MORE PROOF THAT MITT ROMNEY & BAIN CAPITAL WERE NOT “JOB CREATORS”

...Mr. “I Like firing people”, Willard Mitt Romney

As Mitt Romney continues his barely winning of caucuses and primaries on the way towards being the Republican presidential candidate, more information is now becoming available showing that Romney and his Bain Capital company were anything but “job creators”.

In fact, soma Bain managers have said that their mission at Bain Capital was very clear. Mr. Marc B. Walpow, a former managing partner at Bain who worked closely with Romney for 9 years has said, "The primary goal of a private equity company is to create wealth for your investors. I never thought of what I did for a living as [being] job creation".

It’s important to understand that Bain is a private organization, therefore they are not required to publish their internal operations as is required by public companies. In addition, most people don’t know that there were two distinct groups operating within the Bain organization.

One group is the Bain Venture Capital operation. This group looks for entrepreneurs with new ideas and concepts that were looking for the necessary start-up capital for building a new operation around their ideas.

During all the recent election debates and speeches, Mitt has continued to mention how successful the Bain financed, office supplies company, Staples, has become and that they employ over 90,000 Americans. It is true that Staples has been a successful operation. But this was not a Bain Capital financed operation under Mitt Romney. Staples was a start-up from the “Venture Capital” side of the Bain organization.

The other side of the Bain operation was the Bain Capital leveraged-buyout investment firm, which under Mitt Romney became one of the nation's most successful leveraged-buyout firms.

Bain Capital helped lead the trend in which current companies (not start-ups) were acquired using debt, which was often pledged against their own assets or earnings.

Yes, Bain Capital did expand many of the companies it acquired. But like many other buyout firms, Romney and his team also maximized returns by firing workers, seeking government subsidies, and “flipping” companies quickly for large profits. (“Flipping” is the process of buying and selling a company rapidly for a big profit.)

Romney himself became very wealthy at Bain Capital and he is now considered to be worth between $190 million and $250 million, much of it derived from his time running the Bain operation. (Mitt Romney is also probably the richest candidate to ever run for the US presidency.)

As I had said, being a private company, Bain was not required to publish the happenings of their internal operations. But, shortly after Mitt Romney resigned from Bain Capital to run the US Winter Olympics in Salt Lake City, potential investors received a Bain prospectus touting the extraordinary profits earned by the private equity firm that Romney controlled for 15 years.


Listed below are some of the internal prospectus information on how Bain Capital became so successful. It also shows how difficult it is for Mitt Romney to claim that his 15 years at Bain Capital was as being a “job creator”.

>>> The published prospectus shows that 4 of the top 10 companies Bain acquired under Mitt Romney’s leadership declared bankruptcy within just a few years, shedding thousands of jobs. It also shows that Bain investors profited in eight of the 10 deals, including three of the four that ended in bankruptcy

>>> According to the prospectus, (prepared in late 2000 by a division of Deutsche Bank Securities), investors could participate in Bain's funds with a minimum investment of $1 million. Bain Capital's portfolio started with simple venture capital investments like Staples, but under Mitt’s direction, the investment group eventually shifted heavily toward more complex leveraged buyouts and other similar deals.

>>> Leveraged buyouts allow investors to purchase businesses with the acquisition funded sometimes by significant amounts of debt for the company. To the critics, these leveraged deals can make acquired companies more vulnerable to economic downturns, leading to a greater likelihood of bankruptcy and job cuts.

>>> In the case of GS Industries, the 10th-biggest Bain investment in the Romney years. Bain formed GSI in the early 1990s by spending $24 million to acquire and merge steel companies with plants in Missouri, South Carolina and other states. The company’s senior managers cut jobs and benefits almost immediately. Meanwhile, Bain and its investors received management fees from GSI and a $65-million dividend was declared in the first years after the acquisition.

>>> In 1999, as economic challenges mounted, GSI sought a federal loan guarantee intended to help steel companies compete internationally. The loan deal was approved, but before it could be used, the company went bankrupt. More than 700 workers were fired, losing not only their jobs but health insurance, severance and a chunk of their pension benefits. GSI retirees also lost their health insurance and other benefits. On the other side, the Bain partners received about $50 million on their initial investment, a 100% gain.

>>> "It makes me sick," said Steve Morrow, a retired GSI steelworker, recalling what happened to his fellow workers after the Kansas City operation shutdown. Some top executives received bonuses from Bain, he said. "But the salaried and hourly people ended up with the shaft".

>>> Union officials say they tried to work with GSI management and Bain to assure workers and retirees that they would have some benefits even if the company went under. But they said their appeals fell on deaf ears during the time Romney was running the firm. "Bain was demanding certain financial performance with no understanding of what the problems were on the ground," said David Foster, a former steelworkers union official who worked with GSI until the bankruptcy. He said Bain "bled the company dry". They withdrew cash for dividends and management fees, even as the US steel industry was going down the sewer.

>>> According to the Deutsche Bank prospectus, in 1996, Bain purchased Experian, the California-based consumer credit reporting firm. Bain then “flipped” the company two months later, reaping $252 million on its initial investment of $88 million.

>>> On the positive side, Bain acquired Epoch Senior Living, a pioneer in the concept of linking nursing homes and assisted-living apartments. Initially, Bain's investment in 1998 did not go well. But this time, Bain stuck with Epoch, which at the time had just a few hundred employees. When Bain sold Epoch, (well after Mitt was gone), investors had more than doubled their initial $26.4-million investment, and Epoch employed more than 3,000.

>>> But that wasn't the case for a medical technology company in California. Bain purchased a medical diagnostics unit for $448 million in 1994, putting up $26.7 million. It named the new company Dade International. Under Mitt’s direction, Dade acquired a chemicals division of DuPont in 1996 as well as the diagnostics company, Behring. Dade then borrowed big again, this time to repurchase stock from original investors including Bain and Goldman Sachs, for $365 million, more than four times their original investment.
Dade’s growing debt hit $1.5 billion, along with declining cash flow and high interest rates. This led the company to file for Chapter 11 bankruptcy. It emerged from bankruptcy after only two months and continued to operate. However, between 1996 and 2002, the company down-sized and shed more than 1,700 jobs, according to filings with the SEC.

>>> "When I listen to Mitt Romney these days, he talks about creating jobs. My experience at Dade during those Bain Capital years was that it was strictly an investment operation, not one to create jobs," said Michael Rumbin, a vice president of technology management at Dade during the Bain years whose position was eventually eliminated.
"No one came from Bain and said, 'How can we expand and hire more people?' " Rumbin said. "It was instead, 'How do we turn our investment around and make a lot of money?"

Newt Gingrich recently described Bain Capital as a “small group of rich people manipulating the lives of thousands of people and taking out all the money.”

I can’t believe it, but I am actually agreeing with “The Newt”.

Copyright G.Ater 2012

Follow me on Twitter: gater01