The bailout for Bain Capital

Posted by AzBlueMeanie:

When President Obama proposed bailing out the auto industry in 2009, a rescue that was ultimately successful, Willard "Mittens" Romney infamously criticized the plan in a New York Times editorial titled, “Let Detroit Go Bankrupt.”

But when his vulture capitalist firm Bain Capital ran into trouble with one its investments, Bain Capital got a federal bailout. Reuters reported last week in a Special report: Romney's steel skeleton in the Bain closet:

[I]n October 1993, Bain Capital, co-founded by Mitt Romney, became majority shareholder in a steel mill that had been operating since 1888.

It was a gamble. The old mill, renamed GS Technologies, needed expensive updating, and demand for its products was susceptible to cycles in the mining industry and commodities markets.

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 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.

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The story of Bain's failed investment in the Kansas City mill offers a perspective on a largely overlooked chapter in Romney's business record: His firm's brush with a U.S. bailout.

His supporters say the pension gap at the Kansas City mill was an unforeseen consequence of a falling stock market and adverse market conditions. But records show that the mill's Bain-backed management was confronted several times about the fund's shortfall, which, in the end, required an infusion of funds from the federal Pension Benefits Guarantee Corp.

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The steel company declared bankruptcy in 2001. Romney continued receiving dividends from Bain after his departure. He accumulated a personal fortune of between $190 million and $250 million, according to campaign disclosure forms.

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Overall, Bain made at least $12 million on the steel company it created by merging the Kansas City mill with another in South Carolina before the new entity declared bankruptcy in 2001. Bain also collected an additional $900,000 a year through 1999 for management consulting services, public filings show.

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GS Industries declared bankruptcy on February 7, 2001, and said it would shut down the Kansas City plant, eliminating 750 jobs. In a press release, the company said the bankruptcy was triggered in part by "the critical need to restructure the company's liabilities."

Workers soon found out what that meant. In April, GS said it was shedding the guarantees it had promised its workers in the event of a plant closure – the severance pay, health insurance, life insurance and pension supplements that had been negotiated during the 1997 strike.

Workers could buy health insurance through the company's plan, but the company would no longer share its costs. For many who were struggling with asbestosis or other ailments contracted during their years of work, the cost was prohibitive.

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The U.S. Pension Benefit Guaranty Corp, which insures company retirement plans, determined in 2002 that GS had underfunded its pension by $44 million. The federal agency, funded by corporate levies, stepped in to cover the basic pension payments, but not the supplement the union had negotiated as a hedge against the plant's closure.

The Kansas City millworkers are still fuming after being left with no health benefits and a reduced pension check.

MoveOn.org released a new ad featuring steel worker and Army veteran Donny Box, who lost his job of 32 years at Kansas City’s GST after Romney’s firm took it over.

MoveOn.org released another new ad featuring steel worker Glen Patrick Wells, who who lost his job of 34 years at Kansas City’s GST after Romney's firm shut it down. Wells is a self-identified conservative who voted for Bush an McCain. Another Romney layoff victim, this one a conservative, speaks out – The Plum Line.

As Steve Benen noted, "Romney has been haunted by his victims before, and in his 1994 campaign, this mattered. Many of Romney’s victims drove to Massachusetts to protest the Republican’s campaign, and Democrats put together a half-dozen ads featuring laid-off workers who said they suffered while Romney lined his pockets at their expense."