Mitt Romney in 1990 with Bain & Co. founder Bill Bain, who reportedly… (Boston Globe, Justine Schiavo )
WASHINGTON — When Mitt Romney launched Bain Capital in 1984, he struggled at first to raise enough money for the untested venture. Old-money families like the Rothschilds turned down the young Boston consultant.
So he and his partners tapped an eclectic roster of investors, raising more than a third of their first $37-million investment fund from wealthy foreigners.
Most of the foreign investors' money came through corporations registered in Panama, then known for tax advantages and unusual banking secrecy.
Previously unreported details, documented in Massachusetts corporate filings and other public records, show that Bain Capital was enmeshed in the largely opaque world of international high finance from its very inception.
The documents don't indicate any wrongdoing, and experts say that such financial vehicles are common for wealthy foreign investors. But the new details come as President Obama has criticized Romney for profiting from Bain Capital's own offshore investment entities, which are unavailable to most Americans.
The Romney campaign declined to comment on the specifics of Bain's early investors. Romney has argued that his offshore investments are entirely proper, and that he has paid all the U.S. taxes that he owes. The offshore funds do provide tax advantages for foreign investors, allowing Bain to attract billions of dollars.
"The world of finance is not as simple as some would have you believe," Romney said in an interview this week with National Review Online.
The first outside investor in Bain was a leading London financier, Sir Jack Lyons, who made a $2.5-million investment through a Panama shell company set up by a Swiss money manager, further shielding his identity. Years later, Lyons was convicted in an unrelated stock fraud scandal.
About $9 million came from rich Latin Americans, including powerful Salvadoran families living in Miami during their country's brutal civil war.
That first investment fund — used to invest in start-up companies and leveraged buyouts — paid out a stunning 173% in average annual returns over a decade, according to a prospectus prepared by an outside bank. It was the start of the private equity powerhouse that ultimately fueled Romney's political career. He now cites his experience at Bain as a chief qualification for the White House.
Romney faced unusual complications when he launched Bain Capital, a spinoff of Bain & Co., the Boston consulting firm he joined when he graduated from Harvard Business School.
At the time, U.S. officials were publicly accusing some exiles in Miami of funding right-wing death squads in El Salvador. Some family members of the first Bain Capital investors were later linked to groups responsible for killings, though no evidence indicates those relatives invested in Bain or benefited from it.
Romney has said he checked the foreign investors' backgrounds. His campaign and Bain Capital declined to provide specifics.
Alex Stanton, a spokesman for Bain Capital, said confidentiality rules barred him from commenting on the investors.
"The hyperbole of political campaigns cannot change the fact that Bain Capital has operated with high standards of integrity and excellence, including compliance with all applicable laws and regulations regarding the vetting of our investors in consultation with experienced counsel and other advisors," he said. "Any suggestion to the contrary is baseless."
Matt McDonald, a spokesman for the Romney campaign, also declined to discuss details of the original fund. "There were many investors who saw the opportunity of a firm that could help fix broken companies and help them grow."
But when Romney and his partners started the firm, Bain & Co. founder Bill Bain — worried the new venture could fail — barred them from soliciting current clients or corporations that would have to publicly disclose the investment, according to an early Bain Capital employee.
Bain partners put in $12 million of their own money, then sought the rest from wealthy individuals.
Records show the first investment in Bain Capital — $1.25 million in June 1984 — was in the name of Jean Overseas Ltd., registered in Panama by Marcel Elfen, a Swiss money manager. Later, the investment was doubled.
The Panamanian shell company apparently was a vehicle for Lyons, the British businessman and philanthropist. Lyons died in 2008.
His son, David Lyons of Quebec, said in a phone interview that he had never heard of Jean Overseas, but he confirmed that his father was "absolutely" an early investor in Bain Capital and said that Elfen, who died last year, was his father's money manager.
David Lyons said that wealthy Europeans like his father often invested through offshore shell corporations. "It allowed some confidentiality," he said. "It allowed a lot of things."