PEU Intrinsic Motivation: $9 million Pay Package

The Economic Club of Washington reunited The Carlyle Group's David Rubenstein and GM's Daniel Akerson, formerly a Carlyle managing director. DetroitFreePress reported:

David Rubenstein, who worked with Akerson when both were managing directors at the private investment fund Carlyle Group, introduced him Friday and said repeatedly that Akerson walked away from a lot of money to take the GM job.

Akerson said he did it because he believed GM was too big and too important to the American economy to fail. “There’s more to life than money,” he said.

Only in the world of private equity underwriters (PEU's) is a $9 million pay package considered "intrinsic motivation." Akerson walked away from Carlyle in the midst of a year long flipping spree.

As for Rubenstein's "a lot of money," he hates paying taxes on it.  His next "great cash in" is rumored to be a Carlyle Group IPO.

Update 1-12-11:  It's time to change the world, PEU style!

Shell's Alaska Christmas Present from O-BOEMRE?

William Reilly, co-chair of Obama's Oil Spew Commission, had harsh words this week for BP, Transocean and Halliburton.  WaPo reported:

The co-chairman of a separate presidential commission on the Gulf oil spill said Wednesday during a speech to oil industry lawyers in New Orleans that there is widespread belief that "breathtakingly inept" mistakes by BP, Halliburton and Transocean led to the disaster. William Reilly also said the industry must do a much better job of regulating itself. 

As I read this, my gut said "diversion."  What is Reilly trying to steer attention away from?  Reilly is on temporary leave of absence from the ConocoPhillips board, a joint venture partner with BP in the Gulf of Mexico's Tiber field.  Reilly's ample stock holdings remain a conflict of interest.

On April 1, 2010, nearly three weeks before the Deepwater Horizon exploded in a 50 story fireball, the headline read:

Obama’s Offshore Drilling Plan: Conoco, Shell Look North to Alaska and Smile

On December 10, the administration announced the next step in Shell's plan to punch a hole in the Arctic.

The Bureau of Ocean Energy Management, Regulation and Enforcement’s (BOEMRE) Alaska Region has announced that it will accept public comments through Dec. 23, 2010, on the following materials related to Shell Offshore Inc.’s oil and gas activities in the Beaufort Sea:

Shell's position is as follows:

Shell had asked the agency to approve a drilling permit by the end of this month so it can push ahead with plans to drill during the Alaskan summer drilling window.

Upstream Online's related story has "Shell breaking the ice for Alaska exploration."  With Shell's project approved, ConocoPhillips can't be far behind. 

Meanwhile, BOEMRE advanced a project to detect oil under or in sea ice using ground penetrating radar.  The study webpage states:

There may be opportunities to test the new radar systems over actual research oil spills over the next three years 2010-2013.

Unless someone does something "breathtakingly inept," like appointing two conflicted members to an Oil Spew Commission, deciding the future of oil exploration.

President George Bush gifted ManorCare to The Carlyle Group for Christmas 2007.  Will President Obama offer Alaska's Northern Seas in the midst of holiday hustle and bustle?  Ho-ho-ho....

Spain Lands in PEU Plane

WSJ reported:

Ken Spain, who spent four years at the National Republican Congressional Committee, is becoming vice president for public affairs at the Private Equity Growth Capital Council, a Washington-based advocacy group with an influential roster of member companies.

Did Ken help spin the NRCC embezzlement scandal, which unraveled in early 2008? Did he create the hero story with Rep. Mike Conaway or the one with staffer Jeff Burton? Was Chris Ward’s scheme complex or simple? Maybe Spain can tell us if the Chris Ward working for Deloitte & Touche in the UAE is the same as the NRCC embezzler.

Spain was awarded a "Flak Jacket" for PR skills by lobbyist Quinn Gillespie, which described the 2008 award as:

Recognizing those on the PR front lines, the "Flak Jacket" award represents the best of the profession-- level-headed, quick on their feet, silver-tongued and tough as nails.

Spain can cover for private equity underwriters (PEU’s) should they abscond with someone else’s money.

Citigroup Lands Orszag

Citigroup announced the hiring of Peter Orszag as Vice Chairman of Global Banking.  Peter, global bankster, will retain his fellowship at the Council on Foreign Relations.  His expected pay is $2 to $3 million per year.

It's a matter of time before board slots open for Orszag.  How many will be in healthcare or infrastructure?  Peter knows where the money will flow.  That's quite a lure.

Update 1-12-11:  Orszag's swimming with the big boys!

Carried Interest Break & Carlyle Group's 2012 IPO

EconomicPolicyJournal reported Senator Max Baucus (D-MT) blocked a provision taxing carried interest as ordinary income.  This is the fourth year in a row the U.S. Senate prevented a House move from becoming law. 

Sen. Max Baucus (D-Mont.) has dropped a provision in the contentious tax cut bill that would have more than doubled taxes on carried interest. Under a loophole in the tax laws, hedge and private equity fund managers pay only the capital gains rate on their share of a fund’s profit, rather than the ordinary income rate. The former is currently just 15%, the latter can be as high as 35%.

Will tax breaks last until early 2012, when The Carlyle Group plans an independent public offering?  Carlyle's 2010 Cash-in should make any 2011 filed S-1 look good. Bloomberg reported: 

Carlyle's clients, who received $1 billion in cash distributions in 2009, have already seen payouts increase to $5.7 billion 2010. 

And the year's not done, yet!  Carlyle keeps 20% of profits on any deal as carried interest.  That works out to $1.4 billion, based on Carlyle's payout.  Tax savings mean an extra $280 million in Carlyle's coffers.  How can they pay Max back?  Time will show.

PEU's at Bilderberg

Bilderberg 2010 took place in Spain.  I've been remiss in noting any private equity underwriters (PEU's) in attendance. Below are Paul Volcker and James A. Johnson, PEU with Perseus LLC.

Next up is Mustafa Koc, Turkish billionaire, Carlyle Group partner and Monument Capital advisor.

These were the only ones I recognized in The Guardian's pictures. PEU's on the attendee list include Peter Sutherland of Goldman Sachs, Henry Kravis of KKR, Roger Altman of Evercore, Peter Thiel of Clarium Capital and Founders Fund, Frank Pearl of Perseus, and Sean Parker of Founders Fund.

Peter Orszag and Larry Summers went, possibly to job hunt. Which PEU will land their services and sponsor their trip to Bilderberg 2011?

Update 12-11-10:  CitiGroup announced the hiring of Peter Orszag as Vice Chairman Global Banking. 

Jeb Bush's New Board Seats

SEC filings indicate Jeb Bush landed three new board seats.

Angelica Corporation,  CorMatrix Cardiovascular, Inc. and Empower Software Solutions, Inc

I already had his Tenet Healthcare, Rayonier and CNL Bankshares board positions.

Jeb sits on Tenet's Quality, Compliance and Ethics Committee.  Funny, Florida Governor Jeb settled several times with Tenet for improper billing.  Brother George W., as President, omitted Tenet's Memorial Medical Center and the facility's 35 deaths from his Katrina Lessons Learned report.  Tenet lobbied the White House on corporate governance changes.  Lo and behold, Jeb landed a board seat the following year.

Jeb's 2009 board pay:

Tenet--$245,000

Rayonier--$141,044

His stock holdings:

Tenet--218,623 shares (as of 9-30-10), worth $940,000

Rayonier--3,896 shares, worth $206,000

This data is from two of Jeb's six board slots, given four are private firms.  Angelica Corporation provides hospital linens.  Jeb joined their board in 2008.  Bush was appointed to CorMatrix Cardiovascular's board in January 2009.  He since keynoted a meeting "rethinking the future of cardiac care."  Empower Software Solutions lists Jeb as a board member, but doesn't give his start date.

Did W.'s endorsement of little brother for the Tenet board seat in 2006 open the gates for Jeb's current board success?  You won't find the answer in George W.'s book.  But I bet George P. knows.

Update:  Jeb's Tenet shares skyrocketed 53% due to Community Health Systems' takeover offer.   His holdings are now $1.4 million.  In Tenet's "Dear Wayne Letter," they cite Tenet's $1 billion Net Operating Loss Carry forward and $320 million in federal payments under the HITECH Act.

Update 1-21-11:  Jeb was appointed to the board of Swisher International in 2010.

Update 1-19-15:  Jeb served on the board of InnoVida from 2008 through 2010.  InnoVida's executives were convicted of fraud. 

Red Central Planning Goes PEU

China announced three new private equity deals.  Morgan Stanley, KKR and Warburg Pincus are launching new yuan funds.  Reuters reported:

China is encouraging the development of the private equity industry, hoping to channel more liquidity into the private sector to aid economic growth. Beijing also expects to use foreign expertise to improve corporate governance.

Morgan Stanley's board includes Erskine Bowles.  How will he educate Chinese leaders?   Bowles is a private equity underwriter (PEU) with Carousel Capital and Obama's Deficit Commission co-chair.  Bowles noted his need to make another fortune.  Who knew it would come from China?

Prior PEU deals included The Carlyle Group, Blackstone and Bain.  Carlyle's David Rubenstein noted his firm was "teaching people in China to buy companies in the west."  It's a PEUniverse...

Carlyle Ex Goes for Blood & Gore

Bloomberg reported:

Generation Investment Management LLP, founded by former U.S. Vice-President Al Gore and former Goldman Sachs Group Inc. executive David Blood, said it hired Mike Ramsay to start investing in the credit market.

Ramsay was previously global head of leveraged finance at private-equity firm Carlyle Group in London where he helped raise more than 5 billion euros ($6.6 billion) for various funds, Generation Investment said today in a statement.

Funny, GIM is the acronym for Government-Industrial Monstrosity, Eisenhower's MIC on steroids and now deep in finance. Carlyle knows the GIM as well as any PEU (private equity underwriter). 

Blood & Gore cite sustainability, but PEU's 30% annual returns are bubble like.  When they pop, who gets sprayed? 

Too big to fail remains.  It's joined by too connected to fail.

Carlyle Group's Claris IPO: A Foreign Matter

The Carlyle Group launched an independent public offering for Claris Lifesciences, an Indian drug maker.  Claris went public in Mumbai. 

The FDA recalled Claris lots of four injectable drugs due to reports of floating matter. 

The FDA has notified healthcare professionals not to use the intravenous medications, metronidazole, ciprofloxacin and ondansetron manufactured by Claris Lifesciences due to contamination. Claris is initiating a recall of all lots of these products, which may be sold under the Claris, Sagent Pharmaceuticals, Pfizer, or West-Ward Pharmaceuticals labels. The FDA received reports of floating matter in intravenous bags of metronidazole and ondansetron. Foreign matter should not be present in a sterile injectable product. Healthcare professionals should not use these products and should immediately remove them from their pharmacy inventories.

The FDA cranked up its concern regarding Claris, sending a warning letter on November 1.  Customers complained about intravenous bags contaminated with fungus and bacteria.

Does the same warning apply to Claris and stock portfolios?  What else does Carlyle India have in store for us?

Third Yuan Fund for Carlyle Group?

WSJ reported:

Carlyle Group LLC is exploring a possible new private-equity fund denominated in Chinese yuan targeting investments in western China, a person familiar with the situation said Thursday.

The U.S. private-equity firm had preliminary discussions with the government of Chongqing municipality on jointly launching the fund, the person said, declining to be named.

The person didn't comment on the size of the fund, but 21st Century Herald reported Thursday, without citing sources, that the fund could be as large as CNY5 billion ($750 million). 

Carlyle already has two yuan funds, one in Shanghai and another in Beijing.  As for what Carlyle brings to the table, consider co-founder David Rubenstein's words.

“The Chinese government also recognizes how we can help local companies acquire western competitors and technologies and that’s something they’re very interested in.  GE is not teaching people in China to buy companies in the west like we are.”

Also, Carlyle "China-sized" automobile parts maker UCI from 2005 to 2010.  UCI went from no Chinese subsidiaries to fourteen, while overall employment fell by 1,550 workers.

The Carlyle Group loves the certainty of central planning, growing markets and cheap labor, as it pursues 30% annual returns.  Lip licking greed knows no bounds.

Update 5-6-11:  China slowly opens the door for PEU's.

Update 5-31-11:  China published rules for PEU investing

Erskine's PEU Report

It's easier to read the tea leaves, when one grows them. Erskine Bowles bragged of his need to make another fortune as Deficit Commission Co-chair. How do the Commission's recommendations set the stage for Bowles to gain? Take retirement:

Some mandatory programs, like federal civilian and military retirement systems, are similar to programs in the private sector. When appropriate, we should apply innovations and cost-saving techniques from the private sector.

This translates to changing formulas, which lower the retiree's proceeds. Might an innovation be higher return investments, like private equity underwriters (PEU's)

It should encourage Americans to build wealth through savings and investment that will generate a return sufficient to allay fears that retirees will outlive their savings, and should permit Americans to have the option to transmit the remainder of their accumulated savings to their heirs. Americans need a fiscally responsible personal retirement savings system that is advanced funded, supplements the pay-as-you-go Social Security system, and accumulates funds for investments in business and infrastructure to help sustain a healthy economic growth rate.

Erskine's Morgan Stanley and Carousel Capital stand ready to help on the retirement investment front. I'm sure there are profit opportunities in the myriad of reforms in the plan. I expect PEU Erskine to mine them.

Update 11-20-11:  Obama's Deficit Commission report went nowhere.  The Congressional Deficit Supercommission appears headed to the same fate.  End result:  PEUs, virtual nonprofit financial organizations, win.

Update 11-6-16:  Hillary Clinton seems ready to tackle Social Security reform and partial privatization.

Update 11-20-23:  Congress may establish a bipartisan fiscal commission to tackle our country's burgeoning debt.  No word on how many PEUs will serve their interests on this commission.  Thirteen years of preferred "carried interest" taxation.  Thanks Erskine!