina corporation, in her role as NYC’s chief booster.

But if BNYM is paying nothing in the US–rather is getting tax refunds–on its $2.5 billion global profit, then presumably it’s a corporate resident of some other place, not New York, not the United States. So maybe, in addition to North Carolina, Wylde has added the Cayman Islands to the list of places whose corporations she defends as her own Main Street?

In any case, Wylde says Schneiderman shouldn’t sue to prevent BNYM’s scam settlement with BoA. Why is she protecting such a giant corporate deadbeat?

Marcy has been blogging full time since 2007. She’s known for her live-blogging of the Scooter Libby trial, her discovery of the number of times Khalid Sheikh Mohammed was waterboarded, and generally for her weedy analysis of document dumps.

Marcy Wheeler is an independent journalist writing about national security and civil liberties. She writes as emptywheel at her eponymous blog, publishes at outlets including the Guardian, Salon, and the Progressive, and appears frequently on television and radio. She is the author of Anatomy of Deceit, a primer on the CIA leak investigation, and liveblogged the Scooter Libby trial.

Marcy has a PhD from the University of Michigan, where she researched the “feuilleton,” a short conversational newspaper form that has proven important in times of heightened censorship. Before and after her time in academics, Marcy provided documentation consulting for corporations in the auto, tech, and energy industries. She lives with her spouse and dog in Grand Rapids, MI.

14 replies
  1. earlofhuntingdon says:

    It was 15-20 years ago when tax departments morphed from complying with multinational laws and regulations to making profits by skirting them. They became as aggressive as any IBM sales team and woe to the corporate staffer who asked an awkward question about the propriety of that. There have been quite a few years, in fact, where tax “policies” made the difference between profit and loss, between no or average bonuses and big ones.

  2. earlofhuntingdon says:

    Presumably, Wylde takes that position because its the banks’ position, regardless of the bank’s residency. She calls herself the “consumer’s representative” in much the same way that Mr. Obama considers himself a Democrat and friend of the working and middle class.

  3. Strangely Enough says:

    I’m assuming that since around 50% of Americans are paid so poorly, they essentially don’t owe taxes, that makes BNYM just like them…

    Yeah, I got nothing.

  4. bittersweet says:

    Okay, I am going to show some lack of tax law knowledge here. i sort of need more information I guess.
    “Bank of New York Mellon CEO Robert Kelly took home $19.4 million in 2010. The bank, the same year, claimed a $670 million federal tax refund, despite $2.4 billion in U.S. pre-tax income.”
    In a normal world, Robert Kelly would have paid income tax on his $19.4 million in 2010. As would have the other executive recipients of outrageous salaries. Thus the Corporate profits would have been reduced by the same amount, reducing their tax liability, but the Federal Government would have received the tax monies from the Executives instead of the Corporation. No net loss to the IRS, correct? So the corporate officers pay themselves instead of paying the IRS. That makes good sense if you are the guy getting the cash. But which “person” pays the higher tax rate? Individuals or Corporations? Do not individuals pay a higher rate on over a million incomes? (Actually over $200,000).

    Are the tax refunds a result of deductions for previous years’ losses, and “refunds” from projected tax payments sent in during the year..(do corporations do projected income tax payments?) If a corporation is registering as a foreign entity to avoid paying corporate taxes…doesn’t giving their executives big taxable bonuses put more money into the IRS than if the profit stayed in the the “offshore” corporation?

    Do not get me wrong. It is not as though I do not believe these businesses are dirty as the Devil. I just wish to understand how their tax scam works out in real money.

  5. rkilowatt says:

    BankOfNewYorkMellon is fine example of what “old money”, which is an overwhelming syndicate of accumulated privileges.

    “Old money” has already, long ago, gotten rich. Their primary interest is maintaining their elite status via all forms of control.

    “Governing”and “government” are euphemisms for “control”. There is no other way to secure their status. Security is paramount.

    Cf. “new money”, which may be huge in amount, yet has not the dominating power of accumulated connections and shared interests and agendas common to long-established parties.

  6. klynn says:

    “In any case, Wylde says Schneiderman shouldn’t sue to prevent BNYM’s scam settlement with BoA. Why is she protecting such a giant corporate deadbeat?”

    I hope you make a TV appearance soon and get to ask this question.

    Main St. should = taxpaying residents and businesses

  7. emptywheel says:

    Um, this is weird.

    As I updated above, Kelly just stepped down. There’s something going on at BNYM.

  8. rugger9 says:

    I’m not surprised, BYNM is not only involved in the settlement that will die and Schneiderman’s ousting, but for other issues tied to their trustee work. After all nevada just filed suit on the 2008 settlement citing welshing on the part of B of A.

    The fact that the chief rat has left the building tells me the SEC is on the way.

  9. bittersweet says:

    I still am hoping that someone brighter than me will explaining the whole individual verses corporate tax thing I asked in #4. I really do not understand the intricacies of how this all works, it makes me feel like the headline ought to be, “Newsflash: rich make more money than you!”
    How do corporations pay taxes?

  10. joberly says:

    @emptywheel: The *NY Times* reports tonight on the record, and via a pair of anonymous insiders that the reason for Kelly’s departure is Board of Directors unhappiness with him even before the latest bad news. There are now two stories about BNYM alleged fraud that are on the front pages of the business section: 1. that BNYM aided BofA’s (Countrywide) mortgage fraud (NY AG Schneiderman’s charge) 2. that BNYM cheated state pension funds on currency trading. It’s odd that the leading state AG going after BNYM on # 2 is Ken Cucinnelli of Virginia, the same climate-change no-nothing AG who has so aggressively sought the work-papers of Prof. Mark Mann, formerly of the U of VA. Go figure.

  11. greengiant says:

    @bittersweet:
    Yo, the math says Kelly got say 19 million, the bank got 640 Billion refund, and instead of paying 33 percent or so to the Feds and say 9 percent to NYState and no FICA, the BNY paid nothing on 2.4 Billion, so the BNY put 648 Million that they did not pay in taxes offshore somewhere to wash rinse and repeat.

    The tax avoidance scam has gotten so bad that the MBAs are all over shifting profits off shore that they have gone beyond intellectual property shifted to Bermuda and oil royalties paid as taxes to uneconomic activities. If the parts warehouse or job manufacturing causes taxes to be paid, then off shore it you are international.

    The problem is the local business or corporation do not get to play that game.

  12. Bob Schacht says:

    @bittersweet:
    Your answer lies in “capital gains,” which are taxed differently (and at a lower rate) than wage income. The super-rich get most of their money from capital gains. Most of the super-rich don’t really “work” for a living, in any sense that we are familiar with.

    The big companies have scores of tax lawyers looking for every loophole in the tax law. They have more tax lawyers than the IRS. And Congress likes to pick on the IRS, cutting its budget and making it even more impossible to do their jobs.

    Bob in AZ

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