Sunday, November 30, 2014

Corporate Boards: The Bayh Rotation

Senator Evan Bay and wife Susan have shifted their board directorships.  Mrs. Bayh served on nine boards while her husband was a public servant.  She's down to two boards, Emmis Communications and a newly bankrupt Dendreon (Chapter 11).  Mr. Bayh quickly grew his directorships to five, in addition to his private equity underwriter (PEU) slot with Apollo Group Management and influence peddler position with McGuireWoods:

Sen. Bayh serves on the board of directors for Fifth Third Bank, Marathon Petroleum Corporation, Berry Plastics Corporation, RLJ Lodging Trust, and McGraw Hill Education. He also serves on the advisory board for the Central Intelligence Agency (CIA).   

Evan's sun is rising.  Susan, once a corporate star of her own, may now be a satellite.

Friday, November 28, 2014

VP Biden Eats Carlyle Group Turkey

Boston Globe reported:

(Vice President Joe) Biden and his wife stayed at the home of Carlyle Group co-founder David Rubenstein and ate a Thanksgiving feast dinner prepared by Bill Puder, chef at Faregrounds restaurant on the island.

I'll venture the conversation drifted to Ukrainian gas and how Carlyle's energy infrastructure can help Europe free itself of Russian dependency.  USAID came forward to guarantee loans for companies developing energy in Ukraine, Moldova and Georgia.  One such firm has a young Biden on its board of directors.

What was under the PEU serving platter at Mr. Rubenstein's Abrams Point compound?  Fortunately, the last four Congresses pardoned carried interest taxation.  Now that's service.

Update 11-23-16:  Biden's back at Carlyle co-founder David Rubenstein's Nantucket home for Thanksgiving.  Airspace is restricted through Sunday.   

Update 11-22-22:  Biden is back at the PEU Rubenstein compound on Nantucket for yet another Thanksgiving.  He stayed there in 2021 and possibly in 2019.

Sunday, November 23, 2014

"60 Minutes" Omits LaHood's Infrastructure PEU Job

60 Minutes reported:

Ray LaHood: Our infrastructure is on life support right now. That's what we're on.

Few people are more aware of the situation than Ray LaHood, who was secretary of transportation during the first Obama administration, and before that a seven-term Republican congressman from Illinois. He is currently co-chairman of Building America's Future, a bipartisan coalition of current and former elected officials that is urgently pushing for more spending on infrastructure. 

60 Minutes failed to mention LaHood's two other jobs that deal with infrastructure.  LaHood is Senior Advisor to Meridiam Infrastructure, a private equity underwriter (PEU) specializing in infrastructure and  Senior Advisor to law firm DLA Piper.

DLA Piper announced that former US Department of Transportation Secretary Ray LaHood has joined the firm as a senior policy advisor in the Washington, DC, and Chicago offices. Joan DeBoer, Secretary LaHood’s former chief of staff, will also join the firm as a policy advisor.
NextCity reported:

LaHood joined law firm DLA Piper as a senior adviser earlier this year. (The term “lobbyist” was not used, but DLA Piper does occasionally dabble in lobbying for transportation projects. Legally, LaHood is not allowed to lobby the Department of Transportation, but Congress — which he used to be a member of, as a representative from Illinois — is fair game.)
Back to the 60 Minutes interview with LaHood:

Steve Kroft: Why? How did it get this way?
Ray LaHood: It's falling apart because we haven't made the investments. We haven't got the money. The last time we raised the gas tax, which is how we built the interstate system, was 1993.
Steve Kroft: What has the resistance been?
Ray LaHood: Politicians in Washington don't have the political courage to say, "This is what we have to do." That's what it takes.
Steve Kroft: They don't want to spend the money? They don't want to raise the taxes?
Ray LaHood: That's right. They don't want to spend the money. They don't want to raise the taxes. They don't really have a vision of America the way that other Congresses have had a vision of America.

Actually, Congress has a PEU vision for America.  They don't want to tax the billionaires who fund their campaigns and will likely employ them post "public service."  Those billionaires expect a rotating scorched earth for them to buy assets cheap (using levered debt), apply their financial machinations, fluff up the affiliate (often with government subsidies), then resell it for a multiple of their original equity investment.

That's the bipartisan vision Congress and the White House have for America.  Politicians Red and Blue love PEU.  America's traditional watchdogs seem to be protecting the PEU class, not the general public.

Japan's Shame: Looming PEU Boom

The Carlyle Group's David Rubenstein said Japan is now ready for private equity and its financial machinations which cause distortions

“I think we are going to find more opportunities in Japan than before,” said Mr. Rubenstein, who is raising a new fund to invest in the country. “I do think that Japan will see a bit of a mini boom in private equity investing as the government encourages more and more private-equity deals.” 

Japanese culture has historically been the antithesis of private equity.   This should cause great shame to Japan's leaders.

Wednesday, November 19, 2014

Clinton Seriously at Bilderberg

Politico quoted Vernon Jordan, on taking Bill Clinton to Bilderberg meetings in 1991:

“He left law school and came back to the South … He could [have gone to] Wall Street … [but] he came from Yale to home to do something about race.” – Vernon Jordan, longtime Clinton friend.

“I would say, that’s the next president of the United States,. They said, ‘Jordan, you been drinking? You been smoking?’ I said, mark my words.”
WaPo stated in 1998:

After all, it was Jordan who first introduced then-Gov. Clinton to world leaders at their annual Bilderberg gathering in Baden Baden Germany in 1991. Plenty of governors try to make that scene; only Clinton got taken seriously at that meeting, because Vernon Jordan said he was okay. 
Sixteen years ago Vernon Jordan symbolized insider access and corporate cronyism:

Between Jordan and his wife, 17 directorships give the couple an annual income of more than $800,000, in addition to the reported $1 million he makes at his law firm. 

President Bill Clinton helped stoke such cronyism by privatizing government functions, like security checks.  Now Western governments protect the Bilderberg crowd with virtually impenetrable security.  The Clintons should reappear before the Bilderberg Group since it likes to sniff U.S. Presidential candidates.  The corporate Bush's will likely be there, as well.  Bilderbergers love royalty, even the American cracker kind.

Update 11-20-14:  Vernon Jordan is Senior Managing Director of Lazard Freres, the investment bank sending U.S. corporations overseas for tax elimination purposes.   President Obama's latest Treasury appointment is Lazard's Antonio Weiss.

Monday, November 17, 2014

DaVita Settlement Omits Role of Two Former CMS Chiefs

DaVita reported in a SEC filing:

Under the Settlement Agreement, the Company will pay $350 million plus accrued interest from February 8, 2014, at the rate of 2.25% per annum to the United States, plus a civil forfeiture of $39 million (together, the “Settlement Payment”). In addition, the Company has agreed in principle to a settlement of certain state Medicaid claims in the amount of $11.5 million plus interest.

Under the Settlement Agreement, the United States agrees to release the Company from any civil or administrative monetary liability arising from allegations that the Company caused the submission of claims to the federal health care programs that were ineligible for reimbursement due to certain violations of the Anti-Kickback Statute in connection with certain of its dialysis center joint venture arrangements. Additionally, under the Settlement Agreement the United States and the relator agree to dismissal of the civil action filed by the relator under the qui tam provisions of the False Claims Act, and the OIG agrees, conditioned upon the Company’s full payment of the Settlement Payment, to release its permissive exclusion rights and to refrain from instituting proceedings to exclude the Company or any Company affiliates from participating in Medicare, Medicaid or other Federal health care programs.

The Settlement Agreement reflects the Company’s disagreement with the United States’ claims and contains no admissions of facts or liability on the part of the Company.

The United States has also informed the Company that it has declined to proceed with any criminal charges in connection with this matter. 

The behavior in question occurred with two ex-Medicare Chiefs sitting on DaVita's Board of Directors.  Both William L. Roper, M.D. and Nancy-Ann DeParle were appointed to the DaVita board in May 2001.   Roper served on the Board compliance committee and DeParle on the audit committee.

In March 2004 the board established two new standing committees, a public policy committee and a clinical performance committee. The public policy committee consists of Ms. DeParle and Dr. Roper, with Ms. DeParle serving as the chair. 
I believe DaVita expected these two to block for the company and its numerous violations, illuminated in the legal complaint.   After ignoring its internal compliance handbook over a decade's time the company said:

We are proud of our commitment to compliance over our 15-year history. We have worked incredibly hard to get things right and it is our belief there was no intentional wrongdoing. 
The legal complaint reads intentional wrongdoing of the repeating kind.  That I believe.   It occurred under the fiduciary oversight of two former Medicare Chiefs and neither the Department of "Just Us" nor the media shared this basic fact. 

Sunday, November 16, 2014

PEU Barons Right to Carried Interest

What if private equity underwriters gathered to document their concerns to public officials?  A similar gathering of the powerful and influential occurred in 1215 and it produced the Magna Carta:

Magna Carta was written by a group of 13th-century barons to protect their rights and property against a tyrannical king. It is concerned with many practical matters and specific grievances relevant to the feudal system under which they lived. The interests of the common man were hardly apparent in the minds of the men who brokered the agreement. 
The document stated:

Common pleas are not to follow our court but are to be held in a certain fixed place.
Today's Greed-a-Carta would say something like:

Only the common are to pay publicly stated rates of taxes.  Members of the PEU court are to have access to preferred taxation rates known as carried interest.

King John signed the Magna Carta to quell a rebellion.  PEU Robber Barons have no need to rebel, given they sponsor and control the system.  However, the common person may be at their wits end from Congress' catering to the greed and leverage boys for well over a decade.

Saturday, November 15, 2014

Monumental PEU Seeks National Security Firms

Digital Journal ran the following commercial for PEU Monument Capital:

Monument Capital Group Holdings seeks investment into companies featuring four essential characteristics: 1) proven management teams; 2) positive cash flow; 3) non-lethal products and services with technologically competitive advantages; 4) capacity to meet the high demands of national security advancement worldwide.

Eliminating breaches in national and global security and improving national infrastructure security are paramount to governments and citizenry worldwide. In a rapidly changing security environment -- in which biosecurity, data security, cyber security, border security, maritime security and infrastructure security are both crucial and ever-evolving -- it is imperative that the private sector provide the highest possible level of technology the world has to offer. Monument Capital Group Holdings provides the financial backing for that technology to be developed, implemented and deployed, thereby ushering in a new set of national and global security defenses. 

Monument Capital Group Holdings provides valuable investment capital for technology companies with an international focus. Technological advancements are made around the world, and Monument Capital Group Holdings partners with companies worldwide in an effort to ensure its portfolio is at the leading-edge of those advancements. The international range and depth of investment and security technology experience possessed by Monument Capital Group Holdings' executive team and its Advisors ensures that that balance is struck with maximum benefit.

It didn't say Monument Capital's founders and advisors reads like a Carlyle Group franchise.  One has to love that Monument Capital Senior Advisor James A. Baker, III can talk about issues of national security without disclosing his financial conflicts in that arena.  It's Meet the Putz!

Thursday, November 13, 2014

Conflicted Governor Rauner: Rahm's Mentor

Private equity underwriter (PEU) Bruce Rauner won the Illinois Governorship and made the news for taking political donations from executives at firms that manage state pension funds.  Doing so is against the law, but when do laws apply to the greed and leverage boys or their sponsored politicians?  Pretty much never.

PEUs exploded after the new millennium, becoming ubiquitous under Presidents Bush and Obama.  Rauner mentored ex-Congressman Rahm Emanuel, steering him into investment banking.  Emanuel went on to serve as President Obama's Chief of Staff and Chicago Mayor.

Here's what the PEU virus delivers:
Illinois Governor-elect Bruce Rauner accepted more than $140,000 worth of campaign donations from executives affiliated with firms in which Illinois pension systems have investments, according to documents reviewed by the International Business Times.
  But back to public pension money and Rauner's conflict:

Financial disclosure documents show he still retains ownership stakes in 15 GTCR entities. Though Rauner said he retired from the firm in 2012, SEC documents show he retains a partnership stake in at least one GTCR subsidiary. The two state pension systems he will now oversee as governor list GTCR as managing state money.
It gets more twisted when one considers Rauner's GTCR is also a big investor in health care, which taxpayers fund through state Medicaid programs.  Rauner has layers and layers of conflicts.

President Obama's health deformer Nancy Ann DeParle retained an unknown stake in CCMP Capital Partners, receiving several distributions from CCMP affiliates while clearing the health care table for her PEU ilk.  Someone in the White House assurred the public that all of DeParle's conflicting assets had been divested.  They weren't all declared, especially her PEU residual stakes.

Add that Rauner's GTCR is running from a $110 million verdict for nursing home negligence and things get more disturbing.  Welcome to our PEU world, where politicians Red and Blue love PEU.

Update 12-19-14:  Rahm showed his addiction to financial industry contributions by exempting Chicago pensions from ethics coverage.

Update 3-15-15:  Governor Rauner was a top donor to 2014 state election campaigns, using his PEU fortune to fund/buy his election.  Polticians Red and Blue love PEU.  PEU Bruce Rauner is on the Red team. 

Wednesday, November 12, 2014

The Bonus Conundrum

Bloomberg reported:

American Realty Capital disclosed last week that accounting errors were intentionally concealed at the New York-based company, leading to the resignation of two executives and sparking an FBI investigation and a review by the Securities and Exchange Commission. 

The Wall Street Journal reported today that the errors were tied to bonuses. The mistakes resulted from incorrect accruals relating to bonus payments made to management and other employees, according to a person the newspaper didn’t name. 

Bonuses caused management to lie, cheat or steal to garner the prize, which leads us to our next story where financial traders did just that in rigging foreign exchange and gold.  Their punishment?  200% bonuses!  Zero Hedge reported:

FINMA has also instructed UBS to limit bonuses for traders of foreign exchange and precious metals to 200 percent of their base salary for two years.

Which means that clearly nobody is going to jail, however the punishment is far more harsh: riggers will have a bonus of ONLY 200% their base salary for two years to look forward to!  The horror, the horror.
If management wants to distort something, do the following:

1.  Construct a complex extrinsic reward system
2.  Give it time. 
3.  Kaboom!

That's what will eventually happen with the greed and leverage boys.  Party like it's 1929!

Update 5-17-22:  German Allianz SE agreed to pay $6 billion and plead guilty to securities fraud for its Structured Alpha funds.  Reuters story stated "managers also inflated fund results to boost their pay through performance fees."

Saturday, November 8, 2014

The Sore is Private Equity

Carlyle co-founder David Rubenstein told fellow billionaire Ron Baron at an investor conference:

"In other words, if you have a sore ... you eventually figure out how to live with the problem."

"It's an illness we've been suffering from," he continued. "If we could get rid of this sore, could get rid of this problem, I think the economy would do better." 

Rubenstein referred to dysfunction in Washington, but his words equally apply to private equity.  The rise of private equity corresponds with the decimation of America's middle class.  Many believe the relation is not just correlation. but cause and effect.  Ironically, Carlyle Group is investing in companies that sell to China's rising middle class

Since 2000 PEU greed and leverage spread to other public and nonpublic companies.  By manipulating debt and equity companies dressed up earnings per share, ensuring executives got their absurd executive incentive compensation.

Every industry expects Washington to provide preferred legislation, backstop their failures and enhance their profits.  Washington in turn expects donations, which the big money boys provide.  Mr. Rubenstein is correct about the sore and he is one infectious agent.

Sunday, November 2, 2014

Rubenstein Gift to Rebuild Slave Quarters

Carlyle Group co-founder David Rubenstein's $10 million gift to President James Madison's Montpelier estate will fund the restoration of the site's former slave quarters.  Madison is considered the father of the U.S. Constitution.  WaPo reported:

About $3.5 million will go to archaeological and other work on a small complex of slave cabins, a kitchen and two smoke­houses that stood just south of the mansion.

Experts believe about 30 people — "house slaves" and their families — occupied what were relatively comfortable structures. The plan is to reconstruct the buildings and furnish the complex.

The plantation's "field slaves" lived in more spartan cabins of logs and mud near where they worked, said Montpelier's director of archaeology, Matthew Reeves.

Madison, although troubled by slavery, at one point owned 118 slaves. It is said he talked more on the subject of slavery than on any other.

Rubenstein said at a recent event, "Without the Bill of Rights the Constitution would not be what it is."  He did mention the terrible exception for slavery.  Rubenstein joined likely Presidential nominee Jeb Bush and Supreme Court Justice Samuel Alito.

He commented on the Bill of Rights, saying all people "could be equal" but "we're not there yet."  Mr. Rubenstein will loan the Constitution Center copies of the 13th amendment, which abolished slavery. 

Mr. Rubenstein closed with his belief President George H.W. Bush would be a founding father if the Constitution were written today.  What exception would the landed gentry write in today?  Might it be corporate free speech rights, destruction of the right to privacy, even carried interest taxation?

Slavery is the remnant the powerful gifted to themselves.  They would do similarly today.  It's fitting Rubenstein's gift recreates slave quarters.