Campaign 2012: That’s some footnote…

July 20, 2012

For the past two weeks, we’ve taken some delight in the fact that many fellow journalists have been combing through SEC filings looking for hints of presumptive Republican Presidential nominee Mitt Romney’s record at Bain Capital. The Boston Globe has been leading much of the coverage, including this article from today and this story from last Thursday, which seems to have set off the recent frenzy, because it raises questions of when Romney really left Bain.

That kicked off a flurry of interviews by Romney last week, including this incredibly complicated statement by Romney during an interview with CBS News’ Jan Crawford (full transcript here) about his role at Bain after February 1999:

I was the owner of a, of the general partnership but there were investors which included pension funds and various entities of all kinds that owned the, if you will, the investments of the firm. But I was the owner of an entity which was a management entity. That entity was one which I had ownership of until the time of the retirement program was put in place. But I had no responsibility whatsoever after February of ’99 for the management or ownership – management, rather, of Bain Capital.

Since we know a thing or two about SEC filings, we thought we’d try to clear the air, or at least shed some new light. In doing so, we came across a very complicated footnote in this 10-K filed by pizza chain Domino’s on March 28, 2001, a little over two years after Romney says he stepped down from Bain. We haven’t found anyone else who’s delved into this particular footnote, so we decided to take a shot at it.

We haven’t actually printed this out, but the footnote appears to take up a chunk of a single page on pg. 54, which, trust us, is long for a single footnote. That it’s part of a normally routine disclosure known as Item 12: Security Ownership of Certain Beneficial Owners and Management makes it even more unusual. The footnote tries to explain the 4.7 million shares of Domino’s owned by Bain Capital Funds. (For more details on Bain’s connection to Domino’s, this Boston Globe story is a good primer). Here’s the footnote in its entirety:

Consists of (i) 1,849,036 shares of Class A-1 Common Stock owned by
Bain Capital Fund VI, L.P. (“Fund VI”), whose sole general partner is
Bain Capital Partners VI, L.P., whose sole general partner is Bain
Capital Investors VI, Inc., a Delaware corporation wholly owned by W.
Mitt Romney, (ii) 2,104,694 shares of Class A-1 Common Stock owned by
Bain Capital VI Coinvestment Fund (“Coinvest Fund”), whose sole general
partner is Bain Capital Partners VI, L.P., whose sole general partner
is Bain Capital Investors VI, Inc., a Delaware corporation wholly owned
by W. Mitt Romney, (iii) 96,419 shares of Class A-1 Common Stock owned
by Sankaty High Yield Asset Partners, L.P. (“Sankaty”), whose sole
general partner is Sankaty High Yield Asset Investors, LLC, whose
managing member is Sankaty High Yield Asset Investors, Ltd., a Bermuda
corporation wholly owned by W. Mitt Romney, (iv) 385,675 shares of
Class A-1 Common Stock owned by Brookside Capital Partners Fund, L.P.
(“Brookside”), whose sole general partner is Brookside Capital
Investors, L.P., whose sole general partner is Brookside Capital
Investors, Inc., a Delaware corporation wholly owned by W. Mitt Romney,
(v) 6,164 shares of Class A-1 Common Stock owned by PEP Investments PTY
Ltd. (“PEP”), whose controlling persons are Timothy J. Sims, Richard J.
Gardell, Simon D. Pillar and Paul J. McCullagh, (vi) 161,215 shares of
Class A-1 Common Stock owned by BCIP Associates II (“BCIP II”), whose
managing partner is Bain Capital, Inc., a Delaware corporation wholly
owned by W. Mitt Romney, (vii) 34,702 shares of Class A-1 Common Stock
owned by BCIP Trust Associates II, L.P.(“BCIP Trust II”), whose general
partner is Bain Capital, Inc., a Delaware corporation wholly owned by
W. Mitt Romney, (viii) 26,043 shares of Class A-1 Common Stock owned by
BCIP Associates II-B (“BCIP II-B”), whose managing partner is Bain
Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney,
(ix) 10,221 shares of Class A-1 Common Stock owned by BCIP Trust
Associates II-B, L.P. (“BCIP Trust II-B”), whose general partner is
Bain Capital, Inc., a Delaware corporation wholly owned by W. Mitt
Romney, and (x) 50,349 shares of Class A-1 Common Stock owned by BCIP
Associates II-C (“BCIP II-C” and collectively with BCIP II, BCIP Trust
II, BCIP II-B and BCIP Trust II-B, the “BCIPs” and the BCIPs, Fund VI,
Coinvest Fund, Sankaty, Brookside and PEP, collectively, the “Bain
Capital funds”), whose managing partner is Bain Capital, Inc., a
Delaware corporation wholly owned by W. Mitt Romney.

By our count, there’s just shy of 20 different entities described in that footnote, with Romney listed as the “sole owner” of most of the underlying companies, which makes it one of the more complicated footnotes we’ve come across. It may not be quite as complicated as Enron’s now infamous footnote 16 from 2000 (see the heading Related Party Transactions). But to paraphrase Charlotte the spider, that’s some footnote.

Image source: Charlotte’s Web by E.B. White published by Harper Collins, 1952

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It’s earnings season and it’s a Friday, which means that there should be some good stuff in tonight’s Friday night dump. At footnotedPro, our subscription service exclusively for financial professionals, we identify early warning signs and hidden red flags well in advance of the market. For more information, or to inquire about a trial subscription, please email us.

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