Greeks Find Restricted Access to Their Money

Bloomberg reported:

Greece ordered its banks shut Monday to avert a financial collapse after the European Central Bank froze emergency loans to the nation’s lenders.

For the privilege of holding your money banks pay no interest to a pittance.  They control when and how you access it. Thus people look to other vehicles for returns. 

BlackRock Inc. is seeking government clearance to set up an internal program in which mutual funds that get hit with client redemptions could temporarily borrow money from sister funds that are flush with cash.

Recall who gets flinched when the big boys begin to fall.  At Jon Corzine's MF Global it was customers.

MF Global Holdings Ltd. was ordered to pay $1.2 billion in restitution and a $100 million fine over claims that a brokerage unit misused customer funds.

Watch out when the big money boys no longer trust one another to make good on their debts.  Everybody rushes to cash.

Update 6-29-15:  Greek banks are now closed for a week  Puerto Rico said its debts are unpayable.  Ukraine asked for a 40% debt write down. 

Update 7-25-15:  Greek pensioners who voted against austerity find a bigger dose.  Western democracy preys on the most vulnerable as evidenced by the new monthly pension of 87 Euros ($94) for a handicapped person. 

Consul Energy's PEU Moves: Screwing Retirees

Consol Energy will raise roughly $150 million in the spinoff of CNX Coal Resources.  The spinoff will occur after the company announced it's eliminating the retiree health benefit.  TribLive reported:

Consol Energy Inc. said Thursday it will stop paying health benefits for about 4,400 retirees and spouses at the end of this year.

Consol's spinoff is worthy of the best private equity underwriter (PEU) in that while the general partner gains, employees lose.  The SEC filing indicated:

Other Post Employment Benefit liability not assumed = $6.7 million   

It wouldn't be a deal with the greed & leverage boys.  Pittsburgh Business Times reported:

In a deal concurrent with the IPO of Consol Energy's coal mine master limited partnership, New York hedge find manager David Einhorn and his Greenlight Capital will acquire between 2 million and 5 million units in CNX Coal Resources, according to a Securities and Exchange Commission filing.

Consul management is monetizing a portion of its Pennsylvannia coal assets, increasing debt for the new venture.

Our entry into a new $400 million revolving credit facility and initial draw of $200 million, the net proceeds of which will be distributed to CONSOL Energy at the closing of this offering.

Consol stands to gain an additional $22 million via this debt distribution.  As far as deal and annual management fees investors were warned in the SEC filing:

The General Partner and its Affiliates may charge any member of the Partnership Group a management fee to the extent necessary to allow the Partnership Group to reduce the amount of any state franchise or income tax or any tax based upon the revenues or gross margin of any member of the Partnership Group if the tax benefit produced by the payment of such management fee or fees exceeds the amount of such fee or fees. 

Pittsburgh Business Times shared:

MLPs provide investors with a cash distribution, and in this case, CNX intends to pay, at minimum, 51 cents per unit.

Consol has had to lower to its expectations for the initial offering. Units were expected to price between $19 and $21, but now are set at $15. The company also had planned to make 10 million units available to the public. That, too, has been reduced, dropping to 8 million.

CNX Coal expects the offering and private placement to net between $141 million and $155.2 million. At the midpoint of the previous price range, it had expected to net $183.5 million.

The new venture will be virtual nonprofit, like other PEUs.  In addition it will operate with less reporting and scrutiny, courtesy of President Obama and Congress.  The SEC filing stated:

As a company with less than $1.0 billion in revenue during its last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may, for up to five years, take advantage of specified exemptions from reporting and other regulatory requirements that are otherwise applicable generally to public companies. These exemptions include:

• the presentation of only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;
• deferral of the auditor attestation requirement on the effectiveness of our system of internal control over financial reporting;
• exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;
• exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; and
• reduced disclosure about executive compensation arrangements.

We may take advantage of these provisions until we are no longer an emerging growth company, which will occur on the earliest of (i) the last day of the fiscal year following the fifth anniversary of this offering, (ii) the last day of the fiscal year in which we have more than $1.0 billion in annual revenue, (iii) the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period and (iv) the date on which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

We have elected to take advantage of all of the applicable JOBS Act provisions, except that we will elect to opt out of the exemption that allows emerging growth companies to extend the transition period for complying with new or revised financial accounting standards (this election is irrevocable).

Tax avoiding, retiree benefit dumping CNX Coal Resources will operate as an emerging growth company, courtesy of President Obama and Congress.

Investors may be enticed by the opportunity for Consol to roll more of their assets into this venture:

The master limited partnership is beginning its life with operational control over and a 20 percent undivided interest in Consol's three Pennsylvania longwall mines -- the Bailey, the Harvey and Enlow Fork. There also is potential for the MLP to take Consol's interests in its Baltimore marine terminal, a coalbed methane pipeline system and the Buchanan metallurgical mine. 

Consol is looking at spinning off the Buchanan mine and other metallurgical assets into a separate, publicly held business later this year. If it is successful, CNX Coal's right of first offer for the Buchanan mine will automatically terminate, according to the SEC filing. 

Investors may want to recall the lies Carlyle Group co-founder David Rubenstein told in selling Carlyle Capital Corporation as a sure bet mortgage backed securities bet despite being highly leveraged (36x debt to equity).  Investors may want to recall his right of first offer to the City of Missoula on Carlyle owned Mountain Water.

Watch their actions, not their vacuous words.  They care about money, not people.  It's little consolation to see our elected leaders further the PEU agenda through PPACA and the JOBS act.

America's Rising Boat: CEO Pay

America's economic recovery benefited one small, exclusive group since 2009:  The Guardian reported:

While CEOs have seen their compensation soar by 54%, the typical worker’s paycheck hasn’t budged.

This occurred under America's first black President.  The next two legs up on CEO compensation could come from companies jettisoning their employer provided health insurance benefit and Obama's new free trade agreements.

The CEO class is already shifting the burden of soaring retiree health care to people on fixed incomes.  PPACA's aim was to transfer health care coverage from employers to a tapped out Uncle Sam and individuals, i.e. the very people with no raises for the last six years.

As for free trade being the tide that lifts all boats:

Globalization has fostered better living conditions in the developing world. But improving the lives of Indonesian peasants willing to work for desperately low wages really has nothing to do with the decisions that closed some 63,300 American factories between 2001 and 2012.

America's CEOs made these decisions to shed American jobs, which happened to optimize executive incentive compensation.  It's a club where executives and large stock holders sit on each others boards and compensation committees:

Investors – whose representatives on the board of directors have the final say on CEO compensation – seem to become complacent during bull markets, indifferent to how rich CEOs, too, are getting, as long as they are sharing in the riches.

It's not complacency but bad management theory.  Board members assume one person or a small group of executives are responsible for the companies overall performance.  They hire compensation consultants who push extrinsic motivations schemes as the only way to get supposedly professional people to perform.

Average CEO compensation package is 303 times the size of the average earnings of their employees. The late management consultant Peter Drucker (who, as a winner of the Presidential Medal of Freedom, was no foe of capitalism) recommended that a CEO-to-worker pay ratio should never top 25; otherwise, he argued, they would “increase employee resentment and decrease morale”. By 2005, when Drucker died, the ratio was closing in on 400:1. 

 Employee resentment? Check. Low morale? Check. But neither has mattered much to the compensation committees signing off on CEO packages.

The club signing off on executive pay schemes is the same club that dealt with the Obama White House on PPACA and his super-sized trade giveaways.  It's the same PEU club that monetizes assets by placing them in limited partnerships, charging management fees, borrowing to pay themselves dividends and then reselling the venture for a final profitgasm.

I've written many times about the race to the lowest global common denominator on worker pay/benefits, taxes and regulation.  CEO pay is excluded, with two more potential boosts on the horizon.  President Obama will have delivered both.  His Presidential outcomes are worthy of his idol, Ronald Reagan.

Something is rising across America.  It's CEO pay.  

Update 5-30-23:  HuffPo's "The Golden Age of White Collar Crime" stated:

32 percent of American managers said they were comfortable behaving unethically to meet financial targets.

Bankruptcy Cases: Disabled Poor vs. PEU

Bloomberg reported:

Monica Stitt, a 45-year-old woman, is unemployed, disabled, and living far below the poverty line. Still, a federal district judge decided in June that she could not cancel more than $37,000 in student debt in bankruptcy, because she hadn’t made a good-faith attempt at repaying the loans. 

Her entire income—about $10,000 per year, according to the judge—consisted of Social Security disability benefits and public assistance. She has been unemployed since 2008.

Stitt had borrowed $13,250, which had increased with interest to $37,400 by the time she filed for bankruptcy. After the bankruptcy judge ruled she couldn't shake the debt, the woman appealed to the U.S. District Court in Maryland without a lawyer, where a District judge upheld the bankruptcy court's ruling on June 9. 

The debtor didn’t meet the “undue hardship” test required by the bankruptcy code, U.S. District Judge Peter J. Messitte said in his opinion. Unlike credit card debt, student loans can almost never be discharged in bankruptcy. The only way people who have filed for bankruptcy can get rid of the debt is by proving that repaying them would impose "undue hardship" on their lives.

Contrast the bankruptcy case of Mrs. Stitt with The Carlyle Group's Church Street Health Management, a children's Medicaid dental provider.  It went bankrupt in 2012.  At the time Carlyle had nearly $40 billion in dry powder.

Church Street Health Management LLC’s filing with the Middle Tennessee U.S. Bankruptcy Court this week listed roughly $85 million of assets and $300 million of liabilities.

How much of that $300 million in liabilities came from a dividend recapitalization, where a private equity underwriter loads the affiliate with more debt, using proceeds to pay themselves a handsome dividend?  Church Street, a serial ethics violator, was booted out of Medicaid for five years.

The system allowed Church Street to reorganize in bankruptcy, dumping untold amounts of debt.  Mrs. Stitt wasn't so lucky.

Update:  Uncle Sam will garnish Social Security checks for citizens with old student loans, even if they're in their 80's and have dementia.  It's a profitable product line for the U.S. government. With annual returns of 23% Uncle Sam is in PEU territory.

Sperling Advice: Declining Middle Class Should Prostitute Homes

Government policy turned banks into high risk, high return operations under President Bill Clinton.  Clinton advisor Gene Sperling pushed for dropping Glass-Steagall before making huge money off Wall Street.  Sperling is back with the tonic for America's imploding middle class.  MarketWatch reported:

Each of the 50 states has seen its share of middle-class families shrink from 2000 to 2013, thanks to stagnant incomes and rising housing costs, according to an analysis from the Pew Charitable Trusts.

The eroding middle class poses a serious challenge to the nation's economic growth, given that households with mid-range incomes fuel spending on everything from cars to housing. Yet during the past 15 years, more of those middle-income families have slipped out of the sweet spot of the American economy, thanks to a confluence of negative trends such as declining or stagnant wages and a growing income gap.

Sperling recommends renting your middle class house, at least your primary one, as a way to make up for lost wages.

Mr. Sperling finds the supplemental money earned by our hosts (Airbnb) essentially represents a 14 percent annual raise for middle class families on our platform.

It's is not a raise.  It is rental income.  How much of a raise did Mr. Sperling get to write his report?  Does his report include:

1) How many middle class families lost their home in the last fifteen years?
2) How many middle class families have more than their primary home, as one needs a place to stay when they rent their home?

Americans across the country are feeling the stress of lower or stagnant income and rising costs of living, with Pew reporting in January that seven out of 10 Americans are strained by financial issues ranging from crushing debt loads, insufficient savings or income that's too low to cover their expenses.

Sperling and Airbnb sound like they want their service to be a policy solution to address America's shrinking middle class.  Might that include a big chunk of federal money to conduct outreach?   

While mid-income families are suffering, in many states the top 1 percent of income earners have captured all of the income gains since the Great Recession officially ended in June 2009.

Get that shrinking middle class:  You should prostitute your home to get by because your employer (owned or governed by the top 1%)  isn't going to give you a raise.

Beeing Seen in the Right Way

From corporate accounting to the travels of the super rich image management is the game.  It's important to be seen in the right manner.

The billionaire class travels the world attending a series of events.  PEUReport readers know well the Clinton Global Initiative, World Economic Forum (Davos), and Milken Institute Global Conference.  Not mentioned in the piece were Carlyle Group Investor meeting (a different CGI), the Bilderberg Group meeting (which alternates between the U.S. and Europe) or the Concordia Summit (brought to you by two kids of the super rich). NYT reported

So many rich people have been joining the circuit that a new “supercircuit” is emerging, one that has V.I.P. events within the V.I.P. events. 

Everything is a tool of the greed and power club.  That includes supercharged corporate accounting.

Companies, in effect, highlight performance that is based more on fantasy than on reality.

Corporations still must report their financial results under generally accepted accounting principles, or GAAP. But they often play down those figures, advising investors to focus instead on the numbers favored by those in the executive suite — who, it just so happens, stand to gain personally from the finagling.

Among the biggest costs these companies ask investors to ignore are those associated with stock-based compensation, acquisitions and restructuring. But these are genuine expenses, so excluding them from financial reporting makes these companies’ performance look better than it actually is.

This, in turn, makes it harder for investors to understand how their businesses are really doing and whether their shares are overvalued or fairly priced.

Accounting has its own fantasy league so C-suite players can earn the big money.

For the five years that ended in 2013, Mr. Ciesielski found that the number of cost items excluded from the reports of 104 large technology, health care and telecommunications companies had risen to 504 in 2013, up from 365 in 2009.

We’re talking real money. In 2013, Ciesielski also found that the difference between these companies’ GAAP profits and earnings without the bad stuff was $46 billion in 2013. This was down from 2012, but it was more than double the amount in 2009.

But perhaps the most disturbing aspect of the funny numbers used by companies is the way they serve to raise executive pay levels.

One needs money to attend the global events of the super rich.  They needn't be bothered by the plight of the little people, including retirees about to be screwed by a different accounting move. 

The trajectory says "super rich win yet again."  They want to keep it a secret.  

Update 6-19-19:  Accounting Today reported:  "The Securities and Exchange Commission charged KPMG LLP on Monday with changing some of its previous audit work after the Big Four firm received stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board. The SEC’s order also found that a number of KPMG audit professionals cheated on some of the internal training exams they were required to undergo by the SEC after previous problems, by improperly sharing answers with each other and manipulating the auditors’ test results."

O'Leary's Disdain Fits Bilderberg

Ryanair CEO Michael O'Leary attended the annual Bilderberg meeting in Austria.  The Bidlerberg Group is as trustworthy as its attendees.  Consider Mr. Leary's record as a chief executive.  Time reported:

Airlines aren’t exactly renowned as the most honest, upfront, and trustworthy of businesses. Years ago, the industry told travelers that fees for checked baggage were necessary to cover the cost of higher fuel prices. Fuel surcharges were added as well, supposedly for the same reason. Yet even as fuel prices have plummeted, fuel surcharges remain commonplace and baggage fees are pricier and more widespread than ever.

For that matter, travelers have constantly been told that the “debundling” of the airline ticket, in which passengers pay fees a la carte for only the services they want, results in lower prices for strictly the flights themselves. How that concept jibes with the fact that average airfares have soared to all-time highs (over $500) for domestic round trips is rather puzzling.

Among this untrustworthy bunch, European low-fare carrier Ryanair is routinely considered the worst of the pack. Led by brash, headline-grabbing CEO Michael O’Leary—known for calling customers “idiots” for thinking they won’t be hit with fees at the airport, among other things—Ryanair has a long, storied history of bad, misleading behavior.

O'Leary will be valuable to Bilderbergers as he brings skills in manipulating the public in a dishonest way.  That has significant value in today's world where citizens, like customers, are idiots.

Ryanair's Board Chair David Bonderman is founder of TPG, a private equity underwriter (PEU).  Ryanair pilots experienced the PEU treatment.

FT reported Bonderman personally invested £1m for a 20 per cent stake in Ryanair in 1996:

Addressing the International Air Transport Association in 2006, Mr Bonderman said: “It’s time to sell, ladies and gentlemen,” he told his audience in Paris. “This is as good as it gets in the airline industry. It’s only going to get worse.”

It got worse for airline pilots and numerous employees in firms bought out by private equity underwriters:

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.

Bilderberg is full of greed and power addicts.  Mr O"Leary is a prime example of what this crew will deliver over time. 

Lost Confidence in Leadership

America's business, political and religious leaders are trusted by fewer and fewer citizens.  Consider the latest Gallup poll results:

• Only 8 percent have confidence in Congress, down by 16 points from a long-term average of 24 percent – the lowest of all institutions rated. The rating is about the same as last year's 7 percent, the lowest Gallup has ever measured for any institution.
• Thirty-three percent have confidence in the presidency, a drop from a historical average of 43 percent.
• Thirty-two percent have confidence in the Supreme Court, down from 44.
• Twenty-eight percent have confidence in banks, down from 40 percent.
• Twenty-one percent have confidence in big business, down from 24 percent.
• Twenty-four percent have confidence in organized labor, down from 26.
• Twenty-four percent have confidence in newspapers, down from 32 percent. Twenty-one percent have confidence in television news, down from 30 percent.

It's an eleven year slide:

"2004 was the last year most institutions were at or above their historical average levels of confidence. Perhaps not coincidentally, 2004 was also the last year Americans' satisfaction with the way things are going in the United States averaged better than 40 percent. Currently, 28 percent of Americans are satisfied with the state of the nation."

People know what happened since 2004:

• Abysmal response to Hurricane Katrina, including W.'s hapless Lessons Learned report
• Sending millions of American jobs to China, which in turn gave us numerous toxic, deadly products
• Private equity underwriters (PEU)became ubiquitous, making their founders multi-billionaires.
• Both Republican and Democratic Congresses kept private equity's preferred carried interest taxation
• Many retired "public servants" became employed by private equity in non-lobbying positions
• PEU owned companies sent jobs to China or sought massive public subsidies for U.S. jobs they never provided (Vought Aircraft Industries)
• BP Oil Spew occurred because of management shortcuts and greed
• Co-chair of Oil Spew investigation sat on Board of Directors of BP partner in Gulf of Mexico, Conoco Phillips
• Massey Coal CEO Don Blankenship killed 29 miners by placing production over safety.
• Banks which committed serial financial crimes received $13 trillion
• Sixty Minutes missed the proliferation of private equity, corporate raiders and the incredible harm they did to longtime employees
• NBC News Chief Byran Williams lied, saying in his planned come back he welcomes being held to whatever harsh standard people may have, i.e. telling the truth.

It's the greed, power and image obsessed leadership generation.  That doesn't instill confidence or trust.

Obamas Party Like it's Dot-Com Bubble Time

The Hill reported:

The White House on Monday defended a private concert over the weekend featuring Prince and Stevie Wonder, saying the Obamas paid for it themselves.

Around 500 people attended the event, which was not disclosed on the president’s public schedule. Press secretary Josh Earnest confirmed the first couple hosted a private party for their friends and said they “did it on their own dime."

Seattle Seahawks quarterback Russell Wilson, singer Ciara, and the Rev. Al Sharpton were among those in attendance. The guest list reportedly also  included powerful business figures such as Carlyle Group co-founder David Rubenstein and American Express CEO Ken Chenault. 

Much has changed since 1999, including the virus like spread of private equity underwriters.  They've enriched their billionaire founders at the expense of the middle class, many of whom are now paupers.

President Obama may lead from behind, but he's always thinking ahead.  I can see a PEU slot in his future.

Update 6-17-15:  Carlyle Group co-founder David Rubenstein told CNBC that stocks aren't cheap (club deals) as his PEU announced it would reopen its office in Silicon Valley, home of super-over priced stocks and monster equity returns (harkening back to the dot.com bubble).  Wall Street asked for more government subsidies, the last round of $13 trillion came from the 2008 financial crisis.  The greed and power boys always want more..  

Update 6-19-15:  In a flashback to the last PEU run-up it looks like club deals may be back.

Michael Porter Recommends Fracking CEOs Drill Right

In yet another indictment of poor leadership Harvard professor Michael Porter spoke to Fareed Zakaria on CNN's GPS on perceived problems with fracking oil shale to produce natural gas and oil.

PORTER: Well, I think we should worry about them all. And I think one of my big concerns here is how the U.S. industry has really been working counter-productively to its own long-term interests. There has been too much denial in the industry. There's been - oh, no, we're not causing those earthquakes. Oh, no, the water is not a problem. And it is. I mean there are - real documented problems that are significant. 

The good news is that - and we've done a deep-dive on this. In all of these areas, and there are areas of congestion and there's even more than you mentioned. In all these areas, practice is improving. We're getting better. We're able to control most of these problems. And what we did also was to actually do a study, and it doesn't cost much to reduce these problems. You just have to do things right. We can control these problems, including earthquakes. But we're not telling that story. The general public hasn't heard that story. They think that these problems are endemic and unfixable but they're really not. 

What's endemic and apparently unfixable is widespread management greed and hubris.  Time is money and oil executives issued edicts that cause staff to cut corners.  An oil exploration attorney shared his views with me last fall.  The first thing he said is "We're drilling a lot of bad wells" which he attributed to management's perennial cost cutting and focus on executive pay optimization.

He shared his CEO approached him for a green light for something that was clearly illegal.  The attorney struggled with what to do.  In order to be able to look at himself in the mirror and avoid the first step in a slippery slope that produced Enron, the attorney advised his CEO that his desired action was not legal.  The CEO did it anyway.

The attorney approached his board chair with the delicate matter.  Nothing happened to the CEO, but the attorney got pink slipped.  Welcome to our "shoot the messenger, defend the person in charge at all costs" culture.  It's image management 24/7.   

When Libya went bad the media took Michael Porter to task for advising Colonel Ghadafi, while ignoring the spate of private equity underwriters (PEU) currying favor to invest Libya's billions in oil money.  The media ignored Ghadafi pandering billionaires, instead going after a high priced consultant.  Somehow Fareed Zakaria forgot about Michael Porter being a putz, returning him to the advising spotlight.

Who else didn't do things right?  Blue team Presidential hopeful Hillary Clinton didn't handle her e-mails right between earning huge PEU speaking fees at the firms that once courted Libya's Ghadafi.  Red team Presidential candidate Jeb Bush didn't handle his board slot with Innovida with any level of business credibility.

The perfect may be the enemy of the good, but the sleazy and incompetent are a greater enemy of the good.  We've had poor leadership with the wrong priorities for far too long.  That includes business and political leaders, married in the Government-Corporate Monstrosity, Eisenhower's Military-Industrial Complex engorged by trillions ($) in federal steroids.

The will to do things right has been subjugated to greed, power and hubris.  Fracking is a fractal for abysmal leadership.  It appears endemic and unfixable as greed and the lust for power infects board rooms, C-suites and our once hallowed halls of government.  There's no one to to put things in check, bring management back to balance.

It's fixable, but not by the people currently in charge and certainly not by brands Clinton or Bush.

Update 6-19-15:  Evidence of the bad leadership fractal can be seen in Gallup poll numbers on American institutions.  Trust has evaporated.

Update 6-27-15:    There are problems with fracking methods used in Pennsylvania: Between January 2009 and March 2015, fracking operators in the state have been issued more than 4,000 violations with fines totaling $6.1 million.

Bilderberg's High Tech Leaders: Rock On Toward ...

There are a number of technology related names on the Bilderberg attendee list.  Google's Eric Schmidt Chairs a company in search of a mission

Google’s chief executive Larry Page has admitted that the company has outgrown its mission statement to “organise the world’s information and make it universally accessible and useful” from the launch of the company in 1998, but has said he doesn’t yet know how to redefine it.

Page insists that the company is still focused on the altruistic principles that it was founded on in 1998 with the original mission statement, when he and co-founder Sergey Brin were aiming big with “societal goals” to “organise the world’s information and make it universally accessible and useful”.

Accessible to whom and for what purpose? This leads us to our next Bliderberger, Jim Messina.  The Messina Group describes its CEO:

The mastermind behind President Obama’s 2012 re-election campaign, Jim Messina seized the reins on what Bloomberg Businessweek dubbed “the highest-wattage crash course in executive management ever undertaken”—and succeeded, earning the President another term in the White House. With the guidance of technology’s foremost leaders, Messina abandoned every step of a traditional presidential campaign and merged technology and politics in a way that was both unpredictable and unprecedented. Messina’s strategies established the modern presidential campaign—Google’s Executive Chairman Eric Schmidt called it “the best-run campaign ever.”  The American Association of Political Consultants later crowned him the Campaign Strategist of the Year.

In January 2013, the Obama administration announced the launch of Organizing for Action, a new advocacy organization that will promote President Obama’s policies, with Jim Messina as national director.

In 2013, Messina also launched The Messina Group. In this role, Messina provides strategic consulting to political campaigns, advocacy organizations and businesses. In this capacity, Messina serves as senior advisor to Prime Minister David Cameron for the 2015 elections.

Global, technology combine in an era where everything is a campaign. This leads us to the next high tech Bilderberg attendees.  Peter Theil and Alex Karp swim in the security space with Palantir, a company seeded by the CIA.  Forbes wrote Palantir combines "Google-level engineering applied directly to government spying."  A concerned ACLU leader offered: 

Palantir’s software could enable a “true totalitarian nightmare, monitoring the activities of innocent Americans on a mass scale.”

Back to Bilderberg and billionaire Peter Thiel.  WaPo reported:

"Calling our society a democracy is very misleading," Thiel went on. "We're not a republic; we're not a constitutional republic. We live in a state that's dominated by these technocratic agencies."

So who will high tech leaders serve?  Google is not making Bilderberg 2015 information available to the world.  The Messina Group is ready to sell its tech oriented services to political campaigns, advocacy organizations and businesses.  Palantir is protecting the Bilderberg elite.  Rest assured every text and tweet sent within the security zone is seen by the Bilderberg rock.  Money is to be made by serving technocratic agencies, not the people. 

Security: Protect Us from Bilderbergers

The Guardian reported on a number of convicted criminals attending the annual Bilderberg conference.  Offenses included leaking classified information, bribery and fraud.  Numerous corporate representatives avoided individual convictions via huge settlements their firm made with regulators/overseers.  Apparently, one can buy their way out of a possible jail sentence. Here is a partial list of settlements. 

$8.5 billion — Bank of America – June 2011: The bank has paid billions in settlements since the financial crisis, most of them tied to the mortgages that where churned out by Countrywide before it’s collapse and rescue by Bank of America. The biggest settlement it reached, for $8.5 billion, was not with the government but with a group of mortgage bond holders including BlackRock, Pimco and the New York Federal Reserve. The settlement is still awaiting a judge’s approval. 

$25 billion — Wells Fargo & Co., J.P. Morgan Chase & Co., Citigroup Inc., Bank of America Corp., Ally Financial Inc. — 21012: The Five banks agreed to pay $25 billion in penalties and borrower relief over alleged foreclosure processing abuses. The deal represented the largest government-industry settlement since the tobacco deal.

$9.3 billion — Bank of America, Wells Fargo, J.P. Morgan and 10 others — 2013: Thirteen banks reached an agreement with the Office of the Comptroller of the Currency and Federal Reserve to pay $9.3 billion in cash and noncash relief, including loan assistance, to homeowners over alleged foreclosure abuses.

$1.9 billion — HSBC Holdings – HSBC agreed to pay $1.9 billion to U.S. authorities over deficiencies in its antimoney-laundering controls. U.S. officials hailed the settlement as the largest penalty ever under the Bank Secrecy Act. The agreement between the U.S. and HSBC also represented the third time since 2003 the bank agreed to U.S. orders to cease lax conduct and correct failed policies.

$1.5 billion — UBS AG — 2012: UBS agreed to pay $1.5 billion and acknowledged charges that it had manipulated interbank lending rates including the London interbank offered rate, or Libor. It was the biggest fine so far in that scandal.

$1.4 billion — 10 Wall Street firms including Goldman Sachs, Morgan Stanley and J.P. Morgan — 2003: The 10 firms agreed to pay penalties of roughly $1.4 billion to settle charges of conflicts of interest between their research and investment banking sectors.

$1.6 billion — Siemens — 2008: Siemens agreed to pay a total of $1.6 billion in fines and penalties to U.S. and German authorities to resolve allegations of a bribery scheme across several countries to win business.

More tax-deductible settlements occurred the last two years  Here's one:

The Department of Justice settled with six major banks over criminal charges related to manipulation of currency markets. Citigroup (C), UBS (UBS), Barclays (BCS), JPMorgan (JPM) and RBS (RBS) pleaded guilty and will pay a total $5.6 billion in fines. Bank of America (BAC) was fined $205 million.

WallStreetonParade has a list of twelve Citigroup settlements since 2008.  For the banking industry there are more deals to cut.

I found an interesting story of one Bilderberger, former Swiss National Bank chairman Philipp Hildebrand.  The Local CH reported

The banker was forced to step down as head of the Swiss central bank over a currency trading scandal involving his wife, who was accused of making a 75,000-franc profit with inside information.

Hildebrand denied wrongdoing but resigned in early 2012 “to maintain the credibility of the SNB” before taking a London-based position as vice-chairman of BlackRock, the world’s largest asset manager..

The Guardian's latest piece on Bilderberg shows transparency as just another word to manipulate the masses.  It would have been ironic if transparency was one of the confab's major topics, as Bilderberg is anything but.

Jeb Bush: Short Hop to Bilderberg?

It's interesting how potential Presidential nominees gravitate toward the annual Bilderberg meeting, regardless of the site, U.S. or European.  Republican hopeful Jeb Bush went from Germany to Poland while Bilderbergers held court in Austria. 

The Blue team's Hillary Clinton and Barack Obama dropped in on Bilderberg in Chantilly, Virginia to have the global elite kick their tires.  The Red team's Jeb might want Bilderberger support before announcing his Presidential candidacy.

It doesn't take much imagination for local authorities to pin down journalists as the Bush helicopter approaches Bilderberg's monitored airspace.   Who else might run their Presidential bonafides by the greed and power club? Those facts are rarely shared. 

PEU Reps at Bilderberg

Private equity underwriters (PEU) join government, business and media representatives this week for the annual gathering of global tamperers, otherwise known as Bilderberg.  PEU invitees are surprisingly consistent when compared to the 2011 list.  Bob Rubin will be the underground PEU as there is no mention of his work for Centerview Partners.

Bloomberg, The Economist, FT, Google and Google's DeepMind will attend but not write one story about the event.  Palantir's CEO Alex Karp will attend and likely provide high tech security for the fort like event.  Bilderbergers will discuss how the West created ISIS through its over reliance on violence as means to solve problems and its longstanding pattern of pitting oppressed groups against one another.

The Guardian has been the only major media organization to cover Bilderberg.  Will they be allowed in Bilderberg's airspace?

Update 6-10-15:  No on the airspace.  

Lehman Carcass Picking Billionaire Stays Awake at Night

Zero Hedge wrote:

There is something morbidly ironic when one of the world's richest men, in this case South African Johann Rupert, who has made billions (his net worth is roughly $7.5 billion) peddling Cartier jewelry and Chloe fashion as founder and chairman of luxury conglomerate Richemont, whose 20 brands also include Vacheron Constantin and Montblanc, said tension between the rich and poor is set to escalate, that the "envy, hatred and the social warfare" may crush society, and that "we are destroying the middle classes at this stage and it will affect us."

According to Bloomberg, Rupert said that “we cannot have 0.1 percent of 0.1 percent taking all the spoils,” adding that “it’s unfair and it is not sustainable." Being among the 0.1% of said "0.1% of 0.1%" he should know.

“How is society going to cope with structural unemployment and the envy, hatred and the social warfare?” he said. “We are destroying the middle classes at this stage and it will affect us. It’s unfair. So that’s what keeps me awake at night.”

Rupert purchased portions of Lehman Brothers Inc., the division advised by Jeb Bush.   FT reported in March 2009:

Lehman Brothers had close links to Mr Rupert, advising him on the spin-out of his tobacco holdings last year. More recently, LBMB invested with Mr Rupert's holding company, Remgro, in the $2.5bn takeover of Hirslanden, the Swiss hospital group. LBMBowns stakes in 27 portfolio companies.

Rupert knew which Lehman private equity assets to buy on the cheap after the implosion.  It helped the Fed loaned Lehman $138 billion after it fell.  That assured Rupert of having something to buy.  Back to Zero Hedge: 

There was some hope in 2008 when resetting the "unfair" system was a distinct possibility, however it was if not Rupert, than his billionaire banker peers who hijacked the system once more, transferred some $50 trillion in wealth away from the global middle class to the "0.1% of 0.1%", and have virtually assured a revolution or war.

It was part Rupert.  I imagine a pure play luxury goods maker is doing quite well.   

Taxing Story on Carried Interest

Dealbook reported:

Taxing carried interest at ordinary income rates would raise about $18 billion over 10 years, according to a Treasury estimate of President Obama’s recent budget proposal. The Joint Committee on Taxation, which scores congressional legislation, has made similar estimates in the past.

One or two billion dollars a year is more than most of us can find in between the seat cushions. It would roughly double what Congress gives the I.R.S. to spend on information technology. Still, the number is small enough that it makes raising the issue seem petty and vindictive. 

Only if you're one of the greed and leverage boys or pledge allegiance to Carlyle Group co-founder David Rubenstein.  Here's a take from a former big league business reporter (summer 2011).

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!

Dealbook joined with Rubenstein's disdain on raising preferred carried interest taxation with its "petty and vindictive" stance. This fits with another observation by the former big leaguer:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

Thus endeth the Dealbook piece:

"If it were so easy to avoid paying tax on carried interest, why would the industry fight so hard?" 

Ask Congress, their ex-members working for private equity underwriters (PEU) and kajillions of PEU lobbyists.  That group knows why.

Update 9-18-24:  MSN reported:

Something has changed this election season. The perennial hot button issue of carried interest, which offers sweetheart tax rates to wealthy private equity and hedge fund executives—and costs the U.S. Treasury billions of dollars—is getting a pass.

 Politicians Red and Blue love PEU and increasingly, more are one.

Carlyle Hires, then Fires Barclay's Wanker

The Carlyle Group fired a second year analyst from Barclays.

The Barclays interns who received an absurd email about their upcoming summer at the investment bank may still have to provide their neckties for use as napkins, but it won’t come at the behest of the email’s sender, Justin Kwan, who, according to a source, lost two jobs this week after his missive leaked to the Wall Street Journal.

Kwan, who was a second-year analyst in Barclays’ Global Power & Utilities group, was let go by the bank on Friday, our source says.  Kwan was set to leave Barclays at some point this summer anyway for a job at the prestigious asset management firm The Carlyle Group. But after the email fiasco, The Carlyle Group preemptively fired him, leaving him out two gigs. (Through a spokesperson, The Carlyle Group declined comment.) 

Carlyle likely has rules for dealing with its co-founders, collectively known as the DBDs.  It's a shame Justin didn't make it inside Carlyle so the outside world could learn

Kwan was excited about private equity.  His e-mail sounded like a James Bond theme song.

Welcome to Power!  ...I wanted to introduce you to the 10 Power Commandments. Respect them, love them, live them. You may have heard different stories about Barclays Power - go on WSO and you’ll see us called the “frattiest group”, “top Power group on the street”, or the group with the “best PE placement” - needless to say we are a unique group at Barclays. 

Best PE placement.  Nobody does it better.  Almost. 

Tenet's Two Tales: Financial Machinations, Ethics Drought

Two Tenet Healthcare stories show the sad state of deform in U.S. healthcare.  The first involves financial machinations encouraged by PPACA:

Tenet Healthcare Corporation (NYSE: THC) and Welsh, Carson, Anderson & Stowe have signed a definitive agreement under which Tenet and United Surgical Partners International (USPI) will combine their short-stay surgery and imaging center assets into a new joint venture. The Tenet and USPI joint venture will be the largest provider of ambulatory surgery in the United States.

Under the terms of the agreement, Tenet will initially own 50.1% of the joint venture and will consolidate its financial results. Welsh Carson and the other existing investors in USPI will initially own the remaining 49.9%. Tenet will have a path to full ownership of USPI over the next five years through a put/call structure

Tenet expects to raise $2. 2 billion of debt related to these transactions , to be used principally to refinance $ 1. 5 billion in existing debt of USPI , make the $0.6 billion in cash payments to Welsh Carson for USPI and Aspen, and for related transaction expenses.

Welsh Carson is a private equity underwriter (PEU).  Consider the distortions greed placed on our health care system through the second story.  Bloomberg reported:

Four Tenet Healthcare Corp. hospitals are the target of a federal criminal probe into allegations executives paid kickbacks to obstetric clinics for patient referrals, the company said in securities filings.

The investigation arose from a 2009 whistle-blower lawsuit accusing Tenet’s hospitals of paying local clinics to send pregnant, undocumented Hispanic women to their facilities for deliveries covered by Medicaid.

The illegal behavior began as early as 2000 and continued to the time of the complaint being filed.  Tenet Healthcare's board had Jeb Bush on it from 2007 to 2014.

Tenet, the third-largest publicly traded hospital chain, has been dogged by fraud allegations over the years and agreed to a $900 million settlement with the government in 2006 to resolve claims it cheated Medicare through overbilling.

The eight count civil complaint cited a 2007 e-mail from Tenet's Southern Regional Corporate office describing the arrangement as part of the "Georgia inventory."  Also, Tenet hospital cost reports failed to show disallowed costs paid for referrals of Medicaid patient.  One Tenet hospital paid a "management fee" to the OB clinic based on Tenet's net collections.  Tenet tried to defend the scheme as supporting its OB Residency which lost its accreditation in 2008.

Board member Bush should've been aware of this case as a member of the Quality, Compliance and Ethics Committee from 2008 to his resignation.

Tenet is a serial ethics violator, even settling with the state of Florida while Jeb was Governor.  That didn't prevent Jeb from joining the board and being personally enriched with $2 million in cash and stock. 

Welsh Carson has Tom Scully, former Medicare/Medicaid Chief as General Partner.  Scully led the implementation of Medicare Prescription Drug Program (Part D).  United Surgical Partners grew in part to its joint ventures with Baylor Health System.

There's a new joint venture in town between Tenet and United Surgical.

Based on the respective valuation multiples and the expected EBITDA less NCI at the joint venture over the next year, the enterprise value of the joint venture approximates 12.5x forward EBITDA less NCI, based on an equity value of approximately $2.6 billion. The agreement contains a put/call structure, under which Tenet can acquire the remaining Welsh Carson investment in USPI over the next five years at a fixed multiple of 9.5x forward EBITDA less NCI.

It's about financial machinations, a common meme in our PEU world.  I expressly don't want my surgery performed in a center acquired by a put/call structure. 

Update 6-6-15:  Tenet made the news for a third story, one about high infant mortality at a Florida hospital's NICU   The article's title is "9th Baby Dies After Heart Surgery at Florida hospital".

Carlyle Chief Puts Money on Jeb

The Intercept reported:

Former Gov. Jeb Bush has spent much of the year raising money for his Super PAC, called Right to Rise, without disclosing his donors.

Glenn Youngkin, managing director of the Carlyle Group, the investment firm that owns Booz Allen Hamilton, gave $10,000, according to a disclosure statement posted on the company’s website. Because Carlyle manages pension fund money, the company faces special campaign finance requirements.

Carlyle Group has been good to the Bush family, including President George H. W. Bush, President George W. Bush and Presidential hopeful John Ellis "Jeb" Bush.

Carlyle intends to keep its insider connections to power, thus their ongoing support of the Clintons should continue.  Carlyle hired both President Bill Clinton and Presidential hopeful Hillary Clinton to give speeches to their investors.  Not the unit holder kind.

Jeb's Right to Rise PAC caters to the already risen.  As a hegemonic power Carlyle will work with either a Red or Blue team President.  It's all in the PEU family.

Carlyle Bets on UK Car Wrecks

The Carlyle Group, owner of British car towing company RAC, bought National Accident Repair Services PLC, an automotive repair company in the U.K., for an undisclosed sum.  Carlyle owns the ambulance company and hospital for British car repairs.  That kind of network will enable them to steer business from RAC to NARS. 

Carlyle Chiefs to Cash in Partnership Units

Seeking Alpha reported:

The Carlyle Group L.P. (Nasdaq:CG) ("Carlyle") today announced an offering of 7,000,000 common units by Carlyle. Citigroup and J.P. Morgan will act as underwriters for the offering. Carlyle intends to use the net proceeds from the offering to purchase an equivalent number of outstanding Carlyle Holdings partnership units from existing unit holders, including certain of its directors and executive officers.

PEU founders are monetzing a portion of their equity stake.  WaPo reported:

Two co-founders of the Carlyle Group sold 2 percent of their respective shares in the publicly traded asset management firm, pocketing around $31 million each at Monday’s closing price.

It is only the second time since the firm has been publicly traded that Carlyle has lifted a self-imposed restriction on partners selling their ownership stakes.

Firm chairman Daniel A. D’Aniello and co-chief executive William E. Conway Jr., each sold around 1 million shares, or about 2 percent of their respective holdings. They each own around 45 million shares of Carlyle.

Co-founder David Rubenstein held onto to his remaining stake.

Carlyle has 322 million shares in all, of which only the 78 million are in the public markets.

 Lots more monetization to come.