By MARK MAREMONT
The Wall Street Journal
Since the spring, President Barack Obamas re-election
campaign has repeatedly hit Mitt Romney for his career as a
private-equity executive and has aired ads accusing his former
firm, Bain Capital, of ruining businesses and sending jobs
At the same time, the Obama White House played a central
role in encouraging another private-equity firm to rescue a
Philadelphia oil refinery, whose imminent closure by owner
Sunoco threatened to send gasoline prices higher before the
Gene Sperling, director of Mr. Obama's National Economic
Council, helped kick-start discussions to sell the refinery to
Carlyle Group, a well-connected Washington, D.C.,
Mr. Sperling later talked numerous times to Carlyle
executives, government officials and union leaders as part of a
bipartisan effort, according to participants in the talks.
Carlyle last month said it would take a two-thirds stake in
the refinery and invest at least $200
million, staving off the potential for fuel-price increases and
saving 850 unionized jobs in Pennsylvania, a likely
battleground state in November.
To help seal the deal, expected to be made final in
September, the Obama administration and state regulators agreed
to loosen certain environmental restrictions on the
Pennsylvania's Republican governor, Tom Corbett, contributed
$25 million in state subsidies and other incentives.
The refinery story is an example of how the private-equity
industry is a more complicated place than the image kicked up
by this year's presidential election, in which first Mr.
Romney's Republican primary rivals, and then the White House,
used Bain as a cudgel.
It also helps explain why partisans on both sides argue
strenuously about the subject. The successful deal was widely
reported, and an article in the Philadelphia Inquirer reported
some details of the White Houses involvement.
Mr. Corbett, the Pennsylvania governor, said the lesson
is that private-equity firms are not evil. Even though
campaigns may say that, administrations understand they're
necessary to get deals done.
There were no other realistic buyers for the refinery, he
said, and if Carlyle didn't invest, a deal to save it
just wouldn't have happened.
On the other side, Leo Gerard, an Obama supporter and
president of the United Steelworkers union, which represents
most employees at the refinery, said the union wouldn't have
agreed to the deal if Bain had been across the table.
Our experience with Bain is that they strip and flip
and walk out with as much as they can, Mr. Gerard said,
while the union's experience with Carlyle is the
opposite. The union agreed to a new contract with modest
concessions as part of the deal.
During a campaign, some may distort our record for
political purposes, but the truth is that revenues have grown
in 80% of the more than 350 companies in which we have
invested, a Bain spokesman said.
White House officials said they didn't choose Carlyle but
were told by Sunoco that Carlyle was the only viable bidder. A
White House spokesman, Clark Stevens, said the
administrations goal was to protect consumers from
higher prices at the pump and keep people from losing their
Ben LaBolt, a spokesman for the Obama campaign, said,
You would have to engage in quite the verbal gymnastics
to suggest there is an equivalence between the administration
working to save jobs and keep gas prices down and Gov. Romney
claiming he was a job creator when he profited off of
bankrupting companies and outsourcing jobs.
Mr. Romney has acknowledged that some businesses Bain
invested in failed but said the firm helped many others and
In September 2011, Sunoco said it planned to quit the refining business and sell
refineries in Philadelphia and nearby Marcus Hook, Pa. The
company has said its refineries lost $1 billion over three
years. Sunoco warned it would close both facilities if it failed to find a
the end of last year, it had halted refining at Marcus Hook, and talks
with possible buyers for the Philadelphia refinery, including
Carlyle, had fizzled.
Closing the Philadelphia refinery, the largest on the East
Coast, threatened to disrupt gasoline and heating-oil supplies
in the Northeast.
A Feb. 27 report from the federal Energy Information
Administration warned of the potential for prices to
spike. Republicans at that time were criticizing
the administration for rising gasoline prices.
The EIA warnings, along with a broader reduction of refinery
capacity in the region, set alarm bells ringing
inside the White House, an administration official said. Aides
concluded gas prices could rise 20 cents to 30 cents a gallon
in parts of the Northeast.
In late February, Rep. Bob Brady, (D., Pa.), a
union-friendly congressman from Philadelphia, met with Sunoco's
incoming chief executive, Brian P. MacDonald.
Mr. Brady said the White House was concerned and asked Mr.
MacDonald to think about options if there was broader
help, according to a timeline later circulated by
Carlyle, which Sunoco said was accurate. Mr. MacDonald asked to
talk to the White House directly.
A Brady representative said the congressman was traveling
and unavailable to comment.
On March 8, the White Houses Mr. Sperling hosted a
call with the Sunoco CEO, Mr. Brady and Deputy Energy Secretary
Dan Poneman. The White House confirmed the call.
The group discussed the possibility of $5 gasoline prices
for the summer, Sunoco's Mr. MacDonald recalled.
When the officials pressed him on a potential solution, he
said Sunoco might be willing to keep a piece of the
Philadelphia refinery through a joint venture with a partner
that could contribute expertise and cash.
It would have to be a very capable party, Mr.
MacDonald recalled saying. Sperling pushed me: Who
would a party like that be?
Mr. MacDonald said Carlyle fit the bill.
Soon after, Mr. Sperling called Carlyle co-CEO David M.
Rubenstein about the refinery, according to Carlyle, and left a
Carlyle has shied away from any overt involvement in
politics. Mr. Rubenstein worked in the Carter administration,
and the firm employs executives who have worked in
administrations from both parties. It doesn't donate to
Mr. Rubenstein passed the message from Mr. Sperling to a
Carlyle executive who had worked with Mr. Sperling in the
Clinton White House, David Marchick, according to Mr.
Mr. Marchick said Mr. Sperling told him the White House was
willing to help move the deal along. Mr. Sperling also told him
the White House wouldn't do anything just to help Carlyle and
that the same assistance would be available to any potential
buyer, Mr. Marchick said.
They didn't care who bought it, he said.
Eventually, Sunoco and Carlyle agreed to explore a joint
venture, with Carlyle paying nothing for a majority stake but
contributing cash for an upgrade.
On March 19, Mr. Sperling talked to Pennsylvanias Mr.
Corbett to see if the Republican governor was interested in
cooperating. Mr. Corbett, whose office was already trying to
rescue the refinery, agreed.
The White House helped with Carlyle, and we helped
with state government, he said.
A key issue Carlyle identified was a 2005 consent decree
with the Environmental Protection Agency
under which Sunoco agreed to limit emissions at its refineries.
Carlyle wanted to work on the refinery without triggering
costly environmental reviews.
The White House referred the issue to the EPA, which along
with state and local environmental officials agreed to
modify the decree, allowing Carlyle to transfer emissions credits from the Marcus
Hook refinery, in effect giving the Philadelphia refinery
greater leeway to pollute.
The agreement compressed into a few months what participants
said could have taken much longer. Carlyle said it doesn't plan
to use the added credits, and over time will reduce emissions. It said the changes will
provide flexibility as it carries out the upgrade.
Carlyles plan to turn the refinery profitable includes
a partial shift to oil from North Dakota that is cheaper than
crude from West Africa it now refines, and switching to newly
abundant natural gas to power part of the refinery.
In mid-May, as Carlyle and Sunoco were briefing the White House
and other officials on their plan, the Obama campaign launched
a broadside against Mr. Romneys Bain career, which
featured a worker saying Bain was a vampire in its
handling of a steel company.
Later, an independent group supporting the Obama candidacy
released an ad implicitly accusing Mr. Romney of contributing
to the death of a laid-off worker's wife.
On a July 2 conference call announcing the refinery deal, Carlyle and Sunoco
executives and public officials repeatedly thanked the White
House and Mr. Sperling.
The White House was the only major player not on the
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