*This is a guest post from a friend of Stone Street Advisors who prefers to remain nameless. He has over 25 years of experience in investment banking (particularly M&A and equity raising), private equity, and strategic advisory services. He has undergraduate and MBA degrees from top schools and extensive experience dealing with turnarounds since the early 1990s. Enjoy! –Jordan*
The bankruptcy case of American Airlines has aroused much discussion, and
particular concern amongst unions. In fact, there are several recent cases,
such as Kodak and Hostess that are causing similar concerns about the
futures for existing union employees, their pensions and health benefits, as
well as the pensions and benefits of retirees.
The pension and health benefit issues are a particularly difficult issue for
many companies these days given the low returns (due to low interest rates)
on investments, and particularly for those companies that have become
smaller over time and have to support a large retiree base.
In the AMR case, however, I believe the Transport Workers Union of America,
and their attorneys have sunk to a real low. Either that, or their
leadership really has no ability to distinguish fiction from reality. They
have really crossed the line in trying to deal with their situation.
Last week, their attorneys, led by Sharon L. Levine of Lowenstein Sandler,
tried to have Judge Sean Lane hear their objection to the retention of Bain
& Company by American Eagle. Ms. Levine said that Bain’s participation
in upcoming labor negotiations ran the risk of “potentially hurting the
process.” Judge Lane dismissed her objections (which were not an actually
permissible basis for an objection to retention in any event) noting that
she wasn’t presenting facts, but her own views.
Ms. Levine filed an objection,
entered on January 20th, which included the following:
Bain is the consulting arm of Bain Capital, where “[l]ike.. . all the businesses Bain [Capital] invest[s] in, the primary goal with these companies [isn't] job creation but making them more profitable and valuable. This mean[s] embracing aspects of capitalism that have unsettled some Americans: laying off workers when necessary, expanding overseas to chase profits and paying top executives significantly more than employees on lower rungs.” Mitt Romney, Bain Capital and the Gospel of ‘Creative Destruction,’ Washington Post, January 11, 2012, available at www.washingtonpost.com
She and the Union (as will be apparent shortly) are attempting to attach their case to Mitt Romney’s campaign. It isn’t clear if they are doing this in an effort to hurt Mitt Romney or to help their own case. In either case, it is based on an obvious, easily disproved, lie.
One would simply have to go to Wikipedia to see that Bain Capital and Bain & Company are unrelated, but Wikipedia is, as a wiki, subject to manipulation.
Then, you could go to Google and find the web sites of each company. At the
Bain & Company
website you learn that Bain & Company was founded in 1973. At the Bain Capital website you learn that Bain Capital was founded in 1984 by former Bain & Company consultants (a little research will show that Mitt Romney was one of the founding partners – and he came from Bain & Company).
If you go to the Bain & Company recruiting site faqs, and click on “Bain’s innovations: Bain Capital, Private Equity, Bridgespan, CRG and the BCC” you will learn:
What association does Bain Capital have with Bain & Company?
Bain Capital was formed as a separate entity in 1984 by former Bain
consultants to further leverage Bain’s results creation capability. Bain
Capital is a venture capital company; it is not a sister company nor a division of Bain. It is a completely separate company with no sharing of management or information. What it shares is a common approach to the challenges of our clients to deliver extraordinary results. Bain consultants cannot do short-term transfers at Bain Capital. Full-time positions at Bain Capital require a separate application and interview
process. Please contact Bain Capital directly for more information: http://www.baincapital.com.
Now all of this is very easy to find and takes anyone familiar with Google less than five minutes (at most!).
I guess there are no sanctions for filing such obviously misleading (let’s face it, bald faced lies) with the United States Bankruptcy Court, Southern District of New York.
That’s a travesty, but one that journalists should be aware of.
That’s why I was so surprised and disappointed when The Daily Bankruptcy Review, a Dow Jones trade publication for the bankruptcy field, published a piece entitled Bankruptcy
Judge Clears AMR To Throw Out Nine Plane Leases By Rachel Feintzeig.
This piece, which was published on the web on Friday January 27th and in
their daily printed version on Monday January 30th, included the following
Davis took particular aim at Bain & Co., the consulting arm of the Massachusetts private equity firm cofounded by presidential hopeful Mitt Romney. And she wasn’t the only one singling out Bain; at the hearing, an attorney for the Transport Workers Union of America also opposed the move to hire the consulting firm.
It appears that Ms. Feintzeig picked up the mistake about Bain, not from the U.S. Trustee, Tracy Hope Davis, but from previously mentioned filing made by the
attorneys for the Transport Workers Union of America, AFL-CIO – led by Ms.
Sharon L. Levine.
There was apparently no independent fact checking done on this matter.
A colleague, after seeing this, sent an email to the Managing Editor, Nick
Elliott, of the Daily Bankruptcy Review yesterday at 3:53 PM with all of the
supporting information above and asked if he liked being used by lawyers who
assumed he wouldn’t fact check.
A little less than 2 hours later, WSJ.com’s Bankruptcy Beat blog (“From Dow
Jones Daily Bankruptcy Review”) posted this item (as of this writing it reads as follows):
AMR Workers Union Hits the Campaign Trail
Members of the Transportation Workers Union of America have hit the campaign trail in Florida to protest the hiring of Bain & Co., the consulting arm of the private equity firm co-founded by Republican presidential candidate Mitt Romney, by American Airlines’ parent company before the potentially game-changing primary vote in the state Tuesday, according to Aviation International News.
After objecting in bankruptcy court papers to the hiring of Bain & Co.as a strategic consultant in AMR’s Chapter 11 case, members of the Transport Workers Union of America were out in Miami-Dade County last week and in front of Univision during a Republican forum.
Arguments against the hiring of Bain have been made by the union over during the last two weeks. The U.S. trustee, the federal government’s bankruptcy watchdog, has also objected. The lawyer representing the Transport Workers Union argued at a Friday court hearing that AMR’s hiring of Bain, at a price of $500,000 per month, runs “the risk of coming and potentially hurting a process,” of delicate labor negotiations. Bain has been retained “for the singular goal of extracting concessions from the debtors’ rank and file employees, current and retired, who have dedicated their careers to the service of the debtors,” the union said in court papers.
But in an interview with Aviation International News, Transport Workers
Union President James Little stuck the allegations directly to Mitt Romney,
who retired from Bain in 1992 and is now facing a battle in Florida’s primary from opponent Newt Gingrich, who has attacked Romney for destroying jobs during his time as chief of Bain Capital.
“Mitt Romney is a job cremator, not a job creator,” Little said. “He made a fortune snatching up companies, closing factories and laying off workers. Now, Bain & Company, which still lines Mitt Romney’s pockets with their profits, has been hired to axe workers at AMR Corporation.”
Judge Sean H. Lane postponed a ruling on the issue until Feb. 29 but said during Friday’s hearing, “I’m not here to sit in judgment about anyone’s views on Bain. You’re asking me to sign on to your worldview in making this decision.”
So, ignoring the email that was sent they repeated their error and then reported on how the union was now protesting Mitt Romney based on their misrepresentation (outright lie).
The Journal’s story is how Romney is somehow connected to a Union’s possible loss of benefits and some unsubstantiated ties to what happened in his past private equity career.
The story of how a Union was trying to bring Romney down by using the most tangential of connections and extrapolations – completely missed.
What is it the younger generation says now? Epic Fail?