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November 02, 2012

Romney Charged with Ethics Violation for Failing to Disclose Hedge Fund Investment
    by Robert Kropp

The Office of Government Ethics receives a complaint that by not revealing profits his family received from the Obama administration's auto industry bailout, Romney has failed to disclose a potential conflict of interest.

SocialFunds.com -- The 2012 Presidential elections are but a few days away, and the race gained an interesting new wrinkle yesterday. A coalition of public interest groups, labor unions, and one sustainable investment advisory firm—the Social Equity Group (SEG) of San Francisco—has filed a complaint with the Office of Government Ethics, alleging that Republican candidate Mitt Romney has failed to comply with the Ethics in Government Act.

The signatories to a
letter sent to Don Fox, the general counsel of the Office of Government Ethics, state, "The Act requires candidates for federal office to disclose their financial holdings so that the public can identify potential conflicts of interest and personal economic priorities of federal officials and candidates."

However, the letter continues, "The Romney family personally profited at least $15.3 million from the auto bailout of 2009. Romney's June 1, 2012 Public Financial Disclosure Report to your office did not reveal this windfall because he did not disclose the underlying holdings of his private equity and limited partnership funds."

Considering Romney's public opposition to the Obama administration's bailout of the US auto industry, as well as his since-discredited recent ads alleging that US automakers are shipping American jobs overseas, the facts as described in a recent
article in The Nation appear to support the widespread notion that Romney's foremost allegiances are to a niche of the financial industry that like his own Bain Capital profits from the misfortunes of others.

Romney's Public Financial Disclosure Report stated that he owned over $1 million worth of Elliott Associates, a hedge fund that was described in The Nation article as a "vulture investor." After Delphi Automotive, an auto parts manufacturer, fell into bankruptcy, Elliott bought the company's debt for pennies on the dollar. In 2009, as bailout talks were advancing, Elliott and two other hedge funds—including that of John Paulson, who earned $4 billion during the financial crisis by betting that the housing bubble would burst—then used their bonds to gain a controlling interest in Delphi.

According to Steven Rattner, who headed the task force structuring the bailout of the automotive industry, the hedge funds told the Treasury Department and General Motors that if they were not paid $350 million immediately, they would cease supplying the automaker with parts.

The bailout of the automotive industry eventually included payments of almost $13 billion to Delphi. Then, in 2011, the hedge funds took Delphi public at $22 a share, realizing a profit of more than 3,000%.

When the hedge funds took control of Delphi, the company had 29 manufacturing plants and 25,000 unionized workers. Today, four plants remain in the US, and none of the 5,000 domestic workers are union members. The rest of the company's 100,000 workers are overseas in low-wage countries such as China, where parts for US automakers are now being manufactured.

"Mitt Romney is hiding his investments because he doesn't want the American people to know what a Romney Economy would look like," said Tom Woodruff, executive vice president of Service Employees International Union (SEIU), a signatory to the letter. "Governor Romney has invested in companies that outsource good jobs to China and cut wages, benefits and pensions for workers here in America."

"With the presidential election less than a week away," the letter concludes, "the Office of Government Ethics must act now to ensure Mitt Romney is in full compliance with the laws disclosure requirements so that the public has the necessary information to evaluate candidate Romney's position on matters in which he stands to benefit personally should his legislative agenda become law."

"The American people have a right to know about Governor Romney's potential conflicts of interest, such as the profits his family made from the auto rescue," said Bob King, President of the United Automobile, Aerospace and Agricultural Implement Workers (UAW), another signatory.

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