Friday, August 31, 2012

Bain Capital Takes Center Stage At Republican Convention

Mitt Romney initially launched his presidential campaign on a simple premise: During tough economic times, America needed someone who understood the economy, someone with business experience who could turn it around. Early on, Romney frequently referred to his time at Bain Capital, where he said he helped start and revive an array of companies, creating 100,000 net new jobs.

But Bain has faded fast. The company's name was barely mentioned throughout the convention, referred to obliquely as "a company" or "a great success story." Bain's relegation to anonymity was the result of attacks on the firm not just by Democrats, but by Romney's GOP primary opponents. Its reputation was further eroded by independent media reports of the private equity firm taking over companies, saddling them with debt, laying off workers, harvesting profits, and then putting them through bankruptcy, employing a business practice perhaps best explained by Tony Soprano.

The company's use of offshore tax havens has also caused the campaign trouble, as Romney admitted to National Review that the Cayman Islands entities were set up to allow foreign investors to avoid U.S. taxes.

Bain also uses sophisticated tax strategies that some experts said are legally questionable to reduce Romney and other partners' tax bills. While he claims to have nothing to do with the company, Romney told the IRS, in order to win a major tax break, that he was an active investor with Bain.

As a result, the Romney campaign has fervently tried to change the subject to anything else.

But at the Republican National Convention on Thursday, as Romney accepted his party's nomination for president, his campaign underwent a rebranding of Bain, putting Romney's tenure there front and center.

"For 30 years, I have been at Mitt Romney's side when he did extraordinary things. As Mitt says, I'm his 'wingman,'" said Bob White, chairman of the Romney-Ryan campaign. "I was there when Mitt turned around desperate situations; fixed big, broken things; and had a profoundly positive impact on people's lives. Our journey began when Mitt asked a small group of us to help him start an investment firm called Bain Capital."

Three speakers on Thursday focused their remarks on Romney's Bain experience. All attempted to portray Romney as a strong leader with integrity who will be able to save a struggling U.S. economy just as he turned around failing businesses. And Romney himself mentioned the firm by name twice, departing from the convention pattern.

"[Y]ou can imagine my dismay, when I see this White House and their campaign demonizing Mitt Romney," said Tom Stemberg, the founder of Staples, which Bain took over. "Demonizing Bain Capital. Demonizing the private equity industry that created so many new jobs. Over and over again: Fiction. Half truths. Downright lies."

Ray Fernandez, a former employee of the contact lens company Wesley Jessen, was another one of the individuals deployed on Thursday to correct "a lot of false information about Bain Capital and private equity."

"My life today is better because of Bain Capital," said Fernandez. "Mitt Romney helped turn around my company. I can't imagine anyone better prepared to turn around this country."

Fernandez added that he was "well rewarded" when the Wesley Jessen later sold stock to the public.

Romney was still at Bain when it purchased the company in 1994, though he spent most of that year running against Ted Kennedy for Senate.

But when Bain sold Wesley in 2001 -- the move that led to Fernandez's payout -- Romney was supposedly retired from the company, an example of Romney taking credit for Bain accomplishments after 1999, while declining to take responsibility for any of its controversial business practices.

In February 2000, Romney signed documents related to a deal with Wesley, which The Huffington Post previously cited in making the case that he did not actually leave the company in 1999.

Bain bought Wesley for $6 million and sold it for $300 million.

The Romney campaign also launched a new website on Thursday around its Bain campaign, called, referencing a remark by former President Bill Clinton praising Romney's Bain background.

The site features a number of video testimonials from employees at Bain-owned companies, including Fernandez.

Romney's return to Bain also aims to highlight his support of small businesses and entrepreneurs who take risks to create jobs. But there was little risk for Romney.

According to advance excerpts of his speech on Thursday, Romney planned to tell the story of the rise of his firm. "When I was 37, I helped start a small company," he said. "My partners and I had been working for a company that was in the business of helping other businesses. So some of us had this idea that if we really believed our advice was helping companies, we should invest in companies. We should bet on ourselves and on our advice. That business we started with 10 people has now grown into a great American success story."

In her speech Tuesday, Ann Romney also played up the company's small-time roots. "I was there when he and a small group of friends talked about starting a new company. I was there when they struggled and wondered if the whole idea just wasn't going to work. Mitt's reaction was to work harder and press on," she said.

But there was little to worry about. For their book "The Real Romney," Boston Globereporters Michael Kranish and Scott Helman interviewed Bill Bain, the founder of Bain & Co., who asked Romney to head Bain Capital. The story he tells couldn't be more different than Mitt and Ann Romney's.

From "The Real Romney:"

He saw the opportunity, of course, but he also saw risks. First, he felt comfortable in his life. He already had a great job and had five young sons at home. Second, he and the partners in the new firm would be expected to contribute significantly to the investment fund, and thus, if deals went south, they could lose their own money. Romney explained to Bain that he didn't want to risk his position, earnings, and reputation on an experiment. He found the offer appealing but didn't want to make the decision in a "light or flippant manner." So Bain sweetened the pot. He guaranteed that if the experiment failed, Romney would get his old job and salary back, plus any raises he would have earned during his absence. Still, Romney worried about the impact on his reputation if he proved unable to do the job. Again the pot was sweetened. Bain promised that, if necessary, he would craft a cover story saying that Romney's return to Bain & Company was needed because of his value as a consultant. "So," Bain explained, "there was no professional or financial risk." This time Romney said yes.

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