One of the ways private equity firms, including Bain capital, suck the live blood out of firms they aquire is through management fees. The NY AG is investigating whether these firms are illegally converting this management fees to investment income so that they are taxed at 15% as opposed to being taxed as ordinary income -- the way you and I are taxed.
From the New York Times,
Schneiderman’s investigation will intensify scrutiny of an industry already bruised by the campaign season, … Some executives at the firms said they feared that Mr. Schneiderman, a first-term Democrat with ties to the Obama administration, was seeking to embarrass the industry because of Mr. Romney’s roots at Bain. Others suggested that the subpoenas, which were issued by the attorney general’s Taxpayer Protection Bureau, might be part of an effort to recover more revenue for New York under state tax law. … The tax strategy … came to light last month when hundreds of pages of Bain’s internal financial documents were made available online.
Schneiderman, who is also co-chairman of a mortgage fraud task force appointed by Mr. Obama, has made cracking down on large-scale tax evasion a priority of his first term. … Romney continues to receive profits from Bain Capital and has had investments in some of the funds that … used the tax strategy. The campaign issued a statement saying that Mr. Romney did not, however, benefit from the practice. ‘Investing fee income is a common, accepted and totally legal practice,’ said R. Bradford Malt, a lawyer for Mr. Romney who manages his family’s investments and trusts. ‘However, … I can confirm that neither he nor the trust has ever done this, whether before or after he retired from Bain Capital.