Apple CEO Tim Cook speaks at a product-announcement event in Cupertino, California, on October 27, 2016. Photo by Stephen Lam/Getty Images.
By Alex Kane and Matt Cunningham
TYT has learned that the brother of White House Office of Management and Budget Director Mick Mulvaney, an architect of the GOP tax plan, is a portfolio manager for the secretive investment arm of Apple Inc., which under the tax plan stands to gain a bigger windfall than any other company.
A spokesperson for the White House budget office did not deny the connection, and in an email to TYT said, “The conflict laws do not extend to broad Government matters affecting a large and diverse group of the public, such as corporate tax reform. Further, there is no real or apparent conflict of interest between an employee’s duties and the financial interests of a sibling’s employer.”
The spokesperson added, “To put it better—all Americans are going to benefit from tax reform, so by that logic we are all ‘conflicted.’ That’s clearly not the case here.” The White House did not respond to questions about whether Mick Mulvaney had communicated with his brother or any Apple lobbyists about the tax plan.
Mulvaney’s brother Ted has been a portfolio manager for Braeburn Capital—Apple’s wholly owned investment firm—for at least 10 years, according to previous reporting about Braeburn. During that period, he and his wife donated $24,900 to his brother Mick’s four congressional campaigns.
Under federal ethics law, executive branch officials are prohibited from working on matters that would personally benefit them or their spouse financially. The law does not prohibit working on matters that would financially benefit siblings.
Asked about the Mulvaneys, Craig Holman, an ethics lobbyist for the watchdog group Public Citizen, told TYT, “The benefits to Apple Inc. and the Mulvaney family [are] emblematic of the self-dealing nature of this tax plan.”
The House passed its version of the plan on Thursday. The Senate version, which differs considerably, is expected to get a vote sometime after Thanksgiving. The prospects for passage of a reconciled bill through both chambers reportedly are far from certain.
From the outset, Mick Mulvaney has been a key driver of the GOP tax plan, reportedly saying that he was one of three members of the Trump Administration—alongside Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn—tasked with developing the tax plan.
In April, he told Fox News that they were discussing a range of tax issues, including “corporate tax reform, individual tax reform, [and] how do you repatriate earnings overseas.”
According to a new Public Citizen report, the GOP tax plan would let Apple repatriate an estimated $252.3 billion in overseas earnings to the U.S. at a tax rate of 12 percent. Apple would save an estimated $47.1 billion—the most of any corporation. The plan would lower the rate on U.S. earnings to 20 percent from its current statutory level of 35 percent.
Apple’s overseas earnings have been controversial due to accusations that the company has structured itself globally in a way that allows it to report billions of dollars of profits in low-tax countries such as Ireland, the Netherlands, and some island states. Because so much of Apple’s profits are generated by digital sales or intellectual property, the company enjoys more flexibility than brick-and-mortar companies when choosing where to report its revenues.
As of last year, Apple had located three subsidiaries in Ireland, and placed much of its intellectual property holdings in the country. These subsidiaries make money from licensing that intellectual property to other Apple subsidiaries around the world. Apple’s latest annual 10-K filing, released earlier this month, shows two more Irish subsidiaries.
Thanks to a deal with the Irish government, now facing a legal challenge from the European Commission, Apple has been able to direct most of its Irish profits from intellectual property fees to another office that is not technically located in any nation.
As a result, Apple reportedly has paid two percent or less in taxes on its Irish profits. After Apple came under pressure for this arrangement, Apple moved its profits to Jersey, an island off the coast of France that does not usually require companies to pay any corporate income tax, according to “Paradise Papers” documents reported on by the New York Times, among others.
According to a 2013 report by The Guardian, Braeburn manages the profits that Apple reports through its Irish subsidiaries.
Braeburn Capital is based in Reno, Nevada, 200 miles from Apple’s corporate headquarters in Cupertino, California. Apple created Braeburn in 2006, to invest Apple’s massive profits. The company does not disclose how much it invests through Braeburn, but Ted Mulvaney’s profile on the website of a school where he is a board member refers to Braeburn as “a local Apple Inc. subsidiary responsible for investing Apple’s $200+ billion of cash.”
Because Nevada has no state tax on corporate earnings, Apple pays no taxes on the investment profits it makes through Braeburn.
And little is known about how Braeburn invests. In November 2016, Fortune reported that Apple had stopped buying bonds issued by Hyundai, after a Hyundai executive publicly disclosed Apple’s role in a bond sale for the automaker. Fortune quoted an unnamed Korean banker saying that, “Apple never bought Hyundai Capital’s bonds again. Hyundai even went to Reno several times, but Apple would never meet them.”
Apple reportedly does invest a significant portion of its profits—almost $42 billion as of last year—in U.S. government securities. Bloomberg reported that, since 2012, the federal government had paid Apple more than half a billion dollars in interest on those securities.
In a May 2017 C-Span interview, Mick Mulvaney referred to his brother, Ted, and said he “manages money for Apple Computer.” The fact that Mick Mulvaney’s brother handles investments as a portfolio manager for Apple’s controversial Braeburn subsidiary had not been reported until now. Braeburn does not release information that might reveal details such as the size of Ted Mulvaney’s portfolio or how he invests Apple’s money.
In his 2016 South Carolina congressional race, Mick Mulvaney was the sixth highest recipient of campaign donations by Apple employees to House candidates, due entirely to $5,000 from Ted Mulvaney and his wife, according to campaign-finance data maintained by the Center for Responsive Politics.
In 2014, the Mulvaneys gave $10,200, making Mick Mulvaney the top recipient of campaign donations from Apple employees to House candidates. Ted Mulvaney donated $2,500 in 2012, when Mick ran unopposed in the Republican primary. In 2010, Mick was the top recipient of Apple donations to House candidates, after the Mulvaneys donated $7,200 to his first House race, in which he successfully faced off against a Democratic incumbent.
All told, Ted Mulvaney and his wife donated $28,900 to Mick’s congressional and state legislative campaigns.
Apple’s spending, and its push for tax cuts, have come under scrutiny due to questions about the GOP tax plan’s ability to create U.S. jobs.
In the wake of public pressure from President Donald Trump, Apple—the top beneficiary of corporate tax cuts—pledged last spring to create new jobs in the U.S. by investing one billion dollars in domestic manufacturing. TYT reported earlier this month that Apple CEO Tim Cook’s claim that it would “expand” a supplier’s Kentucky factory has been contradicted by the supplier itself and by a local official who told TYT that in the six months since the announcement they have received no applications to expand the factory.
In two personal appearances with Trump, Cook has helped push his economic agenda, including lower corporate tax rates. Apple’s effective tax rate on domestic earnings in its most recent fiscal year—accounting for deductions and write-offs—was 24.6 percent.
Trump this summer said that Cook had pledged to build three new plants in the U.S., but Cook has never confirmed that. Cook has also never said publicly that lower corporate tax rates will lead Apple to hire any new workers.
TYT has reported that not only Apple, but FedEx, UPS, and Lockheed Martin all appear to have enough cash on hand already to hire U.S. workers. Like other cash-rich corporations, they are pouring hundreds of millions of dollars instead into dividend payments to investors. The companies’ public spending plans are focused not on the prospect of new hiring, but on investments that may impede U.S. job creation—including automation, acquisitions, offshoring, and outsourcing.
As TYT also reported, Apple specifically has seen mixed results from past attempts to shift manufacturing to the U.S. from its well-established supply chains overseas.
“Their incentive is to borrow all they can and to invest the deferred taxes, which turns the burden of taxes into a source of profits,” said DCReport founder David Cay Johnston, who reports on corporate and political tax issues. “It’s the job of people like Mick Mulvaney’s brother to engineer the interest without running afoul of tax rules. It’s yet another example of how fundamentally broken our tax system is. The Trump plan will only make things worse by effectively retroactively cutting taxes on Apple’s profits.”
Apple has not responded to TYT’s requests for comment.