WPost’s Kessler Earns 4 Pinocchios

Exclusive: Newspaper “fact-checking” is only valuable if the people doing it have the courage to apply careful journalistic standards to their criticisms, not simply show off an artificial “balance.” The Washington Post’s Glenn Kessler is one “fact-checker” who ignores the facts to shield Mitt Romney, reports Robert Parry.

By Robert Parry

The Washington Post’s political “fact checker” Glenn Kessler is turning the concept of his job inside out by defending Republican Mitt Romney from criticism that is factually accurate and may even be understated.

On Sunday, Kessler gave “four Pinocchios” his worst rating reserved for “whoppers” to the Obama campaign’s characterization of Romney as “a corporate raider” who “shipped jobs to China and Mexico.” Yet, to do so, Kessler relied on his own narrow interpretation of “corporate raider” and then airily dismissed the findings of an investigative article by veteran journalist Tom Hamburger about Romney’s role in job outsourcing, a story that was the Post’s lede just two days earlier.

Mitt Romney with other early principals of Bain Capital, holding dollar bills.

After studying Securities and Exchange Commission filings, Hamburger reported that Romney’s Bain Capital “owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components.”

In other words, Romney’s venture capital firm wasn’t just investing in companies that shipped jobs overseas, Bain owned companies that were trailblazing the practice of outsourcing American jobs.

You might think that after Hamburger’s article appeared on Friday, Kessler would have junked his idea for a “fact-checking” column denying that Romney was a job-outsourcer. Instead, Kessler just mentioned Hamburger’s article in passing, downplaying it as “an interesting area for inquiry,” but supposedly irrelevant to the question of whether Romney was involved in outsourcing American jobs.

Kessler, the “fact-checker,” is equally disingenuous regarding the characterization of Romney as a “corporate raider.” He insists on a very narrow definition of the term, saying it should be applied only to someone who engineers a hostile takeover of a company and then breaks it apart for short-term profits.

But “corporate raider” can also apply to a private equity firm that swoops in on a vulnerable company, secures a controlling stake and then bleeds it of resources, what led Texas Gov. Rick Perry to famously describe Romney as a “vulture capitalist.”

Curiously, Kessler’s interpretation of “corporate raider” doesn’t even fit with the definition he cites from a Web site called Investopedia, which defines the term as:

“An investor who buys a large number of shares in a corporation whose assets appear to be undervalued. The large share purchase would give the corporate raider significant voting rights, which could then be used to push changes in the company’s leadership and management. This would increase share value and thus generate a massive return for the raider.”

Everything in that definition would apply to what Romney’s Bain Capital did with the companies it took over. It assessed the potential value of the beleaguered companies, bought substantial amounts of their stock, forced management changes designed to raise share value, and achieved big rewards for Bain.

Missing the Plunder

In his Sunday column, Kessler also appeared ignorant of a front-page New York Times article from Saturday that examined Bain’s record of plundering vulnerable companies after Romney engineered their takeovers.

The Times reported that Bain, under Romney, took majority stakes in more than 40 U.S.-based companies from 1984 to 1999 and “at least seven eventually filed for bankruptcy while Bain remained involved, or shortly afterward. In some instances, hundreds of employees lost their jobs. In most of those cases, however, records and interviews suggest that Bain and its executives still found a way to make money.”

Romney’s private equity firm extracted hefty fees and other payments from the companies even amid layoffs and bankruptcies, the Times reported.

Kessler ignores these findings and is even more dishonest in his defense of Bain on its record for shipping American jobs overseas. Kessler essentially buys the spin that the Romney campaign has put on this issue, that Bain did very little in the way of outsourcing to foreign countries when Romney was in control from 1984 to 1999.

Yet, Kessler’s decision to carry water for Romney was jaw-dropping for anyone who had read the Washington Post just two days earlier when it published Hamburger’s detailed account of how some Bain companies developed, promoted and facilitated outsourcing of American jobs. Bain wasn’t just doing the outsourcing; it was involved in helping other U.S. corporations ship U.S. jobs overseas.

Since Kessler dismissed Hamburger’s article as simply as “an interesting area for inquiry” suggesting that it was some half-baked story it’s worth excerpting some of its high points.

Hamburger reported that “Mitt Romney’s financial company, Bain Capital, invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India.

“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.

“A Washington Post 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.

“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, 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.

“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 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.

“Two years later, 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.

“The global expansion that began while Romney was at Bain continued after he left [as CEO in 1999, though remaining a major investor]. In 2000, the firm announced it was opening a new facility in Guadalajara, Mexico, and expanding in China, Malaysia, Taiwan and South Korea.

“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, 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. Within a year of Bain taking over, SMTC told the SEC it was expanding production in Ireland and Mexico.

“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.’”

Teaching How to Outsource

So, you get the picture? Bain not only invested in companies that outsourced American jobs, it controlled companies that taught other U.S. corporations how to do it. Romney’s Bain was a “pioneer” in this practice that has destroyed much of the American industrial base and has put millions of Americans out of work.

You might think that this detailed account on the Washington Post’s front page on Friday would have stopped Kessler from giving Obama’s campaign “four Pinocchios” on Sunday for making much the same point, but it didn’t.

Instead, Kessler pressed ahead by applying a dubious definition of “corporate raider” and brushing aside Hamburger’s article as “an interesting area for inquiry” but not relevant to understanding Romney’s role in outsourcing jobs.

Kessler then awarded the Obama campaign “four Pinocchios” for telling a “whopper.” He wrote, “The Obama campaign fails to make its case. On just about every level, this ad is misleading, unfair and untrue, from the use of ‘corporate raider’ to its examples of alleged outsourcing. Simply repeating the same debunked claims won’t make them any more correct.”

Yet, an honest assessment of what the Obama campaign claimed about Romney would be that the criticism is accurate and possibly understated. Indeed, you could have said, Romney was “a corporate raider who made lots of money even when the companies failed and jobs were lost. And he made even more money by pioneering the idea of outsourcing American jobs to low-wage countries.”

Kessler may believe that he is safeguarding his “objectivity” when he goes out of his way to ding President Barack Obama for supposed inaccuracies. Certainly, Kessler has done this before.

For instance, last April, Kessler gave Obama two “Pinocchios” for saying in a campaign speech that “the majority of millionaires support” the Buffett Rule, a change in the tax code that would require people earning $1 million or more to pay a rate at least equal to middle-income Americans.

To support Obama’s comment, the White House cited an article in the Wall Street Journal, which, in turn, cited a survey of millionaires undertaken by the Spectrem Group, which does market research on the affluent. Spectrem’s survey found that 68 percent of responding millionaires backed the idea of the Buffett Rule.

Yet, in attacking Obama’s comment, Kessler noted that the Spectrem group surveyed people with $1 million or more in investments. Kessler made a big deal out of the fact that the Buffett Rule would apply to people making more than $1 million a year, not people holding $1 million or more in net worth.

“So Obama, and the Wall Street Journal, are mixing up two different types of millionaires,” Kessler wrote.

But Obama and the Wall Street Journal were not “mixing up” the millionaires. They were simply reporting that a survey of wealthy people, worth more than $1 million, favored the Buffett Rule, which is named after investor Warren Buffett who does make many millions of dollars a year and says it’s unfair to charge him a lower tax rate than his secretary.

In the “two-Pinocchio” criticism of Obama, Kessler went on to make some technical arguments against Spectrem’s methodology and faulted Obama for not including caveats about the survey in his brief reference to it in a speech.

But is this fair “fact-checking,” when a politician accurately cites a survey by a credible research organization? Or is it just another example of mainstream journalists trying to show phony “balance”?

Beyond the question of fairness, the trouble with this style of “journalism” is that it indirectly benefits the politician who tells the most egregious lies. After all if you’re going to get nailed for saying something that’s actually true or just slightly off the mark, you might as well lie through your teeth, another valuable lesson like profits to be made from outsourcing jobs that the ever-observant Romney appears to have discovered. [See Consortiumnews.com’s “Mitt Romney: Professional Liar.”]

As for Kessler, he has discredited the concept of “fact-checking” by playing games with the facts. Whatever his motives for doing so, he deserves at least “four Pinocchios.”

To read more of Robert Parry’s writings, you can now order his last two books, Secrecy & Privilege and Neck Deep, at the discount price of only $16 for both. For details on the special offer, click here.]  

Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at neckdeepbook.com. His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & ‘Project Truth’ are also available there.

11 comments for “WPost’s Kessler Earns 4 Pinocchios

  1. MagBill
    June 27, 2012 at 21:23

    Robert, there’s a fundamental distinction between corporate raiders and private equity. Raiders are hostile, they buy up control without the company’s cooperation – that’s why they’re called RAIDERS. By contrast, private equity deals are negotiated between the company and the investor. They are invited.

    I know of no PE firm that’s been in business for any time that hasn’t seen some bankruptcies, because they’re frequently investing in distressed companies who have run out of other debt or equity funding options. That’s the same reason you often see significant restructurings, management changes, layoffs, etc. shortly thereafter. Would it be a better alternative for employees and shareholders if the firm shunned new capital and failed entirely?

  2. MagBill
    June 27, 2012 at 21:14

    I appreciate Glenn coming on here with a rebuttal. The criticisms above are grossly unfair. Having followed his writings closely for some years, I’ve found him to be as non-partisan and fact-driven as any writer you’ll find. Witness his eviscerations of many Republican primary candidate ads.

    However, the Tom Hamburger article in no way rebuts Glenn’s work. On the contrary, it warrants a fact-check of its own. It recycled the Modus Media and SMTC Manufacturing examples which Glenn and others have debunked. It implied GT Bicycles moved jobs overseas under Bain, but GT (and Schwinn) were utilizing overseas suppliers *before* Bain ever invested. It criticized Stream International for operating overseas call centers in Japan and Europe, but doesn’t mention their purpose: to serve international customers of U.S. companies in their local languages! And it criticizes Bain for buying (after Romney left) Chippac, a company with Asian chip factories. So buying a company with foreign factories is now the same as sending jobs overseas? Ridiculous.

  3. Glenn Kessler
    June 26, 2012 at 08:59

    Mr. Parry gets some of the chronology wrong here and leaves out some information that might leave readers with the wrong impression. My column on Romney and out-sourcing was about a specific ad that the Obama campaign aired on television. It appeared online on Thursday, before Tom Hamburger’s article. I was not writing a general review of Romney and outsourcing; I was checking the facts as relayed in that ad and how the Obama campaign backed them up. (IE, the Obama campaign relied on a Reuters campaign story as back-up for calling Romney a corporate raider, which I thought was pretty weak evidence, especially when Obama’s former auto czar said he was not a “corporate raider.”)I judged this ad harshly in part because I had written previous articles going into depth how some of these points had stretched the truth.

    My article that appeared online on Thursday was reprinted in the Sunday print edition of The Post and I took note of Tom’s article. But again, the column was specifically about whether the Obama campaign could back up the facts in the campaign ad, not whether Romney was an outsourcer or not.

    Regarding the millionaire poll, it is rather strange to say I raised “technical” points against the poll’s methodology when that was the main point of the column. It was more than technical–it got to heart of the issue. Obama asserted that most millionaires supported the Buffett Rule, citing that poll. But as I showed, that poll only applied to the self-selected people who answered it–it could not be used to make a general assertion about millionaires across the country, as the president did. That’s pretty big error and we should expect all politicians to avoid making such leaps of logic. (They also cannot hide behind citing newspaper articles that failed to understand how the poll was conducted.)

    I urge readers of this article to look at all of my columns, across a period of time, and you will see that I hold all politicians to a very high standard, regardless of party affiliation. Perhaps there is a way for the Obama campaign to make an effective ad about Romney and outsourcing that is backed up by information that is not taken out of context; this particular ad did not meet that test.

    Glenn Kessler
    “Fact Checker” columnist for The Washington Post

  4. Russell Dee
    June 24, 2012 at 22:08

    I’ve read your story and the Washington Post story by Hamburger and the 4 Pinocchio story by Glenn Kessler and any human being with a 3-digit IQ can see the Glenn Kessler is bending over backwards to supply cover for Romney. Actally the Washington Post reporter, Mr. Hamburger, completely proved what the Obama campaign is saying and it gives the impression that if we knew the whole truth it might actually be even more disturbing than the Obama campaign makes it out to be. Mr, Gessler is obviously a political hack supplying cover to Mr. Romney.

  5. F. G. Sanford
    June 24, 2012 at 15:40

    There’s really only one word for a CEO that outsources technology from a country that relies on technology for its national security. That word is treason.

  6. bobzaguy
    June 24, 2012 at 14:47

    “As for Kessler, he has discredited the concept of “fact-checking” by playing games with the facts. Whatever his motives for doing so, he deserves at least “four Pinocchios.” ”

    Taking the Romney “lie through your teeth” approach, why not give Kessler the all-10 pinocchios award and blow his lying ass out of the water completely?

  7. Ahem
    June 24, 2012 at 14:05

    If Mr. Kessler can actually print a defense for Romney’s business activities, then it’s obvious Mr. Kessler received a sweaty wad of dirty cash from Romney’s campaign war chest. If Mr. Kessler doesn’t like the term ‘corporate raider’, then perhaps he would like one of these: corporate predator, corporate parasite, corporate thief, corporate thug, (you get the idea). At the very least, one knows what’s coming in a hostile take-over from a corporate raider, and one can mount a defense. With Romney, he comes covertly out of the darkness with charm and lies, injects himself (Bain) into the middle of the company, and, then, like a parasite, sucks the life blood from the profits, relegating the employees to the ranks of the unemployed, leaving behind him a shell of what was once a contributor to society, belching on his way to the next victim.

    ‘Corporate Raider’? Oh, that term is way too soft!

  8. incontinent reader
    June 24, 2012 at 12:29

    I would like to hear Mr. Kessler’s thoughts about the impact of the WTA, NAFTA, and the ACTA which we have signed but the EU is till considering and the TPP treaty……… (or maybe I wouldn’t).

    June 24, 2012 at 11:39

    Whatever Romney and Bain did or not do…one thing Romney did not do which Obama can take credit for…

    Obama is complicit in the deaths of more Africans than any US President in recent history… The silence of the so-called progressives of the MSM has been deafening. Only Ron Paul, Ralph Nader and Dennis Kucinich called for his impeachment. Of the fearless and loyal members of the Congressional Black Caucus..only one of his early (and fieriest) supporters spoke out when he finally was confronted by the reports of 30,000 Black Libyans “ethnically cleansed” by the members and supporters of the NTC Libyan government. Rep. Jesse Jackson asked for an investigation of the massacres..which will never happen.


    The Butchering of Gaddafi Is America’s Crime

    by BAR executive editor Glen Ford

    “Barack Obama and Hillary Clinton appeared like ghoulish despots at a Roman Coliseum, reveling in their Libyan gladiators’ butchery.”

    Last week the whole world saw, and every decent soul recoiled, at the true face of NATO’s answer to the Arab Spring. An elderly, helpless prisoner struggled to maintain his dignity in a screaming swirl of savages, one of whom thrusts a knife [4] up his rectum. These are Europe and America’s jihadis in the flesh. In a few minutes of joyously recorded bestiality, the rabid pack undid every carefully packaged image of NATO’s “humanitarian” project in North Africa – a horror and revelation indelibly imprinted on the global consciousness by the brutes’ own cell phones.

    Nearly eight months of incessant bombing by the air forces of nations that account for 70 percent of the world’s weapons spending, all culminating in the gang-bang slaughter of Moammar Gaddafi, his son Mutassim and his military chief of staff, outside Sirte. The NATO-armed bands then displayed the battered corpses for days in Misurata – the city that had earlier made good on its vow to “purge Black skin” through the massacre and dispersal of 30,000 darker residents of nearby Tawurgha – before disposing of the bodies in an unknown location.

  10. June 24, 2012 at 11:37

    Maybe we should invent another rating, the “Dark Ages Key.” It would rate those who would disparage hard work and honest, valid research and who would replace that real fact gathering with the ignorance of proclaimed knowledge and the monopoly on control of knowledge, the better to keep us in our chains, mentally. Just another version of controlling the population by controlling all knowledge, as in “the” church being the only body of knowledge and … just start from there and expand. Political campaigns, propaganda, anti-whistleblowing – all control measures.

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