Thursday, January 31, 2013

West Texas Energy Turning Chinese

The Deal reported:

Dallas oil and gas explorer Pioneer Natural Resources Co. said Wednesday it agreed to sell 40% of its 207,000 net acres in West Texas' Wolfcamp Shale play to Sinochem Petroleum USA LLC, a unit of China's Sinochem Group, for $1.7 billion, way above analysts' projections.

The price includes a $500 million cash payment and $1.2 billion for part of Pioneer's share of drilling and facilities cost over six years.

It's not clear from the article if CFIUS approval is needed.

Who knew West Texas would turn Chinese.  They built transcontinental rail, which Texans are refurbishing.  How long before rail lines send U.S. energy to China?

Tuesday, January 29, 2013

Carlyle's Rubenstein Pledges $50 Million, Promises Acclaimed Architect

Washington Business Journal reported:

David Rubenstein, CEO of The Carlyle Group, has agreed to donate half the costs of a $100 million addition to the John F. Kennedy Center for the Performing Arts aimed at adding much-needed rehearsal, education and public outreach space to the venue overlooking the Potomac River.

Rubenstein, also chairman of the center, announced the expansion project and his $50 million commitment to it in a news release Tuesday. In it, Rubenstein said the center has selected Steven Holl Architects to oversee the project.

“I am proud to announce the selection of acclaimed Steven Holl Architects for the Kennedy Center expansion project and look forward to working with one of the foremost architects of our time,” Rubenstein said. “Steven’s wonderful concept will create a strong visual presence that bolsters the Center’s prominence as the national cultural center, while maintaining its unique presence among Washington’s iconic landmarks.

This isn't Rubenstein's first major architectural announcement for a major East Coast city.   Carlyle announced a prize winning architect for Riverside Center in New York.  When it came to develop the first building, Carlyle's famed architect was nowhere to be found.  Let's hope Steven Hoil remains on the job.

This incredible donation should add to Rubenstein's PEU Teflon status. The man is darned near indestructible. .  

Sunday, January 27, 2013

Carlyle Sells Riverside Center Plot to Israeli Tycoon

Haaretz reported:

Despite suffering heavy losses on certain U.S. property projects, Israeli tycoon Yitzhak Tshuva has not soured on the States. His privately held company Elad Group has partnered with U.S.-based Silverstein Properties in buying a plot of land in Manhattan from the Carlyle Group for $170 million. The companies plan to invest about $650 million in building a residential and commercial project called Riverside Center, with more than 660 apartments.

The Real Deal offered Carlyle's original investment in the project:

Carlyle and Extell bought an undeveloped portion of Donald Trump’s Riverside South development from his Hong Kong-based partners in 2005, for $1.76 million, and planned to build the five-building complex, which includes a school, on part of it. 

The project changed numerous times.  Carlyle sold it as designed by an internationally renowned architect.  The first building approved has a local New York architect.  In PEU fashion the project qualifies for an 80/20 tax abatement.

It's not clear how much land Israeli Tycoon Yitzhak Tshuva purchased for $170 million.  Tshuva could've paid 100 times Carlyle's original investment for a subplot.  Carlyle's website is silent on the sale. 

Carlyle profits handsomely, minimizes taxes and keeps their good name.  It's a PEU world.

Saturday, January 26, 2013

Carlyle's Davos 2013

The annual meeting of global tamperers wrapped up in Davos, Switzerland.  The Guardian Live Blogged the WEF for those of us without $40,000 to pay to attend.:

Day 1: Britain to hold a referendum on EU membership in 4 years, George Soro sought to end War on Drugs, and global image maker WPP CEO Sir Martin Sorrell's spoke of "grey swans."

Day 2:  Global tamperer Henry Kissinger talked about America's 51st state - "card holding" Israel, unemployment could stress stability, governments should cut business taxes and slash their "bloated welfare state." 

Day 3  Colluded tax avoidance is sold as tax planning by Goldman Sachs and governments need to steer financial markets.  The male dominated gathering also broached the subject of gender equality.  Topless Femen protestors pointed out only 17% of Davos invited attendees are women.

As for future prognostications, somehow US News & World Report missed business tax cuts.  Here's my prediction:
While the monied and powerful look to feather their beds, the rest will linger along, on stand by to bail them out of the their next manufactured crisis.  

Then there's a U.S. planned surgical strike on Iran, a timely next step after Henry Kissinger's warning on Iran.

Greed and hubris played in Davos for five days.  Oddly, The Carlyle Group's David Rubenstein was relatively subdued.  He aw-shucked on PEU's doing bigger deals, the size of Dell Computers.  Rubenstein was mentioned in the AA Davos list.  My guess is Rubenstein was in deal making mode, which would explain why fellow co-founder William Conway traveled to Davos.  Rubenstein sells, Conway buys.

If "Foreign policy is economic policy", as stated by Senator and Secretary of State nominee John Kerry, the World Economic Forum is the global incubator for oligarchs.  Tamperers ride!

Friday, January 25, 2013

PEU Lobbying in 2012

The Private Equity trade group spread nearly $1.7 million in 9 months to lobby the following groups.  PECKER, my pet name for the association, employed two lobbyists, Steve Judge and Jason Mulvihill to advocate on behalf of private equity underwriters (PEU's).

Rest assured your voice is drowned out by peckers.

Update 1-26-13:  SEC Chief Nominee Mary Jo White worked for Debevoise & Plimpton, a law firm that also lobbies.  Two thirds of its lobbying revenue came from PECKER-PEGCC. 

Update 8-10-22:  The PEU lobby has been recast as American Investment Council.  It's still full of peckers who successfully fought to keep its preferred "carried interest" taxation, yet again.  Blue Corporacrats showed their PEU love.

Sunday, January 20, 2013

Cobalt Toxic to Soros Portfolio

George Soros Fund Management lost big on Cobalt.  Soros bought in early 2010 and was out of Cobalt that same year.  SEC filings show two Cobalt entries.

Did George Soros find out which Angolan government leader(s) were behind Alper Oil?  If so, the SEC and Department of Justice might appreciate such information.  A scorned investor might be one of the few sources willing to talk.

Soros missed the big payday, which occurred last week.

ARINC, Synagro & Cobalt Energy: Carlyle PEU

The Carlyle Group's ARINC received a 33 month ban from the World Bank for "procurement violations," likely bribery.  Affiliate Synagro Technologies bribed the wife of Representative John Conyers (D-MI), who recently was released from jail.  The Carlyle Group settled a New York pension fund bribery (pay to play) investigation for $20 million, $70 million if one counts Carlyle's energy partner, Riverstone Holdings. 

Cobalt International may be the next Carlyle affiliate tainted by bribery for dealings in Angola.

Cobalt's 2012 10-K stated:

We may be exposed to liabilities under the U.S. Foreign Corrupt Practices Act, and any determination that we violated the U.S. Foreign Corrupt Practices Act could have a material adverse effect on our business.

We are subject to the U.S. Foreign Corrupt Practices Act ("FCPA") and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties for the purpose of obtaining or retaining business. We do business and may do additional business in the future in countries and regions in which we may face, directly or indirectly, corrupt demands by officials, tribal or insurgent organizations, or private entities. Thus, we face the risk of unauthorized payments or offers of payments by one of our employees or consultants, given that these parties may not always be subject to our control. Our existing safeguards and any future improvements may prove to be less than effective, and our employees and consultants may engage in conduct for which we might be held responsible

In connection with entering into our RSAs for Blocks 9 and 21 offshore Angola, two Angolan-based E&P companies were assigned as part of the contractor group by the Angolan government. We had not worked with either of these companies in the past, and, therefore, our familiarity with these companies was limited. In the fall of 2010, we were made aware of allegations of a connection between senior Angolan government officials and one of these companies, Nazaki Oil and Gáz, S.A. ("Nazaki"), which is a full paying member of the contractor group. Nazaki has repeatedly denied the allegations in writing. In March 2011, the SEC commenced an informal inquiry into these allegations. To avoid non-overlapping information requests, we voluntarily contacted the U.S. Department of Justice ("DOJ") with respect to the SEC's informal request and offered to respond to any requests the DOJ may have. Since such time, we have been complying with all requests from the SEC and DOJ with respect to their inquiry. In November 2011, a formal order of investigation was issued by the SEC related to our operations in Angola. We are fully cooperating with the SEC and DOJ investigations, have conducted an extensive investigation into these allegations and believe that our activities in Angola have complied with all laws, including the FCPA. We cannot provide any assurance regarding the duration, scope, developments in, results of or consequences of these investigations. 

In the future, we may be partnered with other companies with whom we are unfamiliar. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold us liable for successor liability FCPA violations committed by companies in which we invest or that we acquire. 

"Contractor group" understates the relationship.  These firms are full blown equity partners.  Carlyle effectively partnered with the government official who approved Cobalt's lease, without any public bidding.  AllAfrica reported:

Mr. Manuel Vicente, then head of Sonangol, was also co-owner of Nazaki Oil and Gas, a company that set up a consortium with the U.S. oil company Cobalt. In 2010, Sonangol awarded two pre-salt oil blocs, 9 and 21, to the consortium (Cobalt 40 percent, Nazaki 30 percent, Alper Oil 10 percent and Sonangol Pesquisa & Produção, the remaining 20 percent) without public tender as required by law.
Furthermore, as head of Sonangol, Manuel Vicente selected the local equity partners, Nazaki and Alper, in clear violation of the Angolan anti-corruption laws. He selected his own company to be the main local partner of Cobalt, with which it still shares the same business address in Luanda.

In PEU fashion Vicente is now the Vice President for the Angolan government.  The deal reeked from the get go, when Carlyle's Cobalt paid the front money for Alper Oil and refused to reveal any information as to who was behind this mysterious company.  Cobalt is yet to reveal their 10% partner in any SEC documents.

PEU Report covered Cobalt's investor group in 2010.  The pattern of private capitalists suckling off government through huge contracts and exclusive franchises was already well entrenched.

Greed drives poor behavior, domestic and international.  Private capitalists and government leaders are set for their global reshaping session in Davos, Switzerland.  The World Economic Forum has a distinct odor, PEU.  My pet nickname for this greedy bunch?  It's private equity underwriters, abbreviated as PEU.

Update 3-3-13:  Detroit sewage sludge bribery has its counterpart with Chicago red light cameras.  Oddly, Carlyle almost owned Redflex, the red light camera vendor accused of corruption.  It would've been a fitting addition to any PEU family.

Update 2-16-14:  An Angolan General became a billionaire thanks to deals like Carlyle's   The headline read, "General Dino:  The new Angolan billionaire."  The third largest private oil and metals trader in the world, based in Switzerland, helped himself to "shell companies " to make the Angolan General richer by $750 million. The front man for Iron Angolan president is currently holder of a fortune above a billion dollars."  The last paragraph of the article states:  "General Dino owns an Angolan company - Nazaki Oil & Gas - north American partner of Cobalt International Energy business , whose main shareholders Goldman Sachs and a background set of power controlled by the Carlyle Group and Riverstone Holdings."

Update 8-15-14:  Africa is going PEU in a big way.  President Obama's Power Africa stands to enrich U.S. and African billionaires, like General Dino.   

Update 12-2-14:  Two pension funds are suing Cobalt and its PEU sponsors for losses due to corporate graft 

Update 3-29-15:  A U.S. newspaper columnist reported "Tom Burgis of The Financial Times has a powerful new book, “The Looting Machine,” asserting that firms, including Goldman Sachs and Carlyle Group, backed an oil company called Cobalt in investing in oil operations in which Angolan officials secretly held stakes worth staggering sums."  It's not an assertion.

Update 11-6-16:  Workers must bring their own toilet paper to work at Sonagol, now headed by the billionaire daughter of Angola's President.

Update 2-9-17:  The Justice Department could not find anything wrong with Carlyle's crony capitalism in Angola.

Update 6-17-17:  A piece on the $1 billion Guernsey lawsuit against Carlyle stated, "In testimony that provided flashes of Carlyle Group’s rarefied perch in the investment world, Mr. Conway said the Angolan government, CCC’s biggest investor, considered putting $500 million in the fund. The West African country ended up taking a $150 million stake."  That was in 2006 and 2007.  Carlyle knew the Angolan government quite well.

Update 10-2-19:  Bloomberg reported on Carlyle's latest venture in African oil, Boru Energy.  Carlyle will partner with former Tullow Energy executives.  Tullow was accused of paying $100 million in bribes to Uganda officials in 2011.  As noted earlier Carlyle has its own bribery history.  Together I expect them to shake up African oil.

Update 4-2-21:  Carlyle's Boru Energy is in talks to acquire Occidental Petroleum's oil and gas fields in Ghana.

Saturday, January 19, 2013

Carlyle Group's Cobalt Cash In

The Carlyle Group, a politically connected private equity underwriter (PEU), cashed in one sixth of its investment in Cobalt International Energy, a deep water oil discovery company.  Proceeds from the $1 billion offering amounted to $325 million for Carlyle/Riverstone .

Peter Orszag's Citigroup and Erskine Bowles' Morgan Stanley sold the deal

Thursday, January 17, 2013

Davos WEF: Washington Works for PEU

The Columbus Dispatch reported

Republican U.S. Sen. Rob Portman also is to attend the World Economic Forum in Davos, Switzerland, where global political, business and academic leaders will gather from Wednesday through Jan. 27 to discuss the world’s pressing economic, social and political challenges.

Portman’s attendance wasn’t known until yesterday when the forum announced its 2,500-plus participants and program schedule. He is to participate in a panel discussion on Jan. 25 called “Will Washington Work?” with U.S. Rep. Darrell Issa, R-Calif.; Gov. John Hickenlooper, D-Colo.; and David M. Rubenstein, co-founder of the global asset-management firm Carlyle Group.

Strategic sponsors include Bain, Bank of America, Clayton Dubilier Rice, Goldman Sachs, Jones Lange Lasalle, JP Morgan, Morgan Stanley, and UBS.

Blackstone's Stephen Schwarzman will talk on unlocking Long Term Capital, while George Soros will share his insights the last day of the event.  Rest assured more PEU's are on the dais, as are leaders of central banks.  Senator John McCain will lead a talk on the future of Syria.   Global tamperers unite.

Wednesday, January 16, 2013

Carlyle to Dump Synagro

Waste Recycling News reported:

The Carlyle Group, owners of organic waste recycling and wastewater treatment heavyweight Synagro Technologies Inc., is reportedly in talks to sell the subsidiary.

Reuters reports that Carlyle has directed its financial advisory firm Evercore Partners to reach out to potential buyers. Synagro has been saddled with debt and received a waiver to work on its debt problems in late 2012.

First LifeCare Hospitals imploded from Carlyle loading the affiliate with debt, now Synagro Technologies faces a similar fate:

The company's debt climbed with decreased spending by municipalities after the 2008 financial crisis and the loss of major contracts in New York City and Detroit, the report indicates. If a sale does not go through, Synagro could be taken over by the debt holders.. 

The Detroit loss came from Synagro's bribing Councilwoman Monica Conyers, who was recently released from prison for her conviction.  Fresh testimony on Synagro's dirty dealings came from Detroit. A number of ethical violations occurred under Carlyle's PEU ownership.  How will Synagro's last chapter as a Carlyle Group affiliate end?  Will it be a bloated carcass?

Update 1-21-13:  The Carlyle Group isn't mentioned in the dozens of stories on Synagro's bribing of Detroit City Council members.   It's fascination how the media helps Carlyle keep their "good name."

Update 5-11-13:  Synagro executives were aware of the bribery, but the company was never charged, nor was its owner, The Carlyle Group.  

Saturday, January 12, 2013

China Pacific Five Bagger for Carlyle Group

The Carlyle Group sold the remainder of its China Pacific Insurance Group shares as Chinese IPO's dried up.  

More than $130 billion in private equity and venture capital investments in China are locked inside deals with no easy exits for limited partners, posing a risk that the robust market for private fund investment into China could dry up, according to a report Wednesday by China First Capital.
China Pacific was already trading on the Hong Kong exchange.  China Daily reported:

Carlyle Group, one of the world's largest private equity firms, has sold its remaining stake in China Pacific Insurance (Group) Co Ltd in a deal valued at $793 million.
Carlyle began selling its stake in the insurer in late 2010. It earned about $4 billion from stock sales over that time, five times the $800 million it had invested between 2005 and 2007 for a 17 percent stake in the Chinese firm, according to calculations by Thomson Reuters.
Ring the bell for a PEU five-bagger!  One down, at least seven more to go. 

Friday, January 11, 2013

Carlyle's ARINC Procurement Violations: Bribery?

KHL Group reported:

US engineering company ARINC has been banned from World Bank projects for 33 months for procurement violations on a Bank-funded airport development project in Egypt.

The news comes just a week after Serbian contractor Energoprojekt Niskogradnja was debarred from World Bank projects for 2.5 years after admitting fraud on a Bank-financed road and development project in Uganda.

The World Bank did not illuminate "procurement violations", but Carlyle Group affiliates have a history of bribery.   Serbian Fraud got 30 months from the World Bank.  Carlyle-ARINC's offense warranted an extra 10% penalty at 33 months.

The Carlyle Group and its partners settled a New York "pay to play" pension fund investigation without admitting guilt.  Carlyle's Synagro Technologies bribed the wife of Representative John Conyers.

Another recent Carlyle bribery story came courtesy of WSJ.

Allison Transmission, which is backed by Carlyle Group and Onex Corp., is being sued by a former employee who alleges he lost his job after reporting bribery in China.
If something smells, it's a PEU (private equity underwriter).  Extrinsic motivators distort behavior.  Greed compounds it exponentially.

Update 3-10-13:  Despite being banned by the World Bank for unethical behavior on an Egyptian project, ARINC won more Egyptian work.  

Monday, January 7, 2013

Hagel's PEU Rally

Senator Chuck Hagel's financially powerful brethren threw their support behind his Pentagon nomination.  Consider the spate of private equity underwriters (PEU's) in this one paragraph of Hagel supporters:

Hagel’s supporters, former National Security advisors Brent Scowcroft, Zbigniew Brzezinski, former US Ambassador to Iraq Ryan Crocker, former US Ambassador to Israel Tom Pickering, former Defense Secretary  Frank Carlucci, and World Bank President James Wolfensohn.

Brent Scrowcroft - Strategic Partner with Torch Hill Investment Partners (Bloomberg).  Torch Hill's website offered the following Scowcroft quote:

"Globalization has made the world economy more integrated, more efficient and more susceptible to disruption than ever before in our history."--Brent Scowcroft, Former National Security Advisor, Strategy Partner, Torch Hill Investment Partners

Torch Hill's portfolio is a spate of Defense Department Contractors.  Torch Hill's Chairman co-chairs the Brent Scowcroft Center on International Security.

Mr. Thomas Reeve Pickering is a Strategic Advisor at NGP Energy Capital Management.  The Carlyle Group invested in NGP just before Christmas.

Frank Carlucci, Chairman Emeritus for The Carlyle Group.  Carlucci also is Co-Founder and Chairman of Advisory Board at Frontier Group

James Wolfensohn is founder of Wolfensohn and Company, an investment and advisory firm specializing in emerging market economies.  Chuck Hagel is a director of Wolfensohn and Company.

I illuminated Chuck Hagel's other PEU ties, Advisory Board Member for Corsair Capital and Senior Advisor for McCarthy Capital.  If you search under retired political heavyweight rocks, there's likely a PEU.

Saturday, January 5, 2013

Banner Year for General Peter Pace

General Peter Pace added two more board slots to his already heavy governance load.  The two new positions are with Alien Vault and Laserlock Technologies:

Berman Capital
SM&A Strategic Advisers
Pike Electric
ILC Industries
Pelican Products
AAR Corp.
*Alient Vault LLC
*Laserlock Technologies 

Alien Vault showed its bipartisan side by taking $22.5 million from Al Gore's Kleiner Perkins Caulfield and Byers.  Al Gore just grossed $100 million from selling Current TV to a Qatari sovereign wealth fund. 

How much will General Pace gross from private company governance?  Eisenhower's Military-Industrial Complex, engorged from trillions in federal steroids, morphed into the Government-Corporate Monstrosity.  Pace is no Eisenhower. 

Friday, January 4, 2013

Gore Monetizes Current TV

Al Gore cashed in on one private investment:

Former Vice President Al Gore has made himself a much, much richer man by selling his little watched cable channel Current TV to the Emir of Qatar-funded Arab news channel Al-Jazeera.

Gore netted $100 million with his 20 percent stake in the network when it was sold for a reported $500 million on Wednesday.

How much profit did Al make on Current TV?  Maybe Eliot Spitzer will reveal Al's take.  It's ironic that a Qatari Sovereign Wealth Fund bought out Current TV through affiliate Al-Jazeera.

PEU Al is a co-founder of Generation Investment Management, a partner at the Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, an adviser to Google and a board member at Apple.

Red and Blue love PEU and Al Gore got more than a little love.  Al got a seven bagger.

Tuesday, January 1, 2013

Carlyle Leads Bet on Duff & Phelps

The Carlyle Group leads a consortium of private equity underwriters (PEU's) in taking Duff & Phelps private.  Duff &Phelps last went public in 2007.  Carlyle's Olivier Sarkozy (of Olsen Twin fame) stated why the PEU consortium paid a 20% premium relative to Duff & Phelps recent stock prices.

"Regulatory demands, implementation of new accounting policies and requirements for increased corporate disclosure and third party validation provide significant growth opportunities for Duff & Phelps core products and services. We will harness Carlyle's and Stone Point's global networks while leveraging Duff & Phelps preeminent brand to foster growth in new geographies. Additionally, we believe the involvement of Pictet and Edmond de Rothschild Group will support the Company's initiatives to enhance its international presence and expand its Limited Partner client base. We are excited to work with Noah and his management team on this opportunity."
Carlyle et al can send affiliates to Duff & Phelps for the services cited.  Rothschild recently advised Carlyle regarding LifeCare Hospitals.  Carlyle took LifeCare into a Rothschild recommended bankruptcy.  Duff & Phelps has a restructuring division.  Might business soar given the billions in PEU refinancing coming in 2013 and 2014?

Another Carlyle affiliate, Sandler O'Neill, advised the PEU consortium on Duff & Phelps.  Might Duff & Phelps tag team with Sandler on future PEU refinancings and/or sales.  They could partner in a fee generating explosion, benefiting Carlyle.

Centerview Partners, with Bob Rubin, advised Duff & Phelps on the deal.

Below are items of historical note on Duff & Phelps website:

Valuation advisor for the U.S. Congressional Oversight Committee's Troubled Asset Relief Program (TARP)
Financial advisor to the Examiner in the Lehman Brother's bankruptcy
Expert Witness regarding the Madoff Estate

Carlyle knows leverage in its many forms.  How will The Carlyle Group lever Duff & Phelps? What new bailout might Duff & Phelps support?  What huge bankruptcy will need their services.  What monster fraud will need untangling? 

Update 11-1-2017:  Carlyle and company are ready to flip Duff & Phelps, which was taken private nearly five years ago for about $665.5 million.  Sale price is $1.75 billion.