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During the nearly 15 years that Romney was actively involved in running Bain, a private equity firm that he founded, it owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components, according to filings with the Securities and Exchange Commission.

An examination of securities filings shows the extent of Bain’s investment in firms that specialized in helping other companies move or expand operations overseas. While Bain was not the largest player in the outsourcing field, the private equity firm was involved early on, at a time when the departure of jobs from the United States was beginning to accelerate and new companies were emerging as handmaidens to this outflow of employment.

Bain played several roles in helping these outsourcing companies, such as investing venture capital so they could grow and providing management and strategic business advice as they navigated this rapidly developing field.

Romney campaign officials repeatedly declined requests to comment on Bain’s record of investing in outsourcing firms during the Romney era. Campaign officials have said it is unfair to criticize Romney for investments made by Bain after he left the firm but did not address those made on his watch.

Bain’s foray into outsourcing began in 1993 when the private equity firm took a stake in Corporate Software Inc., or CSI, after helping to finance a $93 million buyout of the firm. CSI, which catered to technology companies like Microsoft, provided a range of services including outsourcing of customer support. Initially, CSI employed U.S. workers to provide these services but by the mid-1990s was setting up call centers outside the country.

Two years after Bain invested in the firm {in other words, 1995}, CSI merged with another enterprise to form a new company called Stream International Inc. Stream immediately became active in the growing field of overseas calls centers. Bain was initially a minority shareholder in Stream and was active in running the company, providing “general executive and management services,” according to SEC filings.

By 1997, Stream was running three tech-support call centers in Europe and was part of a call center joint venture in Japan, an SEC filing shows. “The Company believes that the trend toward outsourcing technical support occurring in the U.S. is also occurring in international markets,” the SEC filing said.

Stream continued to expand its overseas call centers. And Bain’s role also grew with time. It ultimately became the majority shareholder in Stream in 1999 several months after Romney left Bain to run the Salt Lake City Olympics.

The corporate merger that created Stream also gave birth to another, related business known as Modus Media Inc., which specialized in helping companies outsource their manufacturing. Modus Media was a subsidiary of Stream that became an independent company in early 1998. Bain was the largest shareholder, SEC filings show.

Modus Media grew rapidly. In December 1997, it announced it had contracted with Microsoft to produce software and training products at a center in Australia. Modus Media said it was already serving Microsoft from Asian locations in Singapore, South Korea, Japan and Taiwan and in Europe and the United States.

Modus Media told the SEC it was performing outsource packaging and hardware assembly for IBM, Sun Microsystems, Hewlett-Packard Co. and Dell Computer Corp. The filing disclosed that Modus had operations on four continents, including Asian facilities in Singapore, Taiwan, China and South Korea, and European facilities in Ireland and France, and a center in Australia.

“Technology companies, in particular, have increasingly sought to outsource the business processes involved in their supply chains,” the filing said. “.?.?. We offer a range of services that provide our clients with a one-stop shop for their outsource requirements.”

According to a news release issued by Modus Media in 1997, its expansion of outsourcing services took place in close consultation with Bain. Terry Leahy, Modus’s chairman and chief executive, was quoted in the release as saying he would be “working closely with Bain on strategic expansion.” At the time, three Bain directors sat on the corporate board of Modus.

In addition to taking an interest in companies that specialized in outsourcing services, Bain also invested in firms that moved or expanded their own operations outside of the United States.

One of those was a California bicycle manufacturer called GT Bicycle Inc. that Bain bought in 1993. The growing company relied on Asian labor, according to SEC filings. Two years later {therefore, 1995}, with the company continuing to expand, Bain helped take it public. In 1998, when Bain owned 22 percent of GT’s stock and had three members on the board, the bicycle maker was sold to Schwinn, which had also moved much of its manufacturing offshore as part of a wider trend in the bicycle industry of turning to Chinese labor.

Another Bain investment was electronics manufacturer SMTC Corp. In June 1998, during Romney’s last year at Bain, his private equity firm acquired a Colorado manufacturer that specialized in the assembly of printed circuit boards. That was one of several preliminary steps in 1998 that would culminate in a corporate merger a year later, five months after Romney left Bain. In July 1999, the Colorado firm acquired SMTC Corp., SEC filings show. Bain became the largest shareholder of SMTC and held three seats on its corporate board. Within a year of Bain taking over, SMTC told the SEC it was expanding production in Ireland and Mexico.

In its prospectus that year, SMTC explained that it was in a strong position to meet the swelling demand from other manufacturers for overseas production of circuit boards. The company said that communications and networking companies “are dramatically increasing the amount of manufacturing they are outsourcing and we believe our technological capabilities and global manufacturing platform are well suited to capitalize on this opportunity.”

Just as Romney was ending his tenure at Bain, it reached the culmination of negotiations with Hyundai Electronics Industry of South Korea for the $550 million purchase of its U.S. subsidiary, Chippac, which manufactured, tested and packaged computer chips in Asia. The deal was announced a month after Romney left Bain. Reports filed with the SEC in late 1999 showed that Chippac had plants in South Korea and China and was responsible for marketing and supplying the company’s Asian-made computer chips. An overwhelming majority of Chippac’s customers were U.S. firms, including Intel, IBM and Lucent Technologies.

A filing with the SEC revealed the promise that Chippac offered investors. “Historically, semiconductor companies primarily manufactured semiconductors in their own facilities,” the filing said. “Today, most major semiconductor manufacturers use independent packaging and test service providers for at least a portion of their .?.?. needs. We expect this outsourcing trend to continue.” http://www.washingtonpost.com/business/economy/romneys-bain-capital-in
vested-in-companies-that-moved-jobs-overseas/2012/06/21/gJQAsD9ptV_story.html

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There is no question that Bain invested in some companies that helped other companies outsource work and that some of that work went overseas.

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That was the core business for Modus Media and SMTC Corp.

Bain also invested in U.S.-based companies that sold goods manufactured here and abroad, and some of those companies closed U.S. facilities and eliminated U.S. jobs.
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Ours was not a comprehensive review of every company Bain Capital invested in — there are hundreds — nor every one of the transactions the company undertook on behalf of those companies.

The TV ad cites a March 26, 1993, SEC filing (page 6) that says the Holson Burnes Group “outsources approximately 75 percent of its photo frames and fabricates and assembles the balance in its Rhode Island facility,” and “maintains foreign production arrangements with over 35 suppliers located in Far Eastern countries including China, Taiwan, Thailand, Indonesia and Malaysia.”

Clearly, the company outsourced picture frames to overseas manufacturers. However, on the same page, the company says that “approximately 75% of the Company’s photo albums are manufactured at its Claremont, New Hampshire manufacturing facility.” So, it clearly had a large U.S. presence, too. The Obama campaign ignores that. {That has NOTHING to do with the fact that the company did, indeed, outsource}

The Romney campaign takes issue with the assumption that the outsourcing of picture frames had increased under Bain’s control. {Which has nothing to do with the fact that it did, indeed, OUTSOURCE} It points to the company prospectus filed a year earlier that showed 78 percent of the company’s photo frames at that time were outsourced. It argues that outsourcing had gone down from 78 percent to 75 percent in a year. {So WHAT?} This does not prove anything, however, because Bain purchased picture frame maker Burnes of Boston in 1986 and Holson Co. in 1987 and merged them to form the Holson Burnes Group. So Bain had been in control of the company since it formed in 1987.
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That’s not to say that Holson Burnes did not do business in China. Clearly it did. In fact, after the South Carolina plant closed, Holson Burnes entered a joint venture with Chu Kwun Kee Metal Manufactory, Ltd. in mid-1994 to manufacture picture frames, according to a Feb. 6, 1995, corporate press release.

The first company featured in the Washington Post story is a good illustration of the point. As the story notes, Bain Capital purchased a stake in the Massachusetts-based Corporate Software Inc. (CSI) in 1993. CSI did outsourcing of customer support — including call center assistance — for companies like Microsoft and Pfizer.

It’s also true that CSI was setting up overseas call centers. But in the case of the work it was doing for Microsoft, for example, those overseas centers were intended to assist Microsoft’s multinational customers, according to a Microsoft press release in 1993 (accessed via Nexis). {That has nothing to do with the fact that those call centers COULD have been staffed by American workers, in America}

The Washington Post noted that “(b)y 1997, Stream was running three tech-support call centers in Europe and was part of a call center joint venture in Japan” and pointed to an SEC filing that said: “The Company believes that the trend toward outsourcing technical support occurring in the U.S. is also occurring in international markets.”

That’s true, but the Romney campaign insists American call centers handled American phone calls and international call centers serviced international calls. {Same argument; if Indian call centers can handle American customer support, American call centers could have handled international call centers.}

At the center of the issue was a contract the state signed with CitiGroup (which later sold the division to JP Morgan Chase) to handle calls about food stamps, and that company outsourced the work to a company in India. At the time, 38 states had similar contracts with JP Morgan Chase to handle food stamp calls. It became an issue everywhere, and Ohio Rep. Marcy Kaptur called for federal legislation to ban it. http://factcheck.org/2012/06/obamas-outsourcer-overreach/

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State contractors were subcontracting work to companies overseas. Romney vetoed a bill that would have prevented the state from doing business with companies that outsourced any state work to other countries. The veto was supported by leading newspapers as a savings to taxpayers. The Democratic Legislature did not override Romney’s veto, as it did with most of his vetoes.

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