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CNN Live Today
Interview with Rep. James Maloney (D), Connecticut
Aired May 10, 2002 - 12:27 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: In business news, American hardware giant Stanley Works is hammering out a new controversial tax deal. Starting today, Stanley is now incorporated in Bermuda; largely a paper transaction. Much of the headquarters still remaining in New Britain, Connecticut. But that move expected to reduce the company's annual taxes by $30 million, about eight percent overall.
The move could face challenges in court and in Congress. In fact, a number of people are raising red flags on this, including Democratic Congressman James Maloney of Connecticut, calling Stanley's tax move "shameful."
Representative Maloney joins us live from Capitol Hill this afternoon -- sir, good afternoon to you.
REP. JAMES MALONEY (D), CONNECTICUT: Good afternoon to you -- happy to be with you.
HEMMER: Thank you, sir.
I want to use your words and put up on the screen for our viewers here. You're saying -- and quoting now -- "Connecticut has not seen such a shameful day since Benedict Arnold sailed away." Is that a bit overstated, sir?
MALONEY: I don't think so. Stanley is turning the backs on Connecticut, it's turning their backs on the country. We have men and women in uniform in harms way all around the world, and Stanley is saying they don't want to pay their fair share to support those men and women around the world.
HEMMER: But if they're reducing their...
MALONEY: I view the analogy with Benedict Arnold as pretty good.
HEMMER: If they're reducing their tax load by $30 million, one would think if the greater majority of employees are staying in your home state, they could take that $30 million and make capital improvements and make a better company that would produce better jobs. Do you follow the logic there?
MALONEY: Yes, except that the big gap in that logic is Stanley has already gotten rid of the jobs. They've sent their jobs to China and to Mexico. Just about a year ago they closed their last hardware production facility in New Britain and sent those jobs to China. So Stanley is just furthering their disinvestment in the United States.
This isn't even anything that's good for many of their shareholders. Their smaller shareholders, who frequently got their shares by their retirement program, working at the company for years. They're going to take it on the chin here, because they have to pay a capital gains tax.
HEMMER: But if you look at the shareholder vote, almost 70 percent approve this. Is that just the way of the world?
MALONEY: Actually, no. That isn't true. The only won...
HEMMER: My information says 67 percent.
MALONEY: Yes, they won the vote by one-half of one percent. And there were a lot of people unfortunately that didn't vote. There's some confusion even as to the proxies. The large institutional investors think that over the course of time they'll get their money back. But the small investors, the retirees, are going to be paying their capital gains tax and are taking quite a hit in their retirement funds as a result.
HEMMER: All right. You want to pass some legislation to possibly stop this or stop it in the future. What sort of law are you thinking of right now?
MALONEY: Well, as you alluded to in your report, this is just a paper transaction. This is not the reality. Most of the shareholders in Stanley are Americans, the stock is traded on American stock exchanges. Much of the capital is American capital.
Stanley is an American company, and they have relied on the services provided in this country. They rely on the hard work of Americans, they rely on national security in this country today. We're saying that if it's a paper transaction only, you can go incorporate anywhere you want. But the reality is you're an American company and you'll pay your fair share of taxes.
And the legislation that we filed -- Congressman Rich Neal of Massachusetts and I are the original cosponsors. We now have 41 cosponsors in the House. Senator Bachus and Senator Grassley are pursuing parallel legislation in the Senate -- would prevent these not -- would allow the paper transactions, but would prevent them taking advantage of the tax code in the way that Stanley is looking to do so.
HEMMER: All right. I wanted to hear you out. James Maloney, Connecticut, thanks.
MALONEY: Thanks very much.
HEMMER: Thank you for talking. And certainly it has reverberations back in your home state. And there's where it stands. Stanley Works, in terms of a transaction anyway -- in terms of a paper transaction -- off to Bermuda. The company says its savings millions on tax code.
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