Romney and Bain Capital: the Obama campaign's newest ad It makes me angry. Those guys were all rich. They all had more money than they would ever spend, yet they did not have money to take care of the very people who made the money for them. Former steel worker Joe Soptic, in a new Obama campaign ad on Mitt Romney's business record It's no surprise that the Obama campaign chose the story of GS Industries for its first television ad attacking Mitt Romney's record at Bain Capital. Unlike some of the tales of job-killing and factory-closings that were thrown at Romney during the GOP primaries, this is a relatively straightforward story: The initial investment in the steel company was made in 1993 by Bain under Romney's leadership, and the company took on hundreds of millions of dollars in debt while paying Bain investors millions of dollars in dividends. Romney was no longer actively managing Bain when the steel company filed for bankruptcy protection in 2001 and closed its Kansas City plant, causing more than 700 workers to lose their jobs and health insurance, as well as part of their pensions. More on that below. Using just the voices of angry former workers at the company, the ad is less about Romney's business record and more about his values. Romney is described by the workers as "a vampire" who destroyed people's lives while seeking to make as much money as possible. "If he going to run the country the way he ran our business, I wouldn't want him there," one worker says. He would be so out of touch with the average person in this country. Ouch. GS Industries has also been a tempting target for Romney's GOP rivals. In January, Texas Gov. Rick Perry mentioned it as an example of Romney being a "vulture" capitalist. The opposition research done by Sen. John McCain's campaign in 2008 also highlighted GSI. As usual in campaign ads, some important context is missing. Let's fill in some of the blanks. There is also a longer, six-minute version for a Web site called romneyeconomics.com, but we will focus on the two-minute version airing in battleground states. First of all, the investment was one of many done by Bain under Romney's leadership, which the Wall Street Journal documented was a record mainly of success, not failure. The Romney campaign immediately countered the Obama ad with a web ad focused on Bain's successful investment in Steel Dynamics, featuring interviews with happy steel workers. But Bain was a minority investor in Steel Dynamics, whereas it was the majority investor in GS Industries. Under Romney's direction, Bain purchased GS Technologies, a mini-mill in Kansas City - the focus of the ad - and then combined it with Georgetown Industries Inc. in South Carolina, creating GS Industries. Romney was a hands-on manager at Bain, but it is unclear how much direct involvement he had with the newly created company. Roger Regelbrugge, who became chief executive of the new firm, told Bloomberg News last year that he met Romney at a luncheon in Boston and may have had some subsequent conversations. But he said that most of his communications with Bain was through two Bain executives who served on the GS board - and Romney was not on the board. Romney, however, has acknowledged he was involved in the initial deal. "I take personal responsibility for making the investment," Romney told the Boston Globe in 2002 when asked about the plant closure. But I didn't manage these companies. Our philosophy at Bain Capital was to support management teams in companies where we saw potential for growth, or in companies that were in financial distress that we thought we might be able to save. Certainly, the Kansas City plant was already on a downward slide when Bain Capital showed up. The ad suggests everything changed for the worse once Bain arrived - the romneyeconomics.com Web site even calls it a "successful company" - but it is possible the plant may not have survived as long as it did without Bain's investment. A timeline published by the Kansas City Star in 2001 showed the plant had employed 4,500 workers in 1970, but by 1983, it had shrunk to 1,500 workers. "Poor market conditions forced a wave of layoffs in the early 1980s and led the company to prune its product line," Reuters reported earlier this year in a lengthy report on the deal. By the early 1990s, the plant focused on two items: wire for products such as mattress springs and tires; and high-carbon balls and rods used by the mining industry to pulverize rocks. The mill's equipment was out of date and it faced stiff competition from Nucor Corp, which also made grinding balls. After Bain made its investment and the company issued new debt, the plant was able to invest in new equipment. Still, the record is clear that Bain reaped a substantial return on its investment - at least $12 million -- while the company's debt burden soared to $378 million. That debt left the company vulnerable when a flood of cheap imports dramatically lowered prices and devastated the U.S. steel industry. More than two dozen steel companies filed for bankruptcy protection during that period. But how much of this was Bain's fault - or Romney's? The Reuters article quoted union officials as blaming Bain for the saddling the company with too much debt. But Reuters also quoted an analyst as blaming the union - which mounted a strike in 1997 over pension benefits - and noting that all of the steel companies that failed in that period were unionized. And Regelbrugge, the former chief executive, blamed his successor for hiring poor managers. "I have no question that the company would have survived under different management," he said. One could argue that was also Bain's fault. Mark Essig, the chief executive at the time of the bankruptcy filing, cited the low prices for steel products but also pointed the finger at the company's debt load. He told New Steel magazine in 2001 that the company had a debt of $500 million, "which is far too much debt for a company of our size." The company had net losses of $16 million, $25 million, and $53 million in 1997, 1998, and 1999, respectively - and was making interest payments of $40 million a year. Essig also cited the high cost of electricity in Kansas City, as well as natural gas. He said the closure of the plant was permanent because "we don't expect wire-rod, electricity, and natural-gas prices to ever make it profitable." In any case, Romney had left day-to-day management of Bain in February 1999 to help organize the Salt Lake City Olympics. So he was running Bain when GS Industries settled the 1997 strike with workers by promising guarantees on their pensions, but he was not there when the company used the bankruptcy process to break those promises and slash those benefits. The U.S. Pension Benefit Guaranty Corp. later determined that the company underfunded the pension plan by $44 million. The Kansas City plant was closed in February 2001. Romney did not legally extricate himself from Bain Capital until shortly before his Olympic tenure ended in 2002. A 2002 Boston Globe article said he retained a key financial interest until August of 2001. As we have noted before, a 2002 statement Romney filed with the Massachusetts State Ethics Commission listed him as a 100 percent owner of "Bain Capital Inc." But there is less than meets the eye here. Bain Capital Inc. was the management firm, which was paid a management fee to run the funds and actually made virtually no profit, since it existed to pay salaries and expenses. After Romney formally left Bain in 2001, a new entity called "Bain Capital LLC" took over the management function. The Obama campaign argues that it is fair to link the closure of the plant to Romney's decisions. "He set this in motion," deputy campaign manager Stephanie Cutter told reporters. It was his structure that was put in place, and he was listed at this time as either the CEO or president of the company, was still making profits off this deal, and continues to profit off of Bain Capital today. We have twice given the Obama campaign Pinocchios for blaming Romney for Bain deals that took place entirely after he left for the Olympics gig. This case is a different matter. It falls into a gray area, because the investment and many key decisions were made while Romney was running Bain, as he has acknowledged - even if the denouement came when he was no longer in charge. Romney, in fact, in the past has tried to claim credit for jobs created at companies years after he left Bain, so it's no surprise the Obama campaign would try to tag him for job losses. Bain Capital issued a statement saying that "we understand that in a political campaign our exemplary 28-year record will be distorted and complex business situations will be portrayed in a simplistic way." This is how Bain described the case of GS Industries: Bain Capital undertook an ambitious plan in 1993 to turnaround GSI, a struggling manufacturer of specialty steel products that was slated for closure if no investor could be found. We invested more than $100 million and many thousands of hours into this turnaround, upgrading its facilities in an attempt to make the company competitive. This was unfortunately at a time when the steel industry came under enormous pressure, and nearly half of all U.S. steel companies went into bankruptcy. The ad certainly packs an emotional wallop. We can't really fact check the workers" comments, especially their personal attacks on Romney, except to note that they frequently mix up Bain Capital with GSI. Technically, GSI cut the pension benefits, not Bain. The biggest problem with this ad is that it takes a single data point - Bain's investment in GS Industries - and tries to draw larger conclusions about Romney's business practices and his values. But Romney all but invited such scrutiny by claiming that his business experience taught him how to create jobs, when in fact his role was to generate a good return on his investments. Sometimes that worked out well for workers, but in the case of GSI, it did not. Usually, however, it seemed to work out well for Bain. Bain Capital was clearly involved in the company's decisions to greatly add to its debt load - decisions that were made while Romney was actively running Bain. That debt load may have contributed to the company's failure to weather a steep decline in steel prices, but it was not the only factor that led to the company's bankruptcy filing. The ad fails to make clear that the Kansas City plant was already facing hard times, and Bain Capital's investment may have represented its best chance for survival. There is also the question of how much weight one should give to the fact that Romney was no longer actively managing Bain Capital when decisions about cutting health benefits and pensions were made. The workers" frequent references to "Bain Capital" and Romney certainly leave the impression that he was part of that decision. All told, we wavered between one and two Pinocchios because of these missing details but finally leaned toward one. With all of these facts in hand, it will be up to readers to determine how much they blame Romney - or what this particular case says about his business practices or values. One Pinocchio