Stephen Pagliuca: A Study In Contrasts
BOSTON — To listen to Marylou Sudders, you’d never guess that Steve Pagliuca is rich. Very rich. Two hundred and sixty million dollars to $400 million rich.
Sudders is the head of the Massachusetts Society for the Prevention of Cruelty to Children, where Pagliuca serves as board chairman. The first time Sudders met him, she remembers a man who was lost, late and looking for parking.
“I go downstairs, and I see this gentleman, sort of a big guy, totally disheveled,” Sudders recalled. “He’s sweating, his shirt is coming out of his pants — I’ll never forget. And I remember thinking: This is the guy who just bought the Boston Celtics!”
He’s rich, but rumpled. It’s just one of the contrasts embodied by Pagliuca. He’s a deep thinker, but also a risk-taker, says Robert Caporale, co-owner of Game Plan LLC. In 2002, Caporale helped broker the Celtics purchase that was so swift and secret, it shocked the sports world.
Pagliuca’s willingness for fast, bold action brought Caporale back to the bargaining table with him in 2004 when an owner-led lockout had completely shut down the National Hockey League.
“We ought to consider putting together an effort to buy all 30 teams and convert the National Hockey League into a single entity,” Caporale remembers telling Pagliuca.
Pagliuca didn’t even hear the entire pitch before saying yes to the $4.2 billion proposal.
“When we were probably 75 to 80 percent through the presentation,” Caporale said, “he stopped us politely and said, ‘I see what you’re doing here. We will back you and you don’t need to meet anyone else about raising money.’ ”
“He’s sweating, his shirt is coming out of his pants — I’ll never forget. And I remember thinking: This is the guy who just bought the Boston Celtics!”
The deal didn’t go through. Several recalcitrant NHL owners wouldn’t give up their teams. But, Pagliuca wins more than he loses. That’s due in part to another contrast: Those who work for him say Pagliuca is a true diplomat, but also a fierce competitor.
In a pattern familiar in huge corporate buy-outs, following their acquisition of the Celtics, Pagliuca and co-owner Wyc Grousbeck set about restructuring team management. Pagliuca had his eye on NBA great Danny Ainge. Ainge declined the general manager’s job the first time Pagliuca and co-owner Wyc Grousbeck offered it to him. But Pagliuca’s soft touch eventually won Ainge over.
“I was impressed that Steve wanted to win — I could see it and I could see the competitive nature in him,” Ainge said. “And the second time they came back and I think it was their persistence. And I could feel the goals that they had of restoring the tradition of the Celtics, and I believed them. That’s why I came to work for the Celtics.”
So, Pagliuca wooed Ainge. But can he woo voters? As he campaigns, voters have seen another contrast — one that pits Pagliuca’s principles against his loyalties.
In 1994, Pagliuca’s friend and mentor, Republican Mitt Romney, challenged Edward Kennedy for Senate. Though he’s always declared himself a Democrat, Pagliuca donated several thousand dollars to Romney’s campaign. But he doesn’t seem troubled by the contradiction.
“You know, I donated that money out of friendship,” Pagliuca said. “Mitt Romney hired me and I worked with him for 15, 16 years. So I didn’t share political views. But Barney Frank has supported Republicans in certain ways and this for me came out of friendship, not out of politics.”
That friendship is also what made Pagliuca rich. It was Romney who hired him to work at a then-fledgling Bain Capital in the 1980s. Bain is now a $60 billion venture capital and private equity firm, where Pagliuca is still a managing partner. Pagliuca says he’s campaigning as the “jobs candidate” because of his track record at Bain.
But that’s perhaps the sharpest contrast in Pagliuca’s candidacy.
His campaign slogan is “Pags = Jobs,” but the history of Bain Capital reveals a company that excels in the art of the leveraged buy-out. This is a process in which Bain often banks huge profits, but sometimes leaves acquired companies saddled with enormous debt. Some of those companies have been forced to make massive layoffs.
The process begs the question: What’s the real bottom line at Bain Capital? Wealth creation for investors or job creation for workers? When asked, Pagliuca hedged.
“Well, you know, that’s a complex question,” Pagliuca said. “What venture capital does is invest in new ideas and venture capital will fund them. Funding them is creating thousands of jobs because they essentially created a new industry.”
But Bain Capital also buys out established businesses in old industries, such as KB Toys and Dade International, both of which resulted in the lay off of hundreds of workers. Pressed on this, Pagliuca hedged even more.
“There’s investments in public companies and there’s debt in public companies, and there’s job creation and there’s job losses, and the job losses mainly come from competition, from global competition,” he said. “And those job losses in the United States now are 15 million unemployed. And there are 320,000 in Massachusetts. That’s why I got into this race, to try to reverse that.”
There’s another inconsistency that hounds Pagliuca on the campaign trail. He proudly proclaims that he’s not taking any lobbyist or special interest funding. He rails against money’s influence in government. Bain Capital, however, has spent millions of dollars on multiple lobbying groups in an attempt to exert significant influence in Washington.
At a recent campaign stop in Chinatown, reporters repeatedly asked him to explain the apparent conflict.
“So it’s OK for you to pay a lobbyist to give information to politicians, but not alright for you to take it if you’re an elected official?” Janet Wu of WCVB-TV asked.
“Those are your words, not mine,” Pagliuca responded. “I think it’s OK to communicate about issues. And you can go directly to Washington to communicate about issues; you can hire expert groups to communicate about issues. Where I draw the line is you don’t want money to influence those decisions. So I’m not taking PAC or lobbyist money, and that’s the key issue.”
The pieces of the Pagliuca puzzle seem to fall together. He is extremely rich but down to earth. Analytical but a risk-taker. He can put loyalty before principle. He says he’s created jobs when he’s also eliminated them. Are these contradictions a political liability?
Rev. Gregory Groover doesn’t think so. He serves with Pagliuca on the board of the Massachusetts Society for the Prevention of Cruelty to Children. “I’m not sure if it’s a tension, but it’s a rich balance,” Groover said. “It’s a level-headed person who has both extremes.”
Those same contradictions have some political observers asking a different question.
Pagliuca has no political experience and began this campaign with virtually no name recognition. So is the Senate seat the one he’s really after? Or, does Steve Pagliuca have his eye on another seat, on another hill? On Beacon Hill, perhaps, and the seat that was was once occupied by his friend, former Massachusetts Gov. Mitt Romney.