The Titans and Mitt Romney

There really ought to have been more incredulity that, four years after an economic meltdown caused primarily by the financial titans of the great Wall Street casino, we would be presented with a nominee for president that hailed from the very same industry, and made his money in some of the very same ways. That on the heels of yet another loosening of the rules attempting to keep money from thoroughly overwhelming the political process, the richest man in the race would win his primary easily, hands down, while benefiting from expensive ad campaigns targeted at picking off each of his opponents in turn. That those ad campaigns would be, in turn, financed by some of the very hedge fund managers and other financial gurus whose industry wrecked things so efficiently that they are still wrecked, even now. And that the primary policy battles of this election would be, indeed, whether or not our tax structures were sufficiently kowtowing to those financial titans.

It has only been four years or so. That really isn't much time. Unemployment is still rampant—yes, rampant, four years ago the current level of unemployment was considered the worse case scenario, four years later it is considered the new normal, hardly even mentioned. The bank scandals have continued unabated, this time with the new suggestion that the titans of finance had been rigging the whole game from the outset. Two competing populist movements have sprung up: the tea partiers to object to taxing the rich, and the Occupy movement to demand accountability from them.

All of that has happened, and here we are. One of the two candidates for the presidency of the United States is a fabulously wealthy Wall Street financier, from a company whose success was based in large part on financial scheming at the expense of endangered companies, and on offshoring jobs, wildly supported by other Wall Street financiers, and is demanding, one, less regulation of financial institutions, and two, tax cuts for the rich that make the previous tax cuts for the rich look like chicken feed.

If Hunter S. Thompson was alive today, I do believe he would be going off the deep end right about now.

The current political riff over whether or not Barack Obama does or does not loathe businessmen and wish to do them harm is yet another in a long line of examples in which the narrative is, in variation after variation, centered on the titans of finance and what we can do for them. If the economy is suffering, it is because we have not appeased the titans properly. If there are no jobs to be had, it is because the titans are still too unsure of our intentions towards them. If there are still crooks on Wall Street, it is because entirely too many things have been declared to be illegal. Whether or not people have money to buy the things the titans are selling never comes up; it is implicit, in every debate, that the titans will decide whether we will buy things or not. When the economy crashed and things needed propping up, it was Wall Street that got propped up first. When the economy recovered, it was Wall Street that gained the largest share of the profits. According to current narrative, the entire world economy can be neatly encapsulated by the considering the desires and requirements of the top one percent of the top one percent; everyone else on the planet is a footnote.

The central banks all express alarm at unemployment; the central banks all do not a damn thing to combat it. The governments all express alarm at the behavior of the titans; the governments all do hardly a thing to forcibly reform them. And, in politics, we are trapped. The titans finance the elections, the titans underwrite the people who write the rules, the government looks to the ranks of the titans when seeking officials to lead the economic decision-making process. All of this four years after their recession. Their crash. Their failures. All of it just the same as during the four years before the collapse, or worse.

So now the current challenger for the presidency is a Wall Street financier, one who made his money by closing factories and shipping the jobs to cheaper places, or by taking control of companies, loading them with debt in order to pay his own company handsomely from that debt, and departing again—the kind of money-making that the titans think of as the most clever of all, because it extracts money from nothingness, but the kind that nearly everyone else points to as economic parasitism of the highest order. Gordon Gekko has come back to town, and by God and the titans, he's been heralded as a diplomat, and a patriot, and a generally fine fellow.

Holy hell.

Hunter for Daily Kos on Wed Jul 18, 2012

Technorati Tags: Mitt Romney,Wall Street,Bain Capital,Current Events,2012 Elections

Romney, Bain, The Olympics, and Mattel

SEC filings, press releases, and other contemporaneous documents released between 1997 and 1999 indicate that Mitt Romney may have parlayed a $23m investment and seat on the board of troubled software firm The Learning Company (TLC) into an ownership stake in Mattel, Inc. worth as much as $100,000,000 as of June, 1999.

On September 25 of that year, Romney, in his role as CEO of the 2002 Salt Lake City Olympic Organizing Committee, stood before the world to announce that the SLOC had signed an exclusive licensing agreement with Mattel for the production of stuffed-animal representations of the Olympic mascots.

Romney made no mention of his personal ownership interest in Mattel.   Less than two weeks later, Mattel made a bombshell announcement.

On October 4 Mattel disclosed that The Learning Company had incurred millions in product returns and bad debt write-offs and that the TLC division of Mattel would incur a $50-$100 million loss rather than the large profit that had been forecast previously. 

Mattel, whose stock had traded as high as $27.23 when the TLC merger was completed, at $24.14 on June 25 (the date upon which Romney's ownership is documented and worth estimated), closed at $11.69 on October 4.

CNBC would later label the Mattel/TLC merger as 'one of the five worst of all time.'

The market had discovered, and Mattel had admitted, that The Learning Company was essentially a worthless shell.

Mitt Romney, by virtue of his control of a seat on the TLC board, would have most certainly known this to be true.

Thus, and by virtue of his statement of 25 September, 1999, Mitt Romney exposes himself to the potential for very serious allegations of fraud, namely:

That he used his position as CEO of the SLOC to influence the choice of Olympic sponsors and licensees to his own personal benefit.

That he used his position as CEO of the SLOC to make public statements about the health of Mattel which he knew or should have known, to be materially false.

That he used his position as CEO of the SLOC to influence the investment decisions of shareholders or potential shareholders of Mattel, or to influence the price of Mattel's stock, while failing to disclose his own material interest in Mattel.

That he failed to disclose to the SLOC, to the USOC, and to the IOC, a clear conflict of interest with respect to his ownership status in Mattel.

I'm missing two key pieces of information, however.   The first is a primary citation of the June 22, 1999 Bear Stearns report timestamping Lee, Bain, and Centre's Mattel ownership on that date.   That document either does, or does not exist.  If it exists, I need it.

The second is harder:    Between June 22 1999, through September 25, and into October 4, what happened with Romney/Bain's (estimated) 4.1 million shares of Mattel?   Did they sit on them, dump them, what?   Is it possible to know?   How much does it matter if the June 22 date can be validated?

Either this is some serious stuff, or I've managed to foolishly convince myself that it is.  I've been looking at it since I started researching my previous diary:  Mattel Toys, troubled firm partly owned by Bain, signs on as Olympics Sponsor, 9/25/1999.   At the time, it looked like there could be some evidence of petty graft with respect to the stuffed animals.  This could be magnitudes worse.

Right now I need your help.   Please read it. Try to follow my argument, try to tear it apart or show me where its holes are.   Let me know where you need clarification or are confused.

Thank you.

I:  Romney and Bain to acquire stake in The Learning Company

1997/08/26

Learning Co., the troubled software company, said it will retire $150 million in debt by issuing preferred stock to financiers Thomas H. Lee Co., Bain Capital Inc. and Centre Partners Management LLC... The financiers will pay about $123 million for the notes, then surrender them to Learning Co. for preferred stock.
http://articles.chicagotribune.com/...

Lee's contribution is $75m, Romney/Bain's is $28m and Centre's is $20m.

Romney/Bain's $28m is equivalent to 22.7%, which will be used below to determine their post-merger position in Mattel.

1997/12/12
SEC Filing

http://www.sec.gov/...Lee, Bain, and Centre Purchares will acquire common and preferred stock and seats on the TLC board of directors.

II.   Mattel/The Learning Company Merger
1998/12/14
MAT:  $21.42 (down almost $8.00 on announcement)
Press Release

Toy maker Mattel today said it will acquire educational software maker the Learning Company for $3.8 billion in stock.
http://news.cnet.com/...

CNBC will later list this as one of the 5 Worst Mergers of All Time

1998/12/22
This SEC 13D filing documents the acquisition of beneficial interest in Mattel by Lee, Bain, and Centre, notes their voting their shares in favor of the merger, and requiring them to maintain ownership of their shares until completion of the merger.

General statement of acquisition of beneficial ownershipAcc-no: 0000898430-98-004512 Size: 46 KB
(3)...the Lee and Bain Stockholders have agreed to vote the 572,315 shares of TLC Preferred Stock (convertible into 11,446,300 shares of TLC Common Stock) over which they have voting power in favor of the Merger Agreement

(4)  ...the Lee and Bain Stockholders may not dispose of the [shares] that are directly held by them until the consummation of the Merger or the termination of the Merger Agreement.

1999/02/11
MAT:  $25.67
Mitt Romney is announced as CEO of the 2002 SLOC Olympic Games.

Romney will have to sever ties with any companies that do business with the games. Bain Capital has ownership stakes in many companies and Romney serves on various boards of directors.Kristin Moulton, AP

1999/04/19
MAT:  $27.59
Mattel/TLC Joint Prospectus

1999/05/13
Mattel/TLC Merger is completed.
MAT:  $27.33

Mattel, Inc today announced that it has completed its merger with The Learning Company, and that The Learning Company is now a division of Mattel.
http://www.datamonitor.com/...

1999/06/22
MAT:  $24.14
This date brackets Bain ownership in Mattel as a 'key financial investor.'  My source is secondary as linked in the blockquote.   The uncited reference to the primary source is quote "On 6/22/99, Bear Stearns issued a report "Initiating Coverage" on Mattel by Jacobson."

Finally we also like that key financial investors in TLC, Thomas H. Lee Company, Bain Capital and Centre Partners, have 18 million Mattel shares and show no indication of wanting to sell.
http://www.whafh.com/...

1999/06/22
I think I now have enough information to estimate Romney/Bain's stake in Mattel based upon three factors:  

the 18 million shares held by Lee/Bain/Centre above

Bains fractional ownership relative to Lee and Centre pre-perger = 22.7%(Lee:9,146,340;Bain:3,414,640;Centre:2,439,020;Total=15,000,000exact;)

Mattel closes at $24.14 on June 22, 1999

18,000,000 * 22.7% * $24.14 =

$98.6 Million

===

Another way to arrive at an estimate of Romney/Bain's position is as follows.  SEC filings state that

approximately 126 million Mattel common shares were issued in exchange for all
shares of Learning Company common stock outstanding as of the merger date.

Romney/Bain at 22.7% of 18 million shares would hold about 4.1 million.   Those 4.1 million represent about 3% of the 126 million shares noted above.  The stock merger was noted to be valued at about $3.8 billion.   3% of 3.8 billion is about 110 million, placing this estimate well within range of the $98.6 million tallied above.

1997/07/22
MAT:  $23.41
Mattel Press Release (as cited in SEC Filing)

"Our U.S. business was up 5 percent in the quarter, driven by
increases in Fisher-Price(R), American Girl(R), Mattel Media and The
Learning Company," Barad said.
...
"And, as we expected, The Learning Company is producing above average
growth in both revenue and margin, which was one of the reasons this
merger made so much sense for Mattel.
http://www.sec.gov/...

1999/08/16
MAT:  $22.18
Mattel releases report for the 2nd Quarter of 1999
(SEC Filing)
http://www.sec.gov/...

1999/09/09
MAT:  $23.19
This will be the last high before the stock starts to decline.

1999/09/25
MAT:  $21.41 (9/24)
The Salt Lake Olympic Committee and Mitt Romney announce that Mattel Toys has signed a contract as an official licensee for the 2002 Winter Olympics.

September 25, 1999
By Jerry Springer
Desert News Staff Writer

Mattel To Bring Mascots to Life
Toymaker signs on as Licensee for 2002 Games

On Friday the Salt Lake Organizing Committee, announced that Mattel, the renowned maker of such toys as Barbie, Cabbage Patch Dolls, Chatty Kathy, and Hot Wheels, has signed on as a Games Licensee.  The deal guarantees SLOC more than $1 million in advance payments from sales royalties.

"There is no better company than Mattel to help us bring the Olympic Mascots to life for children of all ages." Said SLOC President Mitt Romney.

Romney said SLOC was immediately drawn to Mattel because of the company's worldwide reputation and an existing distribution network rivaled by no other toymaker.  "To have a toymaker of Mattel's stature is a great benefit" Romney said.  "They are a premier manufacturer."

http://news.google.com/...

1999/10/04
MAT:  $11.69
Mattel Press Release (via SEC filing)

LOS ANGELES, October 4 -- Mattel, Inc. said today that its
Learning Company division will have a significant third quarter
revenue shortfall resulting primarily from a decision not to
go forward with a planned licensing arrangement, as well as
higher than expected product returns.  The lower revenues,
together with the write-off of bad debts, increased customer
benefits and the termination of certain distributors, will result
in a third quarter, after-tax loss at The Learning Company of
between $50 million and $100 million, compared with an expected
$50 million, after-tax profit for this division.  Consequently,
Mattel third quarter earnings per share will be approximately
$.30 to $.40, with an estimated 2 to 4 percent decline in
revenue.
http://www.sec.gov/...

2000/02/03
Jill E. Barad resigns as CEO of Mattel Toys

“There is nothing I can say to gloss over how devastating the Learning
Company’s results have been to Mattel’s overall performance.  Because
there must be accountability, I and the board agree that I must resign today
as chairman and chief executive and from the board.” – Jill E. Barad,
Former Mattel CEO, Conference call with analysts on February 3, 2000
http://www.tuck.dartmouth.edu/...

2000/04/03
Mattel to Ditch The Learning Company

Call it a learning experience. Mattel said today that it is looking to sell its interactive software unit, The Learning Company, which the toy maker had characterized as a distraction and blamed for disappointing 1999 earnings, less than a year after buying it.  http://www.forbes.com/...

2001/04/05

Mattel Inc. will close its last United States manufacturing plant and lay off 980 workers to cut costs, the company said yesterday.
...
Production will be moved to Mexico.
http://www.nytimes.com/...

Originally posted to Shuksan Tahoma on Wed Jul 18, 2012

Technorati Tags: Mitt Romney,Bain Capital,Mattel,2002 Olympics,Vultures,Current Events,2012 Elections