Rachel Maddow sees Mitt Romney as the Thurston Howell III character on Gilligan's Island. But as insufferable as Howell was, there was a sweetness to him. I don't see that in Romney. Do you?
Given Romney's business history with Bain Capital, I see him more like Tony Soprano. In an episode of the Sopranos, Tony acquires the sporting goods business of one of his gambling victims; his business strategy for this acquisition is to loot it of its assets and then declare bankruptcy.
At least he didn't charge a management fee. Mitt Romney's career with Bain capital adopted the Soprano's business model, but enlarged it. Bain would also collect fees for management of its victims, and its partners, including Romney, would get appointed to the board of directors. Bain would proceed to gut their acquisitions of assets, fire workers, hire managers who had no background in the business, then sell the husk back to duped investors (leading to a bankruptcy and a shareholder lawsuit in the case of DDi).
Bloomberg recently examined the business record of Romney's company, Bain Capital.
Bain’s 1997 investment in DDi, a circuit board maker, also illustrates how Bain came out ahead even when a company it bought ultimately faltered. Bain initially invested $46.3 million in the company, according to a Securities and Exchange Commission filing. After taking DDi public, Bain sold shares generating at least $85.5 million, according to a Bloomberg News review of SEC filings.
Bain also collected management fees. A DDi prospectus filed with the SEC in February 2001 described payments of $10 million to Bain when it provided consulting and other services.
In the months after Bain sold shares, DDi’s performance deteriorated, the company eliminated jobs and then filed for bankruptcy.
Shareholders protested, filing a class action lawsuit saying DDi, in advertising its initial public offering, withheld information suggesting results were about to sour. Defendants eventually settled the case for $4.4 million, according to court records.
DDi emerged from bankruptcy and continues to operate.
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Bain invested in GS Technologies Corp. in 1993 and merged it with another company in 1995 to form GS Industries Inc., based in Charlotte, North Carolina. The combined company was the largest producer of steel wire rods in the U.S.
Chief Executive Officer Roger Regelbrugge, who had come from Georgetown Industries Inc., the company that merged with GS Technologies, said he met Romney at a luncheon in Boston, and may have had some subsequent conversations. The bulk of his communication with Bain was through two Bain executives who served on the GS board, he said.
When Regelbrugge stepped down as CEO in 2000, his successor, Mark Essig, replaced top staff with colleagues from a previous job who didn’t know the GS business, said Regelbrugge, who remained on the board. That contributed to the company’s decline, Regelbrugge said, adding that he relayed his concerns to Bain representatives. Essig didn’t respond to phone and e- mail requests for comment.
“Bain pleaded with me to give my successor a chance,” said Regelbrugge. “They showed more patience than they needed to.”
Business Deterioration
At a steel plant in Kansas City, Missouri, one new supervisor had previously sold mattresses, said Steve Morrow, 59, who worked at the plant for 32 years and represented workers there as president of United Steelworkers Local 13.
The business deterioration was made worse by declining steel prices and difficult business conditions, Regelbrugge said.
In 2001, the company shut the Kansas City plant, which it said was losing money. More than 700 workers lost their jobs. Retirees and those eligible to retire lost their health benefits and life insurance, said John Wiseman, a staff representative with the United Steelworkers.
Bankruptcy Protection
GS Industries began reorganizing under bankruptcy protection in 2001. In a bankruptcy court filing, the company blamed lower steel prices that resulted in record levels of low- priced imports into the U.S.
That explanation doesn’t satisfy Morrow, who remembers seeing his former colleagues struggle to find jobs with health benefits. Today, when he hears Romney campaign on job creation, he said, “It makes me about half sick.”
In contrast, Bain flourished under Romney’s management and the business model he installed.
The firm started with fewer than 10 employees and a $37 million fund that Romney helped to create. When Romney left in 1999 to help organize the 2002 Winter Olympics in Salt Lake City, Bain had 115 employees managing $4 billion in assets.
Job creator? Only for private equity sharks, and the pilots who fly their planes.
(cross posted at Possible Experience)