Thursday, September 25, 2014

PEUs: An Estate of their Own

Naked Capitalism reported:

In a mere four months, the SEC has gone from calling out widespread abuses in the private equity industry to not just walking back its detailed criticisms, but actually enabling a coverup.

Readers may recall that in May, SEC inspection chief Andrew Bowden gave what was by regulatory standards a blistering speech describing widespread misconduct in the private equity industry. His detailed account followed SEC Chairman Mary Jo White setting forth uncharacteristically clear-cut details of private equity abuses in testimony to Congress.

Gretchen Morgenson provided more confirmation of the SEC’s charges, describing how private equity general partners paid themselves for services never rendered. Morgenson followed up in July with an even bigger and more obvious abuse that the SEC is apparently ignoring, the failure of private equity firms to register as broker-dealers

Even the leading private equity reporter, Dan Primack at Fortune, who by necessity of writing on the industry daily can’t afford to take too tough a line, sided with the SEC’s position in an article, “Will private equity investors keep getting their pockets picked?” The Financial Times published a lengthy analysis in July, Private equity: A fee too far, focusing on how private equity firms line their pockets by charging monitoring and other fees to portfolio companies. It also described how investors in the funds, the limited partners, were upset by the SEC’s confirmation of long-standing concerns, yet found it difficult to bring the general partners to heel

I reported years ago about private equity's manipulation of financial reporters.  My source was an ex-Bloomberg reporter who covered the PEU beat.   

Naked Capitalism concluded:

The real message is that private equity is too powerful to discipline.

Elected officials and regulators won't do it.  The financial media can't do it and get the next breaking PEU story. 

Who does that leave to monitor the PEU boys?  Us. Just us...