by George Burns
This is the second in a series of articles that examine the verifiable facts developed by the University of Pennsylvania's non-partisan Annenberg Public Policy Center (APPC) regarding charges and counter-charges made by campaigns of the two major candidates for president. In this article we explore the charges made by President Obama's campaign that while at Bain Capital Mr. Romney was engaged in corporate raiding practices and as the head of Bain and Governor of Massachusetts he shipped American jobs overseas. Following the APPC 29 June 2012 article, Obama's 'Outsourcer' Overreach, the Obama campaign charged APPC with having their facts wrong. APPC rebutted the charge.
The first APPC article on this subject was published 29 June 2012. The Obama campaign produced a rebuttal. On 2 July 2012 APPC rebutted their rebuttal.
Quotes herein are lifted from the articles identified at the end of this paper.
APPC's 29 June 2012 article:
APPC opens their article with this statement: "Obama accuses Romney in a series of TV ads of being a 'corporate raider' who 'shipped jobs to China and Mexico,' asking if voters want to elect an 'outsourcer in chief.' But some of the claims in the ads are untrue, and others are thinly supported."
Bain Capital, the venture capital firm founded by Romney in 1984, is the focus of Obama campaign attacks. There is no question that Bain invested in some companies that helped other companies outsource work and that some of that work went overseas. For example, that was the core business for Modus Media and SMTC Corp. — two outsource companies featured in a June 21 article in the Washington Post are the basis for these and other Obama TV ads. Bain also invested in US-based companies that sold goods manufactured here and abroad, and some of those companies closed US facilities and eliminated US jobs.
APPC reviewed "numerous corporate filings with the Securities and Exchange Commission, contemporary news accounts, company histories and press releases, and the evidence offered by both the Obama and Romney campaigns, we found no evidence to support the claim that Romney — while he was still running Bain Capital — shipped American jobs overseas." APPC adds:
APPC addresses misleading assertions associated with outsourcing vs. off-shoring. A "Reveal" ad the Obama campaign is running in Virginia and Iowa "asks if those states 'really want an outsourcer in chief in the White House.'” The ad charges that
"Companies can outsource services to another company, but the outsourcing services can be done at different locations still in the United States. Or they can be done overseas to cater to international customers, which isn’t the same as shipping otherwise American jobs overseas." To illustrate the point APPC cites a Washington Post article misused by the Obama campaign. As the article notes, "Bain Capital purchased a stake in the Massachusetts-based Corporate Software Inc. (CSI) in 1993. CSI did outsourcing of customer support — including call center assistance — for companies like Microsoft and Pfizer. But outsourcing doesn’t always mean off-shoring. For example, in 1992, the pharmaceutical giant Pfizer turned to CSI for 'on-site and remote PC software support services.' According to a 1993 press released from Pfizer (accessed via Nexis), those services were provided to Pfizer from locations in New York City and outside Boston. On March 20, 1994, the Boston Globe reported that CSI was 'hiring by the hundreds,' with most of the jobs based in Massachusetts. It’s also true that CSI was setting up overseas call centers. But in the case of the work it was doing for Microsoft, for example, those overseas centers were intended to assist Microsoft’s multinational customers, according to a Microsoft press release in 1993 (accessed via Nexis)."
Former president of Stream International, Scott Murry, one of the companies Bain Capital supported that dealt with outsourcing and off-shoring, provides this insight: "By the time Romney left Bain, Stream’s call centers had grown from just a few hundred people in Massachusetts to approximately 5,000 employees across the United States. Stream was not ‘shipping jobs overseas,’ but creating thousands of jobs for American workers in places like Massachusetts, Oregon, Tennessee, and Texas. Stream’s international operations served foreign clients in their local languages across Europe. … If you called Microsoft or Dell from the United States for technical support, we answered the phones from one of our locations in the United States. If you called Microsoft, for instance, in French from France, we answered your call in France.
Multinational companies often provide some support services in the regions of the world to which they are exporting. That’s not the same as shipping American jobs overseas."
APPC investigated the Obama Campaign charge in various ads that Romney, as Governor of Massachusetts, outsourced state jobs to India. They found that charge to be completely untrue. Instead, it was a contractor hired by the state whose subcontractor outsourced work. At the center of the issue was a contract the state signed with CitiGroup (which later sold the division to JP Morgan Chase) to handle calls about food stamps, and that company outsourced the work to a company in India. At the time, 38 states had similar contracts with JP Morgan Chase to handle food stamp calls. It became an issue everywhere, and Ohio Rep. Marcy Kaptur called for federal legislation to ban it. When the Massachusetts contract was up, the state Department of Transitional Assistance required work to be done in the U.S. It hired another firm that handled the calls from Utah, so the practice ultimately ended, but Massachusetts didn’t get the jobs."
Another charge often levied by the Obama campaign is that Romney was a corporate raider. This, too, is incorrect. APPC provides these relevant insightse. "We have written extensively about Bain Capital’s modus operandi with Romney at the helm. And we have documented instances in which Bain enriched itself and its investors with hefty fees and dividend payments that left companies heavily in debt and vulnerable to bankruptcy. The New York Times on June 22 found that in some cases, even when companies went bankrupt and hundreds of employees got laid off, Bain managed to make money on its investments. But that doesn’t make Romney a corporate raider, which has a specific meaning in the business world. According to the Oxford English Dictionary, a corporate raider is 'one who mounts an unwelcome takeover bid by buying up shares (usu. discreetly) on the stock market.' Specifically, several financial experts told us, corporate raiders are those who lead hostile takeovers of public companies by snapping up publicly traded stock. With Bain Capital, the private investments in companies came at the request of company officials. Mitt Romney ran one of the most successful venture/private equity firms, Howard Anderson, a professor at MIT’s Sloan School of Management, told us. 'In some cases, they built terrific companies – like Staples, like Sports Authority. Often they would go into a company and attempt to improve operations — which sometimes meant selling assets and sometimes moving operations. They didn’t always succeed, but their record from 1985 to 1999 was that they returned 88% each year on their fund, one terrific record. They were not raiders. They came in only with the assent and aid of management — they were invited in.'" APPC adds that "Multinational companies often provide some support services in the regions of the world to which they are exporting. That’s not the same as shipping American jobs overseas."
APPC documents similar inaccuracies/baseless claims in other Obama campaign ads. Interested readers can review details in the Fact Check links at the end of this article. It should be noted that ACCP is non-partisan while both the Obama and Romney campaigns are partisan.
The Obama Campaign Rebuttal to the ACCP 29 June 2012 Fact Check Article. What follows is the entire rebuttal letter the Obama Campaign provided ACCP and others.
Mr. Brooks Jackson
Mr. Eugene Kiely
Factcheck.org
Dear Sirs:
We are writing in reply to your recent post, "Obama’s Outsource Overreach" (June 29).
We disagree, as you would expect, with your conclusions, but there is one particular "fact" that you cite repeatedly that is not a fact at all, not by any fair reading of the record, and yet it appears to be central to your position. This is your assessment that Mitt Romney surrendered active management of Bain Capital--that he "left Bain"--in February 1999 to run the Salt Lake City Olympics.
For example, you state:
"Two electronic outsource manufacturing services companies controlled by Bain Capital closed plants in the U.S. and moved work to Mexico. But Romney had left Bain more than a year before the plants closed at both companies."
You also note: "Modus Media’s announcement that it would close its plant in Fremont, Calif., in September and open a plant in Guadalajara, Mexico…But the announcement of the Modus Media plant closing occurred more than a year after Romney had left Bain."
Regarding SMTC, you cite an SEC report: "In June 2001, we closed our assembly facility in Denver, Colorado. … Production at the Denver facility … has been migrated to SMTC facilities closer to locations and to our recently retrofitted and expanded lower cost Chihuahua, Mexico facility." "But, again, Romney did not work at Bain in 2001." And overall you state that "there’s no evidence that he took any active role in Bain’s decisions after he left in February 1999."
This is simply incorrect. Consider:
(1) What Romney said in this period:
According to a Boston Herald interview with Romney at the time, "Romney said he will stay on as a part-timer with Bain, providing input on investment and key personnel decisions." ("Romney looks to restore Olympic Pride" Boston Herald 2/12/1999)
When Romney did finally surrender control in mid-2001, the Salt Lake Tribune reported the following: "In so, he gave up control over all of Bain Capital’s voting stock,
dividing the shares between the two dozen directors. The divestiture had no financial ramifications, Romney said, affecting only the management and control of the company." ("Romney Plans to Pursue Public Service" Salt Lake Tribune 8/21/2001). In other words, prior to 2001, Romney exercised control and participated in management--just as he said he would do in 1999.
(2) Interviews with Romney's wife and his lawyer regarding this period:
In a Boston Globe interview with Ann Romney from November 2000 the reporter learned that Mitt Romney was dividing his time between running Bain and running the Olympics project. "The [Olympics] project is running smoothly now, though still requiring so much of Mitt Romney's time that he has had to lessen his involvement with Bain Capital, his investment firm." ("West Wings Sprout," Boston Globe 11/11/2000). Please note: not end his involvement with Bain, but "lessen it"-precisely as Romney acknowledged in shifting to part-time management involvement in l999.
Romney’s own personal lawyer as stated that he only became a passive investor in Bain in August of 2001: "[Bradley] Malt, who was designated by the campaign to address Romney’s time at Bain, said Romney finally resigned and reduced his role at the company to that of a passive investor in 2001 when it became clear that he was going to run for Massachusetts governor after the Olympics." ("Cash, Advice on Tap at Romney’s Old Firm" Washington Post 10/21/2007)
(3) How Romney was compensated from 1999-2001:
In addition to being CEO and owner of Bain in 2001, Romney filed financial disclosures with the state of Massachusetts in 2002 and 2003 stating that for the calendar years 2001 and 2002, he received over $100,000 from Bain Capital Inc. in connection with his position as an executive, and another $100,000-plus in income in 2001 and 2002 from Bain Capital LLC in connection with his position as an executive of that management entity. These are listed alongside his Olympics salary under the Employment category. These documents may be downloaded from the website http://romneyfacts.com In other words, these sums represented compensation for service, not the profits from the investment funds which are listed separately on the filings.
(4) What filings with the Securities and Exchange Commission show:
According to the SEC database, there are at least 63 filings with that agency after March 1, 1999 that list various Bain entities and describe them as "wholly owned by W. Mitt Romney."
Here is a sampling of what these filings show:
Stats Chippac
Jan. 25, 2002.
"Most of our materials suppliers are located in Asia. Historically, over half of our substrate costs were incurred from the purchase of materials from Japanese suppliers. In the future, we expect that a growing portion of these materials will be supplied by sources in Korea and Taiwan."
The same filing lists Bain stockholdings:
…(a) 16,303,749 shares of Class A common stock owned by Bain Capital Fund VI, L.P., whose sole general partner is Bain Capital Partners VI, L.P., whose sole general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (b) 2,181,587 shares of Class A common stock owned by BCIP Associates II, whose managing general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (c) 398,580 shares of Class A common stock owned by BCIP Associates II-B, whose managing general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (d) 757,406 shares of Class A common stock owned by BCIP Trust Associates II, L.P., whose managing general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (e) 195,878 shares of Class A common stock owned by BCIP Trust Associates II-B, whose managing general partner is Bain Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (f) 847,004 shares of Class A common stock owned by BCIP Associates II-C, whose managing general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney;
SMTC
Feb. 13, 2001
Summary of Bain investments via Bain Capital Fund VI:
Bain Capital Partners VI, L.P., a Delaware limited partnership ("Bain Partners VI"), is the sole general partner of Fund VI. Bain Capital Investors VI, Inc., a Delaware corporation ("Bain Investors VI"), is the sole general partner of Bain Partners VI. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Investors VI and thus is the controlling person of Bain Investors VI. Bain Capital, Inc., a Delaware corporation ("Bain Capital"), is the sole managing partner of the BCIP Entities. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Capital and thus is the controlling person of Bain Capital.
Bain Capital V Mezzanine Partners, L.P., a Delaware limited partnership ("Bain Partners V") is the sole general partner of the Mezzanine Fund and BCM. Bain Capital Investors V, Inc., a Delaware corporation ("Bain Investors V") is the sole general partner of Bain Partners V. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Investors V and thus is the controlling person of Bain Investors V. Sankaty High Yield Asset Investors, LLC, a Delaware limited liability company ("Sankaty Investors"), is the sole general partner of the Sankaty Fund. Sankaty High Yield Asset Investors, Ltd., a Bermuda corporation ("Sankaty Ltd."), is the managing member of Sankaty Investors. Mr. W. Mitt Romney is the sole shareholder, a director and President of Sankaty Ltd. and thus is the controlling person of Sankaty, Ltd.
Modus Media
March 14, 2000
Summary of Bain stockholdings:
Consists of (i) 1,913,652 shares of Common Stock held by Bain Capital Fund IV, L.P., whose sole general partner is Bain Capital Partners IV, L.P., whose sole general partner is Bain Capital Investors, Inc., a Delaware corporation wholly owned by W. Mitt Romney, (ii) 2,189,986 shares of Common Stock owned by Bain Capital Fund IV-B, L.P., whose sole general partner is Bain Capital Partners IV, L.P., whose sole general partner is Bain Capital Investors, Inc., a Delaware corporation wholly owned by W. Mitt Romney, (iii) 2,042,670 shares of Common Stock held by Information Partners Capital Fund, L.P., whose general partner is Information Partners, a Massachusetts General Partnership, and whose managing general partner is Bain Capital Partners IV, L.P., the sole general partner of which is Bain Capital Investors, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (iv) 287,028 shares of Common Stock held by BCIP Associates, a Delaware general partnership of which W. Mitt Romney is a general partner and member of the management committee; (v) 170,440 shares of Common Stock held by BCIP Trust Associates, L.P., a Delaware limited partnership of which W. Mitt Romney is a general partner and member of the management committee; and (vi)3,445,028 shares of non-voting Common Stock held by Bain Capital Partners V, L.P., whose sole general partner is Bain Capital Investors V, Inc., a Delaware corporation wholly owned by W. Mitt Romney.
The language used in these filings leaves no room for any ambiguity. For example, Bain Capital’s in-house hedge fund, Brookside, supplied the following language to companies in which it invested for their filings with the SEC: "Mr. W. Mitt Romney is the sole shareholder, sole director, President and Chief Executive Officer of Brookside Inc. and thus is the controlling person of Brookside Inc."
By our count, this description of Romney’s control of Brookside was filed with the SEC a total of 33 times after March 1, 1999 and was listed as having "wholly owned" Brookside as of its own quarterly filing on May 14, 2001. Copies of these filings are available at your request.
Statements such as these in these filings end in 2001--just as a reader would expect after reviewing the full record, including what Romney, his wife and his lawyer said on the subject.
In sum, the statement that Gov. Romney "left" Bain in February 1999--a statement central to your fact-check-- is not accurate. Romney took an informal leave of absence but remained in full legal control of Bain and continued to be paid by Bain as such. Governor Romney would have the period of Bain service understood differently, for the obvious reason that there is much in this l999-2002 period that he would prefer to avoid accountability for.
Finally, in addition to the wealth of support for the proposition that Romney participated in management and exercised control of Bain until 2001, there is also the matter of his other continued and significant ties to Bain even after he ended his active management role. His lawyer who was also a lawyer for and investor in Bain ran Governor Romney's not-so-blind trust that has held extensive interests in Bain, including "carried" or profits interests normally paid only to those active in the management of a private equity fund. This deep and continued relationship hardly squares with the suggestion that the Governor "left Bain" in l999.
What we have set out here on Romney's ties to Bain from l999-2001 and beyond is not an interpretation or claim or speculative assertion. Others have come to the same conclusion on these facts. On Friday, The Wall Street Journal reported the following:
"The Romney camp says some of the cases cited by the Obama team aren't valid because Mr. Romney relinquished day-to-day control of Bain in 1999 to prepare to run the 2002 Winter Olympics in Salt Lake City, Utah. But documents filed with the Securities and Exchange Commission and the state of Massachusetts show that he still had ties to the company as late as 2002, and he continues to report income from the firm years after his departure, including more than $2 million in the past year, according to financial disclosures filed with the Federal Election Commission."
("The Murky Calculus of Job Exports")
And in 2007, five years ago, the Washington Post reported the relevant facts as follows:
In his autobiography, Romney wrote that he severed ties with Bain in 1999 when he took the Olympic job and told his partners he wasn't coming back. But R. Bradford Malt, one of Bain's lawyers, who now manages Romney's personal
finances, said Romney took a leave of absence, "partly because of the speed it all happened and partly because it was a limited gig." That meant Romney retained full, sole ownership of the firm for two more years as he worked on the Olympics.
Malt, who was designated by the campaign to address Romney's time at Bain, said Romney finally resigned and reduced his role at the company to that of a passive investor in 2001 when it became clear that he was going to run for Massachusetts governor after the Olympics. The campaign declined to comment further.
In light of this record, we ask that you make whatever corrections, clarifications or revisions are appropriate. At a minimum, we ask that a copy of this letter be posted prominently along with your Outsource overreach report, enabling the readers you serve to drawn their own conclusions.
Stephanie Cutter
Deputy Campaign Manager
Obama for America
APPC's 2 July 2012 article (Rebuttal of the Obama Campaign Letter) :
In its rebuttal APPC stated that "We find the Obama campaign’s evidence to be weak or non-existent, and contrary to statements Romney has made on official disclosure forms under pain of federal prosecution." The Obama charge is that Romney did not give up active management of Bain Capital in February 1999 when he departed to run the 2002 Winter Olympics. Therefore, they claim, he was involved in decisions which resulted in shipping jobs overseas. APPC states that "In fact, if the Obama campaign were correct, Romney would be guilty of a federal felony by certifying on federal financial disclosure forms that he left active management of Bain Capital in February 1999." APPC continues "The Obama campaign’s recent ads thus mislead when they point to investments made by Bain, as well as management decisions made by companies in which Bain invested, after that time...In a nutshell, the Obama campaign is all wet on this point." APPC confirmed this point by "re-checked with Bain spokesman Alex Stanton, who released a statement about Romney’s departure date. Mr. Stanton told APPC that "Mitt Romney retired from Bain Capital in February 1999. He has had no involvement in the management or investment activities of Bain Capital, or with any of its portfolio companies since that time."
Obama's campaign rebuttal according to APPC has "Very little [evidence] and none of it convincing in our judgement." Filings with the SEC following Romney's departure list various entities with Bain and even states that Bain remained "wholly owned by W. Mitt Romney." While Romney remained the owner of Bain there is no evidence whatever that he was in any way involved in Bain decision-making after 1 March 1999. SEC documents affirm this fact. To bolster their claim to the contrary, Obama relies on a few news snippets that upon "a close reading shows these news accounts don't contradict Romney either." According to APPC the Obama campaign simply ignores Romney’s stated intent to “leave running day-to-day operations” to others. Indeed, it was later confirmed that he had no time to devote to Bain. "According to an Associated Press story that ran just two months later, Romney quickly discovered that he was working 16-hour days on the Olympics, leaving no time for Bain (or even his own wedding anniversary). The 4 April 1999 AP story (which we retrieved from the Nexis database) began this way."
Another example of weak Obama campaign' evidence charging Romney with retaining an active role in Bain management after Feb 1999 is derived from a "Salt Lake Tribune story from the time Romney left the Olympics to run for governor of Massachusetts. The campaign quotes Romney as saying he was then giving up control of all Bain’s voting stock, and paraphrases Romney as saying that the divestiture affected “only the management and control of the company.” ACCP affirms the truth of that statement but adds that "it’s not evidence that Romney had been running the company, even on a part-time basis. A full reading of the article makes clear that Romney said he did not intend to 'resume' his management duties, and wanted to let his partners know that they would not have to “move over one office” to make room for him." The Tribune further stated that he gave up control over all of Bain Capital’s voting stock, dividing the shares between the two dozen directors. The divestiture had no financial ramifications, Romney said, affecting only the management and control of the company."
It is our collective misfortune that political candidates and their surrogates resort to distortions, half truths or outright lies to win elections. Unfortunately this happens at all levels; local, state and federal. Seeking office by knowingly misrepresenting facts about oneself or one's opponents is reprehensible. The voting public deserves the truth. Candidates who win using dishonest tactics do not deserve our vote because if they are willing to be dishonest while seeking office rest assured, as has been demonstrated over and over again, they will be dishonest while in office. It is, therefore, vital that we listen, but verify what candidates (and their surrogates) say and vote based on facts rather than crafty words uttered by politicians.
Sources:
http://factcheck.org/2012/06/obamas-outsourcer-overreach/
http://factcheck.org/2012/07/factcheck-to-obama-camp-your-complaint-is-all-wet/
This is the second in a series of articles that examine the verifiable facts developed by the University of Pennsylvania's non-partisan Annenberg Public Policy Center (APPC) regarding charges and counter-charges made by campaigns of the two major candidates for president. In this article we explore the charges made by President Obama's campaign that while at Bain Capital Mr. Romney was engaged in corporate raiding practices and as the head of Bain and Governor of Massachusetts he shipped American jobs overseas. Following the APPC 29 June 2012 article, Obama's 'Outsourcer' Overreach, the Obama campaign charged APPC with having their facts wrong. APPC rebutted the charge.
The first APPC article on this subject was published 29 June 2012. The Obama campaign produced a rebuttal. On 2 July 2012 APPC rebutted their rebuttal.
Quotes herein are lifted from the articles identified at the end of this paper.
APPC's 29 June 2012 article:
APPC opens their article with this statement: "Obama accuses Romney in a series of TV ads of being a 'corporate raider' who 'shipped jobs to China and Mexico,' asking if voters want to elect an 'outsourcer in chief.' But some of the claims in the ads are untrue, and others are thinly supported."
Bain Capital, the venture capital firm founded by Romney in 1984, is the focus of Obama campaign attacks. There is no question that Bain invested in some companies that helped other companies outsource work and that some of that work went overseas. For example, that was the core business for Modus Media and SMTC Corp. — two outsource companies featured in a June 21 article in the Washington Post are the basis for these and other Obama TV ads. Bain also invested in US-based companies that sold goods manufactured here and abroad, and some of those companies closed US facilities and eliminated US jobs.
APPC reviewed "numerous corporate filings with the Securities and Exchange Commission, contemporary news accounts, company histories and press releases, and the evidence offered by both the Obama and Romney campaigns, we found no evidence to support the claim that Romney — while he was still running Bain Capital — shipped American jobs overseas." APPC adds:
- "One TV ad, called 'Come and Go,' claims that Romney 'shipped jobs to China and Mexico.' But two examples cited by the Obama campaign occurred after Romney left Bain. There’s no clear evidence that a third company shipped jobs to China under Romney.
- A second ad called 'Revealed' mocks Romney’s tough talk about cracking down on China’s trade practices by saying 'all he’s ever done is send them our jobs' and citing the Washington Post article. But the newspaper article contained no examples of U.S. jobs being shipped to China while Romney was working at Bain.
- The 'Come and Go' ad casts Romney as a 'corporate raider,' but that term, loaded with negative connotations, is simply inaccurate. Bain didn’t engage in hostile takeovers when Romney was at the helm.
- That ad also repeats the claim that as governor of Massachusetts,
Romney was 'outsourcing state jobs to India.' But it wasn’t the state
that outsourced contracts." It was a company with a state contract who
subcontracted to a company that outsourced jobs.
These Obama ads charge that Romney outsourced jobs overseas without producing any credible evidence. APPC reminded them that "It is incumbent upon the Obama campaign to back up its claims." APPC points out that in tiny type at the bottom of the screen the "Come and Go" ad "cites three sources for the statement that 'he shipped jobs to China and Mexico.' But all of them fail to support the claim that Romney was personally responsible for sending U.S. jobs to those countries." It is true that "Two electronic outsource manufacturing services companies controlled by Bain Capital closed plants in the U.S. and moved work to Mexico." It is also true that "A picture frame company with operations in the Far East, including in China, closed a plant in South Carolina. The Obama campaign cites the plant closing, but those workers were manufacturing photo albums for professionals — a line of work that the company discontinued because it was such a small part of the business." In the first two cases Romney had left Bain more than a year before the plants closed. In the case of the picture frame company APPC admits it is a bit more complex but notes that "The fact is we don’t know whether the company’s outsourcing to China increased under Bain or decreased and, more important, we don’t know if that outsourcing came at the expense of U.S. jobs. The Obama campaign doesn’t know, either." So, the charges in the first two cases are untrue and neither the Obama campaign nor APPC can confirm or deny the facts in the latter case.
APPC addresses misleading assertions associated with outsourcing vs. off-shoring. A "Reveal" ad the Obama campaign is running in Virginia and Iowa "asks if those states 'really want an outsourcer in chief in the White House.'” The ad charges that
"Companies can outsource services to another company, but the outsourcing services can be done at different locations still in the United States. Or they can be done overseas to cater to international customers, which isn’t the same as shipping otherwise American jobs overseas." To illustrate the point APPC cites a Washington Post article misused by the Obama campaign. As the article notes, "Bain Capital purchased a stake in the Massachusetts-based Corporate Software Inc. (CSI) in 1993. CSI did outsourcing of customer support — including call center assistance — for companies like Microsoft and Pfizer. But outsourcing doesn’t always mean off-shoring. For example, in 1992, the pharmaceutical giant Pfizer turned to CSI for 'on-site and remote PC software support services.' According to a 1993 press released from Pfizer (accessed via Nexis), those services were provided to Pfizer from locations in New York City and outside Boston. On March 20, 1994, the Boston Globe reported that CSI was 'hiring by the hundreds,' with most of the jobs based in Massachusetts. It’s also true that CSI was setting up overseas call centers. But in the case of the work it was doing for Microsoft, for example, those overseas centers were intended to assist Microsoft’s multinational customers, according to a Microsoft press release in 1993 (accessed via Nexis)."
Former president of Stream International, Scott Murry, one of the companies Bain Capital supported that dealt with outsourcing and off-shoring, provides this insight: "By the time Romney left Bain, Stream’s call centers had grown from just a few hundred people in Massachusetts to approximately 5,000 employees across the United States. Stream was not ‘shipping jobs overseas,’ but creating thousands of jobs for American workers in places like Massachusetts, Oregon, Tennessee, and Texas. Stream’s international operations served foreign clients in their local languages across Europe. … If you called Microsoft or Dell from the United States for technical support, we answered the phones from one of our locations in the United States. If you called Microsoft, for instance, in French from France, we answered your call in France.
Multinational companies often provide some support services in the regions of the world to which they are exporting. That’s not the same as shipping American jobs overseas."
APPC investigated the Obama Campaign charge in various ads that Romney, as Governor of Massachusetts, outsourced state jobs to India. They found that charge to be completely untrue. Instead, it was a contractor hired by the state whose subcontractor outsourced work. At the center of the issue was a contract the state signed with CitiGroup (which later sold the division to JP Morgan Chase) to handle calls about food stamps, and that company outsourced the work to a company in India. At the time, 38 states had similar contracts with JP Morgan Chase to handle food stamp calls. It became an issue everywhere, and Ohio Rep. Marcy Kaptur called for federal legislation to ban it. When the Massachusetts contract was up, the state Department of Transitional Assistance required work to be done in the U.S. It hired another firm that handled the calls from Utah, so the practice ultimately ended, but Massachusetts didn’t get the jobs."
Another charge often levied by the Obama campaign is that Romney was a corporate raider. This, too, is incorrect. APPC provides these relevant insightse. "We have written extensively about Bain Capital’s modus operandi with Romney at the helm. And we have documented instances in which Bain enriched itself and its investors with hefty fees and dividend payments that left companies heavily in debt and vulnerable to bankruptcy. The New York Times on June 22 found that in some cases, even when companies went bankrupt and hundreds of employees got laid off, Bain managed to make money on its investments. But that doesn’t make Romney a corporate raider, which has a specific meaning in the business world. According to the Oxford English Dictionary, a corporate raider is 'one who mounts an unwelcome takeover bid by buying up shares (usu. discreetly) on the stock market.' Specifically, several financial experts told us, corporate raiders are those who lead hostile takeovers of public companies by snapping up publicly traded stock. With Bain Capital, the private investments in companies came at the request of company officials. Mitt Romney ran one of the most successful venture/private equity firms, Howard Anderson, a professor at MIT’s Sloan School of Management, told us. 'In some cases, they built terrific companies – like Staples, like Sports Authority. Often they would go into a company and attempt to improve operations — which sometimes meant selling assets and sometimes moving operations. They didn’t always succeed, but their record from 1985 to 1999 was that they returned 88% each year on their fund, one terrific record. They were not raiders. They came in only with the assent and aid of management — they were invited in.'" APPC adds that "Multinational companies often provide some support services in the regions of the world to which they are exporting. That’s not the same as shipping American jobs overseas."
APPC documents similar inaccuracies/baseless claims in other Obama campaign ads. Interested readers can review details in the Fact Check links at the end of this article. It should be noted that ACCP is non-partisan while both the Obama and Romney campaigns are partisan.
The Obama Campaign Rebuttal to the ACCP 29 June 2012 Fact Check Article. What follows is the entire rebuttal letter the Obama Campaign provided ACCP and others.
Mr. Brooks Jackson
Mr. Eugene Kiely
Factcheck.org
Dear Sirs:
We are writing in reply to your recent post, "Obama’s Outsource Overreach" (June 29).
We disagree, as you would expect, with your conclusions, but there is one particular "fact" that you cite repeatedly that is not a fact at all, not by any fair reading of the record, and yet it appears to be central to your position. This is your assessment that Mitt Romney surrendered active management of Bain Capital--that he "left Bain"--in February 1999 to run the Salt Lake City Olympics.
For example, you state:
"Two electronic outsource manufacturing services companies controlled by Bain Capital closed plants in the U.S. and moved work to Mexico. But Romney had left Bain more than a year before the plants closed at both companies."
You also note: "Modus Media’s announcement that it would close its plant in Fremont, Calif., in September and open a plant in Guadalajara, Mexico…But the announcement of the Modus Media plant closing occurred more than a year after Romney had left Bain."
Regarding SMTC, you cite an SEC report: "In June 2001, we closed our assembly facility in Denver, Colorado. … Production at the Denver facility … has been migrated to SMTC facilities closer to locations and to our recently retrofitted and expanded lower cost Chihuahua, Mexico facility." "But, again, Romney did not work at Bain in 2001." And overall you state that "there’s no evidence that he took any active role in Bain’s decisions after he left in February 1999."
This is simply incorrect. Consider:
(1) What Romney said in this period:
According to a Boston Herald interview with Romney at the time, "Romney said he will stay on as a part-timer with Bain, providing input on investment and key personnel decisions." ("Romney looks to restore Olympic Pride" Boston Herald 2/12/1999)
When Romney did finally surrender control in mid-2001, the Salt Lake Tribune reported the following: "In so, he gave up control over all of Bain Capital’s voting stock,
dividing the shares between the two dozen directors. The divestiture had no financial ramifications, Romney said, affecting only the management and control of the company." ("Romney Plans to Pursue Public Service" Salt Lake Tribune 8/21/2001). In other words, prior to 2001, Romney exercised control and participated in management--just as he said he would do in 1999.
(2) Interviews with Romney's wife and his lawyer regarding this period:
In a Boston Globe interview with Ann Romney from November 2000 the reporter learned that Mitt Romney was dividing his time between running Bain and running the Olympics project. "The [Olympics] project is running smoothly now, though still requiring so much of Mitt Romney's time that he has had to lessen his involvement with Bain Capital, his investment firm." ("West Wings Sprout," Boston Globe 11/11/2000). Please note: not end his involvement with Bain, but "lessen it"-precisely as Romney acknowledged in shifting to part-time management involvement in l999.
Romney’s own personal lawyer as stated that he only became a passive investor in Bain in August of 2001: "[Bradley] Malt, who was designated by the campaign to address Romney’s time at Bain, said Romney finally resigned and reduced his role at the company to that of a passive investor in 2001 when it became clear that he was going to run for Massachusetts governor after the Olympics." ("Cash, Advice on Tap at Romney’s Old Firm" Washington Post 10/21/2007)
(3) How Romney was compensated from 1999-2001:
In addition to being CEO and owner of Bain in 2001, Romney filed financial disclosures with the state of Massachusetts in 2002 and 2003 stating that for the calendar years 2001 and 2002, he received over $100,000 from Bain Capital Inc. in connection with his position as an executive, and another $100,000-plus in income in 2001 and 2002 from Bain Capital LLC in connection with his position as an executive of that management entity. These are listed alongside his Olympics salary under the Employment category. These documents may be downloaded from the website http://romneyfacts.com In other words, these sums represented compensation for service, not the profits from the investment funds which are listed separately on the filings.
(4) What filings with the Securities and Exchange Commission show:
According to the SEC database, there are at least 63 filings with that agency after March 1, 1999 that list various Bain entities and describe them as "wholly owned by W. Mitt Romney."
Here is a sampling of what these filings show:
Stats Chippac
Jan. 25, 2002.
"Most of our materials suppliers are located in Asia. Historically, over half of our substrate costs were incurred from the purchase of materials from Japanese suppliers. In the future, we expect that a growing portion of these materials will be supplied by sources in Korea and Taiwan."
The same filing lists Bain stockholdings:
…(a) 16,303,749 shares of Class A common stock owned by Bain Capital Fund VI, L.P., whose sole general partner is Bain Capital Partners VI, L.P., whose sole general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (b) 2,181,587 shares of Class A common stock owned by BCIP Associates II, whose managing general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (c) 398,580 shares of Class A common stock owned by BCIP Associates II-B, whose managing general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (d) 757,406 shares of Class A common stock owned by BCIP Trust Associates II, L.P., whose managing general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (e) 195,878 shares of Class A common stock owned by BCIP Trust Associates II-B, whose managing general partner is Bain Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney; (f) 847,004 shares of Class A common stock owned by BCIP Associates II-C, whose managing general partner is Bain Capital Investors, LLC, a Delaware limited liability company wholly owned by W. Mitt Romney;
SMTC
Feb. 13, 2001
Summary of Bain investments via Bain Capital Fund VI:
Bain Capital Partners VI, L.P., a Delaware limited partnership ("Bain Partners VI"), is the sole general partner of Fund VI. Bain Capital Investors VI, Inc., a Delaware corporation ("Bain Investors VI"), is the sole general partner of Bain Partners VI. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Investors VI and thus is the controlling person of Bain Investors VI. Bain Capital, Inc., a Delaware corporation ("Bain Capital"), is the sole managing partner of the BCIP Entities. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Capital and thus is the controlling person of Bain Capital.
Bain Capital V Mezzanine Partners, L.P., a Delaware limited partnership ("Bain Partners V") is the sole general partner of the Mezzanine Fund and BCM. Bain Capital Investors V, Inc., a Delaware corporation ("Bain Investors V") is the sole general partner of Bain Partners V. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Investors V and thus is the controlling person of Bain Investors V. Sankaty High Yield Asset Investors, LLC, a Delaware limited liability company ("Sankaty Investors"), is the sole general partner of the Sankaty Fund. Sankaty High Yield Asset Investors, Ltd., a Bermuda corporation ("Sankaty Ltd."), is the managing member of Sankaty Investors. Mr. W. Mitt Romney is the sole shareholder, a director and President of Sankaty Ltd. and thus is the controlling person of Sankaty, Ltd.
Modus Media
March 14, 2000
Summary of Bain stockholdings:
Consists of (i) 1,913,652 shares of Common Stock held by Bain Capital Fund IV, L.P., whose sole general partner is Bain Capital Partners IV, L.P., whose sole general partner is Bain Capital Investors, Inc., a Delaware corporation wholly owned by W. Mitt Romney, (ii) 2,189,986 shares of Common Stock owned by Bain Capital Fund IV-B, L.P., whose sole general partner is Bain Capital Partners IV, L.P., whose sole general partner is Bain Capital Investors, Inc., a Delaware corporation wholly owned by W. Mitt Romney, (iii) 2,042,670 shares of Common Stock held by Information Partners Capital Fund, L.P., whose general partner is Information Partners, a Massachusetts General Partnership, and whose managing general partner is Bain Capital Partners IV, L.P., the sole general partner of which is Bain Capital Investors, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (iv) 287,028 shares of Common Stock held by BCIP Associates, a Delaware general partnership of which W. Mitt Romney is a general partner and member of the management committee; (v) 170,440 shares of Common Stock held by BCIP Trust Associates, L.P., a Delaware limited partnership of which W. Mitt Romney is a general partner and member of the management committee; and (vi)3,445,028 shares of non-voting Common Stock held by Bain Capital Partners V, L.P., whose sole general partner is Bain Capital Investors V, Inc., a Delaware corporation wholly owned by W. Mitt Romney.
The language used in these filings leaves no room for any ambiguity. For example, Bain Capital’s in-house hedge fund, Brookside, supplied the following language to companies in which it invested for their filings with the SEC: "Mr. W. Mitt Romney is the sole shareholder, sole director, President and Chief Executive Officer of Brookside Inc. and thus is the controlling person of Brookside Inc."
By our count, this description of Romney’s control of Brookside was filed with the SEC a total of 33 times after March 1, 1999 and was listed as having "wholly owned" Brookside as of its own quarterly filing on May 14, 2001. Copies of these filings are available at your request.
Statements such as these in these filings end in 2001--just as a reader would expect after reviewing the full record, including what Romney, his wife and his lawyer said on the subject.
In sum, the statement that Gov. Romney "left" Bain in February 1999--a statement central to your fact-check-- is not accurate. Romney took an informal leave of absence but remained in full legal control of Bain and continued to be paid by Bain as such. Governor Romney would have the period of Bain service understood differently, for the obvious reason that there is much in this l999-2002 period that he would prefer to avoid accountability for.
Finally, in addition to the wealth of support for the proposition that Romney participated in management and exercised control of Bain until 2001, there is also the matter of his other continued and significant ties to Bain even after he ended his active management role. His lawyer who was also a lawyer for and investor in Bain ran Governor Romney's not-so-blind trust that has held extensive interests in Bain, including "carried" or profits interests normally paid only to those active in the management of a private equity fund. This deep and continued relationship hardly squares with the suggestion that the Governor "left Bain" in l999.
What we have set out here on Romney's ties to Bain from l999-2001 and beyond is not an interpretation or claim or speculative assertion. Others have come to the same conclusion on these facts. On Friday, The Wall Street Journal reported the following:
"The Romney camp says some of the cases cited by the Obama team aren't valid because Mr. Romney relinquished day-to-day control of Bain in 1999 to prepare to run the 2002 Winter Olympics in Salt Lake City, Utah. But documents filed with the Securities and Exchange Commission and the state of Massachusetts show that he still had ties to the company as late as 2002, and he continues to report income from the firm years after his departure, including more than $2 million in the past year, according to financial disclosures filed with the Federal Election Commission."
("The Murky Calculus of Job Exports")
And in 2007, five years ago, the Washington Post reported the relevant facts as follows:
In his autobiography, Romney wrote that he severed ties with Bain in 1999 when he took the Olympic job and told his partners he wasn't coming back. But R. Bradford Malt, one of Bain's lawyers, who now manages Romney's personal
finances, said Romney took a leave of absence, "partly because of the speed it all happened and partly because it was a limited gig." That meant Romney retained full, sole ownership of the firm for two more years as he worked on the Olympics.
Malt, who was designated by the campaign to address Romney's time at Bain, said Romney finally resigned and reduced his role at the company to that of a passive investor in 2001 when it became clear that he was going to run for Massachusetts governor after the Olympics. The campaign declined to comment further.
In light of this record, we ask that you make whatever corrections, clarifications or revisions are appropriate. At a minimum, we ask that a copy of this letter be posted prominently along with your Outsource overreach report, enabling the readers you serve to drawn their own conclusions.
Stephanie Cutter
Deputy Campaign Manager
Obama for America
APPC's 2 July 2012 article (Rebuttal of the Obama Campaign Letter) :
In its rebuttal APPC stated that "We find the Obama campaign’s evidence to be weak or non-existent, and contrary to statements Romney has made on official disclosure forms under pain of federal prosecution." The Obama charge is that Romney did not give up active management of Bain Capital in February 1999 when he departed to run the 2002 Winter Olympics. Therefore, they claim, he was involved in decisions which resulted in shipping jobs overseas. APPC states that "In fact, if the Obama campaign were correct, Romney would be guilty of a federal felony by certifying on federal financial disclosure forms that he left active management of Bain Capital in February 1999." APPC continues "The Obama campaign’s recent ads thus mislead when they point to investments made by Bain, as well as management decisions made by companies in which Bain invested, after that time...In a nutshell, the Obama campaign is all wet on this point." APPC confirmed this point by "re-checked with Bain spokesman Alex Stanton, who released a statement about Romney’s departure date. Mr. Stanton told APPC that "Mitt Romney retired from Bain Capital in February 1999. He has had no involvement in the management or investment activities of Bain Capital, or with any of its portfolio companies since that time."
Obama's campaign rebuttal according to APPC has "Very little [evidence] and none of it convincing in our judgement." Filings with the SEC following Romney's departure list various entities with Bain and even states that Bain remained "wholly owned by W. Mitt Romney." While Romney remained the owner of Bain there is no evidence whatever that he was in any way involved in Bain decision-making after 1 March 1999. SEC documents affirm this fact. To bolster their claim to the contrary, Obama relies on a few news snippets that upon "a close reading shows these news accounts don't contradict Romney either." According to APPC the Obama campaign simply ignores Romney’s stated intent to “leave running day-to-day operations” to others. Indeed, it was later confirmed that he had no time to devote to Bain. "According to an Associated Press story that ran just two months later, Romney quickly discovered that he was working 16-hour days on the Olympics, leaving no time for Bain (or even his own wedding anniversary). The 4 April 1999 AP story (which we retrieved from the Nexis database) began this way."
"Sixty days ago, Mitt Romney was preparing to take time off work — one week a month — so he could travel with his wife while her health would still allow it. Now, he can’t even get free for their 30th anniversary celebration, and the trip to Hawaii for her 50th birthday has been canceled. I have a lot to learn, and a lot to catch up on. So I am going full-bore,” says Romney, who has been working 16-hour days, seven days a week. “It is a more intense experience than I had anticipated.” His wife, Ann, is more blunt: “It’s like he walked into an empty elevator shaft.”Further, his wife is quoted in the 11 Nov 2000 Boston Globe as saying that "her husband had been working 112 hours a week at first, causing her to move to Salt Lake City to be with him. Since her arrival, she said, he had cut his Olympics work to 84 hours a week." APPC learned that once the Olympics efforts were running smoothly they still required so much of Romney's time that he had to lessen his involvement with Bain Capital. And he did indeed “lessen” his involvement, giving up all management control according to what he has certified repeatedly. The Globe story goes on to quote Mrs. Romney as saying the couple is still living in Salt Lake City.” According to APPC "Nowhere is she quoted as saying he has spent any time managing Bain." To be certain of this fact APPC consulted with Romney's lawyer, R. Bradford Malt, who told them that "After leaving Bain Capital in February 1999, Mitt Romney devoted 100% of his time and energy to the overwhelming task of rescuing the Winter Olympics, which were in a state of disarray when he took the job. Because of the demands of this job, Mr. Romney was not involved in the management or activities of Bain Capital or any of its portfolio companies in any way." In addition "When it became clear that he would not be returning to Bain Capital, Mr. Romney entered into a retirement agreement formalizing transfer of control based on his February 1999 separation date from Bain Capital."
Another example of weak Obama campaign' evidence charging Romney with retaining an active role in Bain management after Feb 1999 is derived from a "Salt Lake Tribune story from the time Romney left the Olympics to run for governor of Massachusetts. The campaign quotes Romney as saying he was then giving up control of all Bain’s voting stock, and paraphrases Romney as saying that the divestiture affected “only the management and control of the company.” ACCP affirms the truth of that statement but adds that "it’s not evidence that Romney had been running the company, even on a part-time basis. A full reading of the article makes clear that Romney said he did not intend to 'resume' his management duties, and wanted to let his partners know that they would not have to “move over one office” to make room for him." The Tribune further stated that he gave up control over all of Bain Capital’s voting stock, dividing the shares between the two dozen directors. The divestiture had no financial ramifications, Romney said, affecting only the management and control of the company."
It is our collective misfortune that political candidates and their surrogates resort to distortions, half truths or outright lies to win elections. Unfortunately this happens at all levels; local, state and federal. Seeking office by knowingly misrepresenting facts about oneself or one's opponents is reprehensible. The voting public deserves the truth. Candidates who win using dishonest tactics do not deserve our vote because if they are willing to be dishonest while seeking office rest assured, as has been demonstrated over and over again, they will be dishonest while in office. It is, therefore, vital that we listen, but verify what candidates (and their surrogates) say and vote based on facts rather than crafty words uttered by politicians.
Sources:
http://factcheck.org/2012/06/obamas-outsourcer-overreach/
http://factcheck.org/2012/07/factcheck-to-obama-camp-your-complaint-is-all-wet/
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