By now, we have all heard of Mitt Romney’s recent comments that nearly half of American households are moochers who are “dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them.” There is a real irony here. The host of the $50,000-a-plate fundraiser for Romney was prominent private equity manager Marc J. Leder. The private equity firm that Leder co-founded, Sun Capital, has more than once driven one of its portfolio companies into bankruptcy – shedding liability for the company’s pension plan and reducing its debt – only to have another of its units buy the company out of bankruptcy. Normally, owners lose their investment in a bankruptcy, but this maneuver allows Sun Capital to retain ownership of the portfolio company after having stiffed the company’s creditors and thrown its workers and retirees onto the mercy of a government agency for their retirement income.
Just this past November, Sun Capital took Friendly’s, the iconic family restaurant and ice cream parlor it took private in 2008, into Chapter 11 bankruptcy protection. Friendly’s used the bankruptcy to jettison the pensions of nearly 6,000 employees and retirees. Outrageous as this seems, Friendly’s also sold itself out of bankruptcy to another affiliate of Sun Capital. A key part of Sun Capital’s restructuring plan involved shifting liability for the pension plan to the federal government’s Pension Benefit Guaranty Corporation (PBGC).
Now, Romney – at the home of the co-founder of a private equity firm that has the distinction of being the firm that took the most portfolio companies into bankruptcy in 2011 – had the gall to cast aspersions on, among others, workers whose retirement savings in private pension plans were wiped out, forcing them to depend on the government for their retirement income. These workers are simply collateral damage to owners who burden companies with unsustainable debt that plunges the companies into bankruptcy while managing to make a profit for the owners and their investors. In the Friendly’s case, this appears to be a transparent effort by Sun Capital to take advantage of the bankruptcy process to abandon pension obligations and throw the workers’ retirement income onto the PBGC while continuing to keep its ownership of Friendly’s. It is surprising that Romney, well known for his time at the helm of Bain Capital, was unaware of the role that he and others at the fundraiser played in contributing to the 47 percent who he says will not vote for him.