Bain & Co. Partner Consulted with Auto Task Force
Obama Administration officials working on a turnaround of General Motors and Chrysler asked for advice from the consulting firm Bain & Company, among other consulting firms, speaking to partners there at least twice, according to multiple sources familiar with the conversations. In addition, a partner at Bain & Company later detailed his advice on the auto companies when he was contacted for a follow-up review by the office of the inspector general for TARP, according to that office.
Details of the series of contacts come to light in the wake of a complaint from Bain & Company demanding a retraction of a story posted on CNBC.com last Thursday evening. That story stated that a report from the inspector general for the TARP program said that Bain & Company had given advice to the Obama auto team on an “off the record” and non-documented basis.
In an email to CNBC late Thursday night, Bain & Company Global Public Relations Manager Dan Pinkney demanded an “immediate retraction” of the story. Pinkney said it was “factually incorrect” to say that Bain & Company had advised the Obama Administration on the auto bailout. He added that he believed CNBC had confused his firm with another consulting firm, Boston Consulting Group.
CNBC responded by issuing a correction Friday and pulling the initial story from its website, noting that Bain & Company said it was not connected to the firm in the inspector general’s report, which was referred to in the document as “Bain Consulting.”
Next, CNBC contacted the inspector general’s office to see if there had been confusion about which consulting firm provided the advice to the Obama team.
The inspector general’s office said, however, that its report did in fact refer to Bain & Company, and used a casual reference to “Bain Consulting” because that is how the involved partner at Bain & Company referred to his own firm in a phone call. The inspector general’s office said the interview had taken place in November of 2009.
Late Tuesday, a spokeswoman for Bain & Company confirmed that partner's contact with both the Obama administration and the inspector general's office.
Neil Barofsky, who served as the Special Inspector of TARP at the time of its 2010 report on the auto dealerships issue, criticized Bain & Company Tuesday for the firm’s “rash denial.”
“You’d like to think that they’d be more careful before issuing such an adamant denial of a government report that’s been out there for some time,” Barofsky said. “But like many things in the financial crisis, the facts are what they are.”
A source familiar with the auto team’s efforts identified the Bain & Company partner who provided advice to the Obama team as Ted Rouse, of the firm’s Chicago office. According to Rouse’s bio on the Bain & Company website, he is the co-leader of the firm’s M&A practice with “specific expertise in merger integration.” According to the website, Rouse joined Bain & Company in 1982 and became a partner in 1988. He was the managing partner of the Chicago office for ten years and led the firm’s industrial practice for several years. Rouse did not respond to emails and phone messages Tuesday. His office said he was traveling.
“There is no question they gave advice,” the source familiar with the auto team said of Bain & Company. “We had specific questions about specific matters, largely about dealer rationalization.”
According to the inspector general’s report, which was quoted in the initial CNBC story, a person from Bain & Company explained to the inspector general’s staff what he had told the Obama team about the auto companies. According to the report, “An expert from Bain Consulting also stated many dealerships have too much inventory relative to their market area, particularly in smaller markets or markets where there are more dealers than necessary, because they have to have sufficient diversity in their inventory to cover the manufacturer’s entire portfolio and to meet varied customer needs.”
Presented with information that there had been at least two calls with the auto team and one with the inspector general, a spokeswoman for Bain & Company Tuesday afternoon said she could not confirm or deny contacts any partner had with the Obama team unless she was given the name of the partner and the date of the contact.
After CNBC provided the name, the spokeswoman called back. "I can confirm that Rouse responded to an unsolicited call from SIGTARP and provided Bain's point of view on the relative cost positions of the major auto companies," the spokeswoman said. She said Rouse had also responded to a similar earlier call from the Obama auto task force.
CNBC contacted Bain for comment before the initial story ran, although that request for comment came late in the day. CNBC emailed the same Bain spokeswoman for an initial comment at 5:56 p.m. Thursday evening. Hearing no response, CNBC posted the initial story approximately three hours later.