Mitt Romney's "creative destruction" at Bain Capital

Representing everything you hate about capitalism

But if Romney played the friendly politician, kindness wasn't his specialty at Bain. He was generous to ranking executives, rewarding CEOs with huge bonuses. Yet he tended to treat those below his pay grade as little more than machinery.

Romney has repeatedly claimed to have created 100,000 jobs at Bain, and says that providing work for Americans was a primary company goal.

He makes his case by citing Domino's, Sports Authority, and Staples, companies that added jobs after Bain bought in.

Romney and some Bain Capital cohorts enjoy their cash
Romney and some Bain Capital cohorts enjoy their cash
Union official David Foster says Romney pocketed millions while bankrupting steel mills
Jayme Halbritter
Union official David Foster says Romney pocketed millions while bankrupting steel mills

But Bain bought Domino's just months before Romney left to run the Salt Lake City Olympics, meaning someone else created those jobs. And he didn't manage Staples or Sports Authority; Bain was a minority investor in both.

By Romney's logic, any large investor — say, the Texas teachers' pension fund — also creates hundreds of thousands of jobs. The boast is so foolish that his campaign has since backed away from it.

Even Kaplan admits that private equity firms rarely create jobs. Workers are seen as costs, and costs are the enemy. According to Kosman, Romney was in truth among the most heinous job killers of them all.

While writing his book, Kosman conducted an interview with a Bain managing partner. The man told him that when Bain was about to buy a company, its partners would hold a meeting. "He said that about half the time [they] would talk about cutting workers," says Kosman. "They would never talk about adding workers. He said that job growth was never part of the plan."

That claim was buttressed by the Associated Press, which studied 45 companies bought by Bain during Romney's first decade. It found that 4,000 workers lost their jobs. The real figure is likely thousands higher, since the analysis didn't account for bankruptcies or factory or store closings.

An example of Romney's cold-blooded approach is his 1994 purchase of Dade International, an Illinois medical-equipment company. He soon merged it with two similar firms, a move that tripled sales.

Once again, he couldn't help but raid the vault, peeling away $100 million for himself and investors at the same time Dade was laying off 1,700 American workers.

After Bain closed a Dade plant in Puerto Rico, human resources manager Cindy Hewitt was asked to lure a dozen of those employees to work in the company's Miami factory.

But that plant soon closed as well. Though Romney was gobbling up millions, Bain still wanted those laid-off employees to repay their moving costs.

"They were treated horribly," Hewitt told the New York Times. "There was absolutely no concern for the employees. It was truly and completely profit-focused."

Yet Bain's molestation wasn't complete. It was trying to sell Dade, but didn't like the offers it received on the open market. So it created an artificial market of its own.

In 1999 it forced Dade to borrow $242 million, which was used to buy back company stock from Bain, Dade executives, and their banker, Goldman Sachs.

Bain was again extracting profits with borrowed money. It had pushed Dade's debt to a bracing $2 billion. To help pay for the deal, the company laid off another 367 workers.

But that debt proved too much for Dade's shoulders to carry. Three years later, the company was bankrupt.

Kosman calls it standard Romney operating procedure. To pump short-term earnings, he would essentially "starve a company," whacking not just employees, but customer service and research-and-development funding — the very ingredients of long-term prosperity.

"I think they're one of the worst, at least during Romney's time," Kosman says. "They 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."

Kosman says it's telling 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," he says. "I think it's very interesting that he's not telling those stories, because I think they don't exist."


The Welfare Queen

Romney's economic views were on stark parade during this year's Michigan primary. He ripped President Obama for bailing out the auto industry, arguing that it should have been dealt with in his favorite resting place: bankruptcy court.

He was particularly incensed that the president rescued workers' pension funds before covering Wall Street's bad loans.

But 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.

After all, Romney frequently assumed the role of welfare queen himself.

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, he 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.

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4 comments
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Keith & Dustin
Keith & Dustin

Romney should be in prison but in America he gets to run for president.

Jstrudo
Jstrudo

Pete you are a Mormon hater. Most people understand that...

Nicole Gabriela Engel
Nicole Gabriela Engel

I am disgusted at the thought of this man becoming president of this country. I am LDS and I am so glad I did my homework before I bought into his act. For me, it is what you do not what you say that matters most. We all need a wake up call in America and I got mine.

Jstrudo
Jstrudo

Nicole, author Mormon Hater. He hates you as much as Romney.

 
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