Monday, September 30, 2013

Carlyle to Bid on J&J Diagnostic Unit


Reuters reported:

Some of the world's largest private equity firms have made preliminary offers for Johnson & Johnson's Ortho Clinical Diagnostics unit, which makes blood screening equipment and laboratory blood tests and could fetch around $5 billion, several people familiar with the matter said on Monday.

Blackstone Group LP, KKR & Co LP, Bain Capital LLC, Carlyle Group LP and BC Partners Ltd are among the buyout firms that submitted first-round bids last week and are waiting to hear back this week on who made the shortlist, the sources said.

Recall how KKR's purchase of HCA added tens of billions in new health care costs.  Private equity underwriters are not the balm that heals unaffordable healthcare.  Their aim is to ride discontinuity, enabling them to buy health care assets on the cheap, bleed cash from affiliates via management fees and special distributions, then flip the company for a multiple of the original price.  The flip can be anywhere from 2 to 10 times their original equity.

As for quality I'll pass on any Blackstone, Bain or Carlyle Group blood test or transfusion.  Think Chinese infant formula or toxic kids' jewelry.  

Sunday, September 29, 2013

Income Inequality Due to U.S. Policy: Concordia Kids to Rescue


Washington's Blog ran three posts on inequality recently:

1.  The Stunning Truth About Inequality in America. (click here)
2.  Bad Government Policy Has Created the Worst Inequality on Record...and It's Destroying Our Economy (click here)
3.  Who’s Who of Prominent Economists and Billionaire Investors Say that Runaway Inequality Harms the Economy(click here)

Fortunately, the two young founders of the Concordia Summit held a two day meeting on the topic.  These two pedigreed young men grew up on the prosperous side.  Family and blue blood school connections enabled them to throw together a surprise meeting where President George W. Bush attended in 2011.  President William Jefferson Clinton headlined their event in 2012.

HuffPo reported on the third Concordia Summit:

The next global financial crisis has already started, in the form of nearly 75 million unemployed young people around the world.  If this mass of jobless youth doesn't find work, the consequences will be dramatic, a group of politicians and economists at the Concordia Summit here Friday warned -- from increased violence in the Middle East to ever-higher rates of income inequality in the United States to increased political unrest in Europe.

The article does not mention U.S. policy, emanating from the White House and Capital, produced record income inequality.  It does not say private equity underwriters and their billionaire founders have long had their sights set on public-private partnerships (P3) and have billions in dry powder.

Concordia, a Red team version of the Clinton Global Initiative, plans to lever public money for private gain via P3 expansion.  Note the implied frame:  If the U.S. doesn't P3 for youth employment, even higher rates of income inequality will manifest.  More violence in the Middle East!  These aren't bold predictions, they're the current trajectory.

Might one expect a P3 Fellow to conduct a serious study on public-private partnerships and publish the results?  That wasn't the case when P3 Fellow Daniel Bressler summarized his stint at Concordia.  His fellowship was full of stimulating discussions.

It might be more important to be a jolly-good fellow, one who doesn't make waves or pull back the curtain on the Government-Corporate Monstrosity, Eisenhower's MIC on $ trillions in federal steroids.

At least two youths received serious investment from Concordia.  It remains to be seen how far their wealth grows.  I see a P3 beanstalk for these two Jacks.

Friday, September 27, 2013

CNBC Runs More Ads for Clinton Global Initiative

This looks like a "shhshhh", maybe over the Clinton Global Initiative's past conflicts of interest through overt influence peddling.  Bill Clinton seems able to talk himself out of almost anything.

Or is it into almost anything?
Did Maria buy into the Clinton presence?  Whether she did or did not, CNBC did their part to push the Clinton Global Initiative this week.

CGI is the Blue team's marquee event, held annually in conjunction with the United Nations confab.  The Red team launched The Concordia Summit two years ago, courtesy of two "well connected" young men.  Bill Clinton headlined the Concordia Kids meeting in 2012.

The NYSE took over promotion for the Kids.  Here's the Closing Bell on Thursday, September 26:

The kids are the two gentleman second from either direction, kind of "one off" bookends in the picture.  The NYSE clip showed the Concordia logo in front of a trader.  You can wager on the political Red or Blue team, but you can't buy one share of Concordia.

The NYSE event was the kickoff for the Concordia Summit.  It's clear a number of  global leaders made the trek from the Clinton Global Initiative to the NYSE.  All week long a number of international political leaders graced the Opening and Closing Bell.

Enjoy the spotlight boys.  Some day citizens will wake up to the shameless influence peddling both political parties employ.  It's absurd that two kids right out of college, no matter their esteemed family pedigree, can start a meeting and get a star studded Red Team to show up at short notice.

Leadership does not take ethics (Clinton), experience (Concordia Kids), much less theory/knowledge (both Red & Blue teams).  But they can do marketing/PR and hire their ethically challenged peers.  

Wednesday, September 25, 2013

CNBC Offers 5:00 CGI Commercial


CNBC ran a free five minute ad for President Clinton's foundation, the Clinton Global Initiative, when it interviewed Standard Chartered CEO Peter Sands.  There was nary a word about CGI 2013 or the foundation's conflict of interest concerns. 

Tuesday, September 24, 2013

Obama Sells PPACA at CGI

The interchange between Presidents Clinton and Obama was sold this way by the White House (USA Today) :

The president and ex-president Clinton "will engage in a conversation about the benefits and future of health care reform in America and access to quality health care around the globe," said White House spokesman Jay Carney.
The Daily Beast commented on the surreal nature of our public stage:

Could the dialogue about the new health-care law get any more surreal? On one television network, Texas Republican Ted Cruz drones on and on about the evils of Obamacare, and on another, Democratic Presidents Obama and Clinton do their best to sell a skeptical American public on the new health-care law, sounding a bit like the Home Shopping Network as they put in a plug for people to go online to HealthCare.gov and sign up for coverage.
PPACA is surreal on other fronts.  Many corporate over-65 retiree health insurance plans are effectively going defined contribution when companies shift over-65 retirees from their employee group plans to individual Medicare Advantage plans through a private exchange.  This moves retired workers insurance from group plans to individual plans, the exact opposite of what Clinton and Obama stated in their interview.

Obama explained how pooling risk eliminates the expensive cost-shifting when emergency rooms provide care and pass the costs along. He also acknowledged raising taxes—gasp—on higher-income Medicare recipients and on so-called Cadillac plans, which has labor unions in a tizzy, and reducing the subsidies for Medicare Advantage plans.
If the feds are reducing subsidies for Medicare Advantage plans and employers cap their contribution, who does that leave to pick up future increases?  It's the over-65 retired worker.

Obama's statement about pooling risk eliminating expensive ER cost shifting is nonsense.  Pooling risk shares expensive ER costs across a larger group of people.  Benefit design and utilization controls eliminate expensive ER costs by making them the responsibility of the individual for any inappropriate use.

Health care coverage, employer and government provided, is marked by tremendous complexity.  The labyrinth of rules and procedures one must navigate to get coverage is the first hurdle.  The rabbit hole deepens when one needs to access emergency care, see a doctor or obtain a pharmaceutical.  Make a mistake and the penalty can be no coverage. 

Employers simply don’t like to be told they have to provide coverage, and people don’t like to be told they have to have coverage, he said.

Recently released Census data shows employers covering a smaller percentage of Americans.   If employers covered Americans as the same rate under President Clinton (1997), nearly 30 million of the currently uninsured would have coverage today. 

President Obama gave employers an extra year to meet any commitments.  He extended the date employers have to comply with PPACA to January 1, 2014.  The law allows employers to not provide coverage and pay a penalty.  The penalty is a fraction of the amount spent by employers offering a health insurance benefit to workers.

The simple act of dumping employer sponsored health insurance would be a financial boon to the C-Suite in executive incentive compensation.  This is the world we live in, where leaders, corporate and political, lie to people. 

PPACA set up the acceleration of the great employer health insurance shedding, already well underway.  It also rejiggered the health care table for private equity underwriters (PEU's) to make billions buying and selling health care companies.  Think KKR and HCA, Cerberus and Caritas Christi Health System, Gentiva and Capstar's Harden Healthcare, CCMP Capital Partner's sale of CareMore to WellPoint.

Obama's White House Health Reformer had PEU origins and returned to her PEU roots after her public service.  Look for Nancy-Ann DeParle's Consonance Capital to lever PPACA to great profit.

Oddly, Nancy-Ann continued to receive private equity distributions from previously undeclared investments while serving in the Obama White House.  No conflicts here.  As P.T. Barnum would say "Move on the to Great Egress." 

Monday, September 23, 2013

CGI Week Begins Tuesday

The Clinton Global Initiative kicks off tomorrow, fresh from confessing to fiscal transgressions which enriched Clinton associates.  It will be interesting to see if Bill Clinton speaks to this issue during the three day meeting.  While CGI hired big guns for communications, it may not have met fiduciary basics.  PwC might need to do more than teach financial education for Clinton's foundation. 

It's a big week in New York, with the high stakes United Nations' meeting, CGI and the Concordia Kids P4 confab.  I'm not sure the last time this many power brokers were in the same small vicinity.  Maybe the World Economic Forum in Davos.

Update 10-30-16:  ZeroHedge reported just how conflicted CGI is.  Politico did a story as well.

Sunday, September 22, 2013

Harvard's PEU Campaign Co-Chairs


Harvard Magazine identified the nine co-chairs for the university's $6.5 billion fundraising campaign.  Five of the nine are private equity underwriters (PEU's):

1.  Paul J. Finnegan, Madison Dearborn Partners
Paul Finnegan is co-Chief Executive Officer of Madison Dearborn Partners. Prior to co-founding Madison Dearborn Partners, Mr. Finnegan was with First Chicago Venture Capital for ten years.  Mr. Finnegan has more than 30 years of experience in private equity investing with a particular focus on investments in the communications industry.  Mr. Finnegan currently serves on the board of directors of CDW Corporation.    

2.  Glenn Hutchins, Silver Lake Partners
Mr. Hutchins is a co-founder of Silver Lake. He is chairman of the board of SunGard Corp. and a director of the NASDAQ OMX Group, Inc. and Mercury Payment Systems. Mr. Hutchins served President Clinton in both the transition and the White House as a special advisor on economic and health-care policy. He is also a director of the Federal Reserve Bank of New York and Vice Chairman of the Brookings Institution. Mr. Hutchins is a director of the Harvard Management Company, which is responsible for the University’s endowment, and Chairman of the DuBois Institute at Harvard. He is an owner and member of the Executive Committee of the Boston Celtics basketball team. He is also a trustee of the New York-Presbyterian Hospital and a board member of the Economics Club of New York. Mr. Hutchins holds an A.B. from Harvard College, an M.B.A. from Harvard Business School, and a J.D. from Harvard Law School.
3.  Paul Maeder, Highland Capital Partners
As a Founding Partner of Highland, he has over 28 years of experience in venture capital and has served as a director of many public and private companies. He manages Highland’s investments in Avidyne, Bit9, BlueTarp Financial, Imprivata, Rethink Robotics and 2U where he is Board Chair.  Paul was the 2011-2012 Chair of the National Venture Capital Association during the creation and passage of the JOBS Act. He serves on the SEC Advisory Committee on Small and Emerging Companies. 
4.  Diana Nelson, Carlson (privately held conglomerate)

5.  Joseph J. O'Donnell, Centerplate, Inc.

Mr. Joseph O'Donnell founded Boston Culinary Group, Inc. in 1961 and served as its Chairman, Chief Executive Officer and Director. O'Donnell merged concessions giant Boston Culinary Group into Centerplate, Inc.  Mr. O’Donnell also owns Allied Advertising Agency, the leading advertising agency in the motion picture industry.   He also has stakes in movie theaters, ski resorts, and restaurants including John Harvard's Brew House. And he's a partner in the $200 million Westin at the Boston convention center. 

6.  Lisbet Rausing, philanthropist, daughter of Swedish entrepreneur Hans Rausing

7.  James F. Rothenberg, The Capital Group

8.  David M. Rubenstein, co-CEO and co-founder of The Carlyle Group
David M. Rubenstein is a Co-Founder and Co-Chief Executive Officer of The Carlyle Group. Mr. Rubenstein is based in Washington, D.C.  Prior to forming the firm in 1987, Mr. Rubenstein practiced law in Washington, D.C. with Shaw, Pittman, Potts & Trowbridge (now Pillsbury, Winthrop, Shaw Pittman). From 1977 to 1981, during the Carter administration, Mr. Rubenstein was Deputy Assistant to the President for Domestic Policy. From 1975 to 1976, he served as Chief Counsel to the U.S. Senate Judiciary Committee’s Subcommittee on Constitutional Amendments.

9.  Gwill E. York, co-founder Lighthouse Capital Partners

Gwill led the firm's east coast investment activities, managed LP relations and oversaw portfolio management for the first five Lighthouse investment partnerships. She continues to manage Lighthouse's fourth and fifth investment partnerships in conjunction with the firm's partners. While at Lighthouse Gwill sponsored the firm's investments in NxStage Medical, Millennium Pharmaceuticals, DataSage, Sirocco Systems, Corvis, Triton, Ontogeny, StorageNetworks, and Bolt Media. 
This is evidence of private equity's ubiquitousness in today's world.  The business of buying and selling companies has produced massive wealth, which Harvard wants to mine.  

Saturday, September 21, 2013

Rubenstein, Gates Sell Crimson Giving

Harvard Magazine reported:

During the September 21, donor-focused launch events for The Harvard Campaign, Bill Gates ’77, LL.D. ’07 (co-founder of Microsoft, and co-chair and trustee of the Bill & Melinda Gates Foundation), and David M. Rubenstein (the father of daughters in the College classes of 2007 and 2010, and co-founder and co-chief executive officer of The Carlyle Group, the Washington, D.C.-based private-equity and investment-management firm), met for a public discussion on philanthropy, titled “The Opportunity to Make a Difference.”
The Harvard Crimson student newspaper has reported that the campaign goal will be at least $6 billion.  CTPost pegged the number at $6.5 billion.  What might Harvard need to do with some of that $6.5 billion?  Invest it in private equity! 

So please give handsomely to the oldest and richest college in the U.S.  Billionaire David Rubenstein needs Harvard endowment money to invest in Carlyle Group funds.  Think of it as alms for the rich.  

Wednesday, September 18, 2013

Rubenstein Sells PEU from Economic Club of Washington

Bloomberg reported:

On the subject of how he and his wife invest their money, Morgan Stanley CEO Jamie Gorman said, “We’re pretty boring.” He described their portfolio as “modest and unspectacular.” He did allow that they have municipal bonds and invest in a “small biotech fund,” which prompted Rubenstein to ask why they didn’t include private equity. 

“You can never have enough private equity,” joked the Carlyle Group LP co-founder (David Rubenstein). 

This interview came the day after Carlyle's Rubenstein interviewed White House OMB Director Jack Lew at a different Economic Club of Washington event. 


Jack's interview came over breakfast, while Jamie's occurred over lunch.  Members and sponsors have a large appetite for federal money.


They love preferred tax rates and public subsidies.  These are the modern day influence peddlers, money changers and robber barons.  The top 0.1% can "never have enough private equity" in our PEU world.

Monday, September 16, 2013

PEU-tility Commission

The Carlyle Group has one demand and another request before Montana's Public Service Commission.  Carlyle owns Mountain Water, a provider of public water services for Missoula.

1)  Carlyle's Mountain Water joined the Montana Telephone Association and Montana-Dakota Utilities to bring a lawsuit that seeks to keep the salaries of its senior executives private.  The PSC is working on an acceptable proposal where executive salaries can be embargoed from the public. 

2)  Mountain Water Company – Application for State Drinking Water Revolving Loan Fund Recovery Tracking Adjustment – Act on tracking request. (9/17/13).  Last year's tracking adjustment was insignificant.  The size of this year's request remains to be seen.

Carlyle is happy to make money off the public, but wants to keep most information secret.  Carlyle's big payday will come when it flips Mountain Water and senior executives will participate in a huge way.  That might be what The Carlyle Group wants to hide. 

Update 10-20-13:  Mountain Water's PUC filings

Sunday, September 15, 2013

Lehman's Failure: Five Year Anniversary

Five years ago Lehman Brothers fell, taking down the world's financial markets to the point governments and central banks had to intervene mightily.  What took down Lehman, seemingly overnight?  It was a combination of factors.

Lehman financed long term assets with short term debt, some of which needed daily refinancing.  The company had billions in "off balance sheet" liabilities due to risky derivative wagers.  The monied class no longer trusted Lehman to make good on their debts (or bets).

Why didn't the U.S. Treasury save Lehman, when it bailed out nearly everyone else?  Lehman had two Bush's on board, cousin George Herbert Walker and brother Jeb (John Ellis Bush).  It would've been unseemly for a President to bail out his brother and cousin.  

One might ask:  To what extent are companies financing long term assets with short term debt today?  How prevalent are off balance sheet obligations like derivatives or forward looking contracts?  What kind of world event could cause financial institutions to cease short term lending and begin betting heavily on the failure of corporations to pay their debts?

The canary for the Fall 2008 financial crisis cratered in the spring of that year.  The Carlyle Group's mortgage back security fund Carlyle Capital Corporation (CCC) declared bankruptcy.  Five years later Carlyle is stepping back into that arena.  The Carlyle Group is "mapping a strategy that would entail purchasing large volumes of both nonperforming and reperforming home loans with securitization as a source of funding."

CCC valued its mortgage backed security loans as AAA, when they weren't.  Carlyle levered CCC over 30 times debt to equity.  When core holdings fell in value, massive debt drowned the Guernsey based Carlyle Capital.

Five years later Carlyle plans to buy up broken home loans.  Carlyle likes sectors where Uncle Sam provides guarantees, subsidies and ensures little competition.  It remains to be seen how Uncle Sam will assist Carlyle with re-entering distressed home mortgage backed securities.  Rest assured, it's in the mix somewhere.  

How do home loan securitizations, performing and broken, contribute to financing long term assets with shorter term money?  When will the next disequilibrium arrive where lenders fail to provide money needed for refinancing?  Who will implode and why?

Lehman fell five years ago today.  Another crisis will come.  The public's questions will once again be when, where, how and why?

Saturday, September 14, 2013

Are You a Carlyle Unitholder?


The Carlyle Group's unitholders will have their special day on November 11, 2013.  MarketWatch reported:

The Investor Day will include presentations by the firm's management team as well as various fund heads from Carlyle's business segments. The event is scheduled to begin at 8:00 am EST. The Investor Day will be webcast live and can be accessed by all interested parties and media via Carlyle's investor relations website at ir.carlyle.com
Contrast the unitholder web meeting with Carlyle's recent investor meeting.  Speakers included Hillary Clinton, Jamie Dimon and Lloyd Blankfein.  Carlyle's unitholders wait patiently at the bottom for dividends to trickle down.

I suggest Carlyle's unitholders grab a bag of popcorn and enjoy the November 11th show with Carlyle's top three chiefs.  Maybe they'll replay Hillary's remarks for the little people.

Thursday, September 12, 2013

White House Health Reformer Returns to PEU Roots


President Obama's Director of the Office of Health Reform Nancy-Ann DeParle joined Consonance Capital as Co-Founder and Partner according to an August 7 press release.  Consonance is the second private equity underwriter (PEU) to employ DeParle.  The first was CCMP Capital Partners.  Now Nancy-Ann works for Consonance Capital Management (public investments) and Consanance Capital Partners (private equity stakes), CCM and CCP. 

The CC announcement mentions Nancy's prior PEU board slots, CareMore, LHP Hospital Group, and MedQuest.  Oddly, her White House public financial disclosures went years without referring to any residual PEU positions before several appeared.

As a former Center for Medicare/Medicaid Chief Nancy served on a number of public healthcare boards, Cerner, DaVita, Guidant, Medco Health, Triad Hospitals, Boston Scientific and Specialty Labs.  A number of these companies ran afoul of ethical billing regulations while DeParle provided fiduciary oversight.    

When DeParle resigned from Obama's tainted White House she said she would become a Visiting Scholar at the Brookings Institution.   After her eight month scholarly gestation Nancy-Ann had a PEU rebirth.

Those who created Rube Goldberg health reform are in the best position to profit from it.  Ask former White House staffer David Rubenstein about the Great Eskimo Tax Scam.  Those millions seeded the founding of The Carlyle Group, now over $180 billion in assets under management.

"The team at Consonance Capital Partners has a unique combination of deep clinical and healthcare business expertise, as well as many years of experience in working with management teams to build successful companies.'

'I am excited to bring my knowledge to a team that is committed to making meaningful investments that will drive innovation and improve healthcare." - Nancy-Ann DeParle

Watch Nancy-Ann DeParle's personal take post "public service."  Political and financial insiders rigged the game for their benefit.

Meanwhile, health reform leaves the most vulnerable over 65 retirees at huge risk as numerous employers dump group coverage.  What will Nancy and her PEU friends do when the retired elderly can't navigate private Medicare complexity?  What happens when starving retirees beg for scraps from their executive dining room table?  Silly me.  I should know retirees can't get through PEU security with their pacemakers and artificial limbs.

The health decks are being reshuffled by political dealers for their PEU friends. Nancy-Ann is on both sides of the table and stands to profit shamelessly.

Wednesday, September 11, 2013

Hillary, Jamie & Lloyd Play Carlyle


Bloomberg reported on the headline act in Washington, D.C. earlier this week.  Hillary Clinton was already on tap to speak to Carlyle's PEU investors:

Jamie Dimon, 57, also joined Goldman Sachs Group Inc. (GS) CEO Lloyd C. Blankfein, 58, at a client event hosted by Carlyle Group LP (CG) yesterday, according to three people with knowledge of the matter. More than 1,000 guests attended, the person said. 

Those 1,000 guests are not Carlyle's common shareholders, but clearly the class above. CNBC reported:

The gulf between the richest 1 percent and the rest of America is the widest it's been since the Roaring '20s

The very wealthiest Americans earned more than 19 percent of the country's household income last year—their biggest share since 1928, the year before the stock market crash. And the top 10 percent captured a record 48.2 percent of total earnings last year. 

U.S. income inequality has been growing for almost three decades.
Private equity underwriters and Wall Street Mavens are today's Robber Barons.  They're ably aided by politicians, both Red and Blue

Senate Approved Surveillance Abuser as Federal Judge

The U.S. Senate informed the citizenry that most Congressional actions are simply for show in approving serial surveillance abuse Valerie Caproni as a Federal Judge for the Southern District of New York.  The Senate approved Caproni by a vote of 73-24. Loyal soldiers get their reward, even when they've been unjust.

I imagine during the vote Senator John McCain tweeted about his visit to the Gadhafi Ranch and played poker on his I-Phone. 

Update 9-19-13:   Private plaintiffs claim Iran owns part of 650 Fifth Avenue in New York and are legally pursuing forfeiture.  Who stands to make a bonanza in such a case?  Also, the Southern District of New York is the lynchpin for holding onto intrusive surveillance.

Auditing Governor Perry's Texas Enterprise Fund


Governor Rick Perry's Texas Enterprise Fund report to the Legislature is full of the same lies and misrepresentations regarding a $35 million TEF award to Vought Aircraft Aviation in 2004, then owned by The Carlyle Group.

How would you like to have $35 million in Texas taxpayer money for over six years and not have to provide a single new job, much less the 3,000 promised?  That's what Vought did under Carlyle Group ownership years.  In 2010 Carlyle monetized Vought via a sale to Triumph, just as their first TEF report to the state came due.

I wrote Representative Drew Darby with my concerns in 2009, believing he had influence via his legislative subcommittee assignments.  After Darby wrote me back about oversight provisions (or lack thereof), Governor Perry renegotiated the deal in secrecy as Carlyle worked behind the scenes to sell Vought.

Vought, Carlyle Group, the City of Dallas weren't the only ones over-promising and under-delivering.  The Standard Times reported on local TEF recipient Hirschfeld Steel

Hirschfeld Industries received $500,000 from the Texas Enterprise Fund in 2008. The San Angelo-based company was set to produce 225 full-time jobs by 2013 with an annual payroll of $8 million and to invest $40 million in a new plant and expansion.

That was when Hirschfeld Industries had partnered with Martifer to make wind towers, but since then Martifer, a Portuguese company, left Hirschfeld and its plant in West Texas.

According to the latest compliance report Hirschfeld submitted at the beginning of the year, the company had produced 37 of the 225 jobs promised, with an average salary of $35,000 to $39,000.

The latest version of the contract states that Hirschfeld must pay back $861 in damages per job that it is short. It can also roll over credits from years when the company creates more jobs than the contract specifies.

Hirschfeld Industries has paid $264,000 in damages, according to a governor’s office report.

When asked about working with the state, Hirschfeld deferred comment to the state.
Latest version of the contract?  Does that mean Rick Perry renegotiated this deal as well in 2010?

In 2008 Hirschfeld's private equity investors and owners pulled $28.2 million from the firm in partner distributions.  Since money is fungible, did TEF's $500,000 go straight out as partner distributions?

Both Vought and Hirschfeld have deep pocket private equity owners.  Both sought public subsidy for their operations.  Neither wants to speak to their failures to provide the promised jobs or how they profited from TEF grants.

The Texas Legislature repeatedly allowed the Governor's office to persist in its lies and misrepresentations.  A hapless media couldn't find Perry's bald faced untruths during his Presidential run.  Let's hope an auditor offers more in accountability than the Legislature or the media.  Both have been sorely lacking.

Tuesday, September 10, 2013

Government-Corporate Monstrosity Rewards Malfeasor Caproni


Politico reported:

TODAY IN CONGRESS – The Senate meets at 2 p.m. and at 5:30 p.m. votes on the nominations of Valerie E. Caproni and Vernon S. Broderick to be United States District Judges for the Southern District of New York.
The Guardian had this to say about Caproni:

A former senior FBI official implicated in surveillance abuses is poised to become a federal judge in one of the US's most important courts for terrorism cases. 
Caproni, the FBI's General Counsel from 2003-2011, lied to Congress with no consequences:

In an April 2008 House hearing, Caproni told lawmakers that if a phone number obtained from a telephone company using a nonjudicial subpoena ostensibly authorized by the Patriot Act was unrelated to a "currently open investigation, and there was no emergency at the time we received the records, the records are removed from our files and destroyed". 

In fact, the NSA, at the time of Caproni's testimony and today, stores phone records such as phone numbers on practically all Americans for up to five years, whether or not they are connected to an "open investigation". 

Caproni left "public service" to work for Northrop Grumman, a huge defense and intelligence contractor.  Northrop's latest 10-K stated:

We conduct the majority of our business with the U.S. Government, principally the Department of Defense (DoD) and intelligence community.

Northrop named her Vice President and Deputy General Counsel, Litigation and Investigations. 

Rather than face perjury for false testimony Caproni stands to land a federal judgeship, courtesy of President Obama's nomination.  How close did she get to that plum appointment in today's Senate meetings?

Sunday, September 8, 2013

Employers Dump Retirees to Extend Health


Extend Health, a division of Towers Watson, is in the midst of an explosion in demand as employers race to drop retirees from their group insurance plans.

IBM got attention recently, but they follow a heralded list of employers.   Prior to its purchase by Towers Watson for $435 million, Extend Health filed for an IPO.  Their S-1/A stated:

Extend Health is a leading provider of health benefit management services and operates the largest private Medicare exchange in the United States. 

We have provided an effective alternative to traditional group Medicare health plans for over 150 private and public sector clients, including over 30 Fortune 500 companies such as Caterpillar, General Motors, Honeywell and Whirlpool, and we have helped hundreds of thousands of retirees and their dependents navigate to, evaluate and choose a health plan using our proprietary exchange platform and decision support tools. 

Employers are moving thousands of retirees from group health insurance plans to individual Medicare Advantage plans. Such plans have historically been the most profitable for health insurance companies. Extend Health exists to make this happen.

Our substantial revenue growth from fiscal 2009 to fiscal 2010 was driven by the successful transition of a group of General Motors’ retirees in fiscal 2009, resulting in a 202% year-over-year increase in active core members.

The addition of 110,000 IBM retired employees should drive another significant revenue boost and membership increase. 

The HIll reported IBM's move but it failed to mention a prominent retired Congressman, who served on Extend Health's board from 2009 to Towers Watson's purchase.  Rep. Dick Gephardt held nearly 57,000 shares of Extend Health.  The S-1/A stated:

Richard A. Gephardt has served on our board of directors since February 2009. Mr. Gephardt currently serves as President and Chief Executive Officer of the Gephardt Group, LLC, a multi-disciplined consulting firm, and as a consultant for The Goldman Sachs Group, Inc. since January 2005. Mr. Gephardt served as Strategic Advisor from June 2005 until April 2010 at the law firm of DLA Piper in the firm’s Government Affairs practice group.  

Gephardt serves as a director on the board of the Ford Motor Company, an auto manufacturer, Centene Corporation, a health care provider, CenturyLink, Inc., a communication services company, Spirit Aerosystems Holding Incorporated, a supplier of commercial airplane assemblies and components, and United States Steel Corporation. Mr. Gephardt previously served on the board of Dana Holding Corporation, an auto parts manufacturer and supplier, from January 2008 to March 2009.

Centene is a health insurance company which focuses on subsidized small employer and Medicaid coverage.

It's hard to find a board nowadays without an ex-Congressman or CMS chief on it.  Dr. Mark McClellan, head of the Center for Medicare/Medicaid from 2004-2006 sits on Extend Health's Advisory Board. 

The spate of employers dumping retiree health insurance will enrich corporations and their various ex-public servant board members and consultants.  What will it do to retirees?  I expect it to add more financial pain and complexity to their lives.

Frankly, Human Resource's selling these moves as "an opportunity for more flexibility, more choices, and the chance to customize plans" shows how far the HR bar has fallen.  I'd wager Towers Watson has draft language on positioning the dumping of retirees from employer group plans and that it says nothing about abdicating its longstanding commitments to workers.

The twisted part will come in increased Executive Incentive Compensation from dumping retirees.  It may take some time to work its way through the belly of the snake, but rest assured, it will.

IBM Dumps Retiree Health Insurance to Private Exchange

IBM will control the growth in retiree health insurance costs by ending retirees' enrollment in the company's employer-sponsored health insurance plans.  WSJ reported:

International Business Machines Corp plans to move about 110,000 retirees off its company-sponsored health plan and instead give them a payment to buy coverage on a health-insurance exchange, in a sign that even big, well-capitalized employers aren't likely to keep providing the once-common benefits as medical costs continue to rise.

The move, which will affect all IBM retirees once they become eligible for Medicare, will relieve the technology company of the responsibility of managing retirement health-care benefits. IBM said the growing cost of care makes its current plan unsustainable without big premium increases.

IBM will shift the growing cost of care to retirees:

IBM told retirees that its current retiree coverage will end for Medicare-eligible retirees after Dec. 31, 2013, according to documents reviewed by The Wall Street Journal and confirmed by IBM.

"Cost increases under our current retirement group health care plan are no longer sustainable for you," IBM said in the notices. "Health care costs under IBM's current plan options for Medicare eligible retirees will nearly triple by 2020, significantly impacting your premium and out of pocket costs," the notice said.
Instead of subsidizing retiree health premiums directly, IBM will give retirees an annual contribution via a health retirement account that they can use to buy Medicare Advantage plans and supplemental Medicare policies on the exchange, as well as pay for other medical expenses. Retirees who don't enroll in a plan through Extend Health won't receive the subsidy.

Echoing a common move in the pension arena, IBM turned a defined benefit health insurance benefit into a defined contribution plan, one with handcuffs.

Note that IBM received nearly $13 million in Early Retiree Reinsurance Program (ERRP) funds to "keep retiree health insurance more affordable."  Any obligations related to this money disappear on January 1, 2014. 

Cash rich IBM's move means the employer will do less, something I predicted when PPACA passed.  Will IBM's retirees be able to accommodate the extra burden for health care costs during retirement?  That remains to be seen.

Expect more companies, even municipal governments, to follow IBM's move.  Workers should expect to shoulder a greater portion of their retirement and health care.  The latest shedding of employer health insurance should come September 19 via the U.S. Census Bureau's American Community Survey.

Employers, like IBM, will do less, courtesy of Uncle Sam.  I don't trust Uncle Sam's promises to backfill, not given his empty pockets.  Workers are on their own, as evidenced by this recently released Census statistic.

22 percent of households experienced one or more possible "hardships" in fulfilling their basic needs in the previous 12 months. These hardships included difficulty meeting essential expenses, not paying rent or mortgage, getting evicted, not paying utilities, having utilities or phone service cut off, not seeing a doctor or dentist when needed or not always having enough food. 

Many are expected to lose a portion of their Social Security benefits to fund lower corporate tax rates for the IBM's of the world.  That's not justice, but Red and Blue love PEU "Just Us."  PEU affiliates need lower taxes and politicians aim to please. 

Update:  Time Warner Inc. did likewise. Energizer straight out eliminated their retiree health and life insurance benefit.  The City of Fort Worth plans to shift retirees to Medicare Advantage plans as well.  Newport News Shipyard, a division of Huntington Ingalls, shocked employees with their announcement.  An employee said in response, "Their word means nothing.  God knows how much more it's going to cost us." 

Carlyle Group Schooled Wanda Makes PEU Move with AMC Entertainment

The Globe and Mail suggested investors stay away from AMC Entertainment's upcoming IPO. 

AMC Entertainment Inc. is inviting investors to an initial public offering with back-row seats and no chance of buttered popcorn.
Reasons for spurning the IPO include AMC's already bloated debt position, the company's need for major capital investment for theater upgrades, shareholders getting less than standard voting rights.

The real mystery, then, is why Wanda doesn’t put the money in itself, rather than ask outsiders to underwrite its risky investment plan. The Chinese group’s revenue is 10 times that of AMC, and box office sales in China are still growing. If Wanda is reluctant to follow its investment, it’s hard to imagine a storybook ending to this movie.
Wanda's move is typical PEU, where storybook endings mean monetization at levels many times the initial equity investment.  An IPO is but one vehicle for PEU's to profit.  How much did Wanda charge AMC in management fees and how much did they pay themselves in special dividends and distributions? 

They can see in AMC Entertainment's books the tools JPMorgan, The Carlyle Group and Bain Capital used to pull money out of AMC.  My guess is this is a form of Chinese PEU imitation.   It has the odor of many PEU deals.

Monday, September 2, 2013

Hillary & Bill's Upcoming PEU Events


WaPo reported on Hillary's talk at the Carlyle Group Investor Annual Meeting which begins September 9th:

$200,000 That is what Carlyle Group is paying former secretary of state Hillary Clinton to speak at its annual investor conference in Washington next week. (Politico reported the engagement earlier.) Private equity has been very, very kind to the Clintons. Last year, Carlyle paid a similar amount to Hilary’s husband, former president Bill Clinton.
President Bill Clinton privatized USIS, the government department that ran security checks.  The Carlyle Group made big money from holding an ownership stake in USIS from 1999 to 2007.

Hillary recently spoke to KKR's investor group for $200,000.  KKR is another private equity underwriter (PEU).

Next up for the PEU Clintons is the other CGI, Clinton Global Initiative Annual Meeting vs. that of Carlyle Group Investors.  Interestingly, the Clinton Global Initiative confessed to handling money poorly, personally enriching the Clinton's close contacts.  America's Royal Bubba Family will headline their CGI event which runs from Monday, September 23 to Thursday September 26 in New York City.

Directly following CGI 2013 is an event Bill Clinton headlined last year, the Concordia Kids Summit


How many CGI members will head from the Closing Plenary to the NYSE for Concordia's welcome reception on Thursday afternoon?  Bill was the draw last year.  It's not clear who will fill his role in 2013.

Concordia will announce a number of major speakers, including our keynote speaker, over the coming weeks. Our confirmed speaker list includes a number of current and former Heads of State as well as business leaders from Fortune 500 companies and small and medium enterprises.
It'd be too much to ask for Hillary to speak at Concordia 2013, given Concordia is the Red version of public-private partnerships.  Nevertheless, Red and Blue love PEU.

Update 9-23-13:  FireDogLake didn't like the smell of CGI either.