One of Mitt Romney’s most challengingtasks as the Republican nominee for
president is to explain his business career,
which has been the subject of attacks since
last winter’s primaries. The genesis of his
extraordinary wealth is something that he’s
rarely spoken about on the campaign trail in
detail. And when he finally did try to address
the issue at the Republican National
Convention, he never actually mentioned the
name of the private equity firm he ran for
decades – Bain Capital.
A new report by Politicker’s Hunter Walker
helps explain why Romney shies from
defending his firm’s practices. In addition to
buying companies – often strong companies
that could be loaded with debt, Bain also
invested in firms that could wring profit from
crisis. Consider Equity Specialty Holdings, a
reinsurance startup specifically created to
purchase debt from insurance companies
badly hit by the 9/11 attacks.
Walker reports that “Mr. Romney was
invested in Endurance Specialty Holdings
both through Golden Gate Capital, a private
equity firm founded by a former Bain Capital
executive in 2000 and through his direct
interest in another investment firm, CCG
Investment Fund, LP.”
The opportunity for Equity Specialty
Holdings was simple. Its management could
invest in insurers that badly needed to cover
losses due to 9/11, and reap enormous
benefit from the increased fees that the
surviving insurance companies could then
charge. The results were astounding: “Over
the next nine months, the company
generated a net income of $63.5 million. By
the end of 2003, the company was reporting
net income of $263.4 million.”
The Romney family disavows any knowledge
or responsibility for this investment, saying
that their money is in a blind trust. Famously,
Romney dismissed Ted Kennedy’s identical
response in 1994, ridiculing blind trusts as
an “age-old ruse.”
Bain’s reinsurance investment occurred in
that murky period when Romney had left
Bain in order to work on the 2002 Winter
Olympics, yet remained the CEO of the firm.
During that period, Bain made many of its
most controversial layoffs and investments –
including investing in Stericycle, a company
that went on to dispose of aborted fetuses. A
Bain executive has said Romney retained his
position in Bain as leverage while he
negotiated his retirement package. The
implication is that he retained the power to
affect the company’s business.
The world of private equity baffles most
Americans with its tangled web of ownership
and the ability to profit off bankruptcies. But
it’s understandable that Romney would seek
to distance himself from controversial
investments. Profiting from 9/11 doesn’t fit
well with his campaign slogan, “Believe in
America.”