PEU Report

Carlyle's PEU Stripping Fish

2012-01-31T23:46:00.001-06:00

The Carlyle Group strips fish, in addition to corporate cash.

PacAndes is the proverbial puzzle within an enigma. Its 50,000-gross-tonne flagship, the Lafayette, is registered to Investment Company Kredo in Moscow and flies a Russian flag. Kredo — via four other subsidiaries — belongs to China Fishery Group in Singapore, which, in turn, is registered in the Cayman Islands.

China Fishery and Pacific Andes Resources Development belong to Pacific Andes International Holdings, based in Hong Kong but under yet another holding company registered in Bermuda.

PacAndes, which is publicly traded on the Hong Kong stock exchange, reports more than 100 subsidiaries under its various branches, but a partly impenetrable global network includes many more affiliates.

One of its major investors is the US-based Carlyle Group, which bought $150 million in shares in 2010.

China Fishery Group reported a 2011 revenue gain of 27.2 per cent to $685.5 million from $538.9 million, 55 per cent of PacAndes' earnings. The company attributed it to stronger operations from the South Pacific fleet and the Peruvian fishmeal operations.

Recall how Carlyle co-founder David Rubenstein advocated the China model of capitalism at the recent World Economic Forum meeting in Davos, Switzerland. The China model is state directed and subsidized, thus it helps to be in good with the state

(Fishing) overcapacity has been driven by government subsidies, particularly in Europe and Asia, experts say.

A landmark report by Rashid Sumaila, along with the oceanographer Pauly and others at the University of British Columbia, estimated total global subsidies in 2003 — the latest available data — at $25 billion to $29 billion.

Between 15 and 30 per cent of subsidies paid for fuel to allow ships to range widely, it said. Another 60 per cent went to increase size and upgrade equipment.

The study calculated China's subsidies at $4.14 billion and Russia's at $1.48 billion.

Carlyle affiliates frequently suckle on the government teat. It helps garner 30% annual returns.

The Carlyle Group cashed in for the fourth time on China Pacific Insurance. Total proceeds to date are HK$28.7 billion. If you haven't seen enough offshore tax shelters, Carlyle has another holding China Pacific:

Carlyle Holdings Mauritius, another subsidiary of Carlyle Group, still holds 113 million H shares in China Pacific Insurance.

Some experts call for a five year fishing moratorium for some species. A PEU moratorium on government subsidies, stripping cash from affiliates and hiring ex-politicians might allow business ethics to recover. Let's hope its not too late for fish and ethical business practices. Each deserves a chance for survival.

South Carolina State Treasurer Smells PEU

2012-01-30T22:44:00.001-06:00

Curtis Loftis, South Carolina's Treasurer, wants the state's pension fund to lighten up on alternative investments. WSJ reported:

Just five years ago, it was illegal for South Carolina's public pension plan to invest in hedge funds, private equity and other complicated bets.

Now, nearly half its assets are in such investments.

Loftis believes this allocation is far too high.

(Loftis is) fed up with years of high fees on the state's hedge-fund, private-equity and real-estate investments, and their complex terms, which he says are incomprehensible to the average taxpayer.

"I question whether Wall Street's interests are being protected or our interests are being protected," says Mr. Loftis.

The Carlyle Group's David Rubenstein called on Loftis in August 2011. The hour long session was an attempt by Rubenstein to touch his client. Loftis understands the private equity underwriter (PEU) mentality:

"He's a great man," Mr. Loftis says about Mr. Rubenstein. But, he added, "these people are not my friends. If I weren't the treasurer of South Carolina, they wouldn't take my calls."

No, they would not. PEU's focus on the 2 and 20, which Loftis stands to threaten. They'd hate another PEU run. How much did South Carolina's pension pony up in Carlyle capital calls in the 2008 financial meltdown? CalPERS kicked in $681 million.

How much did South Carolina's alternative investment exposure rise keeping PEU's from swirling down the cash drain? Rest assured, David Rubenstein won't say. He probably views it as a discourteous question.

Putting a Bow on Davos' Schmoozing & Parties

2012-01-29T11:39:00.008-06:00

The World Economic Forum, an annual meeting of global tamperers, wrapped up in Davos, Switzerland. The "future of capitalism" theme served as cover for Davos' hegemonic ends. BBC reported:

Participants ... got down to what the event really is about: soaking up new ideas, pitching deals and - most importantly - using the opportunity to network.

The police state protected the event:

There were several small protests outside the heavily protected venue, surrounded by hundreds of Swiss police officers, security guards and soldiers.

It's good the police were there to save Davos participants.

Davos certainly discussed many of the most urgent issues of the world.

Otherwise who will save the world, or preserve it to their end? Scheming is brain work. It requires counter balance, thus Davos' infamous parties. CondeNast's Daily Traveler wrote:

So Far, My Favorite Moments at the World Economic Forum Have Been at the Parties

The setting is majestic: the quaint Swiss town is surrounded by snowy mountains and pine trees blanketed in white. But no one seems to pay much notice to any of that. It’s all about the people.

BusinessInsider reported:

Given the quality of speakers at the World Economic Forum, you may be under the impression that people go for the content. They don't. The content is a interesting diversion, for those with spare time, but the real reason companies happily shell out up to $600,000+ per year to attend the Davos conference is because of the schmoozing.

Schmoozers include David Rubenstein, Tim Geithner, Chelsea Clinton, Jamie Dimon, Bill Gates, Niall Ferguson, Nouriel Roubini, Mario Draghi, Christine Lagarde, David Cameron, Angelo Merkel, Vikram Pandit, Mick Jagger, Dr. Oz, and George Soros.

American branded global mega-corps were in full force, schmoozing and sponsoring schmoozing events:

Chelsea Clinton hosted the Clinton Global Initiative reception at the PwC "Thought Cafe." PwC has Price Waterhouse Coopers in its background. Deloitte promoted its new Business Society. KPMG "Cut Through Complexity" with a snow free stairwell and Davos update page.

Carlyle Group co-founder David Rubenstein predicted capitalism would go state sponsored, like China. Did he plug Moncler ski jackets, available at Ettinger Sports in Davos?

As for braving the cold without proper attire, three Ukrainian topless women were able to get near the heavily guarded grounds. They chanted, "Poor because of you."

Might David Rubenstein offer them a Moncler cashmere turtleneck? Should he feel less charitable, Rubenstein could ask authorities to roll them into a Brintons' carpet. That remark is in poor taste, given Brintons' retirees lost their pension because of Mr. Rubenstein.

Davos' police apparatus quickly silenced the topless threat. Is this evidence of KPMG's "cutting through complexity", Deloitte's new "business society"? It echoes the China model of economic freedom, pushed on Palestinians the last few years.

Next up for global tamperers? It's a pair of CGI's, the Clinton Global Initiative and Carlyle Group investors meeting, which run back to back in the fall. Clinton Global Initiative is a favorite of CEO's, the group getting value at Davos. In between is the annual Bilderberg Group meeting. Times couldn't be better for global tamperers. Not so much for Brintons' retirees or Ukrainian feminists.

The global race to the lowest common denominator on worker pay/benefits, taxes and corporate regulation continues. Exempt from the downward spiral are political donations and CEO pay. Personal freedom, like Carlyle's shareholder rights, must be limited. This is Davos' legacy in the new millenium.

Update: ZeroHedge has a Davos post mortem

Update 1-31-12: MarketWatch offered a scathing summation

Rick Perry Vought to Know

2012-01-29T00:28:00.002-06:00

Rick Perry ought to remember his $35 million Texas Enterprise Fund gift to The Carlyle Group's Vought Aircraft Aviation in 2004. The Carlyle Group is a private equity underwriter (PEU) like "vulture capitalist" Bain & Company.

Governor Perry bragged how the Vought TEF award would bring 3,000 new jobs to Texas. They never came, a fact the media has been unable to find.

Vought dangled Boeing 787 Dreamliner jobs for Texans, before taking $65 million from the state of South Carolina to locate production there. Carlyle deemed Senator Lindsey Graham a better military benefactor. The extra $30 million also helped.

South Carolina's Vought went on to gunk up Dreamliner production. The nightmare ended when Boeing bought out Vought's 787 associated facilities, or so they thought. SEC filings show:

On July 30, 2009, Vought Aircraft Industries sold the assets and operations of its 787 business conducted at North Charleston, South Carolina ("the Boeing sale agreement") to a wholly owned subsidiary of The Boeing Company ("Boeing"). Following the acquisition of Vought by the Company, Boeing has asserted various breaches to the Boeing sale agreement which include alleged losses from aircraft tooling, flawed inventory management and problems with spare parts. The Company and its counsel are continuing to obtain additional information related to the various issues asserted by Boeing.

This sheds light on Carlyle's expertise as an operator, given 787 production ramped up under Carlyle's ownership.

Vought's Texas job commitment rang hollow from the Palmetto flim-flam and failed promises to relocate production from Tennessee and Florida.

On February 26, 2004, we announced plans to consolidate portions of our manufacturing operations to Dallas and Grand Prairie, Texas. The plans include renovating and modernizing the Dallas and Grand Prairie facilities, closing the facilities in Nashville and Stuart and moving their operations to Dallas and Grand Prairie and reducing the size of the Hawthorne facility. The final planned completion dates of closing the Stuart and Nashville facilities are December 31, 2005 and December 31, 2006, respectively.

It never happened, like Vought's employment promises. Vought Aircraft Industries employed 3,350 in Texas when it signed on to add 3,000 more jobs, for a total of 6,350 Texas positions.

Vought's company wide employment danced around its Texas commitment The company decided not to fulfill its Texas promises in 2005.

Amounts previously disclosed for 2004 have been updated to reflect a reclassification of $35 million in grants received from the State of Texas from operating activities to financing activities..

That's a sweet non-debt, non-equity capital injection. Who wouldn't want $35 million to invest for five years Scott free?

Rick Perry's Texas Enterprise Fund spreadsheet indicates Vought provided 3,000 jobs with a total impact of 29,377 jobs. Vought provided 3,350 Texas jobs when Perry pushed suitcases of cash on Carlyle: Not only did Carlyle not add 3,000 jobs, they cut 35. Rick Perry gave "vulture capitalists" $1 million per job lost.

Look how Vought characterized the grant. In 2005 the company stated:.

On February 26, 2004 we announced plans to consolidate portions of our manufacturing operations to Dallas and Grand Prairie, Texas. We received a $35 million grant from the Texas Enterprise Fund in April 2004 and are in the process of working with the Texas General Land Office and several other state and local agencies to help us accomplish the consolidation. By accepting this grant, the Company is obligated to add 3,000 jobs in Texas over the next 6 years with a prorated penalty (based on any shortfall in our ability to maintain a total of 6,000 jobs in Texas with the total penalty amount not to exceed the amount of the grant) assessed beginning in 2010 if that goal is not reached.

Contrast this with their 2010 description:

In March 2005 we were awarded a $35 million Texas Enterprise Fund grant to assist in increasing employment levels at our Texas facilities. This grant requires that we maintain certain employment levels at our Texas facilities. As a result of our failure to maintain the required employment levels, we repaid $0.9 million to the Texas Enterprise Fund in 2010. Our failure to satisfy these commitments in the future could result in the requirement to repay some or all of the remaining portion of $35 million grant over the next nine years. .

When 2010 arrived and Vought failed miserably on its TEF promises, two things happened. Rick Perry renegotiated the deal in secret, enabling Vought to refund the paltriest amount.

Carlyle then sold Vought to Triumph, who now has the TEF obligation. Vulture capitalists chose not to refund Texas taxpayers from their ample profits.

Over the course of my tenure as governor of Texas, we've helped created a climate where 1 million jobs have been created.

Nearly 30,000 of those are a bald face lie. Even a Presidential run couldn't bring these facts to light. The media didn't have to conduct research. PEU Report has numerous posts, complete with links to Perry's fictitious report and Vought's SEC filings.

Rick Perry caters to vulture capitalists, when he isn't calling them names. The media is unaware, ignorant or also catering to the privileged class of super billionaires and their politician benefactors..

Carlyle's Energy JV: Three Rivers IPO

2012-01-28T12:53:00.001-06:00

The Carlyle Group partnered with Riverstone Holdings on energy investments. They started Three Rivers Operating Company LLC in March 2010. This put ex-BP CEO and Riverstone Managing Director Lord John Browne back in Texas.

Less than two years later, Riverstone is ready to monetize by taking Three Rivers public. Three Rivers' S-1 does not state how many shares will be sold or their expected price. It does indicate Riverstone pulled $66 million from Three Rivers since inception. Over $60 million came from a "distribution," while nearly $6 million came from placement and management fees. The S-1 did not indicate the management fee paid for 2011.

Three Rivers used debt and equity to purchase assets from Cheasapeake Energy and Samson Resource. JP Morgan and BNP Paribas syndicated a $600 million credit agreement with Three Rivers. The base borrowing is $325 million. The S-1 stated:

Our company was formed in March 2010 for the purpose of engaging in the oil and gas exploration and production business. We began active oil and gas operations in April 2010 following our acquisition of developed and undeveloped properties from Chesapeake Energy Corporation ("the Chesapeake Acquired Properties") at an aggregate net purchase price of $202.8 million. In January 2011 the Company purchased all of the operated assets in the Permian Basin from Samson Resources Company ("the Samson Acquired Properties") at a purchase price of $343.5 million.

Not only is The Carlyle Group a virtual nonprofit organization, so is Three Rivers:

The Company is not a taxable entity for either U.S. federal income tax purposes or the majority of states that impose an income tax. Income taxes are generally borne by the members through the allocation of taxable income. Accordingly, no recognition has been given to federal income taxes in the accompanying consolidated financial statements.

The Carlyle Group's Daniel A. D'Aniello and Edward J. Mathias exercise investment decision making for 99.9% of Three Rivers' Series A stock units. Carlyle announced it would no longer partner with Riverstone on new funds It's a long term breakup.

Rest assured, Carlyle will profit handsomely. A $300 million IPO puts Carlyle/Riverstone $90 million in the black. Any future stock sales will be pure profit.

Will they garner a double, triple or quad for their two year holding of Three Rivers? How much Three Rivers stock will Carlyle's co-founders, the DBD's, park in the Cayman Islands?

Sad State of Drugs

2012-01-28T10:55:00.000-06:00

The prescription drug landscape is riddled with shortages, sabotage, superbugs and deadly substitutions.

Generic sterile injectible drug shortages impact many people. There are few suppliers making these drugs, so when a manufacturing plant has a problem, it quickly results in shortages. Adding to potential quality concerns, the active drug ingredients are nearly all made in China and India in plants which are rarely inspected. Chinese manufacturers played the deadly substitution game with heparin, killing many Americans.

Such a scenario is playing out in Pakistan, where contaminated cardiac drugs killed more than 100 people. Over 46,000 patients received potentially contaminated medicine. Heartwire reported:

Punjab Institute of Cardiology purchases medicines from the company that bids the lowest rate. The contaminated medicines were distributed from December 15, 2011 until the first week in January [3]. He said the first case was diagnosed on December 20, 2011, but the issue was confirmed on January 5, 2012, when about seven people had died. Elahi added that the distribution of the suspect drugs had been suspended, and 70% of the tablets already distributed had been recovered. He also noted that raw material used in the medicines was imported from China and Dubai.

It's not clear where the contamination for five different cardiac drugs originated, but its deadly outcome is certain.

The overuse of antibiotics created a line of drug-resistant lethal superbugs. Even the tape used to seal wounds can harbor superbugs. One doesn't have to be in a hospital to encounter a superbug. Exposure can occur from a trip down a supermarket meat aisle.

Antibiotics interact with the environment, producing drug resistant bacteria. These deadly organisms are predicted to migrate through other species to humanity's detriment. One strategy is reverse engineer antibiotic sensitivity to bugs, i.e. make them less super. It's a dicey predicament, one made by antibiotic overuse.

Here's hoping the drugs you get are available, safe and effective. Under the current system, it's a quality dice roll.

PEU's Helped Create China Model

2012-01-27T18:58:00.000-06:00

Carlyle Group co-founder David Rubenstein cited Chinese capitalism as the model for a debt impaired future. It's a model private equity underwriters (PEU's) helped create.

“Ten cents of every dollar we manage in private equity is in China,” said Jonathan E. Colby, a managing director with Carlyle Group. He added the Washington, D.C., firm is optimistic about China’s expected transition from an export-based to consumer-based economy.

Forget that another Carlyle executive cited the economic threat posed by China, the very country Rubenstein is teaching his PEU trade. There is only one consistent foundation to the words Rubenstein and his ilk spout. Greed.

Davos' Global Tamperers Twist Words for Power

2012-01-25T21:31:00.003-06:00

The Carlyle Group's David Rubenstein echoed BlackRock's Larry Fink, who lamented working with democratic governments.

"Markets like totalitarian governments."--Larry Fink, BlackRock

HuffPo reported on Rubenstein from the World Economic Forum, the annual gathering of global tamperers, intent on growing their billions in wealth.

David Rubenstein, managing director of asset management firm Carlyle Group, said leaders must work fast to overcome the crisis or see other models of capitalism, such as the form practiced in China, win the day.

"We've got to work through these problems. If we don't do that in three or four years ... the game will be over for the type of capitalism that many of us have lived through and thought was the best type," he said.

China has reaped the rewards of its transition to a more market economy and is now the world's second-largest economy. Unlike the capitalist systems in the U.S. and Europe, China's market transformation has been heavily guided by a state apparatus that continues to balk at widespread democratic reforms.

Rubenstein's new version of capitalism is anything but. It's government sponsored and kills individual freedom. How can a "new version of capitalism" kill both capitalism and democracy simultaneously? When it entrenches those with wealth and power. That's the real game in America's Government-Corporate Monstrosity, Eisenhower's MIC on trillions in steroids.

The media fawns over David Rubenstein and his PEU ilk. They push the shallowest meme to their greedy benefit. Is there nothing they can't twist to their personal advantage?

Davos is about totalitarianism. It's the China PEU model.

Joining the Homage to Mr. Rubenstein

2012-01-24T22:59:00.003-06:00

If CNN, WaPo, and NYT can pay homage to Carlyle co-founder David Rubenstein, who am I to hold back. Consider this my contribution, based on the song "Mrs. Robinson" from The Graduate:

And here's to you, Mr. Rubenstein
Jesus awards you more, as you know (Wo, wo, wo)
God bless you please, Mr. Rubenstein
Washington throws a bone to those who prey
(Hey, hey, hey...hey, hey, hey)

You'd like to know a little bit about us for your files
You'd like to help us learn to help ourselves
Look at Congress, all you see are sympathetic eyes
Stroll the White House grounds until you feel at home

And here's to you, Mr. Rubenstein
Jesus awards you more, as you know (Wo, wo, wo)
God check you please, Mr. Rubenstein
Washington builds a throne for those who prey
(Ts eh, Ts eh, Ts eh...Ts eh, Ts eh, Ts eh)

Hide billions in a place where no one ever goes
Put it in the Caymans with your yacht
It's a little secret, just the DBD's affair
Most Ugland you've got, hide it from the feds

Coo, coo, ca-choo, Mr. Rubenstein
Jesus awards you more, as you know (Wo, wo, wo)
God damn the sleaze, Mr. Rubenstein
Washington fawns over billionaires who prey
(Hey, hey, hey...hey, hey, hey)

Planning Brintons' pre-pack on a Sunday afternoon
Candidates cite "vultures" in their debate
Laugh about it, pout about it
When you've got to choose
Ev'ry way you look at it, little people lose

Where have you gone, W. Edwards Deming
A nation turns it's lonely eyes to you (Woo, woo, woo)
What's that you say, Mr. Rubenstein
Your IPO has left and gone away
(Yaay, yaay, yaay...Yaay, yaay, yaay)

(These lyrics also work well with Mr. Schwarzman and Mr. Peterson, except they already cashed in big with Blackstone's IPO, something Mr. Rubenstein hopes to do.).

WaPo: Toasting Mr. Rubenstein

2012-01-24T21:52:00.000-06:00

WaPo followed Fareed Zakaria's GPS in fawning over Carlyle Group co-founder David Rubenstein. The piece highlighted Rubenstein's upbringing, with his father a postal worker. Mr. Rubenstein cited education as the key to his economic fortune. Surely, other students graduated from Duke and got a law degree at the University of Chicago. How many are multi-billionaires? It it's not 100%, Rubenstein's theory is in need of modification.

Mr. Rubenstein's initial killing came from selling Alaskan Native American tax losses. This venture became known as the Great Eskimo Tax Scam.

“Look, I know capitalism has its problems; it’s not always fair,” Rubenstein said. “I helped to start a company with virtually no money, and now I have more than I ever anticipated.”

Carlyle exploited, even help create structures advantageous to private equity. One of those is tax structures, domestic and offshore. The Carlyle Group's IPO filing shows the firm to be a virtual nonprofit, much like a charitable hospital. There's nothing charitable about private equity underwriters (PEU's).

That said, here's to you Mr. Rubenstein, the nation turns its lonely eyes to you...

World Economic Forum to Dangle Carrots

2012-01-23T22:23:00.001-06:00

The nonprofit World Economic Forum's annual meeting in Davos, Switzerland attracts a surprisingly profitable crowd. More than 1,000 CEO's will attend. Davos ranks with the Clinton Global Initiative as a popular CEO destination. Davos led the way with financial engineering, giving private equity underwriters major play the last decade. What's up for 2012? Check out the public agenda:

Note the "recently savaged for his Libya work" Michael Porter will present.

The Carlyle Group: Fareed's Fawning

2012-01-23T20:41:00.004-06:00

GPS's Fareed Zakaria went prostrate on a Brintons' carpet before Carlyle Group co-founder David Rubenstein. Turn your head if fawning makes you ill. Otherwise, read on or listen to the podcast:

ZAKARIA: My next guest is a pioneer of private equity. The term didn't really exist before David Rubenstein and his partners founded the Carlyle Group almost 25 years ago. Today, Carlyle is, by some estimates, the largest private equity firm in the world. The companies in Carlyle's portfolio have revenues of approximately $100 billion.

If Rubenstein's name sounds familiar, he was also in the news this week for donating $7.5 million to fix the Washington Monument.

Welcome, David.

DAVID RUBENSTEIN, CO-FOUNDER, THE CARLYLE GROUP: My pleasure.

ZAKARIA: Do you understand the attacks that people are making about private equity, about Mitt Romney? The basic argument, as I understand it, goes private equity companies buy these companies, load them up with debt, fire all - lots of workers, find some low cost place to do the same thing, and that's how they make money, and it's terrible for American workers.

RUBENSTEIN: Well, I think that's unfortunate because that's not the reality. The reality is this. Private equity firms are very good at buying companies, improving them, strengthening them, actually increasing employment in many cases, and doing a very good job for the investors, most of whom are public pension funds, fire workers, policemen, teachers. They're the beneficiaries principally of private equity.

ZAKARIA: Do you think that the basic model that people look at is wrong then, that they say these private equity companies come, you - so when you buy a company, how do you strengthen it? You know, how do - what is the magic that makes you able to grow the company other than firing workers and, therefore, reducing costs?

RUBENSTEIN: Well, firing workers is rarely something that's actually done. You know, the private equity statistic show that when you hire more workers, you actually make more money. So, in the end, private equity firms are trying to hire more workers and actually make the companies bigger than they were when they - when they made the original investment.

ZAKARIA: Because it would make -

(CROSSTALK)

RUBENSTEIN: Yes. That's what the statistics show. When you hire more people and you make more products or more services that you sell, you actually make more money, and that's good for the investors.

But actually, what private equity does is this. Somebody like my firm will buy a company. We are incented to do well. We typically get 20 percent of the profits, so we are perfectly aligned with our investors who put up the bulk of the money, though we invest as well.

The managers of the company, the people, the CEOs running the company, they get a large piece of the profits as well. Typically, we do this in a private setting. We don't have to worry about public reporting for a long time. The company's CEO can worry about making the company more efficient over a four to six-year period of time.

And what statistics show over a 10-year, 20 year, and 30-year period of time, that if you invest with a good private equity firm, you're likely to get a much higher rate of return than you would in almost anything else can you invest with.

So we're not doing anything that's magical, we're simply incenting the workers, we're incenting the CEOs, we're incenting the professionals to be aligned with the investors and make the companies grow.

ZAKARIA: What do you think of Bain Capital and - and the stories you hear about it in the context of this campaign?

RUBENSTEIN: Well, it's disappointing if you're in this - an industry that is actually adding value, creating jobs, making America more efficient in many ways and more effective in many ways.

Private equity is dominated by the United States companies. The largest private equity firms are here. Many people around the world are looking to us to how we do private - how they should do private equity there. In fact, the Chinese, for example, they very much want to import our private equity statistics and - because the statistics show that we are very good at what we do, and they want these - these skills and these know-how that we have here.

So why is it that the Chinese are so interested in learning what we do in private equity? Because they want to make their companies more effective, more efficient, and - and strengthen employment as well.

So I don't think what happened to Bain in terms of the criticism is really that fair. They may have done some things I don't know about years ago that aren't the practice of today. Remember, much of what Mitt Romney did happened 20 years ago or more, and the practice of the industry have evolved.

ZAKARIA: The other part about private equity that people worry about or are kind of stunned by is the kind of money you guys make. So - because there may be an IPO for Carlyle, you had to report this, and the three founders of Carlyle I think collectively made $450 million plus. There was returns from your own investments. You made several hundred million dollars last year.

Does - you know, do you understand how a lot of Americans look at that and say this just isn't fair?

RUBENSTEIN: Well, first, I do come from very modest circumstances. My father worked in a post office and never made probably more than $8,000 a year as an employee of the post office, so when people can rise up from very modest circumstances and do well economically, I think that's a good thing about America, and we should encourage that kind of activity.

Secondly, I give away about 50 percent of my income, so my, you know, desire to give back to the country is pretty strong and I intend to give away a lot more. I've signed the giving pledge with Warren Buffett and Bill Gates, and I intend to give away the bulk of my money. So yes, I do have a good income by most American standards, but I'm giving it away and doing the kinds of things that you mentioned the other day, the Washington Monument.

Third, I - I don't really set the - the rules about what income will be and taxes and so forth. If taxes are something that people are concerned about, Congress should change the taxes in the context of comprehensive tax reform.

And, most importantly, the money that I make, or my partners make, is perfectly aligned with our investors. If our investors make a lot of money, then we will make money. We typically get 20 percent of the profits. So if the pension funds that invest with us are doing very well, yes, we will do well. And because we're doing well, I'm fortunate to be able to give away the bulk of my money.

ZAKARIA: Do you know - you know that there is a proposal that the bulk of the money you make, which is currently taxed at capital gains rates, which is much lower than income tax rates, that that should be changed. There are a lot of people who feel that isn't fair, that this is really income, and it should be charged at a higher rate.

Do you support changing the rate of carried interest from capital gains to ordinary income?

RUBENSTEIN: Well, there are a very few people who actually go to Congress and say please tax me higher. Maybe there are some, but there - there aren't many. In my case, what I would like to do is to have Congress tackle a tax reform in a comprehensive way. Trying to do it peacefully I don't think usually works well.

When I worked in the White House for President Carter, we tried to do comprehensive tax reform and we made some progress, and other presidents have as well. I think if you want to change that particular provision, do it in the context of everything else.

The tax system we have today is not fair in many ways. I wish it could be improved. When you have 10,000 pages of regulations and nobody can fill out their own tax return, that's not a good thing.

So I wish we would change it, but don't blame me for complying with the law. All I'm doing is I'm filling out my tax returns - or my accountants are, and I'm paying whatever I'm supposed to pay, though I'm giving away a large amount of the money and that probably lowers my tax rate because I'm giving away so much money. But change the law, but don't blame me for the law. I'm not writing the law. I didn't write the law.

ZAKARIA: But in the context of comprehensive tax reform, you would be comfortable with a change -

RUBENSTEIN: I would like to see what the whole changes would be. I can't just pick one change out and say it should be this way or that way. I want to make sure that we have good incentives, though, for doing what we do well in our business.

The United States does very well in private equity, and we have a very good economy, the most innovative economy in the world, and I want to make sure we don't do anything in tax reform that would change that. We are the envy of the world still in the way our economy is so innovative and the way we do investments very well. I want to make sure that whatever Congress does, it - it encourages people to do the kind of investing that we do.

ZAKARIA: Let me ask you about the economy, because you're looking at it with all these companies that you own, with hundred billion dollars in revenue, and this would put you as one of the largest corporations in the world, really, if you were to count it that way. Do you get the feeling that the American economy is bouncing back?

RUBENSTEIN: The American economy is in better shape than people thought it was just six months ago. I expect that this year we'll grow at three percent, maybe 3.5 percent. Europe will probably be flat to - to negative.

So the United States economy, while we have too much debt - and I'm very concerned about that. We have $15 trillion of - of debt, and we're running a $1.3 trillion annual deficit. That has to be addressed, and I hope Congress and the president will address that relatively soon and not wait until after the next presidential election to address it.

But, given those debt figures, we are doing reasonably well. I think we would do better if we tackled our debt problem, though.

ZAKARIA: Let's talk for a second about the stuff that you buy and give away.

RUBENSTEIN: Sure.

ZAKARIA: So you - you're giving $7.5 million to clean the Washington Monument. You bought a -

RUBENSTEIN: More than clean it. It's to repair it. It's (INAUDIBLE) earthquake damage. Yes.

ZAKARIA: You bought a copy of the Emancipation Proclamation, and what did you do with it?

RUBENSTEIN: I have bought a number of historic documents, and I've put them on display at places where I think people can see them, because I think it's important for people to know about American history.

So I bought a copy of the Magna Carta, the only one in private hands. I've put that on display at the National Archives so Americans can see the document that inspired the Declaration of Independence and the Constitution and the Bill of Rights.

I bought a copy of the Emancipation Proclamation, and I've put that on display at the Oval Office, and I - the president is very pleased to have it there.

I bought a couple copies of the Declaration of Independence. One is on display at the State Department.

Recently I bought a copy of the 13th Amendment, which freed slaves, and that is going to be displayed somewhere else in Washington soon.

So I'm very proud of owning these documents and making - important - making sure that people can see them and learn American history. I'm very concerned that people don't know enough about our history and the rights that we have and the freedoms that we have. And I think if Americans would learn more about American history, I think we'd be a better country.

ZAKARIA: But you - and you buy all these documents. You don't keep any of them at home?

RUBENSTEIN: No.

ZAKARIA: If we were - if one were to go to your house, would there be any documents there?

RUBENSTEIN: No. My - I don't want to have things in my house because how many people are going to see them? I want the American people to see them.

So millions of people go to the - to the Archives. Millions of people going to the Smithsonian. Millions of people go to the State Department. And they can see these documents, and that's more important than having them in - displayed in my house.

ZAKARIA: David Rubenstein, pleasure to have you on.

RUBENSTEIN: My pleasure, Fareed.

GPS and Carlyle would like to close this CNN provided PEU infomercial with a well know song from The Graduate.

"Here's to you Mr. Rubenstein. Congress loves you more than you could know Coo, coo ka choo...."

Update 1-24-12: Financial News noted the GPS piece

CNN to Spotlight PEU's

2012-01-20T19:10:00.005-06:00

On the heels of WaPo and NYT's private equity puff pieces comes CNN's GPS. CNN World stated:

On GPS this Sunday at 10am and 1pm EST: In light of Mitt Romney’s role at Bain Capital, we take a rare look inside the world of “private equity.” What is this industry? How does it make so much money? Is it really all about firing workers?

Fareed speaks to a pioneer of the industry: David Rubenstein of The Carlyle Group, the world’s biggest private equity firm.

Rare is a critical examination of private equity's financial game playing, made more opaque by obtuse language, liquidity event, leveraged recapitalization, sponsor, economic net income, carried interest,

PEU Report covered private equity underwriters (PEU's) since 2006. Fareed is free to ask questions about Carlyle's past sins, but he'd do the public the most service exposing details of their latest S-1/A.

Carlyle Group (NASDAQ) shareholders are like one time election voters. Give Carlyle's DBD founders cash and get no rights. I expect Fareed to spend more time on panda's and the Washington Monument than LifeCare, SemGroup, Synagro, Brintons' or pension "pay to play." Media knows the price for PEU access. It's puff questions. Nothing about puffery.

Update 1-23-12: Bloomberg had the CNN PEU transcript the day before the program ran and produced a nice fluff piece for Carlyle's David Rubenstein. That should keep reported access. As for the show itself, Fareed omitted panda's, but the cameraman's posterior might be sore from the repeated ramming home of Rubenstein's Washington Monument donation. Fareed gave David plenty of air time for his philanthropic deeds. Nothing about any of Carlyle's past sins.

Carlyle's Rubenstein PPP's on Washington Monument

2012-01-19T19:14:00.002-06:00

Carlyle Group co-founder David Rubenstein donated $7.5 million to restore the Washington Monument. WaTi reported:

Rubenstein said he gave the money as a way to “repay my debt to the country.”

Given Rubenstein's vast wealth and low tax burden, his debt repayment could be viewed as pennies on the dollar. Rubenstein is happy to pay interest and debt. He and his ilk hate paying taxes.. WaPo reported:

In an interview, Rubenstein, 62, said he agreed to split the estimated $15 million repair bill with the federal government. Congress has already allocated the government’s share.

Officials had indicated that they were searching for a donor to match the government funding. Rubenstein said he offered to enter “a kind of public-private partnership (PPP) with the U.S. government.”

Rubenstein's move helps Carlyle in at least two ways. One, Carlyle has an infrastructure fund with over $1 billion, most of it ready to go to work in public-private partnerships. Two, the donation links a private equity underwriter (PEU) with the restoration of a national icon. This press is worth far more than any PEU media campaign blitz.

Boeing Ditches Wichita for Texas' Nonunion & Tax Breaks

2012-01-18T23:52:00.001-06:00

After winning the military air tanker contract, Boeing promised thousands of new jobs to the people of Wichita, Kansas. Those new jobs won't happen. To make matters worse, over 2,100 existing jobs will disappear.

Four hundred Wichita jobs will move to San Antonio, Texas to a nonunion shop. Governor Rick Perry said this of his efforts to make Texas attractive to Boeing:

Gov. Rick Perry ceremonially signed House Bill 3727, which relates to the appraisal of aircraft temporarily under production in Texas.

"HB 3727 makes it easier for companies like Boeing to have cost certainty when it comes to their tax bill, helping them commit to doing more business in this community and our state," Gov. Perry said. "This facility and the jobs it supports are part of Texas' economic success, and thanks to this bill, will continue to be part of San Antonio's robust economy."

HB 3727 requires aircraft temporarily located in Texas for manufacturing or assembly to be appraised at 10 percent of its market value. The bill also defines a temporary production aircraft as an aircraft with special airworthiness and flight permits and has a maximum takeoff weight of 145,000 pounds.

The littany of explanations for the move has begun, from Boeing to industry experts. Not said, Boeing needs to compete in the race to the lowest common denominator on worker benefits/pay, benefit from taxing entity giveaways and maximize nondebt, nonequity capital injections (cash and in-kind economic development assistance).

Here's what Texas, Oklahoma and Washington have to beat economic development wise (from Boeing's latest 10-K):

Industrial Revenue Bonds (IRBs) issued by the City of Wichita are used to finance the purchase and/or construction of real and personal property at our Wichita site. Tax benefits associated with IRBs include a ten-year property tax abatement and a sales tax exemption from the Kansas Department of Revenue. We record the property on our Consolidated Statements of Financial Position, along with a capital lease obligation to repay the proceeds of the IRB. We have also purchased the IRBs and therefore are the bondholders as well as the borrower/lessee of the property purchased with the IRB proceeds.

The capital lease obligation and IRB asset are recorded net in the Consolidated Statements of Financial Position. As of December 31, 2010 and 2009, the net assets associated with the City of Wichita IRBs were $822 (milllion) and $856 (million).

Is Boeing cramming down itself or simply shafting the people of Wichita? Here's Boeing's defense book of business (from an October 26, 2011 investor presentation):

A $59 billion backlog and $6 billion in orders weren't enough for Boeing to fulfill its Kansas promises. Approving the move were Red & PEU board members. Ken Duberstein and Susan Schwab represent the Red team, while private equity underwriters (PEU's) from KKR, Carlyle Group affiliate Nielsen, Oak HIll and Clayton, Dubilier & Rice occupy four seats.

Two former Boeing board members served President Obama, William Daley-Chief of Staff and John Bryson-Commerce Chief. Consider these fun facts, nuggets regarding those running the global race to the bottom, only political donations and executive pay are exempted.

Carlyle Group's Ban on Shareholder Lawsuits

2012-01-18T13:10:00.000-06:00

Bloomberg unveiled:

Carlyle Group LP, the Washington- based buyout company that’s preparing to go public, is seeking to bar its future shareholders from filing individual and class- action lawsuits.

The firm revised its governing documents last week to say that investors who purchase company shares must settle any subsequent claims against Carlyle through arbitration in Wilmington, Delaware. That could limit the ability of stockholders to win big awards for securities-law violations such as fraud, several attorneys said.

Will Bloomberg find how Carlyle's co-founders plan to retain control over executive compensation. A publicly listed Carlyle won't appoint a board level committee on executive pay. What are NASDAQ's standards? Carlyle Group investors fork over the money and get few rights.

Second PEU Puff Piece from the Majors

2012-01-17T22:32:00.002-06:00

NYT's Dealbook defended private equity via a piece on Paul Levy, a "low key" private equity underwriter (PEU). This followed WaPo's interview with University of Chicago Professor Steve Kaplan. Both men catered to The Carlyle Group and co-founder David Rubenstein.

Neither article mentioned "leveraged recapitalizations," i.e. "debt for dividend" bleeding, where PEU's recover most of their initial investment prior to any IPO or sale.

The majors omitted PEU's complete reliance on tax minimization. This occurs via:

1) Dramatically increased interest expense - PEU's would much rather pay interest than taxes.
2) Off-shoring to low tax portions of the world - take Carlyle's DBD Cayman
3) Preferred carried interest taxation - for those receiving investment profits
4) Virtual nonprofit status - Carlyle's effective tax rate is 1%.

Both articles cited private equity as pension savers, completely ignoring how Carlyle dumped pensions for two recent acquisitions, RAC and Brintons.

PEU practices are based on greed, which results in dubious ethical practices. It's nice when a PEU and its joint venture partners can pony up $70 million to "settle" a "pay to play", i.e. bribery investigation.

Why would NYT and WaPo omit the PEU nature of private equity? Take it as a clue to their sponsors.

PEU Rick Perry Catered to Vulture Capitalist

2012-01-16T21:51:00.002-06:00

Texas Governor Rick Perry attacked Presidential hopeful Mitt Romney in South Carolina by saying:

“I know the difference between venture capital[ism] and vulture capitalism. Venture capitalism is a good thing, comes in, gives that gap funding to help these companies get off and get started creating jobs, and work. But Mitt Romney and Bain Capital were involved with what I call vulture capitalism."

Perry stuck to his "vulture capitalism" guns on CNN: Chron reported:

Perry said as governor of Texas he had created one million jobs rather than “destructing businesses or destructing jobs” the way Romney had with his investment firm.

What does Rick Perry call a six year $35 million incentive, intended to produce 3,000 new jobs, which resulted in the elimination of 35 jobs? How would Rick Perry characterize a company that failed to deliver promised jobs from closing plants in Tennessee and Florida, instead keeping those plants open? The nondelivery came from a vulture capitalist, a private equity firm like Bain Capital.

Governor Perry should know, given he executed the $35 million Texas Infrastructure Fund grant for The Carlyle Group's Vought Aircraft Industries. Carlyle briefly dangled jobs from Vought's Boeing 787 Dreamliner work, but decided South Carolina's $65 million incentive and Senator Lindsey Graham's good graces outweighed Texas's deal.

The end result of Rick Perry's work? Private equity underwriter (PEU), The Carlyle Group, had $35 million in non-debt, non-equity capital to use for six years. When it became time to pay the piper, Perry renegotiated Vought's TEF deal in secret. He did so right before Carlyle sold Vought to Triumph. None of the proceeds were used to repay Texas taxpayers.

Rick Perry gave free money to vulture capitalist Carlyle. The Carlyle Group's recent dealings with Brintons reveals much. Carlyle used discounted debt to takeover Bintons, a back door move. It shed Brintons' pension, cut jobs and sent production to China.

Perry's political lingo is just that, a ploy to garner votes.. Rick Perry loves PEU's. He'd love a trillion dollar federal budget, all the more money to send to his friends and backers. .

PEU's to Exit BankUnited?

2012-01-15T21:00:00.001-06:00

Reuters reported:

Private equity-backed BankUnited Inc has hired Goldman Sachs Group to explore a potential sale.

That's the widely hated Goldman Sachs helping private equity underwriters complete their profitgasm on BankUnited.

BankUnited was taken over and recapitalized by private investors such as Wilbur Ross's WL Ross & Co, Blackstone Group LP and Carlyle Group CYL.UL during the financial crisis, and went public in January 2011.

Reuters omitted the FDIC's $2.27 billion cash injection in BankUnited. This non-debt, non-equity capital injection made BankUnited the best capitalized bank in America. Where can others line up for 72 cents on the dollar of free money? Oh, the game is for PEU's only. Dang!

PEU's may soon flip the 28 cents on the dollar they put up for BankUnited,, but they'll get 100% of the profits. BankUnited took in $780 million in their 2011 IPO. Add $40 million in transactions fees, dividends and special dividends and PEU investors have nearly free shares. BU's owners initial investment was $900 million. Will it be a double, triple or quadruple?

SNL vs. WaPo on Private Equity

2012-01-14T23:40:00.002-06:00

Saturday Night Live kicked off with a skit spoofing Presidential hopeful Mitt Romney's love for firing people as a former private equity maven.

Donald Graham's Washington Post ran a fluffier piece Saturday night. It could've come from the Private Equity Growth Capital Council (PEGCC). My guess is Thomas Heath and University of Chicago business professor Steve Kaplan made Carlyle co-founder David Rubenstein very happy.

There was no mention how PEU's bleed companies via special dividends, often returning all their upfront equity investment pre-IPO, or pension dumping which happened when Carlyle took over RAC and Brintons. American Airlines' employees could face a similar fate should a PEU become their "sponsor.".

America had a choice Saturday night regarding private equity, funny vs. fluffy.
In five minutes the SNL skit informed more Americans than my five years of blogging.at PEU Report. (PEU stands for private equity underwriter, my pet name for the greed and leverage boys.) While SNL's spoof had span, PEU Report offers research based depth. Feel free to mine it. It's a window into purchased politicians and their PEU sponsors.

How Congress Loves PEU's

2012-01-14T00:03:00.001-06:00

Let me count the nontax ways the U.S. Congress showed love to private equity underwriters (PEU's). Over the last six years The Carlyle Group paid a tax rate of 1%.

The Carlyle Group's David Rubenstein personally visited Congressmen to save PEU preferred carried interest taxation multiple times. Carlyle is a virtual nonprofit.

Four Carlyle principals attended an Inauguration Eve party for newly elected President Barack Obama, only three had their Carlyle credentials omitted. T.F. "Mac" McLarty, co-founder David Rubenstein, and Ed Mathias never cited their Carlyle slots. Only William Kennard listed his employer, The Carlyle Group.

Other PEU's represented at the 2009 soiree included KKR, Perseus, RLJ ( a joint venture partner with Carlyle), Ariel Capital and Ripplewood. Ripplewood purchased Hostess Twinkies in February 2009, sending it into bankruptcy this week. Purchased politicians and their high dollar donors seem bankrupt, much like the Ding Dong.

Tax Wise: Carlyle Group NonProfit for Billionaires

2012-01-10T23:27:00.007-06:00

The Carlyle Group's latest IPO filing bolstered its virtual nonprofit status. Of nearly $920 million in net income, Carlyle paid Uncle Sam $25.7 million, a corporate income tax rate of 2.79%.

Carlyle co-founders and investors bear the tax burden, discounted via preferred carried interest taxation. Here's the breakdown:

Billionaires Rubenstein, Conway and D'Aniello are the three largest equity holders of Carlyle. They stand to make billions more from monetizing their holdings.

Our founders currently have no immediate plans to cease providing services to our firm, but our founders and other key personnel are not obligated to remain employed with us. In addition, a portion of the Carlyle Holdings partnership units that certain of our key personnel will receive in the reorganization, as described in “Organizational Structure,” will be fully vested upon issuance.

After going public, this troika will continue to make executive compensation decisions, not the Board of Directors. The S-1/A states:

Compensation Committee Interlocks and Insider Participation

We do not have a compensation committee. Our founders, Messrs. Conway, D’Aniello and Rubenstein, have historically made all final determinations regarding executive officer compensation. The board of directors of our general partner has determined that maintaining our current compensation practices following this offering is desirable and intends that these practices will continue. Accordingly, the board of directors of our general partner does not intend to establish a compensation committee. For a description of certain transactions between us and Messrs. Conway, D’Aniello and Rubenstein, see “Certain Relationships and Related Person Transactions.”

Add the Equity Incentive Plan, also under co-founder control via a double delegation move:

The board of directors of our general partner will administer the Equity Incentive Plan. However, the board of directors of our general partner may delegate such authority, including to a committee or subcommittee of the board of directors, and the board intends to effect such a delegation to a committee comprising Messrs. Conway, D’Aniello and Rubenstein.

What the Egyptian Army couldn't do, Carlyle's co-founders accomplished. The state of their pay is solely in their hands. NASDAQ shareholders' place is helping them cash out. PEU boys know best.

Update 1-11-12: Crain's Business finally picked up Carlyle's preferred tax status as a PEU, which I noted in September 2011. The S-1/A stated “If we were taxed as a U.S. corporation, our effective tax rate would increase significantly.”

Update 1-19-12: NYT finally noticed Carlyle's shareholder unfriendly IPO Better late than never.

PEGCC to Fight Romney PEU Taint

2012-01-09T20:58:00.004-06:00

The Private Equity Growth Capital Council (PEGCC) plans to defend the Bain Capitals of the world, currently under attack given Presidential hopeful Mitt Romney's frontrunner slot in the Republican Presidential nomination. Romney's Bain Capital, like Blackstone and The Carlyle Group, are private equity underwriters (PEUs).

Romney competitor Newt Gingrich and financial backer Sheldon Adelsen made a 30 minute film exposing PEU practices, job cuts and exportation, loading firms up with debt/higher interest expense, dividend bleeding and flipping companies for doubles and triples after a few years.

PEU Report started in 2007 when I noticed leadership had turned to greedership. The Private Equity Council, the name of the lobbying group before it added Growth Capital, used advantaged minorities to save their preferred carried interest taxation.

After the 2008 financial crisis, PEU's said they posed no systemic risk. Horse hockey! The Carlyle Group was saved by a CalPERS $681 million capital injection.

The unholy alliance of politicians and big money resulted in PEU's keeping low to no taxes. The Carlyle Group is a virtual nonprofit organization, according to its IPO filings.

PEGCC can dust off a prior campaign showing the industry as job creators, just as they pulled a deja vu on "no systemic risk."

Rest assured, more candidates over time will carry the PEU taint. It's rare to find an ex-politician without a Senior Advisor PEU position. It's the pool from which candidates arise and the funds that serve as political oxygen.

Newt Gingrich, slime-ball extraordinaire and ex-adviser to PEU Forstmann Little, will use billionaire Sheldon Adelsen's money to make points made numerous times on PEU Report. The competition to win and send trillions in government spending to one's friends is compelling.

I offer an updated name to the private equity lobby. It's Private Equity Capital Knowledge Executed Responsibly (PECKER), much to the benefit of investors.

Gird yourself for their next campaign. Will it be a non-debt, non-equity government injection or a leveraged recapitalization? Things could get feverish.

Update 1-18-12: Newt Gingrich solidified his sleazy nature by taking $60,000 to speak effusively about private equity for JLL Investors. Dealbook elevated JLL's founder in a PEU puff piece. Credibility established, JLL's CEO took a box knife to Newt's dangling gonads, which he wears on the outside of this pants. Sleaze personified..

Novartis's "$120 Million Recall" Recalls Johnson & Johnson

2012-01-08T15:05:00.001-06:00

Reuters reported:

Novartis's consumer health unit will take a $120 million hit in the fourth quarter after the Swiss drugmaker decided to voluntarily recall four products in the United States and improve quality standards at manufacturing sites.

Products recalled include Excedrin, NoDoz, Bufferin and Gas-X. Novartis said problems included:

Consumer complaints “of chipped and broken pills and inconsistent bottle packaging line clearance practices possibly resulting in mixed tablets.”

I guarantee no customer cited "inconsistent bottle packaging line clearance practices" while complaining of mixed tablets. It's bad enough giving customers defective pills, but stuffing words in their mouth? Risk management and marketing people know no shame.

How far did the quality bar fall at Novartis? Novartis gets to retool their manufacturing practices, much like Johnson & Johnson. Current stories of storied firms bear the mark of poor quality.

Update 1-9-12: Novartis' Lincoln plant made opiate drugs for Endo Pharmaceuticals. Opiates may be mixed in with OTC Novartis drugs and visa versa. The FDA recommends "patients and healthcare professionals examine opiate medicines made by Endo in their possession and ensure all tablets are the same. Healthcare professionals and patients are encouraged to report adverse events or side effects related to the use of these products to the FDA's MedWatch Safety Information and Adverse Event Reporting Program:"

People Paid Attention

2012-01-08T12:30:00.004-06:00

America's decade of mean and greedy leaders was noticed by the public.

"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."--GE CEO Jeff Immelt on December 9, 2009

Recent poll results show:

83 percent said they have less trust in “politics in general” than 10 or 15 years ago

79 percent said they have less trust in big business and major corporations

78 percent said they have less trust in government

72 percent reported declining trust in the media

These figures are startling when compared with Gallup polling from the 1970's or right after 9-11-2001, when as many as 70 percent of Americans had “trust and confidence” that the government could handle problems.

The 70's lacked excessive and complex Executive Compensation formulas. During that decade social scientists and management theorists increased our understanding of intrinsic motivation, the innate desire desire to do good work. Pay served as a secondary motivator, as long as it was fair.

The new millennium, with its over reliance on extrinsic manipulation through rewards/punishment, snuffed out people's natural desire to do good work.

Many watched the decimation of their job, while top executives raked it in and politicians entered the unholy alliance of using the power of the government purse to benefit donors. Those strange days continue, but it seems people noticed.

2011: A PEU Year

2012-01-07T23:04:00.000-06:00

WSJ reported that $200 billion in deals went down in 2011:

Blackstone led the pack with $16.4 billion worth of completed deals, while Carlyle Group and KKR rounded out the top three, with $14.9 billion and $14 billion respectively. TPG, with $12.6 billion and Apax with $11.5 billion followed closely behind.

Carlyle distributed $15 billion to investors over the first nine months of 2011, more than the $14.9 billion in deals listed. 2011 was also the year Carlyle co-founder David Rubenstein topped all D.C. donors. My guess is Rubenstein hates coming in #2.

De-Puffing Carlyle IPO

2012-01-06T21:56:00.000-06:00

NewsMax reported on 2012's stalled IPO market:

More than 200 companies have their IPO plans on hold, the biggest amount in about 10 years, according to Renaissance.

Investors are excited about a potential offering from Facebook. But people aren’t so excited about other companies waiting to go public, such as Toys “R” Us, Yelp, and the Carlyle Group.

Apparently Dan Weil isn't aware of the fealty required when addressing Carlyle's billionaire co-founders. Carlyle has puffed its IPO for quite some time. They don't need Weil to let the PEU air out of the bag. PEU is my acronym for private equity underwriters. How long before they become history?

China Forestry Fells Audit Firm KPMG

2012-01-06T20:53:00.000-06:00

Hong Kong suspended trading of China Forestry's on January 26, 2011. Nearly a year later KPMG fired China Forestry as an audit client, citing valuation concerns. The Carlyle Group sponsors China Forestry. One Asian investment professional stated:

"Chinese private companies tend to not be very transparent and we've had bad experience in the past where accounts are not reliable and the companies' conduct not very ethical after they go public."

The Carlyle Group took China Forestry public in November 2009, when Reuters reported:

China Forestry Holdings Group, a forestry plantation operator backed by the Carlyle Group [CYL.UL], priced its initial offering of shares near the top of an indicative range, raising HK$1.55 billion ($200 million), a source involved in the deal said on Wednesday.

Did investors rely on fraudulent financial information in the prospectus? This isn't the first time Carlyle got hoodwinked by an affiliate. SemGroup, a staid energy pipeline company, imploded from bad energy bets. SemGroup's SEC filings make no mention of such "investments." Louis Freeh conducted the investigation into the SemGroup debacle.

China Forestry's investigation is ongoing. KPMG stated last year there was "serious doubt over the authenticity and reliability of records and documents of the group."

The investigation should "identify all irregularities that may have occurred and all management and officers involved in the irregularities, trace where the group spent the proceeds from the initial public offering and reconcile the details of recorded plantation assets."

What about Carlyle's proceeds from the IPO? I smell clawback and lawsuits. Carlyle knows how to vigorous defend itself.

Carlyle's Opportunistic CRP VI

2012-01-06T00:13:00.000-06:00

Washington Business Journal reported:

D.C.-based The Carlyle Group LLC has raised $2.34 billion to invest in real estate in the Washington area, New York and some cities on the West Coast.

Carlyle Realty Partners VI, also known as CRP VI, plans "opportunistic" investments in residential, hotel, senior living, retail and office properties. It already has deployed about 20 percent of its assets.

What about PEU Carlyle isn't opportunistic?

Carlyle's Turkey Time

2012-01-03T20:40:00.000-06:00

The Carlyle Group, a private equity underwriter (PEU) with $148 billion under management, made its third investment in Turkey. FT reported:

Carlyle Group has taken a 48 per cent stake in Bahcesehir Koleji, a Turkish education company.

Carlyle's first invested in Turkey in 2008 with a 50 percent stake in TVK Shipyard (TVK), a Turkish shipbuilder specializing in chemical tankers and other specialty vessels. The second came in late 2009 when Carlyle acquired a 40 percent stake in Medical Park Sağlık Hizmetleri A. Ş., Turkey's second largest healthcare services company.

Carlyle hopes to solve America's ills in education, healthcare and infrastructure. How much can a PEU cure when it only holds an affiliate two years before monetizing it? That's the status of Medical Park, according to InvestIQ.

Santorum's UHS Sees Black People

2012-01-02T22:15:00.005-06:00

"I don't want to make black people's lives better by giving them somebody else's money; I want to give them the opportunity to go out and earn the money."-- Rick Santorum in Iowa

Ex-Senator Rick Santorum served on the board of Universal Health Services, a for-profit hospital company for four years. Santorum resigned when he announced his Presidential run in June 2011.

Oddly, UHS' payor mix shows Uncle Sam at 46% of acute care and 57% of behavioral health revenue.

Roughly half of UHS' business comes via Medicare and Medicaid, i.e. other people's money.

As more Americans struggled to keep health insurance coverage, UHS drove down charity care and bad debts by five percentage points, a drop of nearly 25%. This occurred while Rick Santorum provided board oversight.

UHS' stinginess on charity care likely meant a greater burden for safety net providers. I noted this nearly two years ago. My point made UHS' investor presentation:

Recently UHS inked a deal to acquire a South Texas nonprofit, community hospital. The Monitor reported:

Selling the community hospital will prevent a "slow death" caused by government cuts to Medicaid and Medicare reimbursement rates and competition from surrounding hospitals with more resources to draw upon, said John Lackey, the chair of the hospital board that approved the sale. Although Knapp’s board expects the hospital to turn a small profit this year, he said, it will become increasingly difficult in the future.

"The ability for a standalone community hospital to compete with the big guys to either side of us is coming to end," Lackey told the council. "We’re trying to do what’s right for the hospital and our community."

Weslaco City Council and area physicians declared war on UHS, which owns seven hospitals in South Texas. UHS devoted three slides in its latest investor presentation to the South Texas market.

Ironically, this area was the focus of a New Yorker piece cited by President Obama as foundational to health reform. The President ignored the Mayo Clinic's outstanding performance, achieved by unleashing clinicians' intrinsic motivation. Obama's team chose the extrinsic motivation model, espoused by the UHS' of the world.

UHS' growth in 2011 is impressive, but leverage could come back to haunt. How much did UHS' interest expense rise in the last year? Interest expense rose over $120 million, an increase of 333%. It's another clue healthcare costs aren't going down under dealmakers.

Rick Santorum sides with the monied and he's not alone. It's a Red and Blue affair. As Santorum noted, it's mostly white as well. All for the green...

Update 1-4-12: Santorum stated he said "blah" people vs. "black" people. So that's how they got enough k's to form the KKK..

Update 1-29-12: Forbes noted how Red and Blue love PEU's..

Santorum's UHS Adventure

2012-01-02T20:34:00.004-06:00

After retiring from the U.S. Senate, Rick Santorum joined the Board of Directors of Universal Health Services, a for-profit hospital chain. SEC filings show his board pay.

2007-	$ 50,412
2008	- $ 77,958
2009-	$ 45,000
2010	- $176,402
Total	$ 349,772

Rick Santorum resigned from the UHS board on June 15, 2011 with $2.3 million in gross holdings from stock and options.

A 2008 SEC filing noted Santorum's post-public service work:

Consultant to the law firm of Eckert Seamans Cherin & Mellott, LLC, Washington, D.C. Senior fellow at the Ethics and Public Policy Center, Washington, D.C.

Eckert Seamans press release on hiring Santorum mentioned health care.

Mr. Santorum was a strong supporter of the establishment of Health Savings Accounts (HSAs), which are giving millions of Americans ownership over their health insurance options. And as a member of the Senate Finance Committee, he was instrumental in helping more than a dozen Pennsylvania hospitals obtain the necessary Medicare reimbursements to ensure that hundreds of their doctors, nurses and staff can continue serving patients.

Later UHS filings showed Santorum as President of Mpower Media, LLC in Reston, Virginia.

Mpower Media was founded by Ken Ferguson and Steve McEveety to allow parents to control the media content their children are exposed to on television and the Internet. Mpower provides families with a box to plug into existing cable and Internet connections, and then families can customize the content their children are exposed to.

Santorum's BigThink's bio cited his role as Vice President of Business Development for MPower. Oddly, the company's website says "coming soon," which might not be the best tag line for a firm trying to stamp out porn.

America faces many addictions at this juncture, money, power, sex. Politics frequently is the conjunction of all three. Is that why UHS President stated, "Rick’s guidance and stewardship will be sorely missed”?

Vampire PEUs: Uptick in Divident Bleeding

2012-01-02T14:55:00.000-06:00

Two private equity underwriter (PEU) strategies will lever up in 2012. Leveraged loans from prior deals will need refinancing. Also, PEUs will wrestle with how much cash to pull from affiliates via dividends. FT reported:

Private equity groups and financiers are expecting a strong start for the US leveraged loan market in 2012 as a light pipeline for new issues creates an opportunity to refinance portfolio companies and pay dividends to sponsors.

Dividend recapitalizations, more accurately stated, are new debt for dividends. They're synonymous with second mortgages, where the homeowner doesn't put the money back into the house, but in their wallet. KKR and company stuck HCA for $4.25 billion in dividends, financed by $1.5 billion in additional debt.

This FT article didn't note that many deals done during 2007, an orgy of highly leveraged buyout activity, need refinancing in 2012. Who will keep financial vampires and their offspring afloat?

Health Care Nots Portend?

2012-01-02T13:44:00.001-06:00

Gail Wilensky, a former Medicare administrator and adviser to Republicans told the Associated Press:

"Medicare as we have known it is not part of our future."

Add the 2006 comment from Andy Stern, former Service Employees International Union President.

"We have to recognize that employer-based health care is ending. It's dying. It will not return,"

With government and employers capping their health care exposure,the individual will bear the brunt of increased costs.

Yet, one group has hope. The greed boys have their eye on health care as the ground shifts mightily. Which brings us back to Gail Wilensky, clearly part of the big money club. She received over $1.1 million for her part time board work, with $1 million coming from health care companies that serve Medicare.

		Board Pay

Quest Diagnostics		$279,648
United Health		$302,565
Cephalon		$440,400
SRA International		$114,114
Brianscope		privately held

Her stock and option holdings stood at:
(number of shares according to latest SEC filings DEF 14A):

Quest Diagnostics		341,889
United Health		314,913
Cephalon		105,000

The gross amount of these holdings totaled $44 million, nearly $20 million in Quest and $16 million in United Health. Wilensky's personal proceeds would be less, given stock options usually come with an exercise price.

Under Wilensky's directorship ManorCare was sold to The Carlyle Group, SRA International to Providence Equity Partners and Cephalon to Teva Pharmaceuticals. Both Carlyle and Providence are private equity underwriters (PEUs).

Gail Wilensky pioneered greed with her call for Medicare Pay for Performance in 2003. Wilensky experienced this personally at United Health, where CEO William McGuire robbed shareholders by backdating stock options. Extrinsic motivators distorted behavior to garner the prize, a lesson Wilensky is yet to learn.

Medicare Pay for Performance will cause the same distortions over time. Will 30% lie, cheat or steal to garner the prize, like corporate CEOs?

Wilensky's firms, the ones yet to sell out, are betting on Medicare changing and employers pulling back. They plan to serve the monied side of healthcare, which leaves providers scrambling to repair holes in the safety net. For many safety net providers the repair job will be too great. They'll sell out for rock bottom prices to the Wilenskys and PEUs of the world, which will flip them later for huge profits.

Are you starting to see the game? Their wallet gets fatter, while yours thins. If that's not galling enough, they're playing with your life. Welcome to PPP & P4P, where you pay.

Pandas Cute, PEUs Aren't

2012-01-01T10:25:00.005-06:00

"There are probably 10 million species on the face of the earth, and I doubt that any one of those species is more popular and more beloved than the giant panda,"--David Rubenstein, co-founder Carlyle Group, a private equity firm

At least in China, where China Daily reported:

David Rubenstein, co-founder of The Carlyle Group, recently affirmed his love of pandas by donating $4.5 million to the giant panda program at the Smithsonian National Zoo. The gift will help to fund conservation efforts in China, including research in the reproductive systems of pandas and professional training programs.

It will also be used to care for the giant pandas Tian Tian (male) and Mei Xiang (female) living at the zoo and upgrade the zoo's habitats as well as beef up public education about the furry creatures.

In appreciation of Rubenstein's donation, the giant panda complex will be named the David Rubenstein Family Giant Panda Habitat.

Contrast beloved pandas with private equity underwriters (PEUs), vilified as greedy, financial manipulators, job eliminators/exporters, debt chokers and corporate flippers. Does David Rubenstein wish to improve his image by association? Let's hope the PEU taint doesn't rub off on Tian Tian.

Meanwhile China morphs into the David Rubenstein Private Equity Underwriter Landscape, which can be abbreviated DR PEU L. How has China's economic development, driven by the Rubenstein's of the world, impacted panda habitat? Are precious natural resources being stripped for the Chinese economic machine, known for suspect quality, and profit?

This donation should win Rubenstein points in Carlyle's favorite part of the world.

Zhang Yesui, Chinese ambassador to the United States, expressed his appreciation for the contribution.

Ah, it already has. What China opportunities will arise in the next five years for Carlyle, the Asia-Pacific PEU of the year? Rubenstein, the consummate salesman, gave the consummate gift.

Oil Spew Co-Chair "Flew" ConocoPhillips

2011-12-31T10:47:00.001-06:00

When President Obama appointed William K Reilly as Co-Chair of his Oil Spew Commission, Reilly reluctantly took a leave of absence from the ConocoPhillips board of directors. ConocoPhillips 2011 DEF 14-A stated:

As a consequence of his leave of absence, Mr. Reilly received no compensation during the period from July 2010 through December 2010.

Oddly, Reilly received the highest tax reimbursement of any board member in 2010.

The amounts shown are for payments by the Company relating to certain taxes incurred by the director. These primarily occur when the Company requests spouses or other guests to accompany the director to Company functions, including Board and Committee meetings, and as a result, the director is deemed to make a personal use of Company assets (for example, when a spouse accompanies a director on a Company aircraft). In such circumstances, if the director is imputed income in accordance with the applicable tax laws, the Company will generally reimburse the director for the increased tax costs.

How does a board member taking half a year off get the largest tax subsidy from the company for personal use of corporate assets? At a 35% tax rate, which people like Reilly rarely pay, ConocoPhillips gave William Reilly nearly $20,000 in use of corporate assets.

Did any trips have to do with keeping the Gulf of Mexico and offshore Alaska open for drilling? ConcoPhillips' website states:

ConocoPhillips plans further appraisal of the Poseidon discovery in the Browse Basin, offshore Australia, and the Tiber and Shenandoah discoveries in the Gulf of Mexico.

The company also plans to test material prospects in the Gulf of Mexico and Kazakhstan.

Reilly did his job, given the Gulf of Mexico is going whole hog, a mere twenty months after the Deepwater Horizon turned into a hellish fireball and nineteen months after Reilly's co-chair appointment. The oilgasm is back on track.

WSJ Aids Carlyle's IPO Push

2011-12-30T20:28:00.000-06:00

The Wall Street Journal highlighted how The Carlyle Group avoided the European meltdown. It reported:

Carlyle Group, setting itself up for a planned IPO in 2012, turned in a stronger year of investment and exits in 2011, bucking the prevailing gloom across Europe and buying companies in a range of sectors and sizes while managing a series of successful asset sales.

WSJ failed to mention on whose back Carlyle entered two European investments, RAC and Brintons. It was employees. Carlyle shed pension plan responsibility at both RAC and Brintons.

WSJ charitably referred to Carlyle's buyout of Brintons:

Carlyle Strategic Partners bought upmarket carpet-maker Brintons out of administration.

As debt holder Carlyle forced Brintons' into a prepackaged bankruptcy. The Brintons' family may not pony up funds anytime soon for Carlyle investments, despite the "record $15 billion return to investors over the year from The Carlyle Group's global activities." WSJ sold Carlyle from start to finish. That should ensure reporter access.

Carlyle's Christmas in Apple Valley

2011-12-25T22:10:00.002-06:00

The Carlyle Group's purchase of Park Water was recently approved by regulators in California and Montana. Carlyle already has two prospective purchasers of Park Water's holdings, Mountain Water in Missoula, Montana and Apple Valley Ranchos Water Company in Apple Valley, California. The deal is Carlyle's first venture into public water infrastructure. Having two buyers right off, that's a Christmas PEU present.

Update 12-30-11: Carlyle took over the company on December 20, 2011. It's the day greed won. Remember 12-20-11.

Carlyle Group PEU of the Year

2011-12-21T22:07:00.001-06:00

Financial Times and mergermarket named winners of their annual Asia-Pacific M&A Awards, which recognize excellence in dealmaking across the region.

Private Equity Underwriter (PEU) of the Year -- The Carlyle Group

These awards "highlight the most outstanding advisory firms in the M&A market each year, providing them the market recognition they deserve." Yes, the deserving Carlyle Group that foisted China Forestry and China Agritech on the world.

Edinburgh Airport: Carlyle's Next Infrastructure Deal?

2011-12-18T14:04:00.000-06:00

The Edinburgh Airport, Scotland's largest, is up for bid in January 2012. The Carlyle Group formed a bidding consortium, according to FT:

BAA is hoping to fetch at least £500m for the airport, which made £44m of earnings before interest, tax, depreciation and amortisation in the past year.

How far with the £44m fall after Carlyle management fees, added interest expense and amortization of goodwill?

PEU Buying into Distressed Debt

2011-12-18T10:42:00.001-06:00

When the front door closes for leveraged buyouts, private equity underwriters (PEUs) head out back. PEUs are after distressed debt, with refinancing looming and extremely difficult to obtain.

Bloomberg reported:

Carlyle Group LP, the Washington- based private-equity firm, is in talks to buy Highland Capital Management LP’s unit that manages $3 billion in collateralized loan obligations in Europe.

GSO Capital Partners LP, the debt unit of Blackstone, became the largest manager of CLOs in Europe after acquiring Dublin-based Harbourmaster Capital Management Ltd. in early October, tripling its European loans under management to 11.5 billion euros.

SCI reported:

Euro CMBS refi warning
Limited availability of refinancing for maturing loans will be the key threat to the credit quality of outstanding CMBS transactions in 2012, according to Moody's. A significant gap exists between refinancing needs and available financing.

When markets become distressed, PEUs go shopping, but with whose money?

"Specifically, we foresee that investment through CLOs will consolidate significantly and that there will be a broader range of investors in the high yield asset class, including credit funds, insurance companies and pension funds."

Underfunded pensions need greater returns. Greed, spread the poison.

Rick Perry Receives Texas Retirement Pay & Salary

2011-12-17T23:45:00.001-06:00

Texas Governor Rick Perry's compensation, courtesy of taxpayers, is $225,400, of which $133,000 is salary and $92,400 in retirement benefits, While Social Security can't afford to pay people turning 65, Texas taxpayers gave Perry an early non-retirement bonus at age 61. There's nothing conservative about a politician double dipping.

It's a Wonderful Carlyle

2011-12-15T23:06:00.002-06:00

Where's Clarence the Angel when you need him? I'd like to be reminded of the world before private equity underwriters sucked the humor from its surface.

Jon Corzine's Lyndie England: Back Office Staff

2011-12-15T21:29:00.002-06:00

MF Global CEO Jon Corzine's story evolved over time. Days ago Corzine claimed to be so big picture that he didn't know his firm was imploding. Today he offered another version, telling lawmakers:

"the firm’s back-office staff 'explicitly' informed him that fund transfers made before the company filed for bankruptcy were legal."

When did back office staff become lawyers and judges? What did MF Global's compliance officer say? How about their board?

The Board has responsibility for providing direction and oversight for management of the Company’s business and affairs, establishing the Company’s long-term objectives and strategy while overseeing the Company’s business performance and management, including risk management. The Company’s enterprise risk management approach flows from the Board, which determines the Company’s risk appetite, and permeates through the Company via a culture that expects all employees to function as risk managers. This approach involves a strong governance structure that clearly defines responsibilities, delegated authorities for risk control as well as risk-taking and documented policies designed to identify, measure, control and mitigate risk.

Blame flows downhill, but it might not stick.

PSC Gives Approval for Carlyle to Buy Mountain Water

2011-12-15T20:07:00.000-06:00

It's rare when a private equity underwriter (PEU) has a willing buyer for an affiliate, before the company joins the PEU family. But that's the case with The Carlyle Group's Mountain Water, which serves Missoula, Montana. The Missoula City Council has long wanted to buy their public water source, owned by a private company, Park Water. Park struck a $102 million deal with Carlyle's infrastructure fund to sell Mountain Water.

Montana's Public Service Commission voted 3-2 to approve Carlyle's purchase. For Carlyle to make its 20% annual return on investment, after three years it would need to sell Mountain Water to the City of Missoula for $176.3 million. Watch how long Carlyle holds and how much they want for Mountain Water. It will be telling.

Incidentally, the Missoulian called Carlyle a $160 billion investment firm. Carlyle's website differs:

The Carlyle Group is a global alternative asset manager with $148 billion in assets under management in 89 active funds and 52 fund of fund vehicles.

What's $12 billion amongst friends?

Carlyle & Coke: Saudi 42 Percent Club

2011-12-14T23:40:00.000-06:00

The Carlyle Group and Coca Cola each invested in Saudi food companies, taking an identical 42% stake. Carlyle bought into Alamar Foods, franchise operator for Domino's Pizza and Wendy's restaurants in the Middle East and North Africa. Coke invested in Aujan Group, a regional sweet drinks maker.

The Arab Spring means fast food and sugary sodas, not to mention fat profits for private equity underwriters and American branded multinationals.

PEU PPD

2011-12-14T23:21:00.000-06:00

Two vectors of greed intersected in PPD, as The Carlyle Group closed on the contract drug research firm. The first is private equity's desire to make huge returns in health care, already prohibitively expensive. Throw in management fees, increased interest expenses, special dividends/distributions and an expected 30% annual ROI and health care costs aren't going down.

The second manifestation of greed came from PPD's golden parachute for their CEO for three months work. StarNews reported:

PPD said that Hill would receive $3.065 million as part of golden parachute payments to top executives and board members if the deal with Carlyle and Hellman & Friedman was consummated.

That's $1 million per month worked in retirement. It's a PEU world.

Select Few Fill Campaign Money Trough

2011-12-14T21:00:00.002-06:00

The Sunlight Foundation reported 17 Americans gave more than $500,000 each to political campaigns and political action committees in the 2010 midterm elections.

The donor elite of both parties tend to live in big cities — especially New York, Washington, Chicago and Los Angeles.

It'd be interesting to see their return on investment from federal business as well as their effective tax rates. Donations likely drive continued tax avoidance.

Seventeen political finance heavyweights garner what in return, besides Bush Pioneer and Obama Bundler status? They train 'em well in D.C.

Are we really building a better America?

Fed Concerned Over MF Global's Internal Controls

2011-12-14T20:00:00.000-06:00

FT reported the NY Fed approved MF Global's status as a primary dealer, despite concerns over the investment bank's internal controls. A visit by MF Global CEO Jon Corzine helped grease the skids for approval, which came in February 2011. Eight months later MF Global declared bankruptcy.

The Federal Reserve stated primary dealer status is not a Good Housekeeping Seal of Approval.

Media Pandering over Carlyle's Rubenstein

2011-12-12T23:16:00.000-06:00

Old and new media ran effusive pieces on The Carlyle Group's David Rubenstein. Fortune called him the Best of Wall Street, citing several Carlyle bonanza cash-ins.

Fortune may want to share their analysis with Forbes, who couldn't track the impact of those cash-ins on Rubenstein's billions. HuffPo's Jerry Jasinowki called Rubenstein "one of our nation's most successful investors, as well as an experienced government policy maker."

I would suggest Rubenstein's billions gives him special influence in government policy, whether red or blue led. It's the New American way. Mr. Rubenstein, watch out for the Peuparazzi.

PEU Ships to Come In?

2011-12-11T13:44:00.000-06:00

FT reported:

When Wilbur Ross, one of the world’s leading distressed asset investors, announced his first shipping investment on August 1, reactions within the shipping industry were mixed. Some welcomed Mr Ross’s investment as a sign that the steady recent trickle of private equity investment into the industry might turn into a flood of fresh capital.

Wilbur Ross and The Carlyle Group specialize in distressed asset turnarounds, some with lethal consequences. Carlyle recently executed a Chinese ships deal, after one Chinese affiliate had its stock trading suspended.

FT went on to say:

Some shipping industry figures say private equity return expectations are simply unrealistic.

Note: Private equity underwriters (PEUs) are the answer to America's ills in healthcare, infrastructure and education. How much Montana water would it take to float a Carlyle Chinese ship?

CEO Severance Packages Worsen Peformance

2011-12-11T11:25:00.005-06:00

CEO Golden Parachutes, multimillion dollar severance packages, are associated with poorer corporate performance, according to a Tulane University study. Chief Executive.net reported:

After putting a severance agreement in place, on average, companies underperformed the markets by 1.6 percent. And companies whose agreement was cash-only underperformed the markets by 4 percent.

56 percent of S&P 500 companies offer severance packages.

Over half with severance packages is interesting in light of CEOs populating one another's board of directors. Tulane Finance Professor Peggy Huang conducted the study after seeing a 175% rise in the use of CEO severance packages

1993 - 20% of firms offered golden parachutes
2007 - 55%gave severance packages

Professor Huang suggested switching from cash severance to packages with stock and options substantially represented. Huang believes this aligns the CEO with the interests of the firm. Following her research, that would move a firm from 4% to 1.6% under performance.

There is another problem with her recommendation. Did Huang forget the CEO stock option backdating scandal which ran from the early "90's to to 2004? CEOs cheated on a widespread basis, as 29.2% of 7,774 companies engaged in
"timing manipulation" for executive stock option grants.

CEO pay exploded in 2007. CEO pay in 2010 rose mightily for most chief executives rom 2009. The WSJ conducts an annual study of CEO compensation, with the latest covering 2010.

Consider my CEO compensation comment from September 2007:

Free markets have American businessmen, who fund U.S. politicians, all pursuing the lowest common denominator (on worker pay/benefits), with the main exceptions CEO pay and investment manager's (PEU) compensation.

This was a six months before Carlyle Capital Corporation defaulted and a year prior to Lehman Brothers implosion. Since then American branded banksters got their compensation back on track. CEO severance pay evolved into the platinum kiss when packages rose to over $100 million. The meanness and greed club looks after itself.

Update 12-15-11: CEO pay soared in 2010.

Update 12-26-11: Benefit cuts since 2007

UK's Circle Holdings: Hedge Fund Healthcare

2011-12-10T13:59:00.000-06:00

Reuters reported a month ago:

CIRCLE HOLDINGS PLC (CIRC.LN), a U.K. hospital operator, said it has finalized a contract that will make it the first private company to take over the running of a National Health Service hospital, in a deal that will see Circle manage GBP1 billion in revenue over the contract's 10-year life.

Circle Health was selected as preferred partner to run Hinchingbrooke Health Care NHS Trust in November 2010. The company said it has now signed a definitive contract to deliver a full range of services at the hospital, located near Cambridge, starting in February next year.

The Guardian reported six investors control 95% of Circle Holdings, run by Ali Parsa, a former Goldman Sachs banker. What's interesting is Parsa got the UK's Competition Committee to take up his issue of small private's being shut out.

Bloomberg reported:

Circle Holdings Ltd., a London- based private-hospital operating partnership, said today that it filed an antitrust complaint in September 2010 regarding ties between private providers and insurers that prompted the OFT’s study.

“Today’s decision will have a profound effect on U.K. health care, unleashing entrepreneurialism and unlocking innovation,” Circle CEO Ali Parsa said in the statement.

Private equity underwriters, like The Carlyle Group's David Rubenstein, salivate over health care. Carlyle closed on PPD, the clinical drug trial company, and is bidding on Rottapharm, an Italian pharmaceutical maker.

PEUs won't decrease the cost of health care, not with added management fees, higher interest expense, dividend bleeds and targeted 30% annual returns on investment. I find it interesting that they're the answer to global healthcare ills. It seems they are at least one form of disease.

Mountain Water Soon to Be Carlyle's

2011-12-10T13:03:00.002-06:00

The Carlyle Group's Robert Dove is about to land his first water infrastructure project. The Montana Public Services Commission issued a draft order recommending approval of Carlyle's purchase of Park Water, which owns Missoula's Mountain Water.

The California Public Utilities Commission gave its approval last week. Park is based in California and will be acquired by Carlyle's Western Water LLC.

Mountain Water Draft Final Order

Montana's PUC will vote on Tuesday. The draft order makes reference to numerous stipulations, which can be found below:

Newpsc Doc (3)

From my reading Carlyle can still charge management fees to Mountain, tap the company for dividends and special distributions, and float debt. Carlyle expects 20% annual returns in the public infrastructure arena, down from its normal 30% annual ROI.

Mountain may have doubled in price when The Carlyle Group is ready to monetize its investment. It's nice Carlyle has a ready buyer in Missoula city government. I predict Mountain will be unaffordable by then.

Corzine Avoids Cause of MF Global Failure: Bank Run

2011-12-09T22:45:00.002-06:00

MF Global CEO Jon Corzine slimed his way through testifying before the House Agriculture Committee. Jon didn't know what was going on as the firm slipped from "meticulous record keeping" on customer accounts to "chaos over a two to three day period." Oddly, Corzine said the firm was in due diligence over the prospect of selling MF Global.

A panic sale can occur when the firm's tangible assets aren't close to clients' investments and is deep underwater. Not many buyers will take on risk they can't understand, even at fire sale prices.

What would they have bought? Corzine pushed MF Global to invest in repo's, of which he stated in his written testimony:

MF Global was required to recognize its profit immediately in RTMs, and the asset (the debt security) and the liability (the money owed to the Counterparty) must be “derecognized,” i.e., removed from MF Global’s balance sheet.

It sounds like Enron fiction, immediate income statement profit with off balance sheet liability. Corzine's MF Global might as well be Greece, with its Goldman Sachs repo.

During the last hours, last days, Corzine stated there were "many, many, many more transactions than typically occur." Customers wanted their money. The lucky ones were at the head of the line. It's called a bank run.

Levered up 30 to 1, it didn't take much of an equity hit, combined with imploding sovereign asset values to put MF Global into the grave. Corzine played personal risk manager for much of his testimony. After 19 months as CEO of MF Global, the firm no longer exists. The buck stops nowhere for Jon Corzine.

Be sure to check out the video. It shows how far the leadership ball has fallen.

Update 12-10-11: Lehman used repos, which hid its imploding financial position. MF Global shows it can happen again.

Corzine & Sarkozy: Neither About Transparency

2011-12-08T23:15:00.002-06:00

MF Global's Jon Corzine pretended to be honest and accountable in testifying before Congress on his firm's thievery of customer money. Like BP's Lord John Browne and Tony Hayward, Corzine implied incompetent underlings caused the disaster. Dealbook reported:

"In theory, an employee may have misused customer cash after misinterpreting the chief executive’s words."

So one employee pulled $1 billion of customer assets into MF Global's trading money? That defense is patently laughable. Jon Corzine testified before Congress to manage his personal risk. The insider suck up included:

One congressman even congratulated the former Goldman executive on achieving considerable wealth.

Corzine's acts caused market dislocation. Olivier Sarkozy, another insider with The Carlyle Group, offered his assessment as to how private equity underwriters can help in turbulent times:

It is very hard for traditional (debt) issuers to provide enough clarity to the public market investor to allow that investor to make an informed, risk-adjusted decision. The assets are simply too large and the leverage too great to allow those markets to operate efficiently in times of dislocation.

Olivier says PEUs are the answer:

"That is where private equity can step in and provide that transparency because we can underwrite these balance sheets. It takes a lot of time and effort, but it is possible to do. In that context we become the most efficient source of capital to the industry and that is where the opportunity lies," he said.

Carlyle and company took $2.3 billion in FDIC cash to recapitalize BankUnited.

BankUnited was floated in February this year and Carlyle made 2.7 times its money on its investment.

Carlyle wasn't transparent. It wasn't until BankUnited's public offering when Carlyle revealed the extent of FDIC funding in BankUnited's recapitalization. Carlyle held BankUnited a year before filing for an IPO.

Congress provided a stage for Jon Corzine to offer his bunk and happily ignored the huge public subsidy for PEUs via BankUnited. The Carlyle Group's IPO revealed the firm to be a virtual nonprofit, given its incredibly low tax burden (a highly symbolic 1%). It's a PEU world for elected and greedy business people.

Carlyle's 2011 IPO Falls into 2012?

2011-12-06T23:10:00.002-06:00

The Carlyle Group's planned independent public offering (IPO) will leak into 2012. CNBC reported:

According to data-provider Dealogic, 79 of 119 this year’s IPOs, or 66 percent, are currently underwater.

Carlyle monetized numerous affiliates in 2011, before debt and IPO markets began to freeze. As expected private equity had another banner year, according to Efinancial News:

In the year ending June 30, developed markets funds returned 36.9%, compared with 29.9% returned by emerging markets funds.

Add Carlyle's nearly tax free status and the PEU boys had a very good first half of the year. The second half looks tepid, given Carlyle's assets under management fell from over $153 billion to $148 billion. I take it some people chose not to reinvest or mark to market valuations bit into Carlyle's AUM. Carlyle's next S-1/A might shed light on the situation. Then again, it may not.

Update 12-7-11: Investors may wish to check out the state of PEU frenzy deals closed between 2006 and 2008

Policy Making PEU Billionaires

2011-11-26T19:05:00.001-06:00

NYT reported:

Over the past 30 years, as the gap between wealthy and poor grew ever wider, total philanthropic giving almost tripled, In an age of widening partisanship and plummeting trust in government, this outpouring of philanthropy has produced a distinct breed of philanthropist: The policy-making billionaire.

The Times piece went on to mention Carlyle Group co-founder William Conway. Private equity underwriter (PEU) Conway is a well know tax hater.

William E. Conway Jr., a founder of the Carlyle Group investment company, is planning to give away $1 billion of his personal fortune, and is said to be considering how his money can aid in financing major infrastructure projects.

Note: Conway's PEU firm has a $1.15 billion infrastructure fund, itching to invest.

In keeping with the anti-government spirit of the times, the new philanthropists share a disdain for established politics and an impatience with the slow churn of old-fashioned policy making.

Billionaires shed that disdain when they visited Capital Hill to keep their preferred status regarding "carried interest" taxation. Carlyle's Conway leads a virtual nonprofit organization, paying a mere 1% in taxes on its $9 billion in net income over the last five years.

Also, PEU's saddle affiliates with dramatically increased interest expense and new management fees, often taking away tax liability for years. It's a business model that "starves the beast."

“As corporate citizens of the world, it is our responsibility — our duty — to serve the communities where we do business, by helping to improve, for example, the quality of citizens’ education, employment, health care, safety, and overall daily life, plus future prospects.”

Conway announced his planned $1 billion donation in late September. It came on the heels of Carlyle's strong arming of Brintons, a British carpet maker. Carlyle dropped the pension fund, cut UK jobs and closed plants. Those moves dimmed the future prospects of many workers. It also shifted retirement responsibility to a public, i.e. government entity.

Did Brintons employees get first dibs at Conway's $1 billion? Hardly.

The very loftiness of (the above) ambitions raises a significant question: Can even the very wealthiest philanthropists finance public services on the scale necessary to achieve social change — that is, on the scale of government itself?

Instead of seeking to supplant what government does, philanthropists can finance advocacy to change it.

Kaching! It's back to Carlyle's distinctive competency, influence peddling. PEU money finances politicians. It's used to lobby for preferred tax and regulatory status, as well as steer chunks of Uncle Sam's trillion dollar budget to affiliates.

Carlyle kaching is used to settle legal investigations and fund attorneys offering laughable defenses (in the case of LifeCare Hospitals' 25 patient deaths after Hurricane Katrina and SemGroup's bankruptcy).

The Times piece sprayed perfume over the PEU stench.

Future Suggests Government Gives & Gives

2011-11-26T11:30:00.002-06:00

Chicago Tribune reported on proposed tax breaks for two large Illinois employers, Sears and the CME Group:

CME Group, parent of the Chicago Board of Trade and Chicago Mercantile Exchange, has threatened to leave the state in protest of a temporary increase to the state's corporate income tax rate. The proposal (new tax break) would tax income from just 27.54 percent of electronic transactions on local exchanges, costing the state an estimated $100 million a year.

Ironically, CME is looking at a government sponsored insurance system in the aftermath of MF Global's implosion.

Under discussion is the feasibility of a government-sponsored insurance fund modeled after the Securities Investors Protection Corporation (SIPC). Another option is an industry-sponsored bailout fund

The program would insure customer funds in the case of a broker default, but would not cover outright theft of customer money, as in the case of Jon Corzine's MF Global.

CME Group offered $250 million toward MF Global customer losses, then upped it to $550 million. Their news release stated:

Our primary concerns are the protection of our customers at CME Clearing and the integrity of all futures markets.

Money is fungible and CME Group faces a crisis of existence, but I wonder how long government insurance programs can cover losses and not participate on the upside?

As an aside, will Jon Corzine ever see time behind bars? The normal course of events is a multimillion dollar settlement with no admission of guilt. Those executing the move include Columbia/HCA's Rick Scott, now Florida Governor and Carlyle's co-founder threesome of Rubenstein, Conway and D'Aniello, PEU billionaires with ready access to Red or Blue politicians.

CME dramatically increased its lobbying in 2007 as the financial world darkened. 2008 brought the failure of Carlyle Capital Corporation, Bear Sterns, and Lehman Brothers:

CME's political donations seem to fund the winning team.

Don't forget Jackie Clegg-Dodd, wife of Senator Chris Dodd of Dodd-Frank fame, sits on CME's board. Will $3 million a year in lobbying and political donations buy CME a government-sponsored insurance fund? Stay tuned, more shit is on the way.

JP Morgan PEU Does Chinese JV

2011-11-25T22:32:00.003-06:00

WSJ reported:

JP Morgan Asset Management, an arm of U.S. bank JP Morgan (JPM), has received permission from the Beijing city government to create a US$1 billion RMB fund under the new Qualified Foreign Limited Partner program

The fund will be named the JPM China Private Equity Fund.

The Private Equity Group is a bottom-up, opportunistic investor in all private equity investment types, stages of business development, industry sectors and geographical locations, and during all market environments.

JP Morgan joins other "bottom feeding" PEU funds in China, including The Carlyle Group, Blackstone, TPG Capital and the Infinity Group

JPM China is a joint venture with the Beijing city government. This brings to mind a statement from an ex-Bloomberg reporter:

I can't tell if the PE guys are being insincere when they talk about China or they are actually stupid. There is no way that the Chinese govt would let American firms come in and strip cashout of Chinese companies the way they've been allowed to in the US! I imagine the Chinese welcome the PE guys because they see it as another way (through PE orchestrated mergers) to get hold of more American technology and companies and jobs.

A decade of US job shedding to China will continue courtesy of bankster and tax avoider JP Morgan. Morgan joins Carlyle in helping America's greatest future enemy, at least that's the view of a Carlyle Group Managing Director :

"China does view financial power as an exercise of power in a way that the United States does not. The United States only exercises financial power through its corporations.”

I'll take that as an admission of America's Government-Corporate Monstrosity, Eisenhower's Military-Industrial Complex on steroids.

Update 12-19-20: Chinese bank pairs up with PEUs.

Carlyle Affiliate's Tear Gas in Tahir Square

2011-11-25T15:46:00.002-06:00

Ahramonline reported:

Egyptian security forces are digging deeper into their budget with each volley of increasingly fatal US-made tear gas they launch at demonstrators.

The human cost of the violent crackdown in central Cairo is increasingly clear -- among the 39 fatalities reported to date, several are said to have died of asphyxiation caused by tear gas.

The article cites Combined Systems Inc., an American tear gas provider financed by The Carlyle Group. Carlyle provided debt financing for Point Lookout Capital Partners' purchase of CSI in 2005.

CSI produces its ‘riot control devices’ under its law enforcement brand name, Combined Tactical Systems (CTS)

Uncle Sam provided $1.7 million in "toxicological agents" -- "including tear gases and riot control agents" -- to Egypt in 2010. It's not clear how much came from CSI/CTS.

Gas manufacturer CTS has been linked with the 'non-lethal' weapons used by Israeli forces that have been unleashed on Palestinian protesters, reportedly causing several deaths due to asphyxiation.

I noted Carlyle's link to CSI during the 2009 G20 meeting in Pittsburgh, where U.S. authorities implemented new crowd control and dispersant measures.

Point Lookout might pay attention to Carlyle's back door takeovers of Mrs. Fields and Brintons. Carlyle Group co-founder David Rubenstein does debtor repossession in addition to hostile takeovers. 30% annual returns must be made...

Update 1-30-12: CSI's product line is being used by U.S. Homeland Security to clear Occupy camps across the U.S. Flashbangs, smoke, tear gas and bean bags. It sounds like money to The Carlyle Group's Combined Systems Inc.

Carlyle to Offer Saudi IPO

2011-11-24T23:27:00.000-06:00

Reuters reported:

Private equity investor Carlyle Group plans to sell its its investment in Saudi Arabia's General Lighting Co through an initial public share offer in Riyadh in 2013 and is now close to doing its second deal in the kingdom, sources familiar with the matter said.

Carlyle bought 30% of General Lighting in March 2010, making it an 18 month hold before leaking IPO plans. It's the age of monetization for private equity underwriters (PEUs).

Carlyle Group is "on the cusp of acquiring a 42-percent stake in a family-owned Saudi food products company within the next two weeks." That would beat their "end of the year" promise.

Does WSJ Know the Half of It?

2011-11-24T09:49:00.000-06:00

WSJ discounted the impact of Olivier Sarkozy on global financial markets. Olivier warned of a Eurozone collapse within three months. When traders thought the message came from half-brother Nicholas Sarkozy, the French President, markets panicked.

Olivier Sarkozy works for the Carlyle Group, by the way. So I suppose his opinions do matter, at least more than, say, if Bill Clinton’s loose-cannon half brother, Roger, had been quoted, last-name-only, making drastic predictions in the 1990s.

The Carlyle Group is infamous for their political connections, Red and Blue. Olivier's access to the global power structure, the very group that attends Bill's Clinton Global Initiative every year, is a huge bonus for Carlyle. Implying he is a mere cut above doltish Roger Clinton is ignorance or a script. The WSJ would have to say which characterization fits, because the Roger label is laughable. Does the journal really know the half of it?

Carlyle Lobbyist Does Land Deal with British PM

2011-11-23T23:56:00.000-06:00

Channel Four News reported on a land deal between lobbyist Lord Charlington and British Prime Minister David Cameron.

Intriguing details have emerged about this transaction that raise questions over how much the public should know about the financial dealings of the prime minister.

In 2001, Mr Cameron paid £650,000 for his constituency home - a purchase aided by around £150,000 in parliamentary expenses. When Mr Cameron bought this home, he also acquired a patch of land up the lane. This was separated from the main house by a driveway and garages belonging to a cottage opposite.

From inspection of Land Registry documents, Channel 4 News found that in November last year, Conservative peer and Tory donor Lord Chadlington, who owns a large manor house nearby, bought the cottage for £715,000, thereby taking ownership of the driveway and garages which ran across the prime minister's land.

Eight months later, in July this year, Lord Chadlington sold the prime minister the driveway and garages together with a large field which he owned at the back of Mr Cameron's constituency home for £137,500.

Charlington lobbies on behalf of the London Stock Exchange, Associated British Foods and The Carlyle Group. Sir Alistair Graham, former chairman of the Committee of Standards in Public Life, offered:

"I would've thought he would've wanted to have done that as quickly as possible, particularly given his public comments about lobbying…If you’re doing a private deal affecting your personal interests with one of the head of the largest lobbying firms in this country then of course you should register that in your MP’s list of interests as quickly as possible."

Public comments are for mass consumption, not an ethical guide. Take fellow private equity underwriter Mitt Romney, formerly of Bain Capital. This week he talked tough on China stealing American jobs. How many jobs did Bain affiliates send to China, both under Mitt and afterwards? The Carlyle Group sent many.

The Government-Corporate Monstrosity is Eisenhower's Military-Industrial Complex on steroids. Elitist insiders work all sides of the triangle, lobbying, government appointments and corporations with ample funding.

Brintons Backdoored by Carlyle (Before Mrs. Fields)

2011-11-22T21:46:00.004-06:00

The Telegraph finally sniffed The Carlyle Group's "purchase" of Brintons, a British carpet maker and found it PEU worthy. It reported:

Rather than buying the family's equity stake, Carlyle bought the company's debt (at a discount to its face value, no doubt). Once they had acquired the debt Carlyle then used a controversial pre-pack administration to seize control – placing the carpet-maker into administration, then buying it straight back.

Carlyle used debt holdings to take over Brintons, a strategy recently used on Mrs. Fields. In the move, Carlyle dumped Brintons' pension, closed factories and cut jobs, all to "save the company."

The descendants of the founding Brinton family accused Carlyle of breaking a string of promises to gain control.

Carlyle doesn't promise. It offers "puffery," at least that's Carlyle's defense when challenged in court.

Don't worry, descendents can buy back the firm in two years for double Carlyle's takeover costs and after a huge dividend bleed. It's a PEU world, where greed matters.

Update 11-29-11: Black Cab hired an ex-Brinton's director.

Carlyle Launches New Churchill

2011-11-21T19:21:00.000-06:00

WSJ reported The Carlyle Group's "acquisition of the management team of debt provider Churchill Financial LLC from private-equity firm Olympus Partners".

Carlyle is getting a 13-person team and "fee income and a platform to build upon," said a person familiar with the deal. The team will continue to manage a $1.25 billion collateralized loan obligation, the equity of which is owned by Churchill Financial Group, which remains a portfolio company of Olympus.

Here's Fortune's take:

Rob Morris of Olympus: "We were not selling the equity. This was basically a process to outsource the admin function... once we received a multiple step upgrade on ratings from agencies in September the reinvestment period on the CLO effectively was locked in, so this was the next move to let the team go build another lending business while our fully invested CLO stayed managed at a lower cost by the same team."

Think of Carlyle's deal as launching New CLO Coke, with Coca CLO Classic remaining, only old Coke has ingredients from Bear Stearns.

As an aside, everyone wants to be Churchill nowadays. Carlyle can claim the Limited Liability Corp version.

Forstmann Little Founder Passes

2011-11-20T22:54:00.000-06:00

The AP reported:

Theodore J. Forstmann, a longtime Wall Street financier who was a major player during the wave of corporate takeovers in the 1980s, including the battle for RJR Nabisco in 1988, died Sunday at the age of 71.

Forstmann later criticized leveraged buyout deals, just as LBO firms were renamed private equity.

Forstmann eventually became a big critic of the industry he helped create. In the late 1980s, he lit into rivals for the risky way they financed their acquisitions. They would borrow money from investors in junk bonds. Those bonds are IOUs issued by the riskiest companies.

Later, he complained that there were simply too many people in the takeover business. The result: Buyout firms were paying sky-high prices for their targets to beat competitors, and so might have trouble wringing profits out of the deals.

He turned out right again — but maybe not in the way he imagined. In the tech mania of the late 1990s, Forstmann himself ended up overpaying for two firms — XO Communications and McLeodUSA. Both eventually filed for bankruptcy.

In 1988, Forstmann made clear his distaste for dealmaking greased by junk bonds. The AP quoted him as saying, "Today's financial age has become a period of unbridled excess with accepted risk soaring out of proportion to possible reward.

"Every week, with ever-increasing levels of irresponsibility, many billions of dollars in American assets are being saddled with debt that has virtually no chance of being repaid," he said.

I wonder what Forstmann thought of the first decade of the 21st century? It put the '80's to shame.

Here's to You, Mrs. Rubenstein

2011-11-19T22:53:00.000-06:00

The Guardian reported:

Alice Rogoff (Rubenstein), the publisher of Alaska Dispatch who is married to one of America's wealthiest men, Carlyle Group co-founder David Rubenstein, told the conference that she had learned Guggenheim Partners was planning a fund "worth billions". She added that it might concentrate first on building a privately funded icebreaker, which could then be leased to the US coastguard.

Private equity underwriters (PEUs) love Uncle Sam's checkbook.

Another PEU, William Reilly sits on ConocoPhillips board. ConocoPhillips has Arctic drilling plans, which Reilly kept on track as a conflicted Co-chair of Obama's Oil Spew Commission.

I envision an update to the theme song from The Graduate, renamed for Mrs. Rubenstein:

Koo-koo-ka-choo, Mrs. Rubenstein,
Heaven holds a place for PEUs who PPP
We'd like you to help yourself to federal funds.

Guggenheim, Carlyle and company, they all want to take in their quest for 30% annual returns.

One of the richest men in America couldn't keep Mrs. Rubenstein's Alaska House open, even after asking for $600,000 from the state of Alaska. It remains to be seen how much Guggenheim seeks from the state or the feds for its Arctic investments:

The Guggenheim Partners website posted a link to an Alaska Dispatch story about the fund, but a company spokesman refused to provide any specific details.

Refused to provide, that's the PEU way.

Carlyle Group Backdoors Mrs. Fields

2011-11-19T12:18:00.001-06:00

The Carlyle Group and Z Capital will gain control of Mrs. Fields in a debt for equity swap. The company has both Mrs. Fields and TCBY yogurt franchises. Founder Debbie Fields sold her company to private equity underwriter Capricorn Holdings in 1996. This will be Mrs. Fields second PEU bankruptcy in three years.

David Rubenstein strategized "back door" takeovers in the 2008 financial crisis. It took three years for Mrs. Fields to fall. How many tasty corporate morsels will Rubenstein down via debt holdings? Time will tell.

Fed to Go PEU?

2011-11-17T00:13:00.001-06:00

President Obama is reportedly considering Jerome (Jay) Powell for appointment to the Federal Reserve Board. Powell, as a private equity underwriter, spent eight years with The Carlyle Group before starting his own investment company. Is Jay's firm a virtual nonprofit, like Carlyle?

It won't be Powell's first time at the board table, having served on the Board of Directors of Dr Pepper/Seven Up Bottling Group, Panolam Industries International and Rexnord Corporation. He's well aware of the global game of finance, perfectly suited for the Fed.

PEU's Want to Be Left Alone

2011-11-11T23:02:00.001-06:00

Carlyle Group co-founder David Rubenstein said at the AVCJ Private Equity Forum:

"We need to make sure that government is leaving the industry alone," said Rubenstein.

That means keeping PEU's preferred tax status and even a name change, long advised by Rubenstein.

Reuters reported the corporate tax rate on private equity firms is half that of non-investment companies and citizens. Over a five year period The Carlyle Group paid 1% in annual taxes. I didn't realize citizens only had to pay 2%.

The most politically connected PEU pays a mere 1%. That shows what influence billions can buy.

Update 11-25-11: They also plan to help China equal the U.S. in financial power, which happens to be a threat, at least in one Carlyle Group Managing Director's eyes.

Carlyle Explains White House DeParle's PEU Phenomena

2011-11-09T23:49:00.001-06:00

The Carlyle Group's revised S-1 states:

"a portion of the carried interest that the company receives is due to (former) employees and Directors."

There's another interesting fact:

In order to better align the interests of our senior Carlyle professionals and the other individuals who manage our carry funds with our own interests and with those of the investors in these funds, such individuals are allocated directly a portion of the carried interest in our carry funds. Prior to the reorganization, the level of such allocations vary by fund, but generally are at least 50% of the carried interests in the fund.

While Nancy Ann DeParle worked for CCMP Capital Partners, not Carlyle, she received CCMP associated distributions while President Obama's Health Czar/Deputy Chief of Staff.

Morgan Stanley Pays Carlyle TGI Premium

2011-11-09T21:57:00.002-06:00

The Carlyle Group sold 5 million shares of Triumph Group (TGI) via a secondary offering. The prospectus showed a maximum price of $54.50 and proceeds of $272.5 million. Morgan Stanley went $1.35 million better:

Morgan Stanley & Co. LLC has agreed to purchase 5,000,000 shares of common stock from the selling stockholders at a price of $54.77 per share, resulting in $273,850,000 aggregate proceeds to the selling stockholders.

The extra proceeds could go toward repaying Carlyle's $35 million tab with the state of Texas, taken long before Carlyle sold Vought Aircraft Industries to Triumph.

Vought happens to be Governor Rick Perry's jobs MVP. For $35 million Vought cut 35 jobs vs. adding 3,000. That's $1 million Rick Perry paid per job eliminated. As politicians are taught to lie boldly, the Governor and Presidential hopeful said Vought created 26,000 new jobs. That claim is as patently laughable as Perry's Presidential run.

Enough disturbing history, why would Morgan Stanley pay The Carlyle Group a premium?

A different Morgan (JP) is one of three underwriters for Carlyle's IPO. For those interested, Carlyle's revised S-1 hit the SEC website. The omissions can be as good as the revelations.

Dynegy Holdings and Four Subsidiaries Declare Bankruptcy

2011-11-08T20:34:00.000-06:00

SEC filings show:

On November 7, 2011, Dynegy Holdings, LLC (“DH”) and four of its wholly-owned subsidiaries, Dynegy Northeast Generation, Inc., Hudson Power, L.L.C., Dynegy Danskammer, L.L.C. (“Danskammer”) and Dynegy Roseton, L.L.C. (“Roseton”) (collectively, the “Debtor Entities”), filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York, Poughkeepsie Division (the “Chapter 11 Cases”). Dynegy Inc. (“Dynegy”) and its subsidiaries, other than the five Debtor Entities, did not file voluntary petitions for relief and are not debtors under chapter 11 of the Bankruptcy Code and, consequently, will continue to operate their businesses in the ordinary course.

The Chapter 11 Cases were filed in accordance with a Restructuring Support Agreement (the “Support Agreement”), dated November 7, 2011, among Dynegy, DH and certain holders (the “Consenting Noteholders”) of an aggregate in excess of $1.4 billion of DH’s $3,370.3 million aggregate principal amount of outstanding unsecured notes and debentures comprised of: 8.75% senior unsecured notes due February 15, 2012, 7.5% senior unsecured notes due June 1, 2015, 8.375% senior unsecured notes due May 1, 2016, 7.75% senior unsecured notes due June 1, 2019, 7.125% senior debentures due May 15, 2018 and 7.625% senior debentures due October 15, 2026 (collectively, the “Old Notes”). The Debtor Entities’ proposed financial restructuring (the “Restructuring”), as outlined in the Support Agreement and the restructuring term sheet attached thereto (the “Term Sheet”), has the support of the Consenting Noteholders.

It seems Dynegy Holdings and four subsidiaries needed protection on off balance sheet transactions, five of which are listed in the filing. Capital games continue via the use of LLC's and financial manipulation. It's a PEU move.

Vought Cash-In: Carlyle's Next Round

2011-11-07T20:51:00.005-06:00

WSJ reported:

Triumph Group said 5 million of its common shares are being offered by investment fund and other entities associated with The Carlyle Group. Upon completion of the offering, Carlyle will own approximately 9.5% of Triumph's stock. The company, which had 49.1 shares outstanding as of Nov. 1, will not receive any of the proceeds. The stock was down 3.9% at $54.76 after hours.

Triumph made the announcement via press release. MarketWatch picked up the story after the close of trading.

I'm waiting for an SEC filing on the matter. Might Carlyle use a portion of their $250 million in proceeds to refund Texas taxpayers for reneging on employment promises made by Vought Aircraft Industries, later acquired by Triumph?

Governor (and Presidential hopeful) Rick Perry's hairspray can't hold together his ridiculously inflated job-impact numbers, promised under Carlyle ownership.

As a virtual nonprofit, Carlyle takes money from governments. It rarely pays.

Update 11-8-11: The prospectus is not on the SEC's website. It must be obtained from Morgan Stanley & Co. LLC, Attn: Prospectus Department, 180 Varick Street, 2nd Floor, New York, NY 10014, telephone: (866) 718-1649 or by emailing prospectus@morganstanley.com.

Update 11-9-11: The prospectus made it to the SEC website. There was no mention of making Texas, much less making Texas taxpayers whole.

Hong Kong Hot for PEUs

2011-11-06T20:16:00.001-06:00

WSJ reported private equity underwriters would gather en masse for the Asian Venture Capital Journal's Private Equity and Venture Forum in Hong Kong.

The list of keynote speakers is pretty impressive: Mr. Coulter; John Connaughton, managing director of Bain Capital; Howard Marks, chairman of Oaktree; Christopher Flowers, chairman of J C Flowers & Co; Henry Kravis, co-chairman of Kohlberg Kravis Roberts & Co.; David Rubenstein, managing director of The Carlyle Group; and Providence Private Equity CEO Jonathan Nelson.

Nick Bloy, managing director at Malaysia-based private-equity company Navis Capital Partners. “So understandably, practically every private-equity investor that one might wish to meet, or who wishes to meet you, is at the AVCJ Forum.”

Who wants to meet Christopher Flowers who helped turn MF Global from a staid investment banker into a dice roller, now bankrupt? How about Henry Kravis, who siphoned $4.25 billion from HCA in special dividends before HCA's IPO? Would they line up to meet David Rubenstein, co-founder of the virtual nonprofit Carlyle Group, which distributed nearly $15 billion to investors in 2011?

Recall China's the new financial threat, according to The Carlyle Group's Frances A. Finelli. PEUs are their trainers in future financial terror. Despite this fact, there will be no drone missile attack in Hong Kong.

PEUs own politicians giving orders on who to summarily execute. Captive militaries and homeland securities would rush to protect this crowd.

Yahoo to Become PEU-Hoo?

2011-11-06T19:43:00.001-06:00

Reuters reported a mix of private equity underwriters and tech giants could pull a threesome with Yahoo!

Other private equity firms interested in Yahoo include KKR, TPG Capital and Carlyle Group. Sources would not confirm if any of them had signed the confidentiality agreement, though a second person familiar with the situation said those three firms and Providence are "among the hottest firms" involved in the process. The New York Times reported late Thursday night that TPG had indeed signed the agreement.

Strategic parties including Alibaba, Microsoft Corp and Google, have also taken part in the still-developing discussions surrounding Yahoo, sources have said.

Private equity firms have indicated a willingness to commit around $1 billion in equity as part of a transaction, according to several people familiar with the matter.

Goldman Sachs is running the "comprehensive strategic review." Why not sell to a virtual nonprofit like The Carlyle Group, whose charitable mission is greed? Give a shout out for PEU-Hoo in our PEUniverse.

Carlyle Distributes Nearly $15 Billion to Investors in 2011

2011-11-04T23:37:00.001-05:00

FT let the PEU out of the bag with their story on KKR's plummeting economic net income. Private equity underwriters try to soften the blow of asset write downs with news about distributions to investors. FT stated:

While KKR has returned $5bn to investors this year, it still lags behind another rival, Carlyle, which has returned almost three times as much to its limited partners year to date. Selling out of investments has become critical both in determining the attitude of limited partners in funds and in influencing dividends paid to public shareholders.

Carlyle's IPO, a major spurt in their Profitgasm, may be reigned in by plummeting asset values. Carlyle's "Great Cash-In" may come to an end.

Recall Carlyle is a virtual nonprofit organization, at least they confessed to this status in their S-1.

Morgan Keegan Price Discounted by $1 Billion

2011-11-03T23:21:00.001-05:00

What a difference a few months and MF Global's bankruptcy made to Morgan Keegan's sale price. Al.com suggested a $1.5 billion bid in July. SF Gate pegged the bids at $550 million:

Buyout firms circling Regions Financial Corp.'s Morgan Keegan brokerage unit lowered bids by at least $200 million after financing markets deteriorated and MF Global Holdings Ltd. filed for bankruptcy, according to people with direct knowledge of the process.

Thomas H. Lee Partners LP and Jeffrey Greenberg's Aquiline Capital Partners LLC submitted the highest offer at about $750 million, the people said, asking not to be named because the talks are private. The group topped a joint bid from Carlyle Group LP and Blackstone Group LP, according to the people, who said previous offers valued the unit at more than $1 billion.

PEU's, like Carlyle and company, love heavily discounted distressed assets. The problem is Carlyle's looming IPO, which faces the same investor headwinds as Morgan Keegan.

Morgan Keegan's owner planned a $250 million dividend bleed before divesting the firm. That's but one PEU move.

Update 12-11-11: Still no sign of a buyer for Morgan Keegan

Dunkin' Update: PEU Management Fees & Secondary Offering

2011-11-02T20:33:00.001-05:00

The Carlyle Group, Bain Capital and Thomas H. Lee Partners charged Dunkin' Brands $14.7 million to terminate their management fee arrangement. That's $4.9 million per private equity underwriter (PEU). Carlyle's chunk is historically tax free, until it hits their partners/investors as "carried interest," effectively taxed as capital gains.

PEU Dunkin's initial public offering in July 2011 covered 25.5 million shares. Round two is for 22 million shares.

Private equity firms Bain Capital Partners, Carlyle Group and Thomas H Lee Partners are the sellers in the secondary offering, which will reduce their stakes from 24.9% each to an expected 19% each after the sale, according to Dealogic.

It should give PEUs free shares by making up their original investment, yet they still own 58% of the company. Goldman Sachs, an underwriter of the first Dunkin' IPO, failed to make the cut for round #2. PEUs don't appreciate a sell recommendation as they near a secondary offering.

NASA & Space Florida Doling Out Cash

2011-11-01T00:25:00.001-05:00

In 2008 Candidate Obama ran on pulling government work back from contractors. In 2009 President Obama issued a five part strategy on contracting reform. Point five dealt with what should be contracted, citing inherently governmental activities. A Sutherland legal alert stated:

Clarify Permissible Outsourcing. The memorandum notes that “the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined.” It therefore directs OMB to give guidance to agencies in this area to establish “clear rules” and avoid situations, which it notes may now exist, where “contractors may be performing inherently governmental functions.” The clear import of the memorandum is to limit outsourcing to private contractors. Thus, this new guidance will have significant consequences for the range of service contractors that have emerged in recent years.

In sum, this important Obama memorandum is probably just the first, opening effort of a full-fledged drive by the Administration to fulfill its campaign commitment to reform government contracting.

Obama shuttered NASA, preferring private contractors develop the next generation of space flight. MSNBC had an odd report on space privatization machinations at Kennedy Space Center.

It said Boeing would lease a former Space Shuttle hangar for 15 years. The story noted Boeing wouldn't pay NASA rent, but is negotiating a deal with Space Florida. NASA turned over the facility to Space Florida for how much? NASA's press release didn't say.

Boeing indicated it would lease the hangar should it win the bid for its CST-100 capsules, a replacement for the Space Shuttle. If Boeing doesn't win, there's no lease. Boeing added that it would locate its Commercial Crew headquarters in Florida, adding political pressure for Boeing to get the NASA contract.

Uncle Sam will fund R & D via a new national space lab. NASA will pay a nonprofit $15 million in annual management fees to run the lab.

That's in addition to providing cheap rent via Space Florida. The state of Florida will pony up direct cash for companies using NASA's old facilities. SpaceX got $7 million. How much will Boeing get to replace the Shuttle? How much is any direct subsidy for the CST-100 and how much is indirect? The rocket booster system, known as the Space Launch System has a potential lifetime cost of $38 billion, according to NASA's internal documents.

That kind of money launches people, sometimes in unethical directions.

Carlyle's Rubenstein Gives $10 Million to White House History Center

2011-10-31T22:18:00.001-05:00

Carlyle Group co-founder David Rubenstein gave the largest gift in history to the White House Historical Center.

Rubenstein noted The White House "plays a critical role in the public’s knowledge of and appreciation for this remarkable building and its unique place in history."

My hope is his $10 million donation will be used to scrub the stench of influence peddling from the White House's hallowed walls. Carlyle and peer private equity underwriters (PEUs) have carte blanche access under both Red and Blue Presidents.

Fed Primary Dealer MF Global Bankrupt

2011-10-31T18:33:00.003-05:00

Reuters reported on the egg Blue bankster Jon Corzine threw on the New York Federal Reserve Bank with MF Global's bankruptcy.

MF Global Holdings Ltd, just nine months after ascending to the list of primary dealers who transact business directly with the Fed, filed for Chapter 11 bankruptcy on Monday.

The bankruptcy does raise questions, however, about how the Fed picks the primary dealers -- especially since MF Global was one of four firms added to the ranks after new, more stringent requirements were put in effect in 2010.

A spokesman for the New York Fed declined to comment.

Corzine's firm bet on a EU bailout for its significant European government bond holdings. He counted on a bailout, maybe even relied on credit coverage. Nevertheless, a Fed primary dealer went belly up after passing "stringent requirements."

MF Global's demise leaves 21 primary dealers to execute Ben Bernanke's Operation Twist.

Update: ZeroHedge made Corzine out to be Bernie Madoff, one who stole from his firm's customers.

Update 11-6-11: MF Global's clients may be organizing. Also, BlackRock and Evercore found MF Global's commingling of the firm's and client funds, but the Federal Reserve Bank could not.

Vaporware Credit Derivatives for Greek Debt

2011-10-30T16:15:00.001-05:00

Lehman Brothers imploded in September 2008, due in part to kajillions in "off balance sheet" commitments gone bad. After Lehman's fall, credit derivatives, already in a major run up, exploded in price for investors wanting "financial protection."

Congress and global financial regulators "reformed" credit default swaps, but that's little solace to investors who expected coverage on Greek sovereign debt for an expected 50% loss. "Standard" CDS products ended up vaporware for buyers, risk-less cash for sellers, according to Tavakoli Structured Finance.

“Customers” that accepted ISDA documentation when buying credit default protection on Greece are now discovering that ISDA defends the position that a 50% discount on Greek debt is “voluntary” and therefore not a credit event for credit default swap payment purposes according to its documents.

WaPo's Robert Samuelson reported Europe's solution to their debt crisis: One element is:

Expand the existing rescue fund, called the European Financial Stability Facility (EFSF). It would provide insurance against losses of about 20 percent on purchases of European government bonds. This protection would supposedly reassure investors, who would continue to lend at low interest rates. An estimated $1.4 trillion of bonds might be covered.

So those selling credit coverage don't have to pay, but European citizens need to fill the gap?

Meetings on a rescue package included French President Nicholas Sarkozy, and German Prime Minister Angela Merkel. Another Sarkozy, half-brother Olivier added his perspective:

Europe’s banking system is much larger than America’s and gets three-fifths of its funds from the “wholesale” market of big deposits, commercial paper and the like, writes Oliver Sarkozy, head of financial services for the private equity firm the Carlyle Group, in the Financial Times. If these big investors fled en masse, Europe’s financial system would collapse.

“The parallels to 2008” — when Lehman Brothers’ failure caused a panic — “are too stark to be ignored,” he says.

The last time everyone fled in masse, the Chinese government walked on their derivatives commitments. The U.S. Treasury funneled billions to American and European banks to keep the system solvent. Why does Uncle Sam and the EU back fill for credit welshers, whether banksters, shadow bankers or the Chinese?

Someone's committing fraud, by selling products they won't, or don't have to back. Holding firms accountable is exceedingly difficult, given their proprietors fund and control institutions charged with passing and enforcing laws. Many are literally the law. It's the PEU way.

(PEU stands for private equity underwriter, a particularly noxious form of shadow banker)

Bill Clinton's Job Creation PEU

2011-10-30T12:43:00.000-05:00

Fortune's Andy Serwer interviewed President Bill Clinton on how to create jobs. The topic shifted to tax reform, where Clinton offered:

I would also like to see money repatriated now for free, with no taxes. We're the only rich country in the world that still imposes taxes on corporations on money they earn overseas. I think they ought to bring it back for nothing if they put people to work with it. And if they want to spend it on compensation or stock buybacks or dividends, let them pay the long-term capital gains rate.

This is essentially the deal private equity underwriters (PEUs) have for carried interest profits. The Carlyle Group is a virtual nonprofit organization.

One company pushing for Bill's recommended tax treatment is Apple, with Vice President Al Gore on the board. Huck & Finn shill for those with the ability to pay more, but always want a break. Note: The Clinton Global Initiative annual meeting is #1 for CEOs.

Carlyle Group Aiding America's Biggest Enemy

2011-10-29T16:11:00.003-05:00

National Defense reported on Debtpocalypse, where Army futurists see another financial meltdown. Francis A. Finelli shared his crystal ball at the meeting:

Finelli said the United States must either slow down its borrowing or risk a big meltdown. The Federal Reserve is fueling a future crisis by flooding the economy with money. The Fed’s balance sheet more than tripled since 2007 by $2.5 trillion, said Finelli. “Such tremendous increase in the money supply has not been accompanied by economic growth in the United States.” A rather shocking statistic, he said, is that the U.S. economy was actually larger in the fourth quarter of 2007 than it was in the second quarter of 2011.

The money supply problem, combined with potentially rising interest rates and inflation, could leave the United States facing trillion-dollar-a-year interest payments and unable to continue to live on borrowed money, Finelli said. “The United States for the next couple of years probably muddles through,” but the pain will come in the second half of the decade, he forecasted. “That is when Bob Wiedemer projects the money supply will start manifesting itself in higher interest rates and higher inflation.”

The U.S. military’s feared potential peer competitor, China, is expected to overcome future economic shocks more easily than the United States or Europe could, Finelli said. The strength of China will not come from its missiles or submarines, but from its wealth, he said. “China does view financial power as an exercise of power in a way that the United States does not. The United States only exercises financial power through its corporations.”

Finelli omitted how his employer, The Carlyle Group, ramped up borrowing to finance deals the past decade. He neglected to mention how Carlyle coached Chinese leaders in the exercise of financial power. When Finelli's boss isn't cracking jokes, Carlyle co-founder David Rubenstein is effusive in his praise of potential "peer enemy" China, the wild Far East.

Note: The image of China came from a Carlyle Group video. It seems the Army had probable cause to take Francis Finelli into custody. Did they cuff and bag Finelli? Doubtful. I bet it was more like a standing ovation.

Ironically, the Army may reinvent itself along private equity underwriter (PEU) lines via cutbacks and partnering.

The Alternative Futures seminar is part of the Army’s “Unified Quest” series of war games, which are conducted annually to examine issues that the Army chief of staff considers critical to current of future force development.

Watch where the 36th Army Chief of Staff General George W. Casey Jr., the 37th General Martin E. Dempsey and 38th General Ray Odierno land after their military service. Given the revolving door, all three had a hand in picking PEU Francis "Frank" Finelli as a speaker. Did Carlyle's Booz Allen Hamilton, a huge government/military consulting contractor, have a role in suggesting Francis?

The Army's future offers multiple ways for PEUs to profit, from anti-cyber terrorism to infrastructure enhancements to control of water resources. Rest assured, Carlyle knows how to pry dollars from Uncle Sam's trillion dollar purse, while minimizing contributions.

Retired General George W. Casey Jr. served as John Negroponte's senior military adviser in Iraq. Negroponte was behind the recent Concordia Summit focusing on international terrorism. Concordia stressed public-private partnership solutions to global terror problems like cyber terrorism. What will Concordia do with China being a financial threat? I see armies of bankers and shadow bankers marching as to war from the safety of their trading desks, happily paid by Uncle Sam. It's truly a PEU world and likely a matter of time before Casey is drafted by KKR, Bain, Blackstone or Carlyle.

Good luck to those who have to wait for the next economic recovery, predicted by Army futurists to begin in 2020 and run to 2028. What kind of machinations will PEUs foist on the globe before 2020 hits? They plan to be supremely profitable.

It's a PEU world, where everything should be remade in its image, including the military and religion.

Schwarzman's Helicopter to Twain Rescue

2011-10-29T00:18:00.000-05:00

WaPo reported how billionaire Stephen Schwarzman saved the Twain Award ceremony:

Former Kennedy Center chairman Stephen Schwarzman — chairman and co-founder of private equity giant The Blackstone Group — has donated millions to the performing arts center. And now he has donated the use of his personal helicopter.

Movie stars Ben Stiller and Matthew Broderick needed last-minute transportation between New York and Washington to help fete friend Will Ferrell, who won this year’s Mark Twain Award for comedy at the Oct. 23 Kennedy Center celebration.

With top performers in a squeeze, Schwarzman swung into action, offering his helicopter so the show could go on. “There are far too few laughs in Washington these days, so I was happy to help out the Kennedy Center when they asked,” Schwarzman said.

Recall Twain wrote:

What is the chief end of man?--to get rich. In what way?--dishonestly if we can; honestly if we must. Who is God, the one only and true? Money is God. God and Greenbacks and Stock--father, son, and the ghost of same--three persons in one; these are the true and only God, mighty and supreme... - "The Revised Catechism" 9/27/1871

Twain nailed private equity underwriters (PEUs) a century before their birth as leveraged buyout firms.

At another recent benefit headliner Schwarzman had a string of jokes on how PEU machinations could save "the church."

He didn't go so far to say "Money is God," but the crowd applauded Schwarzman as if he were one. The world has become a black comedy.

Carlyle's D'Aniello Playing Hard to Get?

2011-10-26T20:50:00.001-05:00

The Carlyle Group may slow down the pace of its independent public offering, according to peHUB.

Saying markets are “not friendly,” one of The Carlyle Group’s co-founders said that the firm may actually not go through with its planned initial public offering after all.

“We’re in no hurry,” said Daniel D’Aniello, one of Carlyle’s three co-founders, who was speaking Tuesday at the Quebec City Conference in Canada. “We’ve been around for 25 years,” he said, saying the firm “might stay private for another 25 years.”

How will Carlyle's DBD co-founders monetize their holdings if there's no IPO? It will be harder to shoot up the billionaires list without a Carlyle Group public offering.

As for peHUB, they might want to use the private equity underwriter (PEU) Carlyle Group logo, instead of the executive recruiter Carlyle Group Ltd. logo. The Ltd. version filed for bankruptcy in 2009.

Private equity Carlyle had its own spate of bankruptcies, beginning six months before the fall of Lehman Brothers. Ironically, PEU Carlyle just hired Lehman's former Senior Vice President of Corporate Communications, Randall Whitestone.

At Lehman Brothers Whitesone was the Global Head of Media Relations for the Investment Management and Mortgage Capital divisions, as well as chief editor of the firm’s annual report.

Just what Carlyle needs, the man who sold the benefits of junk mortgage securitization and wrote Lehman's fictional annual report. There's no way the firm described in SEC filings should have gone down overnight.

The Fall 2008 financial implosion was a team effort between big banks and shadow bankers like Carlyle. But why would The Carlyle Group hire Lehman's former mouthpiece? Whitestone worked for George Herbert Walker, cousin of the Bush boys, one a former U.S. President and the other ex-Florida Governor.

With a bipartisan stable of political heavyweights, Carlyle tilts blue or red as times require. Whitestone can pick up the phone and access financial and political heavyweights, as well as business reporting firms, former employers. The DBD's need help polishing their IPO if they stand to enjoy their monetization and eventual retirement.

For an IPO to happen, there must be investor support. Investment banks would hate to lose underwriting fees. Might D'Aniello be teasing interest? Did Randall Whitestone contribute to a Carlyle IPO sales strategy? If so, he's a cagey guy. Funny, that's where I envisioned Lehman's executives and Carlyle's ethically challenged, behind bars. Instead they're free and remaking the world in their PEU image.

Update 10-30-11: Carlyle is behind Blackstone in more ways than IPO valuation. Carlyle has only filed its initial S-1. By this time Blackstone filed two amended S-1s on its way to a total of ten.

PEU Google on Yahoo Deal?

2011-10-23T22:08:00.000-05:00

RTT News reported Google may join private equity underwriters (PEUs) bidding on Yahoo. With over $42 billion in cash, Google might finance part of a PEU deal. The article highlighted private equity firms in the Yahoo mix:

Silver Lake Partners, Blackstone Group (BX), TPG Capital, KKR & Co. (KKR), Bain Capital, Carlyle Group, Hellman & Friedman, Providence Equity Partners and Warburg Pincus are among the several private equity firms that are said to be considering buyout offers for Yahoo.

Microsoft may team up with Silver Lake and a Canadian pension fund for a Yahoo bid. Does this mean tech firms are the new banks? How does that impact Dodd-Frank? It's a dark, squirrely PEU world.

Idea for Bill Conway to Help Poor

2011-10-23T13:13:00.000-05:00

Carlyle Group co-founder William Conway, a multi-billionaire by virtue of his life's work as a private equity underwriter (PEU), dangled $1 billion to help the poor. Ideas poured in, the latest from WaPo's Robert McCartney.

Does Robert know about Carlyle's propensity to cut jobs to pay for corporate interest and management fees? Does he know Conway & company sent jobs to "low wage portions" of the globe? It doesn't take much research to find Conway's imprint on the poor and elderly.

Starting with a British carpet maker, Brintons, which Carlye purchased after Conway issued his $1 billion challenge, PEU Conway dropped Brintons pension fund and cut 10% of its UK jobs, 70 out of 700. Most of Brintons jobs are moving to China,, where the firm is completing a "state of the art" manufacturing facility.

One could chalk Brintons up to bad timing. However, Carlyle's ownership of United Components reinforces the job shift to China, only these were U.S. auto parts manufacturing jobs. Carlyle owned United Components from 2004 to 2010.

When Carlyle purchased UCI it had no Chinese subsidiaries. By 2010 UCI had thirteen subsidiaries in China or Hong Kong. The number of employees fell from 6,900 to 4,350. Carlyle pulled $35.3 million from UCI via a special dividend in 2007. Add their $2 million annual management fee and the total rises to $47.3 million. How many jobs did Conway send to China outside UCI?

WaPo's McCartney voiced:

Conway’s money can help ensure that those jobs go to people who already live here but have been outside the workforce, rather than to people who’d move here from elsewhere.

Is Conway's challenge regional? Does he desire to burnish his impeccable D.C. reputation? At least Blackstone co-founder Pete Peterson's "Don't Tax the Rich" Foundation has a national focus.

Nonetheless, a billion dollars would pay for a lot of basic education and work skills. That would translate into jobs that would change lives in the long run, just as the philanthropist wants.

Basic education in what? If it's a Carlyle Group subsidiary, they best teach Chinese. The question is which dialect, Mandarin, Cantonese, Shanghainese, etc.? It's a PEU world.

Gadhafi's Cash: Uncle Sam's Suprise

2011-10-23T01:03:00.001-05:00

Libyan leader Muammar Gadhafi had billions stashed around the world, according to the LA Times:

Moammar Kadafi secretly salted away more than $200 billion in bank accounts, real estate and corporate investments around the world before he was killed, about $30,000 for every Libyan citizen and double the amount that Western governments previously had suspected, according to senior Libyan officials.

The new estimates of the deposed dictator’s hidden cash, gold reserves and investments are “staggering,” one person who has studied detailed records of the asset search said Friday. “No one truly appreciated the scope of it.”

When will those detailed records become public in the new Libyan self-appointed democracy? The Obama team should be well aware of one Libyan investment, Arab Banking Corporation, given the bank received $35 billion in Fed loans. The report went on to say:

Obama administration officials were stunned last spring when they found $37 billion in Libyan regime accounts and investments in the United States, and they quickly froze the assets before Kadafi or his aides could move them.

The Bush administration courted Gadhafi billions, as did Obama his first two years in office. America went from no diplomatic presence to opening a liaison office in June 2004. By 2009 the U.S. had a full embassy in Tripoli. Libya's ambassador to the U.S. under Gadhafi is now a key rebel leader.

Wouldn't a U.S. administration know how much money Gadhafi invested in America and around the globe, especially given Gadhafi's money was a reason for opening up Libya? A spate of private equity firms courted Muammar Gadhafi, The Carlyle Group, Blackstone, Colony Capital, etc.

Colony Capital looked to sell a portion of the firm to an unnamed Middle East (ME) Sovereign Wealth firm (SWF). Could it have been the Libyan Investment Authority? Colony Capital's deal for Libya's Tamoil fell through, as did Colony's monetizing a portion of the firm via a ME SWF.

Most of the money was under the name of government institutions such as the Central Bank of Libya, the Libyan Investment Authority, the Libyan Foreign Bank, the Libyan National Oil Corp. and the Libya Africa Investment Portfolio.

The Libyan Investment Authority gave The Carlyle Group $118 million to invest. Shadow bankers, like private equity underwriters and hedge funds, are opaque. There is nothing transparent about them. Goldman Sachs lost 98% of a $1.3 billion Libyan investment. Wall Street hit Gadhafi in the pocketbook long before the latest round of UN sanctions.

I wonder if the same legendary group of PEUs and politicians will line up for Gadhafi's funeral, like they lined up for his money. Will Rubenstein, Schwarzman, Carlucci, Baker, Bush, Townsend, Specter, McCain, Blair, or Mandelson make the burial? Will they give their condolences to Gadhafi's son Saif? Doubtful. A relationship forged on money evaporates when the ka-ching is gone.

Carlyle Monetizes Diversified Machine

2011-10-22T11:11:00.001-05:00

The Carlyle Group sold one automotive supplier, as it works to acquire several others, Cooper Standard and TI Automotive. Crain's Detroit Business reported:

Beverly Hills, Calif.-based private equity firm Platinum Equity has acquired Howell-based aluminum and iron castings supplier Diversified Machine Inc., unnamed sources told Crain's. Financial terms of the deal were not disclosed.

Reports surfaced in August that its previous private equity owner The Carlyle Group was looking to unload Diversified Machine, looking to fetch more than $400 million.

New York-based Carlyle Group formed Diversified Machine in 2005 by acquiring all of the assets of Howell-based supplier UniBoring out of bankruptcy and adding assets from then-bankrupt Metaldyne and Hayes-Lemmerz.

Carlyle lists both Diversified Machine and Metaldyne as affiliates. DMI took on Metaldyne's chassis business and Spanish operations in 2009. Both DMI and Mataldyne have production sites in China, Carlyle's favorite low cost part of the globe.

Carlyle leeched Metaldyne via an $88 million special dividend, financed by floating $225 million in debt. Now it's ready to monetize DMI. One has to wonder what kinds of conversations took place between Carlyle's co-founders and GM's CEO Daniel Ackerson, a former Carlyle Managing Director. Did Ackerson indicate where the growth niches are in the automotive segment?

Was it just time to cash in? It's the PEU way. (PEU stands for private equity underwriter.)

Carlyle's IPO: Double Cash In?

2011-10-20T22:28:00.001-05:00

The NYPost reported The Carlyle Group's planned IPO values the private equity underwriter (PEU) at $8.5 billion. That's a little more than half of rival Blackstone's valuation.

Despite sinking valuations, there are signs Carlyle will push ahead with its public offering. Sources said the firm recently lined up a $600 million loan to replace its existing $150 million credit facility.

The banks providing the loan, led by JPMorgan Chase, will have a difficult time reselling it in the tight credit markets and will take a loss on the deal, sources said.

But the lenders hope t recover that money and more through feeso they collect by underwriting the IPO, expected to happen in early 2012, they added.

As for Carlyle, companies often borrow money right before a public offering because they can gain access to capital at below-market rates.

NYPost missed that PEU affiliates borrow before a public offering to pay special dividends, a pre-cash in to the later IPO cash in. Before HCA's public offering, KKR and company bled the for-profit hospital firm for $4.25 billion, a hefty chunk of it debt financed. Blackstone later ran the debt for dividend scheme on Vanguard Health Systems, its captive for-profit hospital affiliate.

How much of Carlyle's new $450 million in debt will end up in their founders' pockets? The greedy billionaire race continues...

Carlyle's Bill Conway: Quit Firing People

2011-10-18T23:43:00.001-05:00

Carlyle Group co-founder Bill Conway, the billionaire that wants to grow jobs, could start by not firing people. BBC News reported:

Carpet company Brintons is to axe 70 jobs as part of a cost-cutting programme at its Worcestershire base. The firm was bought out by the Carlyle Group last month in a £40m deal to secure its future. Brintons employs 1,700 people globally, of which 700 are in the UK. It plans to lose 70 mainly office-based staff in Kidderminster, a spokesman said.

Brintons employees should enter the Conway $1 billion sweepstakes. Carlyle's Chris Ullman wants to hear from Conway's latest group of de-poled fishermen.

First, Carlyle axed worker pensions, then they cleavered workers. It's a Halloween nightmare, courtesy of the DBD's (Carlyle's co-founders).

Financial Vaporware: BOA's Sleight of Hand

2011-10-18T21:37:00.001-05:00

Bank of America moved risky derivatives to a federally insured banking unit within the company, according to Bloomberg. The Federal Reserve Bank of New York is in favor of the move, while the FDIC objects.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties.

Requested by counterparties? They're the "investors" (gamblers) who took the other side of BOA's derivatives bet.

Bank of America’s holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

Lehman Brothers failed due to bad derivatives bets and the evaporation of short term credit used to finance its balance sheet. Nobody trusted Lehman to pay its debts or its bets.

The Fed is trying to prevent another Lehman. While far from Lehman crash levels, credit default swaps sit at:

Merrill Lynch - 431 basis points (down from 513)
Morgan Stanley - 418
Bank of America - 380
Goldman Sachs - 360

A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Moving credit and other derivatives to a federally insured banking unit, shifts risks to the FDIC.

(Thanks to Economic Policy Journal)

Bloomberg Misses Perry's TEF Vought Fiction

2011-10-17T21:55:00.001-05:00

Bloomberg got Texas Governor Rick Perry's swagger. They missed his put on. Author Joshua Green pushed the Perry line.

Perry has fared much better in situations where success depends upon his own formidable charm. The leading example of this, often touted by the governor and his campaign, is the Texas Enterprise Fund (TEF). In 2003, even as the state was facing a $10 billion budget shortfall, Perry persuaded the legislature to commit $295 million to lure businesses from out of state.

The Governor's most outlandish jobs claim concerned Vought Aircraft Aviation, a Carlyle Group affiliate when Rick Perry forked over $35 million for a promised 3,000 new jobs. After six years with a Texas sized jackpot, Vought hadn't added to their workforce. They cut 35 Texas jobs, meaning Rick Perry gave Vought $1 million per job eliminated.

Bloomberg wouldn't have to look far to garner these facts. Vought's SEC filings and corporate website detailed job numbers. I tracked those statistics over the years, as well as Governor Perry's preposterous claims of over 26,000 new Vought jobs in his TEF report. Take away Perry's Vought fiction and the Texas jobs picture changes dramatically.

The bar continues to fall in ethical leadership and business reporting.

What Occupy Wall Street Doesn't Know

2011-10-16T22:23:00.002-05:00

Does Occupy Wall Street know Obama's top two White House staffers, William Daley and Nancy-Ann DeParle have JP Morgan roots? For his first three years President Obama continued the Bush Corporawhorehouse on Pennsylvania Avenue.

Does Occupy Wall Street have a clue about private equity underwriters (PEUs), the new Wall Street? Infamous Blue and Red political names retire, join lobbying houses and accept a plum Senior Advisor PEU position. Blue Tom Daschle and Red Bill Frist symbolize the new Wall Street.

Does Occupy Wall Street realize the Clinton Global Initiative is the #1 event for CEOs? Do they know Larry Summers, architect of Gramm-Leach-Bliley, is now Senior Advisor for Andreessen Horowitz, a high tech vulture capital firm? Summers is also on the board of Square, a Kleiner Perkins Caufield & Byers investment.

A KPCB partner is former Vice President Al Gore, a double PEU given his status at Generation Investment Management. Also at Kleiner Perkins? Reds Meg Whitman and Colin Powell.

The big money game is truly bipartisan. Wall Street supported candidate Obama in 2008. They'll place their bets for 2012, knowing the winner will appoint their people to key White House slots. I venture nary an Occupy Wall Streeter will be among them.

While serving the public, the aforementioned Nancy-Ann DeParle raked in residual PEU stakes that didn't appear on her financial disclosure forms, much like Red Rick Scott.

The Blue plated Podesta lobbying clan is happy to take money to influence legislation or buy face time with White House staffers. How long before a Podesta offers to help the Occupiers?

Occupy Wall Street is great political theater, but they can't reform a system they don't understand and don't have the means to replace.

It's a PEU world.

Morgan Keegan, Beware Your Only Hope

2011-10-16T11:48:00.004-05:00

A consortium of private equity underwriters (PEUs) may be broker-dealer Morgan Keegan's only hope. Investment News reported:

Private equity may be the last, best hope for Regions Financial Corp. in finding a buyer for Morgan Keegan & Co. Inc. A consortium of private-equity buyers, including The Blackstone Group LP, The Carlyle Group and Thomas H. Lee Partners, are finalists in the bidding for the broker-dealer, which Regions put on the block in June, according to Reuters.

Regions has at least two reasons for dumping Morgan Keegan. One, it owes Uncle Sam $3.5 billion in TARP money. The second relates to Morgan Keegan packaged mortgage security funds that exploded in 2007. That prompted investor lawsuits, which claimed:

The four closed-end mutual funds are: (1) RMK Advantage Income Fund (“RMA”); (2) RMK Strategic Income Fund (“RSF”); (3) RMK High Income Fund (“RMH”); and (4) RMK Multi-Sector High Income Fund (“RHY”) (collectively, the “Funds”).

Investors in the Funds lost approximately $1 billion in 2007 because of the Funds’ investments in poor-quality asset-backed securities, leveraged many times over by complex capital structures.

The suit went on to claim "Morgan Keegan’s gross mischaracterization of risky asset backed securities as conservative corporate bonds and preferred stocks, and the undisclosed highly-leveraged credit risk in the low-priority asset-backed securities held by the Funds."

The company reached a settlement with authorities, according to Al.com:

Morgan Keegan and an affiliate agreed to pay up to $210 million in penalties after authorities said investors were misled into putting money into the company's RMK Select Funds, which were tied to the performance of sub-prime mortgages.

Authorities said Morgan Keegan misled investors about the risks of the funds, misrepresenting material facts in promotional and regulatory documents. The company's settlement of the matter last week neither acknowledged nor denied the majority of the allegations.

That should sound a familiar ring to The Carlyle Group, whose mortgage backed security investment, Carlyle Capital Corporation, imploded in March 2008, when the firm failed to meet $400 million in capital calls.

Carlyle has an investor lawsuit, just like Morgan Keegan. Rest assured, Carlyle won't settle with any admission of guilt. They have their good name to save.

While Carlyle dumped CCC and distanced the firm from the venture, it will gladly use Morgan Keegan's distressed position to negotiate a cheaper price. Consider the price Morgan Keegan could fetch for Regions:

7-26-11 - "Some investors say the unit might fetch as much as $1.5 billion."

9-18-11 - "Regions hired The Goldman Sachs Group Inc. to find a buyer and hoped for a price of at least $1 billion."

10-18-11 - "Regions may be lucky to get the $789 million it paid for the firm back in 2001."

I smell a PEU brown-pile special. It's a perfect fit for Carlyle, where the new affiliate mirrors the parent. Now, how to grow Morgan Keegan's government subsidized business? Blackstone has its tentacles deep inside the U.S. Treasury and New York Fed.

This ain't no Obi-Wan Kenobi "only hope." It's much darker.

Update 10-23-11: Bloomberg reported Regions plans to pull $250 million in dividends from Morgan Keegan before the sale. Interestingly, the deal is back to $1.1 billion with Regions putting up $200 million in debt financing.

PEU Health Care Deals Get More Expensive

2011-10-15T22:41:00.001-05:00

Financing private equity health care deals for PPD and Kinetic Concepts got more expensive with the latest round of debt concerns. The Carlyle Group's deal for PPD was the "third-largest and had the highest debt multiple of 2011 year to date," according to The Deal. The story noted:

One knowledgeable private equity investor says, "The financing [caps] on that deal were 300 to 400 basis points above what it was three months ago." And flex provisions, which give banks wiggle room to change pricing if markets shift, have become dramatic due to bank fears of losses.

That means higher interest costs, courtesy of private equity underwriters (PEU's). The Deal caught up with my earlier observation on PPD's lack of long term debt before selling out. Health care costs are clearly not going down, not in a PEU invasion.

Carlyle Group Bids on Auto Parts Makers

2011-10-15T21:39:00.001-05:00

The Carlyle Group is in the race for two car parts makers, Cooper Standard and TI Automotive, according to Reuters.

Companies looking to sell out to The Carlyle Group should consider the private equity underwriter's (PEU's) track record in the automotive parts space. Carlyle owned United Components from 2004 to 2009. The number of employees fell from 6,900 to 4,350. Carlyle pulled $35.3 million from UCI via a special dividend in 2007.

Will Cooper Standard and/or TI Automotive suffer the same fate as UCI? That would entail a Rank ending, but that's common for PEU's.

Update 11-22-11: Carlyle's winning bid for TI Automotive has not been able to secure debt financing due to seized debt markets.