The Middletown Press (Middletown, CT)
Contrast of words and his business
Stefanowski’s companies reaped toll, state money
Bob Stefanowski proposes steep cuts in government spending and a sharp roll-back 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 first-time 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 privateequity 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 low-income 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 one-week, $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 entrylevel 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.