How hedge funds, Goldman Sachs, and corrupt executives used Gymboree's chaotic bankruptcy to cash out while destroying the careers of loyal employees

Gymboree is one of the many companies acquired by Mitt Romney's Bain Capital, through a "leveraged buyout" through which the company was loaded up with debt so that the hedge fund could cash out; the company was left with massive debts and cycled through a succession of incompetent, inexperienced grifter CEOs who eventually ran the company into bankruptcy.

As the company was going through bankruptcy, the board decided to exercise an obscure clause in its contracts to "terminate the severance plan," for all but a handful of favored execs on the leadership team (that is, the people who drove the company into bankruptcy). By doing this, the company was able to fire longterm employees who had stayed on in the runup to bankruptcy despite the obvious warning signs because they had been hired with the promise of generous severance.

One of those denied severance was Mera Chung, who was recruited to work at Gymboree by her former boss from Old Navy, where she had been a vice-president. Chung was promised control of Crazy 8, Gymboree's most successful brand, and even though she could see that the company was headed for insolvency, she stayed on the job so that she could continue to pay her household bills, which included the costs of caring for her elderly and infirm mother; Chung assumed that her contractually promised one-year severance would kick in if the company folded and that she would have a cushion while she sought other employment.

Instead, she was given no severance -- but watched as colleagues more favored by the company's board and its lead creditor, Goldman Sachs, were given secret severance payouts in the form of "retention bonuses" that nominally ensure that key personnel were available to ensure an orderly wind-down. Read the rest