Consistency, they say, is the hobgoblin of little minds, but sometimes it is just nature at its rare best -- when everything fits perfectly. As I write this piece, I feel a bit like a prosecutor who suddenly has all the pieces of evidence necessary to make a rock-solid case. It's a good feeling and I have Mitt Romney to thank for it. Now, I am not implying that anything he has done is criminal, just using the prosecutor metaphor to make my point. Over the past few months, he has thrown individual pieces of evidence my way but it was not until now that all the pieces meshed together to form a simple, clear, picture.
Ironically, if Romney had been forthcoming about all these facts from the get-go, he might have faced some criticism but there is a good chance he would have been able to put them to bed in time for the November elections, but it's too late now. The court of public opinion is already in session.
Exhibit A - Bain Capital's Business Model
Notwithstanding the financial engineering behind such transactions, the essence of the Leveraged Buyout, or LBO, is painfully simple. Under Romney, Bain bought companies by using a little bit of its own money, taking a big loan out for the rest, and then dumping that debt onto the companies' books so that Bain itself took very little risk. For the next few years, Bain would siphon off whatever profits it could by declaring dividends to itself and then finally cash out by selling the company. With so much debt on the books, a number of these companies (22 percent) went bankrupt or shut down, and 8 percent were complete disasters; of the ones that survived, most had to cut jobs and other productive business activities just to service the debt, which hampered their growth. Bain's investors, meanwhile, made out like bandits -- to the tune of $2.5 billion. Great business model, except if you were the acquired company.
Exhibit B - Outsourcing
Outsourcing of U.S. jobs to India and China has its defenders, but it doesn't change the fact that it's problematic and usually hurts the domestic workforce. Whether the arena is manufacturing, packaging, or information technology, a job is a job and when it gets shipped overseas, it deprives Americans of their livelihood. Yet during Romney's tenure, Bain invested in several companies that did exactly that or at least were part of that chain. The most notable example is a Hong-Kong based Chinese company called Global-Tech Advanced Innovations, which manufactures appliances for U.S. companies. Bain, through an affiliate called Brookside Capital Partners, acquired 6.13 percent of Global-Tech (and possibly more through an undisclosed earlier investment) even though the company's business model was to take advantage of U.S. outsourcing. Romney's campaign has maintained that the investment was made after Romney departed Bain in February, 1999, but recent press reports and public filings seem to indicate otherwise. From an economic standpoint, outsourcing enables U.S. companies to boost their profits, but from a human capital standpoint it's a disaster; yet Romney happily participated in the Global-Tech deal and likely many others that have yet to be revealed or unearthed. Good for Romney, but bad for working class Americans.
Exhibit C - Offshore Bank Accounts
In something straight out of The Firm, Romney has routinely moved his money offshore to tax shelters like Bermuda and the Cayman Islands in order to shield them from the IRS. His 2010 tax return reveals a blind trust held by his wife -- which included a $3 million Swiss bank account glossed over in his previous financial disclosures, as well as a questionable tax shelter called a blocker corporation -- which is frowned upon by the government and costs taxpayers about $100 million every year. This does not include dozens of other offshore investments in Germany, Luxembourg, Australia and Ireland, which Romney has so far revealed very little about. And as for Bain, of the 138 Bain funds organized in the Cayman Islands, Romney apparently has interests in 12, totaling $30 million; not to mention that Bain itself played the same tax shield game as its CEO, effectively allowing him to "double-dip" on the tax side... Again, great for Romney but not for everyone else -- the California Public Interest Research Group reports that offshore tax havens cost the U.S. government roughly $100 billion every year.
Exhibit D - Refusal to Disclose Financial Information / Denials about Bain Capital Involvement
Of all the evidence so far, this piece is undoubtedly the most suspicious and, frankly, mystifying. Why would a presidential candidate who knows he has an uphill task with independent voters, be so astonishingly cagey about revealing information about himself? Romney has been the governor of Massachusetts and is no stranger to politics, so he should know that voters in a democracy expect their leaders to be transparent. But Romney has been the exact opposite, refusing to divulge information on his financial dealings, refusing to release his tax returns (even though it was his own father who began the grand tradition decades ago), refusing to address direct questions about investments he made while at Bain, refusing to voluntarily disclose his offshore banking activities or even the true size of his wealth, and refusing to release the names of his largest campaign donors. Deepening the mystery further, he has repeatedly denied being involved with Bain after his separation from the firm, yet the press keeps finding inconsistencies with that story. Whether Romney is just averse to transparency or whether he is lying to protect some financial dealings that he thinks would be viewed dimly by the American public, his reluctance to open up is a bad sign -- for us.
Putting all this (and a few other things not mentioned above) together, we get a comprehensive view of the Republican candidate for president.
- Loading companies with crippling amounts of debt or firing workers for the sake of profits
- Sending American jobs overseas
- Shifting money out of the U.S. economy into offshore tax shelters
- Providing tax relief to millionaires in the middle of a recession and high unemployment in the nation
- Providing government subsidies to major corporations who don't need or deserve them
- Opposing financial reform that would prevent banks from being reckless with our money and gambling away our economic future
- Dismantling our social safety nets like Social Security and Medicare, and
- Hacking public services.
In addition, he wants to be our economic savior yet some of his Bain investments took entire companies out of our economy, he wants to be a job creator but in reality has been a job destroyer, he claims to be concerned about our deficit yet exploited every loophole he could to minimize his fair share of taxes, he accuses the Obama administration of hiding information from the public about the Fast and Furious program but will not release his tax returns, he talks of charity and family values yet is opposed to amnesty for children of illegal immigrants, he champions freedom but is against gay marriage and a woman's right to choose, he claims to care about the American people yet wants to repeal the healthcare law that would expand coverage and make it more affordable.
These are all traits that make him a good Wall Street shark, but not any type of public servant and certainly not the president of the United States. Coming back to my legal metaphor and since voters deliver their own version of a judgment on election day, I predict that Romney will be found guilty as charged. As I said in my previous article, this could turn out to be Romney's 'Bermuda-Gate'.
In case readers are curious about how the offshore bank account game really works, my novel "Merger" (available from Amazon on the link below) includes a fictional but detailed account of the process of moving money through dummy corporations scattered throughout the globe.