Steve Pagliuca, a senior partner at Boston private equity giant Bain Capital, lost his bid to take on a Republican for the vacant US Senate seat in Massachusetts formerly held by the late Edward Kennedy.
Pagliuca garnered the least amount of votes out of the four candidates running for the Democrat spot, collecting about 12 percent of the vote. The winner, state attorney general Martha Coakley, got about 47 percent of the vote.
Pagliuca had taken a leave of absence from Bain to run for the seat, which was left vacant after Kennedy succumbed to brain cancer in August.
Pagliuca’s opponents, and even some media outlets in Massachusetts, attacked his private equity past. State representative Michael Capuano, another candidate for the Democratic spot, used the example of KB Toys, a former Bain Capital portfolio company, to attack Pagliuca.
Capuano decried what he said was private equity’s process of stripping a company bare and paying out dividends, leaving the company vulnerable. Bain acquired KB Toys in 2000 and recapitalised the company a few years later. The company went bankrupt in 2004.
Capuano says Pagliuca “made a fortune in part by gutting KB Toys, a great Massachusetts company, costing thousands of workers their jobs and their health insurance,” according to an article in The Daily News of Newburyport, in Massachusetts.
KB Toys was bought out of bankruptcy in 2004 by private investment firm Prentice Capital Management, but stumbled back into bankruptcy last year. The company, founded in 1922 as a family-owned business, went immediately into liquidation and ceased to exist.
Pagliuca joined Bain in 1989 as a managing director. He was a vice president at Bain & Company prior to joining the private equity firm. Previously, he worked as a senior accountant and international tax specialist at Peat Marwick Mitchell & Company in the Netherlands. Pagliuca is the co-owner of the Boston Celtics basketball team.
Bain’s founder, Mitt Romney, also has enjoyed a political career, serving a term as governor of Massachusetts and more recently, a candidate for president of the United States. Romney was defeated by Senator John McCain in the Republican primary last year, who was bested by Senator Barack Obama for the US presidency.
Prior to becoming Governor, Romney made a run for Kennedy’s Senate seat, but lost in part due to anti-private equity rhetoric from the Kennedy campaign.