Since the spring, President Barack Obama's re-election campaign has repeatedly hit Mitt Romney for his career as a private-equity executive and has aired ads accusing his former firm, Bain Capital, of ruining businesses and sending jobs overseas. The story of how a Sunoco refinery in Philadelphia was rescued is an example of how the private-equity industry, including Bain, is a more complicated place than the image kicked up by this year’s presidential election. Sometimes the business can be saved and proceed successfully, like STAPLES. Other times the business cannot be saved and is closed. Part of the deal 0bama worked out has the EPA looking the other way while enforcing regulations and mandates on other refineries not favored by 0bama.
The political implications were unspoken: Pump prices were escalating during an election year, and the president could not afford the loss of 850 refinery jobs. Imminent closure by owner Sunoco Inc. SUN -0.23% threatened to send gasoline prices higher before the election.
At U.S. Rep. Bob Brady request, President Obama's top economic adviser, Gene Sperling, organized a conference call with Sunoco chief executive Brian P. MacDonald. Brady and Deputy Energy Secretary Daniel B. Poneman joined the 5:30 p.m. call on March 8. The officials told the Sunoco chief that the White House was worried about the adverse economic effects of closing the largest refinery in the Northeastern United States. As soon as the conference call was over, MacDonald said, he left a message on the cell phone of private-equity firm Carlyle managing director Rodney S. Cohen, who, in a previous role with Pegasus Capital Advisors, had turned around a troubled refinery in Coffeyville, Kan., for a hefty profit. The same evening, White House officials called their contacts at Carlyle to urge them to talk to Sunoco. Sperling and David M. Marchick, Carlyle's managing director for external affairs, had both worked in the Clinton administration.
The United Steelworkers Union, which represents refinery workers, is pleased that most of the workers will still be working in the future and saving 850 unionized jobs in Pennsylvania. So is 0bama; unemployment numbers are already staying at a steady high of over 8%. To help seal the deal, expected to be made final in September, the Obama administration and state regulators agreed to loosen certain environmental restrictions on the refinery. Pennsylvania's Republican governor, Tom Corbett, contributed $25 million in state subsidies and other incentives.
So, you have 0bama villifying private-equity firms in the public forum, but running to them to save his butt behind closed doors. Of course it reveals his hypocrisy. But his proponents will just look the other way. Just as he wants them to do.