Weighing the evidence on Romney’s departure from Bain: A response to readers

at 03:14 PM ET, 07/14/2012

It’s not often that one of my columns gets more than 5,000 comments, many of them angry. I tried responding via Twitter and various e-mail exchanges but eventually gave up because I was overwhelmed. My analysis was also roasted on the web by various people I often admire, and the Huffington Post rewrote my column to highlight exclusive material that they thought I had played down. My best friend from third grade even sent me a message on Facebook saying I “was carrying the Republicans’ water.”

It was that kind of day!

I always value informed critiques. Given the many comments, I will try to make a general response.

First of all, as The Fact Checker, I began looking into Mitt Romney’s departure from Bain Capital in January in response to Obama campaign allegations that he was responsible for the closing of hundreds of stores at KB Toys. The question is not whether Romney left Bain in 1999 or 2002 — everyone knows he took a leave to run the Winter Olympic Games in Salt Lake City, then decided to run for governor in 2002 and officially backdated his resignation to 1999 — but whether he had a direct role in Bain deals during this period.

For some readers, this may not be important. He is listed as chief executive in SEC documents, he hired the people at Bain, and so they might believe he bears responsibility for these deals. End of story. But that’s really an opinion, not a fact.

When evaluating an attack ad, I have to look at the actual facts behind that ad. Can you really say Romney was responsible for the closing of 600 stores at KB Toys in 2004, given that the initial Bain investment took place in 2000, when he was at the Olympics, and he had clearly left Bain by 2002? It would have been fuzzier if the investment had started under Romney’s confirmed leadership, but I could find no evidence of his direct involvement in this deal.

The years 1999-2002 are a gray period in Romney’s life. The importance of whether you pick 1999 or 2002 as the end of his tenure at Bain is best illustrated by the Obama video ad above.

I hold campaign attack ads to a high standard, especially since they can be highly misleading. On balance, I would expect a campaign to provide direct evidence that the rival had a role in the activities being denounced. I would have come to the same conclusion if the person’s name on the Securities and Exchange Commission documents was Barack Obama, rather than Mitt Romney. Indeed, this column gave three Pinocchios to Republicans who claimed that Obama had a secret plan to raise gas prices because of long-ago comments by his aides.

Some readers who complained about the column may not be regular readers. When checking the facts, I pay little attention to the political party making the claim. I look at everything on a case-by-case basis. On the day new questions emerged about Romney and his departure from Bain, I wrote a long column that critically evaluated 22 claims by Republicans about Obama’s alleged “outsourcing,” finding many of them thinly sourced or absurd. I have repeatedly roasted Romney for misleading claims about the number of jobs he claims to have created at Bain. At the moment, I have given four Pinocchios more often to Romney than to Obama.

Regarding Romney and Bain, the question for me remains whether one can specifically tie Romney to the questionable deals. So far, I have not seen enough evidence that he was actively managing Bain and its investments during this period.

Thus I am standing with my assessment that Romney essentially left Bain in 1999. Our colleagues at FactCheck.org have done the same. But of course I remain open to new evidence or information, and will adjust Pinocchio ratings accordingly.

But readers can judge for themselves. Here is a roundup of the evidence, pro and con.

The Facts

SEC Documents

SEC filings in the 1999-2001 period show that Romney was listed as “sole stockholder, chairman of the board, chief executive officer, and president” of Bain Capital Inc., as well as positions with other Bain entities. Most the SEC filings were signed by other Bain executives, but we found six that have Romney’s signature. Moreover, one filing with Romney’s signature concerned ChipPAC, now known as STATS ChipPac, one of the biggest outsourcing companies in the world.

Counterargument: Bain Capital Inc. was simply an entity that was paid a management fee to run the funds and actually made virtually no profit, since it existed to pay salaries and expenses. Fortune magazine reported that it had obtained the offering documents for Bain Capital funds circulating in 2000 and 2001. None of the documents show that Romney was listed as being among the 18 “key investment professionals” who would manage the money during this period.

I consulted with securities law experts who have many years of experience with these particular SEC filings. One expert pointed out that the titles are basically meaningless, that someone can be listed as a chief executive and have no responsibilities whatsoever.

Financial Disclosure Forms

Romney’s state financial disclosure forms indicate he earned at least $100,000 as a Bain “executive” in 2001 and 2002, separate from investment earnings.

Counterargument: The 2001 filing describes him as a “former executive.” It is unclear why the 2002 filing would list him as an “executive” when the previous year’s form said he had retired. It could simply be a typo. The Romney campaign says this is retirement pay, not earnings. The 2001 and 2002 documents also say that Romney is “a passive, limited partner [with] no management capacity” in Bain funds that were part of questionable deals, such as the eventual bankruptcy of KB Toys.

PR releases and proxy statements

Various news accounts and documents describe him as taking a “part-time leave of absence” from Bain, including a July 19, 1999 news release about the resignation of two Bain managing directors that quotes Romney as the firm’s chief executive, saying, “We will miss them.”

Moreover, the annual meeting proxy statements of Marriott International and Staples filed in 1998-2001 — when Romney was a director of those companies — all show him as working for Bain, until he is listed as retired in the 2002 filings. (See this 2001 filing by Staples, for instance, in which it states that “Mr. Romney has also been Chief Executive Officer of Bain Capital, Inc., a firm that manages certain venture capital funds, since May 1992.”) There are SEC requirements that these descriptions be accurate, and directors must personally provide the information through a questionnaire.

Counterargument: Romney’s departure for the Olympics was sudden, nearly breaking up Bain, and he clearly left open the possibility he would return to the firm. The terms of his separation agreement, dating his resignation as 1999, were not reached until late 2001, so these materials reflect the uncertain nature of his future employment at Bain.

When Romney ran for governor of Massachusetts, Democrats sought to block his candidacy on the grounds that he had not lived in Massachusetts for seven consecutive years, as required.

The 2002 Massachusetts Ballot Law Commission report, which certified he could run, listed findings of fact, adopted unanimously by the commission, made up of representatives of both parties, including a) that he was employed by Bain until early 1999 and b) that when he worked at the Olympics he “worked, on average, over 12 hours per day, 6 days per week.”

The report showed that Romney remained on the board of three companies, two of which had Bain connections — Staples and LifeLike Co. The report said he returned to Massachusetts “to attend meetings at Staples,” but it does not mention that he attended any meetings at Bain, even as it provides a long list of social events that brought him back to the state.

2011 Election filing

In 2011, Romney, as a presidential candidate, filed a public financial disclosure form, under pain of perjury, that stated: “Mr.  Romney retired from Bain Capital on February 11, 1999 to head the  Salt Lake Organizing Committee. Since February 11, 1999, Mr. Romney has not had any active role with any Bain Capital entity and has not  been involved in the operations of any Bain Capital entity in any way.”

 You can see Romney’s signature, on the first page. If Romney lied on this form, that would be a felony.

  

The Bottom Line

 I readily concede that the years 1999-2002 represent a gray period in Romney’s background.

The SEC documents, especially the ones Romney signed, do raise some questions. One could suggest that because Romney did not fully extricate himself from Bain until after his Olympic sojourn ended, he should bear some responsibility for what happened at Bain in these years. You could even say he hired the people who made these mistakes.

But that is entirely different from suggesting that he had a direct role in these suspect transactions — as Obama’s ads claim — or that the SEC documents open Romney up to civil or even potential criminal investigation, as the Obama campaign has charged.

I will continue to evaluate the claims made by each campaign on a case -by-case basis. If new evidence emerges showing Romney had a direct involvement in suspect transactions, that certainly would become part of the evaluation.

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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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