“When Mitt Romney and Bain closed the plant, I lost my healthcare, and my family lost their healthcare. And a short time after that my wife became ill….She passed away in 22 days. I do not think Mitt Romney realizes what he’s done to anyone, and furthermore I do not think Mitt Romney is concerned.”
— Former steelworker Joe Soptic, in a new ad by Priorities USA
(NOTE: Since we had previously examined at length the circumstances of this Bain investment, we originally had restated the main points of an earlier column. Frankly, we were a bit distracted trying to untangle the welfare charges and countercharges on Tuesday. But new information has come to light and we have updated the column with a Pinocchio rating.)
Joe Soptic, a former steelworker, makes yet another appearance in a pro-Obama ad, this time for the Super PAC Priorities USA Action.
We have examined this case before, and for the benefit of readers we repeat our main points from an earlier column that awarded the Obama campaign One Pinocchio for the use of this case study against presumptive GOP nominee Mitt Romney.
Most controversially, Soptic this time appears to blame Romney for the death of his wife after he lost his health insurance when the steel plant closed.
Romney was no longer actively managing Bain Capital when the steel company filed for bankruptcy protection in 2001 and closed its Kansas City plant, causing more than 700 workers to lose their jobs and health insurance, as well as part of their pensions. But a case can be made that he was involved in the initial investment and the overall direction of the company before he took on the job of running the Winter Olympics in Salt Lake City.
Bill Burton of Priorities USA Action said it would be “overstating” the point of the ad to say Soptic connected Romney to his wife’s death. “This is another in a series of ads that demonstrates how long it took for communities and individuals to recover from the closing of these businesses,” he said. “Families and individuals had to find new jobs, new sources of health insurance and a way to make up for the pensions they lost. Mitt Romney has had an enduring impact on the lives of thousands of men and women and for many of them, that impact has been devastating.”
Unlike some of the tales of job-killing and factory-closings that have been thrown at Romney, this is a relatively straightforward story: The initial investment in the steel company was made in 1993 by Bain under Romney’s leadership, and the company took on hundreds of millions of dollars in debt while paying Bain investors millions of dollars in dividends.
Bain purchased GS Technologies, a mini-mill in Kansas City — the focus of the ad — and then combined it with Georgetown Industries Inc. in South Carolina, creating GS Industries. Romney was a hands-on manager at Bain, but it is unclear how much direct involvement he had with the newly created company.
Roger Regelbrugge, who became chief executive of the new firm, told Bloomberg News last year that he met Romney at a luncheon in Boston and may have had some subsequent conversations. But he said that most of his communication with Bain was through two Bain executives who served on the GS board — and Romney was not on the board.
Romney, however, has acknowledged he was involved in the initial deal.
“I take personal responsibility for making the investment,” Romney told the Boston Globe in 2002 when asked about the plant closure. “But I didn’t manage these companies. Our philosophy at Bain Capital was to support management teams in companies where we saw potential for growth, or in companies that were in financial distress that we thought we might be able to save.”
Certainly, the Kansas City plant was already on a downward slide when Bain Capital showed up; it is possible the plant may not have survived as long as it did without Bain’s investment. A timeline published by the Kansas City Star in 2001 showed the plant had employed 4,500 workers in 1970, but by 1983, it had shrunk to 1,500 workers.
“Poor market conditions forced a wave of layoffs in the early 1980s and led the company to prune its product line,” Reuters reported earlier this year in a lengthy report on the deal. “By the early 1990s, the plant focused on two items: wire for products such as mattress springs and tires, and high-carbon balls and rods used by the mining industry to pulverize rocks. The mill's equipment was out of date, and it faced stiff competition from Nucor Corp., which also made grinding balls.”
After Bain made its investment, and the company issued new debt, the plant was able to invest in new equipment. Still, the record is clear that Bain reaped a substantial return on its investment — at least $12 million — while the company’s debt burden soared to $378 million. That debt left the company vulnerable when a flood of cheap imports dramatically lowered prices and devastated the U.S. steel industry. More than two dozen steel companies filed for bankruptcy protection during that period.
But how much of this was Bain’s fault — or Romney’s?
The Reuters article quoted union officials as blaming Bain for saddling the company with too much debt. But Reuters also quoted an analyst as blaming the union — which mounted a strike in 1997 over pension benefits — and noting that all of the steel companies that failed in that period were unionized. And Regelbrugge, the former chief executive, blamed his successor for hiring poor managers. “I have no question that the company would have survived under different management,” he said. (One could argue that was also Bain’s fault.)
Mark Essig, the chief executive at the time of the bankruptcy filing, cited the low prices for steel products but also pointed the finger at the company’s debt load. He told New Steel magazine in 2001 that the company had a debt of $500 million, “which is far too much debt for a company of our size.” The company had net losses of $16 million, $25 million and $53 million in 1997, 1998 and 1999, respectively — and was making interest payments of $40 million a year.
Essig also cited the high cost of electricity in Kansas City, as well as natural gas. He said the closure of the plant was permanent because “we don’t expect wire-rod, electricity, and natural-gas prices to ever make it profitable.”
In any case, Romney had left day-to-day management of Bain in February 1999 to help organize the Salt Lake City Olympics. So he was running Bain when GS Industries settled the 1997 strike with workers by promising guarantees on their pensions, but he was not there when the company used the bankruptcy process to break those promises and slash those benefits. (The U.S. Pension Benefit Guaranty Corp. later determined that the company underfunded the pension plan by $44 million.)
The Kansas City plant was closed in February 2001. Romney did not legally extricate himself from Bain Capital until shortly before his Olympic tenure ended in 2002. (A 2002 Boston Globe article said he retained a key financial interest until August 2001.)
As we have noted before, a 2002 statement Romney filed with the Massachusetts State Ethics Commission listed him as a 100 percent owner of “Bain Capital Inc.”
But there is less than meets the eye here. Bain Capital Inc. was the management firm, which was paid a management fee to run the funds and actually made virtually no profit, since it existed to pay salaries and expenses. After Romney formally left Bain in 2001, a new entity called “Bain Capital LLC” took over the management function.
We have given the Obama campaign Pinocchios for blaming Romney for Bain deals that took place entirely after he left for the Olympics gig. This case is a different matter. It falls into a gray area, because the investment and many key decisions were made while Romney was running Bain, as he has acknowledged — even if the denouement came when he was no longer in charge. Romney, in fact, in the past has tried to claim credit for jobs created at companies years after he left Bain, so it’s no surprise the Obama campaign would try to tag him for job losses.
Bain Capital issued a statement saying that “we understand that in a political campaign our exemplary 28-year record will be distorted and complex business situations will be portrayed in a simplistic way.” This is how Bain described the case of GS Industries:
“Bain Capital undertook an ambitious plan in 1993 to turnaround GSI, a struggling manufacturer of specialty steel products that was slated for closure if no investor could be found. We invested more than $100 million and many thousands of hours into this turnaround, upgrading its facilities in an attempt to make the company competitive. This was unfortunately at a time when the steel industry came under enormous pressure, and nearly half of all U.S. steel companies went into bankruptcy.”
The death of Soptic’s wife.
In the ad, Soptic says: “When Mitt Romney and Bain closed the plant, I lost my healthcare, and my family lost their healthcare. And a short time after that my wife became ill.”
The operative phrase is “short time.” The plant closed down in 2001. Politico first reported that Ranae Soptic died in 2006—five years later. (That’s when Romney was governor of Massachusetts.) “Soptic went to the hospital for pneumonia, but doctors found signs of very advanced cancer, and she died two weeks later on June 22,” the Kansas City Star reported on June 26, 2006.
Part of the issue is when his wife got cancer. Clearly, if she had advanced cancer, it may have taken years to develop. But the phrase “short time” certainly leaves the impression that things happened quickly after he lost his health insurance.
In an interview with our colleague Nia-Malika Henderson, Soptic declined to comment on whether he believes Romney is to blame for his Ranae’s death. But, referring to his former employer, he said: “They made certain promises and I feel like if they did fulfill those promises she would have had health insurance.”
In the ad, Soptic also says that when “Romney and Bain closed the plant…my family lost their healthcare.”
That’s not quite accurate either. CNN reported that, from speaking with Soptic, it had learned that his wife had continued to have her own insurance after the plant was shut down. She later lost the coverage in 2002 or 2003 when she left her own job because of an injury.
Here’s the CNN report:
The Pinocchio Test
Lay aside the question of whether Romney left active management of Bain in 1999 or 2001. The fact that Soptic’s wife died five years after the closure of the plant—and that she had had her own health insurance for a period after he lost his job—makes her passing largely irrelevant to Romney’s involvement in this transaction.
Yes, people without health insurance are less likely to survive cancer. Yes, Soptic lost his health insurance when the plant closed. Yes, Romney was involved in the deal at the beginning. But still...it kind of reminds us of the so-called “butterfly effect”--that a storm starts with the flapping of a butterfly’s wings.
As we noted, a case could be made that Bain’s involvement extended the life of a dying steel plant, in which case Soptic kept his insurance longer than he might have expected.
Soptic is welcome to his opinion on possible reasons for his wife’s death, but that does not mean Obama supporters should exploit it. On just every level, this ad stretches the bounds of common sense and decency.
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