Daily Archives: January 13, 2012

Retirement Heist

If you are retired or ever plan to retire, you have to see the Retirement Heist video on CSPAN. You may know you have been taken by your employer, but I bet you don’t even know the half of it.

CSPAN does not provide for embedding their videos in this post, so you will have to use the previous link to see it.  Here is the summary that went along with the video:

Ellen Schultz argued that many large employers have plundered employee pension plans over the past decades and detailed some of their tactics. She also talked about the crisis this loss has created. She responded to questions from the retiree association leaders in the audience. This talk was part of their orientation for the National Retiree Legislative Network’s third annual Washington, D.C., Fly-In to advocate for retirement issues.

I first heard of Ellen Schultz in a comment on the CBS web site.  I mentioned this and linked to it in my previous post, Did Romney actually create jobs at Bain?  As I said there, this comment gave more details about what I was explaining in the post before that one, When Mitt Romney Came To Town — Full, complete version.

When I wrote up those comments, I had no idea of the magnitude of the scam that I was describing.

If you know anybody who still thinks that rich people got that way because they work harder than their lazy employees, then force them to look at this video,

If you think that a 52 minute video is too long to watch, consider just watching a little bit of it. It may draw you in to watching the whole thing, but in any case from whatever amount of this that you see, you will have learned something valuable.

You can also break up your viewing into segments. Just remember the time stamp of where you stopped the last segment. When you open the video again, just slide the slider to the remembered time stamp.

Did Romney actually create jobs at Bain?

Did Romney actually create jobs at Bain? was the title of a report on tonight’s edition of CBS Evening News.

This is a perfect example of how the lame stream media pretends to check the facts, but leaves the obvious questions all unanswered.

They start with an interview with Rick Rickardson who runs a a private equity firm in Washington. He was amazed at Bain’s 88% per year returns when the industry average was 25%. The people in Bernie Madoff’s industry were equally amazed at his returns over 20 years, until they discovered he was running a Ponzi scheme. So what do we really learn from what Rickardson had to say? Would that the reporter had probed a little deeper. Maybe they did dig deeper and carefully edited this out of Rickardson’s remarks.

Then they reported on a steel company in which Bain invested $100 million to turn the company around, the company went bankrupt, and Bain made a $34 Million profit. What kind of a reporter would report that set of facts and not even ask himself, “How could that be?” Wouldn’t we all like to hear an explanation of that. I suspect that Bain took the profits and the lenders took the losses.

There is a fabulous comment posted on this story. The comment started with the following paragraphs:

60 minutes needs to “look further”. Look what happened to the deferred wages of the “Defined Benefit Pension plans” of the baby boomers that disappeared during the “Merger and Aquisition” schemes that Bain Capital and others used to “steal pensions”.

Merger and Aquisitions never would have happened if there was no DB Pension funds in those Companies. The ‘Creative accounting theft” of Pension plans were recently disclosed after a 10 year investigative reporter, Ellen Schultz of the Wall Street Journal, looking at hundreds of 10K’s and figured out that Companies were stealing the employees deferred wages of DB pensions.

This comment has more facts and details to go along with what I said in the previous post, When Mitt Romney Came To Town — Full, complete version.

My comment on the story was:

What a job of reporting. Rick Rickardson was amazed at Bain’s 88% per year returns when the industry average was 25%. The people in Bernie Madoff’s industry were equally amazed at his returns over 20 years, until they discovered he was running a Ponzi scheme.

The you report on the failure of GS Industries steel mills. Bain walked away with a $34 million profit after investing $100 million in the company which went bankrupt. Any decent reporter would instantly say, “How did they do that?”

The previous commenter seems to have the explanation which is the same one that came to my mind minus just a few of those details.

In the future, do not send in a credulous reporter to dig up the facts on an industry he knows nothing about. I am tired of listening to stories reported by people who know less about the subject than I do.

Of course, I am a credulous listener if I expect the corporate news media to really report on the shenanigans of their brothers in crime.

When Mitt Romney Came To Town — Full, complete version

The first 3 minutes of this video is the teaser that you saw in my previous post, The Suffering Began When Mitt Romney Came To Town.

The next 24 minutes is devastating.

I am not sure the video makes it quite clear enough how Bain Capital grew to a $65 billion company while the companies they invested in closed down and went bankrupt.

The video said many times that the companies borrowed huge amounts of money and then could not pay their debts. Where did the money go? To Bain and its investors. Where did the money come from? The people who lent it and would never get it back. What is this called? Highway robbery.

I do not think that highway robbery is touted as an admirable way to make a living in The Book of Mormon.

People like Mitt Romney are able to divide their lives into two separate pieces. There is the life on Sunday where you go to church, pray to god, tithe some money, and help the down trodden. Then there are the other 6 days of the week where you take money from people in ways that are barely legal, put people out of their jobs and homes, and steal money from the investors. Oh, did I forget to mention the government that gets to pick up the pieces of these shattered lives and try to keep people from killing themselves? Where does the government get the tax money to do this? Not from the people who stole it, that’s for sure. They get it from the people who haven’t been robbed. Yet.

And yet, and yet, people want to vote for turning this country over to these people. At least it isn’t socialism.

I should mention the mechanism for doing leveraged buyouts. You find yourself a company that is what is called in the investing world a cash cow. That means that the company is profitable enough and well enough run that it stays in business, pays its debts, sets aside money for its workers pensions and health benefits, and does it all with very little borrowed money.

Particularly if the company is public and its shares are traded by the public, you have a piggy bank waiting to be broken into. The corporate raider, borrows enough money to entice the current stock holders to sell their shares to the raider. The raider then goes into the company and cuts costs ruthlessly. He takes the money out of the company to pay off what he borrowed and pays himself handsomely.

How does he take the money out? Instead of the company self-funding itself with its income, the raider has the company (which he now owns as a corporation) borrow heavily to fund its operations. The raider takes the assets that are in the pension fund and the health insurance fund out, and has the corporation borrow money to replace it. The company has an excellent reputation, so why would people hesitate to lend it money?

All the business schools are teaching that it is a waste of a corporations’ assets to put any more money into the pension funds that what is minimally required by law. If the company goes belly up, the government will pay the pensions. So why worry?

When the debt is high enough and the cash is all gone into people’s pockets, the people being the corporate raider, the company cannot meet its debt obligations out of the decimated factories’ profits. So the company goes bankrupt. All the lenders lose all their money. The workers are all fired. There are no assets to sell. However, the legal person to take all the responsibility is the corporation. Remember corporations are people. The people who took all the cash were merely officers of the company. The laws for corporations shield the people who got all the money from any responsibility to pay it back.

As long as there is some judge somewhere who won’t find it obvious that the corporate raider took the company private for the sole purpose of stealing all the money, then the perpetrators are home free. Even if they get a couple of years in jail, they still get to keep their billions after they get out.

If they manage to stay out of jail, they can go into politics and write laws to make what they did all perfectly legal.

I also wonder if the people who were working for many years at these now bankrupt companies were expecting a pension when they retired. Did the Pension Benefit Guarantee Corporation, a U.S. Government Agency, have to make good on the defaulted pensions? Did the pensioners only receive a fraction of what they should have received? I have a friend who is living solely on Social Security because the owners of the company where he worked for 20 years walked off with all the pension money to use for their own retirement.

Look at my subsequent post Did Romney actually create jobs at Bain?. There is a fabulous comment that gives more details to what I have been trying to explain here.