NHDP - Telegraph: Brown’s $270K income from Mass. company exporting jobs overseas belies campaign promises


Nashua Telegraph: Brown’s $270K income from Mass. company exporting jobs overseas belies campaign promises


A cornerstone of Republican Scott Brown’s campaign to return to the U.S. Senate has been as desire to create more high-paying jobs for workers in New Hampshire and America.

“Washington needs to work together to create a strong business environment that gives all Americans the opportunity to work in good-paying jobs,” Brown says about job creation on his campaign’s website.

But since February 2013, he’s earned $270,000 sitting on the board of directors of a Massachusetts company with a penchant for exporting jobs to cheap foreign labor alternatives such as China while shielding millions of dollars in profits from U.S. taxes.

Kadant Inc. of Westford, Mass. is a global supplier of fiber processing equipment with a major focus on the pulp and paper industry with 2013 revenues of $344 million and employees located in 17 countries.

Of its 14 manufacturing facilities, four are located in the United States. The rest are scattered around the world in countries such as China, Mexico, Brazil, Sweden, The Netherlands and France.

“I am honored to have the opportunity to contribute to Kadant and learn more about the challenges of an international business,” Brown said, when appointed to the board of the company that has a history of growing profits by moving operations overseas.

In 2005, Kadant closed a manufacturing facility in Louisiana, combining it with a facility in Alabama “for outsourcing,” company officials said at that time on a conference call with investors.

“A reduction in manufacturing in North America is necessary as we shift toward lower cost regions such as China,” said Bill Rainville, Kadant’s CEO at the time.

Kadant also expanded its manufacturing in Mexico in 2006 at the expense of jobs in Massachusetts.

U.S. Department of Labor records confirm over the past decade, Kadant made three applications for laid-off workers to receive federal trade assistance because their jobs went overseas.

One of those was for seven “web” workers at the Westford company for what Kadant officials called a “shift in production.”

Kadant’s Chief Financial Officer Thomas M. O’Brien said since 2001 the firm aggressively expanded to markets in Europe, Central America and Asia because that was where business growth was possible.

“Ten years ago we had a hard time winning capital orders for our doctoring systems, which were manufactured in Massachusetts,” O’Brien said via email.

And O’Brien said moving the jobs away, actually helped boost domestic jobs.

“By moving some of the manufacturing to Mexico, we became more competitive, won more orders, and increased our spare parts and consumables products are also made in Massachusetts. Partly as a result of this, our Massachusetts employment is the highest it’s been in 10 years.”

The most recent employment figures for Kadant show that it has 1,800 employees, about 500 of them in the U.S.

In 2013, the firm reported 63 percent of its sales were overseas.

Last year, Kadant purchased a Vancouver, British Columbia company that was already outsourcing 70 percent of its manufacturing.

Chief Executive Officer Jonathan W. Painter told investors then it would look to locate some of that manufacturing to its plants in China.

“And as I said in my remarks, 70 percent of the work that they do is outsourced primarily in the Vancouver area. So I think we are going to take a hard look at whether we can increase their margins by manufacturing something for them in China,” Painter said during an earnings conference call last November.

In the company’s 2014 annual report, Kadant reported it legally avoided paying $146 million in U.S. income taxes by “indefinitely” reinvesting profits made in from overseas operations.

As for the legal avoidance of U.S. taxes, O’Brien said America is unique with a high corporate tax rate and aggressive pursuit of profits earned by the international operations of domestic companies.

“It’s not surprising that Kadant, like other global companies, does not bring cash back to the U.S. unless we really need it,” O’Brien added. “Kadant does pay U.S. taxes and has a 32 percent global tax rate.”

In the company’s 2014 annual report, Kadant reported it legally avoided paying $146 million in U.S. income taxes by “indefinitely” reinvesting profits made in from overseas operations.

“We reinvest certain earnings of our international subsidiaries indefinitely, and accordingly, we do not provide for U.S. income taxes that could result from the remittance of such foreign earnings,” the 2014 report states.

“Through year-end 2013, we have not provided for U.S. income taxes on approximately $145.9 million of un-remitted foreign earnings.”

Brown’s personal financial disclosure statements and company records confirm he’s earned $270,000 since joining the firm’s board of directors in February 2013.

He also acquired 5,000 shares of stock in the company worth $201,400 as of the stock’s trading price on Friday.

Were he to remain on Kadant’s board through his current term next spring, Brown would receive another 10,000 shares worth an additional $397,000 based on current market prices.

Despite repeated requests, Brown declined comment through a campaign spokeswoman.

Campaign officials also refused to answer questions about Brown’s role at Kadant and views about its offshore operations. Instead, officials pointed to the record of incumbent U.S. Senator Jeanne Shaheen, who Brown hopes to unseat this November.

If he is successful in beating Shaheen, Brown would resign his seat on Kadant’s board, his staff said.

“Once elected, Brown has always intended to resign from any prior commitments to focus solely on the people of New Hampshire,” communications director Elizabeth Guyton said in a statement.

Brown had a personal connection to Kadant, having been a classmate of Kadant CEO Painter at Boston College Law School.

Painter gave Brown $2,500 for his Massachusetts Senate campaigns in 2010 and 2012 while the firm’s Executive Vice President Jeffrey Powell gave Brown’s campaign $500 in 2012.

Company officials said placing Brown on the board was not a parochial choice simply because he had represented Massachusetts in the Senate for three years.

“During his time in public office, Sen. Brown has gained a wealth of experience on local, state, national and international issues and I am pleased that he has agreed to join our board of directors,” Painter said in a statement announcing Brown’s appointment to the board.

“His good judgment and pragmatic approach to solving problems will be a strong asset to Kadant as we continue to grow our business throughout the world.”

While in the Senate, Brown’s record on legislation to crack down on outsourcing by U.S. companies was mixed.

He opposed amendments on the topic pursued by Senate Democrats in 2010 and 2011.

But during his re-election campaign in 2012, Brown joined only three other Republicans to permit debate on an anti-outsourcing measure to give companies a 20 percent tax break for bringing foreign jobs back home.

“With the struggling economy and continuing jobs crisis, this is the conversation we need to have,” Brown said adding he wasn’t committed to supporting the bill.

Ultimately, a GOP filibuster blocked the measure from coming to the Senate for a final vote.