Posted on Wednesday, November 19, 2008 - 3:53 pm:

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WHY should the government give the automakers a blank check? So they can continue hemorrhaging cash?

Posted on Friday, November 21, 2008 - 9:41 am:

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A typical example of Bain's approach was its experience with another office-supply company called Ampad, which it acquired in 1992. In 1993, the company had $11 million in debt; by 1999, that number had grown to nearly $400 million, and the firm eventually declared bankruptcy. But despite Ampad's failure, Bain made a fortune, raking in more than $100 million while driving the company into the ground and destroying hundreds of jobs in places like New York (where 185 people were thrown out of work in a plant closing near Buffalo) and Indiana (where the firm fired 200 workers from a paper factory).

Even more telling was Romney's interest in a medical-testing firm called Damon Corp., which Bain bought in 1989. The company was eventually fined a record $119 million for defrauding the federal government out of $25 million, but Bain still tripled its investment on the Damon deal. And Romney, who was sitting on the Damon board at the time of the fraud (his claim that he was the one who called for an internal investigation has never been substantiated), made a personal profit of $473,000 on the deal.

In a delicious detail that says a lot about the nature of Romney's morality, the investor had no problem making piles of cash off companies that executed mass layoffs or defrauded the government, but he balked when asked to invest in a Bain deal to acquire a video distribution company called Artisan Entertainment. "I didn't want to profit from a studio that made R-rated movies," he huffed.

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In early 1995, as the Ampad paper plant in Marion, Ind., neared its shutdown following a bitter strike, Randy Johnson, a worker and union official, scrawled a personal letter to Mitt Romney, pouring out his disappointment that Romney, then chief executive of the investment firm that controlled Ampad, had not done enough to settle the strike and save some 200 jobs.
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"We really thought you might help," Johnson said in the handwritten note, "but instead we heard excuses that were unacceptable from a man of your prominent position."

Romney, who had recently lost a Senate race in which the strike became a flashpoint, responded that he had "privately" urged a settlement, but was advised by lawyers not to intervene directly. His political interests, he explained, conflicted with his business responsibilities.

Now, Romney's decision to stay on the sidelines as his firm, Bain Capital, slashed jobs at the office supply manufacturer stands in marked contrast to his recent pledges to beleaguered auto workers in Michigan and textile workers in South Carolina to "fight to save every job."

Throughout his 15-year career at Bain Capital, which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn't. His ultimate responsibility was to make money for Bain's investors, former partners said.

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“Mitt broke the mold there,” said William F. Weld, another former Republican governor of Massachusetts and private equity fund manager.

“The private equity business is a pretty good place to make a lot of money,” Mr. Weld added. “The market rewards people who show they can see value in a company quickly, adjust a few toggle switches and sell it again four or five years later. It is capitalism’s way of picking the fleas off the dog.”

Such astounding profits brought critics as well. Warren E. Buffett, the legendary investor, has derided private equity firms as “deal flippers” who do little to increase the real value of their targets, profiting from rising prices driven in part by their own deals and by charging their acquisitions “fees, fees, fees.”

Others complain that private equity fund managers like Mr. Romney pay only capital gains taxes instead of income taxes on their cuts of investors’ profits. At present tax rates, that means that they pay 15 percent instead of 35 percent on most of their earnings.

“When you look at the amount of money these guys are making,” said Victor Fleischer, a legal scholar who has consulted with the Senate Finance Committee about changing the law, “the effective tax rate is just sort of shocking to the conscience.”
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One transaction, involving the medical diagnostics company Dade Behring, took place in 1999 as Mr. Romney was leaving the firm, and the other, involving KB Toys, occurred about two years later. 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.

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While in private business, Mitt Romney utilized shell companies in two offshore tax havens to help eligible investors avoid paying U.S. taxes, federal and state records show.

Romney gained no personal tax benefit from the legal operations in Bermuda and the Cayman Islands. But aides to the Republican presidential hopeful and former colleagues acknowledged that the tax-friendly jurisdictions helped attract billions of additional investment dollars to Romney's former company, Bain Capital, and thus boosted profits for Romney and his partners