Thus far, reporters covering the story of Mitt Romney the presidential candidate have largely ignored the story of Mitt Romney the businessman.
But the finish line is still far off in the 18-month smorgasbord of glad-handing, fund-raising and stump speeches that characterize a presidential campaign. If his two previous political forays are any indication, Romney’s 15 years at the helm of
Romney threw his hat into the ring in early February. In the weeks since, reporters and pundits have largely focused on his Mormon heritage, and on whether his views about stem-cell research, abortion and same-sex marriage are acceptable to the evangelical party faithful who hold great sway over the Republican nomination process.
In the not too distant future, however, the media will undoubtedly tire of these story lines, and their attention could well drift to other areas of the Romney dossier, particularly as reporters start looking into where his personal fortune came from. Romney’s tenure at Bain Capital “is part of his pedigree, and it will come under close scrutiny,” said James Post, a professor of corporate governance, strategy and policy at the Boston University School of Management.
To be sure, Americans know much more about Bain Capital and other private equity firms than they did even two years ago. In the last year, LBO shops have been making headlines nearly every day thanks to deals to buy such household names as Harrah’s Entertainment Inc. and Hertz Global Holdings Inc. Still, the private equity industry remains a “black box” for most of the public, Post said. “I think we’ll see the private equity world put under a much brighter spotlight, with or without Mitt Romney,” Post said. But his candidacy “is a convenient factual springboard to get into a discussion about this dark force.”
Tale Of Two Campaigns
Romney, a self-described data junkie known for exacting audits, left Boston-based consultancy Bain & Co. with a handful of colleagues to form Bain Capital in 1984. The firm started out as a traditional venture firm. But under Romney’s leadership, the firm eventually evolved into primarily a buyout shop, making a series of successful investments in companies like Domino’s Pizza and The Sports Authority. In his best-known deal, Romney and two partners planted $600,000 of seed-stage money in Staples Inc. Staples, which opened its first store in a Boston suburb in 1986, now has a market capitalization of nearly $20 billion.
Over the years, Romney stepped away from Bain Capital on two notable occasions. He took a leave of absence to nurse an ailing Bain & Co. back to health in the early 1990s, and he left the firm for a year to run for the U.S. Senate in 1994. By the time he exited from Bain Capital for good in 1999 to perform another rescue mission, this time to salvage the scandal-tainted Salt Lake City Winter Olympics, Romney was playing a much smaller role in the firm he co-founded.
When he made his first bid for public office in 1994, Romney, the son of former Michigan governor George Romney, presented an unusually formidable challenge to Democrat Ted Kennedy. Romney put his record at Bain Capital front and center, boasting of having helped create 10,000 jobs.
Though a 32-year incumbent in 1994, Kennedy responded aggressively by trying to turn Romney’s private equity success story on its head.
A series of attack ads portrayed Romney as a “ruthless” buyout king who pocketed $11 million in the same year Bain Capital laid off scores of employees at an Indiana paper plant and denied health care coverage to Staples employees. (Romney’s campaign responded by saying those employees worked part-time and were therefore ineligible for health benefits; full-timers naturally received coverage.)
Defending himself at the time, Romney said Bain Capital operated in “the real world” where “there’s nothing wrong with companies trying to make money, trying to stay alive, trying to compete.” Romney lost to Kennedy by 18 percentage points, but Kennedy’s need to conjure Romney as a heartless capitalist was seen by commentators as a sign that Romney presented a genuine threat to the well-entrenched senator.
Eight years later, when Romney made his second run for office, he again found his impressive record at Bain Capital turned against him. In the final days of a close 2002 gubernatorial race, Romney’s opponent, Shannon O’Brien, brought back the same story about the Indiana plant and staged a rally in Boston featuring some of the same workers who appeared in Kennedy’s 1994 ads. “It worked in 1994. And supporters of the Democratic gubernatorial nominee … are hoping it will work again,” the Boston Globe wrote at the time. O’Brien’s campaign also ran an ad featuring a Kansas City steel worker who had been laid off after Bain bought GST Steel Co. in 2001.
Romney accused O’Brien of “exploiting” the workers for political gain and said he was on leaves of absence in 1994 when the Indiana paper company laid off workers and in 2001 when Bain bought GST Steel. Romney’s campaign even produced a letter from GST’s president absolving Romney of any responsibility, according the Boston Globe. And Romney’s attorney provided a letter stating that Romney stopped being actively involved with Bain Capital starting in February 1999.
The spotlight is already returning in 2007, with reports now tying Romney, Bain & Co. and Bain Capital to government contracts in Iraq. Romney has called on pension funds to divest of investments in Iraq.
Few Ties To Bain
It’s now been eight years since Romney left Bain Capital, and he has few ties to the firm other than a financial interest kept in the form of a blind trust that contains all of his investments. In his speeches, when Romney wants to prove his business acumen, he turns to his resuscitation of the Salt Lake City games, not his years at Bain Capital; his official biography on his campaign Web site devotes three paragraphs to his role at the Winter Olympics and just one to Bain Capital.
That’s fine with executives at Bain Capital, an organization that is a far cry from the one that Romney knew, which was a mid-market specialist still making its transition from a venture capital firm. Now, it has a hedge fund operation, it’s big enough to take major public companies private, and it operates overseas. Bain partners wish Romney well, but they hope just as much that his eight years away from the firm will keep the spotlight pointed elsewhere. “Like any elected official, Mitt has a track record as governor that will draw a lot more campaign scrutiny than anything he did with Bain,” said a Bain Capital spokesperson. “Since the industry is already in the limelight, we believe Romney’s candidacy will add only a small amount of incremental attention to private equity.”
Romney, whose campaign did not respond to requests for comment, has kept a few old Bain partners among his inner circle. Eric Kriss, who helped launch Bain Capital, served as Romney’s administration and finance secretary. And Bob White, who jumped from Bain & Co. to Bain Capital with Romney in 1984, worked on Romney’s 1994 Senate bid, helped to revive the Salt Lake City games, and ran Romney’s 2002 gubernatorial campaign. White is Romney’s top fundraiser.
But no matter how much Bain Capital blood still flows in Romney, Boston University’s Post predicted he would distance himself quickly from his former business life if the same liabilities that dogged him in 1994 and 2002 resurface. Post believes Romney’s track record at Bain Capital “will be just another piece to move on the political chess board.”