NEW YORK (Reuters) - President Barack Obama is due to attend a fundraiser hosted by one of private equity’s leading lights on Monday evening, the same day his campaign launched a scathing attack against his Republican rival Mitt Romney’s private equity record.
Romney’s presidential bid has spurred attacks on the private equity industry, which is often accused of raiding companies and cutting jobs at a time of high unemployment and growing income inequality.
Tony James, the No. 2 at the world’s largest private equity firm, Blackstone Group LP, is hosting the fundraiser at his luxury Manhattan apartment and at least 60 figures from the world of business and finance are expected to attend.
James, Blackstone’s chief operating officer, has been a loyal supporter of Obama, in sharp contrast to his boss, Stephen Schwarzman, a staunch backer of Romney and a fierce critic of Obama’s economic policies, particularly on taxes.
But James has been critical of political attacks on private equity. In February, he told reporters he found “inaccurate and unfair” depictions of his industry distressing and stressed that private equity provides critical capital for startups, growing companies and struggling businesses on a scale that cannot be replicated.
The fundraiser coincides with what some of Obama’s critics argue qualifies as such an attack. On Monday, Obama’s re-election campaign launched a six-minute video that featured the demise of a steel company, which Bain Capital LLC bought in 1993 under Romney’s leadership.
Less than a decade later, the still mill was padlocked, and 750 people lost their jobs. Bain profited on the deal, receiving $12 million on its $8 million initial investment and at least $4.5 million in consulting fees, according to the Reuters special report.
Bain achieved this by paying itself dividends funded by borrowings of the steel company. Blackstone and other private equity firms also engage in such a practice, referred to in the industry as dividend recapitalization, that enables them to more than recoup their initial investment and in some cases allows them to stay in the black irrespective of a company’s fortunes.
A source familiar with the matter said on Monday the fundraiser had already raised over $1.5 million for Obama’s campaign. A Blackstone spokesman declined to comment on behalf of James.
Reporting by Greg Roumeliotis in New York; Editing by Eric Walsh