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Sat Jan 14, 2012, 07:48 PM

Here are the facts about Bain and KB Toys, much worse than 'Vulture' Capitalism

There is good private equity and there is bad private equity firms.

My company at the time tried to find a partner in the 1990s and I was impressed by some of the people we talked with. They look at 100 companies pare it down to 10 and recommend one.

Here are the facts about KB Toys.

1. At the time it was purchased KB Toys was an industry leader, it was not in trouble.



http://www.fundinguniverse.com/company-histories/KB-Toys-Company-History.html

In 1999, KBkids.com received top points from an e-commerce market research firm, the Gomez Advisors, in the categories of customer confidence, overall cost, and bargain shopping. Softletter named the site one of the 'Ten Best Online Software Stores of 1999' in its October 15th issue. Even the Wall Street Journal dubbed the site the 'best overall' online toy retailer. In a little more than four months online, KBkids.com increased its business more than 400 percent and twice ranked among the five biggest gainers on the NextCard eCommerce Movers index.


It seemed nothing could stop KB Toys from challenging its rivals in the toy industry. Operating profit for 1999 was up 51 percent from 1998. The company, seeking to capitalize on its growth, decided to hold an initial public offering in the spring of 2000, then postponed trading due to unfavorable market conditions. Notwithstanding this delay, KB was more focused than ever on fine-tuning its position in the very fashion-forward toy industry. With relatively small stores and a knack for innovation and creativity in marketing, KB was ready as ever to make quick adjustments to changing customer and merchandise trends.



2. KB Toys was a company that made money and exercised social responsibility

After a 13 year old boy in NYC was shot and killed while holding a realistic toy gun (not from KB Toys) KB Toys destroyed 300,000 toys in inventory and never again carried realistic toy guns. They also gave toys for guns.

The company also participated in New York's 'Goods for Guns' program, which offered gift certificates to people who surrendered real firearms. Although Ann Iverson left as chairman in 1994, her policy of not selling look-alike guns was continued by her successor, Alan Fine, who had been senior vice-president before becoming president and CEO.


3. Bain Capital 'purchased' KB for the respectable price of $ 305 million dollars on December 8, 2000.

http://en.wikipedia.org/wiki/KB_Toys

4. Bain Capital only offered $ 18 million in cash, the rest was leaveraged debt put on the company.

5. "Sixteen months after the buyout, Bain Capital paid itself $85 million in dividends in early 2002."

6. "January 14, 2004, K·B Toys filed for Chapter 11 bankruptcy protection and closed 365 stores."

7. Three years later the rest of the 156 stores were closed down.

But there is a little more to the story. KB Stores had already gone through a tough restructuring in 1996. At that time a private equity bought the company, closed unprofitable stores, and increased profits.

So here is the objective reality of what Bain did.

Bain engineered a private equity purchase of a profitable company that had already gone through 'creative destruction' eliminating unprofitable legacy operations and saddled the company with hundreds of millions of dollars of debt. The company was not just profitable but an example of the kind of companies that demonstrate a wider social conscious for its customers and the larger community. Sixteen months after purchasing the company with only 6% cash of the value Bain takes out dividends at over 400% of their investment. Significantly this was done during the time of the attacks on 9/11 when the country as a whole was undergoing a hightened sense of patriotism, sacrifice and social duty. Less than 2 years after saddling KB Toys with massive debt and taking out astronomical dividends, K-B Toys faces Chapter 11 bankruptcy and closes 354 previously profitable stores.

Vultures take meat that is already dead and complete the final loop in the cycle of life.

Bain took a company that had already been restructured and was surging in profits and cash. There was never any interest by Bain to restructure KB Toys, that had already been done.

Bain purchased KB Toys simply to raid its cash, and they did so during a time when the rest of the country was undergoing a period of reviewing the founding principles of the country.

To call what Bain did to KB Toys as 'Vulture' Capitalism is an insult to Vultures.

They were pirates and this is why there is so much interest to change the subject and not let the real facts of Bain Capital come to the surface during the Republican Primary.

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Reply Here are the facts about Bain and KB Toys, much worse than 'Vulture' Capitalism (Original post)
grantcart Jan 2012 OP
annabanana Jan 2012 #1
laserhaas Oct 2013 #46
notadmblnd Jan 2012 #2
Major Hogwash Jan 2012 #3
grantcart Jan 2012 #5
Remember Me Jan 2012 #6
NBachers Jan 2012 #11
senseandsensibility Jan 2012 #20
Generic Brad Jan 2012 #22
Dawson Leery Jan 2012 #4
KharmaTrain Jan 2012 #7
grantcart Jan 2012 #8
KharmaTrain Jan 2012 #10
grantcart Jan 2012 #13
AnotherMcIntosh Jan 2012 #27
riverwalker Jan 2012 #9
customerserviceguy Jan 2012 #12
Moosepoop Jan 2012 #16
HopeHoops Jan 2012 #17
customerserviceguy Jan 2012 #26
HopeHoops Jan 2012 #28
Major Hogwash Jan 2012 #35
grantcart Jan 2012 #36
pansypoo53219 Jan 2012 #14
BrendaBrick Jan 2012 #15
barbtries Jan 2012 #18
think Jan 2012 #19
grantcart Jan 2012 #34
Scurrilous Jan 2012 #21
JNelson6563 Jan 2012 #23
joe1991 Jan 2012 #24
oldhippydude Jan 2012 #25
Gidney N Cloyd Jan 2012 #33
bleever Jan 2012 #29
JDPriestly Jan 2012 #30
proverbialwisdom Jan 2012 #31
grantcart Jan 2012 #32
joshcryer Jan 2012 #37
grantcart Jan 2012 #38
Liberal_in_LA Jan 2012 #39
victoryparty Jan 2012 #40
grantcart Jan 2012 #41
FSogol Jan 2012 #42
suffragette Jan 2012 #43
TeamPooka Aug 2012 #44
laserhaas Oct 2013 #45
grantcart Oct 2013 #47

Response to grantcart (Original post)

Sat Jan 14, 2012, 07:53 PM

1. k&r. . . . . . . . .n/t

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Response to annabanana (Reply #1)

Fri Oct 25, 2013, 04:32 AM

46. cool

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Response to grantcart (Original post)

Sat Jan 14, 2012, 07:58 PM

2. Destroy jobs, ruin lives. All for the profit of the shareholders

Themselves.

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Response to grantcart (Original post)

Sat Jan 14, 2012, 08:05 PM

3. Wow, that is one whale of an analysis, grantcart.

And I remember KB Toys as being a pretty darned good toy store, with much competiton from the Toys R' Us company.
After they closed, the Toys R 'Us store didn't seem to have any incentive to compete by offering really good toys for kids or making them affordable.

Romney is a scumbag. We already know that.
Now the rest of the nation will know!!

Thanks for this analytical article.

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Response to Major Hogwash (Reply #3)

Sat Jan 14, 2012, 08:52 PM

5. Thanks but I have resources beyond the reach of the Mass Media.

I was able to find the relevent facts using my secret research tool (which a few of us refer to in our own coded nomenclature as the 'Google') during the second half of the Giant/NO game. By using elaborate search code words like 'KB Toys, and 'Bain' and our even more secret research portal 'Wikipedia' I was able to find the objective facts of this secret material that remains outside of the reach of the media in about 15 very long minutes. I was able to combine that with my own personal academic training including JR High studies on Vultures and the Lion King.

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Response to grantcart (Reply #5)

Sat Jan 14, 2012, 09:23 PM

6. This needs to be publicized -- know anyone in political circles at DNC or better yet,

 

can you get it to someone at MSNBC (Rachel?) or at Current to Keith Olbermann?

Oh, and don't use the word "pirate" -- I fear it's too romanticized in this day and age. It's my understanding this is what the mob does -- gangsters and mobsters. In fact, I wonder if they could be prosecuted under RICO (I can dream, can't I?)

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Response to grantcart (Reply #5)

Sat Jan 14, 2012, 11:54 PM

11. Are you referring to today's 49ers/NO game, which the 49ers won 36-32?

"I was able to find the relevent facts using my secret research tool (which a few of us refer to in our own coded nomenclature as the 'Google') during the second half of the Giant/NO game"

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Response to grantcart (Reply #5)

Sun Jan 15, 2012, 12:23 PM

20. LOL

But how can you expect talking heads who are paid millions and have a research staff at their fingertips to do the same?

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Response to grantcart (Reply #5)

Sun Jan 15, 2012, 12:40 PM

22. DUZY nominee!

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Response to grantcart (Original post)

Sat Jan 14, 2012, 08:32 PM

4. This is the doing and legacy of Williard "Mitt" Romney.

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Response to grantcart (Original post)

Sat Jan 14, 2012, 10:44 PM

7. How Does This Stick To Mittens?

He left Bain in '99 and supposedly was playing with the Olympics. Now this doesn't mean he didn't have some relationship with Bain afterwards (and that's murky from all I've read). He could weasel from this one saying he no longer was part of Bain and this was guilt by association. Staples and Sports Authority are far more relevant targets, but it would be interesting to learn more about Mitten's relationship with Bain after he left "active employ".

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Response to KharmaTrain (Reply #7)

Sat Jan 14, 2012, 10:56 PM

8. 1) As CEO and co founder he created the culture of Bain


2) He continued as an equity partner and continued to receive profits from Bain

Because the private equity business continued to thrive, this deal brought him millions of dollars in income each year. As a result of his business career, by 2007, Romney and his wife had a net worth of between $190 and $250 million, most of it held in blind trusts. An additional blind trust existed in the name of the Romneys' children and grandchildren that was valued at between $70 and $100 million as of 2007. The couple's net worth remained in the same range as of 2011, and was still held in blind trusts.

3) The actions taken at Bain were well publicized and he has never made any public statements to distance himself from any of their actions. Given the fact that he uses his roll with Bain as a major asset in being able to lead the country because he 'knows how to add jobs' it is not our burden to to draw lines which Bain acquisitions he agrees with but the burden is with him. Until he states publicly that he doesn't agree with Bain then the burden is on him to clarify not for us to excuse. Let Romney hold a press conference and explain what Bain actions he does disagree with.

If he wants to run on the Bain brand then its in his court to say what part of the brand he disagrees with, not us.

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Response to grantcart (Reply #8)

Sat Jan 14, 2012, 11:39 PM

10. He's Still Not Directly Invovled...

He left as a stockholder in the company...yes a lot of 'em, but he wasn't in the decision making capacity in this deal. He didn't create Vulture Capitalism or the "culture"...he and Bain took advantage of lax regulation and even more lax enforcement. Moral? That's a question each person decides for themselves...but he wasn't culpable in this corporate demolition other than to benefit as a stockholder.

As we're seeing Mittens wears his Bain experience as a badge of honor...why would he denounce the company doing what its investors expected? In the greedy environment prior to the crash of '08 anything that made money was good...and no one wanted to know the details.

Don't get me wrong...I think Mitten's corporate "leadership" and Bain's immorality should be a centerpiece of President Obama's re-election. Spotlight those who were directly affected by decisions made directly by Mittens. Guilt by association only works after you've made a direct connection. There's plenty of dirt in his tenure and I'm sure Mr. Axelrod and Mr. Plouffe have large 8 x 12 binders bulging with these stories ready to roll in the summer and fall...

Cheers...

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Response to KharmaTrain (Reply #10)

Sun Jan 15, 2012, 12:48 AM

13. Your facts are wrong, Romney continued to recieve profits after he left, functioning

as a vested partner:

1) Romney negotiated to continue to receive profits from Bain after he left;



http://www.nytimes.com/2011/12/19/us/politics/retirement-deal-keeps-bain-money-flowing-to-romney.html?_r=2&pagewanted=all

In what would be the final deal of his private equity career, he negotiated a retirement agreement with his former partners that has paid him a share of Bain’s profits ever since, bringing the Romney family millions of dollars in income each year and bolstering the fortune that has helped finance Mr. Romney’s political aspirations,

. . .

Though Mr. Romney left Bain in early 1999, he received a share of the corporate buyout and investment profits enjoyed by partners from all Bain deals through February 2009: four global buyout funds and 18 other funds, more than twice as many over all as Mr. Romney had a share of the year he left. He was also given the right to invest his own money alongside his former partners. Because some of the funds and deals covered by Mr. Romney’s agreement will not fully wind down for several years, Mr. Romney is still entitled to a share of some of Bain’s profits.



This is not guilt by 'association' this is guilt by taking the profits of the deal and putting it into his pocket.

However it goes beyond that;

2) Romney isn't just the guy who carried out trades, he is the guy who created the blueprint


http://nymag.com/print/?/news/politics/mitt-romney-2011-10/

Romney developed one of the tools that made this possible, pioneering the use of takeovers to change the way a business functioned, remaking it in the name of efficiency. �Whatever you think of his politics, you have to give him credit,� says Steven Kaplan, a professor of finance and entrepreneurship at the University of Chicago. �He came up with a model that was very successful and very innovative and that now everybody uses.�



Even if he didn't profit from it, which he did, or it wasn't his company that did it, which it was, you could still tie him to it for using the Romney model. In this case the Romney model WAS used by HIS company and HE did receive profits from it.

3) Romney has promoted his candidacy by association to Bain and the Olympics and being Governor. If he is going to take all of the successes for Bain (and I am willing to accept that there were many) then he also has to accept the problems as well, atleast until he denounces them. The same would be true for his time as Governor.

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Response to grantcart (Reply #8)

Sun Jan 15, 2012, 03:16 PM

27. Thank you.

 

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Response to grantcart (Original post)

Sat Jan 14, 2012, 10:59 PM

9. excellent post

I loved K B Toys. Damn good journalism, grantcart.

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Response to grantcart (Original post)

Sun Jan 15, 2012, 12:47 AM

12. I wondered what had happened to KB Toys

I just assumed that Toys R Us had killed them.

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Response to customerserviceguy (Reply #12)

Sun Jan 15, 2012, 09:46 AM

16. Same here.

We had a KB Toys store in town for a few years, I loved going there for kids toys instead of the few other mass retailers available here. Then they just up and left... never knew why. The building they were in is now a Goodwill store. I like that store too, for clothing, but I'm glad I don't have kids at the toy age any more.

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Response to customerserviceguy (Reply #12)

Sun Jan 15, 2012, 10:17 AM

17. No way. We have a Toys R Us outside a mall that used to have a KB Toys.

 

They got along fine - both of them - until KB went tits up. WalMart has a mission to kill Toys R Us by underselling until the competition is destroyed. Toys R Us has never operated that way. Besides, they had a different market. It's like the difference between a farmers' market and a mega-grocery store. There was stuff you could get at KB that Toys R Us would never carry, and far more selection at Toys R Us than KB could possibly house. The difference was as stark as Old Navy and Victoria's Secret.

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Response to HopeHoops (Reply #17)

Sun Jan 15, 2012, 02:20 PM

26. Ah, yes, Wal-Mart

They've killed a lot of businesses in this country. I had a favorite menswear shop that always had good shoes at a reasonable price, and carried the wider sizes I needed. In our small town, they couldn't differentiate on quality and keep affordable, so it was bye-bye.

Of course, a lot of upscale grocery stores are trying to get into the same high-end gourmet stuff that the farmers markets have been selling, so I fear for them as well.

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Response to customerserviceguy (Reply #26)

Sun Jan 15, 2012, 03:57 PM

28. There's a WalMart connection in this story as well...

 

The Toys R Us used to have its own exit from the main freeway. They reworked it in a manner that not only made it more sane, but also relegated the Toys R Us to "you have to know how to get there" status. Meanwhile, WalMart wants to build a "mini" store on the lot previously occupied by a Chevy dealer and plans on putting in an 8 story parking garage to accommodate the lack of space - with high intensity lights and it will be open 24x7. The locals aren't exactly pleased with this idea. It also requires cutting down a huge stand of old and very tall pine trees - the only buffer between the mall (and proposed WalMart) and the houses. The only reason they're doing that is to drive Toys R Us out of the West Shore.

On the plus side, Toys R Us pulled a big "FUCK YOU WALMART!" and just built a HUGE store not far from the only WalMart within 10 miles. The old one is kind of dated anyway. Now THAT is clever! It's a high traffic area and the spot they picked (an old Lexus lot) has easy access as opposed to the WalMart that's just down the road. Smart move. Smart move.

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Response to customerserviceguy (Reply #12)

Mon Jan 16, 2012, 12:13 PM

35. Me too. Grantcart really lifted the lid on Mitt's Pandora's Box with this thread.

I went to the mall just a few years ago at Christmastime to go to the KB Toys store where it was located, when I cam upon the huge hole left in the place where their store used to be, and I was shocked to see it gone.

I had no idea that Mitt was behind it.
I have bought toys for poor children for 38 years, and I have donated to the Marine Corps' "Toys For Tots" program for 33 years.
So, I was really mystified about what had happened to KB Toys.
Now I know . . . Mitt hates kids.

Christmas is all about children.
And yet without receiving a toy gift on Christmas, poor children don't have that feeling of that day being a special day for them.

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Response to Major Hogwash (Reply #35)

Tue Jan 17, 2012, 12:41 AM

36. thanks

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Response to grantcart (Original post)

Sun Jan 15, 2012, 01:25 AM

14. vampire capitalism.

nt

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Response to grantcart (Original post)

Sun Jan 15, 2012, 07:13 AM

15. +1 Excellent!

Wow - I didn't know all that. Thanks for this post!!!

FYI, you might be interested in this ad released in SC by Stephen Colbert's Super Pac today:

http://www.colbertsuperpac.com/episodeiv-anewhope/

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Response to grantcart (Original post)

Sun Jan 15, 2012, 11:26 AM

18. here's what everyone needs to know

about the filthy rich romney.

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Response to grantcart (Original post)

Sun Jan 15, 2012, 11:33 AM

19. K&R Thank you for your research and post. May you inspire many to follow in your foot steps

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Response to think (Reply #19)

Mon Jan 16, 2012, 11:56 AM

34. You had me at 'thank you'.

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Response to grantcart (Original post)

Sun Jan 15, 2012, 12:33 PM

21. K & R

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Response to grantcart (Original post)

Sun Jan 15, 2012, 12:54 PM

23. Yep, Mitt the job killer.

Asshole.

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Response to grantcart (Original post)

Sun Jan 15, 2012, 01:23 PM

24. Here's obama's winning campaign ad...

A group of kids walking towards a toy store... A mitt Romney lookalike dressed as Snidely Whiplash pulls a chain that rolls down a huge steel door that says "out of business!" ... as the children begin to cry, Romney is pushing a wheelbarrow out the side that is full of cash and toys.

All the while during the ad clips of quotes from news articles show how Romney and Bain cashed and trashed American companies. At the end of the ad is a link to a simple webpage with the succint but powerful information grantcart expertly posted here.

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Response to joe1991 (Reply #24)

Sun Jan 15, 2012, 01:35 PM

25. Snidley Whiplash?

that dates you... god how i miss Rockey and Bullwinkle

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Response to oldhippydude (Reply #25)

Sun Jan 15, 2012, 09:50 PM

33. Harrumph.

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Response to grantcart (Original post)

Sun Jan 15, 2012, 04:22 PM

29. Superb exposition.

I had made the same point in conversation on Friday: vultures perform a useful role in the ecocycle. Corporate raiders like Mitt are about looting the airplane of its parts before parachuting to safety.

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Response to grantcart (Original post)

Sun Jan 15, 2012, 04:41 PM

30. K&R

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Response to grantcart (Original post)

Sun Jan 15, 2012, 05:19 PM

31. Thanks for the post, bookmarking.

 

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Response to proverbialwisdom (Reply #31)

Sun Jan 15, 2012, 09:22 PM

32. Welcome

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Response to grantcart (Original post)

Tue Jan 17, 2012, 01:22 AM

37. I've been saving this to read and when I finally started I couldn't stop.

Amazing investigative reporting grantcart, this is a true eye opener to their authoritarian piracy.

It's beyond the pale.

Romney is done.

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Response to joshcryer (Reply #37)

Tue Jan 17, 2012, 12:24 PM

38. thanks

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Response to grantcart (Original post)

Fri Jan 20, 2012, 04:00 PM

39. kick

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Response to grantcart (Original post)

Fri Jan 20, 2012, 04:13 PM

40. Thanks for this

 

Very, very helpful.

My question is why can't the mass media explain things this way? Why does it always have to be played out so childishly with the "he said, she said" aspects but minimal reporting of facts?

Great job, grantcart.

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Response to victoryparty (Reply #40)

Sat Jan 21, 2012, 12:22 PM

41. Thank you

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Response to grantcart (Original post)

Sat Jan 21, 2012, 12:27 PM

42. K&R. n/t

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Response to grantcart (Original post)

Sat Jan 21, 2012, 02:01 PM

43. Great analysis grantcart

K&R

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Response to grantcart (Original post)

Fri Aug 31, 2012, 03:33 AM

44. k&r

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Response to grantcart (Original post)

Fri Oct 25, 2013, 04:31 AM

45. sure wish I'd seen this way before now

You've just met the man battling Romney for 12 years

and I've filed a Racketeering lawsuit against him last week;
officially docketed today.

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Response to laserhaas (Reply #45)

Fri Oct 25, 2013, 08:51 AM

47. You may find this piece interesting


It details my personal interaction with the Romney family over the last 40 years.

George Romney was actually quite a great man.

http://www.democraticunderground.com/1002436216

It explains what I think is the real motivation of one of the most superficial people ever to make it to the national stage.

He just happened to be really good at ripping companies apart.

Of course the great irony of Mitt Romney is that he is a man who created wealth by a rather insidious and twisted use of debt.

Those supporting him were motivated ostensibly by their concerns of debt.

Putting Romney in charge of the federal budget would be like putting Walter White in charge of the FDA.

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