Oil Spew Co-Chair "Flew" ConocoPhillips

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

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

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

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?

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

Update 3-9-12:  Carlyle pulled out of bidding, according to sources.

PEU Buying into Distressed Debt

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

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

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

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

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?

Update 10-20-12:  Carlyle owned Mountain Water requested a rate increase of just more than 5 percent. The case is set to be heard in the next few months

Carlyle & Coke: Saudi 42 Percent Club

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

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

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

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

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?

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

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

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

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

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.

Update 7-17-19:  The SEC blessed Corzine's new levered $600 million hedge fund.

Update 8-3-19:   “Why on earth should the SEC allow him to have a license to handle customer money once again?”  Couldn't have said it better.  Corzine is back!

Corzine & Sarkozy: Neither About Transparency

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?

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

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

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

  
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

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.

Update 6-3-15:  Carlyle, Hillary Clinton and Bill Clinton intersected in Egypt according to an IBT Times investigation.

Update 6-6-20:  Streetwear retailer Supreme is under fire for its connections to The Carlyle Group, given Carlyle's history in war making and oppressing peaceful protesters.  The article stated "including ownership of Combined Tactical Systems, a company that “specializes in the manufacture of military and police equipment such as tear gas canisters, flash grenades, breaching munitions (rubber bullets), and handcuffs.”

Carlyle to Offer Saudi IPO

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.

Update 3-18-14:  The 2013 IPO for General Lighting turned into a 2014 sale to Philips.

Does WSJ Know the Half of It?

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

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)

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

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

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

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.

Update 9-17-17:  When President Obama dined with Mrs. Rubenstein in 2015 Guggenheim's Chief Investment Officer joined them.

Carlyle Group Backdoors Mrs. Fields

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?

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

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.