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April 24, 2014

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Mitt Romney’s time with Bain Capital has a Nevada connection

After private equity firm sold interest in Stage Stories, company was forced to close several Nevada outlets in bankruptcy

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Mona Shield Payne

Republican presidential candidate Mitt Romney delivers his victory speech at the Nevada Republican caucus Saturday, Feb. 4, 2012, at the Red Rock Hotel and Casino in Las Vegas.

With President Barack Obama’s campaign launching an offensive to paint Republican candidate Mitt Romney’s time as head of a private equity firm in a negative light, here’s the Nevada connection: Between 2000 and 2002, Stage Stores, a clothing chain, shut down three stores in rural Nevada as part of a bankruptcy.

The stores’ closures came after Bain Capital had sold off its interest in the company in 1999. Obama’s campaign said the chain had been saddled with debt after an aggressive expansion under Bain, and after Bain made $170 million profit from the investment.

Nationally, 5,795 workers at Stage, which sells name-brand clothing in small to mid-sized cities, were laid off between 1999 and Feb. 2002, according to the Obama campaign.

It’s unknown how many workers were laid off in the Nevada stores in Winnemucca, Elko and Fallon.

In Winnemucca, 166 miles northeast of Reno, Rich Stone, owner of a dry cleaner next to the former Stage Store, remembers the retailer as a fine fit for the community.

Since it closed, residents of the small town of 8,900 and surrounding Humboldt County can’t buy non-Western-themed clothes there. They have to travel to Reno or shop online, Stone said.

“It’s a void,” said Stone, who is also a city councilman and a Republican. “We lose a lot of sales tax revenue.”

In its place now is a Boot Barn, which sells Western apparel and boots.

Stone was philosophical about the store’s closure.

“That’s America. That’s capitalism,” he said. “If somebody’s not making money, they’re not going to do it. You’re not going to keep it open as welfare for people without jobs. That’s just common sense.”

Romney’s experience in the private sector has been a key argument in his campaign to become president, pointing to his record turning around companies like Staples and Sports Authority. The Romney campaign, while it could not discuss the Stage Stores case in detail on Monday, said that companies he had invested in while in the private sector had created thousands of jobs.

But Romney’s time there also provides ammunition for Obama’s campaign. In an Obama campaign ad released Monday, a steelworker in Kansas City called Bain a “vampire” for sucking out money from GS Technologies.

Sarah Pompei, a spokeswoman with Romney’s campaign, said, “We welcome a discussion about jobs and the economy. President Obama thinks economic development means rewarding his donors with taxpayer money from the so-called stimulus.”

She said Obama’s campaign “has chosen to attack the free market.” The jobless “deserve a leader who understands how the economy works,” she said.

The Stage case also focuses attention on private equity firms, like Bain Capital, that buy inefficient companies, take them private and resell them at a profit.

Bain Capital, which Romney co-founded before he left in 1999 to head the Winter Olympics in Salt Lake City, bought regional retailers in the 1980s and consolidated them under the Stage Stores brand in the 1990s. The company went public in 1996. It filed for bankruptcy in 2000 and closed 331 stores.

Joseph Gilbert, a professor of management in the Lee School of Business at UNLV, said the record of private equity firms is mixed.

“There are cases where private equity firms have really helped companies,” he said. “They have put in better managers, cut excess fat.”

But there are also cases where the firms have taken out loans to give executives bonuses and left the companies “saddled with debt.”

“Sometimes, they’ve fixed the company into bankruptcy, which is a sad ending for everybody,” Gilbert said.

Currently, Stage has 13,000 employees and 800 stores in the United States, according to the company’s website. That’s twice as many as after it filed for bankruptcy.

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  1. I have an idea: if there is a "void" and a need for such a store, why doesn't Stone or some one else in Winnemucca pony up the funds to open one? What's stopping them? BTW, the Sun should be the last one casting stones in a glass house, what with all the employees Greenspin has laid off and businesses he has shut down over the past 10 years. The fact is, in order to survive, businesses fire or lay off employees all the time. I know, I've owned small businesses and have gone belly up in some and was successful in others and, at times, I fired workers or laid them off to keep the doors open. That wasn't enough in some cases and I eventually closed the doors. In the successful ones, I hired additional people. To the uninformed, apparently it's a shock to learn not all business ventures succeed.

  2. This is what Vulture Capitalism in Romney's Hedge Fund Bain Capital is. Then after you Raid the Company and Employee Pension Fund, you take them to Bankruptcy and leave the Taxpayer to pay the Employees Pensions, all the while making a nice profit for yourself. Yes, Socialism/Capitalism on Steroids - And since the 1% writes The Laws, It's ALL Legal. Morally empty though.

  3. This is not a case of a business failing due to lack of business or other market forces. This is a case of taking a business with little debt and profitable, taking out huge loans to pay huge executive salaries, then abandoning the company overloaded with debt and walking away with 100's of millions from the unnecessary loans and pension funds. This is called vulture capitalism, no ethics whatsoever. Do we want a President with no ethics? Do we want a President that has bankrupted more companies then saving them?

  4. Compare Mitt Romney's Bain Capital to Warren Buffett's Berkshire Hathaway. Buffett has bought 100's of companies over the decades, not one has gone bankrupt. Why? Buffett has intentions of making the company better, Romney has intentions of taking all he can then abandoning/bankrupting.

  5. Interesting that RefNV wants to only talk about Staples, rather than the other businesses that Romney ran into the ground while making profits for his cronies. RefNV must not be proud of Romney's record at Ampad. Romney and Bain bought them, racked up 400 million in debt, then plunged the busines into bankruptcy... all to make a profit:

    "The result: Ampad couldn't pay its debts and plunged into bankruptcy. Workers lost jobs and stockholders were left with worthless shares."

    "Bain Capital, however, made money - and lots of it. The firm put just $5 million into the deal, but realized big returns in short order. In 1995, several months after shuttering a plant in Indiana and firing roughly 200 workers, Bain Capital borrowed more money to have Ampad buy yet another company, and pay Bain and its investors more than $60 million - in addition to fees for arranging the deal."

    RefNV wants to ignore Romney's abysmal record on job creation... he also won't mention Romney's record as Governor of Massachusetts, where the state ranked 47th in job creation.

    RefNV and Romney think the future of the United States lies in minimum wage jobs as cashiers at Staples or Dominos. Put down the pom poms, Ref.

  6. Word of caution to future business owners" If you maintain a philosophy of low debt, taking care of your employee's, fully funding a pension program, and are profitable. You are a takeover target.

    Mitt Romney types see your philosophy as wrong and will 'maximize your company's potential' purely for their own profit. Vulture Capitalists like Mitt Romney see hidden wealth. How? Fire those employee's that built the business with you over decades. They are overpaid; bring in younger workers or offshore their jobs to the Chinese who are happy with an equivalent of $50 per month. Take out huge loans for unneeded expansion. Pay Mitt Romney millions as his fee for destroying your original philosophy.

    Thanks to the Republicans pension 'reforms' in 2006, companies are allowed to 'borrow' from these once untouchable funds.

    When 'quality' begins to suffer from underpaid/understaffed employees and customers start bailing, that's when Mitt abandons the company after looting all the gold. Now the company is saddled with unmanageable debt and some go on to succeed once Mitt is out of the picture, but most go bankrupt.

  7. Re Freeman: "Lynn Johnson always seems to be on the losing end of debates and this one is no exception"

    So says you...thanks for the laugh.

    MR_BOSTON: "Mitt Romney actually has credibility on delivering success and actually executing his own plan."

    Mitt Romney has more failures than successes. It would be like recommending a surgeon that only killed half his patients, but hey he saved the other half.

    Mitt Romney has no ethics, no long term vision, and no plan for America other than bringing back the tried and failed Bush policies.

    I'm no fan of President Obama, but I'm not going to throw away 'average' for a much worse candidate, Mitt Romney. If Dr. Paul runs as an independent, there is a good chance he will get my vote.

  8. I see you got most of the right wing talking points down RefNV. Great Job, you're a bold and intelligent follower. You forgot a couple though. If you want a dog-eater as President, vote for Obama. If you want a birth certificate forging non-American Muslim for president, vote for Obama. If you want a multi-million vacation taking First Lady, vote for Obama. If you want Bin Laden striking us with mushroom clouds, oops got carried away, dang Obama got him. Such fun regurgitating garbage, but you seem frustrated RefNV, hurry turn on Fox, link over to Drudge, and re-play your Rush Limbaugh recordings, your missing some of the big talking points.

  9. Chuck333, I don't normally read the 'untrusted' comments, as your comment will be deleted tomorrow and then the discussion becomes fragmented. Join the trusted commenters; half of them use fake identities anyways.

    But, your question "So what say you about GM and GE not paying taxes and employing more people not living in the US than do?
    And how about the fact that the company in question bankrupted 2 years after Romney left Bains employ."

    I have no problem with GM and GE expanding into foreign markets and employing people in those markets. I do have a problem with shutting down American operations, moving them overseas, and shipping the products back to America. I buy 'Made in America' whenever possible. The majority of products GM and GE sell in America are made in America. Products they sell overseas are made overseas, have no problem with that.

    As far as not paying taxes you are wrong. You see after Bush imploded our economy in 2008, all financial companies had HUGE losses (GE Capital and GMAC Finance). This created NOL (net operating loss) that the tax-code allows a carryover to following years until the entire loss is deducted. Compute their taxes the way big oil does: they pay payroll tax, their employees pay taxes, excise taxes on energy, etc. GE also received 'Green Energy Credits' that reduced their liability. To say they pay no taxes is absolutely false. I have a problem with any profitable company not paying their fair share of taxes. Just like I have a problem with Romney paying 13.9% on 29 million of income. His tax rate is lower than mine, yet I made nowhere near what he did.

    If you had read my explanation of how Vulture Capitalists operate, you would have seen the answer to your question about a company filing bankruptcy 2 years after Romney left...he saddled them with a huge debt load, that finally sunk them 2 years after Romney left.

  10. Just for the record:

    "In 2010, Romney made $21.7 million, on which he gave nearly $3 million in taxes at an effective tax rate of 13.9 percent. In 2011, the former governor earned a similar amount, and will pay more than $3.2 million in taxes at a rate of 15.3 percent." http://abcnews.go.com/Politics/OTUS/mitt...

    "The returns also showed that Romney and his wife, Ann, gave away $3 million in charitable donations in 2010, including $1.5 million to the Mormon church. In the past two years, Romney and his wife, Ann, gave just a little bit less, about 10 percent, to the Church of Latter Day Saints."

    I apologize for misrepresenting his 2010 income as 29 million, it was 21.7 million.

  11. I love how Republicans try to add sales taxes, property taxes, state income taxes, federal excise taxes, etc. when talking about the federal income taxes they pay.

    But, then they turn around and make a false claim that half of Americans pay no taxes, when in fact they pay sales taxes, property taxes, federal excise taxes, federal payroll taxes, social security taxes, Medicare taxes, etc.

    We were discussing federal income taxes, and then they have to pad what they pay because their tax rates are lower than the vast majority of the middle class. Well add in ALL taxes I paid in 2010 and my tax rate was more than double Romney's. Am I envious of Romney's wealth, not at all, am I envious of Romney's effective tax rate, absolutely. So who is playing class warfare"the Republicans.

    By the way RefNV, Romney's income is mostly 'carried interest' defined as "Carried interest or carry, in finance, specifically in alternative investments (i.e., private equity and hedge funds), is a share of the profits of an investment or investment fund that is paid to the investment manager in excess of the amount that the manager contributes to the partnership."