Mitt Romney started running Bain Capital in 1984, earning a reputation as a bright star of private investment. A prospectus by Deutsche Bank would write that by the time he left in 1999, that Bain had averaged a glowing 88 percent annual return on investment. Romney would use that success to burnish his political career. But the dark side of that success was not forgotten by the legion of broken companies, fired employees, duped corporate buyers, unions and investors of his wares. He served one man only: himself.
In the early ’90s, Georgetown Steel, producers of wire rods, were to find that out the hard way. In the low-wage economy of Georgetown, South Carolina, employees actually had had a profit-sharing plan. That is until Romney cast his shadow over their books. Since he specialized in flipping companies by what he loves to call his “creative destruction,” he and his team went through Georgetown’s healthy, profit-sharing herd of employees like a pack of hungry wolves.
Bain would buy a firm like GS with a little money down and start mining huge management fees while paying investors enormous dividends. Previously profitable companies suddenly found themselves weighed down with debt, à la Enron. Romney’s smartest boys in the room didn’t care if a company made scooters or no-line bifocals. They knew they could run (or ruin) it better than anybody, which was the fate awaiting Georgetown Steel.
After purchasing the mill, Bain slashed costs, kicked out workers, repositioned formerly production lines and merged new companies with other firms. With some luck, they’d be able dump it in a few years for millions more than they had paid for it. But the dark thought was that it didn’t matter if the company thrived. Romney was yanking cash out early and often. He would profit even if his targets vanished in space. How’s that for the American Dream—or Nightmare—depending on which side of the table you’re on?
At Georgetown Steel, equipment upgrades ceased. Maintenance went out the window. Managers were dumped by people who knew zero about steel. The union’s profit-sharing plan was sliced and diced twice in the first year, than whacked altogether. Employees noticed the decay. They commented that the new people knew nothing about steel, but were taking money from them and putting it somewhere else. Time would prove the employees right. While Georgetown descended into bankruptcy, Romney was helping himself to the company’s treasury. What a guy.
The working man’s enemy
The thing is as Romney ruined Georgetown, he jump-started his career in politics, looking about for the biggest target in Massachusetts: Ted Kennedy’s U.S. Senate seat. Early signs showed he might topple Kennedy. As today, Mitt pitched himself as a commander of the economy, a man, believe it or not, with the mastery to create jobs. His flaw was that he assumed what was good for him was good for all: trickle-down destruction.
Mid-campaign in 1994, one of Mitt’s companies, American Pad and Paper, bought a plant in Marion, Indiana, at the time prosperous enough to be running three shifts. Bain’s first move was to can all 258 workers, invite them to reapply for their jobs at lower wages and a 50 percent cut in health care benefits. One employer described to the L.A. Times how he was told, “Here’s an application. If you want to work for us, fill it out. But you have insurance till the end of the week. That was it. It was brutal.”
Instead of reapplying, the workers struck. They also choose to let the good people of Massachusetts know what kind of man wanted to be their senator. Suddenly, Indiana accents were showing up in Kennedy TV ads, serving up tales of Romney’s creepiness. He was sketched literally as a corporate Lucifer, who wouldn’t blink at crushing little people if it prettified his portfolio.
No way was this a proper leading man’s role for a labor state like Massachusetts. With just 41% of the vote, Romney was creamed in the election. The Marion plant closed just six months after Bain’s purchase. The jobs were shipped to Mexico. That’s Mitt’s dark side, part of it. But there’s more, and darker, because Mitt didn’t learn his lesson. He didn’t know “creative destruction” left a lot of human wreckage in its wake. Nor did he seem get it that voters might see him as more of a dirtbag than a saint. For instance, just a few months after Kennedy hammered him, he set fire to another company.
Classic Bain: before ruining Georgetown, Mitt bought the Armco steel mill in Kansas City, Missouri, which had been in business for more than a century. Bain combined Armco with the Georgetown Mill and foundries in Tempe, Arizona and Duluth, Minnesota, to form the newly christened GS Industries. He bought Armco with $8 million down, borrowed the rest of the $75 million price tag, issuing bonds—IOUs—to borrow still more to pay himself and his investors $36 million.
In a year, he made four times his initial investment while barely lifting a finger. But he’d run up a staggering $378 million in debt on GSI’s tab. Nice guy, eh? Since steel is a highly cyclical business, a worldwide commodity prone to wild price fluctuations like oil, the Kansas City plant forged parts for equipment used in mining gold and copper, leaving it open to the instability of those markets as well. Yet the smartest guys in the room thought they could run the plant better than the people setting production records.
How? They were getting rid of old managers, hiring new ones that didn’t have any steel experience. They didn’t have a clue what was going on. Havoc! This time, many new supervisors were ex-military men who believed grown men and women were best motivated by punishment. Before Bain, everyone seemed to get along. Afterward, they wanted to run the plant like a prison, disciplining people for getting hurt on the job, wanting to put them in a war-like environment, where employees were fighting each other.
On top of that, Mitt-man was charging GSI $900,000 a year in management fees to run the company. That was $900,000 worth of stupidity in return for destroying their production capability. Although Bain borrowed $97 million to retool the plant to produce wire rods also, it left the rest of the facility to rot. And this, thanks to Mitt and his wolfpack helped one U.S. company’s manufacturing ability go down the toilet, in so doing creating a corporate culture that specialized in it.
Instead of resigning, Mitt put Bain on miser maintenance for spare parts and earplugs. Equipment fell apart. The new guys didn’t know how to fix it. They’d want to rent a new piece of equipment instead of maintaining what they had. The waste and inefficiency was heartbreaking, thanks to Mr. Dark Side and friends.
Bain’s plan all along was to streamline the company into profitability for greater rewards in a public stock offering. But the opposite was happening. Even Roger Regelbrugge, whom Bain ensconced as CEO, knew the debt would crush GSI from within. If an IPO didn’t happen, the company would go under.
Also, steel was entering a periodic turndown. Around the world, countries were locked in a tariff war and government-subsidized production was creating a glut and driving down prices. Mitt-man’s strategy was not built to withstand hard times. Workers, no dummies, saw the endgame. And they were worried that Bain had badly underfunded their pension plans as well. So they went on strike in 1997, littering the streets with nails and shooting bottle rockets at security guards.
When the dust settled, the steel workers union agreed to wage and vacation cuts in exchange for extra health and pension safeguards should the plant close. Sure enough, GSI was bleeding money noted the union official, David Foster, while negotiating the deal. Bain cursed the company, Foster claimed, placing its own interests above those of solid customers or long-term stability. And then there was labor’s looming unemployment and pension-screwing? Ouch.
Foster said, “Like many private equity firms, Bain managed the company for financial results, not production results. It didn’t invest in maintenance or short-term customer needs. All that came second to meeting monthly financial goals and getting from under the debt. It only took a few more years of blood-letting and GSI fell into bankruptcy.” Just like Lehman Brothers tried shifting their $50 billion debt off book for the annual report and then back on book for reality’s sake. Nevertheless, they still fell into bankruptcy and initiated the 2008 recession.
The broken-down Georgetown plant and foundries in Arizona and Minnesota were brought out of bankruptcy in the long run by new companies, and their work forces halved. This is how it happens, America, piece by rusted, messed-up piece. Still Mitt-man walked away unscathed, golden boy with the dark inside. After all, all the debt was technically GSI’s, not Bain’s. Romney repaid himself and investors just months after the purchase, pocketing millions for driving the company into the ground. Now he wants a chance to do the same thing to America. Only the deranged would vote for a predator like this to be president, especially at this low point in our economy.
Foster commented, “They were clever and ruthless enough to pay their own investors back at a really high return rate.” And screw the working people and the economy. This was the dark heart of Romney’s racket. Even when he killed a company—and he killed them often—he still made out, leaving labor and suppliers to take the hit.
The wolf in capitalist clothing
Campaigning now, Mitt-man calls his work at Bain resurrecting distressed companies. In other words, first he put them in a state of distress then waited for them to come back to life via debt immersion, imagining himself a white-knight lifting then dropping them in the total collapse they were about to face.
Private equity companies like Bain seldom buy anything but profitable firms for one dark reason: the patient must be healthy enough to be force-fed all that debt. So it’s something of a misnomer for Republican opponents to slur him as a “vulture capitalist.” He’s more the wolf capitalist in sheep’s clothing since he tears apart and eats profitable businesses for himself and his buddies. And he never fails to be impeccably dressed.
In Josh Kosman’s book—The Buyout of America: How Private Equity Is Destroying Jobs and Killing the American Economy—we find Kosman is no fan of the industry. Still he believes, inaccurately, I think, that the industry isn’t inherently wicked. Nah, it’s just there to provide jobs and new growth of companies that will stay in the red and not black, go bust and not grow GDP and the economy.
In fact, what Romney does is get Big Money investors to write checks to people like him, people too dumb to see through his record of pooling that money to buy or invest in other companies. Internal company documents show that a year before Romney left Bain in 1999, one of his funds had reached a massive $10 billion, the sum of all he stole from all the little and big people he screwed. Again, if this is what he does as president, he’ll beggar the United States forever and sell off the pieces for his personal gain.
Although Bain requires a $1 million minimum for a seat at the table of this particular poker game, its investors don’t just come from the wealthiest 1%. They include college endowments and teachers’ pension funds, all the people he would love to have vote for him as he’s screwing them daily.
Jon Burgstone, professor at the University of California, Berkley’s Center for Entrepreneurship & Technology, sees private equity as essential to the economy (whose economy?). He might be a member of President Obama’s National Finance Committee, but he’s still an admirer of Bain. But then Bain just plays the facilitator for this dark inner demon of Romney. Without Mitt’s totally amoral panache, Bain wouldn’t be the same.
I’m not saying that Romney didn’t have a gift for making money from suckers. He found one born every minute. In 1986, he bought medical-equipment manufacturer Calumet Coach for just $1 million, later flipping it for $34 million. He made 16 times his initial investment in the Gartner Group, a tech research firm. His crowning scam was buying the money losing Wesley Jessen VisionCare for $6 million in 1994 and seven years later, sold it for a dazzling $300 million. But what were the totally dark, heartless, criminal tactics that aided that success?
His fans seem strangely incurious about the ruin he has delivered across the country with labor, suppliers, even investors. After all, Bain is a private company, meaning it has no obligation to reveal its practices and never made public a list of companies it has purchased. Neither Bain nor the Romney campaign have commented on their modus operandi for publication. This is a corporate culture of malfeasance and corruption. And like the Mafia, it’s not worried about widows and orphans. If that’s a culture you want to see America steeped in, good luck to you. It’s already halfway or more there. A vote for Romney would be another nail in the coffin of our economy and an afterlife of merciless austerity.
In fact, last January, The Wall Street Journal did a track record piece, reviewing 77 investments made under Romney’s dark direction. Nearly one in three of the companies experienced severe financial trouble. One in five wound up in bankruptcy. Is that a formula for an American economic comeback or for being sucked under the tide with another hyped Titanic?
Moreover, the culture of Bain Capital is buying companies and loading them with debt and then looting the balance sheets. It’s the same Lehman model that drove the American economy off the cliff then left other people to manage the wreckage and carnage.
A former employee of Mitt-man at Bain comments, “But if Romney played the friendly politician [at Bain], kindness wasn’t his specialty. Rewarding CEOs with huge bonuses, he was generous to ranking executives. Yet he tended to treat those below his pay grade as little more than machinery.” Put that on your resume, Mr. Mitt. It’ll probably work with all the Bain holdings, but I’ll bet the bulk of America won’t want it and you for their president if they knew the full truth about your amoral work ethics.
For instance, Domino’s bought into Bain just before Romney left to run the Salt Lake City Olympics, meaning someone else created all those jobs. Romney didn’t manage Staples or Sports Authority. Bain was a minority investor. By Mitt’s logic, any large investor—say, the Texas teachers’ pension fund—also creates hundreds of thousands of jobs. He’s comparing himself to them. The boast is so dumb that his campaign even backed off it. Just throwing money at something doesn’t make it successful. Brilliant, committed, honest people do. Romney’s reputation is among the most heinous job-killers of them all. Job growth has never been about anything but Mitt’s personal wealth growth plan, not the American working peoples plan.
Bain always considered cutting employees as job one. Second is charging high fees for raiding treasuries for self-enrichment and/or seed money to borrow or buy new companies. Bain and Romney are financial molesters, compulsively criminal, as mean as they come. Josh Kosman describes a standard Romney operation procedure: to pump short-term earnings, he would essentially “starve a company,” whacking not just employees, but also customer service and research and development funding—all ingredients for long-term prosperity.
Kosman goes on to say, “They [Bain] were very aggressive about dividends. They were very aggressive about borrowing the most money they could. He’s very driven to be the best he could be, and that was to be as cutthroat as he could be. But in the process, he hurt a lot of companies and cost a lot of jobs, maybe tens of thousands of jobs.” And this man would be president.
It’s also telling, Kosman points out, that “Romney never cites companies he actually managed as evidence of his job-building skills. If Romney had some stories to tell, he’d use those stories. I think it is very interesting that he’s not telling those stories because I think they don’t exist.”
The welfare hawk
Romney ripped President Obama for bailing out the auto industry and argued that it should have been dealt with in his favorite resting place: bankruptcy court. He was also incensed that the president rescued workers’ pension before covering Wall Street’s bad loans. His faith in the free market wobbles when his friends need rescuing. Romney just as vigorously defends the $10 billion government bailout of Goldman Sachs, his investment partner at Bain. Can we go any lower than Romney and Blankfein, devil’s helpers?
In 1988, he bought South Carolina photo-album maker Holson Burnes. In exchange for the firm’s promise to build a new factory, the people of Gaffney, South Carolina, gave Bain $5 million in bonds and $200,000 in utility upgrades. The plant closed just four years later. The 100 jobs there were later shipped to Mexico.
At GSI, Mitt dumped $44 million in pension shortfalls on the federal government. And when he bought mattress maker Sealy in 1997, he took $600,000 in welfare to move the firm from Ohio to North Carolina.
To realize how bent Mitt-man is, he describes one of his great achievements—Steel Dynamics, where he was a minority investor—and practically launched by corporate welfare. Indiana taxpayers gave the firm $77 million to open a plant. Residents of DeKalb County actually had their income taxes raised solely to help Romney and his friends. Tad DeHaven calls it “theft and redistribution.”
DeHaven’s no wild-eyed Trotskyite: DeHaven is a former budget adviser to Republican U.S. senators Jeff Sessions of Alabama and Tom Coburn of Oklahoma. Yet he notes that firms like Bain often get governments to subsidize their raiding parties. The one right now is a raiding party on the United States Treasury and people.
The feds take $100 billion a year from everyday taxpayers and send it straight to companies like Romney’s, says DeHaven, who works for the Cato Institute, a conservative think tank. But like most good Republicans, DeHaven is reticent about singling out the candidate for criticism. “It depends on what he knew and Bain’s involvement in obtaining subsidies,” DeHaven says. “I don’t know if it makes him a hypocrite or not, but he should answer questions about it.”
The Suharto of America
Those answers won’t be forthcoming any time soon, unless in front of a congressional committee inquiring into Bain. Romney refuses to discuss most of the companies he purchased at Bain, nor will he release his tax records from those years. As a result, voters are left to make their own call on his catalog of “creative destruction”—and what he might be like as president. If you don’t get a good idea from this survey of his call on his “creative destruction” machinations, think twice.
Romney has professed his admiration for Ronald Reagan. But judging by his business history, the president he most resembles is Indonesia’s Suharto. Romney has devoted his life to ensuring every last penny rises to a few hands at the top. And like Suharto, he has never shown much concern for the countrymen he tramples along the way. Repeat that sentence to yourself and remember it.
“The word ‘oligarchy’ comes to mind,” says Michael Keating when asked to envision a Romney presidency, a deep dark ‘oligarchy,’ a pool that swallows the moon, money and men.” Keating is a former business consultant and executive at Bertelsmann, a multinational investment firm that operates in 63 countries. He asserts that men like Romney “hide their antisocial actions behind the rhetoric of free-market capitalist platitudes. But in the end, it’s all about the bottom line—and only their bottom line . . .” Perhaps Bain Should more appropriately be called Pain Capital, given the pain it causes its victims.
Keating concludes, “I don’t think Romney is so much dangerous as he is unimaginative. And in the world we live, that amounts to the same thing.”
Jerry Mazza is a freelance writer, life-long resident of New York City. An EBook version of his book of poems “State Of Shock,” on 9/11 and its after effects is now available at Amazon.com and Barnesandnoble.com. He has also written hundreds of articles on politics and government as Associate Editor of Intrepid Report (formerly Online Journal). Reach him at firstname.lastname@example.org.