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By Attorney Jonathan Emord
Author of "The Rise of Tyranny" and
"Global Censorship of Health Information"
January 23, 2012

For Newt Gingrich it appears truth need not get in the way of a good story, particularly if the story might cause your campaign to gain a popular advantage over an opponent. The lies about Bain Capital, however, have backfired badly, turning attention on Gingrich himself and raising questions as to whether he lacks prudence, sound judgment, and integrity. Questions concerning Gingrich’s temper, lack of management skill, and honesty in personal dealings have been with him since the days when he served as speaker but nothing has done more to raise Republican concern over his ability to lead than his handling of the Bain Capital matter. He attempted to weave a web out of misrepresentations to ensnare the front-runner. Rather than cause Romney to stumble, the effort at entrapment itself became the story, Gingrich has become the one to stumble, and the truth about Bain Capital has forced Gingrich to distance himself from the attack.

While Gingrich in New Hampshire first raised the argument that while at Bain Capital Romney was possessed of extreme greed and self-interest, profiting at the expense of the working poor, Ron Paul reacted immediately to the charge as one would expect him to, rejecting it as an attack on capitalism itself and explaining that Gingrich’s allegations raised questions about Gingrich’s faith in the free market system. Upon the very first word of the attack, Ron Paul refused to pile on and explained the nature of equity firms in a market economy. Paul will neither bend principle nor the truth to win votes. He stands on the merits of his clear advocacy of limited government and free enterprise. If the American people come to appreciate his principles and vote for him, he welcomes them, and if they reject his principles, he will not bend one iota to satisfy their demands. In short, Paul is a man of unparalleled integrity. He outshines every other candidate in his consistent defense of the Constitution and in his honest representation of his position. If he is the last man left in America to champion the principles of the Founding Fathers and of a free market economy, he will continue to do so, because he loves his country more than himself and cannot be bribed, coerced, or cajoled into sacrificing those principles.

Gingrich, by contrast, is a partisan who has chosen the low road over the high. What is Bain Capital? Bain Capital is a private equity firm. How does Bain Capital work? Bain is funded by institutional investors, endowments, pensions, and other sources, all seeking a higher rate of return on investment than is common in the market. Because they seek a high rate of return, they are willing to assume a higher degree of risk. Bain pools the money of its investors and then acquires companies, hoping to alter their management and operation in ways that will permit the company to be resold at a profit. In a free market, this kind of reclamation action is beneficial to employers and employees because were it not for the intervention most companies would either linger along as poor performers or go out of business entirely.

Bain invests at the request of, usually, an ailing company’s officers and directors—a company that seeks Bain’s capital to stay alive. When asked to invest, Bain first performs a due diligence, determining if the company requesting money is one that might be made profitable. If it satisfies Bain’s criteria, and Bain’s management think the investment likely to turn a profit, Bain buys a majority stake in the company, tries to make it profitable, and, having done so, then sells it to a new buyer, pocketing the difference as profit.

When Mitt Romney started Bain, it pooled far less money than it now does. It now operates in the $8 to $10 billion range. Ironically, while Rick Perry travels about labeling Romney a “vulture capitalist,” he neglects to mention that as Governor of Texas, those he selected to be on the board of trustees of the Texas teachers’ retirement system invested in Bain Capital without any complaints. Apparently Perry had no objection then either.

The claim by Gingrich that Romney’s tenure at Bain was one of greed and profiteering at the expense of the working poor lacks credibility. The 28-minute attack ad that aired in South Carolina and was financed by a pro-Gingrich super PAC is likewise a distortion of reality, rife with misrepresentations.

The ad identifies four companies that were financed by Bain capital and includes interviews with people who claim Romney and Bain were cold hearted corporate raiders who ravaged the companies they bought, leaving behind a trail of devastation and unemployment.

The claim in the ad that Bain under Romney’s influence caused layoffs at the circuit board company DDi Corporation is false. Even if the underlying contention were true, which it is not, Romney left Bain in 1999, a year before any layoffs. DDi declared bankruptcy two years after Bain had largely sold its interests in the company, and the current CEO of DDi says that the investment made by Bain in DDi created the foundation for the company’s current market success.

The ad claim that Romney bought, managed, and caused the demise of KB Toys (and its 10,000 employees) is utterly false. Bain bought KB Toys two years after Romney left the company. Even if criticism could be leveled at Bain for failing to manage KB Toys to maximum potential, Romney cannot rightfully be charged with the problem; he wasn’t even there.

The ad claim that Romney is to blame for the loss of jobs at a company called UniMac is also false. UniMac was first acquired by Raytheon, which modified the business model of UniMac. Four years after Raytheon acquired UniMac, it sold the company to Bain. Bain sold the company to a Canadian pension fund. The closure of UniMac’s Marianna, Florida plant took place seven years after Romney left Bain and two years after Bain sold UniMac to the Canadian pension fund.


The ad claim that Romney was in charge of Ampad Corporation and is to blame for the loss of some 250 jobs at that Indiana paper products plant is another falsehood. It is true that the workers lost their jobs following a strike at the plant and following Bain’s acquisition of Ampad, but Romney was on leave from Bain, running for the United States Senate, when Bain purchased SCM Office Supplies. Romney had no involvement in management decisions made at Ampad. Indeed, Charles Hanson, Ampad’s President in 1994 when the job losses occurred, confirmed that Romney had no involvement in his company.

Truth gets in the way of a good story, particularly when the story is predicated on false assumptions. Far from revealing Romney to be a cold hearted corporate raider, the factual record reveals him to be well acquainted with market processes and to have been more successful than the typical investor in choosing underperforming companies with potential and then exploiting that potential to achieve greater market success. It is a stretch to claim, as Romney has, that he is responsible for adding “net net” 100,000 new jobs to the marketplace, but it is true that his leadership at Bain caused several underperforming companies to become solid performers and to employ more people. Only a minority of his investments went belly-up and that was not because Bain failed to use best efforts to make the firms going concerns.

As with all things in a free market, private equity funds invest at considerable risk. They are legal fiduciaries of their investors, not of the companies they buy. If after Bain invests and applies its management skills, a company does not produce the hoped for results (if the future returns from the company will not support its continuation in business), Bain identified the most economical means to end the investment, either by selling or, if no one will buy, by liquidating the company, reducing the loss to Bain’s investors as much as possible.

The Wall Street Journal took a close look at Bain during Romney’s tenure. Of 77 businesses that Bain invested in while Romney was in charge, 22 percent declared bankruptcy or closed their doors within eight years following the Bain investment. Conversely 78 percent made it. There are several successful Bain investments that are quite noteworthy, including Staples and the Sports Authority. As it turns out, Bain was among the more successful private equity firms. Private equity firms are a necessary part of the marketplace. They supply sorely needed management and capital to institutions that are underperforming.

Adding to the false charges he and his supporters have made against Romney, Gingrich appears guilty of a bit of hypocrisy. Among the handful of successful equity firms operating in the late 1980s and 1990s, Bain was joined by Forstmann Little and Kohlberg, Kravis & Roberts. None other than Newt Gingrich was on the advisory board of Forstmann Little. I do not mean to suggest that Forstmann Little was not an example of free enterprise functioning as it should, it was (and is), but I do mean to point out that Gingrich appears to have been hoist with his own petard.

The election contest is producing some surprising verities. Newt Gingrich early established himself to be an adept debater and a promising candidate, but the story from behind the scenes was that he had a temper, was vengeful, was disliked by those with whom he worked, and was a terrible manager. He was snubbed in Iowa and attributed his substantial drop in the polls to attack ads sponsored by pro-Romney super PACs.

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He resented that and, rather than rise above it, he chose to engage in the very same practices he condemned. He claimed those anti-Gingrich PAC ads contained false representations, which indeed they may have. For his part Romney has said that he did not approve of the ads and wished they did not exist. Whatever the real story is concerning those ads, the fact remains that Gingrich chose to stoop that low and lower with the trumped up Bain Capital attacks he initiated and his supporters continued (and exaggerated) thereafter.

In the end, Bain has bitten Gingrich back, and that bite could prove fatal for the Gingrich campaign.

� 2012 Jonathan W. Emord - All Rights Reserved

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Jonathan W. Emord is an attorney who practices constitutional and administrative law before the federal courts and agencies. Congressman Ron Paul calls Jonathan “a hero of the health freedom revolution” and says “all freedom-loving Americans are in [his] debt . . . for his courtroom [victories] on behalf of health freedom.” He has defeated the FDA in federal court a remarkable eight times, six on First Amendment grounds, and is the author of Amazon bestsellers The Rise of Tyranny, and Global Censorship of Health Information. He is also the American Justice columnist for U.S.A. Today Magazine. For more info visit











Gingrich, by contrast, is a partisan who has chosen the low road over the high. What is Bain Capital? Bain Capital is a private equity firm.