The House of Representatives voted 261-145 to relax what little Dodd-Frank did to "regulate" private equity underwriters (PEU). Bloomberg reported on passage of H.R. 5424, the “Investment Advisers Modernization Act”:
Among the issues the SEC has found is what’s known as accelerated monitoring fees. Monitoring fees, which private equity firms charge companies they own annually for advisory work, were accelerated into lump-sum payments when a company was sold or taken public ahead of schedule, even when future work wouldn’t be performed. The regulator found that Apollo and Blackstone didn’t adequately disclose the practice to clients.PEU Report chronicled accelerated management fee collections for the following deals:
Dunkin Donuts - $14 million to The Carlyle Group
CommScope -- $20 million to terminate the Carlyle Group management agreement
PQ Holdings - mentions $ obligation to Carlyle but did not list a specific amount
Economist Sam Wilkin wrote in Wealth Secrets of the 1% (Daily Mail):
...behind almost every great fortune, there lies what he calls a 'wealth secret'. This is a piece of knowledge or a technique that, while not exactly criminal, certainly skirts the customs of the time, and possibly the laws as well. All of them, he says, involve 'some sort of scheme for defeating the forces of market competition'. Many involve legal manoeuvrings or the exercising of political influence. Boldness and fearlessness are a given. Mild psychopathy probably helps, too.The House of Representatives vote fulfills my assessment/reaction to Wilkin's statement.
America's Red and Blue political teams cater to the .1%, which is largely represented by the PEU class. Customs skirted, check. Legal and financial manipulation (tax avoidance, management fees, dividend recaps), check. Exercising of political influence on a bipartisan basis, check. Boldness, fearlessness, psychopathy and the complete and total absence of guilt, check.Who's overpaying these undisclosed fees? It could be your pension/retirement plan.
One might expect a CPA to vote for fee disclosure which has legal accountability. Not my representative, Congressman Mike Conaway. His top donor list for this election cycle lists the Private Equity Growth Captial Council.
PEU Report readers know I jokingly call their lobbying group PECKER (for Private Equity Capital Knowledge Executed Responsibly).
The House of Representatives, especially my representative, listened to PECKER's memes and voted their wallets. The Senate is up next.