Here’s a story of what’s wrong with capitalism – brought to you by one of the Mitt Romney’s of the world.
Billionaire Ira Leon Rennert – there’s the sorry ass over on the right – got rich by acquiring all the shares of struggling companies then issuing junk bonds to finance the acquisition. His personal fortune came from paying himself hundreds of millions of dollars from the proceeds of the junk bond sales – not once, but twice per company!
Rennert isn’t satisfied with raiding a company just once. After collecting as much as $100 million-plus from the first junk bond sale for the initial purchase, he would create a holding company which would then purchase the company by selling yet more junk bonds for which Rennert would be paid – again – as much as a hundred million dollars more.
What brings Rennert’s story to headline news is a law suit resulting from him pulling one of his stunt on a company in Utah. The trustee for the estate of Magnesium Corp of America filled a lawsuit against Rennert and his company and he was found guilty of looting the company.
Rennert purchased the company in 1989 which he controlled until 2001. The details of the original purchase are shrouded in secrecy so we don’t know how much he was personally paid from the first acquisition. But in 1996 he established a holding company – Renco Metals – for Magnesium Corporation (MagCorp) which sold junk bonds to purchase MagCorp and then paid Rennert $90 million.
During the 1980’s – 90’s MagCorp was the worst air polluter in the nation, charged by the EPA of “releasing hundreds of tons of chlorine per day from its stack, which was around 90% of the chlorine emitted into the atmosphere from all sources nationwide” [Bold mine]. In the 2001 law suit filed by the estate, prosecutors said Rennert did nothing to clean up the pollution. But Rennert got out of the nearly $1 billion EPA fine by filing bankruptcy for MagCorp and renaming the company US Magnesium – then let the bankruptcy courts take the company. However, Renco owns the company today after having bought it back from bankruptcy probably at a fraction of the $1 billion fine.
Trying to find how many people lost their jobs, retirement benefits and maybe personal property and savings because of Rennert’s corporate looting is like trying to find a needle in the haystack. But you can bet Rennert is not one bit concerned about that ‘insignificant’ loss. He has his $6 billion-plus he made from unfettered capitalism.
Rennert is a major contributor to the Republican Party, contributing money to Senator John McCain and Rudy Giuliani – all the while living in his 63-acre oceanfront estate which has a 62,000-square-foot main house with 29 bedrooms and 39 bathrooms, a 164-seat theater and a 100 car garage in Sagaponack, New York. The main house is adjacent to a 10,000-square-foot “playhouse” with two bowling alleys, a squash court and billiards.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky