Saturday, October 29, 2016

Biden Traitor Klain is PEU

Vice President Joe Biden's recent Secretary of State dance with Blue team Presidential hopeful Hillary Clinton becomes more interesting in light of Wikileaks e-mail revelations.  PEUReport revealed the Podesta team's disdain for Biden in one e-mail exchange between John and Neera Tanden.

Another shows the role Ron Klain played as Hillary and Joe vied for the Democratic Presidential nomination.

She (Hillary) was great last night. Thanks for inviting me into the campaign, and for sticking with me during the Biden anxiety. You are a great friend and a great leader. It's been a little hard for me to play such a role in the Biden demise - and I am definitely dead to them -- but I'm glad to be on Team HRC, and glad that she had a great debate last night. Thanks John.  10-14-15
Ron Klain, Executive Vice President for Revolution LLC, a D.C. based private equity underwriter (PEU) founded by AOL's Steve Case.

Klain asked John Podesta to help find his daughter a job.

Hey anything you can do to help w this would be most appreciated. Any job in press or policy or comms would be great. She is highly unlikely to get a job in OVP....
Podesta's team delivered within 40 days for PEU Klain.

One can throw a rock on the 1000 block of Rhode Island or Pennsylvania Avenue in Washington, D.C. and odds are high it will hit a private equity underwriter.  Revolution LLC is on Rhode Island and The Carlyle Group on Pennsylvania Avenue.

Political Backstage is PEU

Front stage:

Politico reported "Joe Biden is at the top of the internal short list Hillary Clinton’s transition team is preparing for her pick to be secretary of state."  Biden would bring buckets of star power.

Back stage:

Joe Biden's son is on the board of Burisma, a Ukranian oil/gas company, and advisor to Rosemont Realty.  Burisma stands to benefit from USAID loan guarantees for every phase of the development of oil and gas in Ukraine.  Also, Ukraine's Finance Minister founded Horizon Capital, a Ukraine focused private equity underwriter (PEU).

Front Stage:

"He'd be great, and they are spending a lot of time figuring out the best way to try to persuade him (Biden) to do it if she (Hillary) wins.

Back stage:

Neera Tanden:    To tell me that Biden (or his people - unclear to me who) are calling asking for support. Not doing a hard sell. Apparently, he's having some meeting in Washington that he's asking people to attend.  You've probably heard stuff like this, but on the off chance you haven't, letting you know.  Aug 14, 2015 4:49 PM

John Podesta:   Yup. Hunter, Mike Donilon, Ricchetti. Biden can't seem to lean on people. Still can't figure out whether he'll rally himself to do it. Hadn't heard about DC meeting. Losing more sleep over getting straight answers from Cheryl than this.  Aug 14, 2015 at 9:58 PM

Neera Tanden:  I was just at the Tower of London and the Rack seemed to be a very successful strategy for getting straight answers from at least some people.  (Source: Wikileaks e-mail 4115)

It's funny how today's Blue team sounds so much like the Reds.

We don't know if the Biden team read the above interchange but the Vice President already declined the opportunity:

Joe Biden said he has no interest in serving in a potential Hillary Clinton administration Friday, a day after Politico reported the vice president was at the top of a short list of candidates for secretary of State being prepared by Hillary Clinton’s transition team.

"I'll do anything I can if Hillary's elected to help her, but I don't want to remain in the administration.

It's Joe's time to cash in.  I imagine Exxon, Apple or Google could use a new Board member.  It's been awhile since The Carlyle Group landed a politician with star power at the top of their game.  There will be no shortage of offers. Might Joe and Carlyle co-founder reprise their Thanksgiving dinner on Nantucket and talk employment?

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 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 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.


Thursday, October 27, 2016

Private Equity Toxic to Employees

WSJ reported:

Hamilton Lane said “one of the key underpinnings” for private-equity firms in the U.S. has been an economy in which corporate profits have risen as a share of gross domestic product, while wages have fallen as a share of GDP in the past 50 years. One reason for this is the “loss of negotiating leverage by labor in the developed world,” the report said.
And they consider reigning in the greed and leverage boys populism?  It's a rational response to basic unfairness (tax-wise) and shady business practices, which started with leveraged buyouts (LBO).  Once Junk Bond King Michael Milken went to jail LBOs got rebranded private equity.  They are toxic under either name. 

Update 10-30-16:  Naked Capitalism had a similar reaction.

Carlyle Energy Pushes Government Subsidies

Utility Dive reported (original source Bloomberg):

Absent financial subsidies and policy support, the nuclear industry will cease to exist within the next decades, Bob Mancini, one of the leaders of the Carlyle Group’s power unit, said at a conference, Bloomberg reports.
Business Insider reported that Carlyle sought natural gas subsidies in California

To offset losses, Rockland Capital, Calpine and other plant owners, including General Electric and the Carlyle Group's Cogentrix, are asking the state for help. They argue that it is in the state's interest to support the natural gas plants because they provide stability and reliability -- attributes that are important to the state's power grid and something weather-dependent wind and solar can't offer. If the plants don't get needed support, their owners have warned, a critical safety net for the grid could disappear. 
To sum up:  Nuclear needs subsidies relative to cheaper fuels, like natural gas.  Natural gas needs subsidies relative to solar and other renewable energy sources.  One could deduce that no matter what, Carlyle needs subsidies. 

Wednesday, October 26, 2016

Carlyle Group's AUM Decline Continues

WSJ reported on The Carlyle Group's assets under management (AUM):

The Washington, D.C., private-equity firm currently manages around $169 billion, up from $106.7 billion at the end of 2010. 
That's a charitable characterization for a financial paper.  Carlyle's AUM is down from $202.7 billion in Q2 2014.   Of the last 9 quarters Carlyle's AUM had but one slight uptick.  Seven were declines of roughly $2 billion or more.

Update 11-13-16:  WSJ reported Carlyle lost $400 million from its investment in a Moroccan oil refinery.   The loss came through Carlyle's Vermillion hedge fund.  The report said Carlyle's overall hedge fund business declined from nearly $15 billion in Q3 2014 to $1 billion.  That's a free fall.

Update 3-7-17:  Carlyle is in court asking Lloyd's of London to pay up for the stolen Moroccan oil.

Sunday, October 23, 2016

Will Hillary Help Blackstone Manage Your Mandatory Retirement Savings Account?

Blackstone's Tony James e-mailed John Podesta in January regarding a "Retirement Savings Plan" for all Americans, which Blackstone wants to put to work for its considerable fees.


Teresa Ghilarducci passed along your interest in our Retirement Savings Plan. We've spent considerable time researching and thinking about this issue and believe we have some ideas that offer an immediate, sustainable, low cost and politically viable solution to help tackle a looming crisis. If we don't act, our country will see poverty rates and downward mobility of middle class elderly people not seen since the great depression. It is projected that 16 million retirees will be living in or near poverty by 2022 and 25 million by 2050. If we do nothing, 39 percent of all older workers will be poor or near poor at age 65, so the need is real and imminent. The strain this newly poor population will place on our social safety net will devastate federal, state and local budgets for decades. Our goal was to devise a politically feasible solution that addresses the problem now without worsening the national deficit.

We do not believe the problem can be solved by making Social Security better funded and/or adding a higher minimum benefits for several reasons.

First, expanding Social Security would help to take care of the very poorest members of society - but expanding Social Security doesn't help middle class people very much. Social Security was designed as a safety net for those facing poverty in old age. It was never meant to be a vehicle to guarantee a middle class retirement. Social Security is an entitlement, where savings are redistributed based on income. This is a worthy goal in and of itself, but not the focus of our plan. In contrast to Social Security, with a Guaranteed Retirement Account, you get back what you put in, plus investment earnings. These accounts build on the money people put into their own accounts, giving back even more. In other words, raising SS payments above the poverty line isn't the same as guaranteeing widespread retirement security.

Second, unlike Social Security, this is actual cash in each person's individually owned retirement savings account. Because it is real capital that can be invested well (like a DB plan), the higher returns (6-8% per year) finance a lot of the future needs without requiring larger contributions or adding to the deficit in the future. You don't get investment returns filling a lot of the funding gap with Social Security since it is unfunded.

Third, increasing Social Security would mean adding to FICA taxes. This plan is easier on workers because half comes from employers (offsetting other costs), so only 1.5% from workers. And for the 50% of Americans below median income, that "cost" is offset by a federal tax credit. This tax credit is deficit neutral because we are doing away with the 401k deductions, which benefit primarily the affluent.

Finally, Social Security is such a fraught issue with people so dug in, we worried that opening it up for fundamental change was not implementable from a pragmatic standpoint. So we decided to build on Social Security as is. With our plan, the Guaranteed Retirement Accounts are individually owned and controlled and will not require an additional or larger entitlements which would have obvious appeal to the other side of the aisle.

We looked beyond Social Security and propose individually funded add-on accounts. In this way, all Americans can save more and invest more effectively over a longer period of time to support their retirement. All Americans need well-managed, diversified retirement accounts they can contribute to for their entire career.

We are happy to talk these through with you at any point, but here are the basic principles:

Universal Coverage: Every American who works without a pension plan would automatically have their own Guaranteed Retirement Account (supplemental to Social Security and any individual retirement savings). Individuals accumulate funds in their own accounts and retain full control. Upon retirement, they receive guaranteed payments for their lifetime.

Cost Neutral for Workers AND Taxpayers: Savings are mandatory but cost neutral for almost all Americans who earn below median income. We've calculated that workers and their employers need to contribute an annual 3% to close the retirement savings gap (1.5% each). And a tax credit to offset this contribution for families at or below the median income will be paid for by removing existing deductions that overwhelmingly favor the wealthy, making the plan deficit neutral.

Redistributes Government Support to Those Who Need It Most: The refundable tax credit is a positive change from the current subsidies that favor high earners. In 2014, federal and state governments spent $120 billion to subsidize workers' pensions. But these tax benefits are regressive and do little to benefit workers most at risk. In 2014, the most affluent Americans received over 79% of the benefit from retirement tax deductions. The Retirement Savings Plan remedies that by redeploying existing government support from wealthy retirees to those who need it most.

Individually Owned, Effectively Invested: Unlike Social Security, workers maintain ownership over their account through a transparent investment process. Their assets will be pooled and invested in long-term, low-fee strategies that generate higher returns (6-8% per year) than current 401(k) plans, building on the amount invested and giving back even more.

Guaranteed Lifetime Income: Though privately managed, funds will have a government guaranteed return of 2%. Upon retiring, savings will be returned through annuitized payments. This guarantees a continuous standard of living for as long as retirees live.

Federal Plan; Nationally Mandated: A federal program will provide coordinated collection, record-keeping and payments, as well as better negotiated fees for asset management. And by integrating the payment system seamlessly into Social Security's existing infrastructure, we avoid the need for additional bureaucracy and create efficiencies and savings over time. In addition, only through a Federal plan can we create the tax credit that mitigates the cost for families below median income by redeploying 401k deductions.

Incents Desiring Americans to Work Longer: Workers decide when they retire and begin collecting their savings. This will help Americans to work longer if they wish, which has proven to have significant economic (as well as mental and physical) benefits.

Bi-Partisan Appeal: The GRA model avoids larger entitlement conversations by keeping accounts under individual's control and redistributing savings based on the amount invested, not based on income. And it does so without impacting the budget or raising taxes. From the many conversations we've had with members of Congress from both sides of the aisle, our sense is that it's politically viable. This plan intentionally does not touch or attempt to alter Social Security, address underemployment, mitigate the wealth disparity, or raise stagnant middle class incomes. However, it provides an actionable solution to an impending crisis. And this solution will have resounding impact on more than one half of all working Americans. It will relieve our welfare programs from undue strain and free up revenue for other pressing needs.

This will all be fully fleshed out in a white paper we are releasing in a few weeks. We are happy to make time available to discuss these ideas at your convenience.

Our recent NYT op-ed:

Tony and Teresa


This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication.


IB Times reported how Blackstone could benefit, in James own words:

“Managing the Guaranteed Retirement Accounts in a pooled fashion would let them leverage that scale to pay lower fees,” James said. “They would also have access to [the] highest quality managers who could adopt long-term investment horizons and invest in less liquid, but higher returning, asset classes that are more appropriate for retirement funding.”

In the blueprint of the plan, James lamented that 401(k) systems “don’t invest in longer-term, illiquid alternatives such as hedge funds, private equity and real estate,” and said the new program could invest in “high-yielding and risk-reducing alternative asset classes.” In a CNBC interview, James said he wants the billions of dollars of new retiree savings to be invested “like pension plans.” He noted that in “the average pension plan in America, about 25 percent is invested in stuff we do, in alternatives, in real estate and private equity and commodities and hedge funds.”
Neera Tanden of the Center for American Progress wrote John Podesta about Mr. James saying:

"He's a really good guy. And given he will take over Blackstone, one to develop a real relationship with. And he's really nice!"
 Nice is not the first word that comes to mind for the greed and leverage boys. 

Update 11-3-16:  The word is spreading

Who Would You Clawback?

Consider the following scenarios where people received bonuses as a result of fraud:

1)  Short of troops to fight in Iraq and Afghanistan a decade ago, the California National Guard enticed thousands of soldiers with bonuses of $15,000 or more to reenlist and go to war.  Audits reveal widespread bonus overpayments by the California Guard at the height of the wars.  Investigations determined that lack of oversight allowed for widespread fraud and mismanagement by California Guard officials under pressure to meet enlistment targets.  Army Master Sgt. Toni Jaffe, the California Guard’s incentive manager, pleaded guilty in 2011 to filing false claims of $15.2 million and was sentenced to 30 months in federal prison. Three officers also pleaded guilty to fraud and were put on probation after paying restitution. (sourceLos Angeles Times)

2)   For years, mortgage giant Fannie Mae has produced smoothly growing earnings. And for years, observers have wondered how Fannie could manage its inherently risky portfolio without a whiff of volatility. Now, thanks to Fannie's regulator, we know the answer. The company was cooking the books. Big time.  Fannie set aside an artificially large cash reserve. And -- presto -- in any quarter its managers could reach into that jar to compensate for poor results or add to it to dampen good ones. This ploy, according to Ofheo, gave Fannie "inordinate flexibility" in reporting the amount of income or expenses over reporting periods.  This flexibility also gave Fannie the ability to manipulate earnings to hit -- within pennies -- target numbers for executive bonuses.  In one particularly volatile year  target EPS for maximum payout was $3.23 and Fannie reported exactly . . . $3.2309. This bull's-eye was worth $1.932 million to then-CEO James Johnson, $1.19 million to then-CEO-designate Franklin Raines, and $779,625 to then-Vice Chairman Jamie Gorelick.  (sourceWall Street Journal)

Here's what our government did.  In the case of Fannie Mae it identified $10.6 billion in fraudulent accounting motivated by greed, executive's desire to receive maximum bonuses. The report showed over $87 million in bonus payouts during the period of accounting fraud by "arrogant and unethical executives."

James Johnson, the recipient of nearly $2 million in fraudulent Fannie Mae bonuses in the report, helped Democratic Presidential Candidate Barack Obama pick his running mate.  Johnson received much of the blame for Fannie Mae's collapse in the 2008 financial crisis, according to two investigative reporters.

Fannie Mae Vice Chair Jamie Gorelick garnered nearly $4.5 million in fraudulent bonuses.  She went to work for the law firm that defended Fannie's fraudulent accounting, WilmerHale.  She led the BP Deepwater Horizon Oil Spew defense team.

Executive Vice President for Law/Policy Tom Donilon defended Fannie Mae by going after the investigating agency.  Donilon received nearly $3 million in ill begotten gains from his time as a Fannie Mae executive.  He became President Barack Obama's National Security Advisor.  Currently Donilon is Vice Chair of O'Melveny, a giant law firm, and Senior Director, BlackRock Investment Institute.  BlackRock featured Donilon in a Russia-Ukraine scenario planning section of a 2014 investment report.

The government let Johnson, Donilon and Gorelick keep every penny of their fraudulent gains.  That same government is going after 10,000 soldiers who received re-enlistment bonuses as a result of Pentagon incompetence or malfeasance:
Nearly 10,000 soldiers, many of whom served multiple combat tours, have been ordered to repay large enlistment bonuses — and slapped with interest charges, wage garnishments and tax liens if they refuse — after audits revealed widespread overpayments by the California Guard at the height of the wars last decade.  

Roughly 9,700 current and retired soldiers have been told by the California Guard to repay some or all of their bonuses and the recoupment effort has recovered more than $22 million so far. 

There are two systems of justice in our country.  Rules for the politically connected, the "Just Us" crew, are far different from those for common folk.  The soldier bonus clawback is but one example.

Update 2-12-17:  Only two Fannie Mae executives had to return a small portion of their ill gotten gains.  Johnson, Donilon and Gorelick got to keep every rotten penny.

Thursday, October 20, 2016

Carlyle's Marchick in Podesta e-mails

The Carlyle Group is renowned for its Red and Blue political connections.  This is but one of many blue team connections.

On Feb 18, 2015 2:14 PM, "David Marchick" wrote: > 

Enjoy your downtime and good luck with Hillary. Let me know how I can help.
(Link to source)

On 2-12-16 David Marchick advised Hillary to stay on the offensive against Bernie Sanders.  

Laying out her plans, her credentials, her vision and not just responding to Bernie and saying "we need to be more practical"

Practical is the Obama legacy, a time during which most Americans lost ground. 

Update 7-16-22:  American University and just hired former Carlyle Group Managing Director David Marchick as Dean of AU's business school. 

Tuesday, October 18, 2016

Gates First Guest for Billionaire TV

Bloomberg's new Billionaire Television kicks off with an interview with the world's richest man, former Microsoft CEO Bill Gates.  The net worth of two hundred Bill Gates equals the annual U.S. GDP. 

Host David Rubenstein co-founded The Carlyle Group, which invests money on behalf of family foundations.  It was nice of Bloomberg to give Rubenstein a forum to sell his private equity underwriter (PEU) services. 

The producer might want to review the IMF tape on inequality, where Mr. Rubenstein closed the hour long panel with a nearly four minute PEU infomercial

Monday, October 17, 2016

Bloomberg Launches Billionaire TV

Bloomberg launched its latest show starring billionaire Carlyle Group co-founder David Rubenstein.

Renowned financier and philanthropist David Rubenstein travels the country talking to leaders to uncover their stories and their path to success. Each episode features an interview with one business leader.
Oddly, Bloomberg did not cite Rubenstein's primary job as a private equity underwriter (PEU).  Five years ago an ex-Bloomberg reporter wrote:

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.
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 reporter cited the new host of Bloomberg's Billionaire Television:

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.

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!
Bloomberg's host personally lobbied Congress each time elected officials considered changing private equity's preferred carried interest taxation  Rubenstein won every time.

Carlyle's co-founder no longer has to shun enterprising business reporters probing shady PEU business practices.  He gets to frame the questions to maximize Carlyle's image.  If you doubt this assertion watch his private equity infomercial at the end of an IMF panel on inequality.

At 55:35 Rubenstein dubbed himself moderator and offered the "Private Equity Answer" for investors seeking out-sized returns in a low interest rate environment.  The Carlyle infomercial lasted three minutes and virtually closed the session on inequality.  Frankly, it couldn't have ended on a worse note.

The rise of private equity corresponds with the rise in income inequality
And that's why a PEU is hosting Billionaire TV. 

Friday, October 14, 2016

Sisters of Providence Must be Horrified

Saint Vincent Hospital in Worcester, Massachusetts removed a kidney from the wrong patient.  The AP reported:

The surgeon in July was supposed to remove a kidney with a tumor from a patient at St. Vincent Hospital in Worcester, but instead removed a healthy kidney from a different patient with the same name.

Authorities say the hospital failed to follow proper patient identification protocols by checking birth dates. The patients were several years apart in age.
The AP did not report St. Vincent's ownership history:

In January 2005, Vanguard Health System purchased the facility. In 2013, Tenet Healthcare acquired Vanguard and continues to follow the longstanding Catholic tradition of quality care first established by the Sisters of Providence.
I'd venture the Sisters knew their patients well enough to not perform a procedure on the wrong patient. 

Given the hospital's for-profit status I'll venture the wallet biopsy was successfully done on the right patient.  Time will tell if other Sisters will regret their decision to sell to the greed and leverage boys.

Thursday, October 13, 2016

Carlyle Working with Former BP CEO Tony Hayward on Colombian Oil

Sky News reported:

Sky News has learned that Mr Hayward, who stepped down from the top job at BP soon after the Gulf of Mexico Deepwater Horizon oil disaster in 2010, is seeking to identify oilfields to purchase in countries including Colombia and Argentina.

If successful, Mr Hayward is expected to be paid a fee by The Carlyle Group for introducing the deal to the firm, although it is not clear whether he would have an ongoing role in the management of the new venture.

The former BP chief is understood to have lined up a team of oil executives to run the business under Carlyle's ownership.
If Argentina hated hedge funds they won't like private equity underwriters (PEU) like Carlyle.  Colombians learned what private equity can do from The Clinton Foundation, which owns PEU Acceso.  One Colombian citizen stated The Clinton Foundation has done "nothing for workers."

Another local fish merchant took out a large loan and later experienced Clinton bait and switch:

Instead, she would sell her fish directly to Acceso — at sharply reduced prices — and Acceso would resell them. In other words, the Clinton Foundation would act as a middleman and profit from margins supplied by the people it was supposed to be helping.
That's the PEU way.

South Americans should know this isn't the first time Carlyle worked with a BP merchant of death.  Lord John Browne headed BP when its Texas City refinery exploded, killing fifteen workers and injuring 180.  Tony Hayward's Deepwater Horizon explosion also killed fifteen people.

The Carlyle Group's LifeCare Hospitals had 26 deaths in the toxic aftermath of Hurricane Katrina.  That's nearly the combined death toll of the two BP explosions.

It's fitting that Tony Hayward is working with The Carlyle Group.  They are cut from the same greedy cloth.  Based on their prior experience I imagine Colombians get nervous when Western billionaires come snooping for their next profitpalooza. 

Sunday, October 9, 2016

Hillary Finds Rules Onerous and Unnecessary

From the John Podesta e-mails Presidential hopeful Hillary Clinton spoke about federal rules to ensure appointees don't have conflicts of interest. 

"But you know, part of the problem with the political situation, too, is that there is such a bias against people who have led successful and/or complicated lives.  You know, the divestment of assets, the stripping of all kinds of positions, the sale of stocks.  It just becomes very onerous and unnecessary.” [Goldman Sachs Builders And Innovators Summit, 10/29/13]
John Podesta served as the head of President elect Obama's transition team, which had health reform a top priority.  White House Health Reformer Nancy-Ann DeParle supposedly disposed of all conflicting assets in 2009.  How then did she receive a gain from her earn out from MedQuest, a medical imaging company?  Nowhere on her prior two disclosures did she indicate residual private equity stakes in MedQuest or any other healthcare firms, where she served as a board member.

After designing PPACA Nancy-Ann DeParle returned to her private equity underwriting (PEU) roots.  PEUs leverage political connections to earn monstrous gains.  It appears public servants can keep their residual private equity stakes and not declare them.  For the greed and power class it's all so onerous and unnecessary.

Saturday, October 8, 2016

Carlyle's Rubenstein Conducts Seminar on How to Grow Inequality

The IMF held a panel discussion on global inequality and Carlyle Group co-founder David Rubenstein occupied the chair furthest from the moderator.  Rubenstein shared his worries that businessmen will be blamed for income inequality and elected officials may try to solve the complex problem with simplistic short term solutions.  He remarked, "It will take a long time to make modest progress."

He defended the people who go to Davos, the 1%, and said they don't intersect with people who aren't doing as well.  The lowly people "we don't really deal with on a daily basis." We have to figure out how to communicate better, the elites and the non-elites.  Many people who are voting are not happy with the elites."  In his assessment they are disconnected.

Rubenstein also worries about social unrest.  "You're going to have a lot of frustrated people who do things we don't really want."  

The IMF piece on the event offered:

“Many people in the United States are not satisfied with the income inequality gap, and also the social mobility gap,” said David Rubenstein, a financier and founder of The Carlyle Group, a private equity investment company based in Washington, D.C. “Increasingly, people in our society feel they can’t get to the top, and that may be a bigger problem than income inequality.” 

Global inequality:  Brought to you by The Carlyle Group and its:

1.  Global portfolio of more than 275 companies and more than 250 active real estate investments as of June 30, 216
2.  More than 675 investment professionals on six continents with local knowledge and relationships.
3.  More than 1,650 professionals operating in 35 offices in North America, South America, Europe, the Middle East, Africa, Asia and Australia.
4.  More than 1,750 investors from 81 countries rely on Carlyle to achieve premium returns on their invested capital.

Carlyle is a global alternative asset manager with $176 billion of assets under management across 128 funds and 170 fund of funds vehicles.  Founded in 1987 in Washington, DC, Carlyle has grown into one of the world’s largest and most successful investment firms. 
In the latter part of the panel discussion Rubenstein encouraged leaders, most of whom believe in globalization to do a better job of describing and supporting it. At 55:35 Rubenstein dubbed himself moderator and offered the "Private Equity Answer" for investors seeking out-sized returns in a low interest rate environment.  The Carlyle infomercial lasted three minutes and virtually closed the session on inequality.  Frankly, it couldn't have ended on a worse note. 

The rise of private equity corresponds with the rise in income inequality and the decline in social mobility, which is in effect multi-generational income inequality.

Third Way Has PEU Odor

Centrist think tank Third Way has a PEU Board Chair, John L. Vogelstein.  Vogelstein served as President of Warburg Pincus for 34 years.  He's now Chairman of  New Providence Asset Management, LLC and Senior Advisor to Warburg Pincus, LLC.

Also on Third Way's board is David A. Coulter Managing Director and Senior Advisor at Warburg Pincus. 

Third Way's Vice Chair is David B. Heller an ex-Goldman Sachs executive, who started as an equity derivatives trader.  Before he left in 2012 Heller was mentioned as a possible successor to Goldman chief Lloyd Blankfein.

Since then Heller put his money to work by investing in the Philadelphia 76'ers.  The team received an $82 million public subsidy from New Jersey Governor Chris Christie for a practice facility in Camden, New Jersey.   This gift came after Christie cut funding for policing in crime ridden Camden.

Heller also invested in Standard International, a hotel chain which just paid $1.2 million per room for a NYC hotel.  He sits on the board of Acumen which combines philanthropy with equity/debt investing.  Not only do they teach a man to fish, they loan money to buy the fishing pole and bait. 

Other Third Way board members have these names in their employment, current or past:

Apollo Global Management
Arrowgrass Capital Partners 
BlueCrest Capital Management
BlueMountain Capital Management
Bingham Consulting Group (which helps hedge funds assess political risk)
Bohemian Companies (a group of family-owned real estate and private equity holdings)
Chiron Investment Management LLC
Citadel (a giant hedge fund)
Dyson-Kissner-Moran Corp (a privately owned, diversified investment holding company)
Former partner of Apax Partners & Co. Ventures and Warburg Pincus
Fortress Investment Group LLC
Goldman Sachs
GPS Investment Partners LLC  
J.P. Morgan
Mesirow Financial Holdings Inc
Mesirow Advanced Strategies, Inc. (one of the largest fund of hedge funds in the world)
Millbrook Capital Management
Morgan Stanley
MSD Capital, L.P. (the private investment firm founded by Michael Dell)
Pritzker Innovation Fund
One Third Way board member conducted the first ever leveraged buyout in 1964.  LBO's got rebranded private equity to take away the stain from Michael Milken's junk bond conviction.  Another board member is "one of the country's leading private equity law practitioner."

There's a clear theme running through Third Way.  It's the PEU Way.  The greed and leverage boys have had their way long enough.  

Thursday, October 6, 2016

PPACA "Crazy" According to Bill Clinton

When PPACA passed data showed employers covering 176 million Americans.  According to HHS Secretary Sylvia Burwell employer coverage number is now 150 million.  That's a drop of 26 million people.

“There are 150 million people in America using employer sponsored insurance versus the 11 million in the Market Place. Last year, those 150 million only had 4 percent growth in their premiums and that is up against the 8 percent growth that occurred ten years before the Affordable Health Care Act.”

According to H.H.S. data, premiums for the 150 million Americans with employer-sponsored insurance have grown at some of the slowest rates on record.

Many say that premiums have gone up since the Act was made into law health care prices have risen at the lowest rate in 50 years.

“I think when people are talking about premiums, it’s important for them to have the facts,” Burwell said. 
Here are my facts, Mrs. Burwell.  My workplace premiums have gone up "slowly" because coverage has declined markedly, as deductibles and co-pays soared.  The best plan I could get from my employer for 2016 had no physician coverage outside meeting the monstrous deductible.  After that I'd get 80% coverage and be responsible for the other 20%.  Visits to my two specialists are totally on my dime this year.  I visit both for preventive purposes, screening for cancers which if caught early are cheaper to eradicate. 

Ex-President Bill Clinton called PPACA "crazy" while stumping for his wife Hillary's White House run.

"So you've got this crazy system where all of a sudden 25 million more people have health care and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half. It's the craziest thing in the world," Clinton said.
It's not a bizarre outcome.  It was the plan to shift responsibility away from employers and onto individuals and a tapped out Uncle Sam.   America may have more people with healthcare coverage, but it likely has a record number of people who can't afford their out-sized deductibles and copays. 

Almost two in three Americans don't have enough savings to pay for a $500 car repair or a $1,000 emergency room bill, according to a new report.

HHS Secretary Burwell is excited because she sees us "on a path to put the consumer at the center of their care."  And that consumer will foot much of the bill as they attempt to navigate the complex and bizarre PPACA landscape, populated by predatory providers looking to maximize their incentive pay. 

Burwell talks honey but pushes snake oil.

Update 4-3-22:   The average health insurance premium more than tripled for a family plan since PPACA passed in 2010.  Cost curve bent but in the wrong direction.  Concave went convex.  

Update 7-16-22:  Burwell is now President of American University and just hired former Carlyle Group Managing Director David Marchick as Dean of AU's business school.  

Tuesday, October 4, 2016

Serial Ethics Abuser Tenet Healthcare Settles for $368 million

Modern Healthcare reported:

Two of Tenet Healthcare Corp.'s former subsidiaries (sold in March 2016) admitted to conspiring to defraud Medicaid by using referral contracts for translation services to funnel pregnant patients through their doors.

Atlanta Medical Center and North Fulton Hospital in Georgia each pled guilty to one count of conspiracy to violate federal anti-kickback laws and defraud the United States, Tenet said on Monday, as it finalized a $514 million settlement over its involvement in the scheme.
How does a hospital plead guilty to criminal activity?  Who set up the deal and approved payments for over 20,000 Medicaid patients?  An internet search revealed the last time a Tenet executive was criminally charged for illegal kickbacks was 2003.

Back to the case just settled:

In 2014, the U.S. Justice Department joined a whistleblower lawsuit accusing Tenet and four of its hospitals of allegedly making illegal payments to clinics operated by Clinica de la Mama and Hispanic Medical Management in exchange for Medicaid patient referrals, a violation of the federal anti-kickback statute and Stark law.
So Tenet knew two years ago about the scheme and dumped the hospitals prior to announcing the settlement.  It's the game of image management, especially as criminal activity occurred while Tenet was under a 2006 Compliance Integrity Agreement.

Former Florida Governor Jeb Bush served on the Tenet Board of Directors while the fraud was perpetrated.  I'm sure the company did not want to tarnish the image of a Presidential hopeful.  Ironically, Jeb dropped out of the race as Tenet sold its offending facilities..

A Tenet Southern Region CEO was arrested and charged with a crime in 2014.  It wasn't for fraud or kickbacks.  Atlanta Business Chronicle reported:

Hartford, Ala., police arrested Tenet Healthcare Corp.’s Southern region CEO Michael Lee Graue after he allegedly traveled across state lines to have sex with what he thought was a 14-year-old girl, according to Dothan First.

Tenet fired the 58-year-old metro Atlanta health-care executive, who was released Monday after posting a $200,000 bond.
That arrest came courtesy of local police.  We'll see if the Justice Department goes after individuals committing actual crimes vs. negotiating mult-million settlements with subsidiaries and parent corporations. 

I find it interesting an Atlanta based Tenet Senior Vice President of Operations got six years for his child sex solicitation crime.  Contrast this with the Justice Department not charging anyone.  

Tenet HealthSystem Medical Inc. and its subsidiaries (collectively THSM) entered into a non-prosecution agreement (NPA) with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Northern District of Georgia related to the charges in the criminal information
The feds are happy taking Tenet's $368 million and letting perpetrators go Scott free.  Flash back to 2003, when criminals were actually charged for their fraudulent acts.

Monday, October 3, 2016

Your Tax Money Could Enrich Corporate Executives

The latest idea for government to improve the economy came from insider Larry Summers, who long ago sided with those in power vs. serving the public.  Summers floated a trial balloon for the government to buy stock on an ongoing basis.

My initial reaction was revulsion, after which I pondered how Larry's idea would help the greed and power class.

1.  Most executive compensation involves stock options which need rising share prices for the C suite to get millions more in pay.

2.  Companies engineered earnings increases by buying back stock and reducing the float.  Should they wish to re-float treasury stock they'll need buyers.

3.  Private equity underwriters (PEU) need investors to buy stock in companies they monetize via IPO.   Also, most PEUs sell but a portion of their holdings in the initial offering.  Rising stock prices enable them to make the maximum in their final profitgasm exit.

I'm sure there are more reasons for the government to buy company stock to enrich corporate chiefs and their PEU sponsors.  That's the insider group Larry Summers serves.  The call for government to buy equities grows louder.  

Sunday, October 2, 2016

PEU Cerberus Selling Caritas Christi Hospital Facilities: Will Hold Free Shares

Cerberus Capital Management's Steward Health Care will monetize it's buyout of Caritas Christi Health System by selling the hospital facilities to a healthcare real estate investment trust for $1.25 billion.  Private equity underwriter (PEU) Cerberus purchased the Catholic healthcare system nearly six years ago in a $895 million transaction.  Part of the $895 million was a promise to invest in facilities, provide catch up funding for the employee pension plan and repay existing debt.

This isn't the first asset sale/leaseback deal for Steward.  In 2012:

"... it got a cash infusion by selling 13 medical buildings to Healthcare Trust of America, an Arizona real estate investment trust, for about $100 million, agreeing to lease back space." 
It's not clear what Steward did with the $100 million.  Did it stay in the system for capital expenditures or did Cerberus get a fat dividend?

Steward's current value is $2.2 billion, $1.2 billion for hospital facilities it plans to sell/leaseback and $1 billion for the revenue stream and assets left after the facility sale.  The $1 billion valuation for the system without actual buildings came from the 5% equity stake Cerberus sold Medical Properties Trust for $50 million.  That equates to a 100% valuation of $1 billion for Steward without walls.

Steward CEO Ralph de la Torre and other senior leaders can benefit from the facility sale:

The deal, which is expected to close during the next quarter, is also designed to allow top Steward leaders to have a “substantially larger stake” in the company.
This looks and smells like reward from Cerberus as it will own Steward with free money.

The entire initial investment to Cerberus will be paid back, but the amount is proprietary, de la Torre said. The deal will also pay down all of the company’s $400 million in debt, he said. 
No one shared how much Cerberus made in deal fees or annual management fees since November 2011.

All this occurred under PPACA, widely known as ObamaCare.  PEU hellhound Cerberus/Steward will pocket $1.3 billion from its asset sale-leaseback trickery, $1.2 billion for hospitals and $100 million for medical office buildings.

The question is how this washes through Steward's Medicare cost reports and impacts money paid the system by Medicare and Medicaid.  Outside Medicare's byzantine "pay for performance" schedules is there a legacy facility component? Surely a revenue cycle number cruncher has modeled the financial benefits of the deal on Medicare reimbursement.  Is that the reason some facilities are leased and others are mortgaged? 

Only 20% of Steward employees on GlassDoor approve of CEO Ralph de la Torre.  The other 80% know they're there to follow orders, meet financial hard targets and enrich executives and their PEU sponsor.

Cerberus ownership of Caritas Christi is a window into today's healthcare world, where prices soar courtesy of greedy leaders.

Cerberus will eventually sell the mostly asset-less Steward Health and executives will get their final cash reward.  Let's hope Catholic leaders, who sold them Caritas Christi, inform them they cannot take their millions or billions with them.  The bills and their dollar signs stay here.  Their deeds however go with them.

PEU Report posts on Cerberus-Caritas Christi
State of the Division posts on Cerberus-Caritas Christi

Update 2-18-17:  Steward needs more hospitals to bleed.  Debt bloated Community Health Systems will sell eight hospitals in three states to Steward.  So far there's no purchase price but CHS is a public company and their shareholders have a right to know.  CHS employees should know only 18% of Steward's employees approve of their CEO on Glassdoor.

Update 1-26-24:  American Prospect summarized the damage Cerberus and Steward Healthcare did to Massachusetts hospitals.  Steward hired a restructuring advisor and may be headed to bankruptcy.

Saturday, October 1, 2016

Rubenstein Interviewed at WIF

The Atlantic interviewed Carlyle Croup co-founder David Rubenstein on Wednesday.  Here are a few points made during the softball interview at the Washington Ideas Forum:

1.  Rubenstein met with House Speaker Paul Ryan this morning via an interview at the Economic Club of Washington.
Rubenstein is the Club's President and if famous for his intellect and humor displayed during guest interviews.  He's also co-founder of The Carlyle Group, a politically connected private equity underwriter (PEU)

2.  There are four issues facing the economy.  Number 1 is tax reform.  "We haven't had tax reform since 1986 and the tax code is little complicated and many people think unfair.."
The Carlyle Group was founded in 1987 and rode preferred "carried interest" taxation for nearly thirty years.  Rest assured Rubenstein will lobby for tax reform to benefit his wallet, just as he's done the last decade to preserve preferred PEU taxation

3.  The next three issues are trade, immigration and infrastructure.  He's not sure trade legislation will pass in the lame duck session after the election.  Rubenstein said it's been a long time since we've had immigration reform and believes it's time.  He referred to potholes as evidence of crumbling infrastructure all over the country.
Rubenstein did not say Carlyle has two funds targeting 15-20% annual returns on infrastructure opportunities.  Carlyle established a $1.1 billion North America infrastructure fund in 2006.  It's next infrastructure fund is global and over twice the size:

"Carlyle Group is targeting $2.5 billion for Carlyle Global Infrastructure Opportunities I, which features longer hold times for non-core infrastructure investments with a return target in the mid-teens."

4.  The interview turned to pandering over Rubenstein's patriotic philanthropy.  He encouraged Americans to give back to the their country and brought up four founding fathers, George Washington, Thomas Jefferson, James Adams and Alexander Hamilton.
He did not share how Thomas Jefferson used the value of his slaves as collateral for a loan long after writing "All Men are Created Equal."  Nor did Rubenstein, the history buff, educate the public that Jefferson had ample funding to free his slaves, courtesy of the last will and testament of a dear friend.  Yet, Jefferson did not, preferring instead to be a man over several industries run from and around Monticello.  Jefferson was a pioneering PEU.

5.  Rubenstein shared his theory that all the great people today have gone into private equity.  The interviewer laughed, then offered journalism.
Journalists are the group that offer softball questions to the Rubensteins' of the world, lest they get shunned for future stories/interviews.

6.  Rubenstein talked about his support of the African American Museum, which is part of the Smithsonian, and the Washington Monument.  He talked about the history of slavery but left out the role our Founding Fathers' played.  He referred to slavery as the "birth defect" of our country rather than our leader's privileged intent and inability to see through the eyes of others.
I would suggest today's insider class is just as focused on their power and privilege as their blind predecessors be they Jefferson, Hamilton, Vanderbilt, Mellon or Morgan.  Ever the consummate salesman Rubenstein's spin is intended to elevate his and The Carlyle Group's image.

7.  The interview closed with the Washington Monument's elevator problem.  It's 100 years old and needs some assistance.
Using the elevator symbolism for our economy, why do have few people in our country gotten to the top floors income/asset wise?  That might be the next question for Mr. Rubenstein, if it's allowed.