This post is based on the investigative reporting of Greg Palast from his book, Billionaires & Ballot Bandits: How to Steal an Election in 9 Easy Steps and his stories for The Nation, Truthout and Daily Kos
I am very sorry that in the compiling of my blog, the links to the Nation article which originally revealed the relationship between Mitt Romney and the Vulture Funds that outsourced Delphia were dropped. Greg Palast and the Nation did a major service in uncovering this story, and I intended to propagate it, not unwittingly deprive them of their rightful kudos..
The facts are simple. Mitt Romney's blind-trust invested more than a million dollars in a "vulture fund" managed by Paul Singer, a Romney adviser. In 2008, while Delphi Auto Parts was in bankruptcy, Singer's fund bought, for twenty cents on the dollar, Delphi bonds -- lots of them. With Delphi under Singer's control, he threatened to shut it down unless the taxpayer bailed it out -- holding General Motors and Chrysler hostage, because if Delphi shut down, the companies would lack steering columns and other essential parts. After getting his way, and a $7.3 billion bailout from the public, Singer then closed all but five U.S. plants to move these operations and 25,000 jobs to China. Mitt Romney's investments in Singer's fund help make this loss of American jobs possible.
Here is the tangled web that leads to lost American jobs -- and a 3,000% profit for Singer and Romney. In June 2009 the Treasury Department and General Motors announced that as part of the bailout, GM would take control of Delphi, which made crucial parts including steering columns, in a joint venture with Platinum Equity. The plan would shut 14 of Delphi's 29 plants, but retained the rest -- and would have given GM control of key parts of its own supply chain, including the steering columns.
Learning of this plan, Singer and the other hedge funds increased their investment, and converted some of their bonds to a controlling interest in Delphi stock. Singer tripled his holdings. The vulture funds now owned the auto parts company, as well much of its debt, at bankruptcy prices.
The vulture funds, led by Singer, used this strategically acquired control to reject the Platinum deal which would have kept half of Delphi operating in the U.S., insisting on being paid $0.45 on the dollar for their bonds -- more than twice what they had paid.
In a negotiating session with GM, the Treasury, the UAW, and the Singer group, a second deal was offered -- the hedge funds could get their way as long as they agreed to protect jobs. Singer and his partners refused. The hedge funds took the case to the bankruptcy court, where under the terms of bankruptcy law their combined position in ownership of stocks and bonds gave them control.
It was U.S. job protection that was the key point rejected by the vulture funds in which Romney had invested.
They also insisted that the federal government and GM provide them with ongoing financial support which eventually amounted to $7.3 billion -- because without these payments they warned Delphi would stop producing the vital GM (and Chrysler) parts which only it could manufacture. Both auto companies would go under. The Treasury gave in.
Stephen Rattner, who was leading the Obama administration bailout effort, writes that Delphi'a vulture funds initially told the Treasury and GM to hand over the first $350 million immediately, "because if you don't, we'll shut you down."
The newly reconfigured Delphi, with coffers fattened with taxpayer dollars, then proceeded to shut down all but five of its U.S. plants. Virtually all of these jobs were transferred to China, while reaping enormous profits -- Singer's fund alone made $1.2 billion, 3000% return on its investment. We don't know how much of this is Romney's share.
But the record is unequivocal. Romney's trust invested in a hedge fund that threatened to destroy Chrysler and GM if it did not receive more taxpayer dollars. That same hedge fund then helped transfer a major part of the U.S. auto industry supply chain to China. Romney profited not only from shipping the jobs overseas, but also from the taxpayer bailout.
Romney will plead ignorance, citing his blind trust. But he noted that his trust reflects his values, saying "The trustee of the blind trust has said publicly that he will endeavor to make my investments conform to my positions and I have confidence that he will do that well." Is extorting money from the Treasury and outsourcing auto jobs to China one of his values?
If the right questions are asked, the blind-trust won't shield him from having to tell us what he really thinks "job creation" is all about. Exploring Delphi will also tell us he means when he seemingly contradicts himself by saying that he both opposed the bailout of the auto companies (NYT op-ed in 2008) and that "I would never hurt the American auto industry" (third debate).
Romney has opened himself up to vigorous questioning even more, because his campaign has attacked the Obama administration for how it handled the Delphi pension funds.
So Romney must answer a simple but profound question: Did the investment made by Romney's blind trust in Delphi Auto Parts, and the management of that investment, including the threat to destroy GM and Chrysler to double the profits, conform to Romney's positions, values and beliefs? Forget what he knew when -- what does he believe now?
1) When he wrote in his NYT Op-Ed that if the government stepped in the auto industry would not take the necessary steps to restructure itself, was he thinking of the kinds of restructuring that his adviser Paul Singer imposed on Delphi? Is this Romney's idea of what Detroit should have done?
2) How much would his 2009 tax return show him profiting from the investment with Singer?
3) Is what Singer did consistent with Romney's values and his principals? This is the key question -- Romney must either defend his investment or disown it.
Reporters and voters should not allow themselves to be distracted by the fact that Romney will claim he did not know what Singer was up to at the time -- we'll never know when. But he knows today. He knows how much he made from Singer. He knows how the money was made. And he knows if it fits his values. The voters are entitled to know these things as well.
A veteran leader in the environmental movement, Carl Pope is the former executive director and chairman of the Sierra Club. Mr. Pope is co-author -- along with Paul Rauber -- of Strategic Ignorance: Why the Bush Administration Is Recklessly Destroying a Century of Environmental Progress, which the New York Review of Books called "a splendidly fierce book."