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Guaranteed profits

By DAVID S. BERNSTEIN  |  August 8, 2007

Rewriting Staples history. By David S. Bernstein

Mitt's equity army: Romney’s war chest is overflowing with the contributions of his financial-world pals. But what is the price of their loyalty? By David S. Bernstein

Employees of Bain Capital are doing much to help their former boss’s presidential prospects. They have done very well by investing in the company’s funds, which have generally provided terrific returns. But Romney, who leaves little to chance, took additional measures to ensure that he and his colleagues made money off of their deals.

One way they did this was through aggressive stock-compensation plans for key executives and directors at Bain-owned companies — usually including several current and former Bain Capital employees, as is common in private-equity deals.

Another was by using certain companies they controlled to boost the value of others — a practice that Bain Capital helped pioneer. Often, this meant getting Bain’s large, well-known companies to give their business to Bain’s unknown start-ups — a crucial step to a new company’s success. For example, Jenzabar, a Bain-funded Internet start-up of the late ’90s, got several of its first contracts at Bain-owned companies. The portfolio of companies controlled by Bain Capital — as many as 200 during Romney’s years in charge, from 1984 through 2001 — provides plenty of cross-company synergistic opportunities. The firm frankly boasts of this in some of its marketing materials.

Not long after Bain Capital bought American Pad & Paper (AmPad) in 1992, AmPad landed a huge contract with Staples, where Romney was a director. By 1996, according to an industry analysis at the time, Staples accounted for more than 10 percent of AmPad’s entire annual sales.

Two years after buying mattress-maker Sealy in 1997, Bain Capital bought two of North America’s largest mattress-retail chains, Mattress Discounter and Sleep Country Canada, to help boost Sealy’s sales. Other examples abound.

This practice helps Bain, but not necessarily the investors or employees of the individual companies, which may be sacrificing their best interests for those of other Bain Capital companies. One Bain-owned company’s 1997 prospectus even warned that Bain Capital would maintain control of the board of directors after the initial public offering, and that “there can be no assurance that conflicts of interest will not arise with respect to such Directors or that such conflicts will be resolved in a manner favorable to the Company.” In other words: your investment will be in the hands of people who might sacrifice it for a gain in a company you don’t own.

In almost all of Bain Capital’s leveraged buyouts, something else always came above the best interests of the company: a substantial contract with Bain Capital for consulting services — a contract sometimes worth more than Bain was investing in the first place.

When Bain Capital put up about $6.5 million in cash (and another $41 million in borrowed funds) to buy contact-lens maker Wesley-Jessen in 1995, it inked an “Advisory Agreement” for Bain’s management-consulting services. That deal paid Bain Capital more than $4 million in the 15 months between that purchase and the initial public offering (IPO), plus a $10 million buy-out of the remaining years of the contract when the IPO went through — after which the Bain-controlled board immediately inked a new guaranteed 10-year contract, paying Bain a minimum of $2 million dollars a year.

This was hardly an unusual arrangement for Bain Capital. When it bought Domino’s Pizza in 1998, Bain earned a one-time “recapitalization” fee of $11.75 million; an annual fee of $2 million, plus expenses; and a termination fee of $10 million when Domino’s went public in 2004 — more than $30 million in total. Bain took $11 million in fees in just three years from another company it bought in 1998, Anthony Crane Rental. Bain Capital paid itself and its managers $121 million in fees and stock payments from KB Toys, before the chain filed for bankruptcy.

Some investors have brought lawsuits against Bain Capital alleging it pillaged their companies. But when you own the company, as Bain Capital did, you get to decide what to do with it. Romney and his colleagues chose to enrich themselves and their associates. Unsurprisingly, many of them are now backing their old boss’s political aspirations.

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Guaranteed profits
Justice Dept has refused to prosecute $300 million in fraud connected to Romney's Bain entity in the eToys, Stage and KB Bankruptcy cases. Now it is discovered that the US Attorney in Delaware was a partner at MNAT law firm in 2001 when the fraud and perjury was ongoing. you can see our online affidavits at or email us at for any proof you desire. All items are court docket records and this letter was sent to His Honor Mukasey as the new Attorney General December 31, 2007 His Honor Michael B. Mukasey U S Attorney General Department of Justice 950 Pennsylvania Avenue, NW Washington, DC 20530-0001 Dear Attorney General; This letter is to inform you of the many complaints against fraud and corruption within the Dept of Justice, specifically related to the Federal Bankruptcy issues in Delaware. The Director of the EOUST replaced the Region 3 US Trustee, Roberta DeAngelis on Dec. 22, 2004 as Trustee over Wilmington DE. We had direct correspondence with Mr. Lawrence Friedman who assured us that the matter would be handled. On Feb 15, 2005 the Asst US Trustee Frank Perch then did place in a Motion to Disgorge Traub Bonacquist & Fox (TBF), for $1.6 million. This is attached with this letter as “Exhibit 1” (D.I. 2195). The Asst US Trustee has testified, multiple times, that he had discussions with the officers of the courts in the eToys bankruptcy case (Del 01-706), as he specifically warned TBF and the Debtors counsel, Morris Nichols Arsht & Tunnel (MNAT), against breaking the law of § 327(a) and Rule 2014 of the bankruptcy statutes. Despite this warning the Law firm of MNAT and TBF, along with other parties did draft a Hiring Letter for Barry Gold (a direct paid associate of TBF [confessed]). This Hiring Letter was kept hidden, in a clandestine manner, as it directly ignored the caution of Frank Perch as Asst US Trustee. The Hiring Letter is already in the court docket record of eToys as docket item 2169 and is attached here as “Exhibit 2”. It specifically gives Barry Gold, under the “guise” that he is arms length, permission to Circumvent the Code and the Court. While it proves, conclusively, Scheme to Fix Fees (18 USC 155 Janet Reno Reform Act of 1994), it becomes a full blown “conspiracy” to perpetrate “fraud on the court” by “officers of the court” as they were [fore]warned and then did the subterfuge in a “collaborative” manner. Less than ten (10) days after we were told by Director Friedman that the matter would be handled, the attorney for the “new” US Trustee, Kelly B Stapleton, then did sign a letter giving implied clemency to the admitted acts of perjury and fraud. The Stipulation to Settle is eToys docket item 2201 and is attached here as “Exhibit 3”. It contains the following [obvious] illegal clause, “WHEREAS the United States Trustee shall not seek to compel TBF to make additional disclosures; “ Then, documenting that the clemency is totally erroneous and destroyed any “sufficient deterrent” value, Paul Traub of TBF then perpetrated another $100 million fraud in the KB Toys bankruptcy case in Delaware. (04-10120) Where Mark Kenney stepped up to the plate and defended the fraud and obstructed justice by asking the Court to strike and expunge us. (KB Toys D.I. 2228). This is attached as “Exhibit 4”. Immediately thereafter Asst US Trustee Frank Perch and Lawrence Friedman resigned from their office. Other resignations connected to this case include Debra Yang of the Corp Fraud Task Force, Ellen Slights as AUSA in Delaware, Gordon Robinson of the SEC Bankruptcy Fraud Division and your predecessor, Alberto Gonzales, who we informed, right prior to his resignation, about knowledge of his complicity in promoting the removed Roberta DeAngelis to the post of General Counsel of the Dept of Justice EOUST office. DeAngelis and Kenney are now involved, in the criminal conspiracy, asking the 3rd Circuit Court, (case 07-2360) to dismiss the case, while they defend their efforts to give clemency to the fraud and perjury. Finally, just a few weeks back, we placed in the Public Record out here in California, the newly discovered evidence that the US Attorney office in Delaware, Colm F Connolly, whose office has refused to prosecute the affair, is also guilty of bad faith acts and non disclosure. Colm F Connolly was a partner with the MNAT law firm in 2001 when the fraud and perjury began. Over $300 million, all Court Docket record proofs, of fraud has occurred that benefited Bain. The US Sup Ct decision In re Hazel Atlas Glass (1944) has been affirmed by the 3rd Circuit and states, specifically, that there is no statute of limitation of Fraud on the Court by “officers of the Court”. We have also attached a copy of the clocked item given to the US Attorney’s office in California. This mess and corruption of the Dept of Justice is most certainly a rogue element, not of your making. We hope and pray that you will not resign, as the others have, who have chose discretion rather than valor. We seek the American spirit of Truth and Justice. Hoping, earnestly, that you are the person who will stand tall against corruption. Testified to you this day “Under penalty of perjury” Steven Haas (a/k/a Laser) 100% owner Collateral Logistics Court approved consultants of eToys
By laserhaas on 01/01/2008 at 2:04:47

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