Sunday, January 31, 2010

When Real Bankers = Shadow


Five banks failed this weekend. The FDIC transitioned assets from four to an existing bank. One they gave to brand new entity. The AP reported:

Miami-based Premier American Bank, N.A., a new bank with a national charter set up last week, is buying the deposits and $499.1 million of the assets of Florida Community Bank. The FDIC will retain the remaining assets for later sale. In addition, the FDIC and Premier American Bank – owned by the investment firm Bond Street Holdingsagreed to share losses on $305.4 million of Florida Community Bank's loans and other assets.

Who is behind Premier American Bank's corporate sponsor? Bond Street wrote the FDIC on the subject of failed bank acquisitions. The letter was signed Stuart I. Oren. Mr. Oren is a shadow banker, who sits on a number of corporate boards. One proxy filing describes Stuart as:

He is the Managing Member of Roxbury Capital Group LLC, a New York based merchant banking firm that he founded in April 2002. Since May 2009, Mr. Oran has also been a Senior Managing Director of FTI Consulting, a global business advisory firm.

Stuart saw the handwriting on the wall, i.e. there's money to be made from Uncle Sam. Did he watch The Carlyle Group et al's takeover of BankUnited? It became one of the best capitalized banks in America, virtually overnight. BankUnited announced an emphasis on commercial lending. One might think $4.9 billion in subsidies from Uncle Sam would be enough for Carlyle and company, but Obama could add more green to the trough.

In his State of the Union address this week, President Barack Obama said he will initiate a $30 billion program to provide money to community banks at low rates, if they boost lending to small businesses.

America's shadow bankers are now "real bankers." That the gifts keep coming from Uncle Sam should be no surprise. Now if we could just get bankers to lend.

Update: Private equity has $1 trillion in dry powder.

Update 2: Real bankers are going after PEU like returns with short term loans at 120% interest. Profits win over customer service, nearly every time.

Update 3: The Carlyle Group invested $150 million in a Bermuda bank. Yet affiliate Boston Private still owes Uncle Sam $153 million in TARP funds.

Chaos in Davos


The WEF event deteriorated after the cage match between "Dr. Doom" Nouriel Roubini, "The Founder" David Rubenstein of The Carlyle Group, and "The Chief" Rajan, an economist with the International Monetary Fund. Reuters reported:

It was a private, five-minute, expletive-filled tirade against the U.S. President for this reporter's benefit. Welcome to one aspect of the World Economic Forum's annual schmoozefest.

This unique event -- a gathering of several thousand of the members of the world's business and political elites for debate, dealmaking and a fair amount of partying in a ski resort in the Alps -- is in many ways an annual celebration for capitalists.

But this is a very dysfunctional family.

Rather than look in the mirror and accept responsibility, banksters pointed fingers from the World Economic Forum:

When executives talked about a recovery, they also used words like "fragile" and then mumbled about whether the battle between bankers and politicians could upset it all.

These same leaders said politicians would not collaborate on a new global infrastructure. Therefore, they can continue pitting one country against another.

The God's work meme, floated by Goldman Sachs CEO Lloyd Blankfein and his cronies, arose. Obama's "Chrysler speculator" had a comment:

"I think the industry had better wake up before they get the wrath of God on them," said Joseph Perella, a veteran dealmaker and chairman of U.S. investment bank Perella Weinberg Partners.

Wrath is here. If this were the 1700's a few politicians and banksters would be tarred and feathered. In 2010 they make their feather bed, while blaming others.

White House March of the For-Profits


In prior posts I noted Nancy-Ann DeParle's for-profit health care background. The White House Health Czar was a private equity underwriter (PEU) for CCMP Capital Advisers when President Obama tapped her to lead health care reform.

As The White House revealed 75,000 visitor names, I did a little For-Profiteer fishing. Here's what I found:

Tom Scully visited 10-10-09. Mr. Scully is general partner with Welsh, Carson, Anderson & Stowe, a PEU with a distinctive health care focus. Scully also lobbies for health care clients for Alston & Bird, a DC firm that employed Tom Daschle, Bob Dole and numerous White House visitors.

James Shelton visited 10-21-09. Shelton is the former CEO of Triad Hospitals, which had Nancy-Ann Deparle and Uwe Reinhardt, a Princeton health economist, on their board. All made millions from Triad's sale. Nancy-Ann & Uwe also served together on Boston Scientific's board. Shelton is now head of Legacy Health Partners, an affiliate of CCMP Capital Advisers (Nancy's old PEU).

Jack Bovender visited 9-22-09. Bovender is the former Chair and CEO of HCA, an affiliate of KKR, a huge PEU. HCA will pay $1.75 billion in special dividends to its PEU owners. Part of the dividend is debt financed.

Daniel Moen visited 9-23-09. Moen is the CEO of CCMP owned Legacy Hospital Partners.

Robert Bracken visited 9-23-09. His father is Richard M. Bracken, the man who replaced Bovender as HCA's CEO. Did Tulane clean up Robert nicely for a White House visit?

Charles Kahn visited 3-06-09 Chip is CEO of the Federation of American Hospitals, the for-profit hospital lobby. He succeeded in renaming nonprofit community hospitals. The last Senate bill called them "private tax-exempt facilities," enough to chill the heart out of health care.

David Bernd visited 4-03-09 . Bernd served as CEO of Sentara Healthcare, a private tax exempt system in Tidewater, Virginia. He sits on the board of Legacy Health Partners and Old Point Financial Corporation.

Funny, none of Nancy's friends visited her. They spent time with Ezekiel Emanuel or took day long White House tours. Knowing this crowd, they had to be private tours. Who was their escort?

The parties could meet again at the Federation's upcoming Public Policy Conference and Business Expo. As the meeting is in downtown D.C., Nancy-Ann could swing by and see her friends without any White House record. It's been done before.

Saturday, January 30, 2010

PEU Tom Daschle's White House Health Reform Thread


Ex-Senator Tom Daschle stumbled before reaching the health reform starting line. Who can fault him for not seeing those cracks in the pavement like:

1. Not paying his taxes. He failed to claim the value of his driver, a benefit from InterMedia Advisers, a private equity underwriter (PEU). It's not a golf club driver, but a human being, a chaffeur.

2. Not declaring his work for Alston & Bird as lobbying. See Tom doesn't "advocate" for his firm's clients, despite their paying huge money. He needs only rub up against people on the hill to provide value. Apparently, friction accomplishes much. He'll now "not lobby" for DLA Piper, employer of Dick Armey, the man who lowered America's political bar with the Tea Party movement.

The forgiving, forgetful public won't hold it against influence peddler Tom. He marches onward, sometimes up White House stairs. He visited twelve times in 2009, according to White House records. Tom saw the following people:

President Barack Obama
Vice President Joe Biden
Rahm Emanuel
Larry Summers
Peter R. Orzag

Are any Daschle contacts in the White House?

Senior Adviser Pete Rouse-served as chief of staff to former Senate Democratic Leader Tom Daschle (D-SD) for 19 years. After working for Senator Obama, Pete made the President's top advisers.

How about the White House visitor lists?

Laura Petrou-Chief of Staff Health & Human Services. Laura served on the Daschle staff for 20 years. She had 12 White House visits, mostly to Nancy-Ann DeParle and Peter Orzag.

Jeanne Lambrew-coauthored Tom Daschle's health care policy book. Jeanne had 28 White House visits, eleven with White House Health Czar Nancy-Ann DeParle, one with David Axelrod and the rest with Phil Schiliro.

Elinor Hiller-Health care lobbyist at Daschle's Alston & Bird. Her clients are mostly health care, but she represents Safeway Stores, which has an innovative program for employee health coverage. Safeway's CEO Steven Burd also visited the White House.

Marilyn Yager-Senior Policy Adviser for Alston & Bird.

Paul Tewes-Formerly of Hillebrand-Tewes Consulting which did major work for the Obama campaign. The principals split with Hillebrand forming Hillebrand Strategies, while Tewes started New Partners Inc. Tewes spent time as the political director of the Democratic Senate Campaign Committee while Tom Daschle served as Senate Majority leader. Paul Tewes had four White House visits, split between Jim Messina (Deputy Chief of Staff) and Kristin Sheehy.

Mark Childress-Appointed HHS Chief of Staff, expecting Tom Daschle to be approved by the Senate. When Daschle withdrew, Childress resigned to work as an adviser for Ted Kennedy. Mark is a longtime Daschle confident. He visited the White House three times, twice with Pete Rouse and once with Rahm Emanuel.

Linda Daschle-Wife and lobbyist for a string of firms, including her own. She lobbied on behalf of General Electric. Two visits to the White House.

Lindsay Daschle-USDA Secretary Tom Vilsack's confidential secretary. Four visits to the White House.

I'm sure the Daschle thread is much deeper and dirtier than the pulling I've done thus far. Isn't that the way things work in Washington?

Friday, January 29, 2010

PEU's Tap HCA for $1.75 Billion

HCA will pay a special dividend of $1.75 billion to its private equity owners, KKR, Bain Capital and Merrill Lynch Private Equity. The Frist family will get a chunk of the dividend, paid from cash and a credit facility.

Private equity underwriters (PEU's) ponied up $5.5 billion in cash when it bought HCA in 2006. A 32% return from a special dividend? Not too shabby, especially since it includes borrowed money. Using credit to finance dividends renews an old practice. The big money boys have 2010 to load up on special dividends, before a potential change in "carried interest" taxation.

PEU's borrowed heavily to finance the HCA deal, nearly tripling interest expense. No new hospital was built, no new bed added, and no new high tech imaging device installed. Borrowing alone increased health care costs by $1.5 billion.

As for the Frist family split, how much will go to Tommy and how much to Dr. Bill? Oddly, Senator Frist's son Harrison works for The Carlyle Group. PEU's have targeted health care. HCA's latest move shows why. There's big money to be made.

Update: KKR shops an IPO for HCA, valuing the company at twice its cost. Also, Vanguard Health System paid a $300 million dividend to owners, including The Blackstone Group.

Longhorn Budget under Perry's Butcher Knife


The Houston Chronicle reported:

The University of Texas is putting together a proposal for a 5 percent cut that could trim about $29 million from the state-funded portion of its budget.

It seems UT could use most of the $35 million owed to Texas taxpayers by Vought Aircraft Industries, an affiliate of The Carlyle Group. Vought failed to provide 3,000 new jobs at its Dallas area facilities by 2009.

Governor Rick Perry amended the agreement with Vought and another Carlyle affiliate, Authentix. He failed to provide details on the changes. Texas taxpayers deserve $35 million with interest, based on Vought's miserable performance under the Texas Enterprise Fund grant. Vought eliminated 35 full time jobs from 2004-2009. Perry gave the company $1 million per job lost.

High Frequency Trading: Next House of Cards


High frequency trading (HFT) comprises 60 to 73% of U.S. trading volume, according to estimates. The new winner in the fast money game is Goldman Sachs. It supplanted JPMorgan. Bloomberg reported:

Goldman’s technology and its access to a large pool of potential buyers and sellers help it to search for -- and find -- liquidity at the best price for customers.

This golden egg might not last. Talk of a trading tax has stock flippers worried. Who knew it would become passe to hold a stock for 5 days? Apparently stocks don't get better with age, like cheese, wine or cognac.

Update: May 6, 2010. ZeroHedge writes "The Day The Market Almost Died (Courtesy of High Frequency Trading)

Defense Riddle in Synagro/Carlyle Bribes


U.S. District Judge Avern Cohn barred the defense from asking why Synagro Technologies and The Carlyle Group were not charged in the sewage sludge bribery case. Charged were:

Monica Conyers, wife of Rep. John Conyers (plead guilty, awaiting sentence)

Sam Riddle, political consultant (undergoing trial)

James Rosendall, Synagro VP (fired by Carlyle Group, plead guilty)

Neither Synagro or The Carlyle Group are under investigation, due to their "cooperation."

Judge Cohn gave Rosendall 11 months in jail for his five year role in the bribery scandal. Prosecutors cited "extraordinary cooperation," but Rosendall is politically connected in Michigan, having been appointed to the state transportation commission by Gov. Granholm. Carlyle works hard to maintain their good name, especially in an early public infrastructure play. The private equity underwriter (PEU) is renowned for their political connections.

The Carlyle Group purchased Synagro in April 2007. MLive reported:

The influence-peddling reached a climax in fall 2007 when a City Council member accepted payments to vote in favor of the deal with Houston-based Synagro Technologies.

The Synagro deal passed by the Detroit City Council by one vote. It happened under the Carlyle Group's watch. The deal has since been terminated.

Corporations, like individuals, have free speech rights, according to the Supreme Court. Now, how can they truly pay for their crimes?

Thursday, January 28, 2010

White House Entertains PEU's


Private equity underwriters (PEU's) salivate over health care and infrastructure opportunities. Those who don't have targeted funds are scrambling to put money in these sectors. The Obama White House entertained many big PEU names. Their visitor list includes:

David Rubenstein-Carlyle Group
Steve Schwarzman-Blackstone Group

Jonathan Lavine-Bain Capital

James Johnson-Perseus LLC
Richard Holbrooke-Perseus LLC
Al Gore-Kleiner Perkins Caufield & Byers, Generation Investment Management
Bill Clinton-Yucaipa
Tom Daschle-InterMedia Advisers, Apollo Group
Roger Altman-Evercore Partners

Leonard Schaeffer-TPG

Thomas Steyer-Farallon Capital Management

William Kennard-Carlyle Group

Colin Powell-Kleiner Perkins Caufield & Byers

John Rogers-Ariel Capital Management
Steve Rattner-Quadrangle Group
Jeffrey Goldstein-Hellman & Friedman
Bono-Elevation Partners
Glenn Hutchins-SilverLake

The following CEO's visited. Each has a private equity division within their firm:

Lloyd Blankfein-Goldman Sachs
Jamie Dimon-JP Morgan

John Mack-Morgan Stanley

Ken Lewis-Bank of America/Merrill Lynch

Robert Wolf-UBS

Robert Diamond-Barclay's

Vikram Pandit-CitiGroup
Two were present or past board members:

Robert Rubin-CitiGroup
John Rogers--Goldman Sachs

Many were hosted by White House Health Czar:

Nancy-Ann DeParle-CCMP Capital Advisers

Infrastructure opportunities brought Felix Rohatyn out of retirement and back to Lazard, where he'll help CEO Kenneth M. Jacobs. The man who saved New York City can save America from its crumbling infrastructure, while making a ton of money.

Perella Weinberg Partners, Obama's Chrysler "speculators," announced investments in health care and transportation.

Given the White House visitor list is less than comprehensive and inspection is not a robust system for achieving quality, how many uncited PEU's graced the White House doors? We know they are most welcome.

Update: President Obama appointed a PEU as head of the Transportation Safety Administration. General Robert Harding partnered with GTCR Golder Rauner when he sold his security firm, Harding Security Associates. GTCR has its own dark history, having traded nightmares with The Carlyle Group. They exchanged rendition flyer Landmark Aviation and Katrina deathtrap LifeCare Hospitals.

Update: Tim Geithner's top advisors have PEU backgrounds. He's now lobbying for PEU's and hedge funds with the European Union.

Perry Lowers TEF Bar for Carlyle Group Subs


The Fort Worth Star Telegram reported Governor Rick Perry amended Texas Enterprise Fund agreements with 11 firms. Two of the eleven, Vought Aircraft and Authentix, are affiliates of The Carlyle Group, a Washington D.C. based, i.e. politically connected, private equity underwriter (PEU).

For $35 million Vought Aircraft Industries promised 3,000 new jobs by 2009. The company employed 3,350 people in the Dallas area in 2004. Instead of reaching the promised 6,350, Vought eliminated 35 full time positions. As of January 2010, the company doesn't employ that number worldwide. A Vought news release states:

Vought has annual sales of approximately $1.8 billion and about 6,000 employees in eight U.S. locations.

Rick Perry paid $1 million per job eliminated for reneging on stated commitments. Vought suggested it would close its Nashville and Stuart operations, while dangling Boeing Dreamliner production. It did nothing. The Tennessee and Florida plants still operate. Vought took $66.7 million from South Carolina for the Boeing 787 production line, which Vought gunked up due to a liquidity crunch. The 787 Dreamliner flew two years late, mostly due to Vought's tainted operations.

Authentix received a $1 million grant to move from Pennsylvania. The company promised to add 120 new jobs. The grant was awarded in August 2007. The Carlyle Group purchased Authenix in April 2008.

Gov. Perry's TEF press release was issued 1-26-10, a full eleven days after I suggested sending a $35 million invoice to Carlyle's offices at 1001 Pennsylvania Avenue. How were agreements amended? That information is not public.

Pay for performance shifted from number of jobs to pay levels in the Vought deal.

Vought Aircraft’s amendment clarifies that the company will receive credit for compensation and benefits higher than $53,000 per job.
Authentix was given a reprieve, time to meet stage one of commitment:

The jobs fund will hold back a second payment of $250,000 to Authentix, an Addison maker of counterfeit-detection nanotechnology, until 61 jobs are created. In 2007, it had contracted to hire 120 people by 2012.

Behind that charming Southern drawl, Rick Perry is a Corporacrat. The Carlyle Group is most appreciative. University of Texas, not so much. They could use the $35 million.

Update: Perry challenger Kay Bailey Hutchison won't bring this up. Her supporters include James A. Baker, III and President George. H. W. Bush. Both men have ties to Carlyle.

After Successful Domestic Use, Carlyle Group Mobilizes Paydar for Europe & MENA


It sounds like The Carlyle Group, a politically connected private equity underwriter (PEU), is deploying a high tech, deal scoping, credit climate monitoring, international radar system named Paydar. Might it be seen on prime time?

"Captain, our LLC firewalls are imploding. Romulan collateral calls are overwhelming our highly leveraged capital positions. I'm giving it all I've got. She can't take any more."

or

"Dammit Jim, I'm just a country doctor. The Paydar system gave ample warning, but this financial heart attack was so massive... It's fatal."

Sorry, Paydar won't be coming to prime time, at least not in the U.S. PEHUB reported:

Global private equity firm The Carlyle Group today announced it has named Annie Paydar Head of Human Resources for the European and MENA regions. Ms. Paydar has worked in Human Resources at Carlyle for more than five years, previously leading HR activities in the New York office. She will now be based in London.

Prior to joining Carlyle in 2004, Ms. Paydar was part of the Human Resources team with The Blackstone Group in New York City. She earned her Bachelors degree in Political Science and Communications from the University of Utah.

Background in political science? Ms. Paydar must be aware of Carlyle's affiliates propensity to suckle on the taxpayer tit. Surely, she knows about lavish tax breaks and other direct gifts from members of Congress. Paydar was with Carlyle in 2005, the year Katrina struck. LifeCare's 25 deaths post landfall required a talented risk manager, one so skilled the Carlyle affiliate warranted not one mention in the Bush White House Lessons Learned report.

Her job will be to hire Carlyle workers who can pull the same levers in their home countries. If she's successful, Paydar will hit Paydirt. Oddly, dirt is what people are eating in Haiti to give the sensation of fullness.

Wednesday, January 27, 2010

Best iPad Joke of the Day


CNBC's Michelle Caruso-Cabrera commented on Apple's new iPad.

"It sounds like a feminine hygiene product."

Good thing I wasn't drinking anything. Continuing the theme, Erin Burnett followed up with:

"Will it invoke a less than fresh feeling?"

Jobs described it as “like having the internet in the palm of your hands. ” That or sitting on your lap, protecting your crotch.

"Triple R" Cage Match at Davos


The audience cheered for their favorite financial seer at "Chaos in Davos: Part Deux," a WEF event. World Economic Forum competitors included "Dr. Doom" Nouriel Roubini, "Carlyle founder" David Rubenstein, & IMF "Chief Economist" Rajan. They sought the World's Greatest Financial Seer title.

Rubenstein made the first move. He spoke on the side effect of years of steroid use by the financial system.

“We’ve been through a heart attack but heart attacks are not fatal any more.”
David didn't speak of Carlyle's dead, including Carlyle Capital Corporation, BlueWave Partners, SemGroup, Hawaiian Telecom, Edscha, IMO Carwash, or Stallion Oilfield Services. Currently on life support are a host of Carlye investments, including American Achievement and Willcom.

Rajan triangulated, deftly steering responsibility to politicians.

“I do think we’ve moved from a period of great economic uncertainty to a period of great political uncertainty”.

Roubini was predictably gloomy, until the round card girl walked through in skimpy shorts. He briefly smiled, then returned to his dark place.

“Overall, the outlook for advanced economies is weak,” he said and he expressed concerns that there would be a shortage of demand in the world because “the overspending countries are cutting back on consumption and the over-producing countries cannot rely on the over-consuming countries to spend”.
The three aspirants for the world's greatest financial seer agreed on one thing. They have "little confidence in global policy makers to smooth the path of the world economy and financial regulation as the recovery progresses."

That was before Dr. Doom donned his Magneto hat, twisting the cage tightly around Rubenstein and Rajan. A victorious Roubini raised his fleshy arms before the roaring crowd. He then asked, "where'd that round card girl go?"

It was another successful WEF event. Get your tickets for next years "Chaos in Davos: Part Three."

Red Corporacrat Guns for NY House Seat


Chris Cox, President Richard Nixon's grandson, will run for Congress. Cox is an attorney, having advised private equity funds on acquisitions for Weil, Gotschal & Manges. Cox ran John McCain's Presidential campaign in New York.

He is co-founder and managing partner of OC Global Partners, LLC. The NYT described the firm as:

"a financial advisory company that specializes in assisting business transactions in the Middle East and throughout eastern Asia."

The Cox campaign describes OC Global Partners, LLC as:

"a consulting firm where he advises US companies on selling their products in new markets abroad and bringing in capital allowing them to expand their business and grow their workforce in America.

Those sound like two different things. How many American jobs has OC Global created?

The Carlyle Group has a new Middle East fund? Is Chris helping with that effort? Did Senator John McCain help steer Libyan business to OC Global Partners while kicking back at Colonel Qadhafi's ranch? Who else has Cox's back, maybe James A. Baker III with his Middle East legal franchise?

The NYT reported in early 2008:

When asked if he would ever consider running for public office, Mr. Cox sidestepped a bit. “For me, the key is to serve my country and my community in whatever way I can,” he said. “It can’t be about ego. It has to be about using my talents to serve the country in the best way I can.

Cox is ready to serve, but he's not alone. Red Chris is joined by Blue hedge fund lawyer Reshma Saujani as potential Corporacrats in Congress. Reshma worked for giant private equity underwriter (PEU), The Carlyle Group. Bipartisanship might just return. Beware the PEU odor.

(Thanks to Economic Policy Journal)

Toyota Stops Selling 8 Models due to Deadly Gas Pedal


Four people died in Dallas from an accident involving a runaway Toyota on December 26. That led to millions of cars being recalled and stop in production of eight Toyota models. WaPo reported:

Tuesday's recall and sales suspension covered the following models and model years: the 2009-10 RAV4, 2009-10 Corolla, 2009-10 Matrix, 2005-10 Avalon, 2010 Highlander, 2007-10 Tundra, 2008-10 Sequoia and certain 2007-10 Camry models.

Brian A. Johnson, auto analyst at Barclays Capital, said the gas pedal problem could reveal a danger of global parts sourcing. "Toyota is known for using the same parts design across multiple cars and factories and countries," he said, "which everyone is trying to emulate because it gives you economies of scale. What this shows is one of the risks of that strategy. When something goes wrong, instead of a couple-of-hundred-thousand-part recall, you have a multiple-million-part recall."
Toyota joins Johnson & Johnson in losing their quality edge. Who can be trusted in a matrix of "mean & greedy" leaders? Buyer beware continues.

Tuesday, January 26, 2010

Blue Corporacrat Reshma Saujani Running for House Seat


The anti-incumbent movement could see a New York hedge fund lawyer join Congress. Reshma Saujani threw her name in the hat. Rather than hide from her background, Ms. Saujani revels in her Wall Street experience. NYT reported:

In 2005, she helped start an investment fund for a company partly owned by Hassan Nemazee, a Democratic fund-raiser who was charged with bank fraud last year. Ms. Saujani said she left before the alleged crimes. She went to another fund started by the Carlyle Group, before it was hammered by credit-default swaps. Then she shifted to Fortress Investment Partners, which cratered in the market meltdown.

The Carlyle Group hedge fund was BlueWave Partners, a roughly $1 billion fund launched in May 2007. The fund failed to achieve critical mass, i.e., it lost millions. By August 2008 BlueWave was down to $600 million. It closed, costing 40 people their job, including Ms. Saujani. Reuters reported:

"This is an orderly liquidation to ensure fair and equitable treatment of all investors," said Chris Ullman, a Carlyle spokesman.

Ullman once served in the Clinton White House. He didn't say how over $300 million in losses would be divided between investors and "minority partner" Carlyle.

Reshma moved on to Fortress, which failed in the market meltdown. That began in September 2008, a month after BlueWave's shuttering. How long did Reshma stay at each employer? It looks like a year or less.

Why would Americans want someone from three imploded firms in Congress? I know President Obama and Congressional Corporacrats love private equity underwriters (PEU's) like Carlyle. Let's not add any more to the mix, especially under the guise of removing tainted politicians. Black pot meet black pan.

Davos Challenge: Trusting "Mean & Greedy" Leaders


World leaders gather in Davos, Switzerland to consider a report "The Future of the Global Financial System: Navigating the Challenges Ahead." Carlyle Group co-founder David Rubenstein chaired the Steering Committee that produced the report. Daily Exchange reported:

The report stressed that trust is a critically important issue not only for the general health of the financial system but also as a source of competitive advantage.

How are people to trust the very people who imploded their sector? That's who crafted the report. David Rubenstein said:

This report draws on the combined expertise of over 150 of the foremost experts in the global financial system to provide key guidance to those best positioned to ensure we emerge from the crisis with a healthy financial system.
Is that "healthy system" taxpayer sponsored? The Carlyle Group et al purchased BankUnited with a $4.9 billion FDIC subsidy.

The report mentioned three themes, lower profits, increased customer focus (tired of being ridden for high profits), and polarization. Not more polarization! The political sphere is polarized enough. America's hyper-competitive political consultants are now global, infecting elections in Ukraine.

GE CEO Jeff Immelt spoke to a generation of "mean & greedy" leaders, corporate and governmental. Corporations can now buy election ads. The "mean & greedy" fractal is long from over. Who can you trust? It might be down to family and friends.

Carlyle Group Hires Dr. Gold Brain


Goldfinger and Goldmember step aside. There is a new villain helping a generation of "mean and greedy" leaders. Dr. Gold, a brain researcher, is now consulting with The Carlyle Group, a huge private equity underwriter (PEU). CityBizList Atlanta reported:

Dr. Gold is a Distinguished Professor at the University of Florida College of Medicine's McKnight Brain Institute. Dr. Gold has combined academic achievement with business and management expertise in a successful career in medicine, academics and finance. He currently consults with The Carlyle Group.
Is he working on how corporate sponsored, political campaign ads twist through the mind, with triple negatives and purposeful misspellings? Maybe, how to keep the masses occupied with eking out a living, while the landed gentry swim in pools of gold coins? Or is it something more nefarious, like how torture produces "truth" from deep inside the brain? Is Dr. Gold consulting with 1001 Pennsylvania Avenue or a Carlyle subsidiary like Booz?

Might Dr. Gold be David Rubenstein's corner man for the upcoming financial seer cage match in Davos, Switzerland? Should opponent "Dr. Doom" Nouriel Roubini see the thong of a skimpily-dressed round card girl, a damaging Turkish surge could ensue. If it lasts more than four hours, please consult a physician.

Would Dr. Gold help the enemy? It depends on whose side Goldbrain is really on.

Monday, January 25, 2010

Davos Cage Match: Roubini vs. Rubenstein


Who will emerge as kingpin of the world financial cage in Davos, Switzerland? "Dr. Doom" Nouriel Roubini will debate the economic outlook with "Carlyle founder" David Rubenstein and IMF "Chief Economist" Raghuram Rajan. Who will tap out? Who will endure the global financial bruising and come out on top? Roubini, Rubenstein or Rajan are the three R's.

In games of scarcity, there can only be one winner. Who will prevail before the jet set?

Saturday, January 23, 2010

The Carlyle Group: Officially a Leviathan


Riverstone Holdings completed its acquisition of Seajacks International. Energy oriented Riverstone has The Carlyle Group as joint venture partner. CleanTech reported:

Seajacks International owns two self-propelled jack up vessels, the Seajacks Kraken and Seajacks Leviathan. These vessels are currently being operated out of Great Yarmouth in the UK.

Where there's money to be made, Leviathan Carlyle can be found. The monstrous private equity underwriter (PEU) cares about profits for its over 900 affiliates.

Returns can come from European governments needing to meet offshore wind energy targets. Carlyle knows how to milk taxpayer coffers. Someone slay the beast. At least, level the playing field.

Is Goldman Sachs Playing RiskMetrics?


The Wall Street Journal reported RiskMetrics is up for bid. The company hired Evercore Partners to handle the sale. Possible bidders include KKR, The Carlyle Group, MSCI, Bloomberg, McGraw-Hill and Thomson Reuters.

One name winds it way through this possible transaction, Arthur Levitt. Mr. Levitt owns 20,702 shares of RiskMetrics with options to purchase 160,417 shares. The company's 2009 Proxy Statement show Levitt controlling over 180,000 shares. He retired from the RiskMetrics board in 2009, choosing not to stand for reelection.

Levitt serves as Senior Adviser for The Carlyle Group, sits on the board of Bloomberg, and advises Goldman Sachs. The first two are potential bidders for RiskMetrics. Goldman could play the stock in the interim. With Mr. Levitt's deep knowledge of RiskMetrics, his advice could be timely.

Should RiskMetrics go for a 30% premium to its recent stock price of $17, Levitt will gross $4 million. Sweet! It might be Arthur Levitt's turn to cash in. I can see why the big money boys want deal flow to continue. Surely Democrat Arthur Levitt will let some of that trickle down.

Friday, January 22, 2010

The Difficult Generation of Business Leadership



Corporations have unlimited free speech rights when it comes to campaign funding, according to a Supreme Court decision. A company is controlled by its board of directors. Shareholders elect board members. What kind of leaders occupy those board chairs? Most are from the CEO club. A prominent member, GE's Jeff Immelt, said:

We are at the end of a difficult generation of business leadership, and maybe leadership in general. Tough-mindedness, a good trait, was replaced by meanness and greed, both terrible traits.


Rewards became perverted. The richest people made the most mistakes with the least accountability. In too many situations, leaders divided us instead of bringing us together.

Mean & greedy CEO’s populate each others BOD. Shareholders won’t decide, much less control corporate political spending.

Immelt’s wrong, we aren’t anywhere near the end of the generation of leadership meanness and greed. The Supreme Court gave them a new way to divide.

American branded multi-nationals have numerous offshore subsidiaries. SEC filings show the international subsidiaries of the following firms.

UnitedHealth
Caterpillar
Goldman Sachs

Can their offshore subs buy political candidate ad time? It's but another tool in the race to the lowest global common denominator on worker pay/benefits, taxes and regulation.

"When a corporation turns 35 can it run for President?" asked Njori.

I noted The Carlyle Group isn't old enough to serve, at least not yet. It comes of age in the shadow of D.C. politicians with its Pennsylvania Avenue address. What will our country look like when The Carlyle Group reaches 35? How deep will meanness and greed have borne into America's fabric?

It's not hard to imagine a headline, "Wall Street cash pours into NY Attorney General race." Oops, it already happened.

Update 2-11-12:  Meanness and greed accelerated into hyper-competition for the 2012 Presidential campaign.

Thursday, January 21, 2010

Carlyle Group's English Tentacles


English is the language of commerce. Business leaders ushered in an era of meanness and greed, according to GE CEO Jeff Immelt. He suggested "meanness and greed" extended beyond the business community to "leadership in general."

Students need training in English and business. The Carlyle Group's Wall Street Institute partnered with Harvard ManageMentor to accomplish this. Harvard will add their premium management development program to WSI's English language training. Topics include:

Leadership, Performance Management, Communications, and Business Strategy

Will Harvard need to update their modules given today's Supreme Court decision, opening campaign floodgates for corporate payola? Will they add a course on hiring the right lobbyist, given 2009's record lobbying spending? Consider Teddy Roosevelt's words:

Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people.

Shadow bankers like Carlyle personified meanness & greed. They have a long history of leveraging political influence, buying into strategic industries and garnering huge chunks of business from Uncle Sam. Carlyle's Booz, Allen, Hamilton is a huge government consulting firm. Behind the ostensible government sits enthroned an invisible government, maybe government consultants?

Carlyle co-founder David Rubenstein visited the White House six times, even broke bread with White House Chief of Staff Rahm Emanuel at the Blue Duck Tavern. Carlyle co-founder Bill Conway hates a level playing field. How will The Carlyle Group tilt future playing fields in their favor? How many of those fields will be political?

English is the language of business, headed by mean & greedy leaders. Those nefarious leaders now have the right to spend unlimited amounts on political campaigns. My guess is The Carlyle Group will keep on winning members of Congress, even the Presidency. Private equity underwriters (PEU's) like Carlyle expect big returns on their investment.

Carlyle Group to Sell Willcom


The Japanese mobile phone market will change in 2010. The Carlyle Group announced its intentions to sell its stake in personal handyphone system provider Willcom. Did Japan come through with zero capital gains for private equity firms? That could sweeten the profit porridge pie.

Update 1-28-10: The China Post reported Willcom may enter bankruptcy next month.

Update 2-18-10: BusinessWeek reported Willcom declared bankruptcy, making it another Carlyle fallen.

Wednesday, January 20, 2010

Students Compete for Slots at AIC


FT reported over 2,200 college students applied for next week's Alternative Investment Conference in London. Only 350 students can hear Jim Chanos and David Rubenstein. What might they hear in regard to hedge funds and private equity underwriters (PEU's)?

Update 1-31-10: One of the creme de la creme took notes. His summary can be found here.

Verari to Get New Life Post Carlyle Group


Verari Systems failed when cash flow couldn't cover debt payments. It's the latest failure for The Carlyle Group, denting the private equity underwriter's (PEU's) storied reputation. The San Diego Union Tribune reported:

A private investor group led by the founder of Verari Systems has purchased the assets of the failed San Diego rack server company and plans to restart it under a new name, Verari Technologies.

Verari, which makes high-performance computing systems, laid off the vast majority of its 235 employees last month.


The new owners plan to hire 60 employees. It's not life in the PEU fast lane. Verari has a tough road to hoe. But they won't have a 2% Carlyle management fee or be weighed down by debt.

PEU's Place in the Dark


Might your neighborhood movie theater be owned by a shadow banker? AMC Theaters bought out Kerasotes Showplace Theaters in a deal of private equity underwriters (PEU's). AMC is backed by:

CCMP Capital Partners
Apollo Management

Bain Capital

The Carlyle Group

Providence Equity Partners sold its stake in Kerasotes, as did the founding family. The combined company owns 400 theaters with over 5,500 screens.

How have PEU's infiltrated studio houses? In 2005 they funded a 25 picture project via Legend. Private equity helped fund Gran Torino, shot in Detroit. MGM is currently on the block. CNBC reported:

A dozen studios and private equity players signed non-disclosure agreements to evaluate the (MGM) deal... about six bids are expected.

PEU's have a stake in content and a chunk of downstream theater capacity. What impact might it have on movie content? Should a dark comedy make fun of greedy PEU's and their insider political connections, could it get made? How about play? It depends on when Carlyle and company flip their investment in AMC.

Tuesday, January 19, 2010

Homebuilders Look for PEU Financing


Reuters reported:

Convinced that banks will reject homebuilders' loan applications for years to come, the builders' industry association is playing matchmaker to connect members with private equity firms.

Watch out home builders, private equity underwriters (PEU's) use debt for back door corporate raids. Help from a speed date could decimate home builder equity. Beware PEU covenants.

Shadow bankers helped implode the financial system. They could do likewise for home builders.

Carlyle Group's Moncler IPO Instructive for Healthcare


The Carlyle Group, a huge private equity underwriter (PEU), purchased Moncler in 2008. It added 30 stores for the skiwear maker. Carlyle looks to add another retail brand to further grow corporate value. The plan culminates in an independent public offering (IPO) "in a year or so."

The Carlyle Group flipped Horizon Lines for a double in a year's time. Uncle Sam greased the skids for Carlyle's huge profits. Expect something similar in healthcare. Even Obama's called out Chrysler "speculators" have their eyes on health care. Where there's huge profit potential, PEU's stand ready.

Update 6-29-13:  Moncler remains a Carlyle affiliate with a planned IPO in the second half of 2013

Monday, January 18, 2010

PEU Payors Not in CALPERS Study


Private investment firms paid $125 million in placement fees for CALPERS business. A study revealed placement firms receiving fees:

1. Arvco: $58,948,067
2. Tullig Inc.: $16,950,000
3. Donaldson, Lufkin & Jenrette Securities Corp.
: $12,310,020
4. Credit Suisse First Boston Corp.:
$10,811,681
5. UBS Securities:
$8,764,970
6. DAV/Wetherly Capital Group: $5,934,011
7. Presidio Partners:
$3,523,097
8. M3 Capital Partners:
$3,135,650
9. Denning and Co.:
$3,000,000
10. Lazard Freres & Co.:
$1,750,000

It failed to note private equity underwriters (PEU's) and other money managers writing the checks. Who paid the fees? The Carlyle Group manages huge amounts for CALPERS.

The wider "pay to play" story disappears under million dollar settlements.

Buyer Beware Continues


When Tylenol drags its feet on product quality concerns for 20 months, America is in trouble. The brand once pulled all product from the shelves due to cyanide poisoning. The cyanide came from product tampering.

The current recall comes from product odor and stomach pains. NYT reported:

Deborah M. Autor, the director of the Office of Compliance at the F.D.A.’s Center for Drug Evaluation and Research, said on a conference call with journalists on Friday that the company should have acted faster.

“When something smells bad literally or figuratively,” Ms. Autor said, “companies must aggressively investigate and take all necessary actions to solve the problem.”

Funny, last fall I complained about a strong smell and stomach pains from taking OTC ibuprofen. The company said it would send a refund and a package so the product could be shipped back for testing. I received the refund, but not the package. Perrigo wrote later saying:

Product taste and odor are attributes of the product which are subjective to consumers.

While true, their product is the only one where I experienced an overwhelming smell and abdominal pains after ingesting. Other ibuprofen products I've purchased over the years did not do that. Their letter went on to say:

Given the complaint history, no product quality issue is identified, no further evaluation is required.

Does being the first to complain mean one isn't treated seriously? Maybe so.

The FDA said:

J & J did not conduct a timely, comprehensive investigation, did not quickly identify the source of the problem, and did not notify authorities in a timely fashion, prolonging consumer exposure to the products.

J & J might not be alone. It could have company in Perrigo. All signs point to an ongoing buyer beware. If Tylenol failed the American public, who has our backs or stomachs?

Update: J&J continues a slow drip recall on its pain products.

Saturday, January 16, 2010

Royal Carribean Pier Came Out of Haitian Earthquake OK


President Bill Clinton, Special UN Envoy to Haiti, courted investors in 2009. Three American branded multinationals stepped up to the plate, Royal Carribean, Choice Hotels and Best Western. Choice Hotels and Best Western opened or plan to build properties in Haiti.

Royal Caribbean has a lease until 2050 on 260 acres in Labadee, which sits on a northern peninsula. The cruise line constructed an 800 foot pier, a roller coaster and extended a palm lined beach in a $55 million investment. Royal Carribean plans to bring the world's largest cruise ship, Oasis of the Seas, to Labadee. This will increase the need for excursions. USAID is providing $15 million to train Haitians for the hospitality industry.

The earthquake struck Haiti on 1/12. Travel Beat indicated on 1/14:


Royal Caribbean Cruises Ltd.’s facilities at Labadee appear to have escaped damage from the 7.0 earthquake that struck Haiti on Wednesday evening about 10-miles southwest of Port-au-Prince.

"All is fine in Labadee. No one is hurt and we believe there are no issues with our new pier," RCCL’s Craig Milan, SVP Land Operations, told Seatrade Insider. He added that Cap Haitien is, by all accounts, in relatively good shape, too.

A 1/16 Travel Beat post highlighted Royal Carribean's at least $1 million in aid for the Haitian relief effort. They plan to work through 3 local charities and use their cruise ships to deliver needed goods and supplies.

The State Department is coordinating aid for Haiti. Before the quake rattled the country, Hillary Clinton spoke of her vision for USAID. She envisioned USAID as the "world's premier development agency." I'm not sure how it transformed in less than a week.

From the Peter G. Peterson Institute, Hillary called for "investment, not aid." Is it the Royal Carribean model, pushed by her husband? The "new mindset for a new century" has a huge test. Will the privates fulfill her vision in Haiti?

Pre-quake there were stiff challenges. Will going back to the Stone Age improve the odds of success? Will that make people more receptive to big money philanthropy, now known as investment? Maybe that's why President Obama said America is going "slow & steady" on aid. Are we teaching compliance?

Robert Wenzel of Economic Policy Journal encouraged "God's Work" Goldman Sachs CEO Lloyd Blankfein to start a $1 billion fund to invest in Haiti. Mr. Blankfein could pull a fraction from Goldman's bonus pool to fund the initiative. I'm sure President Bill Clinton could line up other investors.


"Aid chases need, investment chases opportunity."-Secretary of State Hillary Clinton

Investment also chases taxpayer dollars. How might these two memes intersect? Keep a close eye on Haiti, currently in desperate need of basic aid.

Update 1-18-10: Royal Carribean cruises continue to operate in heavily guarded Labadee.

Update 2-3-13:  Tourism is "the way" to restore Haiti.  The World Bank and Clinton-Bush Haiti fund invested nearly $10 million to build a five star Royal Oasis luxury hotel. Meanwhile many Haitians suffer in horrific conditions over three years after the devastating earthquake.

Update 8-21-14:  Haiti drove out legions of poor for Clinton driven corporate development.  

Friday, January 15, 2010

Carlyle Group Communications on Expired Texas Enterprise Fund Grant


Texas Governor Rick Perry proudly announced $35 million in state money for 3,000 new jobs in 2004. The Carlyle Group's Vought Aircraft Industries promised the jobs by 2009. Time's up on their commitment.

How'd they do? The Carlyle affiliate failed badly, cutting jobs instead of adding the promised 3,000. The move presaged Wall Street's rescue, where taxpayers ponied up billions, only to see banks shed jobs like used condoms. Vought cut 35 jobs between 2004 and 2009, Texas taxpayers paid the Carlyle affiliate $1 million per job lost. Below is my wish:

State of Texas
Invoice: 02-26-04

Please pay the following sum to the Texas Enterprise Fund for failure to provide the promised 3,000 jobs by 12/31/09:


$35,000,000


Payment is due in 30 days. Sincerely,


Governor Rick Perry

It should be sent. I'd love to see the response from Chris Ullman, Carlyle's newly promoted communications director.

Update: After winning the Republican primary Rick Perry read his scripted lines, "Hardworking Texans sent a simple, compelling message to Washington: Quit spending all the money!"

Carlyle's Boston Private Makes First TARP Payment


Carlyle Group affiliate Boston Private Financial Holdings paid Uncle Sam $50 million of its $154 million TARP capital injection. Boston Private caters to high net worth individuals. Thank heaven the landed gentry is beginning to recover. Maybe BPFH can pay back the remaining $104 million after Wall Street bonus season.

Wednesday, January 13, 2010

Mega PEU's Brutal 2009: Average 31% Loss


For the year ended June 2009 large private equity funds bled badly, losing 31.4% of investor money. This left a bad taste in investors' mouths. Smaller funds performed better. CFO reported:

The one-year performance of mega-funds is making investors wary. In a separate study in December, Preqin found that limited partners were less keen to invest in mega-size funds. Of the 100 investors surveyed, 37% said they would be avoiding mega-buyout funds after having previously invested in them, and only 9% said they would be investing in such funds this year.

The customer is a quick judge. Are "limited partners" the same professional investor Goldman Sachs CEO Lloyd Blankfein blamed in his commission testimony? Goldman packaged junk credit securities because customers demanded it. It then shorted those instruments.

Greed lives in the private equity underwriting (PEU) world. The question is what impact it has on client memory.