The One Time Romney Actually Created Some Jobs, He Disapproved The Business Model

Republican presidential candidate and former Massachusetts Gov. Mitt Romney wears protective glasses as he tours Worthington Industries, a metal processing company, in Worthington, Ohio, Thursday, Oct. 25, 2012. (AP Photo/Charles Dharapak)

By DENISE LAVOIE

Associated Press /  October 25, 2012

CANTON, Mass. (AP) — In newly unsealed testimony related to Staples founder Tom Stemberg’s divorce, Republican presidential candidate Mitt Romney says he was initially skeptical of the idea for Staples, the office supply chain he lauds as a business success story that he helped create.

Romney also acknowledged in testimony in Massachusetts probate court in 1991 that he and other Staples directors created a special class of company stock for Stemberg’s then-wife as a ‘‘favor’’ to Stemberg.

A Massachusetts judge unsealed Romney’s testimony Thursday at the request of The Boston Globe. Celebrity lawyer Gloria Allred, representing Stemberg’s ex-wife, unsuccessfully argued that the judge should also lift a confidentiality agreement that prevents her and her client from talking about the case.

The three days of testimony had been kept sealed for almost two decades after Maureen Sullivan Stemberg sought unsuccessfully to alter the divorce agreement that provided her with 500,000 shares of Staples stock.

Romney said during the hearings that in Staples’ early days, its initial stores performed ‘‘far behind our expectations.’’ He said friends told him that Staples was ‘‘a hard place to shop’’ and employees were ‘‘surly.’’

During the presidential campaign, Romney has described Staples as a ‘‘great American success story’’ and has taken credit for its growth to a mega-firm employing nearly 90,000 workers. Stemberg was one of the speakers who praised Romney last August at the Republican National Convention in Tampa, Fla.

Asked in 1991 what he thought when he was approached about the idea of investing in an office supply chain, Romney was skeptical.

‘‘I told him I didn’t think it was a very good idea, but I'd look at it,’’ Romney testified. Once he got the plan, however, ‘‘I was impressed with the quality of the thinking and the thoroughness of the plan and arranged for a meeting with Tom Stemberg and his managers.’’

In hundreds of pages of 1991 testimony, Romney said his conservative estimate of Staples’ financial worth at the time was justified. Lawyers for Stemberg’s wife questioned whether the stock should have had a higher value before she sold her shares in 1987.

Under a plan approved by Romney and other board members in 1988, Maureen Sullivan Stemberg was given 500,000 shares of Staples common stock, then awarded a special ‘‘D'’ class of stock in exchange for those shares. She sold about half of the shares only to learn that those sold holdings would have been valued higher in a 1989 public offering of Staples stock.

In testimony Romney said he backed the deal to give Stemberg’s wife a special class of stock ‘‘as a favor to Tom. It was something that was done in my opinion, it was initiated as a favor. Tom needed to have a settlement with his wife so that was the genesis of it.’’ But Romney insisted the board’s decision was made ‘‘in the best interests of the company’s shareholders.’’

Romney acknowledged at the time that there were no other cases in which a separate class of securities was created for the benefit of one individual. He also said that as an investor through Bain, he had never seen that kind of a device used before.

In seeking release of the testimony, lawyers for The Boston Globe argued that the public has the right to know the contents because Stemberg has been a prominent spokesman for Romney’s qualifications for the presidency and has cited Romney’s role in Staples’ success. The office supply company was founded with backing from Romney’s firm, Bain Capital.

The Globe also had sought a modification of a confidentiality order prohibiting either side from discussing any aspect of their divorce proceeding, including Romney’s testimony, but dropped that request after lawyers for Tom Stemberg said they did not object to Romney’s testimony being released.

During a hearing in Norfolk Probate and Family Court, Allred became incensed that the Globe was no longer seeking to lift the gag order. She said Stemberg’s ex-wife wants to give the public her opinion of Romney but can’t unless the order is lifted.

‘‘I think voters have a right to know everything about Gov. Romney,’’ Allred said. Without the ‘‘context’’ Sullivan Stemberg can provide, Allred said the transcripts will be ‘‘essentially meaningless to the public.’’

Robert Jones, an attorney for Romney, rejected the notion that Romney undervalued Staples stock to help Stemberg.

‘‘These tabloid charges being shopped by Gloria Allred, one of President Obama’s most prominent supporters, are absolutely false,’’ he said. ‘‘Every time a court has reviewed the allegations of her client over the last 24 years, they have been rejected. There is no new information here.’’Continued...