What’s Behind that Cayman Island Talk

As one of the nation’s most competitive governor’s races picks up, voters in Illinois are hearing a whole lot about a British territory thousands of miles away in the Caribbean.

Democratic Gov. Pat Quinn hammered his wealthy Republican rival for days after reports that Bruce Rauner put some investments in the Cayman Islands, a place often criticized as a tax haven and that has caused political problems for U.S. candidates, including 2012 GOP presidential nominee Mitt Romney.

Rauner’s campaign fired back, saying Quinn’s own pension fund — and that of many Illinois teachers and other public employees — are tied to investments there.

The fallout has included accusations that candidates are unpatriotic and waging a “war on teachers,” recruiting an economist to discuss the ills of offshore accounts and a news conference on a sweltering Chicago beach intended to conjure up images of the Caribbean paradise.

Here’s a breakdown of the situation and what it could mean come November:

THE INVESTMENTS

Rauner has at least five investments in the Caymans, either of his personal funds or set up by the partners of his former firm, the Chicago Sun-Times reported.

Quinn’s campaign says Rauner set up the accounts to avoid paying taxes. Rauner, a private equity investor who’s making his first bid for public office, says the investments didn’t affect his personal tax rate and that he fully disclosed the necessary information to the U.S. government.

International companies and wealthy investors have long taken advantage of offshore financial centers in the Caymans because regulations and legal systems make it easy to move capital internationally. Rauner said his former firm was simply doing “what many, many financial firms do.”

THE CRITICISM

Quinn and running mate Paul Vallas, a former Chicago Public Schools CEO, called on Rauner to release his 2013 taxes and the full documentation for prior years’ tax returns he has already made public.

Standing on the sandy shores of Lake Michigan last week, Vallas said voters shouldn’t have to take Rauner’s word that he’s met his full tax obligations. He said the only way for voters to know for sure is to see the full tax schedules.

Quinn, who releases his full returns each year, said wealthy people and corporations that use offshore investments are “not patriotic.”

“Bruce Rauner is not running for governor of the Cayman Islands,” he said.

THE RESPONSE

Rauner’s campaign said Quinn “should be ashamed of himself” for questioning his opponent’s patriotism. Spokesman Mike Schrimpf also said Rauner — who reported making $53 million in 2012 — and his wife paid more than $25 million in taxes over the past three years.

But Rauner’s campaign again declined to release further tax documentation, calling it a political stunt meant to distract from Quinn’s own record. The campaign says Rauner filed for a six-month extension of his 2013 tax returns, and the return will be made public before the Nov. 4 election.

THE STATE PENSIONS

The Rauner campaign also accused Quinn of a double standard because his pension fund, as well as retirement funds for teachers and other state workers, are heavily invested overseas.

“Pat Quinn either needs to apologize to Bruce Rauner for lying about the facts or apologize to Illinois teachers and state workers for calling them unpatriotic,” the campaign said. If Quinn won’t apologize, it said, he should immediately move to divest all state investments from overseas companies and funds.

Quinn spokeswoman Brooke Anderson said state pension boards decide how to invest money and are independent entities. Quinn’s future pension is fixed, she added.

“Governor Quinn’s bank accounts are all located in Illinois, United States of America,” Anderson said.

Schrimpf noted that Quinn appoints several members of the pension system boards.