Tuesday, December 30, 2014

Carlyle Group's Smoking Tobacco Investment

Claren Road, a hedge fund owned by the Carlyle Group, made big money buying lowly rated state tobacco bonds, then worked deals with state finance officers to boost their value.  ProPublica reported Claren's deal with New Jersey garnered $92 million for the state and over $100 million in profits for Claren Road.

This echoes the Great Eskimo Tax Scam, which preceded Carlyle's founding.

In 1984, a law was passed allowing native corporations in Alaska—that is, Eskimo owned companies created by Congress to manage native lands—to sell their losses to businesses looking for tax write-offs. The Marriott executives, working with David Rubenstein at Shaw Pittman, discovered the Eskimo clause and vigorously bought the losses to offset gains. The adventure has become known in some quarters as the Great Eskimo Tax Scam.
More recently, a Carlyle affiliate pursued Florida "wetlands credits."  PEU's know how to wring out profit, on the backs of people.  In fact, it's an American tradition.