Bain, private equity firms jarred by attacks on Romney
Bain Capital executives have been bracing since last summer for the inevitable downside to their old boss running for president: seeing their firm’s name dragged through the mud by Mitt Romney’s opponents.
But the onslaught has come harder and faster than they or the industry expected, with Romney’s emergence as a frontrunner in the primaries. Republican rivals have painted Bain Capital and private equity firms like it as engaged in the wrong kind of capitalism, making money as corporate raiders and by cutting jobs.
Steve Pagliuca, a managing director at Bain Capital and a Democrat who ran for US Senate in 2009, said, “We have come to understand the hyperbolic and distorted attacks that are part and parcel of today’s campaigns.” He noted, “We are extremely proud of our record and our dedicated team members who recognize the political noise for what it is.”
Pagliuca said the firm remains focused on “making great investments and helping to build and grow great companies.”
If Bain Capital is used to the attacks, after four prior bouts with politics (three for Romney, one for Pagliuca) peers in the business have been chagrined by the sharp criticism coming from Newt Gingrich. A group that backs the former House Speaker is releasing a 28-minute film skewering Romney for destroying jobs.
“These are the guys who are supposed to be on my team, but they’re desperate,” said Kevin Landry, chairman of the Boston private equity firm TA Associates and a Romney supporter. He said Gingrich is misinforming voters.
“I just don’t think Americans have a good appreciation that the only creation of jobs is in the private sector. What’s bad capitalism? When you cut some jobs to save some others? You have to do that sometimes,’’ Landry said.
Meanwhile, the Private Equity Growth Capital Council, the industry’s lobbying group in Washington, is launching a counter-attack to portray private equity firms as job creators. The attacks by Republicans on their business rankles, not only because the party generally embraces business, but because some of the group’s key members, including buyout giants Blackstone Group and Kohlberg Kravis Roberts & Co., have been donors to Gingrich over the years.
In this election cycle, Gingrich’s 12th-largest source of funds is the Blackstone Group, the New York investment firm, with employees there donating $7,000 to his presidential campaign, according to the Center for Responsive Politics.
Back in 1996, when Gingrich was Speaker of the House, he received $5,000 from private equity executives -- notably Henry Kravis of KKR and John Childs, then of Thomas H. Lee Partners in Boston, according to analysis by MapLight, a nonprofit that tracks money in politics.
The Gingrich campaign did not immediately respond to a request for comment.
Gingrich, despite his comments about Romney’s work, also served on the advisory board of a private equity firm, Forstmann Little & Co., after leaving Congress in 1999, Fortune and the New York Times first reported.
Ken Spain, a spokesman for the Private Equity council said in a statement that it’s no surprise Romney’s record is being scrutinized. But, he said, the council aims to show people “how private equity grows and saves businesses.” Going forward, he said, “we plan to aggressively defend the industry against any mischaracterizations regardless of political affiliation.”
Romney’s position on the campaign trail has been that buyouts often involve troubled companies, and that job cuts are sometimes necessary to repair a business, before being able to grow it. But critics point to deals where Bain and Romney made profits even when the companies went bankrupt and jobs were lost.
Bain partners -- many of them friends with the man who started their firm back in 1984 -- would prefer to quietly run billions of dollars in private equity, venture capital and hedge funds, without the national spotlight shining so unflatteringly on them.
To some extent, the Bain Capital partners are hardened to the scrutiny after four prior encounters with the rough-and-tumble political world. They were truly jarred back in 1994, when Romney first ran against Edward M. Kennedy for US Senate, and Kennedy unleashed an attack on him for layoffs at an Indiana paper company called Ampad. Later, there was Romney’s successful run for governor of Massachusetts and unsuccessful first attempt at running for president.
The Ampad deal and others have been detailed many times over, excruciatingly for the Bain Capital partners, who say they have created many more jobs than they have lost. Romney’s partners are not arguing with the revised number of jobs he now says he helped create -- 100,000 versus the tens of thousands he used to cite. But nor would they back up the number or account for it in detail.
Landry, of TA Associates, said private equity has helped the companies his firm has invested in. Since 2004, employment at about 50 companies backed by TA has grown 20 percent to 68,747.
Beth Healy can be reached at firstname.lastname@example.org.