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Friday, January 20, 2012

What's Mitt Fudging?

(By American Zen's Mike Flannigan, on loan from Ari Goldstein.)

Bain, citing privacy reasons, declined to provide a list of the companies it invested in. - The WSJ, January 9, 2012

OK, we've all heard the stories about Mitt Romney's wooden attempts to resonate with the proletariat. For all the jokes about Al Gore's stiffness in 2000 and John Kerry's blue-blooded egalitarianism in 2004, Mitt Romney makes both Gore and Kerry look like the Isley Brothers on Ecstasy with Jimi Hendrix on accompaniment.

In fact, if Mitt Romney was any stiffer, he'd have a Y-shaped incision on his chest. His infrequent and invariably failed attempts to resonate with voters who have actually touched a snow shovel and have actually felt sweat on their skin are invariable disasters. The man worth up to $264,000,000 recently told unemployed people in Tampa, Florida that he was unemployed, bet Rick Perry $10,000 on national TV and thinks getting paid over $374,000 for a speech "isn't much." Hell, the only difference between Romney and Lenin's corpse is that Lenin is perpendicularly challenged and isn't afflicted with terminal avarice.

But Republicans and the mainstream media who love them and take their cues as readily as they do Matt Drudge's every half-baked fever dream are losing their focus. While it's perfectly acceptable for Sarah Palin and Newt Gingrich to ask Romney to release his tax returns (albeit because they just don't think Romney can beat Obama toe-to-toe, which he can't. If by late this summer it comes down to Romney and Obama, it won't be a David vs Goliath matchup as much as one featuring a Ken doll vs Goliath.), there's an even bigger question that the corporate MSM are leaving out of the debate.

Instead of worrying over Romney paying 15% on some of his Bain Capital dividends and stock options, money he hasn't actually earned in 13 years, and perhaps none at all since much of his vast fortune is squirreled away in the Cayman Islands and elsewhere, we ought to focus, instead, on how many tens of thousands of American families Romney had ruined during his 15 year-long reign of terror since he'd founded Bain.

Even if the tax code was rolled back to the days of Eisenhower and Kennedy, in which the wealthiest paid up to 90% in taxes, Romney would still have over $25,000,000 in the bank, hardly an amount that would inspire much pity among many in the 99%. But little attention has been paid outside of Newt Gingrich's SuperPAC and the DNC to the countless rabble left to starve by the side of the road in Romney's locust-like agenda at Bain Capital.

Let's take a look at perhaps Romney's most infamous acquisition, Ampad (which, in a masterful piece of spin doctoring yesterday, the right wing American Enterprise Institute not only downplayed but tried to claim Romney's Bain actually created jobs. Forget the fact that a venture capital investment firm's primary if not sole focus is to make money for itself and its investors and that job creation is merely incidental to that very same end.).

"Last I saw her, she was still technically alive."

American Pad and Paper was one of 10 businesses into which Bain had either invested or acquired outright that made 70% of the money that stuffed the pockets of their investors and, out of those ten, one of four companies to file for bankruptcy within three years. But there's an ingenious way to spin that: Romney and other supporters of Bain Capital piss and moan that it's unfair to assign blame for failed companies after Bain had essentially bankrupted them with massive management and consulting fees and from which they'd subsequently divested themselves. In essence, Bain is taking the identical position of a serial killer who absolves himself of guilt after stabbing a woman and leaving her to die by the side of the road.

At the same they're doing the Pontius Pilate thing and washing their hands of blood or red ink from companies they'd bankrupted (approximately 22% of them), Bain and Romney are also taking credit for building jobs that perhaps ought to go, instead, to a robust Clinton-era economy and senior management at Staples, Domino's, etc.

Romney once said to Newt Gingrich during a debate, "Doesn't he understand how the economy works? In the real economy, some businesses succeed and some fail." What Romney's really saying is something that we all already know but that he just doesn't quite have the guts to say without the varnish: That in the "real economy", in "real" capitalism, in the "free market", a company's success is measured solely by the money it makes for shareholders and executive management, not by how many blue collar jobs it creates.

Ampad's notorious example is a case in point and is fast becoming a verbal Armageddon for both the right and the left to the point where both Romney's detractors and supporters stumble over themselves with their half-facts and contradictions (such as professional banshee Ann Coulter a few days ago ascribing Ampad's failure to unions and a mid-90's America going green while forgetting that around the same time, Staples, a Bain-owned paper store, was making billions at the expense of smaller manufacturing companies such as Ampad.).

The facts are that the union, represented by Romney gadfly Randy Johnson, went on strike when Bain swooped in and raised health care costs for the workers. The deserted hulk and weedy parking lot that used to be the Marion plant was bought by Ampad which was of course owned by Romney's Bain. Despite the workers being represented by a union, Bain and Ampad thought it was more profitable to just fire all the workers and part out the company.

Typical of corporate raider firms, Bain's strategy for making money at all costs was manifold: Charging obscene management and consulting fees, insinuating their own people on the board of directors, driving up debts, selling stocks, inflating the worth of its holdings, with preserving blue collar jobs not even at the bottom of their list of priorities. From a landmark seven part story published by the Boston Globe in 2007 (but no longer archived and available in part here):
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. The firm put just $5 million into the deal, but realized big returns in short order. In 1995, several months after shuttering a plant in Indiana and firing roughly 200 workers, Bain Capital borrowed more money to have Ampad buy yet another company, and pay Bain and its investors more than $60 million - in addition to fees for arranging the deal.

Bain Capital took millions more out of Ampad by charging it $2 million a year in management fees, plus additional fees for each Ampad acquisition. In 1995 alone, Ampad paid Bain at least $7 million. The next year, when Ampad began selling shares on public stock exchanges, Bain Capital grabbed another $2 million fee for arranging the initial public offering - on top of the $45 million to $50 million Bain reaped by selling some of its shares.

Bain Capital didn't escape Ampad's eventual bankruptcy unscathed. It held about one-third of Ampad's shares, which became worthless. 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.

To the folks at Bain Capital, that was all in a day's work, albeit an unusually lucrative day's work, and doesn't exactly paint a portrait of a venture capital firm dedicated to saving American jobs at all costs.

So the next time Romney tries to connect with the proles while pointedly and furtively refusing to release his tax records, instead of obsessing at how stiff and disingenuous Romney is, both political parties as well as the MSM ought to focus on those American workers who similarly don't pay much in taxes for the simple reason that Romney and Company put them out of work.
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Blogger casey said...
Hello Jurassicpork,

With the tax structure Bain Capital (my sister calls it Vain) also made money by the worthless stock it held. It wrote the stock losses against the profits it made so it reduced the taxes it had to pay. This is a win-win for Vain and the other vultures. They take functioning companies and turn them into zombies or actually kill them.