Documents unsealed by a court in Massachusetts today show that Mitt Romney created a special share of stock to help a friend give his ex-wife less money during a nasty divorce, and then testified that she got a fair price, even though she made a fraction of what the shares were worth just a year later.
Romney testified that Tom Stemberg, the founder of Staples, had properly appraised the value of the company’s shares at $2.25 during the divorce. But a year later the share price closed at exactly 10 times that amount on the first day of its IPO.
As we noted yesterday, the divorce testimony was the “October Surprise” with the most potential to actually be surprising. It seems like it may not disappoint. While initial rumors that Romney lied about Staples’ value under oath appear overblown, the story is not particularly flattering at a time when both candidates are desperately trying to attract female voters.
Celebrity lawyer Gloria Allred is representing Maureen Sullivan Stemberg, but failed to get the court today to lift a gag order on her client. The Boston Globe, however, was successful in its motion to release the testimony. The paper’s Callum Borchers explains what happened:
Stemberg left his wife in February 1987, and the divorce was finalized in July 1988. Before the official split, the couple negotiated an agreement in which Sullivan Stemberg got 500,000 shares of Staples stock, which Stemberg valued at $2.25 per share… “In my opinion, that’s a good price to sell the securities at,” Romney, now the Republican nominee for president, testified in June 1991 [when Maureen Bain Capital sued to renegotiate the deal after Staples went public] .
But on April 28, 1989, barely a year after Sullivan Stemberg sold more than half of her shares on the premise that they were worth less than $2.50 apiece, the company made its initial public offering at $19 per share and ended its first day at $22.50. The closing price made Staples, which operated 23 stores at the time, worth more than $200 million. Stemberg, holding 567,000 shares, claimed $12.8 million in company stock. Sullivan Stemberg’s 245,000 remaining shares were worth $5.5 million, but she had lost out on millions more by accepting low sale prices in 1988.
Why did Romney say it was a fair price? In part, he said, because Staples had “surly” employees. Really. Also because he said it had disorganized leadership and slow checkout times.
But perhaps even worse, Bloomberg reports that Romney went so far as to create a special class of shares specifically for the ex-wife as a favor to Tom Stemberg. “It was initiated as a favor,” Romney testified about the type of stock. “Tom needed to have a settlement with his wife.”
Bain Capital was a key investor in Staples and the office chain is one of Romney’s proudest accomplishments, which he touts often on the campaign trail. And Stemberg has been close to Romney beyond Staples. He advised Romney’s gubernatorial administration, has worked with the presidential campaign, and spoke at the 2012 Republican National Convention. Bain put $2.5 million into Staples and took out a $13 million profit when the company went public.
While the news is less explosive than initial rumors, it could still conceivably have an impact. While it’s unclear at the moment what exactly happened, Democrats could easily say the story shows Romney went out of his way to screw over Sullivan Stemberg in order to defend his buddy’s bank account. At a time when both campaigns are desperately trying to woo working-class white mothers in swing states — the so-called waitress moms — it’s not a great narrative to have out there. Stemberg is a very successful interior designer with plenty of friends and allies.
There was also a documentary film in the works in 2008, which likely portrays Maureen Sullivan Stemberg as a sympathetic figure. It doesn’t appear to have been released yet, thanks to the gag order, but could become fodder if the order is lifted. And already, the story has sparked misogynistic sentiments against Sullivan Stemberg, adding a nasty twinge to the whole affair. One comment on a story from yesterday reads: “With less than two weeks to go before the election Democrats are hitching their wagon to a bitter divorcée.”