As you heard reported on Red Maryland Radio last night, Democratic Congressional candidate John Delaney, made his fortune charging high interest rates to small businesses, and foreclosing on mortgages to make a profit.
In the last six years CapitalSource has grown into a $4 billion (market cap) enterprise by making pricey secured loans–often as high as four percentage points over Libor–and thumping borrowers at the first sign of trouble.
According to the same Forbes article, Delaney converted CaptialSource into a Real Estate Investment Trust (REIT) to avoid paying higher taxes.
Here’s why he did it. REITs, which must disburse 90% of their earnings to shareholders, pay no taxes. Delaney believes the recap will lower CapitalSource’s overall tax rate to 21% this year from 39%, increasing profits by $70 million if earnings meet Wall Street expectations.
In Ohio, CaptialSource engaged in a scheme to profit from the foreclosure crisis by taking homes from families.A review of land records and court filings in Cuyahoga County, Ohio reveals CaptialSource purchased thousands of tax liens and then initiated foreclosure on homeowners.If the homeowners couldn’t pay the lien CaptialSource sold the properties at auction.
The University of Dayton Law Review analyzed CapitalSource’s business model.Ohio law allows lien holders to charge homeowners 18 percent interest and attorneys fees, in addition to their original debt.The Dayton Law Review also found that that tax certificate purchases like those made by CapitalSource “created entire neighborhoods of abandoned homes,” and a decline in the property value of surrounding homes.
Here is just a small sample of the foreclosure proceedings CaptialSource initiated in Cuyahoga County.
Delaney is also seeking to profit off this brand of vulture capitalism here in Maryland.The Maryland Judiciary Case Search database shows that CaptialSource has initiated foreclosure on over 800 homeowners in Anne Arundel County, Baltimore County, Montgomery County and Prince George’s County.
Maryland Democrats love to decry Republicans as the champions of vulture capitalism and tax avoidance for the wealthy.In John Delaney, they nominated for Congress, a master practitioner of both.
