CHARLESTON, W.Va. -- How did Mitt Romney get $250 million? Mostly by using borrowed money to take over corporations, bleed them for huge profits -- then leave many of them doomed to bankruptcy, unable to repay giant loans that Romney incurred to buy controlling interest in them.
This grim allegation is outlined in a Rolling Stone magazine expose titled "Greed and Dept: The True Story of Mitt Romney and Bain Capital." It says the Republican presidential nominee "staged an epic wealth grab, destroyed jobs, and stuck others with the bill."
Romney and Bain employed the "leveraged buyout" tactic in which borrowed funds are used to buy controlling interest in a firm, after which the firm becomes liable for the loans used for its takeover. The magazine cites these examples:
• Ampad -- Bain used only $5 million of its own money to seize American Pad and Paper, funding the rest of the takeover with loans that saddled Ampad with $60 million annual debt repayment. Bain also charged Ampad $7 million in management fees. "Ampad wound up going bankrupt, and hundreds of workers lost their jobs, but Bain and Romney weren't crying: They'd made more than $100 million on a $5 million investment," the magazine says.
• KB Toys -- "Bain put up a mere $18 million to acquire KB Toys and got big banks to finance the remaining $302 million it needed," the article says. Soon afterward, as new manager of the company, Bain pulled a "dividend recapitalization" that gave $83 million to Bain investors, including Romney. "Bain added $300 million debt to the firm's bottom line while taking out more than $120 million in cash -- an outright looting." KB Toys went bankrupt and its jobless employees got no severance pay.
• Stage Stores -- Bain invested $10 million and borrowed $300 million from crooked "junk bond" king Michael Milken to take control of two mercantile chains, which were merged into Stage Stores. The latter "filed for bankruptcy protection in 2000 under the weight of more than $444 million in debt" -- while Bain got "a $175 million return on its initial investment of $10 million."
Ironically, Romney is campaigning strongly against government debt, yet he used debt as his chief mechanism to gain control of corporations.
Under his leadership, Bain Capital didn't manufacture cars, grow food or perform any other social purpose -- it merely grabbed stock in existing firms, doing so mostly with borrowed money, often leaving the firms and their employees to sink into ruin.We think this was a miserable form of capitalism.