An American subsidiary of Toronto-based insurer Fairfax Financial Holdings Ltd. has stirred up political controversy by making a $1-million donation to a super political action committee that backs Mitt Romney. OdysseyRe says it chose to make the large contribution to the Restore Our Future super PAC because it supports Mr. Romney's corporate-tax proposals. The move is generating attention because while there are rules barring foreign companies from contributing to the super PACs, donations by U.S. arms of those businesses remain a grey area. Peter Lovell, general counsel for OdysseyRe, said the company has traditionally restricted itself to charitable donations but took a special interest in the upcoming presidential race because of Mr. Romney's view on corporate taxes.
"As an international reinsurer domiciled in the U.S., OdysseyRe has one of the highest corporate tax rates in its industry," Mr. Lovell said in an e-mailed statement. "Governor Romney has proposed meaningful corporate tax reform that would help to level the playing field; consequently, a victory by Governor Romney in November would be beneficial to OdysseyRe."
Mr. Lovell added that the contributions committee of OdysseyRe's board made the decision, and that committee is composed of only U.S. citizens. "Neither our Canadian parent nor any other foreign nationals were part of the decision-making process to contribute to the super PAC," he said.
Prem Watsa, Fairfax's chief executive, is also the chairman of OdysseyRe's board. Fairfax is an insurance conglomerate with multiple divisions, but in recent years has become more well-known for its investments. Prior to the U.S. subprime mortgage crisis, it made financial bets that a number of major banks would see their fortunes tumble, bets that became highly profitable when the crisis occurred. It has recently bought up about 10 per cent of BlackBerry maker Research in Motion, and Mr. Watsa now sits on RIM's board. While Mr. Watsa has developed a reputation over the years for shying away from the spotlight, the company has found itself in the limelight often. It sued a group of hedge funds in New Jersey court, accusing them of conspiring against it. (The judge recently dismissed that case and Fairfax is appealing).