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FACT CHECK: Romney’s Tenure At Bain Was Defined By Layoffs, Bankruptcies, Outsourcing

  • Written by Press Release
  • Category: Commentary

CHICAGO--(ENEWSPF)--August 31, 2012.

Mitt Romney told the story about his tenure as a corporate buyout specialist as if he was just a typical small business owner. But Romney balked at the offer to run Bain Capital until he was guaranteed that there “was no professional or financial risk,” and that he would get his old job back with full pay if the company failed. The truth is that his career in the private sector was defined by layoffs, bankruptcies, and outsourcing. That’s anything but typical, and it’s certainly not a credential for the presidency.

Romney rejected the offer to run bain capital until there was “no professional or financial risk”

When Bain & Company’s Founder Wanted To Spin Off Bain Capital As An Investment Firm, Romney Initially “Balked” At The Offer To Run It. “Bill Bain, meanwhile, was exploring a new frontier for his own firm - and for Romney. … While Bain & Company had been well paid, Bill Bain and his senior partners decided they were reaping only a small share of the value of their work. The new venture would be called Bain Capital. It would buy companies, retool them with Bain techniques, and resell them at a profit. … In early spring of 1983, with the sun pouring into his office in the Faneuil Hall marketplace, Bain offered Romney the job that would make his career. Romney balked, catching Bain off guard. Romney explained that he didn't want to risk his position, earnings, and reputation on an experiment in investing. The offer was appealing, Romney recalled in a recent interview, but he wasn't going to make such a decision in a ‘light or flippant manner.’” [Boston Globe, 6/26/07]

Romney Only Agreed To Run Bain Capital After Negotiating Terms So There Wouldn’t Be Any Financial Or Professional Risk. “So Bain sweetened the offer. He guaranteed that if the experiment failed, Romney would get his old job and salary back, plus any raises handed out during his absence. Romney had one more concern: the impact on his reputation should he prove unable to do the job. In the end, Bain agreed to craft a cover story if necessary, promising to bring Romney back to the consulting firm and explain Romney's return as a matter of his being more valuable to Bain as a consultant. ‘So,’ Bain says, ‘there was no professional or financial risk.’” [Boston Globe, 6/26/07]

Bain & Company Founder Bill Bain: “All The Risk And Investment Was Basically On My Side. I Was Clearly Putting My Neck On The Line And The Company On The Line.'' [Boston Globe, 6/4/07]

Romney and his partners made millions EVEN while driving SEVERAL COMPANIES INTO BANKRUPTCY

New York Times: “Bain Structured Deals So That It Was Difficult For The Firm And Its Executives To Ever Really Lose, Even If Practically Everyone Else Involved With The Company That Bain Owned Did, Including Its Employees, Creditors And Even, At Times, Investors In Bain’s Funds.” [New York Times, 6/22/12]

Under Romney, Bain Capital Propelled Dade Behring Toward Bankruptcy While Cutting 1,700 Jobs And Making $242 Million.  “At Bain Capital’s direction, Dade [Behring] quadrupled the money it owed creditors and vendors. It took steps that propelled the business toward bankruptcy. And in waves of layoffs, it cut loose 1,700 workers in the United States, including Brian and Christine Shoemaker, who lost their jobs at a plant in Westwood, Mass.… By the time the Harvard M.B.A.’s from Bain were finished, sales at the medical company, Dade International, had more than doubled. The business acquired two of its rivals. And Mr. Romney’s firm collected $242 million, a return eight times its investment.” [New York Times, 11/13/11]

Romney And His Partners Made $12 Million From GS Industries While 750 Workers Lost Their Jobs And Pension Benefits Were Cut By Up To $400 A Month After A Federal Agency Had To “Pony Up $44 Million To Bail Out The Company’s Underfunded Pension Plan.” “Less than a decade later, the mill was padlocked and some 750 people lost their jobs. Workers were denied the severance pay and health insurance they’d been promised, and their pension benefits were cut by as much as $400 a month.  What’s more, a federal government insurance agency had to pony up $44 million to bail out the company’s underfunded pension plan. Nevertheless, Bain profited on the deal, receiving $12 million on its $8 million initial investment and at least $4.5 million in consulting fees.” [Reuters, 1/6/12]

Romney’s Firm Reaped $100 Million While They Laid Off Workers And Racked Up Debt, Plunging Ampad Into Bankruptcy. ”In 1992, Bain Capital acquired American Pad & Paper, or Ampad, from Mead Corp., embarking on a ‘roll-up strategy’ in which a firm buys up similar companies in the same industry in order to expand revenues and cut costs. Through Ampad, Bain bought several other office supply makers, borrowing heavily each time. By 1999, Ampad’s debt reached nearly $400 million, up from $11 million in 1993, according to government filings. Sales grew, too - for a while. But by the late 1990s, foreign competition and increased buying power by superstores like Bain-funded Staples sliced Ampad’s revenues. The result: Ampad couldn’t pay its debts and plunged into bankruptcy. Workers lost jobs and stockholders were left with worthless shares. Bain Capital, however, made money - and lots of it. … But while as many as 185 workers near Buffalo lost jobs in a 1999 plant closing, Bain Capital and its investors ultimately made more than $100 million on the deal.” [Boston Globe, 6/26/07]

ROMNEY LED INVESTMENTS IN FIRMS THAT GREW INTO SOME OF THE LARGEST OUTSOURCING AND OFFSHORING COMPANIES IN THE WORLD

Washington Post Ombudsman: “Bain Knowingly And Far-Sightedly Made Strategic Investments, With Romney At The Helm, In These Pioneering Outsourcing Firms In The Late 1990s, Which Grew Into Some Of The Largest Outsourcing And Offshoring Companies In The World. And Romney And Bain Shared In Their Profits While He Was Chief Executive And After He Left.” [Washington Post, 6/29/12]

Washington Post: “Mitt Romney’s Financial Company, Bain Capital, Invested In A Series Of Firms That Specialized In Relocating Jobs Done By American Workers To New Facilities In Low-Wage Countries Like China And India.” [Washington Post, 6/22/12]

Washington Post: “During The 15 Years That Romney Was Actively Involved In Running Bain…It Owned Companies That Were Pioneers In The Practice Of Shipping Work From The United States To Overseas Call Centers And Factories.” “During the nearly 15 years that Romney was actively involved in running Bain, a private equity firm that he founded, it owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components, according to filings with the Securities and Exchange Commission.” [Washington Post, 6/22/12]

Bain Capital Was The Largest Shareholder In Modus Media, “Which Specialized In Helping Companies Outsource Their Manufacturing.” “The corporate merger that created Stream also gave birth to another, related business known as Modus Media Inc., which specialized in helping companies outsource their manufacturing. Modus Media was a subsidiary of Stream that became an independent company in early 1998. Bain was the largest shareholder, SEC filings show.” [Washington Post, 6/22/12]

Washington Post: “According To A News Release Issued By Modus Media In 1997, Its Expansion Of Outsourcing Services Took Place In Close Consultation With Bain.” “According to a news release issued by Modus Media in 1997, its expansion of outsourcing services took place in close consultation with Bain. Terry Leahy, Modus’s chairman and chief executive, was quoted in the release as saying he would be ‘working closely with Bain on strategic expansion.’” [Washington Post, 6/22/12]

Bain Capital Earned Double The Return On Its Investment In Holson Burnes But Workers Were Left Jobless And Work Was Shipped Overseas. “For Bain, the plan was a financial success: Holson Burnes raised $24 million from its initial public offering on the over-the-counter trading market, with Bain executives retaining the majority of the company’s shares. Bain, in the end, reaped more than double the return on its initial investment. But workers were left jobless just as the local economy began to slump. … The cost-cutting continued at Holson Burnes. By 1992, the company manufactured nearly 75 percent of its photo frames overseas, according to documents filed with the Securities and Exchange Commission. One of the company’s clock-making divisions also shipped work overseas from a Rhode Island plant.” [Associated Press, 12/19/11]

During Bain Capital’s Investment, SMTC Announced It Would Close The Denver, CO Plant And Move Production To Chihuahua, Mexico. “To offset losses, SMTC will close an assembly plant in Denver and take a one-time charge of $15 million to $20 million. Production from Denver will move to Chihuahua, Mexico.” [TheStreet.com, 3/30/01]

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