Repurcussions of Private Jet Set Avoiding Oil Patch?

Bloomberg reporters noted the vast difference in the number of private jets at Davos, Switzerland and Midland, Texas.   Davos overflowed with the private jet set.  Oil stressed Midland is now a private jet black hole.

The oil boom last year was easy to see at the airport in Midland, Texas, the gateway to the biggest crude- producing region in the United States. The 30 or so spaces for private planes were often filled.

On one day in early February, a lone corporate jet sat on the tarmac, the empty spots a harbinger of the slowdown looming in a city that is 85 percent dependent on the oil and gas industry.

The article posed the number of private jets as a possible leading economic indicator:

Private aviation's role as canary-in-a-coal-mine is being watched closely again. Even as airline traffic rose at Midland International in January, business-jet takeoffs slid along with smaller non-commercial aircraft, according to data tracker FlightAware. Private flights are poised to drop again in February.

History suggests how private aviation can foretell the end of a boom. In 2008, months before Lehman Brothers's September bankruptcy filing became a signal moment of the global financial crisis, U.S. business-jet flying peaked in March, then fell in every month save one for the rest of the year.

Fewer private jets in Midland is a bad indicator for its oil based economy.

The city's dependence on a single commodity means the downturn "will be significant," said Karr Ingham, an economist based in Amarillo, Texas, who specializes in the region's oil economy. "I don't think there's any escaping that at this point even if prices were to turn and go back north again."

Mr. Ingham's economic model for the Midland economy utilizes airplane boardings but does track private jet parking occupancy rates.   He predicts future pain for Midland and the region.  The question is how far this pain will spread?

CNBC's Jim Cramer believes private equity underwriters (PEU's) are ready to snatch up distressed energy companies for pennies on the debt dollar.  Generally, someone's pain is another's gain, but not always.  Sometimes everybody losses, at least for a while.

Two other March 2008 events seemed bigger canaries for our national economy than business jet flying.  The collapse of Bear Stearns and Carlyle Capital Corporation portended the financial crisis.  Bad credit bets took down both.  Bear went into the arms of JP Morgan, while The Carlyle Group, itself a PEU, sent CCC into bankruptcy.

If PEU's come with their fresh billions to invest in the oil patch, will they arrive in private planes?  It's something to ponder.

Exxon Settles with NJ for 10 Cents on the $1

The State of New Jersey sued Exxon for $8.9 billion in damages for polluting wetlands by the thousands of acres.  A court already heard testimony and neared a ruling when Governor Chris Christie's office asked the ruling be held so a settlement could be reached.  Word has it Exxon will pay $250 million, a mere 9.6% of $2.6 billion in actual damages.  The state's request for $6.3 billion in compensatory damages will disappear.

Bloomberg reported:

The pollution is massive, and includes pesticides, chromium, arsenic and other hazardous substances, according to the opinion by former Union County Superior Court Judge Ross Anzaldi. 

“It was estimated in 1977 that at least some 7 million gallons of oil, ranging in thickness from 7 to 17 feet, is contained in the soil and groundwater underlying a portion of the former Bayonne site alone,” according to the opinion. 

“The documented level of contamination in the waters and sediment of the Platty Kill Canal in Bayonne is so high that Exxon has recommended permanently closing and filling in the canal with an impermeable barrier (estimating 50,000 cubic yards of impacted sediments),” Anzaldi wrote.

Justice or Just Us?  It looks like another case of the latter to me.

PEU'S at AIPAC 2015

The American-Israeli Political Action Committee runs from Sunday, March 1 to Tuesday, March 3.  Confirmed speakers of the PEU and ex-public service variety include:

Evan Bayh - Apollo Global
Eric Cantor - Moelis
Tom Donilon - BlackRock
Dan Senor - Elliott Management

AIPAC's website states that more than two-thirds of Congress attends their annual meeting.  It also highlights speaker National Security Advisor Susan Rice, UN Representative Samantha Power and Israeli PM Benjamin Netanyahu.

Last year's pictures show Senator John McCain, Secretary of State John Kerry, Senator Chuck Schumer, Joe Lieberman,  and Treasury Chief Jacob Lew.  Many of these public servants will become PEU's. 

Ch..ch..ch..ch Change Capital: Oldie, but Goodie

Flashback to October 2009 when Carlyle Group co-founder David Rubenstein suggested private equity update it's name and image.  He did so from Dubai:

"Private equity will probably come up with a new name. It went from bootstrap deals in the early days to leveraged buyouts to management buyouts to private equity," he said. "Maybe it will go to change capital or value-added equity," he said.

Nearly six years later Rubenstein pushed once again for a name update. I've offered private equity underwriter (PEU), but the Carlyle bigwig stuck to his guns in 2015. 

There will be a new name for the industry and the industry will be seen as more mainstream. Mr. Rubenstein’s preferred term? “Change capital.”

How might a move to Change Capital impact the PEU lobbying group? 

Carlyle DBD's Bring Home $288.4 Million in Dividends

The Carlyle Group's three co-founders received nearly $300 million in dividends last year.  That's roughly $100 million each.  The actual numbers are:

David M. Rubenstein earned the most dividends, coming in at $98,229,255, documents show. William E. Conway and Daniel A. D’Aniello each took home $95,094,256 in dividends.

Each co-founder earns a salary and garners income from investments in Carlyle's various offerings.  Dealbook reported:

All told, the roughly $803.1 million that the three men received surpassed the $750 million they received in 2013.

Note that none offered any of their personal resources to refund investors who lost millions investing in Carlyle Capital Corporation.  Also, any legal settlements come from Carlyle's funds, not the top leaders pocketbooks.

We'll have to wait and see how high this vaults Carlyle's troika up the U.S./global billionaires list.

Forced Ranking Payment Schemes to Hurt Healthcare Ethics

Healthcare payment reforms purport to reward providers delivering better care and punish those not doing as well.  They start off by requiring providers to submit data or face payment reductions of 1% or more.  The data is then used to rank providers on a continuum.  Often it's a Bell Curve, where providers are divided into subgroups, frequently quartiles.

The organizational equivalent of healthcare pay for performance is forced rankings of individual employees.  It's the same motivational theory with a similar statistical foundation.   People need to be financially incentivized to do a good job and those below average should be punished.

GE's Neutron Jack Welch eliminated the bottom 10% every year in their forced ranking system. A WSJ piece on the topic stated:

“Forced ranking crushed morale, stifled innovation, and let to unscrupulous competition among workers”.

Extrinsic motivation schemes cause people to lie, cheat and steal.   This has been seen repeatedly in education, financial markets, and executive suites where 30% of stock options were backdated. 

Healthcare pay for performance will lead to widespread lying and cheating within organizations.  The government's practice is a direct imitation of corporate incentive schemes.  In that world CEOs blame bad workers, thus avoiding responsibility for implementing pay schemes that destroy ethics. 

The financial world has a prime example of such.  Fortune described

What do you do when the CEO is part of the problem rather than part of the solution?

That’s the question for HSBC Holdings Plc after weekend disclosures that its current boss, Stuart Gulliver, stashed away millions in an anonymous account in Panama, while he was running the company’s operations in Asia.

The Guardian reported:

Stuart Gulliver, the HSBC chief executive who has vowed to reform the crisis-hit bank, sheltered millions of pounds in a Swiss account through a Panamanian company and remains tax domiciled in Hong Kong.

Leaked files show that the Derby-born Gulliver, who is due to present HSBC’s annual report on Monday in the wake of the international controversy over its Geneva-based private bank, was also one of its clients, holding about £5m in a Swiss account.

Healthcare is about to get much dirtier, ethics wise.  The focus will be achieving payment, not service.  In many cases service data will be complete fiction.  I expect U.S. healthcare to look like China, where companies keep two sets of records.  Only one is for show.

We'll see if doctors and nurses are as smart as CEO's.  Will 30% of them cheat to garner the prize and avoid punishment? 

Update 6-3-22:   Former General Electric chief executive Jack Welch takes the blame for much of what's wrong with businesses today.  Bad management theory remains widespread but Welch is getting his due. 

Update 6-5-22:  Welch's firing employees when things were going well was his contribution to selfish, greedy management which got outsized rewards.  His cost cutting ways were imitated by other CEOs and that led to the Boeing 737 Max and other disasters (BP Texas City Refinery explosion and Gulf Oil Spew).  Welchism led to offshoring and economic wastelands in the U.S.  That aided the rise of Donald Trump, who only thought of himself while in the White House.  

Update 6-6-22:  WaPo reported a Medicare Advantage medical reviewer "discovered 90% of diagnoses for cancer were invalid, as were 96% for stroke and 66% for fractures" at one California health system.:

Several doctors interviewed by The Washington Post said it was common practice for insurance companies and medical systems to search or data-mine the histories of patients covered by Medicare Advantage. Health systems were known to advise doctors on the most lucrative billing strategies, cajole them to document the maximum number of illnesses, and grade and rank them among their peers based on how they coded patients, they said.

"The emphasis is on how to code for more. It's not ethical coding, it's how to code for more money. That pressure is there."

Update 6-11-22:   Management followed Jack Welch instead of Dr. W. Edwards Deming and our world is much worse off for it.  Ignorance and selfishness are widespread.  

Update 11-26-23:  Jack Welch lives on in Amazon's "performance management system."  Forced rankings and eliminating bottom x percent of workers.  Can you say morale killers?  What's a lazy, ignorant manager to do? 

Update 3-29-24:  Some have become aware of the damage done by Jack Welch's executive pay optimization management:

...“ranking and yanking” by firing the bottom 10% of employees every year, playing endless accounting games to make quarterly earnings goals, not thinking long-term

Carlyle's Hedge Fund Runs Off Road

Seeking Alpha reported on Claren Road's brutal quarter.  Claren Road is The Carlyle Group's credit focused hedge fund:

Investors pulled about $2.5B from the fund in Q4, reports MarketWatch, and AUM stood at $5.2B at year-end vs. $8.5B three months earlier.

Claren Road lost 39% in assets under management in three months.  That's one bumpy quarter.

Carlyle's former hedge fund, Blue Waver Partners, invoked water images.  Carlyle rolled up Blue Wave Partners months before the 2008 financial tsunami. 

What imagery awaits clients of PEU hedge funds?  Off road, treacherous, heavy seas or bucolic, peaceful and placid.  Smaller would be a good start.

Oil Refining: Carlyle's Trains Stall Ships

Reuters ran an odd story about six oil tankers lingering as they attempted to deliver crude oil to Philadelphia Energy Solutions (PES), a Carlyle Group affiliate.  The delays began in November and lasted as long as eleven weeks.

All six of the tankers appear to have been destined for Philadelphia Energy Solutions, the 335,000-barrel-per-day (bpd)refinery co-owned by The Carlyle Group and a subsidiary of Energy Transfer Partners, L.P.. Five of the cargoes were imported by the company itself or banks that finance their supplies, according to customs data. The sixth discharged at a Delaware River terminal used by PES, tracking data show.

One person familiar with the tankers said they are "drip feeding" crude into the plant, a rare set-up that may be caused by a lack of onshore storage space for these particular varieties of crude, or limitations on the rate at which the infrastructure can receive supplies, the person said.

 
On October 8, 2014 Reuters reported PES would  take over oil supply logistics and trading from JP Morgan.. 

Bank of America Corp has clinched a deal to provide inventory and working capital financing to the biggest oil refinery on the East Coast, replacing JPMorgan Chase & Co with a revamped arrangement that excludes physical supplies, according to a source familiar with the deal.

The agreement with Philadelphia Energy Solutions (PES), sealed on Tuesday, will give Bank of America's commodities business one of the biggest such financing arrangements in the country, but excludes the physical oil trading and logistics operations that were part of the JPMorgan pact, the source said.

In the new deal, PES will take over its own logistics and trading.  Bank of America will ensure payment to the refiner's suppliers and help it hedge its price risk .

Consider the varied possibilities from this switch alone:  Was there a poor pass off from JP Morgan?
How capable was PES internal logistics group?  How much did short term financial considerations enter into the picture?  How might PES finances look better as a result of holding ships in port and drip feeding supplies?

Never underestimate Carlyle's ability to manipulate the financial picture.  Carlyle announced on February 17 it filed to take PES public.  The S-1 provided clear information on why ship offloading slowed dramatically.  The refinery increased cheaper Bakken crude 622%.  Bakken crude is delivered by rail car, not ships

The capacity of the North Yard terminal was expanded to 280,000 bpd in October 2014, allowing Refining to significantly increase the volume of domestic crude oil it processes. As a result, domestic crude oil comprised 65% of our crude oil slate in the fourth quarter of 2014 compared to 9% of our crude oil slate in the fourth quarter of 2012 (the first full quarter of operation of the Philadelphia refining complex under our ownership). On January 1, 2015, the North Yard terminal was contributed to Logistics, our wholly owned subsidiary. In connection with this contribution, Logistics and Refining entered into a long-term, take-or-pay commercial agreement with minimum volume commitments and related services and secondment and easement agreements. Accordingly, as of January 1, 2015, we conduct our operations through two business segments, refining and logistics, which are operated by Refining and Logistics, respectively. For periods beginning with the three months ending March 31, 2015, we expect to provide financial information and operating data on a segment basis.  

For those wanting to buy into PES consider Carlyle's plans to monetize the Logistics division separately:

Following this offering, and subject to market conditions, in order to grow our logistics segment, we intend to explore an initial public offering of a growth oriented master limited partnership ("MLP") that owns a substantial portion of our logistics segment and that will be focused solely on providing logistics services to Refining and third parties (the "Logistics IPO"). 

If consummated, we expect to retain 100% of the general partner interest and incentive distribution rights, as well as a significant portion of the limited partner interest in the issuer. . 

Here's what Reuters missed in their stalled ship story:

We (PES) have made capital investments in a number of organic growth projects discussed below, including the North Yard terminal, and developed a network of supply relationships to transform the Philadelphia refining complex from a facility that primarily relied on waterborne foreign crude oil to one that can receive and process up to 80% domestic crude oil. 

Other factors in PES use of crude oil could include two "flaring events."  A refinery fire in early January reduced the refinery's operating capacity by half.  The second occurred just two days ago.

Oil trains carry a different fire risk and that is clearly growing, alongside Carlyle's expected profits on PES.  Philly.com reported:

North Dakota crude makes its way to Philadelphia on dedicated "unit trains" that contain 100 or more railcars. Each train typically contains about 70,000 barrels, or nearly three million gallons, of petroleum.

On their five-day journey to the East Coast, the trains are handed off in Chicago to CSX or Norfolk Southern, the two carriers that serve Philadelphia.

"We bring in nearly six miles of train a day for unloading at our facility. It's an amazing kind of thing to see."--PES CEO Phillip Rinaldi

More than 700,000 people in the region - including 400,000 in Philadelphia - live within a half-mile of the rail lines that carry crude oil.

There's much to be gained by asking questions and researching issues.  SEC filings and analyst calls often provide answers or insights.  I expect to learn more as Carlyle updates Philadelphia Energy Solutions' SEC filings.

Update 3-8-15:  An oil train wreck in Galena, Illinois punctured seven oil cars.  Flames could be seen rising high into the sky.  The destination was Carlyle's Philadelphia oil refinery,(Bloomberg)

Update5-23-15:  After the deadly Amtrak train wreck in Philadelphia, Carlyle's refinery had its third fire this year.

Update 9-6-15:  Carlyle benefits from using discounted domestic crude and wants to hold on to this distinct profit advantage.

Update 1-11-16:  Ships are winning again at Carlyle's Philadelphia refinery.  I wonder how this shift might impact a PES Logistics IPO.

Update 12-8-16:  CEO Rinaldi announced his retirement.

Update 12-11-16:  PES had another fire.

Update 7-2-17:  PES faces a potential strike over pension cuts, according to Reuters.  Story says refinery is using West African oil from ships.

Carlyle Group's 34.8% Water Hike for California Customers

Carlyle Group's Park Water owns two other public utilities, Montana's Mountain Water and California's Apple Valley Ranchos Water.  While Missoula, Montana actively pursues Mountain Water via eminent domain, Apple Valley is pondering a similar action, in part due to a requested 34.8% rate increase over a three year period.

Apple Valley Ranchos requested rate increases of $3.12 million or 14.88 percent in 2015, $2 million or 8.48 percent in 2016, and $2.16 million or 8.19 percent in 2017. 

Compounding turns a 31.5% rate increase into 34.8%.  Rest assured the numbers folks at Carlyle understand how to profit handsomely from public infrastructure.  The Desert News Post reported:

... the company already has shown a profit of 12% in recent years, and that stockholders are guaranteed an 8.75% return on their investment as a minimum. It was also announced that $2.5 million has been spent on water system improvements, much of it as speculative major infrastrustructure improvements in outlying areas that don’t have any homes being built. 

Water users are supplying the capital for this company to make huge profits, all the while telling them to conserve water. It’s a case of, the less water you use, the more the company needs to charge per unit to make a profit.

Private equity underwriters are infamous for bleeding cash from affiliates via deal fees, special dividends and annual management fees.  How much has Carlyle pulled from Park Water and its three public utilities?

Fun fact:  How many citizens know the average annual rate increase requested by Carlyle's Apple Valley of 11.6% is over 10 times greater than The Carlyle Group's annual federal tax burden of 1%? 

Update 3-18-15:  Apple Valley residents turned out for a public meeting on the sale of their water supplier.

EU to Enrich Hunter Biden?

In early February U.S. Vice President Joe Biden opined:

Vice President Biden offered strong words Saturday against Russia's moves in Ukraine, suggesting Russian President Vladimir Putin would buck any peace proposal and accusing the leader of "using psychiatric institutions to quell dissent."

Yesterday Biden made a different call:

Vice President Biden spoke on the phone with Ukrainian President Petro Poroshenko on Friday after a rebel offensive this week threatened increased violence between Russia and Ukraine.

Biden strongly condemned the Russian-backed offensive earlier this week in which rebels seized the eastern Ukrainian town of Debaltseve, according to a readout of his call provided by the White House. The U.S. has said the offensive violated multiple cease-fire agreements signed by Russia.

White House press secretary Josh Earnest on Friday said "it's possible that there could be additional costs over and above" current sanctions if Russia not abide by its agreements. 

At stake are Ukrainian gas fields.  Reuters reported:

The European Union will consider "reframing" energy relations based on market conditions with Russia when the time is right and for now is focusing on building a strategic gas partnership with Ukraine.

VP Biden's son Hunter is involved in Ukrainian gas.  The announcement came last May:

Hunter Biden, the youngest son of Vice President Joe Biden, has been appointed to the board of directors of Ukraine's largest private-gas producer. The company, Burisma Holdings, announced Biden's appointment on its website  

Two months later the U.S. government directed USAID to help:

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.

In December Ukrainian President Poroshenko appointed Natalie Jaresko as finance minister.  PEU Jaresko has U.S. government links:

Ukraine's new finance minister is a private equity underwriter (PEU), having co-founded Horizon Capital.  Jaresko served as President of Western NIS Enterprise Fund, capitalized with $150 million in U.S Government funds.

The Vice President is creepy enough when he puts his hands on others.  

What might he be capable of in setting up family members for profits?  The U.S. fomented a coup in Iran for Anglo-American oil and another in Guatemala for United Fruit.  What might our government do for Burisma Holdings?

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 1-16-20:   President Trump will speak at the World Economic Forum in Davos, Switzerland next week.  The billionaire boys will attend.  Horizon Capital is sponsoring Davos' Ukraine House.  The Ukraine Venture Capital and Private Equity Association will meet at the Ukraine House   Ukrainian President Volodymyr Zelensky.will host the invitation-only meeting of the National Investment Council of Ukraine at the Ukraine House  

 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.

 

Bilderberg to Get It's Own "No Fly Zone"?

Bilderberg 2015, the annual gathering of global tamperers, will occur at the Interalpen Hotel, in the Austrian mountains near Telfs from June 9-14.  Austrian authorities are charged with protecting the greed and power class as they consider what mendacity to invoke next:

Police are considering “significant” traffic restrictions, and even a 30 mile no-fly zone around the Bilderberg meeting, to include paragliders and hang gliders.

How might the private plane set handle a no-fly zone?  It probably does not apply to them.  Bilderbergers make the rules that governments follow.

Arctic Port Expansion to Deepen PEU Ties?

Alaska Dispatch News reported:

The U.S. Army Corps of Engineers is set to unveil its first steps toward expanding deep-water Arctic ports in Alaska, and Corps officials said Friday they plan to start by expanding the existing Port of Nome.

Another Alaska Dispatch News story addressed typical funding for port expansion:

.. the cost estimate is likely to be in the hundreds of millions of dollars for the project, a cost that will likely be shared between the federal government and the state. Costs for the construction of the actual ports is typically shared, with federal coffers footing 65 percent of the bill while the state pays for 35 percent.

The Alaska Dispatch News is majority owned by Alice Rogoff Rubenstein, wife of Carlyle co-founder David Rubenstein.  Here's her vision:
 

Experts say if sea ice continues to melt at the rate it is today, a new shipping channel will open up through the Arctic Ocean by the year 2050. Alice Rogoff (Rubenstein) says that scientific prediction informs her vision of Alaska’s future.  “That means the Panama Canal runs along the western coast of Alaska,” Rogoff says. 

She envisions a year round deep water Arctic port in Nome or Port Clarence; smaller seasonal ports in Barrow and Kotzebue; and increased search and rescue capabilities and other services for the shipping industry throughout the region.

“If you were looking down from Mars in 2050, the western coast of Alaska would be all lit up,” says Rogoff Rubenstein. “There would be some form of commercial activity all the way from Barrow to Dutch Harbor.”

Rogoff Rubenstein is in a unique position to profit from her vision, as owner of two Alaska news organizations and Senior Advisor to Pt Capital, an Arctic focused private equity underwriter (PEU).

Where there's federal money one frequently finds a PEU. It's no surprise that Alaska insiders and modern day robber barons have  positioned themselves for massive profits.  

Consider earlier comments by parties involved.  Two Alaska legislators, Sen. Lesil McGuire (R-Anchorage) and Rep. Bob Herron (D-Bethel) said last year:

Ports aren’t the only thing Alaska needs, but a northern deep-water port will be key, he said. At the same time, there also needs to be an enclosed place in the Arctic that can accommodate a C-130 during the winter, he said. “They’ve got to go inside. They have to be inside a hangar in those conditions,” Herron said.

McGuire and Herron say that bringing in private investors can help, even if the state has to play a role.

“I’ve met with Guggenheim Partners, Carlyle Group, Citibank Energy,” McGuire said. “There’s nearly $100 billion in development planned, but it may not come to Alaska.”

Bloomberg reported Pt Capital's and Guggenheim Partners' interest in the region.  Their piece from April 2014 offered Carlyle's latest head fake:

Putting money into the Arctic is too far-fetched to consider, according to Washington-based Carlyle Group LP, which manages more than $189 billion.  

“It is such a frontier place,” Marcel van Poecke, managing director of Carlyle International Energy Partners, said in an interview at a conference in Lausanne, Switzerland, on April 2. “That is for the big oil companies.”

Pensions + Investments tells a different story on Carlyle's interest in Alaska.  This comes from July 2013:

Alaska Permanent Fund Corp., Juneau, committed a total of up to $1.75 billion to Carlyle Group and Blackstone Group, with half of the money committed to co-investments

Alaska Permanent also committed up to $375 million to two or three Carlyle private equity funds. It has targeted investments in Carlyle International Energy Partners and NGP Natural Resources XI. A yet-to-be-formed agribusiness or metals and mining fund might also receive an allocation. 

Mr. Burns said the sovereign wealth fund also committed up to $375 million for co-investments with Carlyle, focusing on the natural resource, metals and energy sectors. The specific funds for the investments have not been determined, he added.

Surely the Alaska Permanent Fund has expectations that some of its investments occur in state and that they benefit citizens.   Alice Rogoff Rubenstein and her husband David are intertwined with Alaska and its future, be it infrastructure, energy, real estate or other.  Managing the narrative is critical, thus it helps to control major news sources.  Garnering federal, state and local subsidies is the PEU way.  It's currently in play in Alaska.

Two things struck me as ironic as I wrote this story.  The first came from the Bloomberg article.

There’s a “tremendous irony” that burning fossil fuels has contributed to global warming, which makes it possible to extract more fossil fuels in the Arctic.--Michael Klare, political science professor, Hampshire College

The second is private equity, which took apart so many with its financial manipulation of acquired companies, is offered as the tonic for Alaska's widespread subsistence living.  Consider these words from a former reporter for a major financial publication:

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.

 It appears they represent the future of Alaska.

Another Cheating Carlyle Affiliate

Undercurrent News reported::

Pacific Andes' flagship factory trawler Damanzaihao, formerly known as Lafayette, is on the final list of vessels marked as engaged in illegal, unreported and unregulated (IUU) fishing drafted by the South Pacific Regional Fisheries Management Organization's technical and compliance committee.

FinanceAsia reported in July 2010:

Dennis Chan looked excited. The financial controller of Pacific Andes International Holdings, a Hong Kong-listed global seafood conglomerate, had just closed a $190 million private placement with The Carlyle Group to fund expansion – the latest in the company’s plans to grow.

“The investment will allow the entire group to expand,” he said. “We are targeting expanding our fishing rights in Peru and in Africa – all over really.”

Another Carlyle affiliate caught cheating again?   Pac Andes/China Fisheries joins Semgroup, Synagro Oriental Trading, China Forestry and Carlyle itself in ethically dubious behavior.   So why might Pac Andes cheat?

The Carlyle Group brags of 30% annual returns on equity.  The ever shrinking blue line must be putting pressure on Pac Andes/China Fisheries management, which gets passed down to subordinates.  Obsession with outcomes produces a wide range of responses, roughly 30% involve lying, cheating or stealing. 

Carlyle funneled the investment through China Fisheries, a subsidiary of Pac Andes.  That's why there's no mention of a Pac Andes investment on Carlyle's website.

A Carlyle Group affiliate was charged with illegal, unreported and unregulated fishing.  I'd venture there's much more to find in Carlyle's global net of PEU holdings, many of them well offshore.  Somehow PEU and fishy go together.

Update 5-12-15:  Pac Andes and China Fishery Group saw revenues and net income plummet due to reduced fishing access off Peru.

Alaska Dispatch Misses Owner's Conflict of Interest

State owned Alaska Aerospace Corporation is exploring privatization, according to the Alaska Dispatch News.  Minutes of the Alaska Aerospace Corporation show dwindling state funds in coming years.  They also show potential federal funding:

The FAA recently selected six national test sites for unmanned aircraft systems (UAS) thirty-seven states competed with over fifty applications. Six were selected and one was the Tri State Pan-Pacific Proposal led by the University of Alaska Fairbanks, involving Alaska, Oregon and Hawaii, to develop a total of 13 launch sites to test and validate technologies.

Private investors want to buy valuable public assets on the cheap.  Board minutes show a possible future partnership with PT Enterprises.  PT Enterprise's is held by PT Holdings.  Investors in PT Holdings include Alaska Dispatch Majority Owner Alice Rogoff Rubenstein, wife of Carlyle Group co-founder David Rubenstein. 

Alice Rogoff Rubenstein is also on the Advisory Board for PT Capital, an investment firm founded by Hugh Short, a 27% owner of PT Holdings.

At what point does a news source report on its owner's ties to a firm advising a public entity on privatization options?  It fits given the U.S. dropped to 49th in World Press Freedoms and Brian Williams is on a six month sabbatical for misremembering and conflating. 

Update 8-15-19:  It turns out daughter Gabrielle Rubenstein is also a co-founder of Pt Capital in 2013.  Add another layer of conflict for when Rogoff was publisher

PEU KKR's $100K per Head Fundraiser for Jeb

The Daily Mail reported:

With rival Mitt Romney officially out of the 2016 presidential race, former Florida Gov. Jeb Bush is now poised to clean up on the cash front and will host tonight a $100,000 a plate fundraiser for his political action committee. 

Officially launched last Thursday, Bush's Right to Rise super PAC will hold a cash-gathering event tonight for the creme de la creme of New York that has even Wall Street Republicans blushing at the price of admission. 

Private equity underwriters (PEUs) rose during brother George W. Bush's two presidential terms.  It's time for the risen to support one of two U.S. royal families.  In 2008 KKR's founders Henry Kravis and George Roberts hired Ken Mehlman, former National Republican Chairman and head of brother W.'s 2004 re-election campaign.  Ken is Global Head of Public Affairs for KKR and chair of the private equity association/lobbying group, the Private Equity and Growth Capital Council. 

Years ago I lampooned PEGCC as it didn't roll off the tongue.  In fact it sounds like a foreign body being dislodged from the larynx via the Heimlich Maneuver.  I offered Private Equity Capital Knowledge Executed Responsibly, which abbreviates as a more pronounceable PECKER.  It's also a better moniker for private equity chieftains and their firms.

KKR's party will be full of PECKERs intent on lifting Jeb's Right to Rise super PAC.  I expect the multitude of $100,000 a head tickets will function like like Viagra for Jeb's Presidential run.  It's Jeb's right to run and the risen are chipping in.  It's a PEU world, where politicians red and blue love PEU.

Carlyle Group AUM Drops 4%

The Carlyle Group's assets under management (AUM) dropped from $202.7 billion to $194.5 billion.  This is Carlyle's first drop in AUM since the financial crisis when assets under management fell $6 billion.

Carlyle image shapers kept the illusion of growth by offering a year old AUM comparison.  To entice investors to remain The Carlyle Group declared a dividend of $1.61 per share. 

Eaglevale Clipped by Greek Implosion

ZeroHedge reported:

Despite having Goldman Sachs CEO Lloyd Blankfein as an investor and being Bill and Hillary Clinton's son-in-law, Marc Mezvinsky (and two former colleagues from Goldman Sachs who manage Eaglevale Partners hedge fund) told investors in a letter sent last week they had been "incorrect" on Greece, helping produce losses for the firm’s main fund during two of the past three years. By 'incorrect' Chelsea Clinton's husband means the Eaglevale fund focused on Greece lost a stunning 48% last year.

The trio formed Eaglevale in 2011.  Trading began mid-2012.  SEC filings show four Eaglevale funds, with two of the four based in the Cayman Islands.  Imitation is the greatest form of flattery.

Update 2-8-17:  Eaglevale closed shop for good in December and will return money to investors.

Altegrity to Declare Chapter 11

WSJ reported:

Altegrity Inc. expects to file for Chapter 11 bankruptcy after reaching the terms of a restructuring agreement with bondholders owed $1.3 billion, the company said Tuesday.

The service began as a government function. It was one of the first privatized, before coming an investment darling for various private equity underwriters.  Here's the history:

1995-President Bill Clinton spins off the security investigation arm of the Office of Personnel Management. It is an employee stock owned firm. Government Executive reported "When USIS was formed, lawmakers were concerned about the job risk for employees leaving the protected confines of the federal government for the business world." It granted the company an exclusive contract in 1996 to perform background investigations and related work.

1999-The Carlyle Group invests in USIS as a minority shareholder.

2001-OPM conducted a new competition for its investigations work, and USIS won the contract again.

2003-Welsh, Carson, Anderson & Stowe (WCAS) paid $545 million for the firm. Employees got $500 million, while the Carlyle Group netted $45 million. Carlyle reinvested $172 million, along with USIS senior managers.

2007-Providence Equity Partners purchased USIS for $1.5 billion at the height of the buyout boom. WCAS, the Carlyle Group, and other investors made nearly a $1 billion profit. 

Carlyle and company garnered a $1 billion from the sale that burdened the company a crushing debt load.  The bankruptcy is expected to reduce Altegrity's debt by $700 million.  That's over a 50% haircut.  It will be interesting to see who owes who in credit default swap settlements.

It took nearly two decades for lawmakers' job risk concern to manifest.

The loss of the contracts led USIS to lay off more than 2,500 employees and effectively shut down its background-check business.

Altegrity is down to two divisions, corporate investigator Kroll and employment screener HireRight.  I offer the following tag line for the firm as it tries to rebuild:

Altegrity:  PEU Built, PEU Imploded

No charge.

Update 4-24-15:  The company paid executive bonuses of $26 million before filing for bankruptcy. Providence Equity Partners senior advisor Admiral Michael Mullen received $125,000.  It's the PEU way to enrich those at the top before shafting employees, vendors and lenders.

Update 12-19-15:  WaPo reported "665,000 cases had been dumped between 2008 and 2012. Internal documents “confirmed that USIS senior management was aware of and directed the dumping practices,” it asserted. The alleged motive was simple greed: “This practice was followed in order to meet USIS’s internal goals for completed cases and, therefore, to increase the company’s revenue and profits.”  The lawsuit cited emails from executives detailing the alleged practice, such as the one that proclaimed: “Shelves are clean as they could get. Flushed everything like a dead goldfish.”

Tavenner's Turn for Healthcare Gold

Bloomberg reported:

Marilyn Tavenner, the U.S. official who directed the stumbling roll-out of Obamacare (actually the law abbreviated as PPACA) as well as its recovery in recent months, will resign as head of the Centers for Medicare and Medicaid Services (CMMS). 

Former HCA executive Tavenner can return to the private healthcare sector and cash in like her predecessors, Nancy-Ann DeParle, Tom Scully, Gail Wilenski and William Roper.

Ironically, Nancy-Ann DeParle designed PPACA in partnership with for-profit healthcare executives and their paid lobbyists.  

Ms. DeParle came from private equity to the White House Health Reform Office and returned to same as co-founder of Consonance Capital.  Who better to mine PPACA's topography for profits? 

Tavenner steps down the end of February and in her place will rise another for-profiteer.

Andy Slavitt, a former UnitedHealth Group Inc. executive who is the agency’s second highest-ranking official, will move into Tavenner’s job on a temporary basis, Health and Human Services Secretary Sylvia Mathews Burwell 

Not that UnitedHealth executives helped craft PPACA and former Medicare-Medicaid Chief Gail Wilensky sits on their Board of Directors.. 

Former CMMS Chief Tom Scully is a private equity underwriter (PEU) with Welsh, Carson, Anderson and Stowe.

William L. Roper, another former Medicare-Medicaid Czar served with Nancy-Ann DeParle on DaVita's board.  Yes, the healthcare for-profiteer world is that small.  DaVita stopped an illegal kickback prosecution for behavior while both DeParle and Roper were on the board via a nearly $400 million settlement. 

A bright future awaits Ms. Tavenner, should she choose to follow in her predecessors footsteps.  Her boss' rewards should be even more splendorous.