Sunday, September 28, 2014

Holder Blocked for Wall Street


The perpetrators of the financial crisis will not be held to account, according to a Bloomberg editorial.

Attorney General Eric Holder, who plans to step down after more than five years in office, has efforts and achievements to be proud of, no doubt, but will probably be remembered above all for something he didn't do: prosecute top executives for their role in the 2008 financial crisis. 
Holder refused to prosecute top executives and boards of directors because prior prosecutions resulted in thousands of people losing their jobs and retirement, aka Enron/Arthur Anderson.

The frame being sold to the public is:  Had any of these leaders, whose greed and avarice caused the Fall 2008 financial implosion, been personally held accountable companies would've failed and legions of people become unemployed.

This ignores the reasons Enron and Arthur Anderson failed.  Enron was a literal house of cards.  It took one pillar to fail and the whole contraption collapsed.  Arthur Anderson, like Enron's lawyers, looked the other way, over and over again.  It trashed its reputation which is what matters for a public accounting firm. 

A corporate attorney shared with me recently that he'd had his Enron moment.  His CEO told him what he wanted to do.  The lawyer told him it was illegal, thinking the CEO would listen to his expert opinion, even seek his counsel to move forward in a law abiding manner.  The CEO ignored his legal advice, doing what he wanted to do. 

This corporate attorney knew the easiest thing to do would be to go along, stay quiet, not rustle any feathers.  He said he had to get up and look at his reflection every morning.  It was his James Derrick moment.  Derrick was Enron's Chief Counsel.  He told the Board Chair what happened and the CEO remains in his position.  You can deduce the rest.

Eric Holder's "Just Us" Department is one window into the world of horrific leadership on display in many elements in our society.  Consider these words from a former regulator charged with ensuring the stability of our financial sector.  They are in regard to behavior at Goldman Sachs and Federal Reserve oversight:

A Goldman employee expressed the view that "once clients are wealthy enough certain consumer laws don't apply to them." After that meeting, Segarra turned to a fellow Fed regulator and said how surprised she was by that statement -- to which the regulator replied, "You didn't hear that."
Another free pass.  It gets better (Bloomberg):

In 2012, Goldman was rebuked by a Delaware judge for its behavior during a corporate acquisition. Goldman had advised one energy company, El Paso Corp., as it sold itself to another energy company, Kinder Morgan, in which Goldman actually owned a $4 billion stake, and a Goldman banker had a big personal investment. The incident forced the Fed to ask Goldman to see its conflict of interest policy. It turned out that Goldman had no conflict of interest policy -- but when Segarra insisted on saying as much in her report, her bosses tried to get her to change her report. Under pressure, she finally agreed to change the language in her report, but she couldn't resist telling her boss that she wouldn't be changing her mind. Shortly after that encounter, she was fired.) 

Bloomberg illuminated another report on a captured Fed:
The Fed failed to regulate the banks because it did not encourage its employees to ask questions, to speak their minds or to point out problems.

Just the opposite: The Fed encourages its employees to keep their heads down, to obey their managers and to appease the banks. That is, bank regulators failed to do their jobs properly not because they lacked the tools but because they were discouraged from using them.
 This sounds like the "Just Us" Department under Eric Holder.

Under Holder's leadership, prosecutors lost sight of what mattered most: holding individuals, not companies, accountable for crimes. Of 21 separate actions against major financial companies from 2009 through May 2014, only eight were accompanied by charges against individuals, and none of them were high-level executives. The authors of any offenses related to the 2008 financial crisis can relax: In most of the cases, the statute of limitations now applies.
Leadership in our country seems focused on two things, having their way and image management.   Having their way means laws can be discarded.  Image management means thwarting or discrediting credible attempts to expose illegal behavior or hold leaders accountable.

Obama's war on whistleblowers fits into the 100% image management meme, which brings back my discussion with the corporate attorney.   I asked him:  Are arrogant, dismissive, and image obsessed leaders more prevalent the higher one rises in an organization?  He said absolutely.  There's an occasional ethical person or two below the top, but that level is mostly "yes people," sycophants.

self-seeking, servile flatterer; fawning parasite
What happens next to Eric Holder?   Certainly, the first steps will be work at a university or think tank.  Will he eventually end up on Wall Street or in private equity, like so many ex-public servants?   If so, his rewards will be great.  

Meanwhile, Valarie Jarrett will aid the search for Holder's replacement. 

Update 9-29-14:  Naked Capitalism has an excellent piece on Holder's zero dot zero batting average in this arena.

Saturday, September 27, 2014

Health Deformer's PEU Targets Hospice


The Tennessean reported:

The private equity arm of New York health care investment firm Consonance Capital announced today the closing of a $500 million private equity fund.

The private equity extension of the firm, called Consonance Capital Partners, was co-founded by former Tennessee Department of Human Services Commissioner Nancy-Ann DeParle.

DeParle served as President Obama's conflicted health reformer   DeParle's financial disclosure statements showed residual payouts from her time as a private equity underwriter with CCMP, but never showed any PEU holdings.

And the public wonders why private equity gets preferential treatment from politicians and regulators.  Insiders design a system they can later mine for huge returns while paying no income taxes.  PEUs are virtual nonprofits.

Consonance Capital invested in a hospice pharmacy provider Enclara Health.  It then metastasized with the addition of Hospice Pharmacia and PBM Plus.  The cancer of greed and political insider connections will not save America's hospices, a service rooted in volunteerism and donated funds.

Hospice clinicians rue the limited formularies imposed by such firms and the obsession of providing the cheapest possible medicine vs. that which works best for the patient.  Mail order does not cut it for rapidly changing patients, either for a critical incident or one actively dying with complex symptoms to manage.

The DeParles of the world decided U.S. medicine needed to be cookie cutter.  Hospice of all things should be highly individualized.  DeParle et al's greed does not belong in the hospice arena.  It should not be the locus of obscene profits.

Nancy Ann DeParle is not an oracle but a blasphemer.  I doubt that is the story written by the White House and its current occupant.  President Obama sold his soul early with his many conflicted appointments.  We've seen the tremendous harm they've wrought to date.
 
I thought there was a small corner of the world unreachable by these people.  Hospice seemed like a safe place where good people could come together to do sacred work.  Apparently I was wrong.  Discordant capital has arrived.

Friday, September 26, 2014

PEU Nursing Home Neglect: Justice Denied


Boomberg reported:

Juanita Jackson died in July 2003, five weeks after she was removed from a Florida nursing home where her family said continual neglect led to multiple bedsores, malnutrition and a fall that injured her head

Trying to collect a $110 million verdict against two nursing home companies has led her family on a four-year odyssey through a maze of private-equity firms and shell companies to a bankruptcy court trial that began today.
The family won one trial.  A second is necessary for justice to be delivered.

Trans Healthcare Inc. and Trans Health Management Inc., which the plaintiffs claimed operated the homes, never appealed or paid the 2010 verdict -- $55 million each -- awarded by a state court jury in Bartow, Florida. Collection was thwarted through a complex transaction that sent Trans Healthcare’s liabilities to a shell company called Fundamental Long Term Care Inc., which had no assets, while creating a solvent nursing home chain that was protected from judgments, lawyers for Jackson’s family contend. 

The defendants including private-equity firm GTCR Golder Rauner LLC counter that they were never responsible for negligence at the homes and weren’t involved in a scheme to send liabilities to an insolvent company. 

GTCR's founder was Rahm Emanuel's mentor, setting him up for his first investment bank gig which gave Rahm $18 million.  With his core wealth established Rahm could return to politics and work on behalf of the landed gentry.  Dealbook noted:

Mr. Emanuel represented GTCR Golder Rauner, a Chicago private equity firm that was buying the business for an affiliate. Bruce Rauner, the firm’s chairman, had first met Mr. Emanuel when he was still exploring job prospects in Chicago after getting a call from Mr. Bowles, an old friend.

Instead of private equity, Mr. Rauner advised Mr. Emanuel to pursue investment banking, where his political experience might be more valuable in landing deals in regulated industries.

Mr. Emanuel called him back after starting at Wasserstein and asked if he could take over coverage of GTCR for his new employer. That eventually led to the nearly $500 million SecurityLink deal.

Obama, of the fiery rhetoric, brought Rahm the rich arsehole into the Oval Office.  There is no evidence of Mr. Emanuel working the Trans Healthcare or Trans Health Management deals although his investment banking career went from 1998 to 2002.

Tampa Bay Times reported:

Trans Health Management Inc. was once a high flier, with 200 homes in 22 states. A Chicago private equity firm and others had created it in 2002 to take over a large, bankrupt chain.

Really, Obama showed his hand right away with his appointments, one of which announced he's leaving.  Eric Holder will do well in private equity or on Wall Street.  He's earned a cushy spot after six years of "Just Us."

It's a PEU world, where politicians Red and Blue love PEU...

Thursday, September 25, 2014

Carlyle Tracked LP's


The Carlyle Group tracked limited partners at their last investor meeting using smart chips embedded in their badges.  What might Carlyle do to common unit holders at their annual meeting?  I can picture renditioning (Landmark Aviation), serving toxic infant formula (Yashili), maybe nutritious green wafers (China Agritech & China Forestry).

If there's money to be made Carlyle will find a way.  Don't wander too far off the beaten path at a Carlyle meeting.  Your wallet and organs could be up for harvesting.  Heartless PEUs are capable of anything. 

PEUs: An Estate of their Own


Naked Capitalism reported:

In a mere four months, the SEC has gone from calling out widespread abuses in the private equity industry to not just walking back its detailed criticisms, but actually enabling a coverup.

Readers may recall that in May, SEC inspection chief Andrew Bowden gave what was by regulatory standards a blistering speech describing widespread misconduct in the private equity industry. His detailed account followed SEC Chairman Mary Jo White setting forth uncharacteristically clear-cut details of private equity abuses in testimony to Congress.

Gretchen Morgenson provided more confirmation of the SEC’s charges, describing how private equity general partners paid themselves for services never rendered. Morgenson followed up in July with an even bigger and more obvious abuse that the SEC is apparently ignoring, the failure of private equity firms to register as broker-dealers

Even the leading private equity reporter, Dan Primack at Fortune, who by necessity of writing on the industry daily can’t afford to take too tough a line, sided with the SEC’s position in an article, “Will private equity investors keep getting their pockets picked?” The Financial Times published a lengthy analysis in July, Private equity: A fee too far, focusing on how private equity firms line their pockets by charging monitoring and other fees to portfolio companies. It also described how investors in the funds, the limited partners, were upset by the SEC’s confirmation of long-standing concerns, yet found it difficult to bring the general partners to heel

I reported years ago about private equity's manipulation of financial reporters.  My source was an ex-Bloomberg reporter who covered the PEU beat.   

Naked Capitalism concluded:

The real message is that private equity is too powerful to discipline.

Elected officials and regulators won't do it.  The financial media can't do it and get the next breaking PEU story. 

Who does that leave to monitor the PEU boys?  Us. Just us...

Wednesday, September 24, 2014

Monument Capital Adds Palantir Executive to Advisor Stable


Monument Capital, a private equity underwriter (PEU) specializing in the security space, announced the addition of three advisors to its already robust team.  The three are Michael Leiter, Professor Silvio Micali and Professor Alex Pentland.

Leiter, who joined MCGH as a senior advisor, is Head of Global Government & Cyber Operations and Senior Counselor to the CEO of Palantir Technologies.
Palantir is the seeing rock guarding the annual Bilderberg meeting from public scrutiny.   How does hiding the machinations of global tamperers make the world more secure?  And this effort is being led by a supposed libertarian.....

The world has gone flippy floppy which provides Monument Capital, effectively a Carlyle Group franchisee, the opportunity to make grand returns.  I don't feel more secure.

Update 9-25-14:  As for flippy floppiness Palantir founder Peter Thiel lives in his own universe, one free of death and complete with floating, law free societies.  Thiel can pronounce himself Island Chair, but my bet is he'll be Lord of the Flies.

Tuesday, September 23, 2014

PEU Billionaires and Carlyle Group Raising Cash


The Carlyle Group monetized a number of assets this week, just as news reports revealed billionaires have been raising cash for their personal accounts.

Each uber wealthy person boosted their cash holdings by an average of $60 million over the past year, according to the 2014 Billionaire Census published by Wealth-X and UBS.

Billionaires don't typically park money in cash unless they're nervous about the market or preparing for a major investment.

Consider the affiliates Carlye sold or announced plans to sell.  The list includes Park Water with a selling price of $327 million vs. $102 million Carlyle paid for the company in 2011.  It also has an IPO of Philadelphia Energy Solutions train offloading assets for $250 million.  Carlyle also will exit from GDC Technology, a Chinese company specializing in digital cinema solutions.

But there's more:

Singapore's sovereign wealth fund, GIC , is in talks to buy the British roadside rescue business RAC from US private equity firm Carlyle Group LP for over 2 billion pounds (S$4.16 billion), Sky News reported

HTC Business reported:

Carlyle Group paid £300m for a majority stake in Addison Lee in April, but has decided to start an auction process after receiving unsolicited offers for the business, according to a source close to the company.

Private equity firms BC Partners, CVC Capital and Charterhouse are among the organisations that have been invited to bid, with reports suggesting the taxi firm could be sold for £800m.

Kansas City Star reported:

The second-largest holder of YRC Worldwide Inc. stock has sold off all 4,083,122 shares it owned in a broker-assisted deal last week.

The Carlyle Group, in a filing with the Securities and Exchange Commission, said it collected $89.4 million from the stock sales that took place Thursday. Its holding represented 14.3 percent of YRC’s total shares.

Back to the reason for moving assets, even ones owned for as short as five months.  WSJ noted:

The bull market in bonds won’t end well.

Worries about overheated debt markets dominated discussion at an investor conference in New York on Monday, with hedge-fund managers and corporate executives expressing concerns about the bond market as the Federal Reserve moves closer toward raising interest rates.

Bill Conway, co-founder of private-equity firm Carlyle Group, said he doesn’t yet see the specific catalyst that would roil the bond market. Almost every company in Carlyle’s buyout funds has benefited from ultra-low rates by refinancing, he said. “We have to take advantage of it while it’s here.” But overall, the message from Monday’s conference was clear: Rising rates are coming.
Many of those borrowings paid Carlyle huge dividends.  Carlyle and its billionaire PEU founders have lots of cash to put to work in the next disequilibrium.  India is calling for PEU money.

Update 9-25-14:  GIC completed the deal for a stake in RAC.  Ring the bell for a triple!