Rudy Wants to Give You a Tax Credit to Hire a Nanny

Presidential hopeful Rudy Giuliani called Democrats efforts to cover more people "Nanny" government. Expanding Children's Health Insurance happens to be one of those initiatives. I wonder how the child above feels knowing some her friends have to take the President's advice and go to an ER for healthcare?

Rudy went on to say he'd like to lower the capital gains tax rate to somewhere around 8%. That echoes Carlye Group and ex-IRS Charles Rossotti's testimony to Congress several years ago. Private equity underwriters (PEU's) already get two breaks on income, one for the firm and the other for senior managers' personal taxes.

As for Democrats being "Nanny's", Sen. Chuck Schumer of New York sounds distinctly Republican in his defense of PEU tax breaks.

Rudy wants to give families a tax credit to shop for health insurance, much like the President's plan. This enables employers to jettison that pesky employee benefit once and for all. This will feul the next round of profit growth wanted by Wall Street.

Mayor Giuliani would have you believe insurers will compete for your business. How long will it take for plan prices to rise to that magic $15,000? Then watch year after year as insurance companies cut benefits/coverage, but keep the premium the same. That's been the case for employers and unions. What makes you think an individual purchaser has more leverage than a large group? That would be the same delusion that has folks thinking George Bush is a good President...

PEU Acquisitions Mean Less Taxes

Vice President Cheney tells the Admiral he's been let go. "The U.S. government can no longer afford your services due to an expected reduction in corporate tax receipts." Now why would the V.P. have to do such a thing? It's more than any tax dodge Halliburton may get by moving its corporate offices to Dubai. When private equity underwriters (PEU's) buy companies they usually take on debt to finance the purchase. This new expense can wipe out the firm's bottom line until operational improvements can make up the difference.

For example, Triad Hospitals was recently purchased by Community Health Systems. The combined company's debt expense will rise from $220 million to $660 million more than wiping out their net income from 2006. With no net income, CHS will not have to pay income taxes to the federal government. Triad paid $132 million and Community $106 million in taxes in 2006. With $238 million less in the federal coffers from one deal, what might be the cumulative impact of all the buyouts/mergers?

Also how long will it take for my local hospital to make up for the additional interest charge allocated to Community's 133 hospitals? That new $2 million dollar hit has to hurt. How much will prices have to go up to make up for an ownership change? Will patients need to learn high finance to negotiate prices with hospitals as the President suggests? Something stinks like the smell of dirty moneychangers and their purchased politicians...

Bush Points Out Uninsured Children

President Bush gave new British Prime Minister Gordon Brown advice on making their health care system more efficient. "Did you see me wave at that homeless waif? She's one of over 8 million children without health insurance. Don't look so shocked! Y'all gave us the story of the Matchstick Girl. We've put that into play in the U.S., only our kids die of preventable infections more so than exposure to the cold. Now Brownie, after you drop the kids from the rolls be sure to increase subsidies for private health insurance companies. This works to everybodies advantage. This is for you Uncle Bucky! Wink, wink."

Chucky One of the PEU Boys

Senator Chuck Schumer promised the high dollar investment boys that he'd work hard to keep their preferred tax on profits. The New York Times reported he raised $1 million from private equity underwriters (PEU's) and investment houses for the Democratic Senatorial Campaign Committee for which he is chairman. That's only scratching the surface as the securities and investment industry is Senator Schumer's number one lifetime donor at $6 million. Toss in commercial banks and the number climbs to $7 million.

Another NYT columnist quoted a professor who blamed voters for suboptimizing representative government. He stated “I see neither well-functioning democracies nor democracies hijacked by special interests.” Open your eyes man! Better yet, use your nose...

When You Can't Perform, Drop the Measure

The United States will no longer report the average number of hours people in Baghdad have electricity due to a State Department "technical change" according to a LA Times article.

Ryan Crocker, the U.S. ambassador to Iraq, told the Senate Foreign Relations Committee last week that Baghdad residents could count on only "an hour or two a day" of electricity. That's down from an average of five to six hours a day earlier this year.

For our math impaired President, that is a 60 to 82% decrease depending which numbers are used. How does the average Iraqi evaluate the American occupation?

Crocker told CBS News this month that electricity was "more important to the average Iraqi than all 18 benchmarks rolled up into one."

The statistic got dropped on Ryan Crocker's shift. Why would the local ambassador participate in such a thing? His orders must have come from above, Rice, Cheney or Bush? Their propensity to hide bad news is well documented...

P.S. This just in from the BBC: 70% of Iraq's 26.5m population are without adequate water supplies, compared to 50% percent prior to the invasion. Only 20% have access to effective sanitation. Nearly 30% of children are malnourished, a sharp increase on the situation four years ago. Some 15% of Iraqis regularly cannot afford to eat. Nearly a third of the population of Iraq is in need of immediate emergency aid. That equates to 8 million people. Want to bet this doesn't make the Bush measure list either?

Arms Sales Concern and Behind the Scenes Money

While President George Bush works to ensure the world is awash in weapons, a few members of Congress are unhappy over some of the recipients. Slated to benefit from Uncle Sam's largess include Israel at $30 billion over 10 years, Egypt's $13 billion, and Saudi Arabia et al totalling $20 billion. A few members of Congress don't want the Saudi's to get the latest and greatest weapons systems. Why? The Washington Post cited several politicians and their reasons:

But Tom Lantos (D-Calif.), chairman of the House Foreign Affairs Committee, who was briefed on the deal Tuesday, said he had several reservations. "This is not a sale at Macy's that you go in and buy a bunch of stuff. There are a complex set of relationships behind it, and while it's very desirable to have the Saudis and others recognize that Iran is an existential threat, there is also a degree of responsibility that they have to show on broader U.S. foreign policy interests," he said in an interview.

In the context of the arms deals, Lantos said the oil-rich countries should use windfall profits from high oil prices to cover the expenses of Iraqi refugees who have flooded Jordan. Saudi Arabia should not try to re-broker reconciliation between Palestinian moderates and militants, he added, and Qatar should look at the television network al-Jazeera's role in the region.

Other names in the story beside Lantos include Weiner, Wexler and Engel. How much money do these gentlemen get from the Pro Israel lobby? Tom Lantos' number three lifetime donor is the Pro Israel lobby weighing in at $311,000 while Mr. Weiner received $53,000, Rep. Wexler got nearly $68,000, and Congressman Engel a sizable $283,000. How much influence did $715,000 spread over 4 Congressional Representatives purchase?

There's too much money being spent on the wrong things, influence pedalling and systems of war. For that the common person pays dearly on a daily basis...

CEO's More Rat than Cat

Given the state of executive incentive compensation, CEO's fall well short of Parade's assessment of cats.

There are few studies of cats, because it's hard to get a cat to perform on cue for a reward. Another sign of intelligence, perhaps?

Meanwhile, incentive compensation for America's business leaders looks more like rats hitting the bar for pellets. Unless they cheat to get the prize, as did some 30% of publicly traded companies under the most pure reward system, stock options. They look like rats either way...but wait!

In lab experiments, rats have been shown to refuse food if their eating causes suffering for other rats.

It appears CEO's are lower than a rat because they take their prize while their workers suffer.

When Sports Elevate

"The players have made us proud, not the greedy politicians"

Mitt Says Partially Free Trade Lifts Poor Nations

Presidential hopeful Mitt Romney cited the need for "partially" free trade to lift Central and South American nations from poverty. His proposals don't include America's subsidized agricultural products. CNN reported:

"Free trade is key to ending Latin American poverty, Republican presidential candidate Mitt Romney said Saturday while courting support from the Cuban-American and growing Venezuelan-American communities. “Trade lifts all nations that participate,” Romney said when asked how he would end poverty and other conditions that have given rise to leaders such as Venezuela’s president, Hugo Chavez, who has been a close ally of Cuba’s Fidel Castro."

Is Mitt's assertion correct? Not according to Dr. Ann Harrison of the University of California at Berkeley. In her Wilson Center presentation she noted there is "no evidence of a significant link between trade and poverty." In another conclusion she cited trade combined with financial integration is associated with rising inequality in poor countries. Mr. Romney is well schooled in financial integration having been the CEO of private equity underwriter (PEU) Bain Capital. Could Mitt's free trade actually be the reason people turn to populist leaders?

Hillary's Elitist Donor List Contrasts with Progressive Campaign

For a candidate running a progressive campaign, Hillary Clinton's race is financed by a high dollar donor list. She leads far and away over all Presidential aspirants in the number of contributors giving the maximum amount of $4,600. Her top twenty industries list has not one union. The closest thing is nonprofits squeaking in at number 19. Between securities/investments and hedge funds Hillary received $4 million, while lawyers easily eclipsed that figure by giving over $6 million.

The list of high contributors reads like a who's who of law firms, media companies and investment houses. When was the last time these three groups led a revolution that didn't dramatically improve their bottom lines? Is that why she showed a little cleavage recently? Was it to boost ratings or give the boys a little thrill for their money? Either way like all good streetwalkers, Hillary's turning her cleavage into cash...

Condi Drags Her Heels

It appears no one is in a hurry to improve the situation in war ravaged Iraq, even their neighbors. Three months ago a major international conference on securing Iraq brought forth commitments and committees were formed to address pressing issues. Today's AP news said:

Little has happened since, despite specific pledges of help and the formation of committees meant to help Iraq solve some of its toughest problems. The committees have yet to meet, although there are plans to do so shortly.

It makes taking a month off for high heat seem not so bad. Now was that a dig at Iraq or Washington, D.C.? Was it a shot at Congress or Condi Rice for dragging those expensive heels purchased in New York while New Orleans filled like a toilet bowl? I report, you decide!

Middle East Arms Sales Jump 300% Overnight

An article on increasing aid to Iraq contained an updated figure for U.S. arms sales to Arab Middle East countries. Yesterday the price tag was at least $5 billion while today the number is 4 times higher.

The sale - expected to total about $20 billion - would include advanced weaponry and air systems that would greatly enhance the striking ability of Saudi warplanes.

So what happened, bad AP reporting or inaccurate/misleading information from the Bush administration? My guess is we'll never know the answer due to executive privilege. (CNN confirmed the updated number.)

What Bush Really Means on FISA Update

President Bush spoke of the need to modernize the FISA law to better monitor terrorist communications. I was puzzled as I read his radio talk as the law hasn't constrained the Bush team from doing what it wants before. So why should it now? Assuming the President needs the law updated to cover his forays into "uncharted" (illegal) territory, I'll attempt to translate the four points George Bush made in his radio speech.

"It includes four key reforms: First, it brings FISA up to date with the changes in communications technology that have taken place over the past three decades." We've been ham struck by terrorists living in caves using smoke signals, the telegraph, and semaphores.

"Second, it seeks to restore FISA to its original focus on protecting the privacy interests of people inside the United States, so we don't have to obtain court orders to effectively collect foreign intelligence about foreign targets located in foreign locations." We can spy anywhere in the #@%# world, we want to. Borders and sovereign countries don't matter.

"Third, it allows the government to work more efficiently with private-sector entities like communications providers, whose help is essential." Like all "modernized" programs, this one will be contracted out to my buddies' companies, mostly affiliates of private equity underwriters (PEU's). Can any of the 90 Carlyle Group tech companies help the President achieve his goal?

"And fourth, it will streamline administrative processes so our intelligence community can gather foreign intelligence more quickly and more effectively, while protecting civil liberties." This is a ruse, gullible Americans. Did you see how I streamlined the federal response to Hurricane Katrina? And then I threw a double dose of stinky with the follow up Lessons Learned report. If you read the bullshit Fran wrote, you'll learn I learned nothing! I can move armies quickly and spend money like a cowboy in a whore house, but civil liberties? Who gives a rat's ass?

UK's Lab Treatment Similar to Bush's Torture

A high court in the United Kingdom ruled the government overlooked the extent of the pain inflicted on animals in some scientific labs. Judge John Mitting ruled that the Home Office, which sets guidelines for animal experiments, acted unlawfully by describing highly invasive procedures as causing only "moderate" rather than "severe" suffering. Did the British government learn from George W. Bush's saying "America doesn't torture" by redefining the term to mean abuse akin to organ failure or death?

Friday Night Fights

At 6:00 pm the bell rang when the Associated Press posted a story on the U.S. increasing its aid and arms sales to countries in the war torn Middle East. Apparently pouring gasoline on a fire is a good thing. The beneficiaries of American largess and new weapons systems include Israel, Egypt and Saudi Arabia. The State Department recommends Israel get $30 billion over 10 years while Egypt stands to pocket $13 billion. The Saudi's and other rich Gulf States wish to buy over $5 billion in weapons in their latest installment. The U.S. has a long history of arms sales to the Saudi monarchy. Somebody needs to protect Dubai with its new Halliburton world headquarters, its Carlyle Group office and its government owned companies fueling private equity profits.

Bush Signed Foreign Investment Law

For private equity firms to make the huge bucks they need someone with even more money to buy their closely held companies. The President facilitated that with his signing of the Foreign Investment and National Security Act of 2007. Carlyle Group inked a deal with Dubai Aerospace for two of its "affiliates", both aircraft service and maintenance companies with facilities across America. The two offices on Pennsylvania Avenue scratch each other's ....

Deal Lines Health Care Advisor's Pockets

A prominent health care economist pocketed millions yesterday from the sale of Triad Hospitals to Community Health Systems. Uwe Reinhardt, Ph.D. helped craft the national healthcare strategy over the years, even speaking at a 2003 symposium alongside Tom Scully, the head of the Center for Medicare/Medicaid.

As a board member for Triad, Uwe got over $2.3 million for his shares. Dr. Reinhardt serves on the board of several other healthcare companies, AmeriGroup and Boston Scientific. Could his ownership in a health insurance company and medical device maker impact the quality of his economic advice to the Bush team? His recent paper on making health savings accounts more attractive could help AmeriGroup sell more high deductible health plan policies. Funny, his bio on the Health Affairs website fails to mention his board directorships.

Now that Uwe is a richer man how did that Bush capital gains cut help him? It saved Uwe $115,000 in capital gains taxes. Is that why the poor elderly and disabled on Medicare and Medicaid had to pony up co-pays for their 10-12 monthly prescriptions?

Update 8-16-19:  After making millions from America's high administrative overhead healthcare system Reinhardt cited such costs as problematic in his final book.  Reinhardt died in November 2017.

New Hospital Parent Apparently Nothing to Celebrate

While eating lunch with friends yesterday at one of our local hospitals, I found out Community Medical Center had a brand new corporate parent. I imagined proud administrators passing out cigars to celebrate the occassion only to find out, no cigars. There wasn't even the slightest party to mark Triad Hospitals sale to Community Health Systems. Why? Then I remembered the size of the purchase and the amount of debt the company would attempt to swallow.

As separate companies Community had $1.9 billion in long term debt and Triad $1.7 billion. However as part of the deal, the mergered company took on $10.2 billion in debt.

In connection with the merger, a subsidiary of the Company entered into a new $7,215 million credit facility and issued $3,021 million aggregate principal amount of its senior notes.

It tripled its indebtedness overnight. Those new interest payments have to hurt. In 2006 Triad had $115 milion in interest expense while Community paid $104 million in interest that same year. Tripling the combined $220 million turns the Company's interest expense into $660 million. This $440 million increase alone wipes out the net income of the two entities pre-merger, $168 million from CHS and $223 million from Triad.

No wonder the boys were nervous. Spreading $440 million in interest expense across 133 hospitals equates to over $3 million per facility. That's alot of staff and services to cut, but welcome to the Bush health care blanket party where the private sector will meet your needs after it meets theirs...

How Big Will the White House Fine Be?

The State of California fined HMO giant Kaiser $3 million for haphazard investigations into patient complaints and physician performance. Given the White House's pitiful track record in investigations, how big will its fine be? From Hurricane Katrina to the CIA agent name leak to the firing of attorney generals to Pat Tillman's death, the White House performed abysmally.

I never heard back from the many government agencies I contacted as to why the hospital with the largest number of patient deaths warranted not one mention in George Bush's Hurricane Katrina Lessons Learned report. Two weeks before it had been purchased by The Carlyle Group with corporate offices just down Pennsylvania Avenue. The day of landfall George Bush asked Micheal Brown about hospital patients. What kind of investigation omits such basic information? Surely not a competent one...

Anything This Guy Says is Suspect

Attorney General Alberto Gonzales is swimming upstream in his efforts to clear his and the Justice Department's name. The flow is strong and turbulent, aided by the force of George Bush's post taco and non alcoholic beer binge effluent. Can he clean up the problem when Alberto is clearly a part of the mess? Finding Nemo had it's clownfish, while the Potomac just has turdfish...

Some Major Military Bribing

An Army Major in San Antoinio has been charged with accepting bribes in return for awarding military contracts. The news report failed to mention the businesses offering the payola but did say:

In total, the ledger records that J. Cockerham received $9.6 million in bribe payments from at least eight contractors and anticipated receiving $5.4 million more.

So who did the bribing? The military would need to know "who paid what, in return for what" to charge the soldier with crimes. Why the secrecy? Don't tell me any wholly owned subsidiaries of any private equity underwriters (PEU's) with offices on Pennsylvania Avenue made the list...

Bloomberg Recommends Education Pay Be Built on Ignorance

Studies of extrinsic rewards show a number of negative impacts. People lose interest in a normally enjoyable task when given performance awards. The surrounding system is suboptimized by those looking to optimize their individual rewards. A significant number of people lie, cheat or steal to reach the targets or be in the payout part of the distribution.

The 12 year run of executive incentive pay provides a clear example of such behavior as nearly 30% of publicly traded companies cheated by backdating stock options, frequently called the most "pure" form of incentive compensation. Yet, NY Mayor Michael Bloomberg and Democratic Presidential hopeful Barack Obama trumpet out the same motivation scheme for teachers, performance based merit pay.

Pay becomes a demotivator when insuffient. Human resource surveys show pay usually not in the top 5 or 6 motivators for working people. So why design a program around your 6th or 7th best motivator? And why use extrinsic motivators known to kill intrinsic motivation?

Recall the story of the Blind Men and the Elephant, each trying to describe their experience of an elephant based on their position? U.S. business and governmental leaders all stand at the tail worshipping the dung flung by the legions of executive pay consultants needed to tinker their never optimally working programs.

"If you want people to do a good job, give them a good job to do."-- Edwards Deming

"Pay people well, pay people fairly, and do what you can to put money out of their minds."--Alfie Kohn

Dr. Deming also said "We can do something about our problems, or we can continue the way we are." Back up the elephant, here comes another load...

Hooked on a Gut Feeling

From Homeland Security Secretary Michael Chertoff to the head of the U.S. Military Northern Command, "gut feelings" suggest an increased risk for terror attacks. Sec. Chertoff said he had no actionable intelligence but a homeland security bulletin described people trying to sneak fake bomb components aboard jetliners. Homeland Security refers to these efforts as "terror dry runs". Are they from domestic or international terrorists, or are they tests conducted by the department itself to check the quality of their inspection process? The department didn't release enough information to know the answer, but I know what my "gut" is telling me.

U.S. Government Not Prepared for Disasters of Either Kind

Responding to natural or man made disasters requires similar skills and competencies. Two news reports should have Americans here at home very concerned about our ability to manage the aftermath in either case. The first deals with evacuations before hurricanes. One in three would stay in an evacuation zone to protect their property or safeguard their pets. This dramatically increases the need for post landfall rescues in catastrophic storms.

Hospitals need to be the last to evacuate and the first to return given their role of caring for the sick and injured. When a powerful hurricane strikes a large metropolitan area, it's likely half to two thirds of the normal hospital patient population will remain to ride out the storm. Having evacuated a Texas Gulf Coast hospital before Hurricane Gilbert in the late 1980's, I can personally attest to the difficulty in getting hospitals farther inland to accept patients. Added to the challenge of getting a bed is transportation. Ambulances are high profile vehicles and stop running when the winds reach 45 mph or higher.

This leads us to the second story of concern, the head of the U.S. military's Northern Command said he needs "at least two years before he is able to pull together the military units he needs to better respond to a chemical, biological or nuclear disaster in the U.S. They would largely be made up of support forces, such as evacuation, medical, logistics and transportation troops." Man made or natural disasters require the same type of response, safeguarding infrastructure, evacuating and treating the injured, bringing supplies and basic necessities to survivors. With months left in the hurricane season, America is less than optimally prepared to respond to a disaster. Apparently Bush will leave his term with yet another item unaccomplished.

Good & Bad News for Carlyle re: LifeCare Patient Deaths

An AP news report on criminal charges against a Memorial Hospital physician contained both good and bad news for The Carlyle Group, owners of LifeCare Hospitals. Their New Orleans facility had the largest number of patient deaths post Hurricane Katrina. The good news for Carlyle is no mention was made of LifeCare or its private equity owner in the story. (However, this is not a new skill as the facility got no mention in three government reports. The White House Lessons Learned report and a Congressional Follow Up Investigative tome gave LifeCare/Carlyle a free pass while a Department of Homeland Security Planning document for future storms left out hospital patients all together!)

The bad news is the grand jury declined to indict the doctor for second degree murder or conspiracy to commit murder. "Criminal doctors" was one leg of Carlyle's two pronged defense. That a grand jury failed to bring charges against Dr. Anna Pou can't be sitting well in the corporate offices on Pennsylvania Avenue. Now LifeCare may be held accountable for allowing uncredentialled providers access to their patients. The district attorney said "none of the patients had been prescribed the drugs by their caregivers, and none of the accused treated the four before the injections." Also, Dr. Pou's specialty is eye, ear, nose and throat surgery. I've never seen an ENT physician as the primary care giver on a Long Term Acute Care Hospital Unit. I would find it hard to believe she had credentials to do anything other than consult on the unit.

Carlyle's remaining defense in those upcoming wrongful death civil suits it the federal government did it! The company claims "patients became wards of the government" when evacuation teams descended on New Orleans. As HCA shouldered the expense of helicoptering their patients from dead facilities, Carlyle's deep pockets stayed full of cash. Surely LifeCare's newest Board member knows of this disparity. And why does Carlyle want any trials to take place in friendlier federal courts? Will they visit Alberto Gonzales for advice on the most Republican federal court in Lousiana. Surely George W. made an appointment down there...

Mike Conaway's PEU Ties

My Congressional representative, Mike Conaway accepted political donations from companies owned by private equity underwriters (PEU's). The company's PAC name and their corporate parent are below:

$10,000 from TXU soon to be an affiliate of KKR (from 3 different PAC's)

$ 1,000 contribution by Vought Aircraft Industries part of The Carlyle Group

$ 2,000 from U.S. Oncology an affiliate of Welsh, Carson, Anderson and Stowe

TXU finished 2006 with record profits then tried to make their $2.5 billion bottom line old news with the merger announcement. Vought spent the last few years on the Texas and federal government corporate tit. They showed their allegiance to the Lone Star state by locating their new production facility in Charleston, South Carolina to be near Senator Lindsay Graham. U.S. Oncology bought out Texas Oncology a few years back and WCAS needs to keep their franchise strong. If anyone can help these corporations get the government support they need, it's Mike!

Carlyle Group News Must be Found Elsewhere

One might expect that ex-Time Warner executive to keep Carlyle's moves open and transparent. Lately company news must be found anywhere but in their press releases. Consider the string of reports that only exist elsewhere:

1. Carlyle to sell two aircraft service companies to Dubai Aerospace

2. Virgin Media considers buyout offers including Carlyle

3. The Carlyle Group invests in huge Indian Bank, HDFC

4. The company failed to mention how it will take care of nursing home patients in flooded areas as it inked a deal to acquire ManorCare. Carlyle's LifeCare subsidiary had the largest number of patient deaths post Katrina and their defense is hospital patients became wards of the federal government as soon as evacuation teams arrived in New Orleans. Will the Justice Department consider this in their deliberations? The White House already left it out of their Hurricane Katrina Lessons Learned report as did Congress. Conspiracy theory anyone?

Maybe, it makes sense Carlyle's keeping these stories off the air as the average American would be incensed...

Carlyle Sells MedPointe for Nearly Double

The Carlyle Group agreed to sell MedPointe Pharmaceuticals to Swedish Pharmaceutical company Meda AB for $520 million in cash and 17.5 million shares of the parent corporation.

The private equity underwriter purchased the firm in 2001 for $408 million. This gives the company a $112 million profit and 17.5 million shares trading recently at $16.32. Add the $285 million in stock and the deal comes to $805 million or a profit of some $400 million. It seems Carlyle pulled a double from their initial investment in 2001. Yet another splashy entry!

So how much do the Bush capital gains tax cuts save on a $400 million profit? That would be $20 million not entering the treasury to pay for childrens health care. Let's see MedPointe can sell eye and nasal allergy medications to kids but their parent company needs a break on capital gains taxes? What about the real parents struggling to provide for their kids health?

Carlyle is allergic to taxes, can someone invent a medication to treat that disease?

Dubai's Owning Six Ports vs. Fifty Airports?

The Carlyle Group, a large politically connected private equity underwriter (PEU), kept news of a pending sale of two of its aerospace companies off its website. Three months ago Carlyle agreed to sell Standard Aero Holdings Inc. and Landmark Aviation, two U.S. aviation maintenance companies, to Dubai Aerospace for $1.8 billion. The deal is under review by U.S. regulatory authorities.

Recall that Dubai-owned DP World's purchase of terminals at six U.S. ports in 2006 triggered a furor among U.S. lawmakers such as Senator Charles Schumer of New York, who said the deal would compromise national security. DP World completed the sale of the facilities to AIG Global Investment Group on March 16, fulfilling a pledge to jettison U.S. operations.

Should this sale go through the United Arab Emirates would control an airport refueling and maintenance company with sites all across America and an aftermarket jet engine servicing company with worldwide aspirations. Fifty airports is a much bigger deal than six ports. No news of the sale exists on either the Landmark and Standard Aero websites. The Emirates have big plans for the aviation market intending to have $7 billion in sales in two years and will finance its expansion using Islamic bonds.

Carlye is well known for growing the government portion of the business and Landmark is no exception. It recently received a military refueling contract in San Antonio. If America's ports are an attractive target for terrorist infiltrators, how excited might they be at striking a blow at U.S. military might on its home turf? One intrepid blogger researched CIA rendition flights and tracked them back to Landmark Aviation's Dulles operations.

So why the huge fuss over ports back then and the silence since early April? Could it be private equity's considerable political connections and influence? They contribute heavily to both parties. For the 2008 presidential race five candidates have received over $50,000 in PEU contributions. That includes three Democrats and two Republicans. Or could it be Dubai Aerospace already plans to spin off much of the operation? One insider believes so. The merger agreement specifies the divestiture of the 30 airport operations run by Landmark Aviation.

So how much will Carlyle make on the deal, should it go through? They purchased Standard Aero in 2004 for $670 million. The history of Landmark is more convoluted as two companies merged, Garrett Aviation and Piedmont/Hawthorne. Carlyle did not reveal the purchase price of Garrett Aviation in 2004. Piedmont/Hawthorne was created in 1998 by the merger of two Carlyle companies, while a third was added in 2000. One can assume the prices paid for such assets are significantly less than current value given the growth in aviation services field.

For the sake of illustration, let's assume Carlyle gets a 100% return on their long held assets. A $900 million profit would require capital gains taxes of $135 million at the 15% rate. The Bush tax cuts keep $45 million from entering the federal treasury to pay for say those CIA rendition flights. If this story doesn't reflect America's bizarre present, I'm not sure what does...