Tag Archives: Bain Capital

Romney arithmetic and Staples

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Romney arithmetic and Staples

Divorce folklore abounds with stories about men trying to offshore assets, so to speak; dark hints about bank accounts concealed or moved abroad, about the plaintiff’s attorney being bought off by job offers or other means, about property liquidated for pennies on the dollar. Most such lore seems more suited for entertainment media–Dick Wolf’s Law & Order–than for hard reporting. Goldie Hawn’s character in the movie The First Wives Club had a little fun with just such a dirty trick, gender-bent.

It looks like less fun in real life. Now we get the real deal, from family guy Mitt Romney of all people. Testifying in a divorce hearing on behalf of a crony who had left his wife, Romney presented the court with an estimated value of a share of stock in Staples at the time–$1.75.

 

Plugging for Staples versus plugging up divorce concessions

Bain Capital had bought Staples stock at $0.86 per share. At the time of the testimony, a recent sales figure had been $2.90 per share. (Romney testified privately that the stock was actually worth less than it was selling for.) Months later, Staples went public with a price of $19.00 per share. The IPO closed on the first day of trading at $22.50 per share. The ex-wife had received $2.50 per share.

Bain Capital got out with a $13 million profit. The Staples executive got out of his marriage, shortly before the company went public, assessed a tenth of the pay-off there would have been after the IPO.

Today’s Washington Post, btw, omits some of these facts.

 

Some quick highlights from coverage so far:

A judge has okayed the release of the transcripts.

Romney acknowledges the ex-wife’s stock category as a “favor” to Tom Stemberg, the divorcing exec.

The Republican Chicago Tribune whitewashes the whole thing.

A fuller though softened report comes from the WP.

Romney was on the board at Staples by virtue of his position at Bain Capital.

[update]

A few more early reports:

From Business Week:

“Republican presidential candidate Mitt Romney, as a board member of Staples Inc., voted to set a low price on the stock and create a new class of shares as a “favor” to its co-founder who was involved in a divorce.”

From truthdive.com:

“Sources have said that Romney provided testimony in the bitter divorce of his friend and staunch advocate, ex-Staples CEO Tom Stemberg, that meant his ex-wife received a poor divorce settlement, the report said.

He testified during the hearings in 1991 that the company’s stock was ‘overvalued’ and that the future did not look good, it added.”

From the Lawyer-Herald:

“Tom Stemberg, founder of Staples, has endorsed Romney on various occasions on his presidency campaign. Hence, his testimony in the Stemberg case is necessary to be exposed to the people, argued the Boston Globe and the judge agreed. ”

“Romney’s business Bain Capital played a crucial role in setting up the huge office-supply retail Staples in 1996.”

 

The returning issue of Romney’s tax returns

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The returning issue of Romney’s tax returns

Tax returns are not trivial

In the land of abundance, the legal obligations of citizenship rest lightly for most Americans. With no military draft or compulsory youth service, the United States actually requires little in the way of civic obligation–that is, obligation imposed by law and justice. Jury duty, maybe. Community service, maybe, depending on your school district, but only for students in school at the time (and their parents, dragooned indirectly to chauffeur them). Showing up to vote? If you don’t want to, no one can make you. Military service, maybe, but only if you sign up, and aside from the occasional court-mediated pre-sentencing agreement for young people, there is no one in officialdom to make you sign up. We may not always find feasible transportation to work, we may not find good jobs, we may not always be able to get needed medical attention. And of course we are supposed to eschew crime. But our system of government imposes few affirmative obligations on us individually as we go about our day. That leaves taxes as one of the few government-imposed legal obligations for the overwhelming majority of U.S. citizens and legal residents.

 

Whack-job signs

Thus it is either funny how much fuss the right-wing noise machine makes about government, when you think about it, or no wonder GOPers make such a fuss about taxes. If media personalities in the foaming-lips crowd want to represent the president as some kind of tyrant, they have little work with.

All this means that discussion about Mitt Romney’s tax returns, and questions about why Romney has not released them, are not trivial, silly or superficial. I respectfully disagree that the presidential candidate’s refusal to disclose his own IRS returns is a side issue.

 

Front page

Furthermore, Romney’s refusal to release his individual tax returns magnifies his inability to disclose his tax plans–tax policy–for other Americans.

 

Rep. Paul Ryan was repeatedly recommended as a vice-presidential pick before appearing in reports on Romney’s short list, before Romney took him on board Aug. 11–and not always by conservatives. In the context of taxes, former automobile ‘czar’ Steven Rattner on ABC’s This Week had this to say:

“I personally would love to see [Romney] pick Paul Ryan, because then we could actually have a decision about Romney’s economic plan, which he is not discussing, because I think when people actually understand his plan, they’ll understand all the tax things that we talked about. They’ll understand the spending implications of the Ryan budget plan in terms of what it does to Medicare, privatizing it, what it does to Medicaid, turning it into a block grant program, and then 33 percent cuts that are going to occur in a whole series of programs, including things like food stamps. Just to make his numbers work. So I would welcome Ryan and the discussion we have about it.”

The next speaker, former White House environmental advisor Van Jones, brought the Aug. 5 discussion closer to tax returns as well as to taxes:

“We’re talking about two different things here. We have a problem with Mitt Romney, because it seems that Mitt Romney doesn’t understand what ordinary people are going through. He’s talking—he’s had these magical mystery numbers about, oh, we’re going to close loopholes. When you dig down into it, the levels, what he’s calling loopholes as you are saying, are what ordinary people rely on to keep moving forward in the economy. So I think what you got here is do you want to elect somebody who won’t tell you how much money he’s making and won’t give you his tax returns, but with all he’s put on paper, will cut his taxes and raise yours. That’s the real question.”

One of Ryan’s biggest boosters, George H. W. Bush speechwriter Mary Kate Cary, pushed for Ryan in hopes that he would distract attention from Romney’s tax returns:

“This is an election about “big ideas,” and the longer it stays on small issues like Bain Capital and Romney’s tax returns, the worse Romney will do. Ryan is the intellectual leader of the party—who better to take the Republican case to voters in common sense language about how high the stakes are? Time to move from defense to offense.”

Ryan holding up budget

Moving back a little earlier in time than the presidential-campaign year, if we remember, Romney declined to weigh in on any congressional disputes over the payroll tax. Thus when congressional Republicans argued–in effect–that payroll taxes don’t count, compared to income tax, Romney offered no reasoned correction. (He has, after all, said in private that “47 percent” of Americans pay no income tax without mentioning that those people do pay payroll taxes.) Romney, the man running as CEO who can fix things, has taken little to no part in any of the fiscal policy disputes embroiling Congress. When he did take part–belatedly and reluctantly–he blew hot and cold, first over Ryan’s budget, then over the debt-ceiling deal. (Right now it looks as though Ryan is returning the favor by positioning himself for 2016, as much as working to benefit Romney.)

Hopeful Ryan with Bush Sec of State Condoleezza Rice

The refusal to release his own tax returns is one of few issues on which the GOP nominee for the White House has been consistent, and Romney has held to this one position even under heavy fire. Even in the Republican primary season, with Newt Gingrich among others calling for Romney to release his tax returns, no dice. He held to the position even when several right-wing commentators weighed in, in concert, with the same advice.

Romney himself recognizes that his unearned income, his inherited wealth and connections, and his immense fortune acquired through finance are less than political assets. He has played down the amount of money he  inherited outright–though the amount would be substantial for almost anyone else. He modestly deprecated $374,000 in speaking fees as “not very much.” He told at least one audience that he, too, feared being fired, feared getting a pink slip. The partial tax returns released do everything possible to minimize his assets abroad in the Caymans and elsewhere. And in the Oct. 18 town-hall debate, Romney even made the remarkable claim that “I came through small business.”

These are not the actions of a candidate oblivious to the impact of tax discussion.

 

Side note:

Taking a leaf from Rupert Murdoch’s book, Bain Capital over the years has invested heavily in media companies in the U.S. and abroad, one example being Clear Channel–a conduit for Bush administration communiques. Other media acquisitions and investments include Warner Music, The Weather Channel and AMC Entertainment, but completed media deals are only part of the picture; the Bain Capital track record also includes several foiled attempts (including in China). No one writes about Bain and media companies, but Bain Capital has a pattern of acquiring or trying to acquire a number of large media companies, in the U.S. and abroad. Thus, just as GOP federal-state links cemented under the GWBush administration have continued to solidify and expand–reinforced by superPACs, well-funded lobbying and party ties–so have GOP government-corporate links, including politics-media links. All signs point to a party (GOP)-government-media nexus on steroids under a Romney White House. It’s the right-wing noise machine grown more elegant, so to speak, because quieter and subtler. Gives a whole new meaning to the old term “fourth estate.”

Bain and Switch

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Bain and switch

No wonder the Romney campaign and helpers have been going on about ‘China’. Bain Capital, Romney’s company, has taken over an Illinois auto-parts company named Sensata Technologies and is closing it down–and shipping the jobs to China. People working at the Freeport, Ill., plant have the unenviable final task of training their Chinese replacements.

 

Sensata Technologies

A sympathetic Steelworkers Union video about the plant closing appears here. Some Sensata employees have set up a mini-camp they name ‘Bainport’, to draw attention to the move. Some of them have also participated in a Bain Workers Bus Tour.

Bainport encampment

No word yet on whether Toyota will number among customers for the sensors and thermal circuit breakers manufactured by Sensata Technologies in Asia.

In hindsight, Romney’s bringing up China at all pinpoints his own ties to China. Of course Mitt Romney would castigate the Obama administration about China. Bain Capital wanted and tried to enter into a $3 billion technology deal with a Chinese company, and the deal fell through only after national security-conscious regulators called a halt. Of course pro-Romney television ads would use ‘China’ as a talking point. A glance at the giant database LexisNexis turns up more than 3,000 hits for ‘China’ [ + ] with ‘Bain Capital’. Admittedly there are other political angles played in Romney’s flogging ‘China’. Former President George H. W. Bush went to China as ambassador. Former GOP candidate Jon Huntsman, more dignified and more plausible as a candidate than Romney himself, served as U.S. ambassador to China. Both Bush and Huntsman fall into the ‘no help’ or ‘little help’ columns, for Romney. U.S. trade with China benefits some of Romney’s business rivals as it benefits him. Still, it has always mystified me that Romney would even bring up ‘jobs’, especially in connection with ‘China’, since no sane person can claim that Romney himself has made a career of protecting other people’s jobs, of broadening the employment base, of opposing mergers and acquisitions that shrink manufacturing largely while expanding certain tiers of management slightly. The whole China talking point illustrates the Karl Rove tactic of attacking the other guy where you’re weakest yourself, the cheesy tactic of pre-emptive strike.

 

Cartoon

Incidentally, when Romney himself appeared in China, he did what his crew would call ‘apologizing for America’: Romney told Beijing university students, quote, that “America makes mistakes.” Yes, Romney the GOP nominee for the White House went to China and, in typically self-deprecating fashion, shared with students at Tsinghua University that his country, the U.S.A., “makes mistakes.” Had the candidate released his tax returns for 2006 and 2007, evidence for the trip would appear as speaker fees, under the category of earned income. The speaker appearance was only scantly reported.

 

Romney speaking engagement, Beijing

Selling one thing and then delivering another is called bait-and-switch, in business. In politics, it’s called flip-flopping–a soft accusation that lets the fraudulent off the hook.

In the 2012 election, we’ve got one candidate who killed Osama bin Laden and saved the U.S. auto industry, and another candidate whose company provably ships jobs abroad, and wrote an opinion piece titled “Let Detroit Go Bankrupt”–and polls show the race as close?

 

The Detroit headline

Obama is still ahead, as he has mostly been, pre-election–a point conspicuously not made in reporting by the national political press.

Tonight’s town-hall format debate on CNN may help, although Candy Crowley may be bent on asking President Obama the questions no one could answer, and asking Mitt Romney the questions anyone could answer. One of Crowley’s specialties is false equivalencies between ‘left’ and ‘right’. Her notion of originality probably goes to accusing Romney of being too polite. Up-ending expectations; a reversal of sorts. With luck, she will not pull that old stunt of challenging Obama to reveal national security secrets or crucial strategy–classified information–and then suggesting soft-on-terrorists when he doesn’t. That one has long been a favorite with the If-it-quacks-like-a-duck crowd.

Questions put by ‘undecided’ voters, i.e. by people waiting to vote with the majority, inherently give the advantage to Romney–who is, as Joy Reid said, basically a salesman. In the freedom of privacy, one can ignore or brush off a sales rep. It will be illuminating to see how Romney enters, how he attempts to convey I’m-the-winner-go-with-me. It would be nice to hear Romney answer questions about his campaign-trail blood-and-thunder rhetoric on foreign policy. Then there’s that matter of paying for embassy security when you’re talking about cutting the deficit. The giant LexisNexis database turns up no mentions of ’embassy security’ with Romney’s name before September 2012, by the way.

On a more superficial debate detail–it will be interesting to see whether Romney looks tan as he did in the Republican primary debates back through 2011-2012, or pale as he looked in the first presidential debate with Obama. Change of makeup? Deliberate choice, for contrast? Mere fatigue?

Romney fan t-shirt

Surely CNN cameras will not find t-shirts in the audience saying “Put the white back in the White House.” It’s unlikely that Crowley will quiz Romney on why he doesn’t quell the race-baiting in his party, though. It would be more like her to accuse the president of playing the race card by being African-American–an attitude typical of people who talk about ‘blame’ in regard to the U.S. economy.

Calling it ‘blame’ is obfuscation. The U.S. cannot afford to bury history any more than we can afford to suppress votes. We need to end the policies and practices that brought us to the brink of a second Great Depression. We need to prevent their continuance. We need to develop the financial literacy to see through false slogans about the deficit, etc. It is essential to remind the public that a Republican congress and a highly-funded movement of lobbyists across the country have opposed every positive step taken by the Obama-Biden administration. Calling the reminder ‘blame’ is bogus. Will Romney claim that he as president would have prosecuted the creators of the mortgage-derivatives crisis? He cannot claim that he would have prohibited the credit default swaps. Bain Capital even securitized franchise fees for Dunkin’ Donuts franchisers–speaking of arcane financial products.

More on Romney finance and GWBush connections

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Ties with Team Bush part 2

Continuing previous posts

This seems like as good a time as any to follow up on previous post on Mitt Romney’s non-released tax information and Romney’s quiet, long-time, scantly reported but extensive ties to the George W. Bush team. For one thing, Bush recently announced that he will be visiting the Caymans just before the election.

 

Bush to address tanned investors

Amidst the hubbub on the front lines and the day-to-day movements of polls, Romney has succeeded in remaining closeted about his finances. It’s one thing he has been consistent about. It is safe to say that Romney has achieved the distinction of being by far the most secretive of any major-party candidate running seriously, if that’s the word, for high office. Richard Lardner reported back in February that Romney did not release names of his bundlers even after President Obama did so. As we know, the pattern extends to Romney’s tax returns–with the exception of partial returns for two recent years–and of course to the para-political organizations including ‘super PACs’ supporting Romney and the GOP even while capital stays on the sidelines when it comes to investing in business. (So much for GOP talk about ‘small business’.) Thus one of the wealthiest men in America, a long-time politician with extensive financial and political connections to the wealthiest members of the GOP in the finance and communication sectors across the country, can run for the White House without ever being called to account on his own financial track record.

 

Imagine what they'd say if this pic had Obama in it

Up top, let me say that this situation would be destructive even if Romney had established his track record in something other than his peculiar line of finance. The lack of transparency and accountability would be destructive even if Romney had been engaged in manufacturing, like his father, instead of in short-term paper losses to enlarge long-term gains, largely at other people’s expense. But it does not help that Romney’s track record includes so much gain for him, pain for others.

 

Romney to Detroit

Today’s history lesson

Remember one of Romney’s successful turnarounds in the 1990s, his temp work returning from Bain Capital to Bain & Co.? That turnaround came partly at the expense of the then-Bank of New England and partly at the expense of American taxpayers.

Bank of New England had already gone bankrupt following its dealings with Bain & Co., where Romney  worked before forming Bain Capital with several colleagues (including T. Coleman Andrews III of a close Bush-connected family). Bain & Co. had lapsed on covenants with Bank of New England. But notwithstanding that the company had contributed to the bank’s failing, Romney’s work at Bain & Co. included getting Bain’s debt to Bank of New England reduced from $38 million to $28 million.

 

FDIC

Bank of New England, in Chapter 7, had already been seized by the Federal Deposit Insurance Commission (FDIC). The failure of the bank and its sister banks is the sixth largest bank failure in U.S. history, thus far. From Investopedia:

“At the time, the BNE was the 33rd largest bank in the U.S., and including its sister banks, it had assets totaling $21.8 billion and deposits totaling $19 billion. As with most bank failures, a bad loan portfolio triggered BNE’s downfall.”

The bank’s bad portolio included Bain. Thus what Romney’s negotiating means, in plain English, is that Romney succeeded in getting Bain’s bill to the American taxpayer reduced by $10 million. Romney’s negotiating tactic was as simple as it was unsavory. Bain & Co. at the time was in dire financial straits–explaining why Romney was brought back on board. Romney turned the minuses into pluses, using them as leverage against the FDIC: He threatened to use Bain’s remaining funds for bonuses to (end-stage) Bain executives.

Back to 2012

As written earlier, there are undoubtedly several reasons why Romney doesn’t want to release his tax returns–or any financial records, except the partial recent tax returns from two presidential-campaign years.  One is that open records would clarify the close ties between the Bush and Romney teams over the years. Even a quick look at Romney’s business career shows that Romney’s interests have been tied closely to Bush’s. Previous posts dealt with entities including CaterAir–the Marriott spin-off that pretty gave Dubya his business career–and World Corp, South African Airways, and InteliData, where business relationships between the Bush people and the Romney-Bain people proliferated. Predictably given its Marriott ties, CaterAir has retained ties with Bain Capital over the years. See for examples corporate bios for Bain alumni from an SEC filing. One is an alumna of CaterAir, Graham a co-founder of Bain. This filing dates from the 2005 merger of InteliData and Corillian Corporation. InteliData, with Bain alum John Backus on board, became Coriallian; Corillian bought CheckFree, now FISERV.

 

Two candidates

To reiterate, in narrow political terms it does not benefit the Romney campaign to be tied too closely to the Bush years. It is beside the point that some recent polls have suggested that Romney is more of a drag on Bush than the other way around; during the past four years leading up to election 2012, the smart money would have seen it the other way around. Clearly the Romney campaign did. Team Romney has been working with GWBush alumni quietly, behind the scenes (as in the machinations in Virginia). By and large, the Bush and Cheney clans have not co-appeared out on the campaign trail with Romney and Ryan. Nor have the disgraced neo-cons left over from the Bush administration, who have nowhere else to go–and have flocked to Romney.

More on that later.

The fiscal and political Bush-Romney relationships have been thick on the ground in northern Virginia, and the D.C. suburbs in Virginia are the major political and financial hub for state and national GOP. Small wonder rival Republican candidates for the White House in 2012 could not even get on the ballot in the Birthplace of Presidents. Except for the well-organized Ron Paul, no one had the skills to compensate for Romney’s lock on what is politely called the establishment in Virginia, i.e. the nexus of corporate, NGO and political links between candidates and their financial support in Virginian suburbs of Washington, D.C. Owen Wister must be rolling over in his grave.

Not that northern Virginia is the only spot. Let’s start with a loose thumbnail of some other Bain investors over the years. The list includes Reynolds DeWitt & Co.

Thus Romney-Bush ties also take us to Dallas, Texas, home of a financial company with the Dickensian name Crimstone Partners (not to be confused with a fantasy character aptly named Crimstone). Here is the company self-described, from one of numerous publicly released statements:

“About CrimStone Partners

CrimStone Partners is a special purpose private equity partnership designed to find, acquire and build companies.”

[sound familiar?]

“The fund’s investors consist of more than 35 highly distinguished business leaders, senior investment bankers and private equity professionals from firms such as Morgan Stanley, LazArd, Dresdner Kleinwort Wasserstein, Bain Capital, AEA Investors, Allied Capital, Seven Rosen Funds, Blum Capital and CIBC.”

CrimStone has substantial ties to Ohio–where the good Sen. Sherrod Brown is enduring an avalanche of attack ads, and where GOP efforts to limit accessibility to voting were successful in 2004.

“CrimStone’s largest investor is Reynolds, DeWitt & Co., an investment firm in Cincinnati, Ohio, whose current holdings include basic manufacturing businesses, national franchise holding companies, real estate developments and a professional sports franchise.”

CrimStone has a claim to fame aside from the colorful name: Its main investor is the firm that backed George W. Bush throughout his business career, bailing him out at critical junctures, and made him a millionaire. Reynolds, DeWitt & Co., as noted, has ongoing business ties with Bain Capital (where, Romney emphasizes, he no longer works). Both Mercer Reynolds and William DeWitt support Romney for president in 2012. No surprise there; they supported him in 2008 against Sen. John McCain, too.

 

Anti-Romney ad in 2007

DeWitt, founder and co-chair along with Reynolds of Reynolds, DeWitt & Co., has continued to donate in the 2012 election cycle–$86,950 in this election cycle so far, according to figures provided by the Center for Responsive Politics. Reynolds, like DeWitt a pillar of Ohio’s GOP establishment, is on the roster of Romney for President. Each donated almost half a million dollars to GOP candidates and committees from 1990 through 2006, according to CRP.

It is no surprise that longtime local businessmen and state GOP honchos would be GOP donors as well.  But donations are only a small part of the story. Straight-out donations pale particularly in comparison to what Reynolds and DeWitt did for George W. Bush, in both business and politics.

The story is long, chock-a-block detailed, and has been written about elsewhere. Condensed, it reads as the story of a political-financial relay team, members effectively poised at each juncture of George W. Bush’s career to hand him the life-saving water bottle or more significant resource, primarily financial backing and political apparatus. A few quick examples of many:

  • In the mid-1980s, Bush’s oil exploration company was bailed out by Reynolds and DeWitt.
  • Also during the 1980s, DeWitt and Reynolds were among the Ohio investors brought in to back Bush’s purchase of the Texas Rangers baseball team.
  • GWBush received $42K year in consulting fees from Harken Energy, backed by Reynolds and DeWitt.
  • The relatively unknown Harken Energy also received a surprising opportunity to drill in Bahrain.
  • DeWitt was Bush’s partner in the Texas Rangers venture.
  • Reynolds was national finance chairman for the 2004 Bush-Cheney presidential campaign.
  • Reynolds co-chaired Bush-Cheney’s presidential inaugural committee.

 

Oil rig, Ship of state, the bloody son

For the record, Reynolds became GWBush’s ambassador to Switzerland and Lichtenstein, 2001-2003. A reward of ceremonial appointments, however, is dwarfed by the favorable tax policy bestowed by the Bush administration on long-time Bush cronies and their companies. 

As with Romney and his Olympics stint, Bush was able to base a claim of business experience on his Texas Rangers. As with Romney and Bain’s dealings with Bank of New England, Bush was able to get significant taxpayer help–Texas taxpayers and the City of Austin provided the stadium where Bush’s baseball team played. And as with Romney and some failed former Bain companies, Bush exited some companies carrying away gain for self while leaving the losses for others. It’s been called “vulture capitalism” for a reason. We could call them vulture political scions.