Friday, May 30, 2008

Carlyle Group Burned by "Jihadi Chic" Iced Coffee Ad

The Carlyle Group suffered its latest management gaffe when affiliate Dunkin Brands pulled its Rachael Ray ad. They did so after conservative bloggers complained about her scarf resembling those worn by Palestinian resisters. While not on the order of the collapse of Carlyle Capital on the Amsterdam exchange or Boeing's jettisoning of a joint venture due to poor performance, one might expect the owner of Nielsen Media to test all angles of a production promotion. That Carlyle owns numerous internet media companies only ads to the conundrum. Invincible? It seems they have at least three chinks in their armor.

Carlyle Fattening Up on Defense Contractors

After lightening its defense portfolio the last few years, The Carlyle Group seems ready for another round of gorging on military contractors. They announced their interest in Filtronic, a British manufacturer of military microwave technology. Carlyle made a killing from two privatized government companies, U.S.I.S. and QinetiQ. They sold their interest in United Defense Industries for major gains. BAE purchased UDI in March 2005.

But recently the infamous private equity underwriter (PEU) dipped its proverbial toe back into bloody waters with its announced acquisition of giant government contractor Booz, Allen & Hamilton. The firm does billions in work for the Defense and intelligence arms of the federal government. Now the PEU is sniffing around Filtronic. Expect more as Carlyle aims to be a one stop shop for the government industrial monstrosity. Booz consultants can subtly steer Uncle Sam toward Carlyle sister company's products. Influence selling, it's a thing of beauty...

Wednesday, May 28, 2008

Dow CEO Suggests Republicans Failed in 2005

The Chief Executive Officer of Dow Chemical lambasted Washington, D. C. for its failure to develop a comprehensive energy policy. Funny, I distinctly heard President Bush brag about such a thing August 2005 when he said:

"This bill launches an energy strategy for the 21st century....This bill is not going to solve our energy challenges overnight. Most of the serious problems, such as high gasoline costs, or the rising dependence on foreign oil, have developed over decades. It's going to take years of focused effort to alleviate those problems. But in about two minutes, we're going to have a strategy that will help us do that."

That was nearly three years ago. Today as a result of soaring petroleum prices, Dow announced price increases up to 20%. They begin working their way through the economic chain on June 1. So far in 2008 crude oil is up 98% and natural gas 58%. Stagflation anyone?

Bush Crosses Paths with a New Silverado

In his fundraising visit for Senator John McCain, a chatty President George W. Bush visited Silverado Cable Company. It takes cohones to show up at a firm with the same name as the savings & loan that caused father George H.W. and brother Neil so much trouble. Senator McCain's difficulties came from his ties with another S & L, Lincoln. Lincoln alone cost U.S. taxpayers $2 billion.

In the last few days, brash President Bush had much to say. He compared the rebuilding of Iraq & Afghanistan to that of Germany and Japan post World War II. The U.S. sent a young Dr. W. Edwards Deming to Japan to raise their economy from the ashes. Dr. Deming's management teachings transformed Japan and for a brief time, he had an audience with top leaders in the United States. They tried his teachings until the siren song of cheap Chinese and Indian labor enticed a labor substitution bonanza. The American people are well aware of the precipitous drop in quality. Management theorists know George W. defecates on Dr. Deming's teachings with his heavy handed, unreality based, petulant bleedership style.

While at Silverado Cable, President Bush stated his economic theories. Hear his words, "the fact that they purchased the machine meant somebody had to make the machine. And when somebody makes a machine, it means there's jobs at the machine-making place -- plus their employees are more productive, they're more competitive. It makes it more likely they're going to keep their business and expand their business."

Bush's aim, grow more machine making places. What if those machines kill people? George W. has just the plan to use those, at least the Asia Times reported as much.

Tuesday, May 27, 2008

Demand Down, Gas Prices Still Rising

The U.S. Transportation Department released statistics showing American drivers cut back their mileage in March. CNN reported:

Americans drove an estimated 4.3 percent less -- that's 11 billion fewer miles, the DOT's Federal Highway Administration said Monday, calling it "the sharpest yearly drop for any month in FHWA history." Records have been kept since 1942. According to AAA, for the first time since 2002, Americans said they were planning to drive less over the Memorial Day weekend than they did the year before.

According to AAA, the national average price for a gallon of regular gas rose to a record $3.936. That compares with an average price per gallon of $3.23 last Memorial Day. The Energy Information Administration says gas consumption for the first three months of 2008 is estimated to be down about 0.6 percent from the same time period in 2007.

What happened between March and Memorial Day? Surely big oil and OPEC are monitoring the data. How did they react? They celebrated record profitability. Middle East sovereign wealth funds kept raking in the billions, searching for ways to spend "your gas money."

What happened the last few months to drive oil prices skyward, especially if U.S. drivers parked their vehicles more frequently? The saber rattling against Iran grew in supply. The Jerusalem Post and Haaretz offered more inflammatory rhetoric from both sides. The JP even has a special section titled the "Iranian Threat."

So don't let President Bush's exhortations of free market solutions, supply and demand fool you. Producers are making hay while the sun shines. Consumers with no ability to pay could be the encroaching shadow. We've already seen it in health care with over 47 million uninsured, housing with rising foreclosures from the credit crisis, and retirement with fixed income seniors taking it on the chin over rising food and energy prices. It looks like the auto and mobility could be next.

In January 2007, I paid $1.769 a gallon for gas. While gas consumption in America went down 0.6%, the price roughly doubled in first quarter 2008. That it keeps rising, as driving demand falls, indicates something else is happening. A 120% increase in 15 months time? It's time to toss some tea in the harbor.

Friday, May 23, 2008

Continued Pentagon MisManagement Remains Bill Clinton's Fault

After a Pentagon study revealed virtually all of $8.2 billion in Iraq contracts failed to meet U.S. rules intended to prevent fraud, Anthony Cordesman blamed the five year problem on the 1990's peace dividend, a time when President Bill Clinton farmed out large chunks of military operations to private companies. The think tank head said:

“This report is further documentation of the fact that the United States had absolutely no preparation to use contracting on the scale that it needed either at the military or aid level in going to war in Iraq,” said Anthony H. Cordesman of the Center for Strategic and International Studies in Washington.

“We had really allowed ourselves to become more and more dependent on contractors in peacetime,” said Mr. Cordesman, who spoke in a telephone interview on Thursday. “We were unprepared to use contractors in wartime, and all of this had an immense impact.”

So the ramp up in Afghanistan from 2001 to 2003 didn't prepare the Pentagon for what was coming in Iraq? What about the first year in Iraq, did the Defense Department get a clue then? Apparently not as the problem was marked throughout the study period which ended in 2006. So America sits in 2008 with a political hack blaming the problem on a President out of office for over seven years? I don't buy it. Another news report on the breakup of KBR's Iraq work amongst three companies shows this administration clearly bears responsibility. The NYT reported:

Critics also say they doubt that the new contract will result in significant cost savings or better services for soldiers in Iraq. The Army has built into the deal the potential for larger profits for the contractors than existed under the prior contract, and it plans to outsource much of the management and oversight of the contractors to yet another company, Serco Inc., for $59 million.

“This new contract sounds good, they are splitting it up, but there are serious flaws, including what looks like outsourcing oversight,” said Dina Rasor, an investigator and co-author of a book about contracting in Iraq.

Outsourcing oversight, there lies the problem and after nearly eight years in office, it's all Bill Clinton's fault. Bull Hockey! But the line does open the door for Dov Zakheim, the CFO of the Defense Department from 2001-2004, to join the Commission on Wartime Contracting in Iraq and Afghanistan and not look like the fox guarding the Bush chicken ranch.

George Bush's Bold Action, Appoint Insiders Yet Again!

BBC News reported that of $8 billion in defense spending in Iraq from 2001 to 2006, almost every payment failed to comply with U.S. laws preventing fraud. The articles stated:

The review by the defence department's inspector general estimates that the US Army made more than 180,000 commercial payments from bases in Iraq, Egypt and Kuwait from 2001 to 2006.

The $8bn spending of US taxpayers' money involved purchases of goods and services ranging from bottled water, mattresses and food to trucks and phones.

In some cases, contracts worth millions of dollars were paid for in cash with little or no documentation to show what was delivered.

The White House acted boldly this past week by appointing two members to the Commission on Wartime Contracting in Iraq and Afghanistan, one of which served as Chief Financial Officer for the Defense Department during the period in question. Dov Zakheim's bio states this about his service:

From 2001 to April 2004 he served as the Under Secretary of Defense (Comptroller) and Chief Financial Officer for the Department of Defense, acting as the Secretary of Defense’s principal advisor on financial and budgetary matters, developing and managing the world’s largest budgets, overseeing all aspects of the Department’s accounting and auditing systems, and negotiating five major defense agreements with US allies and partners.

Accounts payable and documentation of delivery sits squarely in the accounting function. For over half the period of widespread noncompliance, Dov served as the Pentagon's CFO. So this is the guy who will restore voter confidence in the Bush administration's purchasing practices? Not if the public is paying attention to Dov's current job as Vice President of Booz, Allen & Hamilton, where he specializes in getting clients defense contracts as head of global defense consulting.

Grant S. Green,Bush's other appointment to the Commission on Wartime Contracting, comes from the State Department, which groomed L. Paul Bremer for his Coalition Provisional Authority role. Mr. Green joined the Bush administration early on as Under Secretary of State for Management. He left in early 2005, after nearly five years of service. He rejoined GMD Solutions, a consulting firm specializing in government contracts. Their press release highlighted his work for the State Department:

As Under Secretary Grant S. Green was the principal adviser to the Secretary Powell on all management issues effecting Department operations. Reporting to him were the Bureaus of Administration, Consular Affairs, Diplomatic Security, Human Resources, Information Resource Management, Overseas Buildings Operations, the Director of Diplomatic Reception Rooms, the Director of Medical Services, the Foreign Service Institute, the Office of Management Policy and Rightsizing, and the Office of White House Liaison. In addition, he was the State Department’s representative on the President’s Management Council, and was the Department official responsible for implementing the President’s Management Agenda (PMA).

How much of that $8.2 billion in noncompliant spending came via the State Department vs. the Defense Department? Either way, Grant Green and Dov Zakheim were both in charge of major operations during the lapses. This is the crew George W. Bush wants to clean up? It harkens back to Fran Townsend doing the White House Lessons Learned report. The promised robust analysis became simply a bust. I expect similar things from the President's latest appointments. Should they need to add Iran to the Commission on Wartime Contracting, Dov will be ready.

Thursday, May 22, 2008

Yet More Fox Like Bush Appointees for Federal Chicken Ranch

The White House announced "the President intends to appoint the following individuals to be Members of the Commission on Wartime Contracting in Iraq and Afghanistan:

Grant S. Green, of Virginia (Chairman of consulting firm GMD Solutions)
Dov S. Zakheim, of Maryland (VP for Booz, Allen & Hamilton's Defense Clients)

This is the second time President Bush appointed Mr. Green to a key role in his administration. In February 2001, George W. nominated him for for the position of Under Secretary of State for Management. Grant left his job as Chairman and President of GMD Solutions, a consulting firm specializing in growing government business for private companies. He rejoined the company after five years of government service. QD Technologies, a partner of the firm, had this to say about GMD:

GMD Solutions, Inc. assists clients in identifying and capturing new markets in North America for their products and services in both the government and commercial sectors through market research & market analysis, business strategy development, direct marketing and sales, and all aspects of government contracting.

Mr. Grant S. Green is chairman of a company selling consulting services to the very firms he could well hear about in investigations? That seems odd for a Commission member charged with finding and addressing contracting abuse. (Another odd finding is GMD's website has not been updated since October 26, 2006, hardly a professional presentation for a worldwide consulting firm.)

The employer of Dov Zakheim, Bush's other appointee will need to update their website soon. Booz, Allen & Hamilton's government division is being acquired by The Carlyle Group, a politically connected private equity underwriter (PEU). Dr. Zakheim is BAH's Vice President "leading Booz Allen Hamilton's work for global defense clients", "working with U.S. Combatant Commanders and allied and coalition ministries of defense worldwide." Dov, the former Chief Financial Officer for the unauditable Defense Department, recently authored a paper titled "One Stop Defense Shopping". His soon to be new employer, The Carlyle Group, is taking that strategy to another level, one stop federal government shopping.

Well there you have it, two foxes ready to guard the Pentagon's contracting chicken ranch. They should be able to stifle numerous investigations while selling their consulting services to military contractors. Only in Bushworld's government industrial monstrosity! Hmmm, Blackwater could benefit from having ex-State and Defense Department high ups like Green and Zakheim on their side. Did Blackwater's Vice Chair Cole Black call his old counterpart for consulting assistance? Grant Green and Cole Black left for the private sector in early 2005. Or did Condi Rice farm out the State Department investigation to an ex-government insider at BAH or GMD?

Her boss sent one sensitive investigation outside when he hired James Baker's law firm for the British Petroleum Texas City explosion? It let BP CEO Lord John Browne off the hook, such that he could find future employment with none other than the aforementioned Carlyle Group. Then again, George W. kept another critical investigation inside when he tapped Fran Townsend for "bust" Katrina Lessons Learned report. She omitted the hospital with the largest number of patient deaths post landfall. Weeks before LifeCare Hospitals had been acquired, by none other than The Carlyle Group. So many choices, so little time, and so much to hide...

Carlyle Invades Eastern Europe in Search of Deals

Just days after an ex-Carlyle affiliate board member pounded his golf shoe on the podium at the Knesset over Nazi "appeasers", the Carlyle Group announced its planned march through Poland and Eastern Europe. Their new general is Ryszard Wojtwoski, the former managing partner of Poland's largest private equity firm.

True to their modus operandi, their new hire spent time in a high level political position before joining the private equity underwriting (PEU) world. Mr. Wotjowski served as Chief of Staff to the Polish Prime Minister from 1983 to 1991. According to Financial News Carlyle plans to overtake companies in Poland, the Czech Republic, Hungary, Slovakia, Romania, Slovenia, and the Baltic States. Beware the financial blitzkrieg spurred on by co-founder William Conway's exhortation, "Make me money."

Wednesday, May 21, 2008

CIA Promotes Itself as Friendly Culligan Man

If a CIA agent shows up offering free "water treatment", shut and lock your door. What could provide relief in a physical therapy office is pure torture at the hands of CIA interrogators. There are no massaging jets with Epson salts, only a bucket, ill intent and a clenched fist.

Murat Kurnaz, a German citizen held at Guantanamo Bay for nearly five years, shared with members of Congress his experience getting water treatment. Kurnaz said it involved a “strong punch” that forced him to inhale water. Asked if this was waterboarding, Murat said “water treatment” is different:

ROHRABACHER: You suggest that you were waterboarded in your captivity. Is that correct?
KURNAZ: No, it’s not waterboarding. It’s called “water treatment.” There was a bucket of water.
ROHRABACHER: Was a cloth put over your face and you were put on a board?
KURNAZ: There was a bucket of water. And they stick my head in it and at the same time, punch me into my stomach.

Make sure it's the Culligan Man wanting to treat your water, not the CIA. There's a water world of difference, at least for now.

In a creepy coincidence, The Carlyle Group purchased Synagro Technologies, a firm specializing in handling hazardous byproducts from water treatment as part of its infrastructure moves. They plan on buying more government service corporations, including Booz, Allen & Hamilton, the huge intelligence provider. When the deal closes, Carlyle will be able to garner intelligence for the feds via water treatment. It sounds like a dangerous combination.

Carlyle's BAH Promotes CFO Salesmen

Booz, Allen & Hamilton, soon to be an affiliate of The Carlyle Group, released a report on the new Chief Financial Officer earlier this year. It used private equity underwriters (PEU's) as a model for CFO duties in the near future, jettisoning the cartoon image above.

Never mind that tight liquidity prevented Carlyle affiliate Vought Aircraft's joint venture from ramping up production of frame assemblies for Boeing's 787 Dreamliner. Was Carlyle's $2 million annual management fee to Vought a factor in tight liquidity? Boeing fired Vought from the JV as a result. The Dreamliner will be at least 15 months behind schedule. Some customers will get their planes up to 30 months late.

Those CFO duties didn't include ensuring compliance with accounting and regulatory standards. The BAH report concluded:

CFOs must be business partners that actively manage value creation, influence strategy, governance and leadership inside any firm. Small changes in the Finance function will lead to greater success such as including an ambitious planning process, high speed in all development initiatives, releasing the full potential of the organization through alignment, engagement and incentives, and activating leadership. In addition, CFOs must be willing to sell when there is no longer a way to create incremental above-market returns.

The pressure is there to achieve above-market returns, as private equity underwriters expect 20-30% annual returns on their investment. A CFO can either sell, lie or do a combination of both. Carlyle's acquisition of Booz, Allen & Hamilton's government services division is clearly intended to be synergistic with its over 1,000 affiliates, many of which currently sell to Uncle Sam. How can BAH consultants drive more business to their Carlyle sister organizations?

As for lying, recall Enron's fictional revenues? They were facilitated by their Wall Street backers. Get ready for another round, one led by CFO's pressured by PEU's expectation of grand returns.

Tuesday, May 20, 2008

PEU Peter Pace Packs Punch in Proxy Pugilism

Proxy materials from SM&A indicate retired General and Board candidate Peter Pace knows how to take sides in their proxy fight. The letter from Board Chair Dwight Hanger states:

Likewise, two of our most valuable assets—Cathy McCarthy and retired General Peter Pace—have also expressed to me in no uncertain terms that they will not work for a company in which Steven Myers (the enemy) exerts influence or control. A year ago at this time, General Pace was the nation’s highest ranking military officer, serving as chairman of the Joint Chiefs of Staff as part of a long, distinguished career of service to our nation. When he agreed to join us upon his retirement, he made it clear that the reason he chose SM&A was because of the quality of your board, the first-rate management team that took over last year and a sharply focused strategic plan that he can help us execute using his extraordinary depth of knowledge and contacts. We accordingly refined our strategic plan with a pivotal role for General Pace as President and CEO of SM&A Strategic Advisors. As he has told many of you directly, he will not be willing to stay on if Myers were to return or successfully place his slate of directors on the board.

We would hate to lose any of these managers and executives who are such valuable contributors to the new SM&A that is emerging from its past. But if there is a change in the composition of our board, it will trigger another round of management and board change at a time when your company is finally beginning to distance itself from its tumultuous past.

Dwight clearly told us where Peter sits. Apparently General Pace is willing to walk away from his first year compensation of $560,000. In addition to his part time work for SM&A, Peter Pace landed a job with Berman Capital, a private equity underwriter (PEU), and a spot on the Neohapsis board.

I found the description of SM&A interesting in light of the strategic shift and tumultuous past mentioned in Chairman Hanger's proxy letter:

SM&A is the world’s foremost management consulting firm providing leadership and mentoring solutions...

It seems they've encountered their share of leadership problems for the "world's foremost consulting firm." But now they have a fighting man on their side.

Carlyle Buys Majority Interest in ITS Technologies & Logistics

The Carlyle Group's news section of its website ran the headline above. Unfortunately the link to the press release wasn't operating. A web search of the deal produced very little. One might expect a technology company to have a major web presence, but little information was available.

ITS Technologies & Logistics did show up as a contractor for the Defense Logistics Agency. Other than that, I'll have to wait for Carlyle to share more information, but it looks like the government industrial monstrosity has yet another nipple available for their Pennsylvania Avenue cohort.

Update: ITS is an intermodal facilities operator. It lifts containers from rail to truck and truck to rail and performs rail switching, terminal administration and equipment maintenance. It has 52 operations in the U.S. and 3 in Mexico. Can Carlyle pull a double in a year and a half, like they did with CSX Lines, later renamed Horizon Lines? Ex. Treasury Chief John Snow sold CSX Lines to Carlyle for a song. He now heads another private equity underwriter, Cerebus Capital Management. Meanwhile, CSX works Congress for protection from potential hedge fund acquirers. One thing leads to another.

Monday, May 19, 2008

Carlyle to Bank Your Gas Money!

Super rich Middle East sovereign wealth funds continue scouring the landscape for places to invest their hundreds of billions in oil profits. It looks like the infamous Carlyle Group may entice them to pour more of their overflowing coffers into their vault. Carlyle could soon sell additional shares to Gulf investors. Last year they sold 7.5% of their private equity underwriter (PEU) to a United Arab Emirates government fund for $1.35 billion.

Recall Congress explored the topic of U.S. asset sales to Middle Eastern SWF's not long ago. Front and center stood Senator Evan Bayh, D-Indiana, one of the point men for Hillary Clinton's Presidential run. Evan saw few problems with corporate sales to foreign government owned corporations. Did that have anything to do with Carlyle being one of his biggest lifetime campaign donors, number seven on his list?

Never mind the other coincidences. Two members of the Clinton White House occupy key positions in Carlyle, Mack McLarty and David Marchick. David recently testified before Congress on the benefits of selling chunks of American corporations to Middle East government companies. David failed to note how Carlyle sneaked in the sale of fifty U.S. airport operations to Dubai Aerospace last August.

Hillary spoke on April 12th at an Allison Transmission plant in Indiana, a Carlyle affiliate since August 2007. By her side was the aforementioned Senator Evan Bayh. Numerous journalists failed to note the ownership change, referring to the plant as GM's. Several months earlier Mrs. Clinton toured another Allison plant in Maryland. On February 11th, she promoted her green power jobs from a "GM" plant. Her remarks never mentioned Allison's real owner, The Carlyle Group. How could the media miss all The Carlyle Connections? This leads us back to the former board member of CaterAir, a past member of the Carlyle corporate fold, our current President.

President Bush called rising gas prices "like a tax on the working people", and part of those rising prices include rising profits. So your tax money is going to foreign government investment funds, which may soon share another huge chunk with The Carlyle Group, just down Pennsylvania Avenue from the White House. It looks like another screwing from the boys in power in Washington, D.C. Welcome to the government industrial monstrosity. Carlyle grew from $13 billion to over $81.1 billion during Bush's term in office. What new benchmark will it hit before George W. leaves office in January 2009?

Friday, May 16, 2008

Carlyle to Down Booz in $2.54 Billion Shot

Reuters reported The Carlyle Group is buying a majority stake in the government business of Booz, Allen & Hamilton. Carlyle, the politically connected private equity underwriter (PEU), will pick up controlling ownership of the BAH's huge consulting and intelligence division. It looks like a win/win from here as our federal government continues spending dollars out the wazoo on spying. In addition, Carlyle already has many of its over 1,000 affiliates doing work for the feds.

The new Booz Government Division can have its consultants recommend products or services from fellow Carlyle corporations. BAH's press release mentioned telecommunications, healthcare and defense. It just happens The Carlyle Group organized its portfolio companies in similar fashion.

Their newest affiliate can use its intelligence to gain competitive advantage, as even more work is jettisoned to the private sector in bi-partisan like fashion. Carlyle co-founder William Conway hates a level playing field. The Booz acquisition should tilt government contracts even further in Carlyle's favor. (At least they're starting out with a $12.2 billion indefinite quantity, indefinite delivery contract from Uncle Sam under the military's ENCORE II program.)

Other recent news had Norman Pearlstine joining Bloomberg as Chief Content Officer. With the move, how will Carlyle ensure their good name? Does buying a major contractor in the feds spying arm help? There's much dirt to bury, or should I say mud.

Carlyle just got fired by Boeing from a joint venture for holding up production of the 787 Dreamliner. They also failed 24 patients in their LifeCare hospital in New Orleans post Hurricane Katrina. During Norman's term as media man, neither story got much, if any play in the news. With Booz on board, can Carlyle stuff its next management debacle? Highly likely.

Wednesday, May 14, 2008

Stop the Flashbacks!

Two and a half years ago President Bush asked his Homeland Security Adviser Fran Townsend to conduct a "robust" investigation into the White House's response to Hurricane Katrina. Down Pennsylania Avenue, The Carlyle Group struggled mightily to keep their good name. Their LifeCare affiliate lost 24 patients in the aftermath of the storm.

Norman Pearlstine, the ex-Time Inc. chief did a remarkable job keeping the Carlyle connection quiet. No media groups asked why America's preeminent private equity firm couldn't manage a rescue of stranded patients. Was it Carlyle's influence or just sheer luck that Fran omitted any mention of the hospital with the highest death toll in her Lessons Learned report?

Fast forward to this week's news, and I'm not talking about the parallels between Burma's go it alone, foot dragging military junta and George Bush. Do you recall the footage of our President telling a few Mississippi citizens to go to the local Salvation Army for help? "But sir, it's gone," came the reply. Offers of international aid poured in, while Condi Rice purchased expensive shoes in a New York City buying spree.

But this morning's flashbacks came courtesy of Fran and Norman. Both made career moves. Norman left The Carlyle Group to join Bloomberg LP as Chief Content Officer. Funny, in my blogging, Bloomberg is the only site that came close to rattling Carlyle's chains. Reporter Jason Kelly recently reported on a few of Carlyle's stumbles. I wonder if similar stories will make it past Bloomberg's new Chief Content Officer? Doubtful, if he left the firm on good terms.

And Fran, who so kindly omitted Carlyle's newest affiliate from her Katrina Lessons Learned report, what came of her? President Bush appointed her to his Presidential Intelligence Advisory Board. Then rumors flew of her hiring at CNN, but her commenter role was officially confirmed only yesterday. Over the weekend, the U.S. Chamber of Commerce announced her new advisory position to their CEO. What kind of "intelligence" does it take to land these plum positions? Apparently, just the kind that makes your boss or employer look good.

Speaking of intelligence, President Bush just rued the flawed Iraq WMD data that led to the invasion in 2003. BBC News reported the U.S. Chief Executive's perspective:

He said intelligence communities across the world had shared the same assessment. "And so I was disappointed to see how flawed our intelligence was."

I certainly can related to Bush's disappointment. I was shocked to read the White House Lessons Learned report and find no mention of LifeCare's 24 patient deaths. Some people might accuse George of having Fran create a whitewash report, but the President doesn't care what citizens think.

"Popularity is fleeting... principles are forever," Mr Bush said. Yes, Mr. President, the world continues to see arrogant, self centered leaders who use violence to solve problems, cannot admit mistakes, nor ask for help. Let's hope it doesn't go on forever.

Saturday, May 10, 2008

Fran Townsend Lands Advisory Role with U.S. Chamber

It's been an exciting week for ex-White House Homeland Security Advisor Frances Townsend. It began with Politico reporting Fran would become a commenter on CNN and ended with an announcement that Mrs. Townsend had been hired to advise and consult with U.S. Chamber of Commerce CEO Tom Donahue.

If anyone paid attention to Fran's work around Hurricane Katrina, they might question both offers of employment. Sure, Mrs. Townsend had to do what her boss ordered, but flying to Saudi Arabia when thousands of people were stranded in New Orleans hospitals? That ranks up there with Condoleezza Rice's shoe buying while offers of aid poured in from governments around the world (in Burmese like fashion). What are Fran's Saudi friends doing for us today? They have the capacity to pump another 1.5 to 2 million barrels a day, but ignore Mrs. Townsend's old boss and his pleas for a price break.

The U.S. Chamber of Commerce ditched their local jobs multiplier several years back. It estimated the number of times a dollar circulated through the community as the result of new employment. While jobs went overseas, it shifted to promoting a cheap goods multiplier. It implied access to inexpensive products made things more affordable and thus people better off. With commodity inflation and record oil prices, that twin edged blade now slices the other way. Fran's advice will be needed as the Chamber is on the bad end of both of its historic multipliers, jobs and prices.

Unfortunately, Fran's record on "robust" reports doesn't always include the "ro." After returning from Saudi Arabia, President Bush tapped Mrs. Townsend to do the White House Lessons Learned report on its Hurricane Katrina response. It omitted any mention of the hospital with the largest number of patient deaths post landfall. Despite news footage the morning Katrina struck showing George W. Bush ask Micheal Brown about hospital and nursing home patients, sick and disabled patients were left in dead facilities for up to five days. While Fran handed King Abdullah a letter regarding America's support against terrorism, the last patient was removed from Tenet's Memorial Hospital, also the landlord for LifeCare Hospital of New Orleans.

LifeCare's twenty four patients deaths warranted not one citation in Fran's report. Just weeks before Katrina sideswiped New Orleans, The Carlyle Group closed on its purchase of LifeCare. The private equity underwriter (PEU) shares a Pennsylvania Avenue address with the White House. I'm sure Carlyle appreciated the omission, as it faces twenty four wrongful death civil lawsuits.

The Chamber of Commerce hates product liability lawsuits and so does the Bush administration. The irony is Carlyle blames Bush's FEMA as part of their innovative defense from those wrongful death lawsuits. LifeCare contends patients became wards of the federal government as soon as evacuation teams set up in New Orleans. This claim is laughable. LifeCare had a duty to care for patients until they were transferred to another caregiver. Claiming acutely ill patients, sitting in LifeCare hospital beds, were under the care of nonclinical people miles away is ludicrous.

Why would the Chamber hire Frances, in light of the fact that she submitted a whitewash on the White House's response to an "unprecendented disaster"? They obviously employed her for her political connections. The U.S. Chamber of Commerce knows our government is for sale. They invested for their share.

Whether she intentionally covered for Carlyle or simply wrote a sorry report, the politically connected PEU owns over 1,000 companies and continues to gobble up more. This past week, they announced the purchase of a Greek chemical company, a Japanese LCD maker, and a Canadian mining software company. How many of Carlyle's affiliates are U.S. Chamber members? It looks like Fran's consulting gig with the Chamber is a good hire all around!

Tuesday, May 6, 2008

Double Shot of Carlyle

While viewing a story on the Carlyle Group's establishing a Quality Committee for huge long term care provider, ManorCare, an annoying pop up invited me to complete a short survey on the use of the website. It came from Nielsen, another Carlyle affiliate.

After declining their invitation, I found one of the three member committee overseeing quality is Gail Wilenskey, a former board member of ManorCare and head of Medicare/Medicaid under Bush 41. Her vote was necessary for Carlyle to close the transaction. Given the political heat generated by the sale, Gail's influence likely facilitated the current Bush administration's pre-Christmas approval of the deal.

Gail also made out like a bandit from the sale. Her ManorCare stock holdings comprised 27,205 shares and her gross proceeds from Carlye were $1.4 million dollars. This hardly makes Ms. Wilensky the impartial quality assessor needed by long term care patients and their families.

For a list of Gail's other holdings, UnitedHealth Group, Gentiva, Cephalon, SRA International and Quest Diagnostics, check out the SEC's Edgar website. On December 12th, Gail flipped her UnitedHealth stock options for a huge gain. Her 25,000 shares cost an average of $11 a share. She sold them for $57.40, grossing $1,165,000.

Carlyle's check came on December 26th, making the holiday season a banner financial one for Gail. In two weeks time, she garnered $2.565 million. That won't make the news, much less a Nielsen survey in today's world. But ManorCare does have a quality committee.

Don't you feel better knowing the private equity underwriter (PEU)that couldn't rescue hospital patients from one of its twenty one LifeCare facilities in the Katrina disaster, now owns five hundred long term care facilities? Was Gail aware of this fact when she voted for buyout or when she agreed to serve on HCR ManorCare's Independent Advisory Committee on Quality, a three-person panel convened to provide recommendations and advice to the ManorCare Board of Directors?

Update 11-25-18:  WaPo nailed Carlyle's role in sinking ManorCare.  There was no mention of Mrs. Wilensky or the Board Quality Committee.