"How Romney’s Firm Drove Steel Plant Into Bankruptcy, But Still Profited Thanks To Federal Bailout"
A Missouri steel company in which former Massachusetts Gov. Mitt Romney’s (R) Bain Capital was the majority shareholder went bankrupt, laid off more than 750 workers, and had to turn to the federal government for a bailout of its pension funds in 2001, according to a special report from Reuters.
Romney, whose time as CEO of Bain Capital has been a centerpiece of his campaign, as he has criticized President Obama for not having experience in the “real economy,” opposed both the 2008 bank bailouts under President George W. Bush and Obama’s rescue of the auto industry. But when Kansas City’s Worldwide Grinding Systems went belly-up less than a decade after Bain became its majority stakeholder, the company, which had been in operation since 1888, had to turn to a federal insurance agency to bailout its pension program in large part because Bain had “saddled” it with “such a heavy debt load”:
Less than a decade later, the mill was padlocked and some 750 people lost their jobs. Workers were denied the severance pay and health insurance they’d been promised, and their pension benefits were cut by as much as $400 (258 pounds) a month.
What’s more, a federal government insurance agency had to pony up $44 million to bail out the company’s underfunded pension plan. Nevertheless, Bain profited on the deal, receiving $12 million on its $8 million initial investment and at least $4.5 million in consulting fees.
While Romney’s firm benefited from a federal bailout, he has been a vocal critic of such bailouts while on the campaign trail. At different times, Romney both supported and derided the federal bank bailouts, but he most recently referred to the Troubled Asset Relief Program as a “slush fund” that “should be shut down.” When Obama proposed bailing out the auto industry in 2009, a rescue that was ultimately successful, Romney famously criticized the plan in a New York Times editorial titled, “Let Detroit Go Bankrupt.”
And while Bain drove Worldwide Grinding Systems into bankruptcy, it didn’t share in the misery. According to Reuters, Bain made at least $12 million from the invesment, and added another $9,000 a year from the company via management consulting fees. Meanwhile, by 1995, the company was carrying debt that amounted to 10 times more than its annual operating income. Six years later, it was bankrupt. “Romney cost me lots and lots of sleepless nights and lots and lots of money,” Ed Stanger, who worked at the plant for more than 30 years, told Reuters.
The Kansas City steel mill isn’t the only chink in Romney’s “job creator” armor. American Pad and Paper (AMPAD), acquired by Bain in 1992, closed two plants, laid off hundreds of workers, and eventually went into bankruptcy. Several companies owned by Bain laid off thousands of workers, even as Bain made handsome profits from its investments — and boosted those profits by abusing offshore tax havens in Bermuda and the Cayman Islands.
Though he left Bain more than a decade ago, Romney is still making millions a year from the firm thanks to a lucrative retirement package. His campaign, meanwhile, finally admitted that its claims that Bain created 100,000 jobs under Romney’s leadership were bogus.