Did Romney really create 100,000 jobs?

As the GOP frontunner's record at Bain Capital comes under increasing scrutiny, his math looks fuzzy. Here's a look at jobs gained and lost via the hedge fund's work.

By MSN Money Partner Jan 12, 2012 2:47PM

By Susan Adams for Forbes

In the Republican presidential debates last weekend, Mitt Romney repeated his claim that he is an effective leader who created a “net net” of 100,000 jobs while he was working in the private sector.

 

But three recent reports, by the Los Angeles Times, the Associated Press and by FactCheck.org, the nonprofit, nonpartisan project run by the ForbesAnnenberg Public Policy Center at the University of Pennsylvania, say that the Romney campaign has yet to offer convincing proof to back up the claim.

 

The best the campaign has done: providing a list to FactCheck.org of recent or current employment at three big companies where Bain invested: Staples (SPLS), which had 89,000 employees as of Dec. 31, 2010; Sports Authority, which had 15,000 employees as of July 2011; and Domino’s Pizza (DPZ), which has added 7,900 jobs since 1999.

But Romney left Bain in 1999, so it hardly seems plausible to suggest that he created the positions that make up the current head counts at those companies.

 

Besides, as FactCheck points out, Bain was not the sole investor or creator of these companies. For instance, at Sports Authority, investment also came from three other venture firms, William Blair Venture Partners, Phillips-Smith and Marquette Venture Partners. Then of course there was the work of the executives inside the company, like CEO Jack A. Smith.

 

Two other facts about Sports Authority: Kmart owned it for five years starting in 1990, and as of 2006, it has been owned by the private equity firm Leonard Green and Partners. So which entity deserves credit for its job growth?

 

Jobs lost after Bain

Then there are the job losses at the many companies Bain acquired. FactCheck credits reports in the New York Times and Politico for flagging the following cuts or displacements: 385 jobs lost at American Pad & Paper; 1,900 cuts or relocations at Dade International; more than 2,100 workers laid off from DDI Corp.; 2,500 cuts at Clear Channel Communications; and 3,400 at KB Toys.

 

In an early December story, the L.A. Times scrutinized a 2000 prospectus issued by Deutsche Bank, which Bain sent to potential investors, describing the impressive profits earned by Bain Capital. Romney headed the firm for 15 years, until he left to run the Olympics in Salt Lake City. During Romney’s tenure, Bain bought more than 115 companies, according to the Deutsche Bank document. Like other leveraged buyout firms, reports the Times, Bain often made money by laying off employees, getting government subsidies or re-selling companies quickly for a profit.

 

Of the top 10 investments Bain made under Romney, reports the Times, four declared bankruptcy within a few years of Bain’s involvement, “shedding thousands of jobs.” One example: GS Industries, formed by Bain in the early ‘90s by investing $24 million to buy and merge several steel companies. “Company managers cut jobs and benefits almost immediately,” says the Times, while Bain and other investors reaped management fees and dividends. In 2001, GSI went bankrupt and 700 workers lost their jobs and most of their benefits. But Bain had already made $50 million on its initial investment, reports the Times.

 

Bain declined to comment to the Times about GSI, but some 40 other steel companies did go bankrupt during the decade between 1994 and 2004.

 

Romney has also taken credit for another, smaller steel investment that was a job creation engine. In 1994, Bain invested $18.2 million in a manufacturing start-up, Steel Dynamics (STLD), which now employs 6,000 workers. Another example of an employment hike at a Bain company: Epoch Senior Living, which grew from a few hundred when Bain invested $26.4 million in 1998 to more than 3,000 employees when it sold in 2007.

 

So Bain and Romney deserve credits on both sides of the jobs ledger.

 

How much credit?

At times, Romney tones down his rhetoric and uses the words “helped create,” a more supportable claim. In Saturday’s debate, he conceded that “we’re only a small part of that, by the way,” when he talked about Bain’s role in job creation.

 

Maybe voters know that the 100,000 jobs claim is typical campaign hyperbole. But as Romney’s challengers mount attacks on his record at Bain, his fuzzy math is going to get more scrutiny.

 

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