“Mitt Romney the businessman. Take a look at his record. Romney bought companies; drowned them in debt; many went bankrupt; thousands of workers lost jobs, benefits and pensions. But for every company he drove into the ground, Romney averaged a $92 million profit.”

— Voice-over from Priorities USA Action ad attacking GOP presidential candidate Mitt Romney

“14,000 workers laid off.”

— Text from Priorities USA Action ad

Most of the anti-Mitt Romney ads in recent weeks have focused on Romney’s record at the private-equity firm Bain Capital, accusing the Republican presidential candidate of being everything from an outsourcing pioneer to a corporate raider. For what it’s worth, we debunked those notions in several previous columns.

We’ve also awarded Priorities USA Action, a super PAC that supports President Obama, with one Pinocchio for an ad that, in part, accused Romney of making “millions off of companies that went bankrupt while workers lost promised health and retirement benefits.” In addition, we’ve examined some of the companies that laid off workers while Romney served as Bain’s chief executive officer.

The Bain exaggerations are on the other side as well. We dinged the GOP challenger with three Pinocchios for laying claim to job growth that occurred after his tenure with the private-equity firm had ended. We also gave three Pinocchios to Bain Capital — and the Romney campaign — for sugarcoating their business record.

This latest video is unique. It blames Romney for the highest and most specific number of job losses we’ve seen anyone attribute to him as a former businessman. Let’s take a look at the Bain companies that filed for bankruptcy and fired workers to determine how much blame the presumptive GOP nominee deserves.

The Facts

First, a bit of background on Bain Capital. Romney founded the firm, which started out in venture capitalism and helped launch a few massive successes such as Staples and Sports Authority.

Bain eventually plunged into the world of private equity, establishing itself as a heavyweight in the field of leveraged buyouts. This is a practice in which investors take over controlling shares of companies (often struggling ones), and then typically borrow lots of money, acquire competitors, and consolidate operations in hopes of turning around their fortunes.

The firm also collected hefty management fees and cashed in on the loans of at least four companies before they went bankrupt — taking out the money as dividends.

Bain participated in about 80 leveraged buyouts during the Romney era, and just eight of the companies filed for bankruptcy, to the best of our knowledge. (See page 16 of the document we’ve linked to.)

Bain seems to have applied roughly the same management approach to each of the businesses, and the vast majority — about 90 percent, it seems — turned out fine.

The companies that filed for bankruptcy include Ampad, Dade-Behring, DDi, Cambridge Industries, Maxim Crane, Mother Care, and Stage Stores.

It’s a stretch to say Bain “drowned” these companies in debt, as though the firm purposely drove them toward insolvency or just engaged in unmitigated borrowing sprees. Here’s an analysis of Bain’s investment record from Democratic fundraiser and former Obama administration car czar Steven Rattner:

“Bain had less than its share of bankruptcies, but it had a few — it appears four — that are particularly troubling. In all those cases, when the portfolio companies initially showed signs of promise, Bain took advantage of their progress to borrow more money, which it took out as a dividend. Later, the fortunes of each company turned down, ultimately into insolvency.

“When Bain ‘releveraged’ those companies and took the cash out, the investment managers of course had no idea that the companies would later falter. But with the benefit of hindsight, taking a more conservative approach and refraining from squeezing these dividends out of the companies would certainly have been more prudent.

“Let’s be sure to keep these few problem children in perspective. During the Romney years, Bain made 77 significant investments — and a number of smaller ones. It made billions for worthy investors and, yes, doubtless created some incalculable number of net new jobs for the U.S. economy.”

It’s also worth noting that a combination of forces besides debt led to insolvency for these companies, including reduced market share, bad economic conditions, and rising interest rates. Consider this passage from a July 2006 AP article describing the path toward bankruptcy for Dade-Behring:

“Over the next few years, the euro weakened against the dollar. Since half of Dade Behring’s sales were in Europe, the company had fewer dollars coming in. At the same time, rising interest rates meant higher payments on its increased debt load. To deal with the one-two hit, Dade-Behring laid off 1,000 of its 7,000 employees [internationally] and shuttered factories.”

Okay, so it didn’t help that the company had accumulated loads of debt. But that’s pretty much par for the course when it comes to strengthening a business — Keynesian economists argue much the same thing when it comes to the national economy.

As for that precise number of layoffs — 14,000 — Priorities USA provided a long list of news articles citing job losses for Bain companies. But this is hardly the best method for producing totals, since it could easily lead to double counting. The reports weren’t always clear about where and when the cuts took place, after all.

In the case of Dade, Priorities USA cited five articles, at least two of which seem to be talking about the same round of 1,000 layoffs following the company’s merger with Behring. The super PAC counted this as 2,000 job losses.

We noticed another problem with this number: A January 2008 Boston Globe article noted that some of the laid off workers “were offered transfers to other facilities.”

Let’s pretend for the sake of argument that Priorities USA cited perfect numbers. Even then, Bain’s companies would have lost 4,200 jobs while Romney served as the firm’s chief executive — from 1984 until February 1999. The rest of the layoffs occurred after he left, sometimes as long as five years later, as was the case with Anthony Crane. (Democrats sometimes exploit a gray area in Romney’s departure from Bain, but The Fact Checker, FactCheck.org and Fortune magazine have concluded he effectively left in early 1999.)

Here’s how a New York Times article explained that deal last month:

“Bain bought Anthony Crane, a crane rental company, which then acquired a slew of smaller competitors, financed by debt. But a building slowdown hit the company hard, and it filed for bankruptcy in 2004.”

Again, we see that debt was not the only problem. We should also note that Priorities USA attributed 1,220 layoffs to Romney because of the crane company’s troubles. Yet the GOP candidate had left Bain, managed the 2002 Olympics and was serving as governor of Massachusetts by the time it filed for bankruptcy.

We found no articles mentioning layoffs for Anthony Crane, and SEC filings did not show a reduction in employment during Romney’s tenure. But Priorities USA cobbled together a bankruptcy filing, which showed 780 full-time workers in 2004, with a blurb from the trade publication Rental Equipment Register that said the company had “2,000 employees” in the year 2000.

Again, Romney left Bain in February 1999. Besides that, the bankruptcy document reported 780 full-time workers and 900 contract crane operators, which the super PAC never mentioned to us. It’s likely that the trade publication’s 2,000 figure was a ballpark estimate representing both permanent and contract workers. If so, we still don’t have a shred of evidence proving that layoffs occurred at Anthony Crane.

Priorities USA argued that Romney deserves blame for putting these companies on a path toward bankruptcy and layoffs before he left Bain. While there’s a case to be made in this regard, it’s impossible to determine the cutoff point for responsibility.

For example, the New York Times article noted that Cambridge Industries “was finally forced into bankruptcy in 2000, when Bain declined to provide the company with an infusion of capital needed to fulfill a major new order.” Here, debt seems to have hurt the company. But the straw that broke the camel’s back is a decision that took place without Romney, just one year after he left the firm.

As for the claim of $92 million in profits from each bankrupt company, the ad said that’s what “Romney averaged.” But the number — if it’s correct — would actually apply to all the Bain partners. It’s not like the GOP candidate would have pocketed the money himself, which is what the video misleadingly suggests.

Priorities USA founder Bill Burton had this to say about Romney’s record at Bain: “Mitt Romney is dishonestly trying to avoid responsibility for the devastating impact of his decisions while in charge of his buyout firm.” He added, “Profiting from bankruptcies and failure is just one more way that Romney plays by a different set of rules than middle class Americans.”

The Pinocchio Test

In January, we awarded three Pinocchios to Romney for claiming he created 100,000 jobs at Bain Capital, partly because a great many of those jobs seemed to have come about after his time with the firm. This established a standard that we’ve generally followed for analyzing post-Romney Bain: It doesn’t make sense to credit him with good news or bad news that occurred after he left the company.

Time and again, we’ve dinged campaigns when they’ve blamed Romney for Bain-related outsourcing and layoffs that didn’t happen under his watch. We’ve allowed some leeway when these groups attack the candidate for his tenure as chief executive, because that’s largely “fair game for scrutiny of his record as a business executive,” as we said in a previous column.

Still, this Priorities USA ad goes too far. Only a relatively small portion of the supposed 14,000 layoffs could have occurred during Romney’s time with Bain, and it’s impossible to know how much blame to pin on the former executive for the remaining losses. Furthermore, the ad misleadingly suggests that Romney himself collected $92 million in profits from bankrupt companies, but all the Bain partners would have shared that money.

Priorities USA earns three Pinocchios for its latest attack on GOP challenger’s Bain record. The claims are only slightly less tenuous than Romney’s boast of creating 100,000 jobs.

Three Pinocchios

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