Globe Editorial

Pagliuca’s private-equity past deserves fair and full vetting

November 9, 2009

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STEVE PAGLIUCA is right to claim that his business career should be viewed in full, but he’s wrong to suggest that the view shouldn’t include missteps like Bain Capital’s destructive handling of American Pad & Paper.

When he offered a surprise defense last week of his former partner Mitt Romney as a victim of “inaccurate’’ advertising by Ted Kennedy in 1994, Pagliuca was really defending himself. He and Romney were both at Bain Capital when it bought Ampad, the company whose laid-off workers appeared in Kennedy’s ad. Pagliuca, now running for Kennedy’s Senate seat, fears a reprise.

In an odd twist, Pagliuca’s adviser Tad Devine was involved in Kennedy’s ’94 campaign. Devine explained his new boss’s views by saying, “I don’t have a problem with someone objecting that his career is being analyzed by one episode.’’

Fair enough. Private equity investments often help build businesses and create jobs, as Pagliuca boasts in nearly every campaign ad. But they sometimes play a very different role. Ampad was an example of a successful company being purchased by Bain Capital and then weighed down by Bain’s incessant need to provide huge returns to its investors. At Bain’s direction, Ampad took on an enormous debt load to expand quickly while returning tens of millions of dollars in payments to Bain’s investors and partners. Meanwhile, the company shed jobs, leaving workers on the picket lines.

This was not simply the vagaries of the market creating an unfortunate result. Private equity firms represent a particularly aggressive approach to making money, and can be destructive. They promise investors greater returns than other investments, and often stick to those commitments at the cost of jobs and benefits.

Pagliuca seems willing to be judged by his whole career and by what it’s done for society. As the campaign continues, he should expect to discuss his business career more fully, and news outlets should vet him fairly. Voters should consider times when his firm built successful companies and created jobs, but also cases like Ampad when it took money out of companies and hobbled them.

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