Tuesday, May 8, 2012

Mitt's Excellent Adventure at Bain Capital

Well, here comes the great businessman Mitt Romney, to run the country just the way he ran his company!  That, as we are going to hear incessantly, is exactly what we need to get our economy back on track, after Obama ruined it, back there in the couple of years before Obama was President.  We are going to have pounded into our heads the story that Romney's magnificent business success at Bain Capital demonstrates conclusively that the nation needs him in the White House.  Meanwhile, if the past is any indication, no one in the mainstream press is going to spend a minute trying to find out what really happened at Bain Capital as Romney made his huge fortune there.  So here is old Green Eagle to try to figure it out (pathetic, huh?), and here is what I have learned:

First of all, let's set one thing straight.  People keep calling Bain a "venture capital" firm.  This is false.  Venture capitalists find enterpreneurs and finance their compainies, hoping to make money when the enterpreneurs flourish.  That's not what Bain did.  What Bain did was to buy existing, often quite successful companies, strip them of everything but the wiring in the walls, and leave them to their fate, which was often bankruptcy.  The difference between a venture capitalist and Bain is the difference between a partner and a parasite.

So, let's look at three cases of companies that Bain took over while Romney was in charge.

The first is Armco Steel, a 100 year old Kansas City company that, when Romney bought them, was  setting production records.  Romney paid $8 million for this company, in addition to a borrowed $75 million, which became Armco's debt, not Bain Capital's.  He then immediately issued more bonds in the company's name and used the money to pay himself and his investors $36 million- four and a half times what they had just paid for the company.  In the process, within one year, he had saddled this formerly successful company with $378 million dollars in debt.

To cut costs, Bain stopped all company expenses, routine maintenance, equipment, safety- everything.

Within a few years, Armco Steel was out of business.  750 people lost their jobs, only to discover that Romney had removed $44 million from their pension fund; money which had to be made up by American taxpayers.   Workers lost their severance pay and promised health care benefits, and saw the bankruptcy court slash their pensions by $400 a month.  But all of the debt belonged to Armco, and Romney walked away with millions of dollars, having stolen many times his purchase price long before he let this firm collapse.

Here's another example, a company called American Pad and Paper:

"In 1992, Mitt Romney was running Bain Capital, a private equity firm. Bain Capital bought American Pad & Paper Co. (Ampad) for $5 million.

Over the next several years Romney's firm bled the company dry. Hundreds of workers lost their jobs. Stockholders were left with worthless shares. Creditors and vendors were paid less than 50 cents on the dollar.

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...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."

And one final example, a medical technology firm called Dade International. 

"In the waning days of 1994, a small group of investors led by Bain Capital, including Goldman Sachs, paid $450 million for Dade. Bain invested about $30 million.

By 1998, Mr. Romney and his restless colleagues at Bain began looking for a way to cash out of the firm’s 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 Bain’s shares in the company — and half of those of its investment partners.

Bain pocketed the $242 million" 

On an initial investment of $30 million, remember.

"The total payout to shareholders reached $420 million — nearly as much as the purchase price for Dade.

At Bain Capital’s direction, Dade quadrupled the money it owed creditors and vendors. It took steps that propelled the business toward bankruptcy. And in waves of layoffs, it cut loose 1,700 workers in the United States...Bain... extracted cash from the company at almost every turn — paying themselves nearly $100 million in fees, first for buying the company and then for helping to run it.

...in August of 2002, Dade filed for bankruptcy protection."

To sum this up:

Bain Capital “earned” $342 million from investing $30 million in the acquisition of medical technology firm named Dade International. Despite profiting by hundreds of millions of dollars from the deal, Romney’s company led Dade to bankruptcy, laying off thousands of workers throughout the country.

The irony is that this formerly successful company which Bain drove into bankruptcy recovered miraculously once freed of Bain's management, and was eventually sold to the German firm Siemens for a price in the billions. 

Now, let me make it clear that Bain didn't totally destroy every company it bought.  No, some of them, such as Staples and Dominos, were strong enough to survive the bloodsucking which was Bain's business model.  Still, Bain delivered an average annual return of 88% during the time Romney was there- an unbelievable amount given that Bain did absolutely nothing in the way of generating value, and existed solely to strip other companies of their assets.

And, above all, let us not forget that, if Mitt had not been born to a rich and powerful family, he would never in a million years have had the chance to land a "job" like this- a job that paid him $200 million in return for his service of destroying companies and their workers.  No, like George W. Bush's ownership of a baseball team, which paid him $15 million for doing absolutely nothing (except trading Sammy Sosa,) this is the work life of the insanely wealthy, and it is one more reason why people like this should never be permitted to have this kind of money and power. 

Well, there are some facts.  I found it helpful to consider all of this in result of a number of things Romney and his wife have had to say recently.  For example, Romney insists that poor mothers have to go back to work by the time their children are two, because otherwise they will not know the "dignity of work:"

Poor women, he said, shouldn't be given a choice, but instead should be required to work outside the home to receive Temporary Assistance for Needy Families benefits.

"[E]ven if you have a child 2 years of age, you need to go to work," Romney said of moms on TANF..."I said, for instance, that even if you have a child 2 years of age, you need to go to work. And people said, 'Well that's heartless.' And I said, I want the individuals to have the dignity of work.'"

Of course, Mitt Romney, who has not lifted a finger in gainful employment for ten years, and his wife, who has never worked at anything but riding expensive horses, don't need to learn the "dignity of work," because they are rich.

In fact, there is a word for this man: he is a sociopath, who does not give a damn for those who he harms, as long as he gets what he wants.  This sick, perverted person is the last thing we ever need running our country.  He should be in prison for life for the damage he has done, not in the White House.  Of course, the mainstream press is going to do everything they can in the next six months to ignore this fact, just as they ignored the ludicrous inadequacy of Ronald Reagan and George W. Bush, thereby doing their part to destroy the stability of this country.  Studies have already shown that press coverage of Obama is far more negative than that of Romney.  This is the same game the press have played for decades, and they are at it again, foisting off on the American people a morally bankrupt, vicious predator, because he is who the rich people want.

9 comments:

Jerry Critter said...

Republicans love to run up debt be it in government or business.

Zeepogs said...

Once again, Green Eagle has done the research and pieced it together nicely. Thank you for this.

the yellow fringe said...

Fine summary, and if the lesson can be learned then Romney's rich and important friends will take over the prison system, Fanny and Freddie, Social Security, the Parks, and anything else with a cash flow or an asset, charge us to manage it while they sell pieces to their kids and one day make us buy it back at higher prices.

Grung_e_Gene said...

Gree Eagle, great post again! I'm going to link to this post about Romney's character in my latest today seeing as it makes sense on the heels of his shameless, "ll take a lot of credit for the fact that this industry’s come back." for the Auto Bailout.

Unbelievable! But, when you are the Crown Prince of the Kleptocracy and member of the 1% there's no need to do anything else than lie, lie, lie!

Curt said...

Yellow Fringe, odd you should mention the park systems being taken over, because in Michigan, (where I live) on this day public lands in 23 counties have had their mineral rights auctioned off by the Republicans in Lansing. It involves tens of thousand of acres of forest lands. This will mean that once pristine wilderness areas will now be mined by the use of hydrofracturing. A google search revealed that this news was not covered by by any mainstream print media. I heard about it briefly on an NPR station where a lying representative of the Department of Environmental Quality was telling us all how little damage is done by hydrofracturing. He was telling us how benevolent it is. Sad day.

Magpie said...

If ONLY it were just greed...

"As part of just one Bain transaction in 2008, involving its investment in Burger King Holdings, filings with the Securities and Exchange Commission reveal that an unnamed Bain partner donated 65,326 shares of Burger King stock to the Church of Jesus Christ of Latter-day Saints, holdings then worth nearly $1.9 million. And there were numerous others, giving the church a stake in other Bain properties, such as Domino's Pizza, the electronics manufacturer DDi, the phosphates company Innophos Holdings, and Marquee Holdings, the parent to AMC Theaters.

The Republican presidential candidate's campaign staff confirmed that some of the stock transactions were at Romney's direction, but they would not say which ones." - ABC

Like a little theocracy to go with your plutocracy?

Dave Dubya said...

Theocracy is an important tool for our aristocracy's neo-feudalism. When they run out of bread and circuses they'll need to invoke God's will to justify the decline of America's working class and enrichment of the elites.

Green Eagle said...

Thanks all for the nice comments.

Anonymous said...

I worked for Dade, and this is an accurate accounting of the company that was destroyed by Bain and Romney's greed. The company was purchased by Siemens and some of its employees survived, but is no longer a real competitor in the market.Why Americans can support this man as the leader of the free world is beyond me.