SOURCE
Earlier this year, Mitt Romney nearly landed in a politically perilous controversy when the Huffington Post reported
that in 1999 the GOP presidential candidate had been part of an
investment group that invested $75 million in Stericycle, a
medical-waste disposal firm that has been attacked by anti-abortion
groups for disposing aborted fetuses collected from family planning
clinics. Coming during the heat of the GOP primaries, as Romney tried to
sell South Carolina Republicans on his pro-life bona fides, the
revelation had the potential to damage the candidate's reputation among
values voters already suspicious of his shifting position on abortion.
But Bain Capital, the
private equity firm Romney founded, tamped down the controversy. The
company said Romney left the firm in February 1999 to run the troubled
2002 Winter Olympics in Salt Lake City and likely had nothing to with
the deal. The matter never became a campaign issue. But documents filed
by Bain and Stericycle with the Securities and Exchange Commission—and
obtained by Mother Jones—list Romney as an active participant
in the investment. And this deal helped Stericycle, a company with a
poor safety record, grow, while yielding tens of millions of dollars in
profits for Romney and his partners. The documents—one of which was
signed by Romney—also contradict the official account of Romney's exit
from Bain.
The Stericycle deal—the abortion connection aside—is relevant because
of questions regarding the timing of Romney's departure from the
private equity firm he founded. Responding to a recent Washington Post story
reporting that Bain-acquired companies outsourced jobs, the Romney
campaign insisted that Romney exited Bain in February 1999, a month or
more before Bain took over two of the companies named in the Post's
article. The SEC documents undercut that defense, indicating that
Romney still played a role in Bain investments until at least the end of
1999.
Here's what happened with Stericycle. In November 1999, Bain Capital
and Madison Dearborn Partners, a Chicago-based private equity firm,
filed with the SEC a Schedule 13D,
which lists owners of publicly traded companies, noting that they had
jointly purchased $75 million worth of shares in Stericycle, a
fast-growing player in the medical-waste industry. (That April,
Stericycle had announced plans to buy the medical-waste businesses of
Browning Ferris Industries and Allied Waste Industries.) The SEC filing
lists assorted Bain-related entities that were part of the deal,
including Bain Capital (BCI), Bain Capital Partners VI (BCP VI), Sankaty
High Yield Asset Investors (a Bermuda-based Bain affiliate), and
Brookside Capital Investors (a Bain offshoot). And it notes that Romney
was the "sole shareholder, Chairman, Chief Executive Officer and
President of BCI, BCP VI Inc., Brookside Inc. and Sankaty Ltd."
The
document also states that Romney "may be deemed to share voting and
dispositive power with respect to" 2,116,588 shares of common stock in
Stericycle "in his capacity as sole shareholder" of the Bain entities
that invested in the company. That was about 11 percent of the
outstanding shares of common stock. (The whole $75 million investment
won Bain, Romney, and their partners 22.64 percent of the firm's
stock—the largest bloc among the firm's owners.) The original copy of
the filing was signed by Romney.
Another SEC document
filed November 30, 1999, by Stericycle also names Romney as an
individual who holds "voting and dispositive power" with respect to the
stock owned by Bain. If Romney had fully retired from the private equity
firm he founded, why would he be the only Bain executive named as the
person in control of this large amount of Stericycle stock?
Stericycle was a lucrative investment for Romney and Bain. The
company had entered the medical-waste business a decade earlier, when it
took over a food irradiation plant in Arkansas and began zapping
medical waste, rather than strawberries, with radiation. The company
subsequently replaced irradiation with a technology that used
low-frequency radio waves to sterilize medical waste—gowns, masks,
gloves, and other medical equipment—before it was transported to an
incinerator. By mid-1997, Stericycle was the second-largest
medical-waste disposal business in the nation. Two years later, it was
the largest. With 240,000 customers, its operations spanned the United
States, Canada, and Puerto Rico. Fortune ranked it No. 10 on its list of the 100 fastest growing companies in the nation.
But the company had its woes, accumulating a troubling safety record
along the way. In 1991, the Occupational Safety and Health
Administration cited its Arkansas operation for 11 workplace safety
violations. The facility had not provided employees with sufficient
protective gear, and it had kept body parts, fetuses, and dead
experimental animals in unmarked storage containers, placing workers at
risk. In 1995, Stericycle was fined $3.3 million—later decreased to
$800,000—by Rhode Island for knowingly exposing workers to
life-threatening diseases at its medical-waste treatment facility in
Woonsocket. Two years later, workers at another of its medical-waste
processing plants in Morton, Washington, were exposed to tuberculosis.
In 2002 and 2003—after Bain and its partners had bought their major
interest in the firm—Stericycle reached settlements with the attorneys
general in Arizona and Utah after it was accused of violating antitrust
laws. It paid Arizona $320,000 in civil penalties and lawyers' fees, and paid Utah $580,000.
Despite the firm's regulatory run-ins, the deal worked out well for
Bain. In 2001, the Bain-Madison Dearborn partnership that had invested
in the company sold 40 percent of its holdings in Stericycle for about
$88 million—marking a hefty profit on its original
investment of $75 million. The Bain-related group sold the rest of its
holdings by 2004. By that point it had earned $49.5 million.
It was not until six years later that anti-abortion activists would
target Stericycle for collecting medical waste at abortion clinics. A Stericycle official told Huffington Post
that its abortion clinics business constitutes a "small" portion of its
total operations. (Stericycle declined a request for comment from Mother Jones.)
In response to questions from Mother Jones, a spokeswoman
for Bain maintained that Romney was not involved in the Stericycle deal
in 1999, saying that he had "resigned" months before the stock purchase
was negotiated. The spokeswoman noted that following his resignation
Romney remained only "a signatory on certain documents," until his
separation agreement with Bain was finalized in 2002. And Bain issued
this statement: "Mitt Romney retired from Bain Capital in February
1999. He has had no involvement in the management or investment
activities of Bain Capital, or with any of its portfolio companies
since that time." (The Romney presidential campaign did not respond to
requests for comment.)
But the document Romney signed related to the Stericycle deal did
identify him as a participant in that particular deal and the person in
charge of several Bain entities. (Did Bain and Romney file a document
with the SEC that was not accurate?) Moreover, in 1999, Bain and Romney
both described his departure from Bain not as a resignation and far from
absolute. On February 12, 1999, the Boston Herald reported, "Romney said he will stay on as a part-timer with Bain, providing input on investment and key personnel decisions." And a Bain press release
issued on July 19, 1999, noted that Romney was "currently on a
part-time leave of absence"—and quoted Romney speaking for Bain Capital.
In 2001 and 2002, Romney filed Massachusetts state disclosure forms
noting he was the 100 percent owner of Bain Capital NY, Inc.—a Bain
outfit that was incorporated in Delaware on April 13, 1999—two months
after Romney's supposed retirement from the firm. A May 2001 filing with
the SEC identified Romney as "a member of the Management Committee" of
two Bain entities. And in 2007, the Washington Post reported
that R. Bradford Malt, a Bain lawyer, said Romney took a "leave of
absence" when he assumed the Olympics post and retained sole ownership
of the firm for two more years.
All of this undermines Bain's contention that Romney, though he
maintained an ownership interest in the firm and its funds, had nothing
to do with the firm's activities after February 1999. The Stericycle
deal may raise red flags for anti-abortion activists. But it also raises
questions about the true timing of Romney's departure from Bain and
casts doubt on claims by the company and the Romney campaign that he had
nothing to do with Bain business after February 1999.
