Luke Sharrett for The New York TimesThe Republican candidate Mitt Romney’s career at Bain Capital has been attacked by his rivals and in a mock documentary.

Meet Paul S. Levy.

He is a low-key private equity executive and former lawyer who helped co-found a midsize firm, JLL Partners, in 1988. It manages about $4 billion on behalf of pension funds and endowments like the New York State Teachers’ Retirement System and Harvard University.

His firm by his own description is “small potatoes relative to the big guys” like Stephen Schwarzman’s Blackstone Group or Henry Kravis’s Kohlberg Kravis Roberts. Yet Mr. Levy, a well-respected businessman who honed his craft at Drexel Burnham Lambert in the 1980s and was once the chief executive of Yves Saint Laurent, travels in the circles of the industry’s biggest names.

He counts David Rubenstein, a founder of the Carlyle Group, as a good friend (they were once roommates); he has lunch with Leon Black of Apollo Global Management; and his firm has made investments with David Bonderman’s TPG Group.

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Yet Mr. Levy has been dismayed that the industry’s heavyweights have not sought to publicly defend their industry in recent days. Private equity came under attack when Mitt Romney’s political rivals put his career at Bain Capital in the spotlight as part of the Republican primary.

“There’s a tinge of McCarthyism here,” Mr. Levy said in an interview. “I think it’s a pretty honorable industry, and I don’t know why people aren’t stepping up and defending the careers that define their lives. That’s a sad thing. What do they fear it will cost them?”

Mr. Levy, who voted for President Obama in 2008, is right. Virtually none of the big names in private equity have spoken up to defend the industry. Over the past several weeks, anytime my colleagues or I have sought comment about attacks on the industry, private equity’s kingpins have declined. (The industry’s lobbying group, the Private Equity Growth Capital Council, has been working behind the scenes to shore up support and plans a more public campaign in the coming weeks, but with none of the leading private equity executives playing a significant role.)

“Some of the people are saying, ‘Let’s keep our heads down,’ ” Mr. Levy continued.

The question is why.

Of course, it is not a secret that the private equity industry has an image problem, crystallized by the robber baron Gordon Gekko character in in 1987. That view was reinvigorated almost 20 years later in 2006 when BusinessWeek wrote a cover article with the headline “Buy It, Strip It, Then Flip It.” Now it is being underscored again with the release of “When Mitt Romney Came to Town,” an anti-Romney mock documentary riddled with factual errors that was financed by a “super PAC” in support of Newt Gingrich.

You can clearly debate the merits of private equity — the outsize fees, the debt, the special tax treatment for executives. But there seems to be a fundamental myth that has developed that says the vast majority of private equity firms, Bain included, are all out to strip companies to their bare bones.

“We want to build businesses,” Mr. Levy said earnestly. “Nobody wants to fire people. We want to retain all of the value-added, high-quality people that work at these companies. But it’s like any other endeavor. If there are more people there to make the shoes than needed, you can’t keep the people. It’s not about wanting to get rid of people. It’s about wanting to make the company operate on a size and scale that’s commensurate with its opportunities and its revenues such that it can make profits and then build the business. It’s as simple as that.”

Mr. Levy said he felt compelled to speak out because nobody else has. He said his motivation was not about politics, but about standing up for the industry that he works in. “I wouldn’t say that I’m a big Romney fan,” he explained, though he said he would most likely vote for him over President Obama if he were the Republican nominee.

He can’t understand why Bain or Mr. Romney don’t defend themselves. “I don’t have to tell you that the Bain reputation in the industry is excellent. They are viewed as very good people, honest people. It’s sort of like everyone’s picking on the wrong guy.”

Indeed, there are more Gordon Gekko-like firms in private equity that get involved with more troubled companies that require severe cuts. Small, scrappy firms, like Sun Capital Partners and the Gores Group, have a history of looking for nearly bankrupt companies to fix. And yes, for every big success, there is a trail littered with failures.

Speaking about these bottom-feeding firms, Mr. Levy said, “They have more of a crapshoot approach, so they’ll buy companies that have zero or negative Ebitda,” referring to earnings before interest, taxes, depreciation, and amortization. “I think in the past two to three years they’ve had 20 or 30 companies go bankrupt, but mind you, they were digging in on companies that were on their way to bankruptcy anyway, and they figured they would take a shot.”

Of course, the biggest criticism of private equity firms is that they sometimes lard companies up with so much debt that it pushes them into bankruptcy — meanwhile having already taken money out of the business for themselves, effectively rewarding their own failure.

“Not everybody is perfect; we’ve had our mistakes as well, but I don’t think there’s a predatory attitude in doing these deals,” Mr. Levy said.

His firm bought J. G. Wentworth, a financial services firm, in 2005. In 2006, after improving the business by increasing its Ebitda by nearly 300 percent, his firm added debt to the company so it could take out millions of dollars. “The company was firing on every possible cylinder,” he explained. You know where this story is going: “Then the financial crisis hit, so securitizations dried up, the company couldn’t service its debt, the company went bankrupt.”

Mr. Levy’s firm ended up buying the company out of bankruptcy, and now it is doing even better than it was before the crisis.

“Everything has a story and the problem is, as you know, the attention span of everybody is so short and if it’s at all complicated people get confused and it’s very difficult to explain some of these things in a nutshell,” he said, making no apologies.

Finally, Mr. Levy said the conversation in South Carolina and the nation about private equity business is missing a crucial point. “I work for you,” he said. “Look, I’m investing the money for Colorado teachers, Colorado firemen,” he continued, “New Jersey civil servants, Montana, Missouri, New York State teachers, Oregon, Washington; that’s who the investors are, and I don’t think that’s really gotten through very clearly.”

Indeed, as “private” as private equity may sound, the beneficiaries are often the public.

“It’s been said any number of times in the press, but I don’t think it’s really gotten through.”

The voices that could pierce the clamor, though, have remained silent.

Article source: http://feeds.nytimes.com/click.phdo?i=dbeb6ea9611cd234b2db3eea758b3fa7