Thursday, July 31, 2014

Carlyle Hits Record AUM: Over $200 Billion

Pensions & Investments reported:

Carlyle Group reported $202.7 billion in assets under management as of June 30, a 1.9% increase from three months earlier and up 12.4% from the previous year, in its second quarter earnings report released on Wednesday.

In February 2000 Carlyle had a mere $3.3 billion in AUM.   Carlyle grew by $88.2 billion during the George W. Bush Presidency, before falling $5.4 billion during the 2008 financial crisis. 

The Obama White House saw Carlyle grow another $111.2 billion.  Politicians Red and Blue love PEU (private equity underwriters).

Monday, July 28, 2014

Ex-GM CEO Akerson Testifies to Detroit Free Press

Former GM CEO Daniel Akerson, currently with longtime employer The Carlyle Group, finally spoke on GM's ignition switch debacle.  However it was not under oath to a Congressional committee.  Here's what he said:

Had he testified before Congress on the ignition switch recalls, he would have said: “I’ve been here 3½ years. I’ve had a raft of problems every year, and we addressed them straight up and don’t blink and we try to solve them.”

That's not answering his knowledge of the problem under a legal oath.

Akerson said because he was a relative newcomer at GM, he may have gotten fairer treatment from Congress if he still had been CEO when the ignition switch crisis came to light.

“I think it would have been easier for me to defend the company, because quite frankly I thought Mary got treated a bit unfairly by virtue of, ‘You’ve been with the company 30 years. Why didn’t you change things?’ ” Akerson said.

“I could have said, ‘Hey, look, we had to change 30 things. This one dates back to eight, 10 years ago.’ It’s a little unfair, but life isn’t fair, and you own the problem.”

Akerson's tenure is roughly half of eight years and one third of ten years.  It's not credible that an engaged CEO would be ignorant of such a critical issue, especially if he modeled problem solving by facing issues straight up without blinking or blaming the messenger. 

Carlyle went to great lengths to protect their good reputation in the cases of LifeCare and SemGroup.  I imagine word got around an Akerson led GM not to bring the boss bad news.  Fear and other extrinsic motivators cause huge quality problems.  

The automaker’s recent ignition switch recall crisis shows that problems with GM’s corporate culture were far more serious than executives realized.

Akerson's abdicating his role in shaping corporate culture fits with his CEO ilk. 

“Managers are the day-to-day interface with employees and the carriers of culture.  Unless they are effectively and properly trained, organizations will struggle to meet their top training objective of building an ethical culture.”

It's easier to blame complacent employees for abject leadership failures.  "The buck stops here" is long gone in our PEU world. 

Sunday, July 27, 2014

USAID to Help Young Biden: The Burisma File

Economic Policy Journal reported:

Senate Bill 2277 "directs the U.S. Agency for International Development to guarantee loans for every phase of the development of oil and gas" in Ukraine, Moldova and Georgia.

A key player in this exploration is Vice President Biden's son, Hunter, recently appointed to the board of Burisma, a private Ukrainian oil and gas company.  How many Ukranians, which make up the board and management of Burisma, speak like this?

Burisma aims to become the leading independent natural gas producer in Ukraine, by both sales volume and asset base. The Company intends achieve this by monetizing its existing asset base and potentially through opportunistic acquisitions of companies with existing reserves, both domestically and internationally, while maintaining its focus on profitability.
Frankly, it's PEU worthy.  Burisma applauded the Senate move to support Ukrainian oil drilling:

As engagement progresses, we are hopeful that Burisma can serve as a resource for US and other Western leaders to provide needed context and perspective on the Ukrainian market.”

The Blue Team has shown Bush-like ability to overthrow a sovereign government for access to America's global energy resources. 

Ukrainian troopers help installing shale gas production equipment near the east Ukrainian town of Slavyansk, which they bombed and shelled for the three preceding months, the Novorossiya news agency reports on its website citing local residents. 

“Civilians protected by Ukrainian army are getting ready to install drilling rigs. More equipment is being brought in,” they said, adding that the military are encircling the future extraction area." 

Bush, Biden, Baker, and Clintons circle the globe on a mission for private enrichment.  Armies, national budgets and central banks are but tools for them to manipulate.

Update 9-28-19:  ZeroHedge reported Hunter Biden and his partner Devon Archer received $3 million from Burisma.  The story mentions opportunistic USAID funding.

Update 10-2-19:  Modern Diplomacy reported on the Biden history in Ukraine and kindly mentioned this piece from 2014. 

Update 6-26-20:  ZeroHedge ran a piece on Burisma getting USAID funding after Hunter Biden joined the board.

Update 12-18-20:  President Elect Joe Biden calls investigations into son Hunter "foul play."  

Update 10-4-21:  Blue PEU Hunter Biden still owns 10% of a Chinese private equity firm through Skaneateles LLC.  Hunter is the sole owner of Skaneateles. 

Update 2-27-22:  Hunter's business dealings may go under the microscope.

Update 3-1-22:  Biden partner Devon Archer was convicted of fraud for defrauding a Native American tribe.  Oddly, doing deals with Native Alaskans is how David Rubenstein got his Carlyle Group seed money.  

Update 6-30-23:  A Senate subcommittee issued a September 2020 report on Hunter Biden's gorging at the insider money trough.  That boy can flat out eat.  It's PEU level greed.

Update 8-1-23:  ZeroHedge reported Hunter's partner Devon Archer shed light on Vice President Joe Biden's influence on the Burisma board appointment.  Archer said the family's "brand" had value at a time when the firm was facing corruption allegations. 

Update 12-8-23:  PEU cleanup on aisle 9.  Hunter Biden indicted on tax charges.

His gross income nevertheless totaled some $7 million between 2016 and 2020, prosecutors said, pointing to his roles on the board of the Ukrainian energy company Burisma and a Chinese private equity fund as well as his position at a law firm.

Hunter did eventually file his taxes in 2020, while facing a child support case in Arkansas, and the back taxes were paid by a “third party,” prosecutors have said in court documents.

Next Household Hit: Health Coverage

WSJ reported:

Nearly 75% of employers say the Affordable Care Act will negatively affect profits, according to a survey by Cherry Bekaert Benefits Consulting. Nearly 25% said they are considering eliminating employer-sponsored medical plans because of the law.

Is health insurance the next beating employees face?  The Bush-Obama decade saw median household net worth decline 36%.  Each President served five years of this disturbing period 2003-2013. 

On September 10, 2009 I wrote:

While unstated as an objective, I believe reform sets the table for employers to shed that pesky health insurance benefit.
The nearly 25% may do so sooner, but even an architect of health reform believes most employers will follow.  This gives more credence to my earlier prediction.  The great shedding looms, as opposed to the slow motion one over the last fifteen years.

Employees have been paying more of their insurance premium the last decade.

Will they soon shoulder an even greater portion?   It's highly likely.  It will be interesting to see if anyone tracks corporate ownership of firms dumping employer health insurance.  Will private equity be a leader or laggard in further taking apart the average American?

Update 4-3-22:   The average health insurance premium more than tripled for a family plan since PPACA passed in 2010.  Cost curve bent but in the wrong direction.  Concave went convex.  

The Callous PEU Decade

NYT reported:

The typical American household has been getting poorer, too. The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline.

While the middle was dropping top earners soared.  A former business reporter made this observation three years ago.

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.

How did the greed boys do between 2003 and 2013?  The Carlyle Group grew from $17.5 billion in assets under management to $185 billion.

Median household down 36%
Carlyle Group up 960%
Private equity became ubiquitous during this decade, flipping companies for huge profits.  Not everyone in the business world is a fan.

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!

However, Congress and the White House are fans.  It's a PEU world.  Politicians Red and Blue love PEU.  As :former Treasury Secretary Larry Summers said, the loyal get their reward from giving their sponsors their way.

Tuesday, July 22, 2014

Replacing Equity with Debt: The PEU Decade

Corporate leaders learned from private equity underwriters how substituting debt for equity can pay off.  Juggling Dynamite reported:

The glaring overshoot of corporate profits as a percentage of GDP the past 5 years has some re-coupling to do.  And when that happens, those owning stocks today valued at 26 times average 10 year earnings, are likely to feel the financial pain of excessive optimism.
The glaring overshoot seems to begin around 2005.  Private Equity Underwriters became ubiquitous the last decade and it appears their methods have spread to corporations in general.

Leverage is a two edged sword and it cut deep during the fall 2008 financial crisis.  Someday it will wound again, sometimes mortally.

Monday, July 21, 2014

Carlyle Group Homeland Security Franchise Adds Palantir Tech Advisor

Monument Capital Group Holding's advisory board reads like a Carlyle Group legends list.  It includes James A. Baker, III, Frank Carlucci, Thomas F. "Mac" McClarty, III and Mustafa V. KoƧ.  Monument Capital added a new Senior Advisor from Palantir Technology, the group that ensures Davos and Bilderberg attendees are kept safe and sound from mere common folk.

Michael Leiter is Head of Global Government, Cyber Operations and Senior Counselor to the CEO of Palantir Technologies. From 2007 to 2011 he was Director of the United States National Counterterrorism Centre. Mr Leiter has joined MCGH as a Senior Advisor. He will work the MCGH team to provide analysis of the changing global cyber security space and help to inform the firms' target market and acquisition strategy.
Here's why there's a need for rocks that spy.  

"We are developing a team of world class experts who have an unrivaled understanding of the pioneering development and application of technology within the fast moving security and data industries. We are one of only a handful of private equity firms focusing exclusively on the global security market and these appointments give us the insight and edge needed to deliver high growth returns." 

Spending on technology and services in the global and national security sectors currently exceeds more than $1.3 trillion globally and is expected to continue to grow in excess of 7% per year.

PEU's go where the money is, hire ex-government insiders to steer strategy and acquisition of government contracts.  Monument Capital wants to make big money off spying.   A younger Thomas Jefferson would be appalled, the older version, not so much

Carlyle Positions for Genachowski's WiFi Push

The following news came two weeks after Carlyle Group Managing Director and ex-FCC Chief Julius Genachowski recommended Wi-Fi enabled broadband access to America's schools.

Global alternative asset manager, The Carlyle Group (NASDAQ:CG) today announced it has entered into an agreement with the founders of Expereo, a global managed Networks Operator, to take a majority stake in the company.  The founders will retain a significant stake in the Business and will continue to serve in senior management positions in the Company. 

Founded in 2004, Expereo is a global provider of Dedicated and Broadband Internet, Ethernet, Virtual Private Networks, WiFi, Equipment and On-site Professional Services to international carriers, cloud providers and integrators.  Expereo currently operates in 180 countries and has offices and points of presence in The Netherlands, USA, Canada, UK, Germany, Hong Kong, Singapore, Japan and Australia. 

What have you learned anything about private equity over the last seven years?

Sunday, July 20, 2014

Obama's Infrastructure Weekend

President Obama said he would open public infrastructure projects to private investments in roads, bridges and ports.

The focus on private money for road projects marks a shift for the administration, which had previously resisted efforts to seek commercial resources for highways and other pieces of the country’s transportation system. The result may be more tolls for drivers as companies look to make profits by operating roads and bridges

President Obama continues his Bush imitation on public infrastructure and energy exploration.   Bush's Transportation Secretary Tyler Duvall supported the move.

“It’s exactly what these long-term investors have wanted for years.”  Duvall cited access to credit, the demographics of the U.S. and a stable economy and legal environment.
Long term investors are private equity firms.  They love predictable government guaranteed revenue streams and government enforced franchises.  Credit is cheap federal credit.

Obama followed this up by opening up the East Coast to offshore energy exploration, a process that involves the use of sound canons. 

The Bureau of Ocean Energy Management acknowledged that thousands of sea creatures will be harmed but ultimately decided to approve this exploration in the outer continental shelf from Delaware to Florida. Energy companies need the data as they prepare to apply for drilling leases in 2018, when current congressional limits expire.

Ironically, Obama went from announcements to meeting with high dollar donors, the kind that have billions on the sidelines ready to put to work.

The president traveled to New York City to headline fundraisers for the Democratic National Committee and the House Majority PAC, a super PAC supporting Democratic congressional candidates. The events were closed to media. 

Thirty supporters, who contributed $32,400 each, participated in the roundtable discussion at a private home for the Democratic National Committee, according to a DNC official.

I reviewed the list for who might profit from Obama's actions.  Two PEUs were represented, Insight Venture Partners and Sparring Partners Capital.  Also in attendance was Libra Group's George M. Logothetis, sponsor of the Concordia Kids who landed George W. Bush for their initial confab.

Obama has done a fine job of imitating his predecessor.  He will be richly rewarded for his service.  

Twin Set to Pay Sponsor Carlyle Group

Another Carlyle Group affiliate took on debt to pay its owner sponsor a dividend.  MSN Money reported:

Italian fashion brand Twin Set-Simona Barbieri SpA had to increase the period during which it won’t redeem its debt to 1.5 years from one year before it sold 150 million euros of floating-rate notes on July 15. The company, owned by Washington-based private equity firm Carlyle Group LP, planned to use some of the proceeds to pay a shareholder dividend.
This liquidity recapitalization comes two years after Carlyle acquired a majority stake in Twin Set-Simona.

How much of the 150 million euro loan will end up in Carlyle's pocketbook?  However much Carlyle wants.

Update 1-30-20:  Carlyle hired JP Morgan to help sell Twin Set.   

Eric Holder: Delaware to Get $7.35 from Citigroup

With great fanfare the Department of Justice announced a $7 billion settlement with Citigroup on mortgage security fraud misrepresentation.

Of the $7 billion resolution, $4.5 billion will be paid to settle federal and state civil claims by various entities related to RMBS: Citigroup will pay $4 billion as a civil penalty to settle the Justice Department claims under FIRREA, $208.25 million to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $102.7 million to settle claims by the state of California, $92 million to settle claims by the state of New York, $44 million to settle claims by the state of Illinois, $45.7 million to settle claims by the Commonwealth of Massachusetts, and $7.35 to settle claims by the state of Delaware.

Let's hope Delaware Attorney General Joseph R. Biden, III got more than the $7.35 cited in Eric Holder's statement.

Don't spend it all in one place. Delaware!    

Saturday, July 19, 2014

Over Half Carlyle Group's Corporations are Overseas

Fortune's July 21 cover story concerns U.S. corporate flight to foreign climes.  Private equity underwriters (PEU's) perfected this strategy long ago.  The Carlyle Group lists 717 affiliates in its 2014 10-K.  Nearly 40%, 284 subsidiaries, were incorporated in the United States.  Just over 60%, 433 affiliates, listed foreign countries/cities of incorporation. 

DOJ's Citigroup Report Reads Like Katrina's Lessons Learned

Federal investigators set the bar low for Citigroup's multi-year mortgage security fraud investigation.  The Department of Justice failed to specify the period of the settlement in any of their public documents.  Thank heaven Citigroup did so in their press release:

Today’s agreement resolves actual and potential civil claims by the U.S. Department of Justice (the DOJ), several state attorneys general (State AGs), and the Federal Deposit Insurance Corporation (the FDIC) relating to RMBS and collateralized debt obligations (CDOs) issued, structured or underwritten by Citi between 2003 and 2008.
The Holder documents read like the White House Lessons Learned report on Hurricane Katrina in that it offers a few anecdotes but no critical analysis.  Both reports omitted responsible parties, important analysis and critical data.

This is the quality of federal investigations when the party in power wishes to protect friends and eventually enrich themselves.  Who is Attorney General Eric Holder protecting?

Ex-Clinton Treasury Chief Robert Rubin moved to Citigroup in 1999, and until 2009 he served as chairman of the executive committee and, briefly, chairman of the board of directors. On his watch, the federal government was forced to inject $45 billion of taxpayer money into the company and guarantee some $300 billion of illiquid assets. Taxpayers ended up with a 27 percent stake in Citigroup, which was sold in 2010 at a cumulative profit of $12 billion. Rubin gave up a portion of his contracted compensation—and was still paid around $126 million in cash and stock during a tenure in which his serenity has come to look a lot more like paralysis. “Nobody on this planet represents more vividly the scam of the banking industry,” says Nassim Nicholas Taleb, author of The Black Swan. “He made $120 million from Citibank, which was technically insolvent. And now we, the taxpayers, are paying for it.”
Eric Holder is protecting Blue team legend Bob Rubin.  For this Holder will be richly rewarded.

Katrina Lessons Learned author Frances Townsend omitted the hospital with the highest patient death toll from her 2006 investigative report.  Memorial Medical Center lost 35 patients post Katrina, with 25 of those deaths on the LifeCare unit on the seventh floor.   The Carlyle Group owned LifeCare Hospitals (having purchased it weeks prior).  Tenet Healthcare, Memorial's owner, created a board seat for President George W. Bush's brother Jeb a year after Townsend's report was released without any mention of Memorial, LifeCare, Carlyle or Tenet. 

Fran Townsend went on to work for James A. Baker III's law firm.  Baker has long been associated with The Carlyle Group.  Townsend later joined MacAndrews & Forbes, an investment firm which looks and acts much like a private equity underwriter (PEU).  Eric Holder's reward awaits.

"Insiders understand one unbreakable rule.  They don't criticize one another."--Blue team legend Larry Summers

"Just us" has been done and another round awaits.

Update:  It doesn't hurt that Peter Orszag now works for Citi making $4 million a year.  Orszag blocked for BP on the Gulf Oil Spew in the Obama White House.  Some called that Obama's Katrina.  Nowadays, it's who you know, not what.

Friday, July 18, 2014

Jeb Bush PEU Chair for Britton Hill

Bloomberg reported:

Former Florida Governor Jeb Bush is raising private-equity funds for oil and gas ventures.  

Britton Hill Holdings was set up in May 2013 but Jeb Bush’s role as chairman and part owner wasn’t publicly available information until last month when the firm registered as an exempt adviser with the U.S. Securities and Exchange Commission.

Filings describe Britton Hill as a closely held advisory and investment firm that focuses on the energy, infrastructure, logistics and environmental services sectors. Its first investments have been tied to the exploitation of shale oil and gas in the U.S., a booming area for private equity 

Private equity is not new to Jeb Bush.  Bush worked for Lehman Brothers' Private Equity before the firm imploded in the 2008 financial crisis.  I believe President George W. Bush chose not to save Lehman for optics.  He would've saved the firm that employed both his brother and cousin.  Shoveling billions to save the jobs of close relations would've hurt the Red team for years.

Jeb's job of raising PEU funds is not the least bit All American:

It's clear who Jeb will work for if elected President.  It's not the common citizen.

Neither candidate from America's two royal families is free from PEU taint.  Jeb is one and Hillary gets $200,000 or more per PEU speech.  Hillary's husband Bill is also a PEU. Daughter Chelsea is a PEU in training.

It's a PEU world.  One where politicians Red and Blue love PEU...

Update:  Continuing the foreign investor theme, Fortune will run a piece on U.S. companies going overseas.  Over 60% of The Carlyle Group's listed affiliates are incorporated on foreign soil.

Monday, July 14, 2014

Three Little Public Sector Pigs

Consider the following three stories.  The first deals with a former public official:

Former mayor Ray Nagin, the businessman-turned-politician who became the worldwide face of the city after Hurricane Katrina, was sentenced to 10 years in prison Wednesday.

Nagin, 58, was ordered to report to federal prison Sept. 8 and to pay restitution of $82,000. He was found guilty Feb. 12 of fraud, bribery and related charges involving crimes that took place before and after Katrina devastated the city in August 2005.

The second focuses on those entrusted with public assets:

The first two payments were made in paper bags. The last installment came in a shoebox. The handoffs all came at a Sacramento hotel near the Capitol.

In a stunning admission covering years of corruption, the former chief executive of CalPERS said Friday he accepted $200,000 in cash, along with a series of other bribes, from a Lake Tahoe businessman who was attempting to influence billions of dollars in pension fund investment decisions.

Fred Buenrostro, who ran the nation’s largest public pension fund from 2002 to 2008, pleaded guilty in U.S. District Court to a charge of conspiracy to commit bribery and fraud. He has agreed to cooperate with federal prosecutors as they pursue charges against his longtime friend, Nevada businessman Alfred Villalobos, a former CalPERS board member.
The third involves a CPA who tried to hide the annual summary of Congressional junkets from public view.  

House Ethics Committee Chairman Mike Conaway said Thursday that his panel would undo its controversial decision to delete the requirement that lawmakers list free trips they receive on their annual disclosure reports.

"We will reverse that decision," Conaway said during an appearance on a local radio talk show in his Texas district.  The Ethics Committee had quietly deleted the disclosure requirement behind closed doors and without any public announcement.

The last story is interesting in light of the first two.  Behind closed doors is where influence is traded.  Ask Jeb Bush who landed a seat on Tenet Healthcare's board after the company lobbied his brother's White House after Hurricane Katrina.  Bush's Lessons Learned report omitted 35 deaths in Tenet's Memorial Medical Center post Katrina and brother Jeb received a specially created board seat.  Coincidence?
CalPERS invested in The Carlyle Group in 2001, holding its PEU stake until last summer.  The Carlyle Group's LifeCare Hospitals was responsible for 25 of Memorial Medical Center's Katrina deaths.  In our small PEU world neither Carlyle nor LifeCare made the Bush Lessons Learned report.

At least they nailed Ray Nagin, two CalPERS chiefs and shamed a CPA Congressman.

Update 1-14-15:  Alfred Villalobos committed suicide a week before his trial was to begin.

Update 6-1-16: CalPERS ex-CEO is going to jail for 4 and 1/2 years for placing his greed over pensioners

Tuesday, July 8, 2014

Carlyle Group, TPG on "Modernizing" Education

WaPo ran a column by Carlyle Group Managing Director Julius Genachowski and TPG founder James Coulter on the need to increase technology in the classroom. 

The modernization of E-Rate, by bringing Wi-Fi enabled broadband Internet to our schools, creates the necessary backbone for the deployment of technology in education. We believe technology is the transformative lynchpin for moving the nation’s education system forward. For our teachers, Wi-Fi-enabled broadband Internet access in their classrooms in the early 21st century is the equivalent of heat and electricity at the beginning of the 20th century.
Their thesis is technology will make learning better, more effective. The question is what is being automated?  Private equity underwriters (PEU's) have transformed industries by shedding jobs, moving them offshore and replacing them with technology.

As businessmen and believers in free markets, we believe the private sector can and must be heavily involved in bringing technology to our schools.
And what role would Carlyle Group or TPG affiliates play in this transformation?  PEU's hire top government officials to garner the next federal honey pot.  At least one Carlyle associate focuses on:

"investments in the education, technology, communications, media and business services sectors."

I'm sure he's highly supportive of his bosses recommendation.

TPG's technology investments have included Alltel, Avaya, Crystal Decisions, Fidelity National Information Services, Hotwire, IMS, Intergraph, Lenovo, MEMC, ON Semiconductor, Sabre Holdings, Seagate and SunGard among others 

EducationWeek reported in July 2013:

An American private-equity company is acquiring TSL Education, Ltd., giving the buyer purview over a community spanning millions of educators and students—including members of the United States' second-largest teachers' union, through a platform that allows teachers to share resources with one another.

Access to an estimated 52 million teachers and students is said to be one reason U.S.-based TPG Capital, LLP is purchasing TSL.

Normal people have to reveal potential conflicts of interest.  Neither spoke to how Carlyle or TPG could benefit from their recommendation or how each could personally profit.

They also failed to speak to the education community.  What's their theory?  Show where it's been tested on a small scale and the impact.  What was learned and how was their theory revised?

The watershed moment could be another PEU industry onslaught.  There's plenty of information on their prior impact and the decimation they bring.

Update 7-14-14:  Apollo is big into education and owns McGraw-Hill Education which is  borrowing $400 million to pay Apollo its PEU dividend

Update 7-21-14:  Carlyle announced it took a majority position in Expereo, a global provider of Dedicated and Broadband Internet, Ethernet, Virtual Private Networks, WiFi, Equipment and On-site Professional Services to international carriers, cloud providers and integrators.

Saturday, July 5, 2014

The PEU Effect

Private equity underwriters (PEU's) became ubiquitous this past decade.  The Carlyle Group grew from $19 billion in assets under management in 2004 to $199 billion today.  That's 950% growth in ten years or an average of 95% per year.  Investors selected Carlyle based on their historical 30% annual returns on equity. 

PEU greed combined with executive incentive compensation to balloon corporate profits.  The question is how much is real profit growth and how much is fudged figuring.  I would trust the accounting profession to keep things clean, but they've sold out like their human resources brethren. 

Greed is alive and well, in part due to PEU's.

Friday, July 4, 2014

Another Novel Carlyle Group Defense

The Missoulian reported:

In order to side with the Carlyle Group in its motion to dismiss, Missoula County District Court Judge Karen Townsend would have to "adopt novel and creative legal arguments with scant support.

In the eminent domain case the city of Missoula filed against Mountain Water Co. and the global investment firm, Carlyle tried to argue it shouldn't be named as a defendant in the condemnation case given the multiple layers of ownership between the water utility and Carlyle. Carlyle argued it was an "upstream owner," but it wasn't the legal owner of the company's assets in Missoula County.

"That distinction is lost on this court in light of Carlyle Infrastructure's representations to the city," Townsend wrote in a ruling issued Thursday.

Carlyle's lawyers are infamous for novel legal arguments.  Carlyle's LifeCare Hospitals 25 patient deaths after Hurricane Katrina were attributed to the federal government.  Carlyle claimed their patients became wards of the federal government as soon as FEMA teams began setting up in New Orleans.  This novel defense came after Carlyle "Hazelwooded" a New Orleans physician.

Carlyle's Semgroup investor lawsuit used the novel defense of puffery after the firm imploded from billions in bad energy bets, an activity not mentioned in Semgroup's SEC filings. 

Carlyle's lawyers pump toxic lies so the greed and leverage boys can make another billion and keep their shiny image intact

Once upon a time a blog challenged the untoward acts by private equity underwriters (PEU's).  It was known as PEUReport 

Might seven years of research, testimony and analysis disappear under the swipe of a Google anonymity request?  It happened to the BBC.  Does that mean PEU's can lie, then get posts about their lying removed?  Time will tell...

Thursday, July 3, 2014

Patriotic Philanhrophy Joins Music on July 4th at Monticello

The Daily Progress reported:

Monticello plans its 52nd annual naturalization ceremony Friday. David M. Rubenstein, co-founder and co-CEO of The Carlyle Group, is scheduled to deliver the keynote address and patriotic music is to be performed by the Charlottesville Municipal Band.

Monticello's Thomas Jefferson levered his slaves, making him a PEU forefather:

It had long been accepted that slaves could be seized for debt, but Jefferson turned this around when he used slaves as collateral for a very large loan taken out in 1796 from a Dutch banking house in order to rebuild Monticello.  He pioneered the monetizing of slaves, just as he pioneered the industrialization and diversification of slavery.

Jefferson declined proceeds from his friend's estate that would've provided funds to free his slaves.  Instead he used them as collateral on a very large loan.  

It;s fitting the purveyor of the Great Eskimo Tax Scam speak at Monticello on July 4th.   One man's opportunity is another man's boot on the neck.

Update 7-5-14:  The Daily Progress reported on the event:

All of the speakers referenced the significance of Thomas Jefferson's contributions to the foundation of America, and what he may have meant when he said "all men are created equal" in his preamble to the Declaration of Independence.

"As we move even closer to this goal, and ultimately achieve it, we owe a great deal to Thomas Jefferson for first stating so memorably what this country was intended to be," Rubenstein said in his address.

Jefferson showed us the country was for the landed gentry, which Rubenstein represents today.

Wednesday, July 2, 2014

Rubenstein's Nightmare

CNBC's Kelly Evans interviewed Carlyle Group co-founder David Rubenstein.  I noted his comment:

"And people are giving us lots of money to borrow. In other words, we can borrow more money than we really need or want to take because the markets are really liking the kind of returns that we give to investors in these high-yield funds."

It echoed financial sins that set up the 2008 financial crisis.  The greed and leverage boys get cheap debt to lever up deals.

I nearly blew tea out of my nose when I read Rubenstein's response to Kelly's "hard hitting" question:

KELLY EVANS: What do you think is the potential biggest disruptor?
DAVID RUBENSTEIN: Biggest disruptor to private equity?
DAVID RUBENSTEIN: Well, the biggest disruptor to private equity would be if investors begin to say, "We don't want higher rates of return." If all of a sudden they say, "We want low rates of return," that would be a problem. I hope that won't happen.
KELLY EVANS: Or if they settle for low rates of return.
DAVID RUBENSTEIN: They settle for low rates of return, and people say, "I don't really want 19%, 20% rates of return, I want 3% and 4% rates returned." That would be a disruptor.
It sounds like P.T. Barnum attracting rogues to his carney shows.  Rubenstein speaks like a politician or salesman.  Wait they're one and the same.   

PEU disruptors would be increased interest rates, a financial crisis in part of the globe, the implosion of a major financial institution, cratering of specific financial products, massive capital calls on debt for companies having to make huge asset write downs.  The biggest disruptor would be if PEU exits closed down for years and debt balloons came due.  They need a mark to monetize.