“Absentee Owner”: New Bain Questions To Dog Romney And They Are Not About Seamus
Though much of the nation’s attention has shifted to the tragic overnight violence in Aurora, Colorado, the political world will apparently move forward. Republican presidential hopeful Mitt Romney had already scheduled a campaign event in New Hampshire, and his staff alerted reporters this morning that their plans have not changed.
With that in mind, there are new questions about the candidate’s controversial private-sector background that deserve answers. The Boston Globe has this new report, for example, noting Romney’s ongoing ties to Bain Capital after his departure in February 1999.
Interviews with a half-dozen of Romney’s former partners and associates, as well as public records, show that he was not merely an absentee owner during this period. He signed dozens of company documents, including filings with regulators on a vast array of Bain’s investment entities. And he drove the complex negotiations over his own large severance package, a deal that was critical to the firm’s future without him, according to his former associates.
Indeed, by remaining CEO and sole shareholder, Romney held on to his leverage in the talks that resulted in his generous 10-year retirement package, according to former associates.
“The elephant in the room was not whether Mitt was involved in investment decisions but Mitt’s retention of control of the firm and therefore his ability to extract a huge economic benefit by delaying his giving up of that control,” said one former associate.
So, on the one hand, we see Mitt Romney telling voters, “I was in Utah full time. I had no responsibility for management at Bain Capital.” On the other hand, we see evidence that Romney was not in Utah full time and had quite a few responsibilities for management of Bain Capital.
In the meantime, David Corn has a new report on Bain, during Romney’s tenure, investing millions in a pair of companies that specialized in outsourcing high-tech manufacturing.
As for the still-hidden tax returns, the number of Republicans urging Romney to disclose more materials continues to grow.
By: Steve Benen, The Maddow Blog, July 20, 2012
“The Man Without a Past”: Mitt Romney, A Barbarian At The Gate?
Mitt Romney has an identity problem. He is running for president by making promises about America’s future, but as a man who is largely without a past. Not only has Romney renounced many of his previous positions — on abortion, immigration, gun control, climate change, and the individual mandate he once championed as Massachusetts governor. He also refuses to divulge many details about what even he has said is his main qualification for the White House in a faltering economy: his successful career in “private equity” from 1984 to 1999 (or thereabouts).
What is it about the private equity world that Romney doesn’t appear eager to bring up? As I explain in an article in the current issue of National Journal, “Mystery Man,” Romney was basically what used to be known as a “barbarian at the gate.” The term “private equity” sounds respectable, but it is a euphemism for the old leveraged buyout deals we remember from the 1980s, the era of corporate raiders like T. Boone Pickens and Henry Kravis. After junk-bond king Michael Milken, who funded a lot of those takeovers, went to jail, the industry decided to rename itself in order to remove the taint.
This is Mitt Romney’s true world. As the founder of Bain Capital, Romney became a brilliant LBO buccaneer who specialized in buying up firms by taking on a lot of debt, using the target firm as collateral, and then trying to make the firm profitable — often by breaking it up or slashing jobs — to the point where Bain and its investors could load up the firm with even more debt, which Bain would then use to pay itself off. That would ensure a profit for Bain investors whether or not the companies themselves succeeded in the long run. Often, burdened by all that debt, these bought-out companies did not succeed, costing thousands of jobs as they were downsized, sold off and shuttered. Other times they did phenomenally well, as in the case of Sports Authority and Domino’s Pizza.
But job creation is irrelevant to Bain’s business model, which is all about paying back investors. Nor does the long-term fate of the companies that private-equity firms buy up matter crucially to Bain’s bottom line (though of course success is better). The only real risk for Bain is that these companies fail to make enough initial profit in order to permit Bain to pile on more debt and extract a payout, so that it can make back its investment quickly.
Though he started off dabbling in less profitable “venture capital,” Romney quickly saw the high-return, low-risk potential of LBOs in the mid-1980s and ultimately was involved in about 100 such deals, which made him a true Wall Street tycoon. He then maximized his take further by socking away his gains in offshore shelters from Bermuda to the Caymans and using capital gains tax breaks and loopholes to reduce the rate of his 2010 tax return (the only one he’s released) to 13.9 percent, a far lower rate than the one paid by middle-class Americans. Many of Wall Street’s big dealmakers do the same with their profits, employing whole teams of international tax accountants.
But none of these dealmakers has ever run for president. This is perhaps the main reason for Romney’s reticence: It’s not just that being honest about Bain’s real business pulls back the veil from the ugly heart of financial capitalism. It’s also that this may be the hardest year since 1932 for a Wall Street big-shot to make a bid for the White House: The former Masters of the Universe remain unpopular because of the historic recession they did so much to create. So it’s hardly a surprise that Romney won’t dwell on practices that his onetime GOP primary opponent, Texas Gov. Rick Perry, labeled “vulture” capitalism.
None of this is necessarily disqualifying for a presidential candidate; on the contrary. Americans have always admired business success, no matter what package it comes in. It is part of the nation’s lore going back to the rags-to-riches tales of Horatio Alger and F. Scott Fitzgerald, and the storied careers of Andrew Carnegie and J.P. Morgan. Romney is undoubtedly one of the most successful capitalists ever to run for president. Based on his record at Bain, as governor, and at the Olympics, there is little doubt that he is a numbers whiz who is handy with a budget, and America has serious budget problems. “At the end of the day, people are going to know Mitt Romney was a super-successful businessman, and they’re going to factor that in,” says Vin Weber, a senior Romney adviser. “And most people will find that attractive and not negative.”
Maybe so. But as the Obama attacks persist, even some in the Romney camp fret that they are watching a Democratic version of the attacks that permanently defined Michael Dukakis as weak in 1988 and “Swift-boated” an unresponsive John Kerry in 2004. “That worries me a little bit,” Weber admits.
The Obama attacks also may be resonating because they compound an image of aloofness, of detachment from the lives of ordinary Americans, which has dogged Romney for many years. He is hardly the first rich man to run for president, yet he lacks the populist touch of previous successful candidates. Franklin Delano Roosevelt also came from a wealthy patrician family, but by the time he ran for president as a polio victim who had suffered among the people in Warm Springs, Ga., FDR had reputation for transcending that background. So did John F. Kennedy, whose father’s vast but somewhat shady Wall Street fortune financed a rich-kid bid for Congress, the Senate, and then the presidency. But JFK’s charisma and war-hero reputation, and his ability to connect with people — for example, by famously telling a hushed crowd of mothers who had lost sons in World War II that “I think I know how you mothers feel, because my mother is a Gold Star mother too” — made him a popular figure.
Not so Romney. His record contains few such man-of-the-people moments (ironically, his best argument may be his successful health-care law in Massachusetts, another thing he doesn’t want to talk about). And his uncommon Mormon religion, about which he is also reticent, further contributes to the image of a Man Hard to Know. This is the same Romney who declared during the hard-knocking primaries that the $350,000 he earned in speaking fees wasn’t a lot of money, who said that his wife drives a “couple of Cadillacs,” who grinningly bet Rick Perry $10,000 on a whim, and who boasted that even wealthy Ted Kennedy had to “take a mortgage out” to beat him. And those are moments when Romney was trying to be one of the guys. What has become clear is that he is part of a world of super-elites who live in a universe apart from most Americans.
Romney may well make a very good president. But we should know who we’re getting.
BY: Michael Hirsh, The Atlantic, July 21, 2012
“Preserving Political Viability”: Learning “How To Be An American” Capitalist, Non-Sununu Style
The first indicators came during the Republican primaries, when former House Speaker Newt Gingrich and Texas Gov. Rick Perry attacked Bain Capital-style capitalism. Perry even branded onetime Bain CEO Mitt Romney a vulture capitalist. The season has moved on — in fact, Perry campaigned for Romney last week in Elk City, Nev. – and the rhetoric has subsided.
But the reality is turning out to be quite problematic for Romney. Some kinds of free enterprise – such as a small family business – are perfect resume entries for a political candidate. But certain kinds of high-flying capitalism come across as cold-blooded and indecipherable, and they’re vulnerable to attack. Anything that involves the phrase “creative destruction,” for instance, would be risky.
What Romney is going through now is an experience neither major party may want to repeat. So if you are interested in running for president, here’s how to preserve your future viability:
1. Get rich the old-fashioned way. Create a product or service or business. Write a best-seller, like President Obama did. Run a successful company, like Herman Cain did. Jump on a trend early, like Virginia Sen. Mark Warner, who saw the potential of cell phones.
2. When you file your tax returns, imagine they will be on the homepages of every website in the world. Be prepared to defend your low tax rate and explain how you’ve used your untaxed money to create jobs. Alternatively, say you’d like to change the tax code so people like you pay more.
3. Related: Keep your money in the United States. Do not shelter income in Switzerland, Bermuda, the Cayman Islands or anywhere else. Repeat: keep the money at home.
4. If you have a lot of money, give away a lot of money. Think Bill Gates and Warren Buffett. If you have enough excess cash, you might be able to help eradicate AIDS or revolutionize inner city education. Tithing to your church and creating trusts for your kids don’t count.
5. When you leave a position, leave the position. Make a clean break. If you don’t, you will have a hard time arguing you are not responsible for what happened after you kinda-sorta departed, but were still CEO and sole owner. Sure, you may not be able to claim credit for good things that happen after you’re gone. But you won’t be on the hook for developments that are politically unpalatable, and possibly a serious threat to your presidential hopes.
By: Jill Lawrence, The National Journal, July 16, 2012
“At The Altar Of International Finance”: Romney “Goes For The Gold” In London’s Libor Village
In fairness to Mitt Romney, he did not schedule his $75,000-a-plate money grab at the altar of international finance when he heard that—via the Libor bank-rate scandal—Londoners were practicing his kind of crony capitalism.
Even before the Bain capitalist knew that bankers in London were lying to regulators and fixing interest rates in order to run up their profits—engaging in activities that the governor of the Bank of England said “meet my definition of fraud”—Romney was excited about getting a piece of the London bankster action.
But Romney campaign has has gone to Olympian lengths to make their candidate’s British sojourn seem to be about something other than the looting of London.
The Republican presidential contender’s international fundraising operation—and, yes, he does have an international fundraising operation—scheduled two major events to coincide with the opening of the Olympic Games. As a candidate who is having trouble touting his business experience (Bain Vulture Capital) and his governing experience (RomneyCare), the presumptive Republican presidential nominee calculated that it might be a good idea to take a trip across the pond to highlight his (somewhat less controversial) management of the 2002 Winter Olympics in Salt Lake City.
The Olympics are being held this year in east London, just beyond the fabled “City” precincts which are, along with New York’s Wall Street, the nerve center of global banking and financial dealmaking. And Romney is using his London sojourn to skim off some cash—make that a lot of cash—for his campaign accounts.
Or, as London’s Independent headlines the story: “Romney Goes for the Gold in London.”
Romney Victory Inc., the incredibly complex fundraising structure the candidate has developed to funnel money into his many campaign operations, has scheduled two London events for July 26:
1. A meet-and-greet where the price of admission is $2,500 per person.
2. A dinner where the places at the tables go for as much as $75,000 per person.
Both the Romney and Obama campaigns have raised money overseas from American expatriates (who, along with Green Card holders, are allowed to donate to US campaigns even if they do not reside in the United States or work for US-based banks or corporations). Obama’s had the upper hand in the global fundraising race by a $3.1 million to $1.4 million margin. But that will change after Romney collects his London haul.
Why? Because Romney is getting together with with The City’s wealthiest, and most scandal-plagued, banksters.
Or, at least, most of them.
Bob Diamond, the former Barclay’s banking empire chief executive who was forced to resign after it was revealed that his bank manipulated the Libor (London InterBank Offered Rate) with false reports about interest rates, was supposed to be at the head of the table. But with his busy schedule of testimony before parliamentary committees and investigators of the biggest banking scandal in recent years, the American expatriate has been forced to absent himself from the festivities.
“Mr. Diamond decided to step aside as a co-host for the upcoming London reception to focus all his attention on Barclays,” the Romney camp announced. “We respect his decision.”
Why shouldn’t they? One of Diamond’s closest lieutenants at Barclays—which just paid $453 million in fines stemming from the Libor scandal—is still co-chairing Romney’s big-ticket event in London.
Barclay’s lobbyist Patrick Durkin’s name is right there at the top of the invite to “a private dinner with Governor Mitt Romney at a central London location.”
Also on the list of forty-seven co-chairs of Romney’s London fundraisers are the names of top players in other banks that have been targets of the interest-rate manipulation scandal, including:
* Bank of Credit Suisse chief executive Eric Varvel (Varvel has already donated $100,000 to Romney’s “Restore Our Future” Super PAC.)
* Deutsche Bank managing director Raj Bhattacharyya
* HSBC managing director Whitfield Hines
Executives from Goldman Sachs, Blackstone and Wells Fargo Securities—and, of course, Bain Capital Europe—are also on the list.
Why would these Americans associated with international banks be giving maximum money to this particular presidential candidate? Gee, could it have anything to do with the fact that there are calls for criminal prosecution of the bankers who were involved in interest rate manipulations that effectively rigged the rates that helped to determine who consumers in the United States and other countries obtained mortgages and paid on credit cards?
“Much more needs to be done,” Senators Carl Levin (D-MI) and Jack Reed( D-RI) and ten of their colleagues wrote in a mid-July letter to financial regulators and Attorney General Eric Holder. “Banks and their employees found to have broken the law should face appropriate criminal prosecution and civil action.”
Electing a friendly president, who might put the brakes on those prosecutions, just became a very high priority for the men who pull the financial strings not just on Wall Street but in London.
Approached by Britain’s Telegraph, one invitee hailed Romney’s “American understanding of capitalism. A prominent lawyer who will be attending one of Romney’s London bashes explained that the Republican candidate understands “very important things [that] people here in the UK also understand.”
That sort of “understanding” is worth a lot to embattled bankers. Certainly, the $75,000 it will cost for what the Independent describes as a “chance to whisper some of their own policy preferences into the ear of the man who may—or may not—be US president.”
By: John Nichols, The Nation, July 20, 2012
“The Prevailing Order”: The Rich Really Are Different
In the last couple of years, we’ve occasionally seen stories where Wall Street types justify their enormous compensation packages by saying they work really, really hard. They stay late, they work weekends, they just keep their noses to the grindstone, and that’s why they get paid what they do. Sure, $30 million a year is a lot of money. But the hedge fund manager who made it probably worked 1,000 times harder than the electrician who made $30,000. Right?
I thought of those Wall Streeters and their rhetoric about hard work when considering the question of Mitt Romney’s tax returns. One of the things we’ve found out in the whole when-did-Romney-leave-Bain controversy is that even after he retired/went on a leave of absence, he was being paid at least $100,000 a year for doing what he swears was absolutely nothing. That’s a lot of money for doing nothing, at least to people like you and me, but remember that to Mitt Romney, it’s peanuts. According to the information he has released, he made over $42 million in 2010 and 2011 without doing any actual work. He hasn’t held a job in five and a half years, since he left the Massachusetts governor’s office. Tens of millions of dollars just keep pouring into his many bank accounts, without him lifting a finger. And of course, he pays a far lower tax rate on all that income than people who work for a living.
But it really seems that Romney has a hard time understanding why that would rankle people. The entire system is set up to allow people like him to play by a set of rules that was established by the wealthy, for the wealthy; but when you’re the beneficiary, it seems like the prevailing order is a just order. And what Romney wants is to make income from investments and inheritances taxed at an even lower rate. You probably haven’t heard, since there hasn’t been much discussion about it, but Barack Obama’s official position (even if he’s not going to do much about it) is that investment income should be taxed at the same rate as wage income; in other words, money you work for shouldn’t be taxed more (as it is now) than money you make when your money makes you more money. I’m sure that if somebody asked Mitt Romney about taxing all income at the same rate, he’d think the idea was nothing short of insane.
It’s not impossible for someone to benefit greatly from that system and still manage to wrap their heads around the fact that it’s unfair. There are plenty of rich people who do (Warren Buffett is the most visible example). I keep returning to Mitt’s repeated comments that of course he took advantage of every tax loophole he could find to make sure he paid as little as possible. We could argue about whether that’s unpatriotic, but the thing is that for most people who do a job and get paid a salary, there just aren’t those kinds of loopholes available. Not only can’t they afford to hire a team of accountants and tax lawyers; even if they could, there wouldn’t be much those people could do for them.
There is obviously something in Mitt Romney’s pre-2010 tax returns that he really, really doesn’t want people to see. Just how awful it is, we have no way of knowing; it could be something truly shocking, or just more of the offshore accounts and low tax rates we already know about from his 2010 return. But whatever it is, revealing it would no doubt have the effect of reminding people just how different the rules people like Mitt Romney play by really are. And if he’s afraid of that, maybe he’s more self-aware than I’m giving him credit for.
By: Paul Waldman, Contributing Editor, The American Prospect, July 19, 2012
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