June 26 (Bloomberg) -- In June 2008, U.S. Virgin Islands Governor John deJongh Jr. agreed to give London-based Diageo Plc billions of dollars in tax incentives to move its production of Captain Morgan rum from one U.S. island -- Puerto Rico -- to another, namely St. Croix.
DeJongh says he had no idea his deal would help make the world’s largest liquor distiller the most unlikely beneficiary of the emergency Troubled Asset Relief Program approved by Congress just four months later.
Today, as two 56-foot-high (17-meter-high) tanks for holding fermenting molasses will soon rise from the ground on the Caribbean island of St. Croix, the extent to which dozens of nonbank companies benefited from last October’s emergency financial rescue plan is just beginning to come to light.
The hurried legislation adopted by a Congress voting under the threat of sudden global economic collapse led to hidden tax breaks for firms in dozens of industries. They included builders of Nascar auto-racing tracks, restaurant chains such as Burger King Holdings Inc., movie and television producers -- and London’s Diageo.
“It’s kind of like the magician’s sleight of hand,” says former House Ways and Means Committee Chairman William Thomas, a California Republican who ran the committee from 2001 to 2007 and oversaw all tax legislation. “They snuck these things in a bill that was focused on other things.”
Congress inserted the tax benefits for companies other than banks in a fog of confusion and panic after the House of Representatives rejected the first attempt to fund the bank support effort urged by then President George W. Bush and Treasury Secretary Henry Paulson.