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Mitt Romney's Offshore Accounts, Tax Loopholes, and Mysterious I.R.A.
http://www.vanityfair.com/politics/2012/08/investigating-mitt-romney-offshore-accountsExcerpt from a long story:
. . .
Then brutal cost cutting began. Bain cut R&D spending to an average of 8 percent of sales, a little more than half what its competitors were doing. Cindy Hewitt, Dades human-resources manager, remembers how the firm closed a Puerto Rico plant in 1998, a year after harvesting $7.1 million in local tax breaks aimed at job creation, and relocated some staff to Miami, then the companys most profitable plant. Based on reassurances she had received from her superiors, she told those uprooting themselves from Puerto Rico that their jobs in Miami were safe for nowbut then Bain closed the Miami plant. Whether you want to call it misled, or lied, or manipulated, I do not believe they provided full information about what discussions were under way, she says. I would never want to be part of even unintentionally treating people so poorly.
Bain engaged in startling penny-pinching with the laid-off employees. Their contracts stipulated that if they left early they would have to pay back the costs of relocating to Miamibut in spite of all that Dade had done to them, it refused to release the employees from this clause. They said they would go after them for that money if they left before Bain was finished with them, Hewitt recalls. Not only that, but the company declined to give workers their severance pay in lump sums to help them fund their return home.
In 1999, generous pensions were converted into less generous benefits, wages were cut, and more staff members were laid off. Some employees contacted Norman Stein, then the director of the pension-counseling clinic at the University of Alabama law school, with a view to challenging the conversions. Stein says the employees were extraordinarily nervous, so fearful, in fact, that they refused to let lawyers even make copies of pension documents. I have been dealing with pensions issues for over 25 years and I never saw anything like this, recalls Stein. The spooked employees did not go to court. Stein says that, while breaking pension contracts like this was not unheard of, the practice at that time was questionable, adding that Dade may have saved $10 to $40 million from converting its pensions.
The beautyor savageryof leverage is that it can magnify any and all cash-flow boosts, such as this one. Take $10 to $40 million squeezed from a pension pot, then use that to create new, rosier financial projections to borrow several times that amount, and then pay yourself a big special dividend from the borrowed funds, many times the size of the pension savings. That is just what Bain Capital did: the same month it converted the pensions, it created new financial projections as a basis to borrow an extra $421 millionfrom which Bain, its co-investor Goldman Sachs, and top Dade management extracted $365 million in dividends. According to Kosman, Bain and Goldmanafter putting down only $85 million made out like banditsa $280 million profit. Dades debt rose to more than $870 million. Romney had left operational management of Bain that year, though his disclosures show that he owned 16.5 percent of the Bain partnership responsible for the Dade investment until at least 2001.
Quite soon, however, a fragile Dade faced adverse conditions in the currency markets, and it had to start in effect cannibalizing itself, cutting into the core of its business. It filed for bankruptcy in August 2002 and Bain Capital departed. When Dade emerged from bankruptcy, its new owners invested in long-term R&D, and it flourished again.
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Mitt Romney's Offshore Accounts, Tax Loopholes, and Mysterious I.R.A. (Original Post)
swag
Jul 2012
OP
As The Song Says, Sir: 'Some Men Rob You With A Six-Gun, Some With A Fountain Pen'
The Magistrate
Jul 2012
#1
The Magistrate
(95,247 posts)1. As The Song Says, Sir: 'Some Men Rob You With A Six-Gun, Some With A Fountain Pen'
"The gamblin' man is rich, and the working man is poor."