05/210 CT Lt Gov.Fedele Says Business Failure Casts Doubt On Greenwich Resident Tom Foley And Claims Foley Made Millions 'On The Backs Of' Employees

Republican Lt. Gov. Michael Fedele Friday said that a Courant story "raises serious questions" about sweeping claims of business success by his leading rival for this weekend's Republican gubernatorial nomination, Greenwich multimillionaire Tom Foley.

Fedele issued a statement saying: "Today's Hartford Courant story that Tom Foley's business practices contrast sharply with his campaign rhetoric raises serious questions about his job creation claims and it suggests that Tom has distorted his record as a job creator."

The Courant reported that one of Foley's claimed success stories -- his ownership of The Bibb Co., a textile manufacturer that he bought through a junk-bond-financed leveraged buyout in 1985 -- ended with him relinquishing executive control and most of his 95 percent stake in Bibb 11 years later.

Bibb -- whose Bibb City plant on the outskirts of Columbus, Ga., was once known as the largest cotton mill in the world -- went through a "prepackaged bankruptcy reorganization" in 1996 that removed Foley from executive control. It never recovered and was sold in 1998 by its new management, and the renowned Bibb City plant closed forever in 1998.

Foley's Greenwich-based holding company, the NTC Group, collected management fees from Bibb of $4 million each year from 1992 to 1994, then $3.4 million in 1995, even as Bibb struggled and began losing money in 1994, according to filings with the U.S. Securities and Exchange Commission. He estimates he personally collected about 20 percent of those fees.

Fedele also said in his statement Friday: "I hope he will explain how he can justify making millions of dollars on the backs of long-time employees of this company which failed under his leadership. We certainly don't want what happened to Bibb City to happen here in Connecticut."

While Foley has enjoyed success in business overall, his Bibb venture contrasts starkly with the rosy-hued picture painted in his campaign literature. In an interview carried in the Courant story, Foley defended both his campaign's positive characterization of the Bibb deal and the collection of the multimillion-dollar management fees from Bibb by his Greenwich-based holding company, the NTC Group.

Here is part of a 2009 Foley campaign biography that dealt with the Bibb venture: "Tom's record in business is impressive. His primary operating companies, The Bibb Company, T.B. Woods, Inc., and Stevens Aviation, each more than doubled in revenues and each expanded employment by more than fifty percent while under Tom's leadership," said one of his campaign biographies. "Tom believes the same expertise and problem-solving skills he uses to manage and grow businesses can be used to help government improve the economy and expand jobs for Connecticut citizens."

Foley said he didn't think his campaign account was misleading "because when I bought The Bibb Co. it was losing $14 million a year, and shortly after I acquired it we got it turned around and we were earning money. And the company was doing quite well in 1988 so we bought a bigger ... textile business from J.P. Stevens." That acquisition increased the number of the company's employees, he said.

But then things turned sour for the business, whose main products included towels and sheets.

"In the late '80s, valuations on businesses were pretty high -- the economy was very good -- and we overpaid for that part of the business," he said. "We integrated the two businesses. ... I think from a management point of view things were doing pretty well. ... But we just couldn't bear the weight of the debt that had been taken on, and so that was the reason for the [bankruptcy] restructuring."

"Over the 10-year period I owned The Bibb Co., the textile business was under tremendous pressure from products coming in from overseas," Foley said. "I think we certainly did much better than the management team that was in place before I bought the business would have done. So I think you have to compare the performance [on the basis of] how long we were able to keep business and hold on under different circumstances."

Foley said the annual management fees of up to $4 million, which were collected by NTC as the Bibb Co. struggled, were for "a lot of employees ... helping to run the company" out of NTC's Greenwich office.

Foley said he is "not really a finance person by background" and instead has specialized in managing companies he buys and improving their performance.

"I think the image of a slash-and-burn person is more of a trader, somebody who comes in and buys something, and does a quick fix-it-up or face-lift and then tries to sell it for a quick profit or sell of the parts and make money -- and that's done quickly," Foley said. "I was an investor. I came into these companies, and I tried to make them perform better. I was involved with developing plans to ... meet the challenges they were facing."

Source: http://blogs.courant.com/capitol_watch/2010/05/fedele-says-business-failure-c.html