For years, Sen. Pat Toomey (R-Pa.) led the fight to protect one of the most controversial provisions in the entire tax code — a loophole criticized by presidents of both parties that allows a handful of private equity executives to pay a lower tax rate than other high earners.
Now, Toomey is being rewarded with a seat on the board of a private equity giant that has lobbied to preserve that tax loophole.
On February 22, Apollo Global Management announced that Toomey, who retired from the Senate in January, will serve on the firm’s board of directors. In 2021, Bloomberg reported that new directors at Apollo are granted $600,000 in restricted stock, in addition to a baseline $150,000 salary.
With his trip through Washington’s proverbial revolving door, Toomey is following a well-trodden career path for politicians who shill for industry and quickly land corporate jobs. Several of Toomey’s recently retired colleagues have already joined D.C. lobbying firms. Corporate board seats are particularly coveted, though, because they pay well and typically require little work.
Watchdogs say Toomey’s move stands out as exceptionally flagrant.
“Over the course of his Senate career, Toomey was a top recipient of campaign contributions from the nation's biggest banks and asset management companies,” said Vishal Narayanaswamy of the Revolving Door Project, which scrutinizes personnel ties between business and government. “He routinely peddled their dishonest talking points and championed their deregulatory legislative priorities in committee hearings and on the Senate floor. Now, one of America's largest private equity firms… has rewarded him for 12 years of loyal service to the industry."
In recent years, Toomey played a pivotal role in preserving the so-called “carried interest loophole,” which allows ultra-wealthy private equity managers to pay the lower, capital gains rate of 20 percent on large portions of their income, as opposed to the regular top income tax rate of 37 percent.
The controversial tax loophole for the ultra-wealthy has survived despite opposition from Democratic and Republican presidents and lawmakers. He also pushed legislation that would make it easier for private equity firms to access the lucrative business of managing Americans’ retirement funds, and worked to hamstring federal financial regulatory entities.
Toomey did all this while owning stakes in several private equity funds, and as donors in the finance industry bankrolled his election campaigns. The securities and investment industry was Toomey’s top career donor, delivering nearly $5 million to his campaigns, according to OpenSecrets.
During his 2016 reelection bid, Toomey benefited from $15 million in spending by the Senate GOP’s super PAC, the Senate Leadership Fund, which received huge donations from the financial industry, including more than $3 million from the CEO of the private equity giant Blackstone Group.
“After 18 years in the public sector, I am excited to bring my differentiated perspectives to the board of Apollo, a firm that plays an important role in generating retirement income for millions of savers and providing capital for business growth,” Toomey said in a statement on the job move.
An “All-Star” For Private Equity
Every president since George W. Bush has campaigned on closing the carried interest loophole, as have lawmakers from both parties. But the tax break has continually survived, thanks to massive political donations from private equity executives, as well as lobbying efforts from private equity firms including Apollo, and their lobbying group, the American Investment Council.
It seemed like lawmakers might finally close the loophole in 2017 after President Donald Trump had railed against it on the campaign trail and claimed to support its inclusion in the Republicans’ signature tax bill as a way to help finance their giant corporate tax cut.
House Republicans ultimately did not propose ending the carried interest loophole, while Toomey helped preserve the provision on the Senate side.
An industry lobbyist told the Associated Press that Toomey had been an “all-star” in their fight to protect the carried interest loophole in the tax legislation. In response to a request for comment, Toomey’s office referred the Associated Press to interviews he had given defending the loophole.
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Both Apollo and the American Investment Council have reported lobbying on carried interest. The American Investment Council’s board includes an Apollo executive who also traveled through D.C.’s revolving door — David Krone, who served as chief of staff to former Senate Majority Leader Harry Reid (D-Nev.).
Toomey was also a vocal opponent of the climate and health care spending bill Democrats passed last summer, including when it contained a proposal to limit the carried interest loophole. He suggested that Sen. Kyrsten Sinema (Ind.-Ariz.), a private equity industry ally, might help block the legislation.
“I’m not speculating about what she is going to do, but I do know there are some provisions in this field that she has had reservations [about] in the past,” Toomey said about Sinema, adding: “I’m looking forward to chatting with her this week.”
The provision to limit the carried interest loophole was removed amid opposition from Sinema, whose vote was needed to pass the broader bill.
“Private Equity Firms Add Value”
In recent years, Toomey has also pushed for legislation that would make it easier for private equity to access Americans’ retirement savings.
Last year, he introduced legislation to allow private equity access to the more than $7 trillion in Americans’ private 401(k) retirement plans. At an event last summer sponsored by the American Investment Council, he touted the legislation and talked about how private equity could be beneficial for retirees.
“The numbers from private equity have been very, very good,” Toomey said. “It’s the fact that most of the most successful private equity firms add value to their portfolio companies. That’s their real reason for being successful.”
In reality, private equity investments are extremely risky, their valuations are shady, and their high fees obscure the actual returns on the investments — which are often much lower than advertised. Private equity firms, originally known as “corporate raiders,” have a long history of loading up their portfolio companies with debt and laying off workers.
Earlier this year, Apollo announced a 77 percent increase in net income, driven by “record fee-related earnings,” and a 10 percent increase in its assets under management, all driven by an expansion in its retirement business despite falling private equity returns.
Meanwhile, Toomey also was a key player in pushing to defund or strip federal financial regulators of their power. Late last year, he proposed legislation to put the Consumer Financial Protection Bureau (CFPB) under the Congressional appropriations process, a key step towards defunding the agency. He has also praised a federal court decision that throws the agency’s funding structure into question — and could lay the groundwork for thwarting the work of other federal agencies.
“The Fifth Circuit’s decision to invalidate the CFPB’s payday lending rule because it is the product of an unconstitutional funding scheme calls into question the validity of all of the agency’s actions to date,” Toomey said in a statement on the court decision. “The CFPB has been an unconstitutional and unaccountable agency since its inception. I’ve long argued that the CFPB should be subject to Congressional appropriations.”
Multiple Apollo portfolio companies engage in lending activities covered by the CFPB, per company financial filings.
Toomey will join Jay Clayton, chairman of the Securities and Exchange Commission under Trump, on the Apollo board.“I look forward to working closely with Pat and the entire board to continue generating value for shareholders and delivering for clients across the integrated Apollo ecosystem,” Clayton said in a press release.
