By Matthew Mosk and John Solomon
Washington Post Staff Writers
Sunday, October 21, 2007
At key moments during his rise in politics, Republican presidential candidate Mitt Romney has returned to the same reliable source for money, advice and corporate muscle: Bain Capital, the investment company he founded in the 1980s.
The business executives who helped him start the firm and cement its early investment deals were called back to duty when he ran for Senate in 1994, revived the 2002 Winter Olympics, won the Massachusetts governorship and launched his bid for the White House. They fully expect another call should he win the presidency.
"I'm on my fifth 'once in a lifetime opportunity' with Mitt," said Robert F. White, one of Romney's early partners at Bain whose latest assignment is as chairman of Romney's presidential campaign.
Romney frequently invokes his success at Bain, the team he assembled there and the shrewd decision-making that helped turn struggling businesses into gold mines. And in what he regards as perhaps his greatest personal triumph -- reviving the tarnished Salt Lake City Olympics -- his Bain colleagues played an important role.
When Romney was tapped to head the scandal-plagued Salt Lake City Olympic organizing committee, he lined up Bain's consulting arm to analyze the Olympics' accounting ledgers, and he summoned past and current Bain partners to offer their expertise, all at no charge. He targeted several companies that had been acquired by Bain or had installed Romney on their corporate boards for Olympic sponsorships, raising tens of millions of dollars. He also solicited Bain partners for $1 million in personal donations.
In his autobiography, Romney wrote that he severed ties with Bain in 1999 when he took the Olympic job and told his partners he wasn't coming back. But R. Bradford Malt, one of Bain's lawyers, who now manages Romney's personal finances, said Romney took a leave of absence, "partly because of the speed it all happened and partly because it was a limited gig." That meant Romney retained full, sole ownership of the firm for two more years as he worked on the Olympics.
Malt, who was designated by the campaign to address Romney's time at Bain, said Romney finally resigned and reduced his role at the company to that of a passive investor in 2001 when it became clear that he was going to run for Massachusetts governor after the Olympics. The campaign declined to comment further.
Romney started Bain Capital in 1984 in Boston and built it into one of the largest and most successful equity firms in the United States, with billions in assets and a successful record of leveraging buyouts of famed but struggling companies such as Domino's Pizza, Staples and the pharmacy chain Duane Reade. Under Romney, Bain earned a reputation for turning around companies through shrewd cost-cutting and growth strategies.
In the process, Romney's personal fortune soared to as much as a quarter-billion dollars. Though he left the company in 2001, Romney and his family still own a significant stake in the equity firm through his blind trust, which in 2006 and early 2007 earned him $7 million to $15 million.
"The people I know got involved with him because they believed in him, not because they were invested with him or depending on him for their financial support," said White, who took leaves from Bain to help Romney run for Senate in 1994 and to help run Romney's transition team when he won the Massachusetts governorship in 2002.
White said Romney asked him to leave the firm in February 1999 for several weeks to join him -- without pay -- in Salt Lake City to assess the Games' finances and management.
What they found was demoralizing, White said. Ten members of the International Olympic Committee had resigned or were expelled in the wake of a bribery scheme that engulfed the bid to bring the Games to Salt Lake City. The ledgers showed the Games were hundreds of millions of dollars in the red, and prior Olympic sponsors were reluctant to donate for fear of being associated with the problems.
"My key advice to him was to come back on the airplane to Boston because I thought the situation was helpless," White said. "It was a dire situation. But he obviously felt very strongly that the situation was salvageable and did a great job."
On repeated trips between Boston and Salt Lake, White helped the Olympic team identify $98 million in budget cuts while reviewing with Romney the strengths and weaknesses of each Olympic manager.
Others called to duty for the Olympics gave a similar account. When the Games hadn't signed a new sponsor in 13 months, Romney needed a plan for reducing costs and raising money. Bain's consulting arm answered the call.
Bain & Co. had gained familiarity with the Olympics when it helped Dallas make a bid for the 2012 Games, so it offered to help Romney in Salt Lake City. The consulting arm performed six to eight weeks of free work evaluating the Games' budget.
"There was quite a financial gap," said Mark Gottfredson, a partner in the firm's Dallas office. "My assessment was it was a pretty inflated budget they had and probably unrealistic, and it needed to be managed."
When Romney installed his own chief financial officer for the Olympics, he once again tapped the Bain pipeline to lure Fraser Bullock, an early partner at Bain Capital who had left in 1986 to start his own business. "It was so difficult and so challenging, I believed only Mitt could pull it off," said Bullock, who initially resisted the idea of going to Salt Lake.
When Romney began recruiting new corporate sponsors for the Games, he started with the contacts he had made through Bain. "The first place we turned was his Rolodex," recalled Mark Lewis, who oversaw Romney's revival of Salt Lake City sponsorships. "He had the connections to make things happen."
Lewis's goal was to find new sponsors in various business niches: a soda company, a shoe company, a paper goods supplier, a bank. Most often, Romney would place the initial call, Lewis said.
"Mitt would pick up the phone, and they knew that name, and they knew of his reputation and of his experience and the results he had presented," Lewis said.
Romney reached out, for instance, to Grant Pace, a former Bain consulting colleague who had become a division head at Nu Skin, a Utah-based maker of skin-care products. "He simply talked about the merits of sponsorship, and we had a lively discussion about whether the sponsorship made sense for a company our size," Pace said.
The company made a huge commitment -- estimated at the time to be $20 million.
When it came time to identify an office supply store as an official sponsor, Romney turned to one of his earliest successes at Bain Capital. In the mid-1980s, Romney chose the Staples chain and its founder, Thomas Stemberg, for one of Bain's major initial investments. The gamble paid off as the office supplier turned into a financial powerhouse, and Romney eventually joined Staples' board of directors.
Spurned for Olympic sponsorships by Office Depot and OfficeMax, Romney decided to solicit Stemberg's company even though he continued to serve on its board. Stemberg reluctantly signed on.
"I was intrigued by the ability to use the [Olympic] rings for a couple of million dollars of product," Steimberg recalled. "He told me our deal was only possible because Office Depot and OfficeMax had both said no to major sponsorships."
But Romney changed course on his longtime friend when Office Depot later came back with a much more lucrative sponsorship offer. Stemberg said he was disappointed "but respected Mitt's ability to put doing the right thing ahead of rewarding friends."
As a gesture, Romney offered tickets to Staples executives to attend the Games. "His then telling me if I gave $100,000 personally, I would get great tickets was a typical Mitt move: win, win, win. It worked for me and added even more to Olympic coffers," Stemberg said.
Later, when Romney became governor of Massachusetts, Stemberg helped persuade him to tackle the thorny issue of health care. White, as head of his transition team, tapped other Bain connections for working groups that would study such issues as education and health insurance for the soon-to-be governor.
The continuing association also has paid off politically. Current Bain employees have donated nearly $197,000 to Romney's presidential campaign, making the firm one of his largest sources of political cash. And numerous former and current Bain partners and executives of companies Romney bought through the firm are raising hundreds of thousands of additional dollars.