BUFFALO, N.Y. -- "Mitt Romney absolutely was legally responsible
for the actions of Bain Capital after he 'retired' from the company
in 1999 to run the Utah Olympics," says David Westbrook, JD, a
legal scholar and recognized voice in corporate, contract and
Westbrook, professor of law and Floyd H. & Hilda L. Hurst
Faculty Scholar in the University at Buffalo Law School, points out
that after his 'retirement,' Romney remained chairman of the board
of directors, chief executive officer and sole shareholder of Bain
"As a matter of Delaware law," says Westbrook, "Romney was
legally responsible for the management of Bain, which is a Delaware
corporation, for so long as he was a director of the company and a
member of top management, positions he continued to hold well
Romney has not denied that he held corporate offices in Bain
during the period in question. However, he says his offices were
nominal, others were actually running the company and, therefore,
he cannot be blamed for Bain's operations during the period in
which the corporation was responsible for outsourcing jobs at
companies it controlled.
"Understandably, many people find it hard to believe Romney's
claims that he was not responsible for a company over which he had
complete control and from which he profited mightily," says
"But he says that despite the confusion and obfuscation,
"Delaware law is clear in this matter. Corporate directors and
managers must fulfill their fiduciary duties of care and oversight;
that is, those who hold those offices are responsible for the
management of the company.
"One cannot evade such responsibility by simply saying, as
Romney has, that other people were in fact running the company
during the period," Westbrook says.
"By way of analogy, a captain of a ship cannot evade
responsibility for a wreck by saying "I let somebody else steer."
Somebody else may have been steering; the captain is still
From a legal perspective, he says The Washington Post's "Fact
Checker" and others are wrong to focus on what Romney was "actually
managing," and wrong to argue that "chief executive officer" is
mere boilerplate because it is not a defined term at securities
"Federal securities law routinely imposes duties on directors
and top management, whose roles are defined by state corporate
law," Westbrook says.
"It is true that, in response to a case called Smith v. Van
Gorkom, Delaware has allowed corporations to amend their charters
to relieve directors from liability for failure to fulfill their
'duty of due care,' so long as they acted in 'good faith' and in
accordance with the law and their 'duty of loyalty to the
corporation, '" says Westbrook.
"However, subsequent cases, including Caremark and Stone v.
Ritter, have made it clear that 'good faith' and the 'duty of
loyalty' mean that directors cannot completely abdicate their
responsibility as directors," he says.
Westbrook says, "One claim made in defense of Romney's position
is that he was the sole shareholder of Bain Capital Inc., so as
chairman and CEO, he essentially owed duties to himself, and that
as shareholder/owner, i.e., the fiduciary duties normally imposed
on directors and managers (in this case, Romney) could be waived by
the beneficiary of those duties (also Romney).
"The problem with this argument," he says, 'is that Bain was
incorporated, meaning that shareholders receive limited liability
only insofar as the corporate form is observed. If the corporation
is merely the alter ego of its owner, then the company is in effect
a sole proprietorship, and the law 'pierces the corporate veil,'
making the owner responsible for the activity of the business.
Westbrook says that, to some, the fact that Bain was organized
as a corporation may appear to be a mere legal technicality; that,
as a matter of business reality, if not legal form, Bain was
Romney's company, and if he wanted to pay attention to the Utah
Olympics instead of running his business, that was his
"In that case, however, the people who actually managed Bain
were Romney's agents," says Westbrook, "and Romney is responsible
for their actions as Bain's owner and principal -- just as
employers are generally responsible for their employees.
"Perhaps Romney is telling the truth, even if it seems
implausible, when he claims that while he was focused on the Utah
Olympics, he did not participate in business decisions that his
opponents now criticize. But even if that was the case," says
Westbrook, "under Delaware law Romney remains responsible for
"For that reason, as Charles Blow at The New York Times says,
Americans may not understand Romney's sophisticated dealings, and
find him slippery -- a judgment the President's campaign is