The latest attack on Mitt Romney's time at Bain Capital appeared this week at Vanity Fair by author Nicholas Shaxson. While the article is ostensibly an investigation into Mitt Romney's offshore accounts, a close look at the reporting shows it is mostly a rehash of older reports and reveals several instances where the author failed to offer readers a broader perspective on the issues at hand.

The opening section of the story reports on Romney's offshore accounts in places like Grand Cayman. Much of this material was reported three months ago by the Washington Post. In case there's any doubt he was familiar with it, Shaxson quotes the Post piece at one point to claim that experts on both sides of the aisle agree Romney hasn't been sufficiently transparent with his tax returns. What Shaxson omits from the Washington Post report is any mention that Democrats like former Presidential candidate John Kerry were similarly inclined:

...since the 2004 campaign — when Democratic presidential candidate John Kerry declined to disclose some of his wife’s holdings — the Office of Government Ethics has permitted nominees and presidential candidates to postpone revealing underlying assets in investment accounts that have a legally binding confidentiality agreement.

There are other odd omissions in the Vanity Fair piece. For instance, the discussion of the tax rate Romney pays on his income, which is about 15 percent, fails to mention the ongoing political debate over the "Buffett Rule," which President Obama has been pushing for nearly a year:

Romney manages this low rate because he takes his payments from Bain Capital as investment income, which is taxed at a maximum 15 percent, instead of the 35 percent he would pay on “ordinary” income, such as salaries and wages. Many tax experts argue that the form of remuneration he receives, known as carried interest, is really just a fee charged by investment managers, so it should instead be taxed at the 35 percent rate. Lee Sheppard, a contributing editor at the trade publication Tax Notes, whose often controversial articles are read widely by tax professionals, is nonplussed that the Obama campaign has been so listless on the issue of carried interest. “Romney is the poster boy, the best argument, for taxing this profit share as ordinary income,” says Sheppard.

Shaxson quotes "controversial" economic analyst Lee Sheppard. Sheppard is an acknowledged expert in tax policy who has been advocating consistently for this particular change since at least 2006. This NY Times profile of Sheppard from 2007 is more descriptive of the kind of controversy that exists about her work: "A lot of people would tell you that [her analyses] are skewed toward the government's way of looking at things and that she frequently does not give the taxpayer's side."

But that's really the least of the problems with this account. Raising capital gains taxes isn't just a tax issue among policy wonks; it's a political football. The President had Warren Buffett's secretary sit next to the First Lady at his State of the Union to highlight the issue. NPR described it as the President's "rallying cry" this tax season. So why would Shaxson talk around the issue and its connection to Romney's presidential aspirations without mentioning the wider political context of the debate? The fact that Sheppard is considered pro-government (by some) and that this issue has been a crusade of President Obama certainly seems relevant and worthy of a mention.

One of the most striking claims in the Vanity Fair piece is aimed squarely at Romney's credentials as a businessman based on his Bain Capital work:

It is substantially on this stellar record that Romney is now running for president. His work at Bain was unquestionably good for himself and for Bain, but was it also good for the businesses he acquired, for their workers, and for the economy, as he claims?

A report by Bain and Co. itself, looking at the period from 2002 to 2007, concluded that there is “little evidence that private equity owners, overall, added value” to the companies they took over: nearly all their returns are explained by broad economic growth, rising stock markets, and leverage.

The suggestion here is that Romney's work at Bain Capital is a fraud. However, Shaxson performs some sleight-of-hand to reach this conclusion. First of all, Romney left Bain Capital in 1999, so the period looked at by the Bain and Co. report did not cover his tenure in the industry. That is significant, because the article from which Shaxson took the quote about private equity suggested this particular period of time (2000-2007) was distinct in the industry: "In the benign period that preceded the downturn, private equity firms did not have to put much muscle into generating attractive returns." Shaxson also leaves out this caveat in the Bain and Co. report: "Clearly, some industry leaders did create value in their portfolio companies, and their active ownership was rewarded with superior returns."

A GAO report covering the same time period as the Bain report Vanity Fair relies on found: "Academic studies analyzing LBOs done in the 2000s suggest that private equity-owned companies usually outperformed similar companies not owned by private equity firms across a number of benchmarks, such as profitability, innovation, and the returns to investors in IPOs." The GAO report does say it is difficult to tease out the threads of this performance. but some areas, such as innovation, seem fairly cut and dry. 

A study of U.S. patents found that private equity-owned companies pursued more economically important innovations, as measured by how often the patents are cited by later patent filings, than similar companies. This finding also suggests that private equity-owned companies are willing to undertake research activities that can require a large up-front cost but yield benefits in the longer term.

This is at odds with the views of private equity Shaxson paints in his article. Josh Kosman, a critic of private equity, is the source of much of this material. A significant portion of the Vanity Fair piece, a case study of medical device manufacturer Dade Behring, is rehashed from this 2009 Boston Globe op-ed by Kosman. More recently, Kosman has labeled firms like Bain Capital "the worst of Capitalism" in an article at Rolling Stone, a magazine not know for its friendliness toward Republicans.

There may be some validity to Kosman's criticisms of private equity in general and Bain in particular, but Shaxson devotes his piece to critics like Kosman and Sheppard, allowing no space for supporters of the industry to rebut their claims. The VF article notes parenthetically that Bain Capital refused to speak to him for the story, but surely someone could have been called upon to support the industry?

The Vanity Fair piece is mostly a rehash of criticisms from other publications, one which not only fails to provide a response from those within the industry but which often excludes mitigating language in the sources it does rely on. In any case, Vanity Fair is going to have a hard time pressing this attack on private equity when President Obama is on the record describing private equity as "the best opportunity for long-term economic vitality, for the expansion of jobs, for the improvement of productivity and a quality standard of living."