Wednesday, April 15, 2009

Carlyle Group's Latest Investigation

New York Attorney General Andrew Cuomo continued investigating placement fees paid by private equity underwriters (PEU's) and hedge funds to intermediaries. Fees arose from garning New York State pension investments. Some were paid to politicians and their advisers, others to politically connected investment professionals.

Barret Wissman, an investment executive, plead guilty to a felony securities fraud charge and agreed to pay a $12 million fine. Mr Wissman effectively steals from New York State pensioners and walks away with a fine? That fits with the SEC's kid gloves for the plethora of executives backdating stock options. Stealing from shareholders garnered little in the way of punishment.

Caught in the New York pension investigation net is The Carlyle Group. I don't expect the PEU to linger long, not with their blue connections. Carlyle avoided any mention of LifeCare affiliate’s 24 patient deaths after Hurricane Katrina in Bush’s WH Lessons Learned report. Surely they can ditch a New York state investigation.

Ex-Clinton White House staffer Chris Ullman read Carlyle's defense. Ullman "told The NY Times that Carlyle was cooperating fully in what it called “an industrywide investigation” and had done nothing improper."

If the New York pension fund had the same experience as CALPERS, they received a capital call, a request to pony up more money or lose their investment. Pensioners took it on the chin twice, but Carlyle keeps on ticking. They have a good name to keep. An ex-New York Attorney General may do the trick. Mary Jo White will try to control "a populist frenzy." Paying big money for ex-insider performance is a fractal in Carlyle's world.