10/11/2012 02:03 pm ET Updated Dec 11, 2012

Mitt Romney's Bain & Company Timeline: Let's Get It Straight, Shall We?

Over at the Daily Beast, Megan McArdle responds to Zach Carter and Jason Cherkis' story about Bain & Company's well-documented efforts to open up the emerging markets in the crumbling Soviet Union with a lot of arm-waving and a soupçon of having it both ways. None of it does a particularly worthwhile job engaging with the material facts presented in the piece.

McArdle's primary effort here is to wave away any concern that Romney was in charge of Bain & Company when the consulting firm was heavily involved in opening up the emerging markets in the Soviet Union to tobacco companies. McArdle writes: "The Russian strategy stuff, which sounds more damning, seems to have mostly happened from 1993-1995, except for one (failed) privatization deal. I don't think there's actually any question about who was the head of Bain during that time: it was Orit Gadiesh, the woman who is still Bain's chairman today."

McArdle then cites a one-paragraph Forbes article from 2005, and a 1994 New York Times profile as proof that Carter and Cherkis don't have the goods.

She caps it off thusly: "Perhaps Cherkis and Carter have direct evidence that Mitt was actually controlling things while she was nominally in charge, but if so, I don't think they made it clear in the article."

Well, golly, let's make it all clear, then! Here"s the actual evidence that Carter and Cherkis laid out in the piece:

1. Two Bain employees, including Bain & Co. founder Ralph Willard, saying they briefed Romney on Russia. The point man pitching Bain to tobacco in Russia, Sushovan Ghosh, told HuffPost he reported directly to Romney.

2. FDIC documents uncovered by Rolling Stone showing Romney in charge in March of 1993.

3. An October 1993 Boston Herald report (written by current Romney adviser Eric Fehrnstrom) citing Romney as "chairman and ex-CEO" of Bain & Co.

4. A November 1993 Roll Call article stating that Romney "runs" Bain & Co.

5. A July 1994 Boston Herald article stating that Romney was still attending Bain & Co. meetings, according to his Senate campaign at the time.

This all seems pretty compelling to me. But add to that pile additional evidence from SEC filings from Mariott and The Sports Authority that the Associated Press relied on for its own article on Romney in China:

At least seven Securities and Exchange Commission filings from May to December 1993 by Marriott International, Inc., where Romney served as a director, listed him as 'chief executive officer of Bain & Company, Inc.' A 1998 Sports Authority SEC filing said Romney was Bain's CEO and chairman to 1993 and a director to 1998.

So that takes care of McArdle's arm waving. Let's move on to the "having it both ways" part. McArdle concludes her piece with this:

More broadly, I'm rather hesitant to criticize people for being associated with a firm that took tobacco business twenty years ago. Society's views of tobacco have shifted rather dramatically since then, and there are limits to how much we can expect people to have retroactively embraced modern mores.

But the dramatic shift in society's views on cigarettes began well before the 1990s, as Carter and Cherkis document:

The U.S. government had issued its own scientific conclusions in multiple surgeon general reports dating back to the early-'60s. Federal research had long linked smoking to cancer, and in 1988, had stated that cigarettes are as addictive as heroin.

The first modern-era lawsuit against cigarette manufacturers was filed in the early '80s by Rose Cipollone, a 57-year-old dying of lung cancer. The case made national news, and presented scores of damning internal industry documents to the public. Class-action lawsuits followed.

"Internal documents showed clearly [these companies] understood the full nature of the extent of the full hazards of cigarette smoking in terms of lung cancer and heart disease and later the addictive nature of nicotine," recalled Cipollone's attorney Marc Edell. "And in fact formulating cigarettes so that they would enhance the addictive aspect of using the product. Those were pretty dramatic revelations."

At the time Romney and Bain came in, cigarette makers were becoming pariahs. "You have to know they are the world's deadliest consumer product and the deadliest invention in the history of civilization, and the world's leading cause of death," said Robert N. Proctor, professor of the history of science at Stanford University and author of a definitive account of the industry, "Golden Holocaust: Origins of the Cigarette Catastrophe and the Case for Abolition." "You have to know those things."

More to the point, one of the people who, "twenty years ago," put on a really good show of embracing these "modern mores" when it suited his purposes, was Mitt Romney. Once he had made his move from Bain & Company to Bain Capital, the notion of profiting from cigarette sales suddenly became very, very icky. As Barton Gellman reported in his Time profile of Romney:

More than once, according to [Romney's Bain Capital colleagues Geoffrey] Rehnert and [Marc] Wolpow, someone brought up Colt's and Remington as prospects. Each time the result was the same. "No way we could do deals with rifle manufacturers," Wolpow says. Romney never spoke of his reasons, and he did not use his deciding vote to forbid the transactions directly. "He'd raise rhetorical questions," Wolpow says. "'Do you think our investors would like this? Could there be reputational risks for Bain Capital?' And most of the partners agreed with that."

Lucrative tobacco opportunities came and went as well. RJR Nabisco had a leveraged buyout, tobacco-leaf dealer W.A. Adams changed hands in a private sale, and American Brands sold off its tobacco division. Brown & Williamson gave up most of its discount cigarette brands, and a deal for the Miami permium cigarmaker went begging until a Swedish firm stepped in. Romney stayed far away.

According to Rehnert, "stuff like tobacco and gambling," along with gun companies, had "a personal yuck factor" at the partners' table. "Do you want to make money doing something that feels gross?" he asks. "There was also how investors feel about things. Do you really want to be doing things that you're not proud to talk to your friends and family about, much less investors? At the end of the day, there are a lot of ways to make money, and there was a culture at the firm that people didn't want to make money off other people's misery."

Why Romney suddenly switched up his attitudes is a matter for speculation. But the creation of Bain Capital and Romney's recruitment to run the venture offers some insight. As Michael Kranish and Scott Helman wrote in their book, The Real Romney, Bill Bain had been stewing over the fact that his consulting firm "could watch its clients prosper only from a distance, taking handsome fees but not directly sharing in profits." His "epiphany" was Bain Capital, "a new enterprise that would invest in companies and share in their growth, rather than just advise them."

And Romney recognized at the time that removing the very "distance" that Bain desired posed certain reputational risks, and he shocked Bain by not immediately jumping on board. What finally brought Romney to Bain Capital was a promise of blanket immunity from financial and reputational harm:

Yet Romney stunned his boss by doing just that. He 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 due to his value as a consultant. "So," Bain explained, "there was no professional or financial risk." This time Romney said yes.

So Romney understood from the get-go that the nature of Bain Capital's business dealings presented certain risks that his work at Bain and Company did not. Knowing that, his conversion to a guy who found trading in cigarettes to be meretricious makes a lot of sense.

Now, is it possible that Romney may have experienced some private change of heart on the matter of tobacco between his time pushing cigs in Eastern Europe and his time at Bain Capital? Sure. But it wasn't a story he was willing to share with Carter or Cherkis. Absent such an explanation, his sudden unwillingness to "make money off other people's misery" after he went to work at a venture capital firm underpinned by a healthy investment of misery money, reads as rank hypocrisy from a guy who enjoyed that "distance" between his consulting firm's profits and what it took to reap them.

Mitt Romney's Bain Made Millions On Big Tobacco In U.S., Russia

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