Romney didn't load up on Staples stock, devastating Allred's case

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Politics,Paul Bedard,Washington Secrets,Politics Digest

Republican presidential candidate Mitt Romney not only thought Bain Capital-backed Staples stock was a risky investment, he never exercised all of his options to buy it, according to new testimony that is devastating to Obama backer and celebrity attorney Gloria Allred's bid to use a 1987 divorce and subsequent appeals to torpedo Romney's campaign.

A source familiar with the case provided Secrets with testimony from the appeals case in which Romney revealed that he didn't buy all the Staples stock he could because he didn't see it as a sure thing.

At issue is the 1987-1988 divorce of Staples founder Tom Stemberg and Maureen Sullivan Stemberg. The ex-wife believes that during the initial divorce settlement, the value of Stemberg's Staples stock was undervalued and her take was cut as a result. Sources said that the former Mrs. Stemberg believes that Romney schemed to devalue the price of Staples stock to help her husband.

Despite earlier reports, Romney, then a leader at Bain, a major Staples investor, did not testify in the first divorce case - as there was no actual divorce trial. He did testify during one of Stemberg's efforts to re-litigate the divorce settlement in later years.

In October 1991, Romney was called to testify about the valuation placed on Staples in 1987 during the original divorce settlement. At the end of three days of testimony Romney was asked about his own opportunity to buy up Staples stock before the IPO. He was asked if he had purchased the full amount he was allowed to buy - essentially "maxing out" on buying up Staples stock pre-IPO.

Romney said he didn't because while he still believed that there was a chance that the company could take off, there was also a chance that the company could fail.

A source familiar with the case told Secrets, "This disproves the Allred allegation completely. He put his money where his mouth was."

Earlier Thursday, a Massachusetts court ruled that Romney's testimony can be released but the judge did not lift the gag order on Maureen Sullivan Stemberg, which would have allowed her to discuss what transpired during the divorce proceedings.

Below is the transcript provided to Secrets. In the questioning, the "Q" is attorney Bernard Dwork, Stemberg's attorney, and the "A" is Romney.

Q: "Thank you. Now, you say that before making the investment in Staples round C you read the statement 'Additionally, this is planned to be Staples final equity offering prior to a public offering of mid 1989.' And you say that you did not - Strike that. You say you read that statement. Let me ask you this, sir. Did you, therefore, as a result of that subscribe to the full amount to which you were entitled to subscribe?"

A: "I did not."

Q: "And why was that, sir?"

A: "Because while I believed that there was a realistic probability that we would achieve that outcome, there was also a realistic probability that we would either lose our money or we would achieve something less than that. And my personal assessment and that of my partners was that the risk that we would not achieve the plan was high enough that we should not subscribe to our full amount."

Q: "And you did not subscribe to the full amount?"

A: "We did not subscribe to the full amount."