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WaPo Gives Baldwin ‘Three Pinocchios’ for Ad Blaming Factory Closure on Hedge Fund

Sen. Tammy Baldwin / Getty Images

The Washington Post fact checker on Wednesday gave Democratic Sen. Tammy Baldwin (Wis.) "three Pinocchios" for claiming in a recent campaign ad that a hedge fund in New York was responsible for shutting down a Wisconsin factory and making the town it was in go "bankrupt."

"A hedge fund in New York takes control of a great Wisconsin business, shuts down a factory, and 450 people lose their jobs," Baldwin says in the ad, "Predator," released on March 27. "The town of Brokaw goes bankrupt. It's not right. We cannot let these predators devastate our communities, so I am working to stop these Wall Street hedge funds from destroying another town."

Baldwin, who is in a tough reelection fight this year in a state that President Donald Trump won in 2016, used the anecdote to highlight her support for the Brokaw Act, a bill that seeks to restrain activist investors through various measures, such as shortening the window for disclosure of the purchase of a substantial amount of stock.

The Post found that Baldwin "too quickly looks for a corporate villain when economic and competitive pressures almost certainly played a more important role." The paper awarded the senator "three Pinocchios" out of a possible four for her ad, which, according to the fact checker's rating scale, means the claim is "mostly false" with "significant factual error and/or obvious contradictions."

The hedge fund in question, Starboard Value LP, based in New York, began acquiring shares in Wausau Paper in May 2011, and revealed on July 28 that it had taken a 6.9 percent stake. Demand for Wausau's fine-quality paper had declined sharply in recent years, forcing paper mills in other states to close, but its bathroom tissue business was performing well. Starboard wrote in a letter to company executives at the time that Wausau's specialty paper brands may have potential to "garner higher multiples."

In Oct. 3, 2011, Starboard had 7.5 percent of the company stock and urged "a sale of the paper business, as well as timberlands and hydroelectric assets, to become a ‘pure play' tissue business," according to the Post. Later that month, Wausau announced it was considering selling the Brokaw mill. Then just over a month later, the company announced that it had sold its writing paper and color brands and its timberlands, and that it would shut down the Brokaw mill.

"Today's announcement reflects the outcome of a strategic review of alternatives for the Print & Color business, begun early in 2011," Wausau said in a statement. "Our decision to exit Print & Color was ultimately driven by dramatic and irreversible market demand decline and the need for consolidation to bring these markets properly into balance."

Regarding Baldwin's claim, the Post noted that "Starboard did not have control of the company, let alone even a board seat."

"When the Brokaw decision was made, Starboard did not have a voice in the boardroom—a point made at the time by Wausau Paper," the Post added. "Indeed, the company even said it had been thinking of dumping the paper business before Starboard started buying shares."

One former Wausau executive said of the mill closing, "It would have been the eventual outcome regardless … It was a market dynamic as opposed to a hedge fund strategy."

"Contrary to statements the senator makes to the camera, Starboard did not control the company at the time and was not part of the executive decision-making to close the factory," the Post concluded. "We can find no Starboard statements calling for the closure of the factory—and company statements at the time said it had no role."