On paper, it appears a curious detour for a venture capitalist living in the Back Bay.
On Dec. 20, 1999, Jeffrey S. McCormick, now an independent candidate for governor in Massachusetts, bought a $218,000 two-bedroom condo in Portsmouth, N.H.
McCormick, in the mortgage documents he signed, said the townhouse would be his principal residence, an issue banks take seriously when considering the rates and type of mortgages they give. An owner-occupied home almost always commands the best interest rates.
Under the terms, he was required to live there for at least a year. But he subsequently claimed two other Boston addresses as his primary residence during that year, according to several public records, signed under oath.
McCormick signed the New Hampshire mortgage just seven days after he and his private equity firm made a $640 million investment profit, but his campaign adamantly denies he was seeking haven in a state that has no capital gains tax.
The front page of his income tax returns from 1999, 2000, and 2001, provided with income redacted, show that he continued filing as a Massachusetts resident, meaning he would have been subject to the state’s capital gains tax.
Pete Wilson, his press secretary, said McCormick acquired the New Hampshire condo so he and his girlfriend, who would later become his wife, could get away from time to time from the fast pace of his Boston life.
“Jeff’s primary residence has always been in Boston since he moved here, and he has paid taxes to the Commonwealth just like every other resident,” Wilson said.
Still, it is unclear how McCormick got a mortgage that was given based on the unit being used as an owner-occupied, principal residence.
The terms of the mortgage cite only two ways the borrower can legitimately move out within the year and not violate the agreement: if the lending company, North American Mortgage Co. of California, agreed in writing for such a move or if it was necessitated by “extenuating circumstances which are beyond borrower’s control.”
McCormick’s campaign offered no record that the mortgage firm approved a move. “I think we have answered enough questions about the mortgage and the condomium purchase in N.H.,’’ Wilson said late last week when questioned on this point.
McCormick, who declined to be interviewed about the issue, said through his spokesman that he followed the mortgage officer’s lead on the issue of the type of occupancy he planned for the town house.
“Jeff’s recollection is that at the time of purchasing the condo the bank officer asked if he owned another residence and he told them no. He then asked if this was an investment property that he planned on renting out, and he said no,” Wilson said. “After a few more questions he sent over the documents, and after reviewing them, Jeff signed them.’’
Under Massachusetts tax laws, a person who lives out of state for six months of the year can avoid paying taxes on investment gains and income that are not generated within Massachusetts. This is valid, however, only if the taxpayer has created a primary residence in another state.
Under such circumstances, the person would still have to file as a nonresident in Massachusetts for any income derived from activities in that year.
With his Portsmouth address, McCormick could have qualified to file his state tax returns in New Hampshire, which has no capital gains tax and does not tax most income. At the time, Massachusetts had a 5.8 percent income tax and a top short-term capital gains tax of 12 percent.
Within months of getting the principal residence mortgage, McCormick claimed Massachusetts residency in a number of documents. On May 23, 2000, he used the Portsmouth, N.H., address when he created a business trust. But several days after filing the document with the Massachusetts secretary of state’s office, he filed a correction, saying he was actually a Massachusetts resident living at 231 Commonwealth Ave. in the Back Bay.
Neither McCormick nor Wilson would provide any comment as to why McCormick initially claimed to be a New Hampshire resident on the trust document but then quickly amended it.
Then on July 5, 2000, he said he was living at 208 Beacon St. in Boston when he signed, under oath, a city voting registration form declaring he was a Massachusetts resident.
In February 2001, 14 months after buying the New Hampshire condo, McCormick and his wife purchased a $1.9 million condominium at 190 Beacon St. Two years later, he sold the Portsmouth property, making a $72,000 profit.
McCormick, who has accumulated his wealth though his venture capital and private equity firm Saturn Asset Management, formally launched his campaign for governor early this month as an independent. As a social moderate who supports gay marriage and abortion rights, he is touting his business background and skills that he says will help him create more jobs, streamline the state bureaucracy, and hold the line on spending and taxes.
He is expected to draw on his fortune to finance much of his campaign. He has already spent $185,000, but appears able to spend millions more of his own money if he chooses to do so. He joins a race in which five Democrats are vying for the party’s nomination.
The GOP establishment is backing Charles D. Baker, its 2010 gubernatorial nominee. Also seeking the Republican nomination is Mark R. Fisher, a political newcomer from Shrewsbury who aligns himself with the Tea Party. Another independent with financial resources, Evan Falchuk, a lawyer and health care executive, is also expected to be on the November ballot.
In early December 1999, McCormick and his firm saw their investment in FreeMarkets Inc., a Pittsburgh-based company, soar 480 percent, to about $680 million, as the result of an initial stock offering. McCormick, individually and through Saturn Asset Management and its subsidiary Saturn Capital, was one of the first investors in the company in 1995. FreeMarkets is an online auctioneer of commodities and services.