NEW ROMNEY VIDEO: In 1985, He Said Bain Would "Harvest" Companies for Profits

[kpete]

Source: Mother Jones

NEW ROMNEY VIDEO: In 1985, He Said Bain Would "Harvest" Companies for Profits

This clip shows the young CEO focusing on businesses as targets for his investors, not as job creators or community stakeholders.

—By David Corn | Thu Sep. 27, 2012 3:00 AM PDT

...............................

But at Bain, Romney's top priority wasn't to boost employment. As the Wall Street Journal recently noted, creating jobs "wasn't the aim of Bain or other private-equity firms, which measure success by returns produced for investors." And, the newspaper reported, Romney's 100,000-jobs claim is tough to evaluate.

Mother Jones has obtained a video from 1985 in which Romney, describing Bain's formation, showed how he viewed the firm's mission. He explained that its goal was to identify potential and hidden value in companies, buy significant stakes in these businesses, and then "harvest them at a significant profit" within five to eight years.

The video was included in a CD-ROM created in 1998 to mark the 25th anniversary of Bain & Company, the consulting firm that gave birth to Bain Capital. Here is the full clip, as it appeared on that CD-ROM (the editing occurred within the original):

Read more: http://www.motherjones.com/politics/2012/09/1985-romney-bain-harvest-firms-profits-video

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&feature=player_embedded

[hifiguy]

1. David Corn has been a hero of heroes this campaign

cycle.

[pangaia]

2. Doesn't sound to me like this guy is talking

at all about people, actual humans, jobs. But of course, that is not what private equity firms do, now is it. They exist, as far as I can tell, to make money ONLY for themselves and their investors.
And that is NOT the type of behavior required or desired to run a nation.

[Enrique]

3. if he was harvesting he would need the right tool

[valerief]

4. What a grim job reaper. nt

[freshwest]

28. Truly. Shades of Gordon Gecko. He played that role to the hilt.

Last edited Thu Sep 27, 2012, 02:26 PM - Edit history (1)

[JHB]

37. Not close enough. Gordon did jail time...

...but then, he didn't start off with Mitt's connections.

[freshwest]

38. And there were still a few regulators to spank him. Obama had Warren in place, but the GOP

Raised hell and defunded the office, so he had to go with Plan B.

http://www.alternet.org/newsandviews/article/635582/obama_appoints_elizabeth_warren_ally_richard_cordray_to_head_consumer_financial_protection_bureau

Corduray is making inroads, but quietly. For some, not fast or flashy enough, it's necessary to keep Obama in office to stop the end of this bureau's work.

[aint_no_life_nowhere]

33. Dollars are the grain - people and jobs are the chaff

[BadgerKid]

43. Hey, I didn't even eat the salmon mousse. n/t

[Major Nikon]

5. Bain Capital was founded with the same money that financed death squads in El Salvador

[font color="black" size="4"]Mitt Romney Started Bain Capital With Money From Families Tied To Death Squads[/font]

In 1983, Bill Bain asked Mitt Romney to launch Bain Capital, a private equity offshoot of the successful consulting firm Bain & Company. After some initial reluctance, Romney agreed. The new job came with a stipulation: Romney couldn't raise money from any current clients, Bain said, because if the private equity venture failed, he didn't want it taking the consulting firm down with it.

When Romney struggled to raise funds from other traditional sources, he and his partners started thinking outside the box. Bain executive Harry Strachan suggested that Romney meet with a group of Central American oligarchs who were looking for new investment vehicles as turmoil engulfed their region.

Romney was worried that the oligarchs might be tied to "illegal drug money, right-wing death squads, or left-wing terrorism," Strachan later told a Boston Globe reporter, as quoted in the 2012 book "The Real Romney." But, pressed for capital, Romney pushed his concerns aside and flew to Miami in mid-1984 to meet with the Salvadorans at a local bank.

...

http://www.huffingtonpost.com/2012/08/08/mitt-romney-death-squads-bain_n_1710133.html

[kathman-duzi]

18. Thank you for this video of harvesting businesses. Wow Warren Buffet acturally buys companies to

make healthy and run, not harvest.

So the video talks about having capital available to chip in up to Bain puts into the pot and there is also 50 million dollars available to sweeten the deal. This is an inappropriate question but do you think LSD Inc is the source of the additional dollars available to ensure this deal. I realize this is 1984 or 85 dollars the video is speaking about.

Romney can't wait to get his hands on social security and medicare to harvest those dollars.

[FailureToCommunicate]

6. Here comes Bain...

[littlemissmartypants]

42. Would you

get in bed with this? The RR idea of a warm fuzzy.

[freshwest]

31. And the results of his becoming CEO of America would be...

[corkhead]

8. "Soilent Green is People, My Friend"

[highplainsdem]

9. I wish the term "harvest" was as damning as it initially sounds, but this is the typical meaning in

private equity, as taken from Private Equity: History, Governance, and Operations:

A "harvest" or "exit" is an event whereby the investors and management of a company sell at least a portion of their shares to public or corporate buyers. The harvest provides an opportunity for private equity (PE) funds to realize returns for their investors, while enabling managers with equity stakes to have a "liquidity event" for their shares -- in other words, an opportunity to sell their shares by making them "liquid."

Along these lines, there are three primary methods by which PE funds harvest companies: initial public offerings (IPOs), mergers, and acquisitions. The latter two exit methods (discussed in subsequent chapters) are frequently discussed in parallel and are collectively known as M&A transactions.

So "harvest" is essentially a neutral term.


What was harmful to many of the companies Romney acquired when he ran Bain Capital was the way he acquired them -- maximizing the use of leverage, as this Bloomberg article explains, which loaded the companies with debt, socialized the risks and privatized the profits:

http://www.bloomberg.com/news/2012-07-15/romney-s-bain-yielded-private-gains-socialized-losses.html

[highplainsdem]

10. From that Bloomberg article, an example of how the way a company was acquired set up a disaster

for everyone except Bain:

In 1992, Bain Capital bought American Pad & Paper by financing 87 percent of the purchase price. In the next three years, Ampad borrowed to make acquisitions, repay existing debt and pay Bain Capital and its investors $60 million in dividends.

As a result, the company’s debt swelled from $11 million in 1993 to $444 million by 1995. The $14 million in annual interest expense on this debt dwarfed the company’s $4.7 million operating cash flow. The proceeds of an initial public offering in July 1996 were used to pay Bain Capital $48 million for part of its stake and to reduce the company’s debt to $270 million.

From 1993 to 1999, Bain Capital charged Ampad about $18 million in various fees. By 1999, the company’s debt was back up to $400 million. Unable to pay the interest costs and drained of cash paid to Bain Capital in fees and dividends, Ampad filed for bankruptcy the following year. Senior secured lenders got less than 50 cents on the dollar, unsecured lenders received two- tenths of a cent on the dollar, and several hundred jobs were lost. Bain Capital had reaped capital gains of $107 million on its $5.1 million investment.

[kathman-duzi]

19. Quite a harvest, um I mean neutral transaction . So the firm was harvested and the investors were

harvested and the unsecured lenders were royally screwed blue and tattooed! How sweet a deal huh?

[yardwork]

11. It's not neutral. He's talking about outsourcing and laying off people. Look what happened.

Look at the history of the companies that Bain bought. They were literally sucked dry and abandoned. Look at the department stores, for instance. Gone.

[highplainsdem]

13. Again, that ISN'T what "harvest" necessarily means in private equity. It's a neutral term

that's used by both the more ethical venture capitalists AND the vulture capitalists like Romney.

If you don't believe the textbook I quoted above, maybe you'll believe this page at the University of Michigan's site:

http://www.bus.umich.edu/CourseManagement/ViewCourseDescriptions.asp?course=626&dept=FIN&term=1

This enables us to study how the four main aspects of venture capital and private equity – valuation, deal structuring, governance, and harvesting – are conducted in different legal and regulatory settings, under different customs, culture and business practices. The case method is used to demonstrate the practical, hands-on application of techniques following their development in class.

Emphasis added.

Again, "harvest" is simply a standard, neutral term.

I had the same initial reaction to it that you did. I thought, "Wow, what a damning video! What a horrible word to use!"

But I majored in political science, not business. And I know I'm not familiar with a lot of business terminology.

So I just googled "harvest" and found out, within a couple of minutes, that it means what I explained in my first reply here.

[eggplant]

14. I agree.

I hate Bain; they are scum. But not everything that comes out of Mitten's mouth can be considered damning, and there is enough that *is* damning that it does us a disservice to focus on the quotes that simply *sound* bad.

All VC firms expect to be able to extract profits from an investment after a specific amount of time. This is independent of the evil that is Bain. (But don't get me started on the evil that all VCs are.)

[midnight]

32. eggplant VC business model in the hands of mittens is particularly worrisome and perhaps should be

outlawed.

[highplainsdem]

17. I agree that Romney is a vulture capitalist. I hate what Bain did. But I still think that

since the term "harvest" is neutral, this video of Romney using that term isn't particularly harmful to him -- let alone devastating, like the "47%" video. His use of the term "harvest" can be explained, and then dismissed, too easily.

[MissMarple]

16. So Bain could either leave a viable company or a dying hulk

depending on how the deals were structured? Would they have had a choice or was the destruction just a sure way to take out profit for Bain? Would that depend on the amount of short term gain which could kill or cripple the company versus a longer involvement that would be much less exciting in the amount of profit for Bain?

I think Bupkus may have answered the question. Amoral and sleazy. That's all I can say about Bain.

[highplainsdem]

29. They had choices. All too often they made the wrong ones, the amoral ones.

[kathman-duzi]

20. I believe you! Using the harvest definition so broadly allows the vultures and

the economic rapists to sleep at night. It is like lawyer speak to keep the unwashed out of legal business. Doctors also have their own language and some are harvesting their patients.

[kathman-duzi]

22. Absolutely! n/t

[grasswire]

30. it's not a neutral term to the average voter n/t

[highplainsdem]

36. Probably not, but I think it's too easily explained as a standard term for this to be a bombshell.

I posted in GD about Andrew Sullivan's response to it:

http://www.democraticunderground.com/10021425411

He called the term "clinical."

I've been checking Google News and Twitter, and this new video definitely isn't getting the sort of reaction that the "47%" video got as soon as Mother Jones published it.

[M_M]

12. Hmmm, Har-vest-ing.....

[kathman-duzi]

21. LOL it was a fun read~! n/t

[GEOpix]

23. In it's simplest form

they are literally fattening companies for slaughter!

[AndyTiedye]

24. Engulf & Devour

?w=500&h=315

[Arugula Latte]

25. First he'll harvest your companies, then he'll harvest your organs.

You'll wake up sitting in a bath of ice and your kidney will be MIA.

[global1]

26. Is This What Is Happening To That Company In Freeport, Illinois That Bain Has Interest In?......nt

[closeupready]

35. Make no mistake - yes. Yes. Oh, and yes.

nt

[midnight]

27. K&R

[closeupready]

34. Right. This is consistent with 'vulture' capitalism - a corruption

of what capitalism was founded to do. K&R

[Stuart G]

39. K and R nt..

[reformist2]

40. When you harvest a crop, you mow it down and leave it for dead.

So much for Mitt's record of "building" companies that last...

[Tx4obama]

41. Rev. Al just played the Romney 'Harvest' clip on his show

And they are discussing it

[emulatorloo]

46. Great work, David Corn!

Thanks for posting this.

[maddogesq]

47. Gosh, the only line miissing from that is "Greed is good!" NT