Last updated on September 5th, 2012 at 09:38 pm
It is not unusual for powerful men to assemble a team of dedicated assistants they can trust to look out for their interests, and often, they work on the periphery doing important work away from the public’s gaze. It is standard practice for high-profile and successful football coaches to take their trusted assistants from team to team, and politicians are notorious for keeping their staff intact as they move from one elected office to the next. Indeed, even organized crime figures surround themselves with confidential acolytes who live to advance the crime boss’s agenda, and it is equally true in the corporate world of high finance. Central to any corporation or financial organization are lawyers and savvy managers who understand the law and what it takes to manipulate the courts to their business’s advantage, even if it means using barely legal tactics to reap the greatest profit regardless who gets fleeced.
In the September 13 issue of Rolling Stone, Matt Taibbi’s cover story, “Politics: Greed and Debt: The True Story of Mitt Romney and Bain Capital,” lays out Willard “Mitt” Romney and Bain Capital’s practice of leveraging companies with debt, “extracting million-dollar fees from those same companies” in exchange for telling them who to fire to finance the debt he saddled them with to begin with. It is a tactic gangsters called “bust-out” where they take over a business, run up debt on the company’s credit line, and when the debt comes due, they burn down the business and collect the insurance money leaving the company with the original debt, zero assets, and bankruptcy. Throughout Bain Capital’s “creative destruction” process, Bain Capital and Romney always got paid first even as companies languished in bankruptcy proceedings.
Taibbi briefly touched on the KB Toys deal when Romney was a Bain investor and owner, and it is certain that what Bain Capital did to KB Toys was typical of Romney’s business model. In order to take out more than $120 million in cash, Bain added $300 million in debt to the firm’s bottom line that creditors claimed in a lawsuit was “breaking open the piggy bank” by giving outrageous bonuses to top managers that helped send the company into bankruptcy. One of the beneficiaries of the bonuses was KB Toys CEO Michael Glazer who earned $18.4 million and was part of the Romney bankruptcy team.
What Taibbi did not go into detail about was how Romney and Bain Capital took companies into bankruptcy and gamed the system with a web of deceit by inserting their team of lawyers and directors intricately tied to Bain Capital. In fact, the team followed several companies Bain Capital leveraged into bankruptcy and colluded to serve as creditor’s and debtor’s council as well as install directors loyal to Bain to assure a company’s inventory and assets flowed to Bain which allowed them to buy the company at a discount and start the procedure all over again. The team were instrumental in the bankruptcy proceedings of Stage Stores, a company Romney owned controlling interest in and is crucial to understanding why he was still fully engaged at Bain Capital regardless his alleged “retroactive retirement” in 1999. Stage Stores filed bankruptcy in 2000, and Willard “Mitt” Romney was listed as Bain Capital founder, owner, and controlling shareholder.
The team Romney gathered for the Stage Stores bankruptcy in 2000 (00-35078), were director, Jack Bush who was also CEO of Bain Capital’s Idea Forest and integral to Jumbo Sports (another Bain company) bankruptcy. Bush has an extensive record of bankruptcy dealings, and integral to Romney’s bankruptcy team. Serving with Bush as co-director was Michael Glazer (KB Toys CEO) while Stage Stores was in bankruptcy. Stage Stores hired Barry Gold as an assistant director to Jack Bush and Michael Gazer who in turn hired Paul Traub as attorney for Stage Stores. The team of Glazer, Gold, and Traub were all involved in KB Toys and eToys bankruptcy, and played both sides of the ball in eToys federal bankruptcy case. More on that later.
When Jack Bush and Barry Gold hired Paul Traub, they failed to disclose a prior relationship that should have immediately disqualified Traub, and is in fact perjury. In 1999, a Wall Street lawyer, John Gellene, was caught lying in two disclosures and when it was exposed that he did in fact have a conflict of interest, he was indicted and prosecuted in U.S. v. Gellene (7th Cir. 1999). Gellene was convicted under USCS 152(3) that says, “A person who knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1s746 of title 28, in or relation to any case under title 11 (bankruptcy), shall be fined under this title, imprisoned not more than 5 years, or both.” In Gellene’s disclosures, he said, “After due inquiry, I am unaware of any other current representation by my client of an equity security holder of institutional creditor.” Mr. Gellene went to prison.
When it was discovered Traub did have prior dealings with Jack Bush and Barry Gold in Jumbo Sports and other deals, instead of his immediate disqualification and prosecution of Paul Traub, he filed a supplemental affidavit outlining previous dealings in several cases. Remember, according to the Gellene case, lying under oath is perjury, and yet they were allowed to proceed in bankruptcy court and it brings into question how deep malfeasance goes in the Federal bankruptcy court system, but when Bain Capital and Willard Romney are involved, the blinders come of the scales of justice.
The problem is endemic in federal bankruptcy courts because there are only 21 U.S. Trustees (police) in charge of monitoring an average 1.5 million bankruptcy cases creating an environment for corruption. In fact, in another case, Paul Traub was partners with Ponzi Schemer Tom Petters in an unsuccessful bid for the bankrupt Pillow Tex. However, they were successful in using Ponzi Scheme monies to buy FingerHut and Polariod. Tom Petters is in prison for 50 years. The Third Circuit Court, re Arkansas 798 F. 2d 645, noted that Congress stipulated that “in practice, the bankruptcy system operates more for the benefit of attorneys than for the benefit of creditors,” and the Romney Stage(d) Stores bankruptcy ring exemplifies what Congress stipulated in 1978.
Willard Romney stands before the American people and tells them if he is elected president, he has a plan to get the economy running again, except as has been pointed out by pundits and critics alike, he is short on details. However, as the Rolling Stone article points out in great detail, it is a plan steeped in “greed and debt” and it is the true story of Willard “Mitt” Romney and his tactics that made him filthy rich while he ran Bain Capital. The stakes, though, are much higher and instead of Stage Stores or KB Toys, it is Social Security, Medicare, Medicaid, and the American economy that stands to be raided, bankrupted, and left smoldering like so many companies and communities across America. Romney touts his business acumen as the primary reason to entrust him with the keys to America’s bank, and future, and yet his record guarantees that he will insert his deceitful team of Wall Street corporate lawyers and directors to leverage America with unsustainable debt for the sole purpose of enriching himself, his Wall Street campaign donors, and team of Stage(d) Store bankruptcy ring and cronies.
Born in the South, raised in the Mid-West and California for a well-rounded view of America; it doesn't look good.
Former minister, lifelong musician, Mahayana Zen-Buddhist.
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