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Politics

Romney helped salvage Olympics

For the most part, claims of success by the presidential contender hold up to scrutiny.

By DAVID BAUMANN, Congressional Quarterly Staff Writer
Published September 27, 2007

Presidential hopeful and former Massachusetts Gov. Mitt Romney hosts an "Ask Mitt Romney" town hall meeting Wednesday in Long Beach, Calif.
	[AP photo]

By his own account, Mitt Romney almost single-handedly saved the 2002 Winter Olympics in Salt Lake City.

His new television ad says he "took on the bankrupt Olympics and turned them around."

He has written a book titled Turnaround: Crisis, Leadership and the Olympic Games.

The work Romney did in Salt Lake City has become part of his legend. But some people in Utah contend it's a bit of a myth. He didn't do it all by himself, and they believe that the Republican presidential candidate deserves a gold medal for chutzpah.

"I know that's a sensitive issue out here," said Robert Garff, former chairman of the board of the Salt Lake City Organizing Committee, and the person responsible for hiring Romney. "Did he do it all by himself? No. Does he deserve all the credit? No."

But Garff, who is supporting Romney's presidential candidacy, defended the oversimplified message: "You're talking about a 10-second sound bite."

In two of his campaign ads, Romney stresses his success in three areas: first, turning around the Olympics; second, establishing himself as a business innovator; and third, resolving a fiscal crisis when he was governor of Massachusetts without raising taxes.

How close does his record match his claims? On the first two, Romney is on solid ground, but his record as governor is not the clear case of spending discipline that he portrays.

All business

In 1977, after working at Boston Consulting Group, Romney joined Bain & Co., considered one of the country's hottest consultants. Companies hired Bain to help them; anecdote after anecdote indicates that Romney, equipped with an extremely sharp mind, excelled at his job. But the turning point came when Bain & Co. decided to use its consulting expertise to buy troubled companies, turn them around and then sell them. Bain Capital was born.

"There's not been a better company in the industry than Bain Capital," said Howard Anderson, a lecturer at MIT's Sloan School of Management. Anderson said Romney was among the first to realize that Bain's expertise could be used not just for contract work with companies, but for investing. "He knew how to take the brain power that was Bain and turn it into money," said Anderson, who sat on the board of one company with Romney.

Other companies have since adopted the Bain model, said Steve Kaplan, a professor of finance at the University of Chicago School of Business. He added that if being able to charge higher fees is an indication of success, then Bain has been very successful.

Romney's biggest success may have been deciding to invest in Staples, the office supply giant. Bain put about $600,000 in the company, which opened one store in Brighton, Mass., in 1986. The company went public in 1989. Today, it has 1,962 stores and in 2006 had $18.2-billion in sales.

Meanwhile, Bain & Co., the consulting company, found itself in financial trouble, so Romney left the capital group to help get the consulting operation back on its feet. The board "took a blood oath" to bail the company out, said Anderson. "They would not have done that for anyone but Mitt."

Romney's talent is "that he could see patterns and could execute," Anderson said. "I'm not going to vote for him, but as a businessman, he's marvelous."

Romney's business success came back to haunt him a bit in his 1994 Senate race against Democrat Edward Kennedy. Kennedy filmed campaign ads in Indiana, where Bain Capital had purchased an office supply company and laid off the workers. Romney lost the race.

Olympic trouble

The Salt Lake Olympics were in dire straits when Romney took over as chief executive in February 1999. At that moment, it faced an operating deficit of nearly $400-million.

Previous chief executive Thomas K. Welch and vice president David R. Johnson had decided the key to winning the games was spreading more than $1-million in gifts to International Olympics Committee members. When the news media uncovered the gift-giving, several members of the committee were forced to resign and suddenly the games were cloaked in scandal.

The Justice Department and Congress were investigating. Sponsors wondered if they still wanted their names attached to the games.

"Was it bankrupt?" Garff asked. "No, but it was at a low." Expenses did exceed revenue, but he attributed some of that to pledges that had not yet been collected.

Garff said Romney did keep one wavering sponsor, John Hancock, from bolting. "It was a very important signal to the rest of the sponsors that he had righted the ship."

Retaining John Hancock was vital to rescuing the Olympic brand, said Stephen A. Greyser, a professor emeritus at Harvard Business School and a specialist in sports marketing. And Romney was instrumental in keeping John Hancock in the fold, he said. "It was Mitt Romney who was, in essence, Mr. Integrity," Greyser said.

David D'Alessandro, the former John Hancock official who threatened to pull the company's sponsorship, was not available for comments.

Many big sponsors predated Romney's involvement in the games, said Sydney Fonnesbeck, a former member of the Salt Lake City Council and a friend of Welch's. "He just came in and gathered the money that was already (pledged)," she said.

Garff confirmed, too, that the Olympics' television contract with NBC -- worth between $400-million and $500-million -- had been negotiated well before Romney joined the Olympic effort.

Still, Romney deserves a huge amount of credit, according to a member of the International Olympic Committee, who was on the committee at the time. "If no one had stepped in and taken charge, there would certainly have been an organizational and financial disaster," Richard Pound, a Montreal lawyer wrote in response to e-mail questions. "There were good people in the organization, but for them to have been able to do the many things that needed to be done, they needed a good leader who could make decisions and empower them."

But Fonnesbeck said Romney alienated some people with whom he worked during the games. "He didn't want to give anyone else any credit," she said. "We became nobodies. A lot of us were hurt and angry. It didn't surprise any of us when he ran home and ran for governor."

Define 'tax increase'

The fiscal mess Romney confronted when he took over the Olympic effort was nothing compared to the $3-billion deficit he tackled when he took over as Massachusetts governor in 2003. As a Republican, he was vehemently opposed to raising taxes to balance the budget and instead, vowed to cut spending.

And he succeeded, according to his campaign commercials, which claim that he did not increase taxes while he was governor. There is evidence to support this claim and to disprove it.

Romney did not increase income taxes for individuals and the state did not increase the sales tax while he was governor.

On the other hand, the state consistently increased fees for such things as registering a boat and filing a court case. And it did increase corporate income taxes by closing loopholes. In addition, the state decreased payments to cities and towns, meaning that local governments had to shift the burden of paying for services to the property tax.

For instance, in 2003, Romney's first year in office, Romney and the state legislature reduced payments to cities and towns by 5.8 percent. The state increased myriad fees by some $218-million -- Romney had proposed increasing fees by $400-million. And the state increased corporate income taxes by $174-million, according to the National Association of State Budget Officers.

"The suggestion that he didn't raise revenue is not accurate," said Michael Widmer, president of the Massassachusetts Taxpayers Association, a conservative group. If aid to cities and towns decreases, then property taxes at the local level increase, he said, adding that "it is a little bit indirect."

The Club for Growth, a conservative Political Action Committee that pushes for spending cuts and tax cuts, evaluated Romney's fiscal record. "Overall, Romney's record on tax policy is mixed," the club concluded. "His record is marred by questionable statements and positions and his fee hikes and 'loophole' closures are troubling."

[Last modified September 27, 2007, 01:11:33]