( – promoted by lowkell)
Only the word “hypocrisy” can characterize Mitt Romney’s editorial in the New York Times (18 Nov. 2008) and his attacks in campaign ads and on the stump against President Obama’s work helping to rescue America’s auto industry. The reason for this word is that-in connection with such hedge fund moguls as Paul Singer (of Elliott Management), John Paulson (of John Paulson & Co.), and Daniel Loeb (of Third Point)-Romney profiteered off the American taxpayer from the rescue (while also condemning it). But just recently the United Auto Workers, Citizens for Responsibility and Ethics in Washington, People for the American Way, Public Citizen, and other groups filed a formal complaint with the U.S. Office of Government Ethics, stating that Romney improperly hid a profit of at least $15.3 million in Ann Romney’s “blind” trust-the kind of trust that the former governor called “an age-old ruse . . . . you can always tell a blind trust what it can and cannot do.”
So how did Romney profit off the taxpayers recovery of the auto industry, in particular General Motors? And what were the effects of his fellow hedge fund friends, all of whom are major donors to his campaign, on workers in the industry? Although the details are complicated, as one can expect of the machinations of hedge fund operators working behind the scenes and trying to hide their investors, the relevant history is clear enough. As the investigative financial reporter Greg Palast sums it up: “The Romneys’ gigantic windfall was hidden inside an offshore corporation inside a Limited Partnership inside a trust which both concealed the gain and reduces the taxes on it” (“UAW Files Charges Against Romney on His Auto Bail-out Profiteering,” Nation of Change, 01 Nov. 2012). (For a thorough history of the Romneys’ gains from the auto industry rescue, see Palast’s article “Mitt Romney’s Bailout Bonanza,” The Nation, 17 Oct. 2012).
According to Dan Curry, who is the legal-ethics expert that drafted the complaint, Ann Romney has no federally approved blind trust. Moreover, an approved blind trust is not to be used to hide major investments that could be influenced by anyone if they become President. Nonetheless, in 2009 Ann Romney entered a partnership with one of her husband’s key political supporters, Paul Singer, who together with other hedge fund chieftains quietly purchased a controlling interest in Delphi Auto, GM’s former parts supplier. The hedge funds threatened to stop GM’s supply of parts unless the company and the government’s TARP rescue fund for the industry provided Delphi with huge payments. According to a sworn deposition in July 2009 by Delphi’s CFO John Sheehan, the hedge funds’ bond-holders reinforced their threat with “an analysis of the cost to GM if Delphi were unwilling or unable to provide supply to GM,” thereby forcing a “shutdown.” Steven Rattner, who headed the task-force to negotiate with the troubled auto industry and its creditors in order to avoid its collapse, compared the demands from the funds’ bond-holders to “extortion.” But having already lobbied successfully for laws and regulations in their favor, the hedge funds took a whopping $12.9 billion in taxpayer bail-out money.
As a consequence, the shares of Delphi stock that Singer and Romney purchased for only 67 cents each are today worth over $30 each-a 4000% windfall.
The ethics complaint against Romney for trying to hide all this sordid and hypocritical dealing within an offshore corporation on the Isle of Jersey (Europe), inside a Limited Partnership inside a so-called blind trust, calls on him to tell precisely how much he has gained off the Delphi deal. He needs to acknowledge also about the human costs in the U.S., resulting from the machinations of his hedge fund buddies: (1) the elimination of 25,000 UAW jobs with Delphi, (2) the off-shoring of nearly all its auto parts manufacturing to Mexico and China, (3) the termination of health-care insurance for the former UAW workers, and (4) the slashing of their pensions. To add insult to injury against America’s taxpayers, who jump-started the industry recovery that the Romneys profiteered from, the federal government’s Pension Benefit Guaranty Corporation had to take over paying Delphi’s retiree pensions because the hedge funds refused to. The cost to taxpayers: $5.6 billion.
Although conservative 501(c)(4) groups such as “Let Freedom Ring” have tried to blame the Obama administration for the Delphi pension fiasco, it was Elliott Management and the other hedge funds that were to blame. The pensions were a responsibility of Delphi’s owners, not the government.
Because the Romneys were invested in Singer’s hedge fund by the end of 2010 when Delphi’s stock was mere pennies and before Singer, et al., took the company public, the Romneys reaped a bonanza. According to her Federal Financial Disclosure filing for 2011 and 2012, Ann Romney’s trust lists “more than $1 million invested” in Elliott Management. Required by law, this minimal disclosure is how all of her large investments are described in the document. With an investment of at least $1 million, her smallest possible gain when Delphi was taken public would have been $10.2 million, plus an additional $10.2 million for each million invested with Singer’s hedge fund. And after Delphi’s November 2011 IPO, its stock price has soared, raising the Romneys’ windfall to $15.3 million for each million they invested with Elliott Management-all gains as a consequence of the auto industry rescue that Mitt Romney has repeatedly opposed and ridiculed.
In his NYT’s editorial Romney chastised America’s auto industry, saying: “No more focus on . . . short-term stock appreciation that means quick riches. . .” and “don’t ask Washington to give shareholders and bondholders a free pass-they bet on management and they lost.” But his investments with Elliott Management focused precisely on quick stock appreciation and riches. Romney bet on no-holds-barred management by Paul Singer, et al., and won big-for himself and his family.
[This diary is cross-posted by me on bluenc.com.]
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