In fact, Bain Capital under Romney frequently rewarded those at the top, and paid itself millions in consulting fees (see, “Guaranteed Profits”), even when, beneath them, their companies turned to dust. Despite a reputation for wise corporate guidance — observers have always considered Bain Capital’s management-consulting prowess its strength compared with other LBO firms — many of its companies withered after Romney’s team cashed out. Stage Stores, DDi, KB Toys, Babbages, Holson-Burnes, Dade-Behring — they all collapsed. But by the time they did, Romney and his team had already made money for themselves, their investors, their executive teams, and their bankers, legal consultants, and accountants.
That’s business, where greed is good, or at least justifiable. Of course, it might not be “good” for working-class voters, who’d prefer that Medicare and Social Security were not treated as financial playthings to be plundered.
According to some in the investment community, Bain Capital’s companies have historically been particularly generous with executive compensation, claiming that it incentivizes top performance. Romney’s contributors include dozens, if not hundreds, of such recipients.
But the firm did not apply the same principle of motivating largesse to those occupying a different stratum: the workers toiling at the heart of those companies.
While showering execs with bonuses and stock options, Bain was typically slashing costs elsewhere, through layoffs and budget reductions.
One of the best-known examples is Dallas-based American Pad & Paper (AmPad), which Bain Capital bought in 1992. During Romney’s unsuccessful campaign for the US Senate in 1994, Ted Kennedy assailed him for Bain’s ruthless firing of hundreds of AmPad employees — and then offering to rehire some of them at lower wages and fewer benefits.
Bain Capital and its investors made more than $100 million on AmPad, even though the company eventually filed for bankruptcy.
This was hardly atypical. Bain Capital’s record shows the same treatment for many companies: slashing jobs, benefits, research-and-development budgets, and other items to show quick profitability before selling or taking the company’s stock public.
“At Bain Capital, Governor Romney and his associates would buy troubled companies,” says Eric Fehrnstrom, spokesperson for the Romney campaign. “Not every investment was successful. Mitt Romney has a great deal of experience fixing things that are broken. Sometimes that requires making difficult and hard decisions.”
See no evil
Over the years, Romney has taken pains to avoid being associated with those difficult and hard decisions. He has sometimes tried to deflect blame by casting it onto others. Faced with the AmPad controversy, he claimed to have been uninvolved and uninformed — a claim disputed even by one of Romney’s loyal Bain Capital managers, who publicly noted that Romney was the CEO with 100 percent ownership control of Bain at the time.
Romney again tried to recast his involvement when faced with questions about Damon Corp., a medical-testing company based in Needham that Bain owned — and for which Romney served as a director — until 1993. Damon later paid a $119 million fine for fraudulently billing Medicare during its Bain years.
Although the Damon board was never directly implicated, Romney asserted, in a Boston Globe story during the 2002 gubernatorial election, that he and other board members had proactively discovered the fraud and took corrective steps before selling. But, the article pointed out, court records revealed that the fraudulent activity continued for as long as Bain Capital owned the company, and Damon never mentioned the issue (as it would be legally required to do) in its Securities and Exchange Commission (SEC) filings leading up to the sale.