Little did I know that my layoff in 1995 from Dupont Medical Products was a God-send that saved my Dupont pension from the Bain Capital boogey-men

New England Nuclear logo

After college, I started working for a little medical diagnostics company in Worcester, Massachusetts known as New England Nuclear in 1974.  We occupied two converted former residential houses on Harvard Street, which was a newly zoned business district.  Our specialty was manufacturing medical diagnostic kits that utilized a radioactive "tracer" component.

When I began working there, the company had sites in Worcester, Boston and Westwood, Massachusetts.  We didn't make much money then, but it seemed the owners were satisfied with their share of small profits, which still allowed them to live well.  Executive salaries in the tens of millions of dollars was not common and really could never have been accommodated given our tiny profits at the time.  It was a different time then.  The profit motive was not the only consideration to businessmen at that time.  Employees made the difference and executives realized that and honored them for it.  We all could feel the warm concern that our employers had for us.  Many of us worked for them for a long time.  We were a small "family" that grew with each other.  We considered ourselves scientifically trained intellectuals and all had respect for each other.   We had fun doing our jobs and fun socializing with each other.

Investment in research helped us rapidly develop a number of new diagnostics kits and our product line and profits began to increase.  In about a year after I started, the business  expanded and moved from Worcester to a nice new facility in Billerica.  And that is where I worked for the next 20 years.

In 1982, Dupont Company became interested in our little company and purchased us.  It was really a good thing for our company.  Dupont management was very knowledgeable and taught us much about managing a company.  But this huge Corporation was very different than anything we knew before.  The corporate culture was very structured and inflexible.   The environment became somewhat more uneasy and competitions between departments began to arise.  As Dupont began to bring in their own people some of the original members of our New England Nuclear team lost out on promotions.  We played second fiddle to Dupont's own talented organization.

Around 1992, the newest thing to managing a business was Manufacturing Requirements Planning (MRP). The essence of MRP was to implement a computer tracked transactional system that allowed management and business users to have much better understanding of their sales, production capacity, inventory, purchases and financials.  We began an implementation of MRP in 1992.  We did a good job of implementing that computer system and became a "Class A" manufacturing company within two years of implementing it.  It gave management a better understanding of our business activities, future potential and financial situation.

In anticipation of undisclosed future actions, Dupont management moved the people from the Billerica diagnostics operations to the Boston site.   Perhaps because the MRP system was providing such good information, or perhaps because Dupont expected more profits than we could produce, in 1995 Dupont management decided to have a reduction in force of a good percentage in all divisions.  Many of us who were with New England Nuclear from the early days were let go.  I was one of them.  Maybe they were trying to save the greatest costs or perhaps they thought our severance package would get us further along to finding a new job, but we were all surprised by the selection of experienced people who were laid off.

For those of us who were terminated, it was a stressful time.  Jobs were not easy to find.  One of our young colleagues was found dead in his apartment.  I never knew why he died.  It may have been due to some other cause or due to some other reason, but I tended to believe it was suicide.

Because of my longevity with Dupont I was one of the lucky ones.  I had enough time in to have earned a Dupont pension.  I was given eleven and a half months severance pay and eleven months later I finally found a lower paying job.  Not my best choice in jobs, but my only choice since I had come up empty on any other offers.  At the time I thought this was terrible, but I did not know that my lay-off in 1995 was going to save me from a fate worse than the lay-off I had just experienced.

Dupont management's undisclosed plan was to divest entirely of the medical diagnostics division.   Dupont's main reason for the move from Billerica to Boston was to move the medical diagnostic personnel into a common location with the other medical site that they also planned to sell off.  Some commonly refer to this as putting all the crap into one sock.  The year after I was laid off, in 1996 Dupont found a buyer in Bain Capital.

Mitt Romney and Bain Capital team

Bain had already purchased another medical diagnostic company called Dade International in 1994 using mostly borrowed money.  Right away Bain paid themselves nearly $100 million in fees for buying the company and managing it. This amount was over three times Bain's original investment.

In 1996 Bain included my former colleagues into the Dade organization.   During Bain's reign over Dade International, more than 1700 US workers were laid off.  Some of my colleagues were the first with a layoff in 1997.  At first Bain's approach to cost cutting included reducing salaries and not paying overtime to existing employees.  Then they revoked their pensions.  Finally they laid them off.

In 1998, Bain wanted to sell Dade and were given a generous offer by Kohlberg Kravis Roberts and Company, but Romney wasn't happy with the offer.  By the next year Bain used creative financing to find a way out.  Romney had Dade take out hundreds of millions of dollars in loans to buy out half of Bain's shares and half of those of its investment partners.  As a result, Bain extracted $242 million from Dade and Goldman Sachs got $121 million.  Top Dade executives got $55 million.  Total payout was $420 million.

In 2002 Dade's liabilities reached nearly $2 billion.  By leveraging the company so badly in order to pay themselves, Bain put the company into bankruptcy.  In the bankruptcy, Romney was accused of "unjust enrichment" and Bain had to relinquish its remaining ownership of Dade.  Romney and Bain kept the $342 million.  The other creditors didn't fair so well.

After bankruptcy, Dade's revenue and share price rapidly increased and it was bought by Siemens in 2007.

Here's hoping that many of my former colleagues survived Romney and Bain Capital.  My bet is that they will not  be voting for Romney for President, even if they're Republicans.

Why Mitt Romney appears to be a spineless, dishonest shape-shifter

This may be the most sympathetic blog I have ever written about Mitt Romney.

The video below shows the record on the extreme flip flop nature of Mitt Romney.  It seems strange that Mitt Romney's position on so many issues could be reversed so thoroughly since he has begun his Presidential Campaign.  What could be happening that could make him such an etch-a-sketch man? 

Postulating causes of that metamorphosis may not take us in a direction that most of us would find familiar.  Mitt Romney is not like most of us.  His life has been blessed with riches that we will never know.  He has experienced the leadership power of being a Corporate CEO and the political power of a Governor of Massachusetts.  This is the second time he has attempted a run for the Presidency of the United States.  In order to have accomplished all that in his lifetime, he must be knowledgable, capable and at one time must have been likeable.  

Although Romney has not made it part of his political campaign, he was a Mormon Bishop in Boston for many years.  He was a generous contributor to the Mormon religion.  Although many consider Mormonism a cult, Romney did get positive life experiences by being a member.

Tony Kimball, a long-time Romney colleague, said he was "shocked" by Mr Romney's "end justifies the means" approach to trying to win the White House.

Tony Kimball

"There is no way that I can square what Mitt is doing and saying on the campaign trail with the Mitt I have know for 40 years and I don't know how he can square it either," said Mr Kimball, a retired university politics professor who served as another Boston area Mormon bishop and then spent seven years as Mr Romney's executive secretary.

Boston Mormon Temple

"I am dismayed by the things he feels the need to do as a political candidate.  This is foreign to the way he spoke and presided in the church.  It is not the same person."

"The sharp-edged individualism, the turning his back on the poor, the arguing that the rich deserve more tax breaks, that is all counter to what Mormonism teaches about compassion and collective care."

"Mitt seems to create a caricature of Obama and the Democrats and then attacks that creation.  I think he lacks the antennae that a good politician needs and I have serious misgivings about how he would manage the White House."

So what has thrown him off his game?  Why does he appear to be so wishy-washy, aloof and incapable of being President?  Why would he deny the exceptional health care plan he provided as Governor of Massachusetts?  Why would he change his opinions on almost every major issue he stood for since he has been a Presidential contender? 

Which is Mitt?

One reason is that he is a man who is being molded by a new Republican Party.  A Party that must reward their billionaire donors.  A Party whose policies violate Romney's own standards and personal values.  As such he is a man out of touch with his own sensibilities.  A man so unlike his own Party's thinking that his actions, his speech and his body language appear off to us.  He is a man who has given up on his own confidence.  Like a fish out of water, he is trying to survive in a world where everything is different than he knows.  By his flip-flops and lies we know he has given in to his "owners" and now his mind is theirs.  He is spine-less in that way.

Honesty is not his forte.   He is devilishly clever enough to realize when his policies are unpopular with voters and dishonest enough to change his policies on a dime to capture votes, even when it conflicts with his real beliefs.  He seems to have no problem with lying to the public about Obama and Democratic policies.  He truly does create lies about Obama and then blames him for them.  He is dishonest and a shape-shifter in that way.

Somehow in the excitement of this campaign he has forgotten his religious teachings.  His charity now begins with his wealthy supporters at the expense of those who struggle to make ends meet.  Thy shalt not lie is an easy commandment for him to break.

This is not a man that we can trust as President.  We can reasonably expect that this is a man who will deliver favors to those billionaires who are buying the Presidency.  He will forego his own thinking on all kinds of decisions to be led by his masters.  His dishonesty with the American people is sure to continue in office if he were elected.  When crisis is upon us, we do not want a dishonest puppet leading us to his master's commands. 

I strongly recommend viewing the following video.

Having Mitt Romney in the 2012 Presidential Race could be the best thing that has happened to America...but not for the reasons you may think

Having Mitt Romney in the US Presidential race could be the best thing that has happened to America.      

OK, so you support Mitt Romney and toe the Republican line and probably couldn't agree more.  Sorry to disappoint, but that's not the reason for my introductory statement.

The reason it's a good thing is because America gets to see that the tax laws of this country unfairly favor the rich and legally allow them to avoid paying their fair share of taxes.  We have heard Romney claim he has paid all the taxes he is "legally" obligated to pay.  Some of us have heard of situations where some Corporations pay no taxes.  We understand that there is a maximum tax rate and an "effective" tax rate.  This effective tax rate is usually after the legal loop-holes have been utilized to reduce the maximum rate to Romney's "legally" obligated rate.

The rich may even be involved in some "creative" tax avoidance activity that legally runs amuck, such as what might have happened with Romney's IRA.  And now we may get to see this play out in Congressional hearings with Romney or his tax advisors as litigants.

Some Democratic members of Congress have formally filed an official request for an investigation into the activities of such wealthy people as Romney who have found ways to stash upwards of $100 million dollars into their IRA accounts.  See this link for the actual letter sent.

Since the average American can legally only deposit $6000 annually (in 2012, if age 50 or older) into an IRA, it is important to know if the actions of Romney and potentially other Americans are illegal.  I have previously speculated on one illegal way that this could have happened in an earlier publication.  See this link for the original story.

Even if the practice is found to be legal, it could make a big difference in the amount of tax revenue collected.  The US Treasury Department may want to seal up this loop-hole.

Perhaps the government is debating on whether to have these hearings now or wait until after the election.

If they have them now, it may cause havoc in the Republican Party, especially if Romney is found to be guilty of tax evasion.  If they lose their Presidential candidate, they will be forced to find an alternate, and we the people will have to go through the learning curve all over again.

If they wait until after the Presidential election, since there are two possible outcomes, it could make a difference to history.  In the one case where Romney loses, he will just be punished as a citizen criminal.  However, if he wins the election, he will have to be impeached.

I'm thinking the government will wait until after the election to carry out this investigation, betting that Romney will not be elected.

How to shelter $100,000,000 in an IRA

Recent controversy over Mitt Romney's tax returns has included questions over his IRA (individual retirement account) which is reported to contain well over $100,000,000.

For those of you who do not have an IRA, it is important to note that regulations impose a $5000 limit to the annual contribution that an individual can make to it and even less than this was allowed in the years before 2012.

If Mitt Romney worked at Bain Capital for 25 years, then at the current allowable deposit amount and excluding interest, Mitt's principal would grow to $125,000 in that time.  Yet Romney has nearly 1000 times that amount in his IRA.  So let's say that the investments made by the IRA gave Romney a 15% return each year.  After twenty-five years that IRA should contain about $1,600,000.  Still a far cry from $100,000,000.

So how could Romney's IRA contain so much more?  Allow me to speculate.

When Romney founded Bain Capital, it was created as a Private Corporation.  Legally, Private Corporations do not have the financial transparency that Public Corporations have.  The stock of the Private Corporation is not sold to the public and usually remains under the ownership of the partners of the Investment firm.

The United States Treasury Office began to see a phenomenon occurring with Private Corporations around year 2000.  In increasing numbers, Private Corporations began to find tax shelters to protect their profits from United States taxes.  Additionally, certain stock based compensation plans did not comply with what IRS called "deferred compensation" tax rules.  For example, certain individuals were given stock options with an exercise price that was less than the fair market value of the company's common stock.  To block this practice after year 2000, regulations were adopted to add an additional 20% tax on these transactions.  The idea was to discourage evading taxes by writing regulations that made it less profitable to do so.

In certain companies (Bain may be one of them), under-priced stocks were given to the owners and directly deposited into their IRA accounts.  So let's say the $5000 limit on the IRA deposit was achieved by under-pricing these stocks by a huge amount.  For example, let's speculate that the per share fair market value of the stock was $50.00 but the owners got shares deposited into their accounts at $0.10.  In that case, the number of shares at the fair market value is 100, but at the reduced price is 50,000.  For reporting to the IRS, the Individual Retirement Account meets the regulations and only $5000 is reported as being deposited.  Yet in reality, the true value of the number of shares is 50,000 shares x $50.00 per share = $2,500,000.  

Repeat this year after year and you will soon have $100,000,000.  Even if you do not reduce the price of the stock as much as in my example, you will still be there in no time.

If the individual has a Roth IRA, then the situation is even more favorable.  With a Roth IRA, the taxes are paid on the deposit amount and are not taxed upon withdrawal at retirement.  So in our example above, the Roth IRA owner would pay taxes on $5000 up front and not on the $2,500,000 withdrawn during retirement.

So if you want to shelter $100,000,000 in an IRA, open a Private Corporation, setup a Roth IRA and give yourself stock options at a seriously reduced price.  Pay taxes on $5000 and enjoy the tax-free high life at retirement.