Why Romney's Quit Date at Bain Matters
Jul 12, 2012
In every campaign he's run in the last 10 years, Mitt Romney has claimed he made a clean break from Bain Capital in February 1999 as a way to defend himself from charges that he laid off workers and outsourced jobs overseas. But more and more evidence is mounting that the break wasn't so clean. Romney was listed as Bain's "sole stockholder, chairman of the board, chief executive officer, and president" on Securities and Exchange Commission filings until 2002, the Boston Globe's Callum Borchers and Christopher Rowland report Thursday. Further, Massachusetts state documents show that Romney owned 100 percent of Bain in 2002, and that he earned at least $100,000 as an executive of Bain in 2001 and 2002. That follows a Vanity Fair report earlier this month showing that Romney still gets income from Bain -- $2 million in June alone, and investments in the firm's Cayman Island funds could be worth as much as $30 million. And Mother Jones found that November 1999 SEC filings concerning Bain's deal with Stericycle state that Romney "may be deemed to share voting and dispositive power with respect to" more than 2 million shares of Stericycle stock "in his capacity as sole shareholder" of the Bain entities involved.
Romney's campaign says Romney's name was still on the paperwork for legal technicalities, and that it doesn't really mean he was there. But former SEC commissioner Roberta S. Karmel told the Globe that claim strains credulity:
"You can’t say statements filed with the SEC are meaningless. This is a fact in an SEC filing… It doesn’t make a whole lot of sense to say he was technically in charge on paper but he had nothing to do with Bain’s operations. Was he getting paid? He’s the sole stockholder. Are you telling me he owned the company but had no say in its investments?"This is how the paper describes the Romney campaign's response:
A Romney campaign official, who requested anonymity to discuss the SEC filings, acknowledged that they “do not square with common sense.”So what?
Three reasons why it matters:
Outsourcing. There are two Democratic attacks that Romney has defended himself from by citing the 1999 departure date from Bain: that he's an outsourcer and that he's a corporate raider. President Obama's ad calling Romney an "outsourcing pioneer" are based on a June 21 Washington Post story looking at how Bain, led by Romney, was an early outsourcer. FactCheck.org rates the Obama commercial false, because much of the outsourcing happened after 1999. For example, Bain didn't become a majority shareholder in Stream International, which set up call centers overseas, until later in 1999. A subsidiary created by the deal, Modus Media, closed a California plant in 2000 and opened one up in Guadalajara, Mexico. Again, FactCheck.org rated the Obama ad based on the Modus outsourcing false, because Romney said he'd left Bain in 1999. The same goes for SMTC, which closed plants in Denver and opened them up in Mexico in 2001.
Corporate raiding. As for the corporate raider charge, Obama's campaign says Bain took over companies, extracted huge fees, and then let them fail. One example is Ampad, which NPR's Planet Money has cited as an example of private equity gone wrong. Bain bought the paper company in 1992, took on a ton of debt, and the promised turnaround never happened. Instead, Planet Money explains, workers lost their jobs, stockholders were "wiped out," and lenders "got back a fraction of what they were owed." But so what? Ampad declared bankruptcy in January 2000, almost a year after Romney's official quit date. But the Globe's report makes that more complicated. Likewise, GS Industries, which Bain formed in the early 1990s by merging multiple steel plants, went bankrupt in 2001, "two years after Romney left Bain," as the Los Angeles Times reported. Or one year before he left?
Legal issues. There are legal implications no matter which date is correct. Romney's most recent federal financial disclosure form says that "Since February 11, 1999, Mr. Romney has not had any active role with any Bain Capital entity and has not been involved in the operations of any Bain Capital entity in any way." Earlier this month, in evaluating the truth of an ad by President Obama's campaign calling Romney an outsourcer, FactCheck.org said that if Romney hadn't really left Bain when he said he did, "then Romney is guilty of lying on official federal disclosure forms, committing a felony."
But the Boston Globe says that if he did leave in 1999, and kept being listed as controlling the firm, that could be problematic too. Former SEC commissioner Roberta S. Karmel told the Globe:
"If someone invested with Bain Capital because they believed Mitt Romney was a great fund manager, and it turns out he wasn’t really doing anything, that could be considered a misrepresentation to the investor... It’s a theory that could be used in a lawsuit against him."
