Mitt Romney is facing his first, genuine crisis as the presumptive Republican nominee. This is now an “all hands on deck” exercise. A failure to beat back the latest set of allegations against the former governor, and the fresh narratives they provide to Team Obama, could well define Romney before the Republican convention (not unlike John Kerry in 2004), and set the terms of the general election in favor of President Obama, before the fight has even started in earnest.
The facts are these.
A Boston Globe story, published three days ago, makes a strong prima facie case that Mitt Romney continued to be involved in the affairs of Bain Capital well after Romney stated that he had cut all ties to the private equity firm in 1999.
To support the charges, the Globe story identified SEC filings in the 1999-2001 period that show Romney listed as “sole stockholder, chairman of the board, executive officer and president” of Bain Capital. According to Glenn Kessler of the Washington Post, while most of the SEC filings were signed by other Bain executives, six submissions in that time period bore Romney’s signature.
Setting aside for a moment the rebuttal argument, the immediate political problem created by the story is obvious – that Romney has misled the public about his relationship with Bain, or worse, that there is some form of intentional deceit by Romney and the campaign, ostensibly for political benefit. This, in turn, provides three progressively larger narratives for Team Obama to influence the debate on Romney’s candidacy:
1) “Romney Really Has Outsourced Jobs”: the two campaigns have been trading charges daily about outsourcing and who has the worst record in this regard. The key to Romney’s defense has been that he was not in charge of Bain Capital (after 1999) when Bain-invested companies did outsource jobs, or when Bain companies went bankrupt. If Team Obama can tie Romney to the three years after 1999, then the outsourcing charges become relevant.
2) “Romney Has Something to Hide”: on the surface, the Globe story creates alarming questions. How can you leave a company but be a 100% stock holder? How can you say that you have no influence on investment decisions but sign legal documents to federal regulators regarding those investments?
These questions then play directly into one of the most vexing campaign positions that Romney has taken – his refusal to release more than two years of tax returns. Up until now, the tax return issue has been at the fringes of the campaign. Now that a story has raised doubts about Romney’s candor with regard to his business dealings that are already a matter of the public record, the substance of Romney’s tax returns take on new urgency, where his refusal to release the documents creates the appearance for better or worse, that the former governor has something to hide.
3) “You Can’t Trust Mitt Romney“: during the primaries, Rick Santorum detailed 18 years of Romney policy flip-flops on everything from abortion and gay marriage to carbon caps and the Reagan Revolution. Now comes reporting that contradicts the official campaign record of Romney’s business ties and affiliations, just as the candidate – already estimated to be worth more than $250 million – refuses to provide any long-term tax information on the sources and means of his acquired wealth.
Put together, these pieces of Romney’s record and positions can be puffed up into a full blown “character debate,” and that makes this turn of events a potential, full-fledged train wreck for the former governor. If this narrative holds, it will be Romney – and not the economy, or the president’s abysmal stewardship of it – that will be the referendum question for voters in November.
The good news is that there are answers to the Globe’s charges – details that would have provided balance to the story that did not make it into the Globe’s final version.
The first is obvious and overlooked.
While Romney claims no active management or influence in Bain, that is not to say that he did not have passive ties to the company, up to and including today, where Romney is an investor in Bain’s funds. There is nothing unusual here. This would be little different from retired CEO’s of other firms that have compensation packages after the end of their active involvement with their respective companies. As a private equity firm, Romney’s investment in Bain funds is little different that CEO’s who retire with generous stock options; options that fluctuate with the market, as do the value and investments of Bain funds – without Romney’s direction, influence or participation.
With regard to the SEC filings and Romney’s listed position, a crucial if technical detail regards the scope of responsibility.
Bain Capital exists as a legal entity only to pay salaries and expenses from the management fees it collected to run the funds. A paymaster if you will.
The actual investment and management decisions regarding the funds were the legal responsibility of others given the unique way that private equity funds are structured, as opposed to traditional companies. In support of this point, Fortune magazine has reported that offering documents for Bain Capital funds circulated in 2000 and 2001 do no show Romney listed at all. In addition, 2001 and 2002 filings by Bain list Romney as a “passive, limited partner [with] no management capacity.”
Further clarification of Romney’s role during the years in dispute comes from the 2002 Massachusetts Ballot Law Commission Report, prepared after Democrats attempted to block Romney’s candidacy for governor in 2002.
The report unanimously certified that Romney was employed by Bain until early 1999. After that, when Romney was working for the Olympics, he “worked on average, over 12 hours per day, six days a week.” Hardly any time to manage anything involved with Bain.
The report showed that Romney remained on the board of three companies – two of which were Bain invested – but the report made no mention of Romney attending any meetings at Bain, even as the report provides a long list of events that brought Romney back to Massachusetts.
Finally, there is the very clear statement of Romney himself.
Under penalty of perjury (which is a felony) Romney signed and filed a public financial disclosure form as part of a requirement of his candidacy that stated, “Mr. Romney retired from Bain Capital on February 11, 1999, to head the Salt Lake Organize Committee. Since February 11, 1999, Mr. Romney has not had an active role in any Bain Capital entity and has not been involved in the operation of any Bain Capital entity in any way.” (emphasis added).
Romney’s statement in this filing is wholly consistent with SEC filings describing his role at Bain as a separate entity from the funds it managed.
The problem for Team Romney is that his most credible defense against the Globe and the Obama campaign, is in the weeds. The average voter could hardly be less interested in technical definitions of companies and their different organizational structures. That makes these voters susceptible to Team Obama’s arguments. Complicating matters, a robust public defense with these details could be characterized as hair-splitting, or worse, gaming the system, which hurts Romney as much as the narrative Team Obama is creating around him.
If there is a silver lining here, it is that the Romney folks understand the threat. The nominally press shy presumptive nominee went a news blitz right after the story broke, and Romney surrogates have been particularly aggressive in all media theaters, in defending Romney against Obama campaign charges.
But that is not enough. The truth is that even with the facts on his side, Romney cannot win this debate on Bain, particularly when it is used by opponents to frame an argument about Romney’s taxes.
So where from here?
The obvious answer is a change in topic. A pivot point comes from two unlikely sources.
Both FactCheck.org and Glenn Kessler, the Fact Checker for the Washington Post, have categorically come down on Romney’s side on the Bain debate. In addition, Kessler, in particular, has been very hard on Team Obama for accusations of Romney outsourcing at Bain that plainly didn’t happen on his watch.
Team Romney should avoid the urge to litigate the details here, even as the media attempts to keep the light on Romney and Bain. Refer interviews to the Fact Check sites and move on.
The fact remains that at the end of the day, no matter how hard Team Obama tries to change the subject from the economy, the economy always comes back into the discussion, if not at the urging of Team Romney, than through the monthly reports that have come to dog the Obama administration.
To that end, the June numbers for weekly earnings and the consumer price index (inflation) are due out next week on July 17th & 18th. That is a preview for the Big Kahuna of economic reporting that will all fall within a single week that straddles July and August.
On July 27th, QII GDP will be announced. QI GDP came in at a disappointing 1.9 percent. On August 1st, the Institute for Supply Management (ISM) will release its report on business activity for July. The last report for June, released on July 2nd, showed a contraction in business activity. And then on August 3rd, the July unemployment numbers will be released. The economy has not created more than 100,000 jobs since March.
These reports will set the narrative for August.
For now, Team Romney needs to be disciplined, pro-active and aggressive. Respond in kind to the onslaught of ads by the Obama campaign, and remain nimble enough to exploit opportunities which may avail themselves in the coming days, all in the service of ensuring that this new narrative is not the one that remains with voters in November.