A unifying theme at the Democratic National Convention was Mitt Romney's opposition to the auto bailout. But did Mr. Romney somehow cash in on the very auto rescue that he publicly opposed under the headline Let Detroit Go Bankrupt? Yes, and here's how:
In the Fall of 2008, the country was debating the rhyme and reason of spending billions in taxpayer money to bail out the US auto industry. At stake weren't just autoworker jobs, but jobs that impacted tens of thousands of other Americans who worked for auto-related businesses. I met one of these workers, who I'll call Joe. He was barely hanging onto his job that year.
"On a Friday afternoon I get called into a conference room and the group I was with, and there were like eleven of us. We were offered a package and they give us to the next Friday to make up our minds."
Joe's company was Sensata Technologies, headquartered in Attleboro, MA.
They don't manufacture cars, but they make sensors that get installed in them. The auto industry's trickle-down effect isn't new. Since the late 1950's the saying went, "as General Motors goes so goes the nation." So four years ago, the auto bailout wasn't just about cars, it was about jobs and politics."
Just weeks after John McCain lost to Barack Obama, Mitt Romney wrote the op-ed in the
Times calling for a "managed bankruptcy". When President Obama took office he ignored Romney's suggestion and pumped 80 billion dollars into a bailout for General Motors and Chrysler.
Fast-forward to the recent Democratic National Convention where all signs credited the bailout, and President Obama, with saving more than a million American jobs.
But there was also an unexpected beneficiary to saving Detroit: Mitt Romney.
The auto bailout reached far deeper than automakers and assembly line workers. It also saved auto-related industries like Sensata, a company bought by Bain Capital in 2006. Even though Romney was several years gone from the private equity firm that he co-founded, he was still making money from his Bain investments.
"One of Mitt Romney's top investment is this thing called Fund 8, which is a Bain Capital investment."
Jeremy Thompson is a senior researcher for Mass Uniting, an advocacy group that pushes for corporate accountability.
"Fund 8 is part of Bain's interest in Sensata. Sixty-three percent of their business in 2011 came from the automotive industry."
Standing in the lobby of the John Hancock building in Boston where Bain Capital is headquartered, Thompson elaborated:
"In 2008, of course, Mitt Romney specifically said that they should not be given a bailout. But instead, what happened is that they were bailed out, which allowed them to keep making cars, which allowed them to keep buying parts for their cars, which meant that Sensata got to keep doing business. Because Sensata got to keep doing business they were able to pay their investors, including Mitt Romney."
Dan Primack, a senior editor at Fortune Magazine, has studied Romney's financial history. Primack says Romney benefited from a golden parachute signed years earlier at Bain.
"When Romney decided he was going to leave Bain Capital, he signed a deal with his partners, which basically was a transition from CEO, but was also a way for him to lose ownership in the firm, whereby from ten years after he left he was going to get an interest or a piece of any fund that Bain Capital raised during that ten year period. He wouldn't have to pay for them. He also had the option, if he wanted, to pay to get additional stakes in those funds. He basically had a piece of every Bain Capital investment that was made for the ten years after he left as well obviously, as all of the ones prior. And so for whatever the percentage of the funds he got, he got that percentage and profits from Bain on Sensata and every other Bain deal that they've done."
Both Bain and the Romney campaign turned down request for interviews. The campaign did send a statement:
Governor Romney left Bain Capital in 1999. As we have said many times before, Governor and Mrs. Romney's assets are managed on a blind basis. The investment decisions are made by a trustee.
But are blind trusts completely blind and totally out of sight from a businessman like Romney? Rebecca Wilkins, senior council for Citizens for Tax Justice, a DC based non-profit that has angered both Republicans and Democrats over the years, is not convinced. She's been reviewing Bain documents, Sensata filings, and the only complete tax return that Governor Romney has released.
"We can see in Governor Romney's 2010 return that he owns an interest in the private equity fund that holds Sensata Technologies. He also owns shares of Sensata personally. We see in Romney's tax return the carried interest loophole. We see a charitable remainder trust that he set up in 1996 where he got a big deduction for amounts that still haven't gone to charity. We see a private foundation that he set up to get a big charitable deduction from money he moves there. We see all types of aggressive tax planning."
In 2010, Romney paid a rate of 13.9 percent on nearly $22 million in income. Since capital gains is taxed at a much lower rate than a nine-to-five job, Romney stood to make a good--but undetermined-- amount of money from Sensata Technologies when it went public, says Fortune Magazine's Dan Primack:
"Romney would have profited because Sensata a couple of years ago after the Bain investment went public. Bain took it public. Bain's made a bunch of money off of that IPO. Bain still holds a lot of stock in Sensata. I believe at the end of last year held a 51 percent stake, i.e. still has control of it. But there would have been distributions of stock which Mitt Romney would have gotten. We've actually seen from his financial disclosures that he did indeed get those distributions of stock."
But the question some might ask is: So What? There is nothing to suggest that Mr. Romney did anything improper by profiting indirectly on the auto-bailout. After all, President Obama also has indirect investments in Sensata through the Illinois Pension Fund, according to the Illinois State Board of Investment. But Mass Uniting, the advocacy group for corporate responsibility, sees a major difference. Their statement reads:
"Mitt Romney is the proud pioneer of the corporate model that is shipping Sensata's jobs overseas -- and he stands to reap significant financial rewards at those workers 'expense. Romney's Bain Capital has made billions in profits by shuttering plants, shipping thousands of American jobs to China and India, and slashing wages and benefits for the few jobs that remain. That is an irrefutable fact -- one that has played out over and over again under the watchful eye of Romney and his acolytes at Bain. Any assertion that Mitt Romney is a 'passive' beneficiary of his own offshoring-for-profit model is an absolute farce, at best."
But the Romney campaign argues that any profit the former governor may have received from the auto bailout is indirect and coincidental:
Bob King, president of the UAW, speaking by telephone from Detroit, described that interpretation as a "good twisting of the facts."
"Go on the streets and ask anybody and I think the common person would say that's a hypocritical position for him to take. Especially when he profited from the bail out by shipping's jobs to China and other places."
Michael Sandal, the noted Harvard Philosopher, views Romney's financial gain from the auto bailout differently.
"The success of the auto bailout is a good argument for having opposed it. But I don 't think that it's necessarily hypocritical to profit from a legitimate public policy, a morally defensible policy, even if one opposed it."
But Sandal says the question that should be asked of Romney is "Does he think there is anything morally wrong with shipping jobs offshore?" Though Sensata derives a major share of its business from the US auto industry, more than 90 percent of its workforce is based overseas. And sometime in November ---between Thanksgiving and Christmas ---170 US workers will lose their jobs at a Bain-Sensata plant that is closing in Freeport, Illinois. Fifty two year old Cheryl Randecker trained some of the workers in China who will soon replace her on an assembly line overseas.
"What am I going to do now. I have to go back to school cause I have too long to work yet, so I gotta find something that I can do as I'm getting older. And we're kinda in a hard spot right now. But we'll have to try to make the best of a bad situation."
The Freeport workers have publicly called on former Bain CEO Mitt Romney to intervene on their behalf. So far there has been no response from the candidate, and that is perhaps the greatest irony of winners and losers in the aftermath of the US auto bailout.
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