Romney's Italy Problem

Mitt Romney skipped Italy on his swing through Europe. That was probably prudent. That’s because Bain Capital, under Romney as chief executive officer, made about $1 billion in a leveraged buyout 12 years ago that remains controversial in Italy to this day. Bain was part of a group that bought a telephone-directory company from the Italian government and then sold it about two years later, at the peak of the technology bubble, for about 25 times what it paid.

Bain funneled profits through subsidiaries in Luxembourg, a common corporate strategy for avoiding income taxes in other European countries, according to documents reviewed by Bloomberg News. The buyer, Italy’s biggest telephone company, now has a total market value less than what it paid Bain and other investors for the directory business.

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While few ordinary Italians realize the link between Romney and the investor group, the deal symbolizes Italy’s economic woes and government futility as the nation struggles to convince investors that it can repay Europe’s second-largest debt without a bailout. The economy is in its fourth recession since 2001 and unemployment is at a 13-year high. Romney himself probably earned more than $50 million, and possibly as much as $60 million from the Italian directory sale of Seat Pagine Gialle SpA, according to a person familiar with the matter. The deal turned into one of the biggest windfalls of his tenure.

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