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View Diary: Vanity Fair's Brutal Offshore Banking Piece Just Sank Mitt's Candidacy UPDATED x2 (326 comments)

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  •  What people need to hear is THIS story.... (63+ / 0-)

    as part of the series of PAC ads hammering Bain's tactics and ethics.  From the VF Article:

    Dade Behring is a cause célèbre for Romney’s and Bain’s critics, and it illustrates the leverage problem clearly. In 1994, Bain bought Dade International, a medical-diagnostics company, then added the medical-diagnostics division of DuPont in 1996 and a German medical-testing company called Behring in 1997. Former Dade president Bob Brightfelt says the operation started well: the Bain managers were “pretty smart guys,” he recalls, and they did well cutting out overlap, and exploiting synergies.

    Then brutal cost cutting began. Bain cut R&D spending to an average of 8 percent of sales, a little more than half what its competitors were doing.

    Cindy Hewitt, Dade’s human-resources manager, remembers how the firm closed a Puerto Rico plant in 1998, a year after harvesting $7.1 million in local tax breaks aimed at job creation, and relocated some staff to Miami, then the company’s most profitable plant.

    Based on re­a­ssur­ances she had received from her superiors, she told those uprooting themselves from Puerto Rico that their jobs in Miami were safe for now—but then Bain closed the Miami plant.

    “Whether you want to call it misled, or lied, or manipulated, I do not believe they provided full information about what discussions were under way,” she says. “I would never want to be part of even unintentionally treating people so poorly.”

    Bain engaged in startling penny-pinching with the laid-off employees. Their contracts stipulated that if they left early they would have to pay back the costs of relocating to Miami—but in spite of all that Dade had done to them, it refused to release the employees from this clause.

    “They said they would go after them for that money if they left before Bain was finished with them,” Hewitt recalls. Not only that, but the company declined to give workers their severance pay in lump sums to help them fund their return home.

    In 1999, generous pensions were converted into less generous benefits, wages were cut, and more staff members were laid off.

    Some employees contacted Norman Stein, then the director of the pension-counseling clinic at the University of Alabama law school, with a view to challenging the conversions. Stein says the employees were “extraordinarily nervous,” so fearful, in fact, that they refused to let lawyers even make copies of pension documents. “I have been dealing with pensions issues for over 25 years and I never saw anything like this,” recalls Stein. The spooked employees did not go to court. Stein says that, while breaking pension contracts like this was not unheard of, the practice at that time was “questionable,” adding that Dade may have saved $10 to $40 million from converting its pensions.

    The beauty—or savagery—of leverage is that it can magnify any and all cash-flow boosts, such as this one. Take $10 to $40 million squeezed from a pension pot, then use that to create new, rosier financial projections to borrow several times that amount, and then pay yourself a big special dividend from the borrowed funds, many times the size of the pension savings. That is just what Bain Capital did:

    The same month it converted the pensions, it created new financial projections as a basis to borrow an extra $421 million—from which Bain, its co-investor Goldman Sachs, and top Dade management extracted $365 million in dividends. According to Kosman, “Bain and Goldman—after putting down only $85 million … made out like bandits—a $280 million profit.” Dade’s debt rose to more than $870 million. Romney had left operational management of Bain that year, though his disclosures show that he owned 16.5 percent of the Bain partnership responsible for the Dade investment until at least 2001.
    Is it any wonder the Mittster has fiercely resisted release of the full details of his tax returns.....especially the offshore stuff.  Make note in the article that many of the holdings included in the little he did release indicate only that each one contains "over a million" dollars.  Well....there is one-million one dollars and there is Lebendy Kazillion dollars and methinks that the actual figures could well be well over the lower limit.

    Note too in the article, the details on how Mitt apparently was able to create very large IRAs to shield against taxation...far beyond what you and I could do under the law, by using a quirk in the tax law to stuff the vehicles with a special kind of stock and let it grow.

    Couple all of this with Mitt and Ann being able, under current tax law, to deduct $77,000 as their share of expenses on a show horse, and THAT becomes something Joe Sixpack can begin to grasp.

    Free markets would be a great idea, if markets were actually free.

    by dweb8231 on Tue Jul 03, 2012 at 10:52:53 AM PDT

    [ Parent ]

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