Skip to comments.A Brief History of Mitt Romney’s Record of Putting Profits Ahead of People as CEO of Bain Capital
Posted on 01/28/2012 9:40:26 AM PST by JediJones
Bain Capital is a classic strip and flip shop a private equity firm that made its money buying businesses and sucking profit out of them by any means possible that often resulted in a stack of pink slips for everyday Americans.
Romney made fortunes by bankrupting five profitable businesses that ended up firing thousands of workers.
Heres how it often went down. Romneys Bain would buy a company and increase its short-term earnings through firing workers and shuttering plants in order to borrow enormous amounts of money. The borrowed money was used to pay Bain dividends, however, those businesses needed to maintain that high level of earnings to pay their debts. When they couldnt, that meant plant closures, more layoffs, bankruptcies, and in many cases, the end of the business. Yet these bankruptcies still meant huge profits for Bains investors.
They leveraged this thing to the hilt and got out when they could, Rumbin said. We were left holding the bag.
...Bain bled the company, withdrawing cash for dividends and management fees even as circumstances in the steel industry deteriorated.
If I were looking for effective management of a project, a company or a country, this is exactly the kind of management I would not want to have, Foster said of Bain.
...Romneys Bain invested 22 percent of the money it raised in five businesses that ended up filing for bankruptcy and walked away with a $578 million in profit.
Its no wonder Wall Street lobbyists are lining up to throw campaign money Romneys way today...
...cites a Boston Globe report that a company under Romneys watch collected a $10 million bailout while Bain Capital profited $4 million.
(Excerpt) Read more at romneygekko.com ...
I hope you have on your asbestos underwear.
I was disappointed when Santorum said that Mitt was a “hard worker.” Mitt’s accomplishments no dount require hard work, but they also show greed and lack of loyalty to American citizens. He’s already a wealthy man, why does he have to be greedy. He’s part of why our capitalistic system has been undermined.
We all know that this will be repeated loudly and often by the MSM if Willard ends up as the nominee. I believe Romney will wither under the onslaught, yet he’s the pick of the GOP-E.
Let’s all go with communism! Yeah, that’s the ticket, equal pain for all!
Nothing in the scope or magnitude of mittens, or with such blatant self absorption.
This stuff will be plastered all over the airwaves if Romney is the nominee and we will probably lose! God forbid.
Lets all go with communism! Yeah, thats the ticket, equal pain for all!
No, let’s go for company owners being responsible for paying back money they borrow. Why should deadbeats suck millions out of a company and leave the lenders holding the bag. Is that real capitalism?
Curable LepersTo quote Albert Brooks: "Right there between the Lepers"
The Mittiot may fit all encased categories
...cites a Boston Globe report that a company under Romneys watch collected a $10 million bailout while Bain Capital profited $4 million.
If Romney is elected we lose.
The war is on now. Right now Romney is our principle concern. We can't win the war if we lose the battle with Romney.
It's down to Newt or Romney.
It is time for all Patriotic Americans to choose which side they are on.
Agree with you 100%
Yes...I will send him more money as soon as I am able to and help door to door here in Ca.
When a person invests capital in an institution for the purpose of growing that capital. It would be unethical for the leadership of said institution to abrogate their responsibiliy and put their own social beliefs ahead of their clients interest.
I think you meant to post this article two clicks down the internet on DU.
Show me proof that Bain did that. I have seen none. I HATE this line of attacks. Santorum showed us the way to destroy Mittens - ROMNEYCARE! The idiot actually DEFENDED it! The next debate should have both Rick and Newt slamming Mittens with it, in for the kill.
Agree it’s horrible what Romney did at Bain Capital. It’s destructive to Capitalism.
Anyone that thinks it’s okay to rob companies from the top, destroy people lives, and ultimately destroy a business for personal gain is stupid or sick in the head.
That’s what the Mafia does to businesses. It’s called Crony Capitalism and that is what Mitt was practicing. Robbing companies from the top for personal gain and the hell with the company in the long run. The question is how many businesses did Mittens wreck???
If you are a true Capitalist, then there is no way you can defend this type of behavior.
Usually the same people that defend Mitt over this criminal behavior thinks that it’s okay for Congress to insider trade but not we the people.
What social beliefs are you talking about? Not every single way of making a profit that happens to be legal is also ethical.
For example, insider trading apparently isn’t illegal for members of Congress to engage in, as we learned from folks like Rick Perry and Sarah Palin recently:
So I’m not sure what your argument is. Are we not allowed to judge people for being unethical just because what they do is legal? So I guess we can’t judge Planned Parenthood and abortion doctors for how they make their profits either.
What’s unethical about some of Bain’s profits are clearly outlined in the quotes I made from the article.
Bain Capital and Romneycare are not mutually exclusive issues...
Bain Capital invests in HCA, founded by Bill Frist, who is publically saying that Obamacare should not be repealed.
Bill Frist, medical doctor and former Republican Senate Majority Leader (2003 - 2007), said Tuesday that hes for fixing not nixing ObamaCare.
Frists father and brother founded Hospital Corporation of America, the largest private operator of health care facilities in the world. With ObamaCare, hospitals forecast less uncompensated care (bad debt) and their stock prices have been rising accordingly.
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When Bain takes over your company, expect this:
(clip from “Goodfellas” — liberal use of the f word)
Bain and Goldman Sachs, for example, put $85 million down in a $415 million 1994 leveraged buyout of Baxter International’s medical testing division (renamed Dade Behring)
Bain reduced Dade’s research and development spending to 6 to 7 percent of sales, while its peers allocated between 10 and 15 percent. Dade in June 1999 used the savings as part of the basis to borrow $421 million. Dade then turned around and used $365 million from the loan to buy shares from its owners, giving them a 4.3 times return on their investment.
A Dade executive, who requested anonymity, said he confronted new CEO Steven Barnes after a boardroom meeting within a week of the distribution.
“You really think it’s a good idea to borrow, you know, one times sales?” he asked.
“Oh. Yeah. Yeah. You know, that’s fine,” Barnes responded. “You know companies do that all the time.”
The executive then told Barnes, “Well, that’d be like me going out and borrowing the amount of money I make in a year and then trying to pay it off and pay for my house and feed myself and everything else. That doesn’t make sense.” The executive said he let it drop after that.
In August 2002, Dade filed for bankruptcy.
By 1998, Mr. Romney and his restless colleagues at Bain began looking for a way to cash out of the firms investment in Dade.
Bain settled on a common tactic in private equity: In April 1999, it pushed Dade to borrow hundreds of millions of dollars to buy half of Bains shares in the company and half of those of its investment partners.
Bain pocketed the $242 million. Goldman received $121 million. Top Dade executives got $55 million, records show. The total payout to shareholders reached $420 million nearly as much as the purchase price for Dade.
Even as the investors prospered, Dade cut 367 more jobs in 1999, documents filed with the Securities and Exchange Commission show.
The strategy of sharply increasing Dades debt alarmed several executives. Mr. Garrett, the former chief executive of Dade who stood to gain from the transaction, said he had argued unsuccessfully against it.
It was too aggressive, Mr. Garrett said. It was done right up to the limit of what the company could borrow.
Creditors, unsettled by deteriorating finances and high debts, began to pounce. More layoffs followed. And in August of 2002, Dade filed for bankruptcy protection.
The creditors threatened litigation against Bain and its investment partners, accusing them of professional negligence and unjust enrichment, according to bankruptcy documents. Bain and the other investors argued that the claims were baseless, but agreed to forgo about $68 million owed to them by Dade.
It is not the responsibility of an equity firm to save or create jobs. It is their responsibility to make money for their investors. I didn’t mention the word legal.
It is not the responsibility of any employer, consumer, contractor, corportation, etc.. to save or create any job. It is however the responsibility of every human to protect innocent life.
What is unethical about Bain’s behavior is not clearly outlined in your quotes. Any time any owner of a company decides to close a plant or layoff workers it could be spun by collectivists (like you) to appear unethical.
I’ll make it clearer then. Bain over-leveraged the firms because they knew they could walk away with the profits taken out of the borrowed money. That put those companies in a weaker position against their competitors and made it more likely for them to go bankrupt. It is the equivalent of what went on with the mortgage-backed securities, somebody using high finance techniques to trick someone out of their money by selling them something worthless. It’s not a question of legality, but of the kind of ethics and values we want in a president.
It also directly ties into Romney’s socialist schemes as governor. Just like John Corzine, often the type of person who likes playing these big money shell games also likes to collect a lot of tax revenue for the government and think he can work some accounting magic with those funds as well. This is not the profile of a small or limited government conservative.
Don't we need a "strip and flip" kinda guy? To me this is essentially Romney's only positive quality.
If you own shares in a company and decide they’re overvalued, is it unethical to sell at the inflated market value? (Assuming you’re not illegally trading on inside info of course.). Are you morally obligated to wait for a lower price? If you see market values in your neighborhood starting to edge down, is it incumbent upon you to sell at a big discount based on how far prices might fall in the next five years?
The high yield bond and loan investors who lent the money to allow the dividends and share buybacks were ultimately responsible to make the determination that the terms and pricing of the additional debt were adequate compensation for the increased risk of default.
Debt investors consider the value of the assets in the event of bankruptcy, because if that occurs they’re the new owners. There is nothing unethical about the process.
The creditors threatened litigation against Bain and its investment partners, accusing them of professional negligence and unjust enrichment,
I'm not saying the creditors don't bear responsibility for taking the risk they did. I'm saying they felt they got ripped off in the end and looking at the available facts I agree with them. It looks like Bain knew the company was on the road to bankruptcy when they borrowed the money and it's hard to imagine they were fully open and honest with the creditors about that.
Then there's the overall criticism of the leveraged buyout private equity business model as practiced by Bain, that appears to make companies weaker, leading to suffering on the part of the employees and shareholders, especially when the firms end up in bankruptcy. I'm not saying it's a legal question. But if you take a lot of money out of a company to enrich yourself to the detriment of the business and its employees and shareholders, that is a valid question of character. And Mitt Romney agrees with me...
Bain and its co-investors extracted special payments of over $100 million from each company, enabling Bain to make a healthy profit even before re-selling the businesses a practice known as getting back your bait. Lenders say Bain is one of the firms that has taken the most in such payments, which companies usually make by taking on additional debt.
Both Dade Behring and KB Toys soon suffered dips in their business. Unable to meet the burden of their debts, each filed for bankruptcy and laid off thousands of workers. Bain Capital spokesmen have said the company did nothing improper.
Mr. Romney, who remains an investor in Bain Capital, said he had not been involved in those decisions but acknowledged that such payments became part of the buyout business very early on.
It is one thing that if I had a chance to go back I would be more sensitive to, Mr. Romney said. It is always a balance. Great care has got to be taken not to take a dividend or a distribution from a company that puts that company at risk. He added that taking a big payment from a company that later failed would make me sick, sick at heart.
Every loan is a gamble, that is why you do your due diligence and research what you are getting into.
If the vultures didn’t clean the highways, it sure would be a smelly place now wouldn’t it?
All this about Bain, what about Solyndra with OUR money????
Sorry it’s still not clear. Did they purchase the companies for market value? How did they receive the credit? Were the lenders forced to give them credit? Or, did the lender look at the proposal, do due diligence and make a business decision to extend credit based on the lender’s best interest? If the company was purchased for market value and extending credit was in the companies best interest (according to both the lender and debtor) then it was nothing more than a failed business plan. My guess is that attacking Bain as an inept company is not as easy as using the tools of the left and portaying them as evil capitalists.
By the way, I would not vote for Romney in any election but I will not attack capitalism to try and defeat him.