By
Jon Swaine, Washington


7:57PM BST 17 Aug 2012


The Republican
presidential candidate appears to have profited from a marketing company
that was contracted by the state of Massachusetts after receiving $5 million
(£3.2 million) in financial backing from Bain Capital, Mr Romney’s
investment firm.


One of his vice-presidential candidate's brothers, who is a former Bain
consultant, was at the time of the investment a senior executive at the
marketing company, Imagitas, which was co-founded by another former Bain
executive.


Both Mr
Romney and Tobin Ryan, who omits his work at Imagitas from his
corporate biography, also apparently stood to benefit from the $230 million
(£146 million) sale of the company in 2005, while Mr Romney remained in
office.


Massachusetts law requires that all state employees divest themselves of
financial interests in private sector contracts with state agencies. At the
time, failure to do so could have resulted in a $2,000 (£1,273) fine or a
2.5-year prison sentence. The potential punishments are now stronger.


Asked repeatedly by The Daily Telegraph throughout this week whether Mr Romney
had indeed profited from the company, had been aware of the potential
conflict of interest, or had taken any action to avoid one, his campaign and
Bain Capital declined to comment.
The finding also sheds light on previously unnoticed connections between Mr
Romney’s involvement in the private sector, government and campaign finance.


Imagitas donated tens of thousands of dollars to the Republican Governors’
Association while it was chaired by Mr Romney. A former Imagitas investor
and director donates to both Mr Romney and Paul Ryan, who also received
thousands of dollars in contributions from his brother Tobin.


Pro-transparency groups said that Mr Romney should have declared his interest,
and lamented the cycle of cash through business and politics. Melanie Sloan,
of Citizens for Responsibility and Ethics in Washington, said the case
showed that “the problems of money in politics are legion”.


“Mitt Romney should have been extra careful,” said Ms Sloan. “That is part of
the deal in politics. This appears to be a conflict of interest, and he
should have disclosed his stake in a company that stood to gain from its
work for his administration”.


For three years from 1995, Tobin Ryan, who is now 47, was a senior manager at
Bain & Company, the consulting firm where Mr Romney made his name. Mr
Romney was at the time leading Bain Capital, the firm’s investment arm,
inside the same Boston headquarters.


In March 1998, Mr Ryan left Bain to become a vice-president at Imagitas. The
company had been co-founded by Tom Beecher, another former Bain consultant.
Their company secured the $5 million (£3.2 million) from Bain Capital in
June 2000. Mr Ryan declined to say if he was involved in the deal. Mr
Beecher declined to be interviewed.


A Bain Capital source said the investment was made by the company's Bain
Capital Fund VI. While Mr Romney had by then taken what he called a leave of
absence to run the 2002 Winter Olympics, SEC filings state that he remained
sole stockholder, chairman, CEO and president of this fund’s two controlling
entities. His campaign now claims that he retired "retroactively"
in 1999.


Flush with funds, Imagitas quickly expanded. It won contracts with several
state governments to produce vehicle registration mail-outs, on which it
sold advertising. Five colleagues said that Tobin Ryan had responsibility
for this project. “He was my boss’s boss,” said Michael Donovan, the firm’s
director of government relations at the time.


“A lot of the folks who joined us around that time came from the worlds of
politics and government,” said a manager who reported to Mr Ryan on the
vehicle registration project. Another, who like several former employees
requested anonymity, said Mr Ryan’s role included travelling to states to
meet with senior government officials.


In December 2001, Imagitas secured a contract with Wisconsin, whose
then-governor, Scott McCallum, was a political ally of Paul Ryan, who is a
US congressman for the state. Roger Cross, the administrator of Mr
McCallum’s department of motor vehicles at the time, said: “I know Tobin
through politics, not business”. Tobin Ryan declined to say whether he had
been involved in the Wisconsin deal.


Imagitas announced a similar partnership with Massachusetts in July 2002,
shortly before Mr Romney was elected as the state’s Republican governor, and
just after Tobin Ryan says that he departed the company. Its work for the
state continued for several years under Mr Romney’s governorship. His
officials boasted that it saved taxpayers tens of thousands of dollars a
year.


Mr Romney’s 2002 financial disclosure form states that he still owned 100 per
cent of Bain Capital Investors VI, the fund’s controlling entity, and Bain
Capital Inc, their overall parent company. However, the forms did not detail
the individual companies, such as Imagitas, in which Bain Capital held
investments. New state employees were obliged to prevent conflicts of
interest with existing contracts. The following year, he began declaring
that his holdings were in a so-called "blind trust" controlled by
his lawyer.


Victor Fleischer, a law professor at the University of Colorado specialising
in private equity, said it was “possible but unlikely” that Mr Romney could
have completely prevented himself from benefiting from Imagitas.


"This highlights the problems for voters with the lack of detail that has
been disclosed about what was and is in Mr Romney’s Bain holdings,” said
Prof Fleischer. Financial interests worth one per cent or less of the stock
of the company involved were exempt from Massachusetts ethics law.


Records at the Massachusetts commission of ethics show that Mr Romney did not
make filings acknowledging the interest and claiming an exemption, as he was
entitled to do.


Bill Allison, editorial director of the Sunlight Foundation, said: “The whole
purpose of financial disclosure is that people know whether sitting
officials have a conflict of interest. Mr Romney should have had to disclose
the company names. If you can’t connect the dots, it defeats the point.”


By 2004, following rapid growth, Imagitas had annual revenues of $87 million
(£55.5 million). A former senior executive with knowledge of the company
accounts estimated that the vehicle registration programme brought in up to
$10 million (£6.4 million) a year.


In May 2005, the firm was sold for $230 million (£146 million) to Pitney
Bowes, the mailing corporation. It meant a payday for Imagitas stockholders
such as Bain Capital. The former executive estimated that Bain Capital
tripled its original $5 million (£3.2 million) stake.


“They did fine,” said the executive. “They had a business that had been
starting to meander, and it succeeded and grew”. A Bain Capital source
claimed its return was lower than three-fold, but declined to clarify
further.


Mr Romney’s presidential financial disclosure forms show that in 2006, he was
continuing to earn between $100,001 (£63,710) and $1 million (£637,958) per
year in dividends, interest and capital gains from Bain Capital Partners VI,
which controlled Bain Capital Fund VI and was controlled by Bain Capital
Investors VI. Several Bain vehicles continue today to add to Mr Romney's
estimated fortune of $250 million (£160 million).


Spokesmen for Mr Romney repeatedly declined to confirm or deny that he had
profited from the sale of Imagitas, or to answer a series of detailed
questions about his financial connections to the firm lodged by The Daily
Telegraph earlier this week. “You’ve seen his disclosure forms - you know
what’s on them,” one campaign source said.


Michele Davis, a former Treasury department aide recruited by the Romney
campaign to deal with issues relating to Bain, said in an email: “Governor
Romney left Bain Capital for the Olympics in 1999, and from that point
forward had no role in management or investment decisions.”


A spokesman for Bain Capital added: “Due to the sudden nature of Mr Romney's
departure, he remained the sole stockholder for a time while formal
ownership was being documented and transferred to the group of partners who
took over management of the firm in 1999. Accordingly, Mr Romney was
reported in various capacities on SEC filings during this period.”


The sale also profited employees and former employees of Imagitas who were
given stock options when they joined, and again during the 2000 investment
round. One manager, who was junior to Mr Ryan and like him departed before
the sale, said: “I made quite a bit - a few times what I paid”. A former
executive said: “I’m sure Tobin would have had stock”. Mr Ryan declined to
say whether he owned Imagitas stock or profited from the sale.


Another corporate backer to profit was The Carlyle Group, the Washington-based
investment firm with extensive links to the Republican party, which put $20
million (£12.8 million) into Imagitas in 2000.


Glenn Youngkin, a senior Carlyle executive who joined the board of Imagitas in
the deal, has donated $16,500 (£12,759) to Mr Ryan’s congressional campaigns
since 1999, according to F.E.C. filings - more than to any other politician.
He also gave $50,000 (£31,822) to the Romney Victory Fund in June this year.
Mr Youngkin declined to answer questions about Imagitas or his political
contributions.


Imagitas itself donated $64,825 (£41,258) to the Republican Governors’
Association between Mr Romney’s appointment as vice-chairman in November
2004 and his stepping down as chairman at the end of 2006, according to
filings with the I.R.S. After resigning at the end of his first and only
term as Massachusetts governor, he launched his ultimately unsuccessful
campaign for the 2008 Republican presidential nomination.


Tobin Ryan has since 1997 donated $5,250 (£3,349) to his brother Paul’s
congressional funds and other Republicans, according to F.E.C. filings.


A spokesman for Pitney Bowes, which still owns Imagitas, declined to comment
on the connection with Bain Capital or on why Imagitas had donated to the
Republican Governors’ Association, noting that most of the contributions had
been made under its previous management.


Imagitas later faced a multi-billion dollar class action lawsuit from drivers
in Massachusetts and other states, who alleged that the personally-targeted
adverts in their vehicle paperwork represented a misuse of private data. The
company eventually prevailed after a four-year legal battle.


Tobin Ryan has since 2009 been a private equity executive at the
California-based Seidler Equity Partners. While he lists several past
appointments on his biography at Seidler’s website, he does not mention
Imagitas. He lives five blocks away from his brother Paul in Janesville,
Wisconsin, and was pictured with Mr Romney at a campaign rally in the state
last weekend.


Reached at their home, a 150-year-old property that has been opened to the
public for historical tours, his wife Oakleigh Ryan said that all press
inquiries must be directed to Paul Ryan’s campaign spokesmen. A spokesman
directed inquiries back to the Ryans, saying that they were “private
citizens”.


Tobin Ryan, who has been quoted in profiles of his brother by American media
this week, declined to respond to multiple emails requesting comment, and
declined to allow telephone calls to be put through to his office from the
front desk at the headquarters of Seidler Partners in Marina Del Rey. http://www.telegraph.co.uk/news/worldnews/us-election/9483845/US-election-Mitt-Romney-may-have-breached-ethics-laws-through-company-linked-to-Paul-Ryans-brother.html