Con­trast of words, busi­ness

Ste­fanowski’s com­pa­nies reaped toll and state money

Connecticut Post (Sunday) - - Front Page - By Ken Dixon

Bob Ste­fanowski pro­poses steep cuts in gov­ern­ment spend­ing and a sharp roll­back in per­sonal and cor­po­rate taxes. He op­poses high­way tolls to pay for tran­sit im­prove­ments, call­ing them an added tax on Con­necti­cut’s cit­i­zenry.

But there’s a big gap be­tween this first­time po­lit­i­cal can­di­date’s pub­lic state­ments and his busi­nesses prac­tices over the last 10 years, a Hearst Con­necti­cut Me­dia in­ves­ti­ga­tion has found.

At his last job, Ste­fanowski, now the Repub­li­can can­di­date for gover­nor, was paid mil­lions of dol­lars as chief ex­ec­u­tive of­fi­cer of a pay­day loan com­pany whose short- term in­ter­est rates are so high, it is not even al­lowed to do busi­ness in Con­necti­cut.

While chair­man of a pri­vate- eq­uity group, Ste­fanowski in­vested more than $ 100 mil­lion with a com­pany that con­structs and prof­its from op­er­at­ing toll roads.

When he was chief fi­nan­cial of­fi­cer for UBS, which once touted the largest trad­ing floor in the coun­try at its Stam­ford of­fice, the bank took $ 20 mil­lion in state sup­port, but by 2017 had laid off more than twothirds of a Con­necti­cut work­force that

once ex­ceeded 4,400.

Com­pany in­vested in toll roads

On the cam­paign trail, Ste­fanowski has railed against his Demo­cratic ri­val Ned La­mont’s pro­posal to in­sti­tute trucks- only tolls on state high­ways, call­ing it an added tax that is bound to even­tu­ally ex­tend to au­tos. With­out of­fer­ing much de­tail, Ste­fanowski says he fa­vors pub­lic- pri­vate part­ner­ships to tackle fu­ture trans­porta­tion- in­fra­struc­ture projects.

“Tolls are a non- starter with me,” Ste­fanowski said. “I think we need to bring the pri­vate sec­tor in. I think it needs to be part of the so­lu­tion. You have to be care­ful, be­cause the pri­vate en­ti­ties are go­ing to want to make a de­cent re­turn.”

Ste­fanowski hasn’t said how those com­pa­nies would make their re­turn, but pri­vate tolling is an op­tion he’s fa­mil­iar with.

In his job as the Lon­don­based chair­man and manag­ing part­ner at the 3i Pri­vate Eq­uity Group, be­tween 2008 and 2011, toll roads served Ste­fanowski well. He headed an in­vest­ment port­fo­lio of $ 1.5 bil­lion that, in part, re­lied on tolls to earn prof­its. The group in­vested $ 111.5 mil­lion in a sub­sidiary of KMC Con­struc­tions, a firm in­volved in at least seven toll high­ways in In­dia.

Ste­fanowski did not re­spond to six mes­sages, left over the course of a week, seek­ing com­ment.

Hired in mid- Septem­ber, 2008, at the height of the U. S. bank­ing melt­down, Ste­fanowski found a sil­ver lin­ing in the re­ces­sion that threw 8.6 mil­lion Amer­i­cans out of work and hit Con­necti­cut’s man­u­fac­tur­ing sec­tor par­tic­u­larly hard.

“Yes, it’s a big op­por­tu­nity for us,” he told Merg­ers & Ac­qui­si­tions, a trade mag­a­zine, go­ing on to say that “we think it’s go­ing to head con­tin­u­ally to­ward pub­lic/ pri­vate part­ner­ships, where there will be an op­por­tu­nity for pri­vate money to come in and fi­nance some of this ( in­fra­struc­ture) build out.”

In Oc­to­ber of 2008, Ste­fanowski told In­fra­struc­ture In­vestor, an­other trade mag­a­zine, that “If we’re look­ing at a com­pany in the U. S. that’s a heavy- man­u­fac­tur­ing com­pany and they want to think about out­sourc­ing some­thing to Asia, I can pick up the phone and call the woman who runs our Bei­jing of­fice or our Hong Kong of­fice.”

In his po­si­tion at 3i, Ste­fanowski was also on the board of Quin­tiles Health­care, a sub­sidiary of Quin­tiles Transna­tional Cor­po­ra­tion, which in 2011 Forbes mag­a­zine called “the leader in a se­cre­tive and pow­er­ful $ 20 bil­lion in­dus­try” that out­sourced clin­i­cal tri­als. That same year, the com­pany was one of 10 that made pay­ments to the fam­i­lies of 22 peo­ple in In­dia who died dur­ing drug tri­als, av­er­ag­ing about $ 4,500 each, ac­cord­ing to The In­de­pen­dent, a Bri­tish news­pa­per that called the dead “Guinea pigs”

UBS takes state money, still cuts jobs

In 2011, Gov. Dan­nel P. Mal­loy, a Demo­crat, of­fered a for­giv­able loan of $ 20 mil­lion to UBS in at­tempt to keep the com­pany in Stam­ford, where they once had more than 4,000 work­ers, be­fore the re­ces­sion, in which UBS suf­fered a $ 50 bil­lion loss.

It was part of the gover­nor’s plan to keep big em­ploy­ers in the state, a strat­egy widely crit­i­cized by Repub­li­cans. Even Joe Markley, Ste­fanowski’s run­ning mate, in 2014 called it “cor­po­rate wel­fare.”

Ste­fanowski was named chief fi­nan­cial of­fi­cer of UBS a few months af­ter the

deal was signed. By the time he left in 2014, he re­duced op­er­at­ing costs by $ 700 mil­lion and cut the staff to about 2,000 — nearly half of what it had been.

Jim Wat­son, spokesman for the state Depart­ment of Eco­nomic and Com­mu­nity De­vel­op­ment, said that a 2017 job au­dit in­di­cated that UBS had an an­nual av­er­age of 1,330 em­ploy­ees, and is on- track to re­tain more than $ 17 mil­lion of the $ 20 mil­lion loan. The for­give­ness- and- re­pay­ment sched­ule of the deal re­quires a min­i­mum of 1,000 jobs, and runs through 2021.

Dur­ing a re­cent meet­ing with the Hearst ed­i­to­rial board, Ste­fanowski held up UBS as an ex­am­ple of the sharps cuts in state spend­ing and the rene­go­ti­a­tion of the con­tracts with state work­ers that he would make if elected gover­nor.

It is un­clear what role state in­cen­tives like loans or tax de­fer­ments would play in an ad­min­is­tra­tion that wants to cut cor­po­rate taxes and spur job growth.

“We have to stop re­ward­ing bad be­hav­ior,” Ste­fanowski said, prais­ing the tac­tics of Pres­i­dent Don­ald Trump in rene­go­ti­at­ing a va­ri­ety of deals. “I also think it’s ac­count­abil­ity. I think it’s about lead­er­ship and it’s about run­ning this state like a busi­ness. Gov­ern­ment ex­pe­ri­ence is a lit­tle over- rated.”

Loans at a steep cost

Prior to his de­ci­sion a year ago to run for gover­nor, Ste­fanowski., now 56, was the CEO in Lon­don for DFC Global Corp., for­merly known as Dol­lar Fi­nan­cial Corp., a “pay­day loan” com­pany that charged low­in­come con­sumers and those with bad credit, up to nearly 3,000 per­cent in­ter­est.

The com­pany, with 1,000 branches in seven coun­tries, hired Ste­fanowski in late 2014, about a year af­ter a fraud law­suit was filed al­leg­ing that DFC’s lend­ing prac­tices in­cluded hook­ing bor­row­ers into short- term loans that they could not re­pay, stretch­ing them deeper and deeper into debt.

A year later, the Fi­nan­cial Con­duct Author­ity of the United King­dom or­dered DFC to re­pay 15.4 mil­lion pounds, about $ 24 mil­lion, to 147,000 cus­tomers. The or­der dated back to loans taken out in April, 2015, five months af­ter Ste­fanowski joined the com­pany.

The can­di­date has of­ten

said dur­ing cam­paign de­bates that his role was to turn the com­pany around. Speak­ing on an in­dus­try panel in 2016, he said DFC pro­vided needed cash for a pop­u­la­tion that needed it.

“I truly be­lieve that there is a seg­ment of our pop­u­la­tion that needs our prod­uct,” he said, not­ing that new poli­cies low­ered loan amounts to 60 per­cent in a so- called term- loan pro­gram in Cal­i­for­nia and Canada.

“It’s not 1,000 per­cent the way a pay­day loan is,” he said. “The is­sue with the in­dus­try is that they got lit­tle bit greedy and they didn’t nec­es­sar­ily have to.”

Ste­fanowski’s LinkedIn pro­file touts a re­struc­tur­ing of the busi­ness, in­clud­ing the is­suance of “a new set of prod­ucts to bet­ter meet cus­tomer needs” at DFC.

In Con­necti­cut, there is a ceil­ing of 12 per­cent in­ter­est for loans un­der $ 10,000, vir­tu­ally pre­vent­ing DFC and other pay­day loan­ers com­pa­nies from op­er­at­ing here, ac­cord­ing to the state Bank­ing Depart­ment.

Na­tion­ally, the U. S. Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau says that pay­day loans can trap con­sumers in a cy­cle of debt. The av­er­age charge of $ 15 on a one­week, $ 100 loan be­fore a cus­tomer’s next pay check, while ap­pear­ing mi­nus­cule, is the equiv­a­lent of 400 per­cent an­nu­ally. The bu­reau re­ports that a quar­ter of cus­tomers roll over their bor­row­ing eight times, mul­ti­ply­ing fees and in­ter­est charges.

Dol­lar Fi­nan­cial has a va­ri­ety of sub­sidiary firms, in­clud­ing Money Mart, which op­er­ates in 10 states in­clud­ing Cal­i­for­nia and Vir­gina, as well as Cash Ad­vance USA.

In 2013, a Dol­lar Fi­nan­cial sub­sidiary in the United States agreed to a set­tle­ment with the bu­reau, re­turn­ing about $ 3.3 mil­lion to Amer­i­can ser­vice mem­bers and vet­er­ans who were de­ceived on the terms of auto loans.

Mov­ing up the lad­der

Dur­ing a 13- year ca­reer at Gen­eral Elec­tric Cap­i­tal, be­tween 1994 and 2007, Ste­fanowski rose from an en­try- level ac­coun­tant to divi­sion chief and was named a com­pany of­fi­cer. In re­cent years, GE sold off its fi­nan­cial unit amid de­clin­ing prof­its, seis­mic changes in top man­age­ment and, now, a rock- bot­tom stock price.

Jes­sica Hill / As­so­ci­ated Press

Repub­li­can Party can­di­date Bob Ste­fanowski speaks to the me­dia af­ter gu­ber­na­to­rial de­bate at the Univer­sity of Con­necti­cut in Storrs on Sept. 26.

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