How the business community works in New York

Last week Governor Cuomo was joined by John Mack and Leslie Whatley to launch Start-Up NY, which will create zones around universities where businesses can locate tax-free for 10 years. Mack, formerly CEO and chairman and currently senior advisor of Morgan Stanley, will be an advisor to the governor and to Empire State Development’s board on the program. Whatley, formerly global head of corporate real estate at Morgan Stanley, will be running the program as executive vice president.

Why did Cuomo appoint Whatley and Mack to these new positions? From Crain’s New York Business:

The governor said that when he spoke to Ms. Whatley, the former head of global real estate at Morgan Stanley and previously JPMorgan Chase, about running the program, she said, “I know nothing about government,” and he replied, “Exactly. You’re hired.”

The governor explained his reasoning: “This is not about how government works; this is about how the business community works.”

So how does the business community work? In 2011 PAI released a report about the dodgy practices of corporations affiliated with the Committee to Save NY, formed by the Partnership for New York City and the Business Council of New York State (both supporters of Start-Up NY) to push for an austerity budget in NYS. We found these corporations benefiting from almost $20 billion in state corporate tax breaks each year, $2 billion in state and local subsidies and control of at least 1,700 offshore tax havens.

We also released a report in 2011 specifically concerning the practices of the six largest banks, four of which are headquartered in New York. Overall these banks paid extremely low federal and state income taxes between 2001 and 2010, not including income which may be in offshore tax havens. Together they maintained over 900 subsidiaries incorporated in offshore tax havens in 2010.

Whatley and Mack likely know quite a bit about this, considering Morgan Stanley’s place among these shining stars of corporate irresponsibility.

  • In 2009 and 2010, Morgan Stanley paid only 17.8% in federal income taxes though the corporate rate is 35% in the tax code.
  • Morgan Stanley had 344 subsidiaries incorporated in offshore tax havens in 2010.
  • Mack was steering the ship when the company accepted $10 billion in federal bailout funds and tapped the Fed’s Primary Dealer Credit Facility 212 times to avoid collapse.*

Who better to run a program designed for new businesses to avoid taxes than former executives of a company that has shown a real affinity for avoiding taxes?

*John Mack was CEO of Morgan Stanley from 2005 to 2009. He made $38.5 million in 2005, including a signing bonus, and another $37.3 million in 2006. Mack refused his bonus in 2007, citing the financial crisis and bailout, but still ended the year with a cool $41.8 million, including stock options “awarded in fiscal 2007 for performance in fiscal 2006,” according to the firm’s 2010 proxy statement. He also refused a bonus in 2008 and 2009, earning only $1.9 million and $1.2 million respectively those years. Mack stepped down as CEO at the end of 2009, but continued as chairman before retiring in 2011. Information about his total income in 2010 and 2011 is not available, but he did earn a doubling of his base salary to $2 million in 2010.