Today, the LA Times reported a story about the early days of Bain Capital and how Mitt Romney and other founding partners of Bain went out to raise money in 1984 for the new firm. The Times report covers the early founding history of Bain.
Here is a part of the article:
The first outside investor in Bain was a leading London financier, Sir Jack Lyons, who made a $2.5-million investment through a Panama shell company set up by a Swiss money manager, further shielding his identity. Years later, Lyons was convicted in an unrelated stock fraud scandal.
About $9 million came from rich Latin Americans, including powerful Salvadoran families living in Miami during their country’s brutal civil war.
That first investment fund — used to invest in start-up companies and leveraged buyouts — paid out a stunning 173% in average annual returns over a decade, according to a prospectus prepared by an outside bank. It was the start of the private equity powerhouse that ultimately fueled Romney’s political career. He now cites his experience at Bain as a chief qualification for the White House.
Romney faced unusual complications when he launched Bain Capital, a spinoff of Bain & Co., the Boston consulting firm he joined when he graduated from Harvard Business School.
At the time, U.S. officials were publicly accusing some exiles in Miami of funding right-wing death squads in El Salvador. Some family members of the first Bain Capital investors were later linked to groups responsible for killings, though no evidence indicates those relatives invested in Bain or benefited from it.
Romney has said he checked the foreign investors’ backgrounds. His campaign and Bain Capital declined to provide specifics.
Alex Stanton, a spokesman for Bain Capital, said confidentiality rules barred him from commenting on the investors.
“The hyperbole of political campaigns cannot change the fact that Bain Capital has operated with high standards of integrity and excellence, including compliance with all applicable laws and regulations regarding the vetting of our investors in consultation with experienced counsel and other advisors,” he said. “Any suggestion to the contrary is baseless.”
Matt McDonald, a spokesman for the Romney campaign, also declined to discuss details of the original fund.
“There were many investors who saw the opportunity of a firm that could help fix broken companies and help them grow.” But when Romney and his partners started the firm, Bain & Co. founder Bill Bain — worried the new venture could fail — barred them from soliciting current clients or corporations that would have to publicly disclose the investment, according to an early Bain Capital employee.
Tonight, the Democratic National Committee released the following statement by Maryland State Delegate Ana Sol Gutiérrez, the first Salvadoran-American Elected to Public Office in the U.S:
The newly released LA Times investigation exposing potential ties between a very wealthy Salvadoran group with family ties to the right-wing death squads and the seed money that Mitt Romney used to start Bain capital is deeply troubling. Having spent my childhood in El Salvador before migrating to the United States and becoming the first Salvadoran-American to ever hold elected office, I know firsthand the strife that El Salvador was going through during that time and the sensitivity of the issue for Salvadorans in the U.S. This difficult period is a very painful memory for our community and brings about more questions about Governor Romney’s efforts to maintain his financial records hidden from the American public. Our community is still healing from the scars from this tragic time in our history and now, more than ever, Salvadoran-Americans and Latinos all over the U.S deserve answers about his “profit at any cost” way of conducting business.
We know that politics is dirty and what someone does 28 years ago might not be relevant, but it would be troubling to think that a presidential candidate started his business career with a little help from the Latin American elite. Gutiérrez lived during that brutal time, which still weighs heavily with many Salvadoran Americans. As The Nation’s Jon Wiener wrote today:
The civil war in El Salvador lasted from 1980 to 1992 and killed more than 70,000 Salvadorans. It started after Archbishop Óscar Romero was assassinated while giving a mass shortly after he published an open letter to President Carter asking him to cut off US military aid to the Salvadoran military regime. T
The Times reporters found no direct evidence that the accused Salvadorans themselves “invested in Bain or benefited from it”—it was “family members” of Bain investors who were linked to the killings.
Romney himself made a trip to Miami in 1984 to raise money for Bain from the Salvadorans.
“The group included some of El Salvador’s wealthiest people,” the Times reports, including coffee exporters Francisco R.R. de Sola and his cousin Herbert Arturo de Sola. His brother, Orlando de Sola, according to the Times, was “suspected by State Department officials and the CIA of backing the right-wing death squads, according to now-declassified documents.”
Orlando de Sola has denied supporting the death squads. He is now serving a four-year prison term for “unrelated fraud charges.” Reporters from the LA Times interviewed him at the prison in Metapan, El Salvador. He told them he “did not benefit from the family investment in Bain Capital.” He added that his family’s “relationship with Bain Capital was a step to diversify into foreign investments. But I insist to you, I was not part of it.”
The other Latin American investors declined or did not respond to requests from the Times for comment. The Salvadorans hid their investment in Bain by working through shell companies set up in Panama, “then known for tax advantages and unusual banking secrecy.”
The Times quoted Steven H. Hagen, a Miami lawyer who provides tax advice to offshore companies and international investors, describing Panama in the 1980s as “the country of choice for foreigners wanting to make investments on a confidential basis.”