$100m IRA?

Discussion in 'Economics' started by ryleg, May 16, 2011.

  1. ryleg


    Mark Gorton, (America's answer to Richard Branson) founder of Lime Brokerage, just lost about $100m to the RIAA because of his company Lime Wire. He was warned this could happen.

    link: http://news.cnet.com/8301-31001_3-20062418-261.html

    "They noted he possessed $100 million in an IRA account."

    Every news article I've seen says the same thing. $100m IRA.

    How does one get so much money in an IRA account? I thought there was a very low limit to the amount of money someone can put into an IRA every year.

    My first thought is that he might have fed trades from his taxable accounts into his IRA account as a way to avoid paying taxes (that way the taxable account looks like a huge loser, and the IRA is a huge, tax free, winner). Is there a much easier, legal way to get such a large IRA?

    $100m IRA sounds extremely shady to me. What am I missing?
    Or is this just another case of inaccurate reporting?
  2. My 2 cents, and maybe worthless as I'm not quite to the 100 mil mark, but what an idiot. If it is true the guy is a fool. With that kind of money I would have it distrubted among adivsors on top of what I managed for me. Too easy to spread among trusted people and myself and come out with a resonable return. Not to mention putting in fairly safe bonds on a layered plan and come out ahead.
  3. this guy might actually be really smart.

    someone else here mentioned that you can have someone administer your own IRA. This allows you to invest in a wider variety of stuff that isn't normal stocks, bonds, options, etc. through it you can invest in private partnerships, private corporations, etc.

    it's possible that this guy did that and then bought 5,000 of some investment vehicle (a corporation or something) and then stuffed the corporation with assets, thereby protecting them from lawsuits.

    after i saw this post, i googled the news and the riaa is claiming that he moved a lot of assets to protected areas (trusts, family members, etc). in the article they passively state he had a 100MM ira.

    this might be how the record companies are only able to get 100MM from him.
  4. clerk


    Hypothetical way to get your IRA to $100m: The firm he founded (or some firm he worked at) may have issued corporate stock or stock options to employees through their retirement plans. At the time of issue the stock would have had negligible value to reflect the speculative nature of equity in a start-up company with no profits, no plans, no customers, etc.

    If only he had kept that $100m in his ERISA-protected employer sponsored retirement plan, he would be able to keep all of it in bankruptcy. Right now, in bankruptcy only the first $1,171,650 of property in his IRA is exempt. If he terminated employment with the sponsoring employer, he should have transfered his 401k assets to his new employers' retirement plan (where it would have continued enjoying unlimited exemption from bankruptcy).
  5. elon


    Not a bad strategy. When you have that much money to play around with you might as well get creative.
  6. ryleg


    I'll buy that I guess. I do wonder what the IRS would think about such cheaply priced stock/options, but they probably won't even look.

    It's a good trick I suppose.

  7. clerk


    My previous post is incorrect; if he had transfered assets from his 401k to his IRA, and can adequately trace/document the property, it remains exempt in bankruptcy.