RUTHFULLY YOURS

Godfather vs. Tax Man

So how good a businessman is Herman Cain? During a meeting with Wall Street Journal editors yesterday, the Republican presidential candidate said that his experience as a CEO in the restaurant industry was important training for the job of America’s chief executive. But Mr. Cain was also quick to point out that when it comes to personal wealth he is no Mitt Romney, who made a fortune in private equity. And an Internal Revenue Service audit may be part of the reason why Mr. Cain isn’t able to self-fund a political campaign.

Mr. Cain’s straight talk and keen understanding of the challenges facing small businesses are among the reasons he has thrilled conservative audiences. In the era of the tea party, he also routinely wins applause simply by announcing that he has never held public office.

The office he did hold for close to a decade was CEO of the Godfather’s Pizza chain. Following an impressive tenure overseeing Burger King in the Philadelphia region, in 1986 Mr. Cain was promoted to CEO of Godfather’s by Pillsbury, the chain’s corporate parent. After rapid growth in the 1970s and early ’80s, Godfather’s had been struggling to stay in business. Mr. Cain cut costs and closed unprofitable locations and said that he returned the business to profitability in just 14 months. Then he led his management in a leveraged buyout of the company in 1988. But growth remained elusive.

Over the next decade and a half, sales fluctuated in the range of $250 million to $300 million. Mr. Cain said that in 1996 he struck a deal to sell his stake in Godfather’s to his partners. That’s when the IRS showed up and commenced an audit of his tax return for the year 1994, coincidentally the year he publicly challenged President Clinton on the impact of his health-care reform plan. Simultaneous audits of Godfather’s and Mr. Cain’s partners were quickly concluded, but Mr. Cain said that the audit of his personal finances dragged on until 1999.

When he finally concluded the sale of his Godfather’s stake, Mr. Cain said that its value had fallen by 75% and yielded only enough money for him to “buy new golf clubs and move to Atlanta.” As for the IRS, they claimed he owed $1.8 million in back taxes, but he said that as soon as he appealed this decision, they immediately dropped the claim and asked only for $40,000 to cover interest on “the money I didn’t owe.” Outraged, he nevertheless paid the bill to resolve the matter. He said that such treatment at the hands of the IRS happens all the time.

Clearly, Mr. Cain was no Mitt Romney, but many voters may find his story at least as compelling