Romney's Testimony In 1991 Trial Gives New Glimpse Of Work At Bain
October 26, 2012
A lawsuit involving the former chief of Staples is back in the news more than two decades later because one of the key witnesses in the trial was Mitt Romney, the Republican nominee for president.
In 1987, two years before the company went public, then-Staples chief Tom Stemberg was negotiating his divorce settlement. The company's board, which Romney was a part of, agreed that Stemberg's company stock was worth less than a penny a share.
Meanwhile, it was preparing to go public at a hoped-for offering price of $6 a share.
The board's low valuation in 1987 short-changed Maureen Stemberg when she wound up selling the shares she received in the divorce for about $2.35 each, according to the suit she filed in 1991 in an unsuccessful attempt to redo the settlement.
Romney was on the Staples board at the time because his investment firm, Bain Capital, had provided much of the money to get Staples started and was a major holder of its preferred stock.
Romney has touted his years running Bain Capital as a prime qualification for the presidency, while the Obama campaign has used the Bain years against him by highlighting the firm's record of making huge profits on its acquisitions, even when the companies it purchased laid off workers or closed entirely.
Now, the testimony Romney gave in the 1991 trial in Dedham, Mass., defending the board's stock valuation is under scrutiny.
The Boston Globe went to court Oct. 15 to unseal the transcript of Romney's testimony. Meanwhile, Gloria Allred, a workplace rights lawyer (and Democratic supporter of President Obama) asked the court to lift the long-standing gag order that has kept Maureen Stemberg from talking about the matter.
The court agreed Thursday to unseal the testimony, but left the gag order intact. Romney's lawyer offered no objection to unsealing the testimony. Allred objected mightily about Maureen Stemberg's being unable to speak out, arguing that her explanation was critical to put the dense, at times confusing testimony in context.
"We can only discuss what happened in court yesterday and Wednesday," she told NPR Friday.
Romney's campaign referred questions to Romney's lawyer, Robert Jones, who released a statement attacking Allred:
"These tabloid charges being shopped by Gloria Allred, one of President Obama's most prominent supporters, are absolutely false. Every time a court has reviewed the allegations of her client over the last 24 years, they have been rejected. There is no new information here."
The transcript does show Romney as highly detail-oriented, walking the judge through the complicated business of venture capital and private equity. He explains that Bain Capital typically invested in startups only when it believed it could earn its investment back with a 10-fold return within five years.
He went through a detailed explanation of how he appraised the value of Staples stock, based on a variety of factors, to arrive at a fair market price of about $1.30 a share.
Maureen Stemberg's lawyer in that 1991 trial, Joseph Walsh, tried to show a contradiction between that valuation and the one-tenth of one cent per-share value that Romney and the rest of the Staples board set on Sept. 22, 1987.
Answered Romney: "It was my true belief that one could justify one-tenth of one cent as the value of the common stock, but that the stock was probably worth more than that."
Romney also testified that he was aware Staples was talking to Goldman Sachs about a possible public offering. In an earlier deposition, Romney had said a $6 per-share price was realistic, enabling Romney and his Bain partners "to more than double our money over a one- to three-year time frame."
But under questioning from Tom Stemberg's lawyer, Romney qualified that optimism by saying he thought there was only a 25 percent chance of Staples doing very well financially, and a 25 percent chance of Bain losing its entire investment.
Stemberg has been a strong supporter of Romney's political career and spoke in support of his nomination at the Republican National Convention in Tampa, Fla., in August.
S.V. Dáte is congressional editor on NPR's Washington Desk.