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SEC filings, press releases, and other contemporaneous documents released between 1997 and 1999 indicate that Mitt Romney may have parlayed a $23m investment and seat on the board of troubled software firm The Learning Company (TLC) into an ownership stake in Mattel, Inc. worth as much as $100,000,000 as of June, 1999.

On September 25 of that year, Romney, in his role as CEO of the 2002 Salt Lake City Olympic Organizing Committee, stood before the world to announce that the SLOC had signed an exclusive licensing agreement with Mattel for the production of stuffed-animal representations of the Olympic mascots.

Romney made no mention of his personal ownership interest in Mattel.   Less than two weeks later, Mattel made a bombshell announcement.

On October 4 Mattel disclosed that The Learning Company had incurred millions in product returns and bad debt write-offs and that the TLC division of Mattel would incur a $50-$100 million loss rather than the large profit that had been forecast previously.  

Mattel, whose stock had traded as high as $27.23 when the TLC merger was completed, at $24.14 on June 25 (the date upon which Romney's ownership is documented and worth estimated), closed at $11.69 on October 4.

CNBC would later label the Mattel/TLC merger as 'one of the five worst of all time.'

The market had discovered, and Mattel had admitted, that The Learning Company was essentially a worthless shell.

Mitt Romney, by virtue of his control of a seat on the TLC board, would have most certainly known this to be true.

Thus, and by virtue of his statement of 25 September, 1999, Mitt Romney exposes himself to the potential for very serious allegations of fraud, namely:

  • That he used his position as CEO of the SLOC to influence the choice of Olympic sponsors and licensees to his own personal benefit.
  • That he used his position as CEO of the SLOC to make public statements about the health of Mattel which he knew or should have known, to be materially false.
  • That he used his position as CEO of the SLOC to influence the investment decisions of shareholders or potential shareholders of Mattel, or to influence the price of Mattel's stock, while failing to disclose his own material interest in Mattel.
  • That he failed to disclose to the SLOC, to the USOC, and to the IOC, a clear conflict of interest with respect to his ownership status in Mattel.

I'm missing two key pieces of information, however.   The first is a primary citation of the June 22, 1999 Bear Stearns report timestamping Lee, Bain, and Centre's Mattel ownership on that date.   That document either does, or does not exist.  If it exists, I need it.

The second is harder:    Between June 22 1999, through September 25, and into October 4, what happened with Romney/Bain's (estimated) 4.1 million shares of Mattel?   Did they sit on them, dump them, what?   Is it possible to know?   How much does it matter if the June 22 date can be validated?

Either this is some serious stuff, or I've managed to foolishly convince myself that it is.  I've been looking at it since I started researching my previous diary:  Mattel Toys, troubled firm partly owned by Bain, signs on as Olympics Sponsor, 9/25/1999.   At the time, it looked like there could be some evidence of petty graft with respect to the stuffed animals.  This could be magnitudes worse.

Right now I need your help.   Please read it. Try to follow my argument, try to tear it apart or show me where its holes are.   Let me know where you need clarification or are confused.

Thank you.

I:  Romney and Bain to acquire stake in The Learning Company

1997/08/26

Learning Co., the troubled software company, said it will retire $150 million in debt by issuing preferred stock to financiers Thomas H. Lee Co., Bain Capital Inc. and Centre Partners Management LLC... The financiers will pay about $123 million for the notes, then surrender them to Learning Co. for preferred stock.
http://articles.chicagotribune.com/...
  • Lee's contribution is $75m, Romney/Bain's is $28m and Centre's is $20m.
  • Romney/Bain's $28m is equivalent to 22.7%, which will be used below to determine their post-merger position in Mattel.

1997/12/12
SEC Filing
http://www.sec.gov/...Lee, Bain, and Centre Purchares will acquire common and preferred stock and seats on the TLC board of directors.
II.   Mattel/The Learning Company Merger
1998/12/14
MAT:  $21.42 (down almost $8.00 on announcement)
Press Release
Toy maker Mattel today said it will acquire educational software maker the Learning Company for $3.8 billion in stock.
http://news.cnet.com/...
CNBC will later list this as one of the 5 Worst Mergers of All Time

1998/12/22
This SEC 13D filing documents the acquisition of beneficial interest in Mattel by Lee, Bain, and Centre, notes their voting their shares in favor of the merger, and requiring them to maintain ownership of their shares until completion of the merger.

General statement of acquisition of beneficial ownershipAcc-no: 0000898430-98-004512 Size: 46 KB
(3)...the Lee and Bain Stockholders have agreed to vote the 572,315 shares of TLC Preferred Stock (convertible into 11,446,300 shares of TLC Common Stock) over which they have voting power in favor of the Merger Agreement

(4)  ...the Lee and Bain Stockholders may not dispose of the [shares] that are directly held by them until the consummation of the Merger or the termination of the Merger Agreement.

1999/02/11
MAT:  $25.67
Mitt Romney is announced as CEO of the 2002 SLOC Olympic Games.
Romney will have to sever ties with any companies that do business with the games. Bain Capital has ownership stakes in many companies and Romney serves on various boards of directors.Kristin Moulton, AP
1999/04/19
MAT:  $27.59
Mattel/TLC Joint Prospectus

1999/05/13
Mattel/TLC Merger is completed.
MAT:  $27.33

Mattel, Inc today announced that it has completed its merger with The Learning Company, and that The Learning Company is now a division of Mattel.
http://www.datamonitor.com/...
1999/06/22
MAT:  $24.14
This date brackets Bain ownership in Mattel as a 'key financial investor.'  My source is secondary as linked in the blockquote.   The uncited reference to the primary source is quote "On 6/22/99, Bear Stearns issued a report "Initiating Coverage" on Mattel by Jacobson."
Finally we also like that key financial investors in TLC, Thomas H. Lee Company, Bain Capital and Centre Partners, have 18 million Mattel shares and show no indication of wanting to sell.
http://www.whafh.com/...
1999/06/22
I think I now have enough information to estimate Romney/Bain's stake in Mattel based upon three factors:  
  1. the 18 million shares held by Lee/Bain/Centre above
  2. Bains fractional ownership relative to Lee and Centre pre-perger = 22.7%(Lee:9,146,340;Bain:3,414,640;Centre:2,439,020;Total=15,000,000exact;)
  3. Mattel closes at $24.14 on June 22, 1999

18,000,000 * 22.7% * $24.14 =

$98.6 Million

===

Another way to arrive at an estimate of Romney/Bain's position is as follows.  SEC filings state that

approximately 126 million Mattel common shares were issued in exchange for all
shares of Learning Company common stock outstanding as of the merger date.
Romney/Bain at 22.7% of 18 million shares would hold about 4.1 million.   Those 4.1 million represent about 3% of the 126 million shares noted above.  The stock merger was noted to be valued at about $3.8 billion.   3% of 3.8 billion is about 110 million, placing this estimate well within range of the $98.6 million tallied above.

1997/07/22
MAT:  $23.41
Mattel Press Release (as cited in SEC Filing)

"Our U.S. business was up 5 percent in the quarter, driven by
increases in Fisher-Price(R), American Girl(R), Mattel Media and The
Learning Company
," Barad said.
...
"And, as we expected, The Learning Company is producing above average
growth in both revenue and margin, which was one of the reasons this
merger made so much sense for Mattel.

http://www.sec.gov/...
1999/08/16
MAT:  $22.18
Mattel releases report for the 2nd Quarter of 1999
(SEC Filing)
http://www.sec.gov/...

1999/09/09
MAT:  $23.19
This will be the last high before the stock starts to decline.

1999/09/25
MAT:  $21.41 (9/24)
The Salt Lake Olympic Committee and Mitt Romney announce that Mattel Toys has signed a contract as an official licensee for the 2002 Winter Olympics.

September 25, 1999
By Jerry Springer
Desert News Staff Writer

Mattel To Bring Mascots to Life
Toymaker signs on as Licensee for 2002 Games

On Friday the Salt Lake Organizing Committee, announced that Mattel, the renowned maker of such toys as Barbie, Cabbage Patch Dolls, Chatty Kathy, and Hot Wheels, has signed on as a Games Licensee.  The deal guarantees SLOC more than $1 million in advance payments from sales royalties.

"There is no better company than Mattel to help us bring the Olympic Mascots to life for children of all ages." Said SLOC President Mitt Romney.

Romney said SLOC was immediately drawn to Mattel because of the company's worldwide reputation and an existing distribution network rivaled by no other toymaker.  "To have a toymaker of Mattel's stature is a great benefit" Romney said.  "They are a premier manufacturer."

http://news.google.com/...

1999/10/04
MAT:  $11.69
Mattel Press Release (via SEC filing)
LOS ANGELES, October 4 -- Mattel, Inc. said today that its
Learning Company division will have a significant third quarter
revenue shortfall resulting primarily from a decision not to
go forward with a planned licensing arrangement, as well as
higher than expected product returns.  The lower revenues,
together with the write-off of bad debts, increased customer
benefits and the termination of certain distributors, will result
in a third quarter, after-tax loss at The Learning Company of
between $50 million and $100 million, compared with an expected
$50 million, after-tax profit for this division.  Consequently,
Mattel third quarter earnings per share will be approximately
$.30 to $.40, with an estimated 2 to 4 percent decline in
revenue.
http://www.sec.gov/...
2000/02/03
Jill E. Barad resigns as CEO of Mattel Toys
There is nothing I can say to gloss over how devastating the Learning
Company’s results have been to Mattel’s overall performance.
 Because
there must be accountability, I and the board agree that I must resign today
as chairman and chief executive and from the board.” – Jill E. Barad,
Former Mattel CEO, Conference call with analysts on February 3, 2000
http://www.tuck.dartmouth.edu/...
2000/04/03
Mattel to Ditch The Learning Company
Call it a learning experience. Mattel said today that it is looking to sell its interactive software unit, The Learning Company, which the toy maker had characterized as a distraction and blamed for disappointing 1999 earnings, less than a year after buying it.  http://www.forbes.com/...
2001/04/05
Mattel Inc. will close its last United States manufacturing plant and lay off 980 workers to cut costs, the company said yesterday.
...
Production will be moved to Mexico.
http://www.nytimes.com/...

Originally posted to Shuksan Tahoma on Wed Jul 18, 2012 at 03:49 PM PDT.

Also republished by The Bain Files.

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  •  Tip Jar (236+ / 0-)
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  •  Off topic (12+ / 0-)

    would you please upload the Mitt Happens Olympic pin to the photo library? I love it. Sorry I can't help with your research. Keep it up!

  •  ? (14+ / 0-)

    "...stood before the world to announce Mattel had signed an exclusive licensing agreement with Mattel for the production of stuffed-animal representations of the Olympic mascots."

    ? moebius strip ?

    Addington's Perpwalk: TRAILHEAD of Accountability for Bush-2 Crimes.
    * Join: OBAMA'S TRUTH TEAM *

    by greenbird on Wed Jul 18, 2012 at 04:12:52 PM PDT

  •  Parlez-vous "Conflict Of Interest"?? (33+ / 0-)

    Is it just me, or would it seem to rational-minded folks that as the "Big Honcho" of the SLOC, the Mittster should have gone OUT of his way to avoid the reality of, and ANY possible taint of self-interest, possible double-dealing and conflicts of interest in his quest for sponsors and big bucks.

    It's bad enough that he suckered the US Gov't to provide 1.5 BILLION in infrastructure underwriting and other enhancements that benefitted his Mormon buddies, but crafting sponsorship deals with Bain-owned entitles certainly SCREAMS of self-enrichment, and conflict of interest.

    Where's the arms-length of these transactions?

    Marriott? Staples? This thing STINKS of self-interest, and cronyism

    For a better America, vote the GOP out of office whenever and wherever possible and as soon (and as often) as possible!

    by dagnome on Wed Jul 18, 2012 at 04:33:06 PM PDT

  •  I think he is a vulture capatalist crook, but (22+ / 0-)

    if his contract said he had to sever, and we see in his tax returns he benefited, isn't he a criminal/felon?

  •  All I want is some damned proof. (16+ / 0-)

    I need to weed the garden and dig a trench for the electrical and get some siding on the house.   I don't need this distraction right now.

  •  So fraud proves he's qualified to deal (7+ / 0-)

    with the Banksters as an equal, right? I mean, this is America, who with money gets any penalty for crimes?

    This is clearly good news for Mitt Romney.


    The Internet is just the tail of the Corporate Media dog.

    by Jim P on Wed Jul 18, 2012 at 04:41:43 PM PDT

  •  Thanks for this excellent investigative journalism (23+ / 0-)

    Shuksan Tahoma.  This are worthwhile questions to pursue.

    The means is the ends in the process of becoming. - Mahatma Gandhi

    by HoundDog on Wed Jul 18, 2012 at 04:45:43 PM PDT

  •  A question for clarity's sake (5+ / 0-)

    Does I above where it says "Lee, Bain, and Centre Purchares will acquire common and preferred stock and seats on the TLC board of directors." mean that Romney himself was on the Board or just a representative of Bain was on the Board and we don't know who specifically?

    I am just asking for clarity, I don't really think it matters.

    •  I don't know but here are more details (6+ / 0-)

      These are from the SEC filing of 1997/12/12.

      When I refer in shorthand to Romney/Bain, the shorthand refers to this:

      GROUP MEMBERS:        BAIN CAPITAL FUND V, L.P.
      GROUP MEMBERS:        BAIN CAPITAL FUND V-B, L.P.
      GROUP MEMBERS:        BAIN CAPITAL INVESTORS V, INC.
      GROUP MEMBERS:        BAIN CAPITAL PARTNERS V, L.P.
      GROUP MEMBERS:        BCIP ASSOCIATES, L.P.
      GROUP MEMBERS:        BCIP TRUST ASSOCIATES, L.P.
      GROUP MEMBERS:        BROOKSIDE CAPITAL INVESTORS, INC.
      GROUP MEMBERS:        BROOKSIDE CAPITAL PARTNERS FUND, L.P.
      GROUP MEMBERS:        BROOKSIDE CAPITAL  PARTNERS, L.P.
      ...
      GROUP MEMBERS:        W. MITT ROMNEY
      and then
      Pursuant to each of the Purchase Agreements, TLC agreed to
      (a) take all actions necessary to ensure that one representative of each of the following groups is appointed to the Board of Directors of TLC (the "TLC Board"): (i) the Lee Purchasers and affiliates; (ii) the Bain Purchasers and affiliates; and (iii) the Centre Purchasers and affiliates;
      Thanks
  •  There was a lawsuit and settlement (14+ / 0-)

    I don't know if this helps to shed any light:
    http://www.wikinvest.com/..._(MAT)/Litigation_Related_Learning_Inc
    I expect that lawsuit would have lots of details

    In Romney's disclosure to MA elections:
    http://www.buzzfeed.com/...
    I don't see anything related with him as a director bit i'm not surprised by that as the disclosure was 2002 though Romney failed to disclose his Bermuda company in those documents

    Here's some info on it
    http://www.bankruptcymisconduct.com/...

    http://www.delawareliberal.net/...

    I'm still looking

  •  The more we find out about this man and (11+ / 0-)

    his business "accumen", the scarier the prospect of a
    Romney presidency! Running the country like a business? You have got to f---ing kidding me.

    Obama wants your guns = Romney wants your Medicare Stop choosing your guns over your health You're shooting yourself

    by blueoregon on Wed Jul 18, 2012 at 04:55:12 PM PDT

  •  Shuksan Tahoma (9+ / 0-)

    That`s a hell of a lot of work you did.
    I wish I could help.
    Thank you.

    I`m already against the next war.

    by Knucklehead on Wed Jul 18, 2012 at 05:31:56 PM PDT

  •  Outstanding diary... small typo (2+ / 0-)
    Recommended by:
    Shuksan Tahoma, rb608

    "large profit forecast."

    should read

    "large profit that had been forecast."

    •  Thanks, the 1999/10/04 release says: (3+ / 0-)
      The lower revenues, together with the write-off of bad debts, increased customer benefits and the termination of certain distributors, will result in a third quarter, after-tax loss at The Learning Company of between $50 million and $100 million, compared with an expected $50 million, after-tax profit for this division.
      So the primary source supports my mangled language.

      ==
      minor update to diary as per your suggestion.

      •  OK, then my suggestion was not correct. (0+ / 0-)

        how about?

        "$...50 million profit that had been expected."

        I think that would match your source material.

        There's probably a different reference for the profit forecast that would have shaped investor expectations, but this reference it not it.

  •  Did Mattel provide/revise their quarterly est.... (3+ / 0-)

    It might be useful to dig up whether/when Mattel had revised their quarterly projections.

    Isn't there usually a conference call between quarterly reports,  with analysts, and business press, when management gives them "guidance?"

  •  Have you read through the Mattel (12+ / 0-)

    Annual Reports? I just downloaded the ones from 1998 to 2002. And am trying to read them.

    The 1998 Annual Report has a statement about The Learning Center merger:

    - Pending Business Combination
    During December 1998, a total of six separate purported class action complaints were filed by several stockholders of Learning Company in the Court of Chancery of the State of Delaware in and for New Castle County against Learning Company and its board of directors for alleged breaches of fiduciary duties in connection with the proposed merger. The six complaints have since been consolidated. The consolidated complaint seeks the certification as a class of all Learning Company stockholders, an injunction against the merger, rescission if the merger is consummated, damages, costs and disbursements, including attorneys’ fees. The consolidated complaint alleges that Learning Company’s board of directors breached their fiduciary duties to Learning Company’s stockholders by, among other things, failing to conduct due diligence sufficient to have discovered material, adverse information concerning Mattel’s anticipated operational and financial results and agreeing to an exchange ratio that failed to protect Learning Company stockholders against a decline in the value of Mattel common stock. The consolidated complaint names Mattel as an additional defendant, claiming that Mattel aided and abetted the alleged breaches of fiduciary duty. Mattel will aggressively defend itself against the action and will continue to pursue the merger.
    Have you already researched these lawsuits that were filed?

    For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

    by hungrycoyote on Wed Jul 18, 2012 at 05:46:53 PM PDT

    •  I have not researched that/those lawsuit(s). (1+ / 0-)
      Recommended by:
      hungrycoyote

      I used the pleading to cite the June 22, 1999 Bear Stearns statement.  That's as far as I've gone into it/them.

      I've been aware of that lawsuit but have rather purposefully avoided researching it up until this time.

      Up until this time.  Tomorrow?

      •  Well, so far there is no mention of the lawsuit (11+ / 0-)

        in the 1999 Annual Report, but this struck me as too funny. Turns out that Mattel did things retroactively just like Romney:

        The following discussion should be read in conjunction with Mattel's consolidated financial statements and notes thereto, and the information included elsewhere herein. This discussion and the accompanying consolidated financial statements and notes thereto have been prepared to reflect the retroactive effect of Mattel's merger with Learning Company in May 1999. The merger was accounted for as a pooling of interests, which means that for accounting and financial reporting purposes and the discussion herein, the two companies are treated as if they have always been combined.

        For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

        by hungrycoyote on Wed Jul 18, 2012 at 06:11:24 PM PDT

        [ Parent ]

      •  I found the part where they talk about the (6+ / 0-)

        lawsuits in the 1999 Annual Report:

        Litigation Related to Business Combination
        On December 16, 21, and 23, 1998, several stockholders of the legal entity The Learning Company, Inc. that merged into Mattel (‘’Old Learning Company’’) filed six separate purported class action complaints in the Court of Chancery of the State of Delaware in and for New Castle County against Old Learning Company and Old Learning Company’s board of directors for alleged breaches of fiduciary duties in connection with the May 1999 merger. The six complaints were consolidated. The consolidated complaint named Mattel as an additional defendant, claiming that Mattel aided and abetted the alleged breaches of fiduciary duty. On March 9, 2000, the plaintiffs filed a notice and order of dismissal dismissing the action without prejudice. Upon approval by the court, the consolidated action will be formally dismissed.

        Litigation Related to Learning Company Earnings
        Shortfall Following Mattel’s announcement on October 4, 1999 that it expected an earnings shortfall at its Learning Company division in the third quarter of 1999, several of Mattel’s shareholders filed purported class action complaints in the United States District Court for the Central District of California, the United States District Court for the Southern District of New York and the United States District Court for Massachusetts naming Mattel and certain of its officers and directors as defendants. The complaints generally allege, among other things, that the defendants made false or misleading statements that artificially inflated the price of Mattel’s common stock by overstating the revenues and net income of Mattel, including its Learning Company division, and by falsely representing that the May 1999 Learning Company acquisition would be immediately accretive to Mattel’s 1999 and 2000 financial results.

        Two of the purported class action complaints are brought on behalf of the former stockholders of Broderbund who acquired shares of Old Learning Company in exchange for their Broderbund common stock in connection with the Old Learning Company-Broderbund merger on August 31, 1998. Mattel has been named as a defendant as the successor-in-interest to Old Learning Company. The complaints generally allege that that the Old Learning Company-Broderbund Registration Statement on Form S-4 filed on or about July 14, 1998 in connection with the merger was materially false.

        On November 23, 1999, Mattel (along with other defendants named in the federal securities lawsuits) filed a motion and brief before the Judicial Panel on Multidistrict Litigation seeking to transfer all of the federal actions to the United States District Court for the Central District of California for Coordinated or Consolidated Pretrial Proceedings. On March 3, 2000, the Judicial Panel on Multidistrict Litigation granted Mattel’s motion.

        In addition, a Mattel stockholder filed a derivative complaint on behalf and for the benefit of Mattel in the Superior Court of the State of California, County of Los Angeles. The complaint alleges that Mattel’s directors breached their fiduciary duties, wasted corporate assets and grossly mismanaged Mattel in connection with Mattel’s acquisition of Learning Company and seeks both monetary and injunctive relief. On February 10, 2000, the court sustained defendants’ demurrer and dismissed the complaint with leave to amend.

        Mattel believes the lawsuits are without merit and intends to defend them vigorously.

        For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

        by hungrycoyote on Wed Jul 18, 2012 at 06:47:14 PM PDT

        [ Parent ]

        •  '99 annual report cites lawsuit (via hungrecoyote) (4+ / 0-)

          Thanks, this helps.

          Your citation ends with this:

          Mattel believes the lawsuits are without merit and intends to defend them vigorously.
          good.  more to follow.

          Thanks again.

          •  Okay, I wasn't sure if I was helping. (2+ / 0-)
            Recommended by:
            Shuksan Tahoma, semiot

            I found more in the remaining Annual Reports, and will post each year separately, but so you know they reached a settlement in 2002 via arbitration.

            Here's 2000 Annual Report:

            Litigation Related to Learning Company

            Following Mattel’s announcement in October 1999 of the expected results of its Learning Company division for the third quarter of 1999, several of Mattel’s stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants. The complaints generally allege, among other things, that the defendants made false or misleading statements in the joint proxy statement for the merger of Mattel and Learning Company and elsewhere, that artificially inflated the price of Mattel’s common stock.

            In March 2000, these shareholder complaints were consolidated into two lead cases: Thurber v. Mattel, Inc. et al. (containing claims under § 10(b) of the 1934 Securities Exchange Act (“Act”)) and Dusek v. Mattel, Inc. et al. (containing claims under § 14(a) of the Act). Mattel and the other defendants filed motions to dismiss both lawsuits for twenty five Mattel, Inc. and Subsidiaries failure to state a claim. In January 2001, the Court granted defendants’ motions to dismiss both Thurber and Dusek, and gave plaintiffs leave to amend. Plaintiffs are expected to file amended consolidated complaints in March 2001 in both actions.

            Other purported class action litigation has been brought against Mattel as successor to Learning Company and the former directors of Learning Company on behalf of former stockholders of Broderbund Software, Inc. who acquired shares of Learning Company in exchange for their Broderbund common stock in connection with the Learning Company-Broderbund merger on August 31, 1998. The consolidated complaint in In re Broderbund generally alleges that Learning Company misstated its financial results prior to the time it was acquired by Mattel. Mattel and the other defendants have filed a motion to dismiss the complaint in In re Broderbund, and are awaiting a ruling. Thurber, Dusek, and In re Broderbund are all currently pending in the United States District Court for the Central District of California.

            Several stockholders have filed derivative complaints on behalf and for the benefit of Mattel, alleging, among other things, that Mattel’s directors breached their fiduciary duties, wasted corporate assets, and grossly mismanaged Mattel in connection with Mattel’s acquisition of Learning Company and its approval of severance packages to certain former executives. All of these derivative actions, one of which was filed in the Court of Chancery in Delaware and the remainder in Los Angeles Superior Court in California, have been stayed pending the outcome of motions to dismiss in the federal securities actions.

            Mattel believes that the purported class actions and derivative suits are without merit and intends to defend them vigorously.

            For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

            by hungrycoyote on Wed Jul 18, 2012 at 08:37:15 PM PDT

            [ Parent ]

            •  the 1999 and 2000 wording is the same (2+ / 0-)

              1999:

              Mattel believes the lawsuits are without merit and intends to defend them vigorously.
              2000:
              Mattel believes that the purported class actions and derivative suits are without merit and intends to defend them vigorously.
              •  Yes, I know. They were fighting them. (0+ / 0-)

                Stand by. I just posted 2001 and I'm about to post 2002 where they settled the suits.

                For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

                by hungrycoyote on Wed Jul 18, 2012 at 08:47:45 PM PDT

                [ Parent ]

              •  Dang. For some reason Adobe isn't (0+ / 0-)

                letting me just copy the text in 2002. Stand by, I may have to manually type it.

                For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

                by hungrycoyote on Wed Jul 18, 2012 at 08:53:32 PM PDT

                [ Parent ]

              •  Same wording not unusual (2+ / 0-)

                The wording is standard boilerplate. I'll bet you can pick up any annual report for any company for any year in the last 20 years and find the exact same wording regarding lawsuits pending.

                The exact same wording here is not unusual. No company, no matter the circumstances, is going to tell their shareholders that an action brought against them has merit.

          •  More ... (1+ / 0-)
            Recommended by:
            semiot

            From the 2001 Annual Report:

            Litigation Related to Learning Company

            Following Mattel’s announcement in October 1999 of the expected results of its Learning Company division for the third quarter of 1999, several of Mattel’s stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants. The complaints generally allege, among other things, that the defendants made false or misleading statements, in the joint proxy statement for the merger of Mattel and Learning Company andelsewhere, that artificially inflated the price of Mattel’s common stock.

            In March 2000, these shareholder complaints were consolidated into two lead cases: Thurber v. Mattel, Inc. et al. (containing claims under §10(b) of the 1934 Securities Exchange Act (‘‘Act’’)) and Dusek v. Mattel, Inc. et al (containing claims under §14(a) of the Act). In January 2001, the Court granted defendants’ motions to dismiss both Thurber and Dusek, and gave plaintiffs leave to amend. In December 2001, the Court denied defendants’ motions to dismiss the amended complaints in both Thurber and Dusek. In each case, the plaintiffs have asked for compensatory damages. Both Thurber and Dusek are currently pending in the United States District Court for the Central District of California.

            Other purported class action litigation has been brought against Mattel as successor to Learning Company and the former directors of Learning Company on behalf of former stockholders of Broderbund Software, Inc. who acquired shares of Learning Company in exchange for their Broderbund common stock in connection with the Learning Company-Broderbund merger on August 31, 1998. The consolidated complaint in In re Broderbund generally alleges that Learning Company misstatedits financial results prior to the time it was acquired by Mattel. The defendants’ motion to dismiss the complaint in In re Broderbund was granted in May 2001, and the case was dismissed. The In re Broderbund plaintiffs appealed the dismissal, and the case is currently pending before the Ninth Circuit Court of Appeals. The plaintiffs have asked for compensatory damages.

            Several stockholders have filed derivative complaints on behalf and for the benefit of Mattel, alleging, among other things, that Mattel’s directors breached their fiduciary duties, wasted corporate assets, and grossly mismanaged Mattel in connection with Mattel’s acquisition of Learning Company and its approval of severance packages to certain former executives. These derivative actions have been filed in the Court of Chancery in Delaware, in Los Angeles Superior Court in California, and in the United States District Court for the Central District of California, and are all in a preliminary stage. The plaintiffs have asked for unspecified monetary damages. Plaintiffs filed an amended consolidated complaint in February 2002 in the California state court actions and defendants have filed a demurrer seeking dismissal of that action.

            Mattel believes that the actions are without merit and intends to defend them vigorously.

            For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

            by hungrycoyote on Wed Jul 18, 2012 at 08:46:48 PM PDT

            [ Parent ]

            •  this buttresses the allegation that (5+ / 0-)
              The market had discovered, and Mattel had admitted, that The Learning Company was essentially a worthless shell.

              Mitt Romney, by virtue of his control of a seat on the TLC board, would have most certainly known this to be true.

              (Quoting myself above.)  

              Since I can't see into Romney's mind in 2009, that's obviously an allegation rather than a factual statement on my part.

              I felt comfortable in that allegation based primarily on the 1997/12/12 SEC filing affirming Bain's acquisition of a seat on the TLC board.

              I don't think it necessarily follows, and I am not asserting, that Romney/Bain were part of any fraud leading into the merger.

              •  Yes, but as always, no one ever investigates Bain (1+ / 0-)
                Recommended by:
                Shuksan Tahoma

                Capital and/ or Mitt Romney issues. For they are (purportedly and historically) - Above the Law.


                Mitt Romney was CEO of Bain until Aug 2001. Proof of Bain & Romney Fraud

                by laserhaas on Wed Jul 18, 2012 at 09:26:13 PM PDT

                [ Parent ]

              •  Yes! Go and read the 1999 Annual Report like I (3+ / 0-)

                mentioned in a comment below. Here excerpts in that 1999 Annual Report:

                The bad news for 1999 unfortunately has overshadowed the good news. We are all painfully aware of the negative effect the acquisition of The Learning Company and its subsequent performance had on our results for 1999. These well-reported difficulties obscured the fundamentally strong performance of Mattel’s core brands and sectors.
                Our weaker than expected overall results in 1999 primarily reflected problems with The Learning Company. This acquisition, which was undertaken to support a still-persuasive e-commerce and interactive strategy, coincided with a slowdown in CD-ROM sales, leading to inventory problems and discounting, which resulted in an operating loss totaling approximately $206 million, pre-tax, before restructuring charges.
                Merger-Related Risk
                Continued difficulty integrating the operations of Learning Company into Mattel, which may prevent Mattel from realizing the expected benefits from the merger, such as cost savings, operating efficiencies, revenue enhancements or other synergies.
                1999 Compared to 1998
                Consolidated Results
                Net loss for 1999 was $82.4 million or $0.21 per diluted share as compared to net income of $206.1 million or $0.47 per diluted share in 1998. The 1999 results were negatively impacted by restructuring and other charges totaling $346.0 million, approximately $265 million after-tax or $0.64 per diluted share, related to the Mattel restructuring plan, the merger and integration of Learning Company, and other nonrecurring charges. Additionally, Mattel’s 1999 results were negatively impacted by the results of operations of its Learning Company division, which reported a pre-tax loss of $205.5 million for the full year 1999.

                (snip)

                The negative results of the Learning Company division in 1999 were attributable to a number of factors. In 1999, Learning Company experienced a decrease in sales of CD-ROM products at retail and a higher proportion of sales of relatively lower priced and lower margin products. During the second half of 1999, Learning Company was in the process of revising its distribution channel arrangements. These changes in distribution terms combined with the general weakness in the CD-ROM market resulted in increased product returns. Significant price and promotional competition caused the Learning Company division to incur higher than anticipated price concessions and marketing expenses, including increased use of rebate programs, price protection and advertising. In addition, increased bad debt reserves of approximately $56 million, including $35 million related to one of Learning Company’s major distributors, contributed to its operating loss.

                For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

                by hungrycoyote on Wed Jul 18, 2012 at 09:38:03 PM PDT

                [ Parent ]

                •  Were defective/overpriced products made in USA? (0+ / 0-)
                •  This statement screams possible accounting (0+ / 0-)

                  irregularities or control fraud:

                  This acquisition [of TLC by Mattel], which was undertaken to support a still-persuasive e-commerce and interactive strategy, coincided with a slowdown in CD-ROM sales, leading to inventory problems and discounting...
                  Where a company finds some creative ways to book sales in the current quarter that aren't really happening until the next quarter.

                  Such as deceptive marketing and 30-day trial periods, etc. - money back guaranteed...

                  Note: Just speculating, not alleging any proof of fraud.

          •  Finally ... had to manually type it. (3+ / 0-)
            Recommended by:
            laserhaas, madhaus, semiot

            Here's the Litigation part from the 2002 Annual Report. I need to go back and look at 1999. I remember seeing that they had to spend millions letting go of 150 Learning Company employees after the merger. I thought it was a lot when I read, and now that I read here that the severance packages for former executives were part of the lawsuits, I want to go look at that.

            Litigation Related to Learning Company

            Following Mattel’s announcement in October 1999 of the expected results of its Learning Company division for the third quarter of 1999, various Mattel’s stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants. The complaints generally alleged, among other things, that the defendants made false or misleading statements, in the joint proxy statement for the merger of Mattel and Learning Company and elsewhere, that induced Mattel’s shareholders to vote to approve the merger and artificially inflated the price of Mattel's common stock.

            These shareholder complaints were consolidated into two lead cases: Thurber v. Mattel, Inc. et al. (containing claims under §10(b) of the 1934 Securities Exchange Act (‘‘Act’’)) and Dusek v. Mattel, Inc. et al (containing claims under §14(a) of the Act). Both of these federal lawsuits and are pending in the United States District Court for the Central District of California. In November 2002, the Court permitted the actions to proceed as class actions.

            Several stockholders have filed derivative complaints purportedly on behalf of and for the benefit of Mattel, alleging, among other things, that Mattel’s directors breached their fiduciary duties, wasted corporate assets, and grossly mismanaged Mattel in connection with Mattel’s acquisition of Learning Company and its approval of severance packages to certain former executives. Some of the derivative suits were consolidated into one lawsuit filed in Los Angeles Superior Court in California, which was dismissed for failure to make pre-suit demand on the board of directors, and is currently on appeal. Another derivative suit was filed in the Court of Chancery in Delaware, and was dismissed without prejudice in August 2002. A third derivative suit, filed in federal court in the Central District of California was dismissed in July 2002, and re-filed in November 2002 as part of the settlement described below.

            In November 2002, with a court-appointed mediator acting as a neutral facilitator, the parties negotiated and thereafter memorialized an agreement in principle to resolve all of the federal lawsuits in exchange for payment of $122.0 million and Mattel's agreement to adopt certain corporate governance procedures. Under the terms of the settlement, Mattel and its directors and officers liability insurers have deposited the settlement funds into an escrow account pending completion of a final written settlement agreement and court approval of the settlement. The settlement is conditioned upon court approval of the terms of the settlement, entry of final judgments dismissing the federal lawsuits, and dismissal or withdrawal of the appeal in the California state court derivative action.

            At the time of the lawsuits, Mattel maintained directors and officers liability insurance with a maximum of $120 million through several different carriers. One of those carriers, Reliance Insurance Company, had become insolvent and was unable to meet its coverage obligation for its $20 million excess layer. As a result, Mattel contributed this $20 million layer to the settlement fund, and has made a claim against the California Insurance Guarantee Association ("CIGA") to recoup the full $20 million of the Reliance layer. CIGA disputes that it has to pay this amount, and has taken the position that it had to pay only $0.5 million.

            The total amount that Mattel expects to incur in connection with the Learning Company litigation is $25.4 million on a pre-tax basis, consisting of the uninsured portion of the settlement and legal and professional fees in excess of insurance coverage. Mattel recorded this amount in its results of operations in the fourth quarter of 2002.

            For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

            by hungrycoyote on Wed Jul 18, 2012 at 09:19:18 PM PDT

            [ Parent ]

            •  Okay, I found the part about the Learning (6+ / 0-)

              Company employees in the 1999 Annual Report:

              The fourth quarter restructuring charge of approximately $18 million relates to the termination of an additional 150 Learning Company employees at its domestic offices. This action was taken to further consolidate the operations of Learning Company’s domestic offices.
              Throughout the 1999 Annual Report, losses because of the merger with Learning Company are mentioned a lot. Of all the Annual Reports, this is the one you're going to find a lot of information in it. Fortunately, when you open it in Adobe, you can just search on the word "Learning" and go through every section it is mentioned. They lost millions on this deal .... increased bad debt, lower sales, it just goes on and on.

              I'm going to keep going and look at 2003 because while 2002 talks about settlement, it looks like a couple of other cases were still ongoing at the Federal level.

              For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

              by hungrycoyote on Wed Jul 18, 2012 at 09:28:55 PM PDT

              [ Parent ]

            •  Could this have been hush money? (1+ / 0-)
              Recommended by:
              hungrycoyote

              For those who were willing take the fall?

              I thought it was a lot when I read, and now that I read here that the severance packages for former executives were part of the lawsuits, I want to go look at that.
          •  It wasn't over. There was an appeal going (4+ / 0-)
            Recommended by:
            laserhaas, KenBee, Ditch Mitch KY, semiot

            in 2004. Here's the litigation stuff from the 2003 Annual Report

            Litigation Related to Learning Company

            Following Mattel’s announcement in October 1999 of the expected results of its Learning Company division for the third quarter of 1999, various Mattel stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants.

            These shareholder complaints were consolidated into two lead cases, one under §10(b) of the Securities Exchange Act of 1934 (“the Act”), and the other under §14(a) of the Act. In November 2002, the United States District Court for the Central District of California permitted the actions to proceed as class actions. Several stockholders filed related derivative complaints purportedly on behalf of Mattel. Some of the derivative suits were consolidated into one lawsuit in Los Angeles County Superior Court in California, which was dismissed for the plaintiff’s failure to make pre-suit demand on the board of directors. An appeal from that decision was dismissed in July 2003 by stipulation of the parties. Another derivative suit was filed in the Delaware Court of Chancery, and was dismissed without prejudice in August 2002 in deference to the then-ongoing California derivative case. A third derivative suit, filed in federal court in the Central District of California, was dismissed in July 2002, and re-filed in November 2002 as part of the settlement described below.

            In November 2002, the parties to the federal cases negotiated and thereafter memorialized in a final settlement agreement a settlement of all the federal lawsuits in exchange for payment of $122.0 million and Mattel’s agreement to adopt certain corporate governance procedures. The court granted final approval to the settlement in September 2003, and judgments were entered accordingly. On October 9, 2003, a group of persons purporting to be members of the §14(a) class filed a notice of appeal, challenging the manner in which the $122.0 million was allocated between the §10(b) class and the §14(a) class. Briefing on the appeal is scheduled to be completed in the first half of 2004. An oral argument date has not been set.

            At the time of the lawsuits, Mattel maintained directors and officers liability insurance with a maximum coverage of $120 million through several different carriers. One of those carriers, Reliance Insurance Company, had become insolvent, and was unable to meet its coverage obligation for its $20 million excess layer. As a result, Mattel contributed this $20 million layer to the settlement fund, and made a claim against the California Insurance Guarantee Association (“CIGA”) to recoup the full $20 million of the Reliance layer. CIGA disputed that it had to pay this amount, but on June 27, 2003, agreed to pay $0.5 million to Mattel, without prejudice to Mattel’s right to seek additional amounts. That same day, Mattel filed a lawsuit in Los Angeles County Superior Court seeking a declaration that CIGA was obligated to pay additional amounts to Mattel. On September 30, 2003, the parties entered into a written settlement agreement whereby CIGA agreed to pay Mattel $7.75 million (in addition to the $0.5 million previously paid), and Mattel agreed to dismiss its lawsuit. CIGA has since paid this sum, and the case has been dismissed.

            For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

            by hungrycoyote on Wed Jul 18, 2012 at 09:48:11 PM PDT

            [ Parent ]

          •  And it continued on .... (4+ / 0-)
            Recommended by:
            laserhaas, KenBee, Ditch Mitch KY, semiot

            from the 2004 Annual Report:

            Litigation Related to Learning Company

            Following Mattel’s announcement in October 1999 of the expected results of its Learning Company division for the third quarter of 1999, various Mattel stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants. These shareholder complaints were consolidated into two lead cases, one under §10(b) of the Exchange Act, and the other under §14(a) of the Exchange Act. In November 2002, the United States District Court for the Central District of California permitted the actions to proceed as class actions.

            Several stockholders filed related derivative complaints purportedly on behalf of Mattel. Some of the derivative suits were consolidated into one lawsuit in Los Angeles County Superior Court in California, which was dismissed for the plaintiff’s failure to make pre-suit demand on the board of directors. An appeal from that decision was dismissed in July 2003 by stipulation of the parties. Another derivative suit was filed in the Delaware Court of Chancery, and was dismissed without prejudice in August 2002 in deference to the then ongoing California derivative case. A third derivative suit, filed in federal court in the Central District of California, was dismissed in July 2002, and re-filed in November 2002 as part of the settlement described below.

            In November 2002, the parties to the federal cases negotiated and thereafter memorialized in a final settlement agreement a settlement of all the federal lawsuits in exchange for payment of $122.0 million and Mattel’s agreement to adopt certain corporate governance procedures. The court granted final approval to the settlement in September 2003, and judgments were entered accordingly. On October 9, 2003, a group of persons purporting to be members of the §14(a) class filed a notice of appeal, challenging the manner in which the $122.0 million was allocated between the §10(b) class and the §14(a) class. Briefing on the appeal is complete, and in January 2005, the United States Court of Appeals for the Ninth Circuit issued an order directing that the case be placed on the next available calendar.

            For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

            by hungrycoyote on Wed Jul 18, 2012 at 09:57:29 PM PDT

            [ Parent ]

        •  Mitt Romney signature - The Learning Co Dec 1997 (0+ / 0-)

          Context from the diary:

          Romney/Bain,and the other major investors would acquire 3 seats on the Learning Company board when they invested in 1997/08/26.
          Proof of Romney's stake in The Learning Company, December 1997.

          Here's a link to a SEC 13D statement of beneficial ownership, with Mitt Romney's signature, about his  beneficial ownership of 6.6% of The Learning Company, December 12, 1997.   Note that this is only the part of Bain's stake that Romney controlled.

          Romney's signature block:
          Date:  December 12, 1997  / s / W. Mitt Romney
                                                  ------------------
                                                  W. Mitt Romney
          Statements of Mitt Romney's job(s) at the time and authority in the deal:
          (14) W. Mitt Romney, an individual ("Mr. Romney"), as sold shareholder of BCI and Brookside Investors (as defined below) and as a member of the Management Committee of BCIP and BCIPT;
          ...
          Mr. Romney is principally engaged in the business of serving as sole shareholder of BCI and Brookside Investors and as a member of the Management Committee of BCIP and BCIPT. [emphasis mine]
          ...
          Mr. Romney may be deemed to share voting and dispositive power with respect to

          (i) 2,151,380 shares of Common Stock currently held by BCF- V and BCF-V-B (assuming the conversion of all shares of Preferred Stock held by BCF-V and BCF-V-B into Common Stock) in his capacity as sole stockholder of BCI,

          (ii) 897,420 shares of Common Stock currently held by BCIP and BCIPT (assuming the conversion of all shares of Preferred Stock held by BCIP and BCIPT into Common Stock), in his capacity as a member of the Management Committee of BCIP and BCIPT, and

          (iii) 365,840 shares of Common Stock currently held by Brookside Fund (assuming the conversion of all shares of Preferred Stock held by Brookside Fund into Common Stock) in his capacity as sole stockholder of Brookside Investors, which in the aggregate represent approximately 6.6% of the total number of Outstanding Shares (plus the 3,414,640 shares of Common Stock held by BCF-V, BCF-V-B, BCIP, BCIPT and Brookside Fund upon such conversion and assuming that no other shares of Preferred Stock held by others have been previously, or are simultaneously, converted to Common Stock), as reported in the Quarterly Report.

          The filing of this Schedule 13D by Mr. Romney shall not be construed as an admission that Mr. Romney is, for the purpose of Section 13(d) of the Exchange Act, the beneficial owner of such shares held by BCF- V, BCF-V-B, BCIP, BCIPT or Brookside Fund. [emphasis mine]

          Question for Kossak's in finance.  What does the disclaimer above mean?  Is it boiler plate language?

          Thanks in advance for the education.

          •  Wrong link to the 13D? (1+ / 0-)
            Recommended by:
            Occam was an optimist

            I think you may have pasted the link to the S4 twice.

            •  Correction: Link TLC SEC 13D December 12, 1997 (0+ / 0-)
              •  Oh, ok so that's the doc I cited on that date..... (1+ / 0-)
                Recommended by:
                Occam was an optimist

                Are you pointing out something else we should be seeing in there?  

                Is it the 6.6% number?

                If so, what does this mean?

                which in the aggregate represent approximately 6.6% of the total number of Outstanding Shares (plus the 3,414,640 shares of Common Stock held by BCF-V, BCF-V-B, BCIP, BCIPT and Brookside Fund upon such conversion and assuming that no other shares of Preferred Stock held by others have been previously, or are simultaneously, converted to Common Stock), as reported in the Quarterly Report.

                6.6% + 3.4 million shares?

                •  My comment attempted to emphasize... (0+ / 0-)

                  Your analysis of ownership is very good, and more broadly covers the big picture.  You already covered the fact that he sat on the TLC board and that gave the Bain investor group at least one seat on the Mattel board of directors.

                  My comment attempted to emphasize, for skeptical readers, that Mitt Romney wasn't just serving as a director on the board of TLC.  He wasn't just one part of the group of "BAIN Investors."  He was, in fact, a also a major shareholder, and here's the signature that proves it.  

                  Mitt Romney, himself, controlled 6.6% of TLC Common Stock before the merger with Mattel.

                  1) Mitt's signature in December 1997 and specific language that was used in SEC filings when he was definitely running Bain Capital and various subsidiaries.

                  2) The fact that Mitt Romney, himself, controlled 6.6% of TLC shares before the merger with Mattel.  The collection of investors referred to as "the Bain Investors" also controlled some big chunks.

                  That means he had a large vested interest in making sure the exit strategy for the investment in TLC made money for himself and BAIN.

                •  You asked: If so, what does this mean? (0+ / 0-)

                  You analysis covers the whole group of Bain Investors - it's the main point... and I find no fault with it.

                  The 6.6% refers to the SUBSET that was controlled by Mitt Romney, separate from the shares that were controlled by other BAIN managing partners.

                  Caveat: If I read the 13G correctly

                  Apologies if I'm getting too far down in the weeds.

                  •  we may be reading that differently (1+ / 0-)
                    Recommended by:
                    Occam was an optimist

                    Romney owned and controlled all of the various 'Bain Entities.'   Mark Nunnelly (as posted below) apparently was Romney/Bain's representative on the board of TLC.

                    I may remember having read that one or two of these 'Bain Entities' was managed by a managing director other than Romney.

                    Challenging stuff to keep track of and especially to separate the signal from the noise, the wheat from the chaff, the whiskey from the water.

        •  TLC SEC form S-4 - purportedly "materially false." (1+ / 0-)
          Recommended by:
          hungrycoyote

          From hungrycoyote's excerpt of Mattel's 1999 Annual Report:

          The complaints generally allege that that the Old Learning Company-Broderbund Registration Statement on Form S-4 filed on or about July 14, 1998 in connection with the merger was materially false.
          Here’s a link:

          The Learning Company SEC S-4 filing on July 14, 1998

          What materially false statements might we find in this one?  

          Statements about the value?

          Statements about management?  

          Statements about strategy?

          Suggestions welcome.

          •  This S4 lists identifies Bain's TLC board member (1+ / 0-)
            Recommended by:
            Occam was an optimist
            (6) Certain affiliates of Bain Capital, Inc., including Bain Capital Fund V, L.P., Bain Capital Fund V-B, L.P., BCIP Associates, L.P., BCIP Trust Associates, L.P. and Brookside Capital Partners Fund, L.P., own 170,732 shares of TLC Series A Preferred Stock, which were convertible as of June 30, 1998 into 3,414,640 shares of TLC Common Stock. Mr. Nunnelly, a director of TLC, is a Managing Director of Bain Capital, Inc. and therefore may be deemed to have shared voting and investment power with respect to the shares of TLC Series A Preferred Stock owned by the affiliates of Bain Capital, Inc. Mr. Nunnelly disclaims beneficial ownership of all shares of TLC Series A Preferred Stock. Based upon information contained in a Schedule 13D dated December 12, 1997 filed with the SEC.
            'Mr. Nunnelly' is presumably Mark Nunnelly
            http://www.baincapitalprivateequity.com/...
  •  ssssssboom!!! (1+ / 0-)
    Recommended by:
    MidwestTreeHugger

    on target!

    Crikey, what a hot mess this Mittens is!

    From those who live like leeches on the people's lives, We must take back our land again, America!...Langston Hughes

    by KenBee on Wed Jul 18, 2012 at 05:49:44 PM PDT

  •  Sounds like they milked TLC dry and then sold the (14+ / 0-)

    used up shell to Mattel by dressing it up and hiding the skeletons in the closet. They sold Mattel a bill of goods and made off like bandits.

  •  A little history (10+ / 0-)

    Jill Barrad parachuted with lavish rewards.

    Learning Company had instructional software: "Reader Rabbit"

    When the stock hit $10  Barron's flogged it as a great turn around investment.

    Barbies were off-shored to factories which employed young girls who earned a weekly wage which ill afforded a Barbie doll
    toy.

  •  Mitt / Bain / Mattel / Olympic License / $$$$$$$$$ (7+ / 0-)

    Shukshan Tahoma -- Thank you, thank you.  I wish I could help with details.

    I think all of us should forward the link to this diary to David Corn, Rachel Maddow, Lawrence O'Donnell and ask them to follow the ties between:

    Romney / Bain / Mattel / Olympic license / $$$$$$ for Mattel
    Does anyone believe it's just a coincidence that Mattel got the Olympic license to prop up Mattel stock just before TLC tanked?  Fat chance.

    Good luck getting more details.  

  •  And remember, 1999 was the last hurrah... (3+ / 0-)
    Recommended by:
    Shuksan Tahoma, laserhaas, Paper Cup

    ... of the internet bubble, which broke in the spring of 2000.

  •  can we add another one to the Bain closing of (12+ / 0-)

    a factory ?

    Apr 5, 2001 – Mattel Inc. will close its last United States manufacturing plant and lay off 980 workers to cut ... The plant, in Murray, Ky., makes Fisher-Price toys.
    here
  •  My, My, My..... (4+ / 0-)

    Very interesting.  What a coinkydink.  Mitt's toy company was not doing so hot, but Mitt just happened to be available to broker a deal for toys that millions & millions of mom & dad's would buy from his company for their little darlings as Olympic souvenir.

    Mitt scores.  It's like Romneycare, Mitt wants to hide something else again.

  •  What role, if any, did Romney/Bain play... (4+ / 0-)

    ...in the TLC-Mattel merger? Did they encourage it, or buy TLC stock on information the merger would take place?

    The road to Hell is paved with pragmatism.

    by TheOrchid on Wed Jul 18, 2012 at 07:13:41 PM PDT

  •  So now I'm wondering... (2+ / 0-)
    Recommended by:
    Orlaine, Occam was an optimist

    Since Willard may have some pending legal issues among other problems in his future, who will be the Republican nominee? Santorum, Newter, Ron Paul, or crazy assed Michele Bachmann. I think that Bachmann is definitely out. The first three are looking like they're going to get another chance based upon the fact that I am starting to formulate an opinion that Mitt is going to pull out.

    Any takers?

    While not all republicans are bigots, all bigots are republicans.

    by Maximilien Robespierre on Wed Jul 18, 2012 at 07:19:38 PM PDT

  •  I've now met a fair number of assholes like Romney (5+ / 0-)

    Their fortunes aren't made from entrepreneurism, intelligence, or even managerial competence.

    They become rich, instead, through gall, greed, cronyism, manipulation, and outright fraud.

    Start with the Fortune 500 list.  Consider the CEOs.  How far down the list do you have to go to find one that isn't a combination of a useless moron and a ruthless psychopath?

    How far down before you find one that hasn't duped shareholders, backed idiotic decisions, destroyed organizational culture, shredded ethics, and destroyed jobs, communities and people?

    It would seem that all the mechanisms of self-correction that used to protect us - law, corporate governance, journalism - have been shattered.

    Toto, I've a feeling we're not in Kansas anymore

    by Minerva on Wed Jul 18, 2012 at 07:25:29 PM PDT

  •  Question regarding step II (2+ / 0-)
    Recommended by:
    Shuksan Tahoma, semiot

    Did Mattel issue new shares to acquire TLC? Because that would dilute Bain's share.

    In theory, there is no difference between theory and practice; but in practice, there always is a difference. - Yogi Berra En théorie, il n'y a aucune différence entre théorie et pratique, mais en pratique, il y a toujours une différence. - Yogi Berra

    by blue aardvark on Wed Jul 18, 2012 at 07:36:30 PM PDT

  •  The Republican Convention ought to be fun! (1+ / 0-)
    Recommended by:
    Ditch Mitch KY

    Is Rick Santorum lickin' his pencil, squintin' he eyebrows and writing his acceptance of the nomination speech yet?  

    Are we there yet Mitts?  Are we there yet?

  •  Follow the money and access... (8+ / 0-)

    I've spent a carer working with firms whose management teams have faced similar dilemmas and pressure as the one at Mattel did.

    For every Bain-style transaction, there are insiders, and there are "outsiders".

    Jill Barad took a big hit in the media and on Wall Street and was forced to resign as a result of The Learning Company acquisition "failure" that was pinned on her. That is your "outsider". Find her, and get her to talk, and you will know all you need to know about what really happened -- and how much and who profited from it.

    Other execs from the time, who all were getting BIG kudos for the Barbie-line turnaround just a few short years before the Bain-led TLC transaction, were forced out too. I guarantee you many of them have little fondness for Bain, or Romney in particular.

    Go to the source.  

  •  Nice Work (5+ / 0-)

    I'm impressed with your original investigative research.  It certainly demonstrates the opportunities for fraud when when someone retains ownership in a company while maintaining the appearance that all ties have been cut.  I do have a couple of questions.

    1) Is their any evidence that either the IOC or the SLOC did or didn't know about Romney's ties to Mattel?

    2) I'm not sure I understand the material gain Mattel got from the Olympic franchise.  I think what you're saying is that Mitt had knowledge about Mattel that wasn't otherwise available to the shareholders and/or the public and he somehow used that knowledge or repressed it in order to deceive investors.  But I'm not sure I understand how the deceit was perpetrated.  What am I missing?

    •  Great questions: (5+ / 0-)

      1.   You caught me throwing the USOC and the IOC into the  mix.   I may have done that for rhetorical flourish.

      Honestly, the only facts I know to be true is that the SLOC hired Romney on 2/11/1999 and he was quoted in the press on 9/25/1999.  

      I have no idea about anything anybody inside any of the organizations may have known about anything.

      2.  That is a very challenging question.

      I approach this by asking the same question generically:  What material gain does any sponsor achieve from association with the Olympics?

      The answer clearly must be 'International exposure and stature.'

      Accepting this answer, then, allows us to hypothesize that a company in extreme financial duress could indeed benefit from the positive association with the Olympic brand, and the implied stature it brings with it.

      What do you think?

  •  Great work. I'm actually excited to see if the (2+ / 0-)
    Recommended by:
    Ditch Mitch KY, semiot

    allegations of Mitt Romney being invested in Mattel was true in 2001 - also!


    Mitt Romney was CEO of Bain until Aug 2001. Proof of Bain & Romney Fraud

    by laserhaas on Wed Jul 18, 2012 at 09:09:59 PM PDT

  •  Fantastic work (5+ / 0-)

    This is great research, but I agree that the basic underlying questions are not yet answered, or clear.

    On the one hand, the award of the SLOC contract to Mattel certainly smacks of cronyism at least, and quite possibly corruption, given that Romney himself, and Bain, would obviously benefit directly from this business coup for Mattel.  However, one could see an argument in response that Mattel was clearly one of the most prominent U.S. toy makers, so it's hard to claim that the award was obviously fraudulent.

    Your second hypothesis, that Romney awarded Mattel the contract to offset the impending effect of revelations concerning TLC's failing business is less persuasive.  It's not really different than the first notion of cronyism, anyway, and the fact that Mattel's stock tanked along with TLC suggests that it wasn't a very effective strategy, at best.

    The real smoking gun, of course, would be if Romney and/or Bain could be shown to have dumped their Mattel stock right around the time of the SLOC award.  Especially in the immediate wake of that announcement, and before Oct. 4.  That would be enough to send him to jail, let alone destroy his candidacy.  Probably too much to hope for, but this could be exactly the kind of thing that his tax returns would reveal, and why releasing them would be suicide.

    Again, great work!

    Yet it is not our part to master all the tides of the world, but to do what is in us for the succour of those years wherein we are set... -- Gandalf

    by dnta on Wed Jul 18, 2012 at 09:26:10 PM PDT

    •  That is the question dnta. Was it a pump n dump? (3+ / 0-)
      Recommended by:
      dnta, semiot, dear occupant

      When did Mitt Romney and his Bain associates unload their stock?

      Furthermore - either Mattel was an idiot in accounting or The Learning Company books were cooked.


      Mitt Romney was CEO of Bain until Aug 2001. Proof of Bain & Romney Fraud

      by laserhaas on Wed Jul 18, 2012 at 09:28:46 PM PDT

      [ Parent ]

    •  Thanks for a good counter-argument (6+ / 0-)
      However, one could see an argument in response that Mattel was clearly one of the most prominent U.S. toy makers, so it's hard to claim that the award was obviously fraudulent.
      Agreed.   Additional sponsors Sealy, Marriott also noted.
      ... the fact that Mattel's stock tanked along with TLC suggests that it wasn't a very effective strategy, at best.
      I don't necessarily agree.   Timing is everything in the market.   A hypothetical bad player with inside knowledge would be able to profit on both the upward and the downward movement of any stock.

      Thanks again.

      •  Plus Mattel also had an agreement for (2+ / 0-)
        Recommended by:
        dnta, semiot

        the 2000 Olympics in Sydney. So, they already had a previous relationship with the Olympics per this article in the September 25, 1999 edition of Dessert News, Salt Lake City, Utah:

        Mattel to bring mascots to life
        Toymaker signs on as licensee for the 2002 Games

        By Jerry Spangler
        Dessert News staff writer

        Barbie may just have to find a new place to park her Ferrari other than the toy store shelf.

        Come this Christmas, Utah toy stores will be making room on their shelves for a new Mattel toy line -- cute, cuddly and overstuffed mascots for the 2002 Winter Games.

        On Friday, the Salt Lake Organizing Committee announced that Mattel, the renowned maker of such toy lines as Barbie, Cabbage Patch Dolls, Chatty Cathy and Hot Wheels, has signed on as a Games licensee. The deal guarantees SLOC more than $1 million in advance payments from sales royalties.

        "There is no better company than Mattel to help us bring the Olympic Mascots to life for children of all ages," said SLOC President Mitt Romney. "Their high quality products will be constant reminders of the fun and enthusiasm the Olympic mascots convey about the 2002 Games."

        The sponsorship announcement came one day before the official unveiling of the names for the three mascots: a rabbit, a coyote and a bear. The names will be announced during half-time of today's football game between Brigham Young University and the University of Virginia. The first 3,500 fans wearing blue will receive free Olympic merchandise.

        Louise Georgeson, director of strategic alliances for Mattel, said the company will rush into production a line of mascot products specifically for the Utah market and in time for the Christmas shopping season. The first toys produced will be donated to children's hospitals sometime in December. The real money-making marketing push for Mattel will be for next year's holiday season.

        "They are very cute and adorable," Georgeson said, "and they have appeal beyond being mascots."

        Mattel secured the licensing agreement only for a line of plush toys. No licensing agreement has yet been signed for other types of toys related to the Olympics or the mascots. Mattel is negotiating with SLOC to extend the licensing agreement across other Mattel brands, Georgeson said.

        Mattel will develop a variety of plush toy mascots ranging in price from $9 to $40 each. The history and Indian legends behind each mascot will be told on the product's packaging, she said, adding the stories will be a fundamental part of the marketing campaign.

        Mattel is also the licensee for the plush mascots for the 2000 Games in Sydney. Georgeson said the Sydney Games will be a good sales barometer for products for the 2002 Games, but there are, as yet, no target figures for the number of plus toys that must be sold or that will be manufactured.

        Mattel is headquartered in El Segundo, Calif., and has offices and manufacturing facilities in 36 countries. Its products are sold in 155 nations throughout the world, returning annual revenues of almost $6 billion.

        Romney said SLOC was immediately drawn to Mattel because of the company's worldwide reputation and existing distribution network rivaled by no other toymaker. "To have a company of Mattel's statute is a great benefit," Romney said. "They are a premier manufacturer."

        For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

        by hungrycoyote on Wed Jul 18, 2012 at 10:39:11 PM PDT

        [ Parent ]

      •  That was the 1999 crash - many stocks tanked. (0+ / 0-)
  •  Mattel was bleeding some many millions of $ that (3+ / 0-)
    Recommended by:
    KenBee, semiot, Occam was an optimist

    it Gave Away - The Learning Company for Free to Gores Technology Group.

    After the dust of litigations settled - Gores did give Mattel $27 million (purportedly)

    http://www.gores.com/...


    Mitt Romney was CEO of Bain until Aug 2001. Proof of Bain & Romney Fraud

    by laserhaas on Wed Jul 18, 2012 at 09:30:53 PM PDT

  •  Mitt went into the direction of money (2+ / 0-)
    Recommended by:
    laserhaas, Ditch Mitch KY

    The "false idol."

    That pic of him with the other young guys flashing currency.

    How can anyone stomach that?

    Being rich for its own sake.

    It strikes me as extremely childish.

  •  My take: (2+ / 0-)
    Recommended by:
    laserhaas, Occam was an optimist
    The market had discovered, and Mattel had admitted, that The Learning Company was essentially a worthless shell.
    TLC's sales in 1998 were roughly $850 million. There has to be some intangible value there.
    millions in product returns and bad debt write-offs  
    Right there is your opportunity to contain costs. Romney or Mattel thought they could contain those costs, or perhaps expand their market, or a combination of the two. Maybe they planned to divest individual software titles.

    I'm not sure there's evidence of fraud. It looks like they couldn't handle management.  

    "A cynical, mercenary, demagogic press will produce in time a people as base as itself." - Joseph Pulitzer

    by CFAmick on Wed Jul 18, 2012 at 10:00:09 PM PDT

  •  Great diary! Keep it up!! n/t (1+ / 0-)
    Recommended by:
    Ditch Mitch KY

    "@MittRomney spent five interviews last night whining. Time to buck up. This is politics after all, not Horse Ballet." Brad Woodhouse @woodhouseb 7-14-2012

    by surfermom on Wed Jul 18, 2012 at 10:19:59 PM PDT

  •  thanks all for the assistance and encouragement (2+ / 0-)

    back in the AM west coast time for any follow-ups.

    s

  •  Wow! (3+ / 0-)

    A few things;

    (1) Absolutely great citizen journalism - any major media outlet would be blessed with investigative journalism of your quality.

    (2) If you want this to be followed up, but lack the resources (document access fees, support staff etc.), refer it to a show such as Rachel Maddow. Maddow is good at taking hints and tips from the public, and she's got the resources to follow-up this kind of lead.

    (3) Again, magnificent cit. journalism - hopefully, this will blow open and hit the (mostly useless) mainstream media just after the convention :)

  •  Either insider trading or conflict of interest.n/t (1+ / 0-)
    Recommended by:
    laserhaas

    So, now, every time a U.S. voter sees anything related to the Olympics, they are reminded: Romney . . . Burma . . . slave labor. Nice.

    by tomwfox on Thu Jul 19, 2012 at 05:23:13 AM PDT

  •  Amazing (2+ / 0-)
    Recommended by:
    laserhaas, Occam was an optimist

    I especially love how the merger which enriched Mitt and his friends at Mattel resulted in the loss of a thousand jobs when all was said and done. Vampires.

  •  Just saw your diary from Sun. (2+ / 0-)
    Recommended by:
    laserhaas, Occam was an optimist

    I'm glad you reposted this.  This is truly a smoking gun.

    If your facts hold up, this is the type of info that needs to go out to investigative journalists.

  •  Selection of Mitt Romney - by Utah Governor (1+ / 0-)
    Recommended by:
    Shuksan Tahoma

    More from Regional Newspaper:

    'White knight' for SLOC is Mitt Romney10 new trustees are appointed and ethics policies announced
    By Lisa Riley Roche and Alan Edwards
    Deseret News staff writers
    Published: Thursday, Feb. 11 1999

    Beginning of Mitt Romney's selection via a "flawed" process.

    The governor said Romney "could clearly be referred to as a franchise player."

    While no one is questioning the choice of Romney, concerns are being raised about the way he was selected to replace outgoing CEO Joklik. Joklik resigned last month amid the ongoing scandal surrounding Salt Lake City's bid.

    "There's a big question about the process, but we're very fortunate to have someone like Mitt," said Utah League of Cities and Towns President and SLOC board member Ken Bullock.

    [Note: Ken Bullock was reportedly no relation to Fraser Bullock, but I don't have independent confirmation of that.]
    "How do you reinforce trust of the public and the board that decisions are not dictated by a few individuals?"

    It's been no secret that the governor wanted Romney to take the job. Leavitt and SLOC Chairman Bob Garff have met several times with him in Salt Lake City, and a hastily assembled "screening" committee, as the governor put it, met with him Wednesday.

    At one time, Garff and others had said there would be a formal search for a new leader for the 2002 Winter Games. But later Garff said that would change if a "white knight" emerged.

  •  Cronyism evident in SLOC CEO selection process (1+ / 0-)
    Recommended by:
    Shuksan Tahoma

    More from Regional Newspaper:

    'White knight' for SLOC is Mitt Romney10 new trustees are appointed and ethics policies announced
    By Lisa Riley Roche and Alan Edwards
    Deseret News staff writers
    Published: Thursday, Feb. 11 1999

    There were big concerns about the SLOC CEO selection process:

    snip

    Others had been approached about the job even as negotiations were under way with Romney, including Jon Huntsman Jr.

    Huntsman, the son of billionaire industrialist Jon Huntsman, said he turned down a spot on the management committee offered by the governor because of concerns about how the new CEO was being selected.

    "If I was not able to support the process which they were employing in bringing in new leadership, I shouldn't be serving in a position like that," Huntsman said.

    He said he was willing to be considered a candidate for the top job at SLOC but learned from media reports that an effort was under way to hire Romney without a formal search.

    Indeed, the committee that was supposed to help screen candidates wasn't formed until Tuesday, after the governor and Garff had already apparently settled on Romney.

    Folks, you can't make this stuff up.

    And now we see clearly who was an insider in Utah politics.  

    It clearly wasn't Jon Huntsman.

    Utah political insiders wanted Romney for a reason.

    Utah insiders wanted Romney so badly that they rushed a decision through under a hastily assembled rubber stamp committee.

    •  The Romney/Huntsman angle has so many layers (1+ / 0-)
      Recommended by:
      Occam was an optimist

      and millions of dollars and political power involved.

      Somebody needs to take this one on exclusively.

      •  The same article ends with a Huntsman quote (0+ / 0-)

        'White knight' for SLOC is Mitt Romney10 new trustees are appointed and ethics policies announced

        By Lisa Riley Roche and Alan Edwards

        Deseret News staff writers
        Published: Thursday, Feb. 11 1999

        "A search was never fully carried out," Huntsman said. Had the effort to find a replacement for Joklik been "open, fair and honest," Huntsman said he "would have at least been willing to talk to them."

        Huntsman was in a similar position in 1997, when the decision was made to replace former SLOC President Tom Welch with Joklik without a formal search. [emphasis mine]

        So was Huntsman excluded twice?  For objecting to a flawed selection process?
  •  Primary support for 18,000,000 shares - SEC 8-K (1+ / 0-)
    Recommended by:
    Shuksan Tahoma

    Mattel's Amended SEC Form 8-K, June 9, 1999 lists the conversion rate for TLC common stock into Mattel common stock:

    Pursuant to the Merger Agreement, each outstanding share of common stock of Learning Company, $.01 par value per share ("Learning Company Common Stock"), was converted into the right to receive 1.2 shares of common stock of Mattel, $1.00 par value per share ("Mattel Common Stock").
    Starting from the diarist's tally of Bain et al. holding  15,000,000 shares of TLC [common stock] before the merger.

    15 million x 1.2 = 18 million shares

    Question: What is par value, and why is it $0.01 for TLC and $1.00 for Mattel?

    Note:  This calculation includes the assumption that all shares of preferred stock were converted into common stock and no other shares were issued to or puchased by Bain prior to the merger.

    •  Great find, this is what I asked for. (1+ / 0-)
      Recommended by:
      Occam was an optimist
      I'm missing two key pieces of information, however.   The first is a primary citation of the June 22, 1999 Bear Stearns report timestamping Lee, Bain, and Centre's Mattel ownership on that date.   That document either does, or does not exist.  If it exists, I need it.
      Well, not quite exactly, I asked for the Bear Stearns document.    But this SEC filing is two weeks prior to the Bear Stearns report and would have been Bear Stearns' source for the 18,000,000 figure.

      Excellent.

      Updating the diary with this citation.   Thanks.

  •  Bain Management as of December 12, 1997 (0+ / 0-)

    From SEC 13D December 12, 1997 (link is in the diary)

    Bain Capital Investors V, Inc. and Brookside Capital Investors, Inc.        

    Each of the following officers and managing directors of Bain Capital Investors V, Inc. and Brookside Capital Investors, Inc., is a United States citizen and is employed by Bain Capital, Inc., Two Copley Place, Boston, Massachusetts 02116.  

    Officers:      
    President and CEO
         W. Mitt Romney

    Treasurer      
         Joshua Bekenstein                                                                       Secretary                    
         Stephen D. Pagliuca

    Managing Directors:
         W. Mitt Ronney      
         Joshua Bekenstein      
         Stephen D. Pagliuca      
         Edward Conard      
         David Dominik      
         Paul B. Edgerley      
         Robert C. Gay      
         Adam Kirsch      
         Ronald P. Mika      
        Mark E. Nunnelly   [Where else have we heard this name?]  
         Geoffrey S. Rehnert      
         Robert F. White      
        Marc C. Wolpow

    Wasn't Marc Wolpow quoted in the press, circa July 1999, as having left Bain to start his own firm?  Why is he still listed as a Managing Director of Bain in December?  

    Open Question: Was it standard practice for Bain to keep listing managing directors with the SEC, after they already left the firm?

  •  Scratch the question - wrong year! Doh! (0+ / 0-)

    Wasn't Marc Wolpow quoted in the press, circa July 1999, as having left Bain to start his own firm?  Why is he still listed as a Managing Director of Bain in December?  

  •  Cronyism on the SLOC board - Romney picked for CEO (0+ / 0-)
    Utah Olympic Panel Clings To Traditional Social Order
    Hiring Of Romney As New Ceo Fails To Dull Critics' Barbs
    February 12, 1999
    By Philip Hersh,
    Chicago Tribune Olympic Sports Writer
    SALT LAKE CITY — This was to be the new beginning, the first big step toward distancing Salt Lake City from the scandal created by some of its leading citizens' actions and inaction during the successful bid for the 2002 Winter Olympics.
    ...

    Mike Leavitt proposed new rules of openness for the SLOC management that were approved by its board of trustees.
    ...

    "I would have hoped we could have risen above good old boy," said female trustee Zee Owen, a 1994 Olympic team alternate in luge, "but whether we did or not remains to be seen."
    ...

    Owen added: "Questions aren't encouraged, and other opinions aren't necessarily appreciated."
    ...

    Challenges to SLOC's operations were dismissed for years, creating the atmosphere in which former bid committee heads Tom Welch and Dave Johnson carried out an apparent bribes-for-votes relationship with two dozen International Olympic Committee members.

    ...

    SLOC Chairman Robert Garff said, [referring to Trustee Lillian Taylor] "A few people were left out of the interview process with Mitt Romney, and she came to this meeting feeling excluded. There is nothing in my past that would show I am prejudiced."

    The selection process was curious. Garff announced Tuesday that a selection committee was being formed to screen candidates. Two days later Romney, a Mormon and the son of former Michigan Gov. George Romney, emerged from a field of 42.

    [emphasis mine]

    Who is Robert Garff - Clearly an insider in GOBP of Utah Olympics - Business - Politics?
  •  New Ethics Policies - Draft rules as of March 29 (0+ / 0-)

    The SLOC Board of Trustees circulated a draft of the new ethics policies prior to their meeting on April 8, 1999.  

    I haven't yet found the approved policies, so I'll go ahead and post an excerpt of the proposed conflict-of-interest rules.

    SLOC Panel Refines Policies
    KRISTEN MOULTON
    Associated Press, AP News Archive
    Mar. 29, 1999
    SALT LAKE CITY (AP) _ A Salt Lake Organizing Committee panel is close to proposing a new conflict-of-interest and ethics code to clean up its scandal-tainted image.

    snip

    The panel was given its charge at a Feb. 11 reorganization of the SLOC in the wake of allegations that the bid committee spent $1.2 million currying favor with International Olympic Committee members who chose Salt Lake as the site of the 2002 Winter Games.

    snip

    Under the draft ethics code discussed Monday, no key employee, officer or board trustee could do business with the SLOC if the contract is worth $1 million or more and the person has an interest of 5 percent or more in the company that wants SLOC business.

    The employee or trustee would either have to quit the SLOC, divest the business interest or drop the idea of doing business with the committee.

    Those with smaller conflicts could do business with the SLOC if the conflicts are disclosed and approved. A new ethics officer would review potential conflicts amounting to $100,000 or less and the independent ethics panel would have to sign off on potential conflicts on contracts worth $100,000 to $1 million.

    The idea, said Nolan Karras, the chairman of the ad hoc panel, is that the SLOC will try to avoid doing business with companies in which trustees or employees have a stake. The ethics officer and panel will demand to know if other businesses could do the work as well.

    snip

    The new policy reaches deeper, requiring disclosure about jobs and business interests of not only spouses and children, but siblings, parents, grandparents and in-laws.

    [emphasis mine]

    So, there we have an idea of what "substantial personal benefit" means.  

    We also see what level of personal benefit required approval by an INDEPENDENT ethics officer.

    Isn't it funny how they expanded the law to include conflict of interest by extended family members, but don't seem to include conflict of interest by current or former business partners?

    Can we say Good NEW Boys Network? (Same as the Good OLD Boys Network)

    •  Thread - where is this one going? (0+ / 0-)
      Those with smaller conflicts could do business with the SLOC if the conflicts are disclosed and approved.
      OK, so the Mattel contract was worth more than a million, but Romney/Bain owned < 5% of Mattel, so the ownership state wasn't forbidden.

      It had to be disclosed and approved by an independent ethics panel.


      My hunch is that if disclosed, Mattel would have been disclosed in the summer of 1999, and would have easily been approved,  because the SLOC would have had no idea of the Bain/TLC history at that time.  

      Might Mitt have had plausible deniability?

  •  Typo? 1997/07/22 - shouldn't that be 1999? (0+ / 0-)

    In the diary.

  •  Mark E. Nunnelly was appointed to the TLC Board (0+ / 0-)

    From TLC Form SEC 13D December 12, 1997

    I think you may already have this in your diary or the prior diary, but I couldn't locate it easily so I'm putting it here.

    Effective as of December 5, 1997, Anthony J. DiNovi was appointed to the TLC Board as the representative for the Lee Purchasers and their affiliates; Mark E. Nunnelly was appointed to the TLC Board as the representative for the Bain Purchasers and their affiliates; and Paul J. Zepf was appointed to the TLC Board as the representative for the Centre Purchasers and their affiliates.
    So Mark E. Nunnelly is the Bain Capital Managing Partner on the TLC board prior to the merger with Mattell.
  •  Checking the math re Bain's stake (0+ / 0-)

    I understand your calculation of the Bain stake from the amounts of money.  I tried to calculate it independently and I got a higher number.

    From TLC SEC 13D, December 12, 1997

    % of class - # of shares* - Reporting Person

    6.60              3,414,640    W. Mitt Romney
    1.80                 897,420    Joshua Bekenstein
    0.80                 365,840    Brookside Capital Partners Fund, L.P.
    0.80                 365,840    Brookside Capital Partners, L.P.
    0.80                 365,840    Brookside Capital Investors, Inc.
    1.2                   596,940    BAIN CAPITAL FUND V, L.P.
    3.1                1,554,440    BAIN CAPITAL FUND V-B, L.P.
    4.3                2,151,380    BAIN CAPITAL INVESTORS V, INC.
    4.3                2,151,380    BAIN CAPITAL PARTNERS V, L.P.

    Totals for Bain Investors       
    23.70% of class   
    11,863,720 shares of TLC common stock

    *if all shares of preferred stock are converted to common stock.
    ----------------
    Note 1: # of shares was listed in the filing.  The conversion rate was also stated as 1 share preferred stock = 20 shares common stock

    Note 2: Group members agreed not to sell their shares through some time in 2002.

    Note 3: Using the conversion factor of 1.2 Mattel shares for each TLC share.

           11,863,720   x   1.2

           = 14,236,464 shares of Mattel common stock

    Since the Bain purchase of TLC required them to hold onto their stake for so long, might they have discovered a problem, and were stuck with a dog of a company?

    Was the Merger with Mattel the only way they could exit the TLC position?.

    •  If the Bain stake in Mattel was higher, then (0+ / 0-)

      14,236,464 shares of Mattel @ 24.14
      = $315 million

    •  I think the calculation above was not correct... (0+ / 0-)

      ...because it has double counted some of the shared voting power.

      I'm not sure how to independently arrive at the same number as the diarist, to calculate the amount of the Bain stake in the deal.

      The deal was a purchase of debt, and surrendering the debt in exchange for preferred stock.

      The seems clear from this filing that a whole group of purchasers received preferred shares equivalent to 15,000,000 shares of TLC common stock.

      Congrats again to the diarist - tracking the numbers in this deal is far from trivial!

  •  From the same 12/1997 SEC filing (0+ / 0-)
      Pursuant to a Securities Purchase Agreement dated as of
    August 26, 1997, as amended as of September 16, 1997 (the "Bain Purchase Agreement"), a copy of which is attached hereto as Exhibit B-2 and is incorporated herein by reference, by and among TLC, BCF-V, BCF-V-B, BCIP and BCIPT (BCF-V, BCF-V-B, BCIP and BCIPT are collectively referred to as the "Bain Purchasers"), TLC agreed to sell to the Bain Purchasers an aggregate of 170,732 shares of Preferred Stock in exchange for (i) the surrender of Notes in an aggregate principal amount of $34,146,400 and (ii) a cash payment by TLC to the Bain Purchasers in an aggregate amount equal to approximately $182,588. As of December 4, 1997, BCF-V assigned certain of its rights and obligations under the Bain Purchase Agreement to Brookside Fund (Brookside Fund shall hereinafter, unless the context otherwise requires, also be referred to as a Bain Purchaser). The Preferred Stock held by the Bain Purchasers is currently convertible into 3,414,640 shares of Common Stock.
    Again, 3,414,640 is 22.7% of 15,000,000 shares.
    Bain's investment share of the original TLC note was $28m of the $123m note, or 22.7%

    So again, Lee, Bain, and Centre collectively spent $123m to retire TLC's outstanding note, and then received stock proportional to their share of the $123m investment.

    Thanks for the independent review.

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