Thursday, February 27, 2014

Carlyle Co-founders 2014 Pay & Texas Taxpayers

WaPo Business reported:

The Carlyle Group’s three co-founders took home about $750 million between them in 2013, mostly from their dividends in the private equity firm and the gain they received from their investments. 
The vast sums earned by Daniel D’Aniello, 67, William E. Conway Jr. 64, and David M. Rubenstein, 64, known in the firm as the “DBD” after their first initials, came from salary and stock dividends from their Carlyle holdings and payouts from investing personal money in the firm’s funds. 

The triumvirate could easily refund Texas taxpayers their $35 million gift to the DBD's in 1994.  The money was to provide 3,000 new jobs in the DFW area.  Carlyle affiliate Vought Aircraft Industries decided to send Boeing 787 Dreamliner jobs to South Carolina, then held on to the $35 million for six years.

Rather than refund the job incentive money when The Carlyle Group looked to cash in Vought, Carlyle worked with Governor Rick Perry to redo the deal.

The DBD's 2013 take home pay could refund Texas taxpayers over 11 times.  I'd consider that patriotic, living up to one's commitment to provide promised jobs or give a full refund with accrued interest.  The DBD's did neither.

A refund would be Texas Justice, the status quo is Texas "Just Us" billionaires and their purchased politicians.

Tuesday, February 25, 2014

Carlyle's Rubenstein on CNBC

CNBC reported:

"We believe healthcare, because of what is going on in the United States and the aging of the population in Europe, the United States and Japan, is a pretty good investment," said David Rubenstein, who co-founded private equity giant Carlyle Group, which manages $185 billion.

CNBC researchers have catching up to do given Carlyle's assets under management were $188.8 billion at year end.   As for what's going on in the U.S. it's PPACA, designed by a private equity underwriter (PEU) for PEU's. It's the nature of the game.

It is nice of CNBC, Dealbook and Bloomberg to give Rubenstein free air time to promote Carlyle.  Business reporters know what happens if they don't play nice with modern day Robber Barons.  It's a PEU world.

Monday, February 24, 2014

Nader's Billionaire PEU Presidential Candidates

The Carlyle Group's co-founders are so beloved, two of the three made Ralph Nader's list of promising Presidential candidates. 

11.  David Rubenstein – former, energetic White House assistant to President Carter and co-founder of a successful venture capital firm – the Carlyle Group – expanding philanthropist and convener.

15.  William Conway – co-founder of Carlyle Group – whose priority philanthropic mission is to generate job producing activities.

It must be for the Greed Party.  Nader may need a history lesson on private equity underwriters. 

Carlyle Co-founder to Grow More Conservatives

Carlyle Group co-founder Daniel D'Aniello gave $20 million to the American Enterprise Institute, a Red Team D.C. based think tank.  St. Louis Post Dispatch reported:

The contribution by D'Aniello — set to be announced Tuesday — marks a new foray into policy advocacy by the top Carlyle executive, who has maintained a much lower profile than co-founder David Rubenstein. It also represents the marriage of one of Washington's business titans to one of its top think tanks.

AEI will name its new building after D'Aniello before moving in late next year. The building, at 1785 Massachusetts Ave. NW, formerly owned by Andrew Mellon.

Fitting that a modern day robber baron would have his name on a building formerly owned by a historical robber baron.  As for the money it's going toward more than a building:

The expansion will allow AEI to continue to grow rapidly, from 140 staffers in 2009 to 206 today. AEI will build radio and television studios, classrooms and other meeting spaces in an effort to expand its influence.
As for the 24 hour 365 day a year permanent political campaign, it will become the annual 31,536,000 second permanent political campaign.

Consider D'Aniello's motivation:

"One of the biggest problems we have in the United States is really [that] the family is so diluted in many sectors of the economy that there's no support system at home," he said. "What that means is obviously education and instilling in young people the belief that they can have a better life."

In light of Carlyle's impact on the family and this belief in a better life, as shared by a former business reporter:

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out. 
The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent. 
I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!
I imaging this ex-business reporter would feel similarly about Daniel D'Aniello.

Note:  Think tanks are ofter the initial landing spot for retired public servants, prior to their making their move to private equity underwriting (PEU).  D'Aniello's donation can fund a number of retired Congressmen and White House appointees.  This is the Red side of Red and Blue love PEU. 

Sunday, February 23, 2014

SEC on PEU Deal Fees: Decision Looming

Bloomberg reported yesterday:

The U.S. Securities and Exchange Commission is considering granting private-equity firms a reprieve after they collected billions of dollars in deal fees without being registered to do so, according to a person with knowledge of the matter. 

The SEC staff is weighing a special exemption for private-equity firms to continue collecting deal fees in the future, said the person, who asked not to be named because the deliberations aren’t public. An exemption would mean the agency is unlikely to pursue enforcement action over past deals, the person said. A final decision hasn’t been made and the agency could still require the firms to register or seek sanctions for past deals. 
The issue arose nearly a year ago:

The issue first flared up last April when David Blass, chief counsel for the SEC’s trading and markets division, said in a speech that private-equity firms’ routine practice of taking transaction fees appeared to “fall within the meaning of the term ‘broker.’” 

The speech set off a flurry of calls from fund managers to securities lawyers to understand whether the speech raised issues for them and what new regulatory obligations may await.

Since Blass’s April speech, the industry has pressed for an exemption, arguing that investment advisor rules provide sufficient protections for investors, making the added broker-dealer requirements -- registration with a self-regulatory organization, training for staff and additional SEC inspections -- unnecessary.
This theme continued in August 2013:

John Ramsay, the acting direct of the SEC’s Division of Trading and Markets, said that the group is continuing to look at broker-dealer registration matters as they relate to the private fund sector.

Ten days ago DealBook ran a story on Stephen Luparello, the man likely to replace Ramsay, who will return to the private sector.

(Luparello) works in the securities department at Wilmer Hale, a go-to firm for Wall Street banks.
Recall that BP hired WilmerHale to smooth waters after their summer long Oil Spew in the Gulf of Mexico.

Luparello's bio (on WilmerHale's website) states:

Stephen Luparello is a partner in the Securities Department, and a member of the Broker-Dealer Compliance and Regulation, and Litigation and Enforcement Practice Groups. He joined the firm (WilmerHale)  in 2012 after a 16-year career with the Financial Industry Regulatory Authority (FINRA), where he most recently served as Vice Chairman.

During his time as vice chairman, Mr. Luparello was responsible for all aspects of FINRA’s examination, enforcement, market regulation, international and disclosure programs. He also served as a primary staff representative to the Board, alongside the CEO, and to its outside constituencies, including the Securities and Exchange Commission (SEC), Congress, industry groups, media and other regulators. Mr. Luparello was part of the team to oversee the merger of NASD and NYSE Regulation programs, and assisted with the consolidation of their rulebooks into the FINRA Rulebook.

Prior to joining the FINRA, Mr. Luparello briefly worked for the Commodity Futures Trading Commission, where he served as Chief of Staff to Chairman Mary Schapiro. He also spent nine years at the Securities and Exchange Commission, serving as branch chief in the Office of Inspections in the Division of Market Regulation, and prior to his departure, as Counsel to the Commissioner, where he advised on regulatory and enforcement matters.
To show how small the appointee group is in Washington, D.C., Luparello once worked with John Ramsay, the man he is to replace.  Two different times the pair served Mary Schapiro in staff roles.  All are self-regulation proponents from inside the financial industry. 

Dealbook article on Luparello's likely appointment -- 2-13-14
SEC announces Luparello's appointment -- 2-20-14
Bloomberg on SEC likely waiving PEU Deal Fees -- 2-22-14
These appear to be smoke signals to the PEU class that their deal fees are safe.

To think they could've just gone down the street or met at the White House.  Time will tell if this is the correct interpretation.

Will the private industry trade group, which I peg as PECKER, get its way?  PECKER stands for Private Equity Capital Knowledge Executed Responsibly.  Anyway joke delivered, their head lobbyist had this to say:

“Private equity investment advisers perform a fundamentally different service than broker-dealers, and should not be required to register as such.  Layering broker-dealer regulations on private equity will be of no meaningful benefit to investors and would levy significant costs on private equity firms.” 
Translation:  PEU's aren't done being served by Uncle Sam, in this case Stephen Luparello. 

The decision on whether to give the industry a pass is being deliberated by SEC staff, not the presidentially appointed five-member commission, the person said. SEC staff are authorized to issue rule exemptions without putting it to a commission vote.

Luparello could ensure a fine future for himself and his family with this one decision.  Also, watch where John Ramsay lands post public service.  That may be another indicator of how pervasive private equity has become.  It's PEUbiquitous. 

PEU Sustainability

WaPo "Business with Bloomberg" reported:

The Carlyle Group of the District appointed Jackie Roberts chief sustainability officer.

Her first act should be to explore the sustainability of her employer and other private equity underwriters.  How sustainable are they when their impact studies only count their winners?  It takes pathology to exclude affiliates who failed the sustainability test by going bankrupt.   

How sustainable are they when Carlyle made over $650 million in capital calls to CalPERS during the financial crisis?  That doesn't count Carlyle's other owners who kicked in how much cash to keep the PEU afloat?  What if they declined?  How sustainable would've Carlyle been?

Image is everything in our PEU world.  The profitability of corporate flipping is dependent on a number of factors, massive tax breaks/direct government subsidies, leverage and cheap debt, management fees to investors, management/deal fees to affiliates,  bleeding affiliates via dividends/distributions and growing asset prices.

Right now the system is stacked in Carlyle's favor.  For private equity to be sustainable its needs someone to buy their companies.  That will stop at some point.  The question is when.

Consider what Carlyle affiliate Commscope said about sustainability:

“It's easy to think of a few things that definitely shouldn't be sustained, such as traffic jams, head colds and boring lectures.” 

I’d add private equity to the list.

Saturday, February 22, 2014

Rubenstein's Decade of Tax-Break Funded Philanthropy

The latest NYT billionaire pander piece lathered Carlyle Group co-founder David Rubenstein with praise over his "patriotic philanthropy."

“The United States cannot afford to do the things it used to do,” Mr. Rubenstein said.

Nearly fifteen years of out of control federal deficits coincided with the virus like spread of private equity underwriters (PEU's).  Both the Red and Blue political teams set the stage for corporate flippers to profit handsomely.  In return flippers, or their affiliates, gave generously to both parties and their candidates.

Many public servants ended up on Carlyle's or other PEU payrolls after leaving office.  This is the system that caused the United States to not be able to afford the things it used to do.  In that system Rubenstein profited mightily. 

Carlyle intends to monetize a portion of its equity in PQ Corporation via an independent public offering.  PQ started its PEU sentence under CCMP Capital Partners.  A look at PQ's PEU history and Carlyle's concomitant growth show:

Carlyle's assets under management grew ten times in the last ten years.  The Grinch's heart only grew three sizes when he heard the Who's singing Christmas morning with no presents, food or trappings?    How many people working in PEUville wake up and sing with their pension plan frozen or gone, their retiree benefits jettisoned to an individual exchange so the employer can limit their contribution, or their job eliminated and sent south or overseas?

Carlyle's Rubenstein is a lifelong student of history.  His $10 million donation to Monticello becomes more interesting when one realizes Thomas Jefferson had the funds to free his slaves from the death of a good friend.  Jefferson's friend bequeathed his fortune under that sole condition.   The man who wrote "All men are created equal" turned down the offer, instead taking out a loan using slaves as collateral.  One might say Jefferson was a PEU founder, or at least, an early visionary.

Rubenstein and his PEU brethren profited handsomely through the federal government's creating and funding favored industries, whether those be defense, homeland security, infrastructure or healthcare.  Also, the federal government taxes the Carlyle's like a nonprofit, community hospital.  That's charity if I've ever seen it.  Rubenstein is clearly one major recipient.

It's nice he gives a smidgen of it back.

Bonus fact:  CCMP Capital Partners employed White House health reformer Nancy-Ann DeParle, who after crafting PPACA returned to her PEU ways with Consonance Capital.  There are curious financial filings while she served as Counselor to President Obama.  Post public service she was also named to the boards of giant hospital company HCA and CVS-Caremark.

Update 2-24-14:  Rubenstein's fellow co-founder Daniel D'Aniello gave $20 million to the American Enterprise Institute, a Red Team D.C. based think tank.   Note that think tanks are ofter the initial landing spot for retired public servants, prior to their making their PEU move.

Sunday, February 16, 2014

Rubenstein's Talk at Tiger 21

The Tiger 21 Conference hosted several high profile private equity underwriters (PEU's).  ValueWalk reported:

David Rubenstein – The Carlyle Group

The private equity expert explained that as emerging markets mature, the frontier markets – those countries with even less developed markets – will present the best investing potential. 

An Angolan general and energy partner with The Carlyle Group's Cobalt Energy became an early frontier market billionaire.

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."

One could view it as get in early and let billionaires grow more of their kind.  Upon closer examination it looks more like the payola PEU's have given for decades, before blaming underlings and settling for millions to make the whole thing go away.   But back to Rubenstein's Tiger 21 talk: 

Rubenstein noted that we’ll have a historic moment in 2014 when the Gross Domestic Product of emerging markets will surpass the GDP of the developed markets  – this includes the emerging markets of China (2nd largest economy) and Brazil (6th largest economy).

“If you are going to invest for a 5 or 10 year period of time there is no doubt that the emerging markets are going to become the dominant part of the global economy. The US will still be the greatest place to invest, because while we don’t have great growth rates we do have rule of law, transparency, great financial markets, talented people to run companies and exit opportunities. That aside, emerging markets are the place where you will see the greatest growth and number of opportunities,” said Rubenstein.

On China – where Carlyle has 15 percent of its workforce – Rubenstein thinks the country is experiencing a difficult transition as it grows, but in the long-term it remains a safe bet. The key to Carlyle’s success in China is that the firm is bringing people and their skills to Chinese companies and teaching the Chinese workers, which helps those companies grow. This is in contrast to companies that completely take over a Chinese business for market share.
I expect there to be a number of historic moments in 2014.  It'd be nice if some of those involved pulling the curtain on private equity and actually prosecuting some of their "investigation worthy" behavior.

As for the familiar China refrain, Carlyle's training the Chinese (world renowned for bribery) in PEU greed and leverage, I offer an assessment from 2011:

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.

Carlyle needs more PEU's in China to have exit opportunities.  If China hits a bad patch and credit gets hit, 9% of Carlyle's assets under management could experience severe stress.  It'd be interesting to see the Chinese reaction to PEU capital calls, especially given the way China refused to honor its derivative commitments in the 2008 financial crisis and its aftermath.  Maybe that's what Rubenstein means by rule of law.

DaVita's Settlement: DeParle's Involvement?

DaVita is close to reaching a settlement with the Justice Department on the company's joint ventures with a Denver nephrology group

DaVita HealthCare Partners said Tuesday it will pay $389 million to settle criminal and civil anti-kickback investigations and plans to end joint ventures with kidney doctors involving 28 dialysis clinics.

Denver-based DaVita's CEO, Kent Thiry, announced in an earnings call with shareholders that the company has "agreed to a framework" for settling federal investigations into some of the company's relationships with kidney doctors' offices.

He said the exact settlement still is being finalized, but that both he and federal attorneys expect to hammer out the details in coming months.
White House health reformer Nancy-Ann DeParle sat on the DaVita Board of Directors when this questionable deal was struck.  She served on the Compensation Committee, which met eight times in 2007 and seven in 2008.  DeParle resigned from the DaVita board on July 29, 2008.
In May 2008, DaVita sold 49 percent ownership of the same seven clinics to Denver Nephrology, the other large nephrology group in town. But the price paid by Denver Nephrology — $1.89 million — was only a fraction of what previously had been deemed fair-market value, according to the documents obtained by The Post.

What role did the Board play in ensuring legal due diligence was conducted and a fair sale price reached?  The company filed the following with the SEC in February 2008:

Some of our medical directors also own equity interests in entities that operate our dialysis centers. The Stark II exception applicable to physician ownership interests in entities to which they make referrals does not encompass the kinds of ownership arrangements that referring physicians hold in several of our subsidiaries that operate dialysis centers. Accordingly, it is possible that CMS could require us to restructure some of these arrangements or could seek to impose substantial fines or additional penalties on us, prohibit us from accepting referrals from those physician owners and/or force us to return certain amounts paid by CMS and program beneficiaries.

Consequently, it is possible that CMS could determine that Stark II requires us to restructure existing compensation agreements with our medical directors and to repurchase or to request the sale of ownership interests in subsidiaries and partnerships held by referring physicians or, alternatively, to refuse to accept referrals for designated health services from these physicians.

This language occurred in every 10-K filing from 2005 to 2009, which included the last four years Nancy-Ann DeParle served on DaVita's board.   Twice in 2005, March and October, the company received subpoenas regarding joint venture relationships with physicians.

Ex-CMS Chief William L. Roper chaired DaVita's Board Compliance Committee for this whole period.  Did this committee exercise any oversight, receive any consultation, inquire with CMS or the other board representative that once headed CMS, Nancy-Ann DeParle?   Surely Dr. Roper could've gotten an opinion as to the legality of DaVita's joint ventures and any recommendations for compliance.  Surely Nancy-Ann DeParle heard enough at a whole board meeting to form an opinion in this regard.

DaVita's board deserves scrutiny in this investigation, especially the knowledge of Nancy-Ann DeParle and William L. Roper regarding any questionable activities.  Instead, DaVita will pay a fine while perpetrators walk and enablers skate.

PPACA resets health care for similar behavior to occur.  Nancy-Ann DeParle stands to profit handsomely from the landscape she created.  After leaving the White House and an appropriate amount of time at a think tank (Brookings), DeParle co-founded Consonance Capital Partners, a private equity underwriter focused exclusively on investing in the U.S. healthcare industry.

She also landed two new board seats with CVS-Caremark and HCA.   KKR's ownership of HCA added billions in costs to America's unaffordable health care system, much of which went into PEU pockets.   

Health care reform is a private equity underwriter's dream.  It should be as that's who created it.  Look for many more DaVita's, widespread illegal corporate behavior, wiped away with a settlement.  That's PPACA's future.  

Saturday, February 15, 2014

Tracking PPACA's Founders

A former CCMP Capital Partners PEU, Nancy Ann DeParle joined HCA's Board of Directors.   DeParle served as the key architect of PPACA in the Obama White House.  The White House did deals with hospitals and big pharma.

Another key PPACA architect Senator Max Baucus was appointed U.S. Ambassador to China, land of quality debacles and payola.  Sometimes the reward comes up front, other times it's given afterwards.

The DeParle's and Baucus' deliver for PEU's and PEU's happily return the favor.  Sometimes the parent does the gifting, other times it's the affiliate.  

Update 2-19-21:  Nancy Ann Deparle had a banner payday after Consonance Capital sold Enclara Healthcare to Humana in 2020.  Enclara is "one of the nation's largest hospice and benefit management providers."  Yet, Humana intends to spin off Kindred Hospice as it prefers a partnership model for end of life care.

Wednesday, February 12, 2014

PQ Holdings Under PEU Ownership

PQ Holdings can be examined under the lofty assessment of a Business Ethics professor at NYU's Stern School of Business who stated in DealBook:

"Private equity is all about coming in, finding the inefficiencies, ripping them out, putting in better procedures and making the thing more valuable.”

One of those "better procedures" is the annual management fee, consulting agreement or monitoring fee charged to PQ by its private equity underwriter (PEU) owners.

Consulting Agreement with Carlyle 

PQ Holdings Inc., TC Group IV, L.L.C., an affiliate of Carlyle, and PQ Corporation entered into a consulting agreement relating to the provision of certain financial and strategic advisory services and consulting services. We paid a one-time fee in the amount of $12 million on July 30, 2007 for structuring the acquisition of our company by Carlyle. In addition, we agreed to pay an annual monitoring fee equal to $2 million. In conjunction with the INEOS Silicas acquisition on July 2, 2008, the consulting agreement was amended to increase the annual monitoring fee to $3 million. TC Group IV, L.L.C. assigned the consulting agreement to Carlyle Investment Management L.L.C., another affiliate of The Carlyle Group, on June 7, 2012. We will pay Carlyle Investment Management, L.L.C. a $ fee to terminate the consulting agreement in connection with the consummation of this offering.

That's $29 million in management fees to Carlyle since 2007.  How many millions extra will Carlyle charge to terminate the consulting agreement?  Rest assured, it won't be cheap.

That said, PQ has more than one PEU owner.

Consulting Agreement with INEOS 

PQ Holdings Inc., INEOS (Capital Partners) and PQ Corporation entered into a consulting agreement relating to the provision of certain financial and strategic advisory services and consulting services. We paid a one-time fee in the amount of $6 million on July 2, 2008 for structuring the INEOS Silicas 2008 acquisition. In addition, we agreed to pay to INEOS an annual monitoring fee equal to $2 million. We will pay INEOS a $ fee to terminate the consulting agreement in connection with the consummation of this offering.

That's $16 million or more in additional annual PEU fees for PQ Holdings, bring the total to $45 million since 2007.

Add $5.2 million in PEU dividend distributions from 2009-2012 and PQ's sponsors sucked $50 million in cash from the firm.  These PEU efficiencies likely required headcount and benefit reductions.  The defined benefit pension plan was frozen right before Carlyle purchased PQ.

The Company’s funding policy is to fund the minimum required (defined benefit pension) contribution under local statutory requirements.

As of 12-31-12 the company's pension was underfunded by roughly $50 million.  The underfunded amount grew by $40 million under PEU ownership.  SEC filings show a pension plan contribution of $5.5 million in 2006

PQ did the same with its retiree health care retirement plan just prior to Carlyle's purchase.

These (retiree health care) plans were closed to new retirees in the United States and Canada as of December 31, 2006. 

As for making the whole thing "more valuable," Carlyle loaded PQ up with debt when it bought the firm for $1.5 billion.  Annual interest expense rose to the $110 to $120 million range under PEU ownership.  This helped put the company into a loss position, where it could obtain net tax subsidies from Uncle Sam.  Here's the picture going forward:

The Company has a net operating loss carryforward available of $241,053,000 to reduce future federal taxes payable from tax years prior to 2012. The federal carryforward period is 20 years.
This is the PEU way, which I characterized as:

"Ripping out inefficiencies" like people and pensions.  "Better procedures" like PEU annual management fees and special distributions.  "Making the whole thing more valuable" via debt balloons requiring affiliates to pay dramatically higher interest costs and significantly lower taxes.  All so they can flip the thing in one to five years time for a multiple of their original equity investment. 
I challenge business ethics professor's proffering standard PEU drivel through The Carlyle Group's ownership of PQ, doing so with data from PQ's S-1.  There are other ethics stories embedded in the public document, free for business ethics examination.  It merely takes time and an ethical framework.

Update 2-15-14:  PQ's history includes Carlyle buying it from JP Morgan's PEU division, CCMP Capital Partners. PEU CCMP put the pension plan and retiree healthcare on ice.  Also, Naked Capitalism pointed out the impact the greed/leverage boys had the last few decades as did The Herald Scotland on 2-17-14.

Update 9 -28-14:  Carlyle cancelled PQ's IPO.

Update  6-13-17:  Carlyle is taking another run at a PQ IPO.

Tuesday, February 11, 2014

DealBook Panders to PEU Rubenstein, Schwarzman

DealBook reported on the #21 and #23 top donors from 2013.  Both are private equity underwriters (PEU's):

David M. Rubenstein, the co-founder of the private equity giant Carlyle Group, is a fan of the John F. Kennedy Center for the Performing Arts. So much so, in fact, that he donated $50 million to the center last year. His total donations of $121.7 million ranked No. 21 on The Chronicle of Philanthropy’s 2013 list of top American donors.

Among Wall Street moguls, Mr. Rubenstein narrowly beat out another private equity tycoon, Stephen A. Schwarzman, the head of the Blackstone Group, who gave away $103 million last year. His top receiver was Tsinghua University, a research school based in Beijing.
One has to shake their heads at this description of private equity, masters of greed and manipulation.  How many of these donations involved the permanent naming of something Rubenstein or Schwarzman?  DealBook added:

“These people have an incredible problem-solving focus,” said Jonathan Haidt, a professor of business ethics at the New York University Stern School of Business.

Mr. Haidt pointed out why private equity specifically might fit this mold. “Private equity is all about coming in, finding the inefficiencies, ripping them out, putting in better procedures and making the thing more valuable.”
"Ripping out inefficiencies" like people and pensions.  "Better procedures" like PEU annual management fees and special distributions.  "Making the whole thing more valuable" via debt balloons requiring affiliates to pay dramatically higher interest costs and significantly lower taxes.  All so they can flip the thing in one to five years time for a multiple of their original equity investment. 

That a professor of business ethics offered standard PEU drivel is more disturbing.  But that's the state of business in our world, where executive compensation grows while jobs are slashed. 

P.S.  The twenty higher donors DealBook missed can be found here.

Rubenstein at Harvard: PEU Riches

Dealbook reported a portion of Carlyle Group co-founder David Rubenstein's talk to Harvard students interested in becoming private equity underwriters (PEU's):

Though private equity firms will continue to hunt for bargains, returns may not be as high in the future as they have been in the past, David M. Rubenstein, a co-founder and co-chief executive of Carlyle, said in a keynote speech on Sunday.

Mr. Rubenstein predicted that private equity would continue to be a better bet than the public markets. But he sought to temper the expectations of any Harvard students thinking of entering the industry.

“The days of getting fabulously rich in private equity may be a little bit behind us,” Mr. Rubenstein said.
Rubenstein loves to talk about Carlyle's 30% annual return on equity, sans bankrupt affiliates and before PEU fees.  This view into the PEU world came from:

The 20th Annual Harvard Business School Venture Capital and Private Equity Conference, one of the largest and most anticipated student-run conferences on the HBS campus.

Twenty years of Harvard PEU.  It's absolute fabulous, little rich darlings. 

Saturday, February 8, 2014

George "PEU" Bush

George P. Bush, the son of Jeb Bush, rode through San Angelo last week on the campaign trail for Texas Land Commissioner.  George P. was the cutest thing our Republican ladies have seen since ex-Mayor J.W. Lown.  Besides George P.'s Red Team pedigree, he carries strong private equity underwriter (PEU) credentials.

George P. Bush is the founding partner of St. Augustine Capital Partners, LLC, an opportunistic, Texas-based partnership focused on principal investing and consulting services for small to middle- market transactions in the oil and gas industry.  Prior to founding St. Augustine, Mr. Bush led the management of investor relations with Pennybacker Capital—a middle market private equity firm he co-founded in 2007.  His responsibilities also included sourcing and providing analysis of potential investment opportunities.
Yesterday George P. met with Senator Rand Paul, son of former Representative Ron Paul of Lake Jackson, Texas.  George P.'s relations never warmed to Rand's father, preferring to keep him on the Red Team periphery.

Should George P. win Texas Land Commissioner he would administer state-owned lands and their rich mineral resources.  This could be a boon to St. Augustine, the firm George P. founded.

As for elected officials dumping their private equity stakes, consider Obama's chief health reformer Nancy Ann Deparle.  She never declared any private equity holdings, but received PEU distributions in her years serving the public.

Red and Blue love PEU.

Monday, February 3, 2014

"Just Us" Department Looks at Libyan SWF for U.S. Bribes

WSJ reported:

The Justice Department has joined a widening investigation of banks, private-equity firms and hedge funds that may have violated antibribery laws in their dealings with Libya's government-run investment fund, people familiar with the matter said. 

The criminal investigation, which has intensified in recent months, is proceeding alongside a civil probe by the Securities and Exchange Commission that began in 2011 and initially homed in on Goldman Sachs Group Inc. The Justice Department's involvement hasn't been reported previously. 

In addition to Goldman Sachs, federal investigators are examining Credit Suisse Group AG, J.P. Morgan Chase, Société Générale SA, private-equity firm Blackstone Group LP and hedge-fund operator Och-Ziff Capital Management Group LLC, these people said. Spokesmen for the Justice Department and the SEC declined to comment.
What, no Carlyle Group?  The article mentioned two PEU giants as visiting Libya in 2008:

Blackstone Chief Executive Stephen Schwarzman and Carlyle Group LP Chief Executive David Rubenstein attended the 2008 wedding in Tripoli of Mustafa Zarti, the deputy chief of the Libyan Investment Authority. There is no indication that Messrs. Schwarzman or Rubenstein were involved in any transactions that are under investigation. Both declined through spokesmen to comment.

PEUReport noted Carlyle's hosting a dinner for Gadhafi's son Saif in Washington, D.C. in 2008.  Former British Prime Minister Tony Blair worked magic in opening Libya.  Of course it took freeing a Libyan terrorist to get a huge BP deal.  Those are the words of Gadhafi's son. 

The Libyan Investment Authority gave Carlyle $118 million to invest.  President Obama ordered these funds frozen when the West decided on Libyan regime change.  That explains the financially sophisticated ragtag group of Libyan rebels.

Stay tuned to see who settles with the "Just Us" Department.  It wouldn't be the first time The Carlyle Group or one of their affiliates paid a big sum to make an investigation go away.

Sunday, February 2, 2014

Bipartisan Roots of Inequality

Fortune reported:

In the U.S., the gap between rich and poor is wider than it has been since the 1920s. The top 1% own 42% of the nation's wealth and on average made $717,000 per year from 2008-2012 compared to $53,046 for everyone else. While the financial crisis of 2008 may have hurt all of us somewhat, the 1% reaped 95% of all income gains since that time.
Few mention this manifested under two Democratic and one Republican President(s), while the Roaring Twenties had three Republican Presidents.  Thus, governing factors contributing to inequality are bipartisan in nature.

Even fewer mention the rapid ascendance of private equity underwriters, beginning in earnest with the Clinton I years, then exploding under Bush II.  PEUs are now ubiquitous, so much so, it's hard to find anyone advising or contributing to the White House without a PEU tie.

America has a bifurcated system by design.  Politicians and PEUs, virtual nonprofits, gave it to us.  Act by act, sleaze by sleaze, greed by greed.   Face it.  They don't like to share power or money.  But they need a compliant populace for both.

As for the author of the Fortune article, he's a private equity underwriter.  How did he contribute to the race to the bottom on worker pay/benefits, taxes and regulation during the three headed Clinton-Bush-Obama Presidency?

Rep. Eric Cantor's Service in Davos

Bloomberg interviewed Representative Eric Cantor (R-VA), the leader of a thirteen person Congressional delegation to the World Economic Forum meeting in Davos.  Cantor didn't stray from his party line in this discussion.

Political and business leaders learned their status had fallen in the eyes of the public:

The U.S. saw a dramatic 16 percentage point fall in the level of political trust to 37 percent.  

Only government officials were trusted less than CEOs -- and both groups were the only ones distrusted by a majority of respondents.

Politicians and CEOs were essentially the two U.S. groups confabbing in Davos, which explains the widespread silence from America's Congressional thirteen and the plethora of private equity underwriters (PEU's) in attendance.

The big money boys and Eric Cantor go way back:

Speaking of PEU's, they've a huge sponsor of Eric Cantor, especially since 2008.

Now that's something to hoot about!  I'm sure Cantor and the PEU boys had a big time in Davos.  It also explains the silence from Congressional members of the Blue team attending the World Economic Forum.

It's almost like hanging out at the Gadhafi Ranch. How far will they run from this event in the future?

Saturday, February 1, 2014

This Week in PEU

PEU headlines for the week include:

"Libya Says Goldman Didn’t Explain Options" - Dealbook
      2008 deal part of West's courting Gadhafi

"KKR Buys Stake in German Soccer Club" - Dealbook   
     Deal done in Davos? 

"PE Manager Hit with Fraud Lawsuit" - FinAlternatives
     Charged with bilking investors of over $9 million.  Can you smell settlement?

"Leeds United takeover agreed subject to Football League approval" -  Football Traded Directory
     The announced 75% owner of Leeds United has twice been convicted of fraud.  A Dubai based PEU GFH Capital is selling the stake. 

"William Broeksmit, Ex-Deutsche Bank Risk Manager, Dies at 58" - Bloomberg
      Broeksmit was a pioneer in interest rate swaps and derivatives.  He warned of risks to Orange County from such investments, which later caused the largest municipal bankruptcy.  The 58 year old man committed suicide by hanging.

"JPMorgan Technology VP Dies in Fall From London Headquarters" - Bloomberg
     This is the second suicide this week.  This follows several other private equity suicides or attempts.

"Third Banker, Former Fed Member, 'Found Dead' Inside A Week"  - Zero Hedge
      With stocks a mere 4% off their highs, why are so many high ranking and well respected bankers committing suicide?

It's the strangest week for big money boy news.  What does it portend?