Sunday, November 29, 2009

Low PEU Bar for Connecticut Rest Stops


The Hartford Business Journal reported on The Carlyle Group's first infrastructure deal with Connecticut regarding 23 highway rest stops:

Carlyle told officials that it had not paid any placement agents or hired any lobbyist to obtain the rest stop contract.

He (Carlyle's Daniel A. D’Aniello) wrote that the firm’s contract proposal had been submitted without collusion or fraud and that none of his firm’s subcontractors or employees had bribed or attempted to bribe a state employee in connection with the deal.

Connecticut ignored its unethical history with Carlyle:

Carlyle a decade ago figured prominently in what was known as the “Silvester scandal,” in which it and other investment firms paid lucrative “finder’s fees” to associates of the corrupt former state Treasurer Paul Silvester to secure hundreds of millions of dollars in state pension fund investments.

It failed to account for ample evidence of the firm's shady dealings. The Carlyle Group and its energy joint venture Riverstone Holdings paid a combined $50 million to the New York State attorney general to make another pension pay to play investigation disappear. What ethical papers did they sign to garner Connecticut, New York or New Mexico pension fund investments? What makes the current one better than past assurances?

Carlyle purchased Synagro Technologies in April 2007. Later that year, Synagro officials bribed Detroit city councilwoman Monica Conyers, wife of Rep. John Conyers, in regards to a sludge hauling/incineration contract. Her sentence is yet to be decided.

The Carlyle Group charges affiliates a 2% management fee. For that, they should be intimately involved with Synagro's management practices. Did they directly order the bribe or institute reward systems that encourage people to lie, cheat or steal to meet the objective?

As for other due diligence available to Connecticut, SemGroup and Vought Aircraft offer unique insights. SemGroup imploded from forward looking contracts or hedging. The staid oil pipeline firm placed risky bets on the price of oil. SemGroup's SEC filings did not mention this practice or associated risk.

Vought Aircraft industries took $35 million from the state of Texas in 2004, promising over 3,000 new jobs. None arrived. It sent Boeing 787 production to South Carolina, which offered $66.7 million. When a 787 joint venture gunked up the plane's roll out, Vought CEO Doty cited "liquidity problems." Isn't that Carlyle's specialty?

Carlyle wants Connecticut rest stops for two reasons. One, it provides a platform for rapid expansion of company owned Dunkin' Donuts stores. Pay no attention to Dunkin's lawsuit happy harassment of franchisees. Two, it allows Carlyle to approach other states with a certified win under their belt.

The Carlyle Group has a long history of "unlevel playing field" activity. William Conway, David Rubesntein and Daniel D'Aniello wouldn't have it any other way. If a piece of paper does the tilting, so be it. So much for government due diligence. Maybe Virginia can do better.

(Note to Hartford Business Journal: The joint venture is Project Service LLC. Doctor's Associates, Inc. is the JV partner. The Stamford Advocate got the name, plus more right.)