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The “Bain” of American Wage Earners: Romney’s Way (A Homework Assignment for Listeners)

 

COMMENT: The 2012 Pres­i­den­tial race will like­ly be decid­ed by the econ­o­my, or the elec­torate’s per­cep­tion of same. Observ­ing the medi­a’s treat­ment of the can­di­dates is rem­i­nis­cent of the grotesque media bias to which Al Gore was sub­ject­ed in 2000. (Robert Par­ry, among oth­ers, has not­ed the overt bias of the main­stream media [1] toward Dubya dur­ing that elec­tion.)

A recent arti­cle in The Vil­lage Voice [2] high­light­ed the man­ner in which Rom­ney’s Bain Cap­i­tal oper­at­ed. It is the sup­posed “suc­cess” of Bain Cap­i­tal that has been tout­ed by Rom­ney and the flacks in the media run­ning inter­fer­ence for him as proof that this “busi­ness­man” has the nec­es­sary exper­tise to run the U.S. econ­o­my.

The fact of the mat­ter is that Bain Cap­i­tal and Rom­ney epit­o­mize the very worst aspects of preda­to­ry pri­vate equi­ty busi­ness. If a Pres­i­dent Rom­ney runs the Amer­i­can econ­o­my the way that he oper­at­ed at Bain, it bodes very poor­ly for Amer­i­can work­ers.

It is to be not­ed that, after can­ni­bal­iz­ing busi­ness­es and screw­ing work­ing folks for fun and a great deal of prof­it, Rom­ney parked a great deal of mon­ey in off­shore bank accounts in the Cay­man Islands, one of the most noto­ri­ous tax havens.

I am charg­ing the lis­ten­ers (and read­ers) to do a lit­tle home­work. I want them to dis­trib­ute this arti­cle, and the infor­ma­tion about Rom­ney’s off­shore bank accounts. In the Inter­net age, it should be pos­si­ble for a rel­a­tive­ly small num­ber of lis­ten­ers to gen­er­ate a great deal of buzz in this regard. If Rom­ney gets in, you are going to be very, very sor­ry.

“Dri­vers, start your engines!”

“Mitt Rom­ney, Amer­i­can Par­a­site” by Peter Kotz; The Vil­lage Voice; 4/18/2012. [2]

EXCERPT: It was the ear­ly 1990s, and the 750 men and women at George­town Steel were pump­ing out wire rods at peak per­for­mance. They had an abid­ing trust in man­age­men­t’s abil­i­ty to run a smart com­pa­ny. That alle­giance was reward­ed with fat prof­it-shar­ing checks. In the base­ment-wage econ­o­my of George­town, South Car­oli­na, Sander­son and his co-work­ers were blue-col­lar aris­toc­ra­cy.

“We were doing very good,” says Sander­son, pres­i­dent of Steel­work­ers Local 7898. “The plant was mak­ing mon­ey, and we had good prof­it-shar­ing checks, and every­thing was going well.”

What he did­n’t know was that it was about to end. Hun­dreds of miles to the north, in Boston, a future pres­i­den­tial can­di­date was siz­ing up George­town’s books.

At the time, Mitt Rom­ney had been run­ning Bain Cap­i­tal since 1984, mint­ing a rep­u­ta­tion as a prince of pri­vate invest­ment. A future prospec­tus by Deutsche Bank would reveal that by the time he left in 1999, Bain had aver­aged a shim­mer­ing 88 per­cent annu­al return on invest­ment. Rom­ney would use that suc­cess to launch his polit­i­cal career.

His spe­cial­ty was flip­ping companies—or what he often calls “cre­ative destruc­tion.” It’s the age-old the­o­ry that the new must con­stant­ly attack the old to bring effi­cien­cy to the econ­o­my, even if some com­pa­nies are destroyed along the way. In oth­er words, peo­ple like Rom­ney are the wolves, culling the herd of the weak and infirm. . . .

. . . . Bain would slash costs, jet­ti­son work­ers, repo­si­tion prod­uct lines, and merge its new com­pa­nies with oth­er firms. With luck, they’d be able to dump the firm in a few years for mil­lions more than they’d paid for it.

But the beau­ty of Rom­ney’s the­sis was that it real­ly did­n’t mat­ter if the com­pa­ny suc­ceed­ed. Because he was yank­ing out cash ear­ly and often, he would prof­it even if his tar­gets col­lapsed.

Which was pre­cise­ly the fate await­ing George­town Steel.

When Bain pur­chased the mill, Sander­son says, change was imme­di­ate. Equip­ment upgrades stopped. Main­te­nance became an after­thought. Man­agers were replaced by peo­ple who knew noth­ing about steel. The union’s prof­it-shar­ing plan was sliced twice in the first year—then whacked alto­geth­er.

“When Bain Cap­i­tal took over, it seemed like every­thing was being neglect­ed in our plant,” Sander­son says. “Noth­ing was being invest­ed in our plant. We did­n’t have the nec­es­sary time to main­tain our equip­ment. They had peo­ple here that did­n’t know what they were doing. It was like they were tak­ing mon­ey from us and putting it some­where else.”

His­to­ry would prove him cor­rect. While George­town was begin­ning its descent to bank­rupt­cy, Rom­ney was help­ing him­self to the com­pa­ny’s trea­sury. . . .

. . . . In the midst of that 1994 cam­paign [against Ted Kennedy], one of Rom­ney’s com­pa­nies, Amer­i­can Pad & Paper, bought a plant in Mar­i­on, Indi­ana. At the time, it was pros­per­ous enough to be run­ning three shifts.

Bain’s first move was to fire all 258 work­ers, then invite them to reap­ply for their jobs at low­er wages and a 50 per­cent cut in health care ben­e­fits.

“They came in and said, ‘You’re all fired,’ ” employ­ee Randy John­son told the Los Ange­les Times. “ ‘If you want to work for us, here’s an appli­ca­tion.’ We had insur­ance until the end of the week. That was it. It was bru­tal.”

But instead of reap­ply­ing, the work­ers went on strike. They also decid­ed the good peo­ple of Mass­a­chu­setts should know what kind of man want­ed to be their sen­a­tor. Sud­den­ly, Indi­ana accents were show­ing up in Kennedy TV ads, offer­ing tales of Rom­ney’s vil­lainy. He was sketched as a cor­po­rate Lucifer, one who would­n’t blink at crush­ing lit­tle peo­ple if it meant pret­ty­ing his port­fo­lio.

Need­less to say, this was­n’t a prop­er lead­ing man’s role for a labor state like Mass­a­chu­setts. Tak­ing just 41 per­cent of the vote, Rom­ney was pound­ed in the elec­tion. Mean­while, the Mar­i­on plant closed just six months after Bain’s pur­chase. The jobs were shipped to Mex­i­co. . . .

. . . . 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. Although 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 also cus­tomer-ser­vice and research-and-devel­op­ment funding—the ingre­di­ents of long-term pros­per­i­ty. . . .

COMMENT: And where did this “busi­ness­man” put his mon­ey? He stashed it in the Cay­man Islands, where he won’t have to pay U.S. tax­es. What a guy!

“Rom­ney Parks Mil­lions in Cay­man Islands” by Matthew Mosk, Bri­an Ross and Megan Chuch­mach [ABC News]; yahoo.com; 1/19/2012. [3]

EXCERPT: Although it is not appar­ent on his finan­cial dis­clo­sure form, Mitt Rom­ney has mil­lions of dol­lars of his per­son­al wealth in invest­ment funds set up in the Cay­man Islands, a noto­ri­ous Caribbean tax haven.

A spokesper­son for the Rom­ney cam­paign says Rom­ney fol­lows all tax laws and he would pay the same in tax­es regard­less of where the funds are based.

As the race for the Repub­li­can nom­i­na­tion heats up, Mitt Rom­ney is find­ing it increas­ing­ly dif­fi­cult to main­tain a shroud of secre­cy around the details about his vast per­son­al wealth, includ­ing, as ABC News has dis­cov­ered, his invest­ment in funds locat­ed off­shore and his abil­i­ty to pay a low­er tax rate.

“His per­son­al finances are a poster child of what’s wrong with the Amer­i­can tax sys­tem,” said Jack Blum, a Wash­ing­ton lawyer who is an author­i­ty on tax enforce­ment and off­shore bank­ing. . . .