Tuesday, September 21, 2021

Mnuchin Goes PEU with Saudi Money


Former Treasury Secretary Steve Mnuchin formed Liberty Strategic Partners, a $2.5 billion private equity underwriter (PEU)  The fund's initial investment came in Cybereason.  Like every good PEU Liberty has a retired general on board.

Mnuchin will join the Cybereason Board of Directors, and Liberty’s Senior Advisor General Joseph F. Dunford (Ret.), who served as the 19th Chairman of the Joint Chief of Staff (2015-2019), will join the Cybereason Advisory Board.

General Dunford also serves on the board of Lockheed Martin Corporation.  

The Saudi Public Investment Fund provided a significant portion of Liberty's initial cash raise.  Mnuchin should ask Carlyle Group co-founder David Rubenstein about losing Middle East investor money.  Rubenstein had to mollify angry Kuwait investors after his "safe", 36 times levered mortgage backed securities fund, Carlyle Capital Corporation, imploded in spring 2008.  Mnuchin could also look at how the Saudi's treated journalist Jamal Khashoggi for insight into possible repercussions.

Founder Mnuchin hired a retired diplomat at Liberty Strategic Global, former U.S. Ambassador to Israel David Friedman.   President Biden's Cabinet is chock full of PEUs.  Biden's Defense and State Department chiefs worked for PEU Pine Island Capital.

Should Mnuchin become President he has a diplomat and general to draft back into public service, which for the last few decades turned into self service. 

Sunday, September 19, 2021

PEU Love Continues in Washington

MarketWatch reported:

Today, virtually all income groups pay roughly 28% of their income in taxes – except for the 400 richest Americans, who each own more than $2 billion in wealth today and pay around 25% in taxes.

The super-rich’s low tax rates of today are in part aided by the collapse of federal corporate taxation. In the 1950s, 5% to 7% of national income came from corporate taxes. By 2018, that figure had fallen to just 1.5%.

The effective tax rate collapses for billionaires further because they can avoid reporting individual income by instructing their companies not to pay dividends and holding on to their shares without realizing their gains.

Public sentiment has long wanted the rich to pay more in taxes.

In the 2009 poll, 61% supported raising taxes on people with incomes of $200,000 or more.

Policy making billionaires kept preferred carried interest taxation for private equity underwriters (PEU) for the last decade. despite several runs at eliminating the tax break.

Carlyle co-founder David Rubenstein interviewed Bob Rubin and Larry Summers in 2016. Rubin and Summers served as Treasury Secretaries under President Bill Clinton.

The interviewees noted that Rubenstein could teach the audience some lessons on influencing government, given his surprisingly successful record of fighting to retain the "carried interest" tax loophole, which gives private-equity and hedge fund managers a tax preference on their performance fees.

You would need legislation to close the loophole, and that legislation has been stalled by private-equity-friendly members of Congress.

Clinton Labor Secretary Robert Reich was surprised by the Blue team's failure to increase taxes on the super wealthy.  He wrote:

This week, House Democrats released their proposed tax increases to fund Joe Biden’s $3.5tn social policy plan.

The biggest surprise: they didn’t go after the huge accumulations of wealth at the top – representing the largest share of the economy in more than a century.

Billionaire Rubenstein and his PEU brethren keep winning over widespread public opinion. 

But remarkably, House Democrats have decided to set corporate tax rates below the level they were at when Barack Obama was in the White House. Democrats even kept scaled-back versions of infamous corporate loopholes such as private equity’s “carried interest”. And they retained special tax breaks for oil and gas companies.

Forbes reported how good times continue for the PEU boys.

The private equity industry is in the midst of its most prolific year ever, with buyout firms striking deals and spending cash like never before.  

Through the end of June, investors had completed 1,721 acquisitions in the U.S. middle market with a combined value of $264.6 billion.

 

 
Tax avoidance and political influence are two levers pulled by the PEU boys and they frequently overlap.  Politicians Red and Blue love PEU, which continue to metastasize.  

Update 9-20-21:  As part of that metastasis former Treasury Secretary and Foreclosure King Steven Mnuchin has a new $2.5 billion PEU fund, Liberty Strategic Capital.   Most of the money is from Middle East sovereign wealth funds. 

Wednesday, September 15, 2021

Carlyle Co-founder to Get Doctor of Humane Letters


Carlyle Group co-founder Daniel D'Aniello will receive an honorary doctorate from Syracuse University.  D'Aniello studied transportation economics at Syracuse as an undergraduate.  The press release stated

D'Aniello found success in the international world of business as a pioneer in the private equity industry, and his philanthropic impact has had a broad reach.

Interestingly, Syracuse described their distinguished alum in another 2010 article as:

With his partners William Conway Jr. and David Rubenstein, he cofounded the Carlyle Group in 1987. They used politically connected advisors such as former President George H.W. Bush and former British Prime Minister John Major to buy defense-oriented firms, turning them around and selling them for profit. He serves as Chairman of the Board, running the firm’s daily operations. 
That sounds a bit shady, but it got D'Aniello the funds to contribute to Syracuse University.

The Carlyle Group’s big returns have made D’Aniello and his family rich and continues to show his gratitude through donations to several institutions, one of which is Syracuse University. The D’Aniello Entrepreneurship Internships, an internationally recognized initiative, are named after him as a testimony to what he stands for: the entrepreneurial spirit, hard work, imagination, aggressiveness, tenacity, and strong moral values.

Strong moral values are not a core competence of private equity underwriters (PEU).  Carlyle affiliate Landmark Aviation conducted rendition flights of terror suspects to black CIA sites for enhanced interrogations, i.e torture.

As a business leader, D’Aniello has long championed diversity and equity. 

There is little equity in the spoils going to billionaire rich PEU sponsors and executives of Carlyle's affiliate companies.  Employees usually take a big hit in a private equity buyout as interest expense explodes.  

The is no fairness in the greed and leverage boys keeping their preferred carried interest taxation for the last decade.  Public opinion wanted the rich to pay more in taxes, but policy making billionaires prevented that from happening.

The public has long found healthcare costs outrageous, but the innovative PEU boys bought us surprise medical billing.  Congress is yet to address this grossly unfair practice.  

Carlyle bankrupted two healthcare providers, nursing home giant ManorCare and LifeCare Hospitals, where 24 patients died in Hurricane Katrina's aftermath.   Those deaths warranted not one mention in the White House Lessons Learned report on Hurricane Katrina.

The letters PEU are not humane, not in the least.

Sunday, September 12, 2021

Twenty Years' Growth of Carlyle Group AUM Post 9-11

The Carlyle Group annual investor meeting was underway when Al Qaeda attacked the United States on 9-11-2001.  

Former President George H. W. Bush, along with former First Lady Barbara Bush, leaves Washington, DC, by private jet, bound for a speaking engagement in St. Paul, Minnesota. The Bushes spent the previous night at the White House. They had flown to Washington the previous day to attend several meetings and a dinner. One of the meetings attended by the former president was the annual investor conference of the Carlyle Group, which was also attended by Shafig bin Laden, one of Osama bin Laden’s brothers (see (9:00 a.m.) September 11, 2001). 

Members of the Saudi super-wealthy Bin Ladin family left once U.S. airspace reopened.

Nine chartered flights with 160 people, mostly Saudi nationals, departed from the United States between September 14 and 24. 9-13-2001 via private jet.

For example, one flight, the so-called Bin Ladin flight, departed the United States on September 20 with 26 passengers, most of them relatives of Usama Bin Ladin. 

The Carlyle Group's assets under management in June 2001 stood at $13 billion.  Today Carlyle has an AUM of $276 billion.   That's growth of over 2,100%.  Carlyle went from stakes in dozens of companies to thousands as private equity underwriters became ubiquitous.

The Guardian revealed former politicians that would help grow Carlyle's AUM so greatly:

The more business-oriented activities of Carlyle's staff have been conducted much more quietly: since it was founded in 1987 by David Rubenstein, a policy assistant in Jimmy Carter's administration, and two lawyer friends, the firm has been dispatching an array of former world leaders on a series of strategic networking trips.

Last year, George Bush Sr and John Major traveled to Riyadh to talk with senior Saudi businessmen. In September 2000, Carlyle hired speakers including Colin Powell and AOL Time Warner chair Steve Case to address an extravagant party at Washington's Monarch Hotel. Months later, Major joined James Baker for a function at the Lanesborough Hotel in London, to explain the Florida election controversy to the wealthy attendees.

Private Equity International added more key hires the summer of 2001.

William Kennard, the former chairman of the U.S. Federal Communications Commission (FCC), will join The Carlyle Group as managing director for media and communications.  Earlier this week it hired Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission (SEC) as senior advisor.  And last month, Afsaneh Beschloss, former treasurer and chief investment officer at the World Bank, also joined up.
Carlyle co-founder David Rubenstein went from a wonky former presidential advisor to policy making billionaire. 

The Guardian highlighted concerns shortly after 9-11:

"It should be a deep cause for concern that a closely held company like Carlyle can simultaneously have directors and advisers that are doing business and making money and also advising the president of the United States," says Peter Eisner, managing director of the Center for Public Integrity, a non-profit-making Washington think-tank. "The problem comes when private business and public policy blend together. What hat is former president Bush wearing when he tells Crown Prince Abdullah not to worry about US policy in the Middle East? What hat does he use when he deals with South Korea, and causes policy changes there? Or when James Baker helps argue the presidential election in the younger Bush's favour? It's a kitchen-cabinet situation, and the informality involved is precisely a mark of Carlyle's success."

The world of private equity is an inherently secretive one. Firms such as Carlyle make most of their money buying firms which are not publicly traded, overhauling them and selling them at a profit, so the process by which likely targets are evaluated is much more confidential than on the open market.

Rubenstein has ready access to U.S. Presidents and recently revealed he hosts elected officials.

The U.S. remembered 9-11 through a series of events.

“It’s hard because you hoped that this would just be a different time and a different world. But sometimes history starts to repeat itself and not in the best of ways,” Thea Trinidad, who lost her father in the attacks, said before reading victims’ names at the ceremony. 

Carlyle affiliate Landmark Aviation provided rendition flights to CIA black sites. That's but one way Carlyle influenced government policy and used Uncle Sam's wallet to handsomely profit since 9-11-2001.  It's the stuff of nightmares.

Saturday, September 11, 2021

Another Disturbing David Rubenstein Interview


Yahoo Finance
reported:

Earlier today, as part of a private event, this (TechCrunch) editor was afforded the opportunity to talk with some of the biggest names in the world of private equity, including Carlyle co-founder David Rubenstein; Bain Capital co-chair Steve Pagliuca; Jean Salata, the CEO and founding partner of Baring Private Equity Asia; and Sheila Patel, the vice chairman of B Capital Group AGM and formerly the chair of Goldman Sachs Asset Management.

We covered a lot of ground, from how interested Carlyle and the other firms are in blockchain technologies (the feedback here was a little mixed), to how focused they are on sustainable and socially responsible investing. On this front, Rubenstein claimed that "private equity people are very focused on it."

Rubenstein's family office Declaration Partners invested in blockchain technology firm Paxos in two funding rounds.  Was that private event a Rubenstein gathering of elected officials?

Consummate salesman Rubenstein is known for influencing government policy to make money.  That's why Carlyle set up in Washington, D.C.  He's also known to push investments where he already has a stake.  


Consider his comments to TechCrunch's editor, where Rubenstein illuminates income inequality, a direct result of decades as a policy making billionaire:

They say this is the best of times and the worst of times. It's the best of times for investors, because if you're in the tech world, if you're in the investing world and you're investing in India, China and the United States, you've made a lot of money and you're beginning to think you're a genius because you made so much money, and you just don't realize that it's the worst of times for people that don't have internet access, [or who] work with their hands and not with their minds as much, [or who] aren't educated [or] have childcare [needs]. Really, in the United States and probably other parts of the world, we are further and further creating [an] economic divide unfortunately and greater income inequality and a lack of social mobility, and that's a real problem.

Rubenstein is a major architect of the economic divide that took decades to grow.  Private equity underwriters (PEU) sponsored elected officials who kept preferred carried interest taxation in place and passed corporate tax cuts.  

They have fellow PEU Jay Powell as Fed Chair.  His monetary policy, lots of liquidity and low interest rates, favored the greed and leverage boys.

For those for whom it's been the best of times, eventually something will end. At some point, the Federal Reserve will increase interest rates -- probably not until 2023, but maybe before -- and at some point, people begin to say, "I'm taking more of my chips off the table. I'm not going to invest as much at these valuations." I just got off a call this morning [regarding] a small deal in Asia where people want to pay things like 25 times projected revenues.

The British have become aware of the damage done by the PEU boys.  They hollowed out countless companies by shedding valued employees, selling core assets and loading them with debt.  If the greed and leverage boys are ubiquitous can they hollow out a whole economy?  

Update 9-19-21:  House Democrats chose to let policy making billionaires keep their decades of ill gotten gains.  No surprise to PEU Report.  Politicians Red and Blue love PEU.

Friday, September 3, 2021

Carlyle's Rubenstein Hosts Elected Officials, Finds Cryptocurrencies Enjoyable


Carlyle Group co-founder David Rubenstein said he hosted members of Congress on a monthly basis prior to COVID-19 and hopes to restart that practice.  Rubenstein said elected leaders express relief at being able to talk and meet with members of the other party in a private setting.  

This is how a billionaire private equity underwriter (PEU) kept preferred carried interest taxation for over a decade.  It's also how Rubenstein influences government policy to benefit Carlyle and his family office, Declaration Partners.  It's PEU practice within the American experiment.

Rubenstein said he'd most like to have dinner with Thomas Jefferson, the man who pioneered using slaves as collateral for a loan.  Jefferson refused an inheritance that could have freed his slaves.  At Carlyle Rubenstein followed Jefferson's innovative use of debt. as a private equity underwriter.  On cryptocurrencies he said:

"I have not invested in cryptocurrencies myself.  I have invested in companies that service the industry."

Rubenstein believes people can take one, two or three percent of their portfolio and put it in cryptocurrencies.  "It's not harmful and you'll probably have an enjoyable time." (like Vegas).

He lamented American leaders not working together to solve problems as quickly as they could be tackled.  Mr. Rubenstein believes elected officials will soon work together to tackle a crisis.  He is in a position to know as one of America's premiere policy making billionaires.

Let me guess:  Congress will provide safe space for Rubenstein's cryptocurrency investment and he will keep his preferred taxation.  

Update 9-9-21:  A wealthy Virginian freed his slaves in 1791.   Jefferson refused the inheritance that could have freed his slaves in 1819. 

Thursday, September 2, 2021

Jessica Simpson in Taylor Swift Position with PEUs


Jessica Simpson is trying to get back the rights to her clothing brand from a smattering of private equity underwriters (PEU).  Music giant Taylor Swift was in a similar position with The Carlyle Group.

Tengram Capital acquired Simpson's clothing line through affiliate Sequential Brands, which recently filed for bankruptcy.  PEU debt holders include Apollo Global Management and KKR.  

Tengram, Apollo and KKR are working with Jessica Simpson.  The Carlyle Group never gave Taylor Swift a chance, so she is re-recording all of her prior music.  

Apollo owned Yahoo Finance reported:

Jessica Simpson’s family offered to buy the singer-turned-fashion entrepreneur’s brand out of bankruptcy for $65 million, a lawyer said in court Wednesday.

What if Jessica Simpson ignored the greed and leverage boys and started a new brand?  She certainly is in a position to trash private equity underwriters. 

Tuesday, August 31, 2021

PEU Insurance Investments Soar


Insurance Journal
reported

Private equity and venture capital firms have been pouring capital into insurance companies despite the uncertainties about claims and losses from the pandemic.

Actually the PEU boys are pouring insurance company reserves into their fund offerings. 

PE-backed M&A in the sector globally reached $19.28 billion in disclosed value in the year to Aug. 20, already exceeding the full year 2020 total of $12.88 billion,

The five big public PE firms — Apollo, Blackstone, The Carlyle Group Inc., KKR & Co. Inc. and Ares Management Corp. — have all bought into insurance companies over the past two years.

It remains to be seen how regulators view private equity underwriter (PEU) ownership of insurance companies.  

The largest deal has been Apollo Global Management Inc.’s planned merger with retirement services company Athene Holding Ltd. in deal suggesting a total equity value of roughly $11 billion for Athene.

The greed and leverage boys also want access to the common person's retirement funds.   Could buying insurance companies be an interim step to achieve that aim?

Monday, August 30, 2021

Paulson Pans Crypotcurrencies to Paxos Investor Rubenstein

 

“I wouldn’t recommend anyone invest in cryptocurrencies,” John Paulson told David Rubenstein, co-founder of Carlyle Group, on Bloomberg TV.

Rubenstein:  What about cryptocurrencies? Are you a believer?

Paulson:  No, I’m not. And I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing. So to the extent there’s more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.

Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies.

Rubenstein's family office was the lead investor in the Series C funding round for cryptocurrency play Paxos.   The press release on Declaration Partners investment in Paxos stated:

  • The launch of Paxos Crypto Brokerage, a platform solution that powers crypto services for PayPal and Revolut US; 
  • The issuance of more than $7.5 billion in stablecoins across three of the leading US dollar-backed stablecoins; 
  • Becoming the first company to settle US equity trades on a blockchain outside of the legacy system (under No-Action relief from the US Securities and Exchange Commission staff); and
  • Confirmation of more than $3.5 trillion in commodities trades with its Post-Trade automation service.

Rubenstein's Declaration Partners threw more money at Paxos in its $300 million April 2021Series D funding round, which valued the firm at $2.4 billion.  That press release stated:

  • Supported the launch of crypto buying and selling services on Venmo through its partnership with PayPal;
  • Received conditional approval for the first de novo Trust Bank charter for digital assets from the Office of the Comptroller of the Currency;
  • Completed same-day settlement of traded stocks for Instinet and Credit Suisse via the Paxos Settlement Service;
  • Grew total stablecoin assets across three of the leading US dollar-backed stablecoins to nearly $10 billion; and
  • Tokenized more than 100,000 oz of the highest quality investment-grade gold with PAX Gold.

Paxos latest press release stated:

Paxos is building a new system that allows assets to move instantaneously, anywhere in the world, at any time, in a trustworthy way. Paxos uses technology to tokenize, custody, trade and settle assets. It offers crypto solutions for enterprises, crypto trading and settlement solutions for securities and commodities. 

That would be powerful tool for billionaires and their sponsored government officials.  An Afghan President could leave the country with only the clothes on their back after Paxos'ing millions to their desired destination, say Dubai.

Saturday, August 28, 2021

Afghan People Got PEU Model


The Afghan military evaporated in the midst of the U.S. withdrawal from Afghanistan.  Ides of August reported:

Afghans did not reject us. They looked to us as exemplars of democracy and the rule of law. They thought that’s what we stood for.

And what did we stand for? What flourished on our watch? Cronyism, rampant corruption, a Ponzi scheme disguised as a banking system, designed by U.S. finance specialists during the very years that other U.S. finance specialists were incubating the crash of 2008. A government system where billionaires get to write the rules

The U.S. government has long catered to billionaire private equity underwriters (PEU).   The bipartisan effort started under Bill Clinton and every following president furthered the PEU agenda.  

BIG by Matt Stoller wrote:

U.S. military leaders, like bad consultants or executives, lied about Afghanistan to the point it was routine. Here are just a few quotes from generals and DOD spokesmen over the years on the strength of the Afghan military, which collapsed almost instantly after the U.S. left.  

In 2011, General David Petraeus stated, “Investments in leader development, literacy, marksmanship and institutions have yielded significant dividends. In fact, in the hard fighting west of Kandahar in late 2010, Afghan forces comprised some 60% of the overall force and they fought with skill and courage.”

In 2015, General John Campbell said that the the Afghan Army had “proven themselves to be increasingly capable,” that they had “grown and matured in less than a decade into a modern, professional force,” and, further, that they had “proven that they can and will take the tactical fight from here.”

KKR, a New York based PEU, hired General Petraeus in 2013. As a KKR partner Petraeus serves on the board of OPTIV, a government cybersecurity contractor.  General Campbell also serves a middle market PEU.

J.F. Lehman & Company, a leading middle-market private equity firm focused on the defense, aerospace and maritime sectors, is pleased to announce the addition of General John F. Campbell, U.S. Army (Ret.) to its Operating Executive Board (””OEB””). The OEB is a group of seasoned industry and government executives who have significant experience in the firm's target industries. Through key relationships and sector-specific knowledge, OEB members contribute to sourcing and evaluating transactions, advising on portfolio company strategy and recruiting senior level portfolio company management.
The greed and leverage boys are happy to partner with Middle East strongman Saudi Crown Prince Mohammed Bin Salman.  

Afghan President Ghani fled with either millions of dollars or just the clothes on his back.  Using wire transfers he could have left with both.  Ghani ended up in the United Arab Emirates (UAE), a haven for western financial interests and Afghan graft.  

Former Pentagon CFO and PEU Dov Zakheim wrote for The Hill.

For years it was widely known that Afghan leaders were acquiring estates in Dubai with embezzled funds they had deposited in that city state. 

DealBook reported in 2008, as did FedInsider:

The Carlyle Group has a scroll like list of ex-government insiders. They even have one of their own, Dov Zakheim, on the President's Commission for Wartime Contracting in Iraq & Afghanistan.

Zakheim facilitated The Carlyle Group's sale of Standard Aero and Landmark Aviation to Dubai Aerospce in 2007

Private equity greed retrograded management practice in their flipping companies for massive profits.  Public companies copied PEUs overuse of debt, over-reliance on technology and over-emphasis on achieving that final profitgasm.  Government leaders catered to PEU founders, policy making billionaires.  Former elected officials and public servants did their best to steer government purses to their private equity affiliates.  

The 2020 U.S. State Department report on Afghanistan states:

Officials frequently engaged in corrupt practices with impunity. Reports indicated corruption was endemic throughout society, and flows of money from the military, international donors, and the drug trade continued to exacerbate the problem. Local businessmen complained government contracts were routinely steered to companies that paid a bribe or had family or other connections to a contracting official.

According to prisoners and local NGOs, corruption was widespread across the justice system, particularly in connection with the prosecution of criminal cases and in arranging release from prison. There were reports officials received unauthorized payments in exchange for reducing prison sentences, halting investigations, or outright dismissing charges.

Freedom House reported inadequately trained judges and extensive corruption in the judiciary, with judges and lawyers often subject to threats and bribes from local leaders or armed groups.

During the year there were reports of “land grabbing” by both private and public actors. Most commonly, businesses illegally obtained property deeds from corrupt officials and sold the deeds to unsuspecting prospective homeowners who were later prosecuted. Other reports indicated government officials confiscated land without compensation with the intent to exchange it for contracts or political favors. There were reports provincial governments illegally confiscated land without due process or compensation in order to build public facilities.

Afghans understood exactly what the U.S. brought them.  Management greed and self service is not an inspiring model for the common person, be they citizen or worker.

Update 9-21-21:  Former Treasury Secretary Steve Mnuchin formed PEU Liberty Strategic Partners, a $2.5 billion PEU fund whose initial investment came in Cybereason.

Mnuchin will join the Cybereason Board of Directors, and Liberty’s Senior Advisor General Joseph F. Dunford (Ret.), who served as the 19th Chairman of the Joint Chief of Staff (2015-2019), will join the Cybereason Advisory Board.

The Saudi Public Investment Fund provided a significant portion of Liberty's initial cash raise.  Mnuchin should ask Carlyle Group co-founder David Rubenstein about losing Middle East investor money.  He could also look at how the Saudi's treated journalist Jamal Khashoggi.

Friday, August 20, 2021

Carlyle's Rubenstein Holds Over 33 Million CG shares


Carlyle Group co-founder David Rubenstein recently sold 4 million shares of CG stock for nearly $190 million.  It is his third sale of Carlyle Group stock this year.  

Fellow founder Daniel D'Aniello also sold a 5 million share chunk of CG stock.  He hold almost 39 million shares in the private equity underwriter (PEU).

Carlyle monetized Novetta with a sale to Accenture Federal Services.  Twilio agreed to pay a 10% premium for a SPAC investing in Carlyle affiliate Syniverse.

Another profitgasm for the greed and leverage boys.

Wednesday, July 28, 2021

Frances Townsend Defends Activision Employee Harrassment

In an odd move for someone so politically connected Frances F. Townsend joined game maker Activision Blizzard in March 2021 as Chief Compliance Officer, Corporate Secretary and Executive Vice President of Corporate Affairs.  

Townsend remains on the Council for Foreign Relations, the Trilateral Commission and sits on the boards of Freeport McMoran, Chubb Ltd. and Investcorp.

California's Department of Fair Employment and Housing brought a lawsuit against the company for. gender pay discrimination and allowing ongoing sexual harassment complaints to go unresolved.


Townsend's risk management response of denying all accusations did not go over well with employees, referred to as "everyone."  Many workers planned to walkout today.

The walkout comes after more than 2,000 current and former Activision Blizzard employees signed an open letter to management regarding the lawsuit from the state of California.

Harmed employees expect leadership to repent (turn around) after the lawsuit, not deny the charges and discount those injured.  

Many corporate compliance programs are an exercise in legal defense and used to identify problem employees that need to be nudged out the door.  The income earning franchise of top executives and board members must be protected.  That is world Fran Townsend swam in for the last decade.   

Townsend wrote the Lessons Learned report after Hurricane Katrina and protected The Carlyle Group's LifeCare Hospitals and Tenet Healthcare.  Together they had 35 patient deaths in Memorial Medical Center in Katrina's aftermath.  

Who omitted the hospital with the highest death toll in the aftermath of Hurricane Katrina from the Bush White House Lessons Learned Report?  Frances Townsend.  The Carlyle Group, a private equity underwriter (PEU), owned Lifecare Hospitals, which was responsible for 25 patients deaths.  Ten other people perished under Tenet Healthcare's umbrella.  Fran successfully managed these two companies' risk with her vacuous collection of hero stories and "we can do betters."

Tenet Healthcare's lobbyists visited the White House several times while Fran's "researched" her report.  Jeb Bush joined the Tenet Healthcare Board of Directors a year after brother W.'s White House foisted Fran's whitewash on the public.

Frances Townsend has been richly rewarded for putting corporate loyalty above public service.  President George W. Bush refused to release e-mails from Townsend, Andy Card, Joe Hagin and others involved in his hapless Hurricane Katrina response.  I imagine those e-mails are buried under legal protection, "state secrets" or otherwise.

The public has no right to know how insiders protect and enrich each other as they dance between public service, private equity underwriters (PEU) and government front groups.
 

Reports written to minimize corporate liability are not inspiring to harmed employees.  Activision Blizzard learned that lesson very quickly.

Oddly, the company hired Wilmer-Hale, the law firm that defended BP for their Gulf Oil Spew.  They did not offer Jamie Gorelick, the Queen of Crisis Management.  Instead they selected the former enforcement head of the SEC.  

The WilmerHale team will be led by Stephanie Avakian, who is a member of the management team at WilmerHale and was most recently the Director of the United States Securities and Exchange Commission’s Division of Enforcement.

The SEC is one of many compromised federal agencies.  Hiring a toothless former regulator should be less than inspiring to aggrieved workers.  WilmerHale had this to say when she rejoined the fold in February 2021.

Stephanie is returning to a practice that she helped lead as the vice chair based in New York before she left the firm in 2014 to become the SEC’s Deputy Director of Enforcement.  She will lead one of the nation’s premier groups of lawyers in counseling and defending financial institutions, public and private companies, hedge funds, accounting firms, investment advisors, boards, corporate executives, and individuals facing regulatory and criminal investigations and litigation with the government.

Activision's CEO wrote a letter to employees.  One line stated:

"There is no place anywhere at our Company for discrimination, harassment, or unequal treatment of any kind."

There is vast unequal treatment between the executive and worker class in terms of pay and benefits.   

"To put it clearly and unequivocally, our value as employees are not accurately reflected in the words and actions of our leadership," employees said in the petition.

Fran has a way of finding the hot seat in her repeatedly defending the indefensible.  It's a pattern.

Update 8-2-21:  The SEC fined Bausch Health (Valeant Pharmaceuticals) $45 million and left the door open for executives to repeat their improper actions at another company.  Investors have a $3 billion lawsuit against the company.  Bloomberg noted:

Formerly known as Valeant Pharmaceuticals International Inc., Bausch Health previously settled claims for $1.21 billion that it misled investors about the company’s financial performance. In several related lawsuits, investors accused Valeant of deceptive business practices, including price gouging and a kickback scheme that led to the conviction of a former executive on bribery charges in 2018.

After being enforced by the DOJ Columbia HCA's Rick Scott became a U.S. Senator for the state of Florida.  

Circle the legal wagons, wait out and water down the regulators.  Then resume getting one's part of the financial and power pie.

Update 8-3-21:  FT reported the resignation of Blizzard Entertainment President J. Allen Brack.  It stayed away from directly naming Fran Townsend in this statement:

Activision Blizzard’s initial reaction to the lawsuit dismissed it as “irresponsible behaviour from unaccountable state bureaucrats” who had “rushed to file an inaccurate complaint”. The company’s chief compliance officer said in an internal memo that the case “presented a distorted and untrue picture of our company, including factually incorrect, old and out of context stories”.

Fran's memo inspired a walkout at Activision Blizzard which resulted in Brack's resignation. Townsend's job got harder with a shareholder lawsuit citing executives' failure to disclose the California state investigation in SEC filings. 

An Activision Blizzard employee group rejected the hiring of WilmerHale and Stephanie Avakian.  Their letter citing Avakian's history of protecting the wealthy and powerful.  They added Frances Townsend's connections to the law firm. 

A colleague commented on Townsend's representation on the Council for Foreign Relations and the Trilateral Commission.  They said "Churches must shake when she drives by."

Update 8-6-21:  Fran avoids direct naming in most stories on Activision's employee harassment:

Activision Blizzard’s initial response to the lawsuit was tragic, with one leader calling the allegations meritless and distorted. 

The tragic response came from Frances Townsend. 

Update 8-8-21:  Townsend resigned from her role as executive sponsor of Activision Blizzard King's Women's Network.  She remains an executive for the company.

Townsend told employees over Zoom that her statement was following “legal counsel’s guidance on language, and that the end result no longer sounded much like her voice[.]”

Despite claiming the statement was not her voice, Townsend was criticized again for tweeting a link to an article titled, “The Problem With Whistleblowing,” on her personal social media account. The article which calls out whistleblowers was seen as inappropriate given many current and former Blizzard employees were sharing stories of their abuse online or to the press.

After being criticized for her tweet, Townsend seemingly began blocking Blizzard employees and journalists (myself, included) before deactivating her Twitter account altogether.

Fran also serves on the Leadership Council for Concordia, the Red Team's attempt to emulate the Clinton Global Initiative.  It was started by two politically connected college grads, now Concordia's board chair and CEO.

Wednesday, July 21, 2021

Carlyle Launches Copia Power


 WSJ
reported:

Private-equity giant Carlyle Group Inc. is launching a company to develop renewable-power-generation and storage projects in a push to reorient its energy business toward sustainable investments.

Funds Carlyle operates will inject as much as $700 million in the new venture, Copia Power, enabling it to arrange projects worth over $6 billion. Copia will focus on developing large-scale solar generation projects and battery facilities to store power and distribute it after sunset.

 PE News added:

Copia will launch with several projects acquired from Omaha, Neb.-based power developer Tenaska Inc., which are slated to produce about 6 gigawatts of clean energy. The startup will also join with Birch Infrastructure to help negotiate future power-purchase agreements with large corporate buyers.

Carlyle will work with Tenaska and Birch, much like it planned to work with The Berry Group on a Texas deep-water oil terminal.  Both projects were launched with considerable excitement.

Copia Power--“The formation of Copia Power and relationships with Tenaska and Birch highlight Carlyle's continued commitment and focus on finding differentiated and attractive investment opportunities that will drive the energy transition. We feel strongly that the combination of leading and proven management teams such as Tenaska and Birch, along with the scale and capabilities of our platform at Carlyle, we can drive significant growth and accelerate the development of utility scale sustainable infrastructure in the United States.”
Corpus Christi--"Sean Strawbridge, the Chief Executive Officer of Port of Corpus Christi. “In partnering with such an experienced and well-capitalized firm as The Carlyle Group, the market should take notice and have a high degree of confidence of this project’s success.”
Carlyle appreciates the steadfast, prescient leadership provided by the Port of Corpus Christi Authority in advancing this project. Providing VLCC access at the Port is of critical importance to the United States, and we will collaborate with all stakeholders to ensure such service is provided.

Carlyle’s equity for this investment will come from its Global Infrastructure Fund.

Partners and potential customers may wish to ask why Carlyle suddenly dropped its development role and fifty year lease with the Port of Corpus Christi in October 2019.  Reuters reported:

Sean Strawbridge, chief executive of the Port of Corpus Christi, said Carlyle notified the port on Oct. 8 it would no longer proceed with its investment. That left construction company Berry Group as the sole backer.

Carlyle said in a statement Berry Group was “now the sole owner of Lone Star,” but did not comment on why it dropped out of the project, which it said continues to be actively developed.

Lone Star in September filed a lawsuit against Carlyle in a Texas state court, alleging the private equity firm breached its contract to jointly pursue the project and asking the court to award it full ownership. The lawsuit also sought unspecified damages.

Will Copia end up like Corpus Christi?   Maybe not.  However, one should be concerned when the greed and leverage boys target their industry for massive profits.  That's the PEU game.  Their green is the color of money.  

The Port of Corpus Christi ended its fifty year lease with Lone Star Ports in March 2021.  Without Carlyle's capital the project imploded. 

Monday, July 19, 2021

Billionaire Yachts Rise with Tide


Billionaire owned yachts float on their ability to make public policy and garner government subsidies, direct and indirect.  

Nearly four years ago a Reuters columnist wrote:

As the debate over wealth inequality rages, a paradox is expected to play out over the next five years: the share of people in the lowest strata will decline, while the wealth of the world’s richest will grow faster than any other group.

These projections from Credit Suisse’s Global Wealth Report will be seized upon by proponents of the view that the wealth gap is narrowing, however slowly, and those who argue that the ultra-rich getting richer is no cause for celebration.

The “Paradise Papers” leaks this month revealed the lengths to which some of the world’s wealthiest individuals and institutions go to minimize their tax payments, and re-ignited the debate over wealth inequality.

Whether it’s tax avoidance (technically legal but morally questionable) or tax evasion (outright illegal), the documents shone a light on the financial affairs of the rich and ultra-rich. “One rule for them and one for everyone else” was a common reaction to the revelations.

The richest 1 percent of the world’s population now owns half of its wealth. And there’s no sign of that receding.  A rising tide lifts all yachts.

CommonDreams reported today:

Under pressure from well-heeled conservative advocacy organizations and donors, Republican senators have removed funding for IRS enforcement from an emerging bipartisan infrastructure plan, threatening to tank a proposed crackdown on rich tax cheats.

The scrapped provision would have increased the IRS budget—a frequent target of GOP cuts in recent years—by $40 billion over the next decade to help the agency combat tax dodging, which is depriving the federal government of trillions of dollars in revenue. An analysis released earlier this year by academics and IRS researchers estimated that 36% of unpaid federal income taxes are owed by the top 1%.

MarketWatch reported on the wealthy's use of debt to avoid taxes.

ProPublica’s investigation into billionaires’ tax returns has more people paying attention to the strategies wealthy Americans use to avoid paying taxes. As it turns out, one of those tactics involves the advantageous use of debt. There’s even a catchphrase for it — Buy, Borrow, Die.  

You don’t pay taxes on an asset until it produces cash.  That allows for the wealthy to build up their assets tax free. To most of us, it would seem that the problem with that method is that “sooner or later you’re going to have to sell,” he said. But that’s actually not the case. As long as someone is wealthy enough to live on a percentage of their assets, they never have to sell.

Instead, they can borrow against those assets at an interest rate that’s much lower than the rate at which the assets will appreciate over time, McCaffery said, and use those funds as spending money. But unlike the wages and salary most people use to pay for living expenses, the borrowing isn’t taxed, so they face a relatively low tax bill. Once they die, the assets pass to their descendents tax-free or with minimal tax treatment.  

Private equity underwriters (PEU) are masters at the use of debt to minimize taxes.  Politicians Red and Blue love PEU.  While the rising tide lifts all yachts, the rest of us are treading water.

Update 8-2-21:   Recently released wealth data reinforced the themes in this post.  Yahoo Money reported "The share of wealth held by the top 1% continues to climb while those at the lower end lost ground … by that measure, inequality worsened.” 

Update 8-14-21:   Policy making billionaires ensured the Trump tax cuts benefited them in an outsized way.

Update 8-26-21:  "Afghans did not reject us. They looked to us as exemplars of democracy and the rule of law. They thought that’s what we stood for.  And what did we stand for? What flourished on our watch? Cronyism, rampant corruption, a Ponzi scheme disguised as a banking system, designed by U.S. finance specialists during the very years that other U.S. finance specialists were incubating the crash of 2008. A government system where billionaires get to write the rules."

Thursday, July 15, 2021

Blackstone's PEU Deal with AIG


 A press release stated:

American International Group, Inc. (NYSE: AIG) and Blackstone (NYSE: BX) today announced that they have reached a definitive agreement for Blackstone to acquire a 9.9% equity stake in AIG’s Life & Retirement business for $2.2 billion in an all cash transaction.

As part of this agreement, AIG also agreed to enter into a long-term strategic asset management relationship with Blackstone to manage an initial $50 billion of Life & Retirement’s existing investment portfolio upon closing of the equity investment, with that amount increasing to $92.5 billion over the next six years.    

Private equity underwriters (PEU) love taking stakes in insurance companies so they can steer reserves to their investment offerings.  These hardly seem like arm's length relationships and offer a distinctive PEU odor..  

The FTC will need to give approval, but that is regularly granted.  While the Treasury Department has an insurance office the industry is mostly regulated by states.

Another part of the AIG deal has Blackstone buying AIG's affordable housing portfolio.

Separately, AIG and Blackstone Real Estate Income Trust (BREIT), a long-term, perpetual capital vehicle affiliated with Blackstone, also announced today that they have reached a definitive agreement for BREIT to acquire AIG’s interests in a U.S. affordable housing portfolio for approximately $5.1 billion, in an all cash transaction.

Blackstone helped make rent unaffordable:

A UN housing advisor "singled out Blackstone’s business practices – which they claim include massively inflating rents and imposing an array of heavy fees and charges for ordinary repairs – as having “devastating consequences” for many tenants in countries around the world."  
They accused Blackston of undertaking “aggressive evictions” to protect its rental income streams, shrinking the pool of affordable housing in some areas, and effectively pushing low and middle-income tenants from their homes.

Don't forget Blackstone brought surprise medical billing to the common man and instituted a widespread ad blitz when it looked like Congress might reign in the practice. 

Questions state regulators can ask include:  

1.  How many people with AIG life and retirement products worked for companies that froze their pensions under PEU ownership?   

2.  How many AIG customers can no longer afford to pay rent in their Blackstone owned house?

3.  How many AIG insureds were hit by devastating surprise medical bills?

It's a PEU world where politicians Red and Blue love PEU and the greed and leverage boys make the rules via regulatory capture.  Right Fed Chair Jay Powell?

Update 7-18-21:  Worker mistreatment by the greed and leverage boys can be seen in OpenGate Capital's treatment of Hufcor's Wisconsin employees.  Someone else sees PEU's harm on our healthcare system.

Tuesday, July 13, 2021

Carlyle Group Backs disguise

 IBC Daily reported on The Carlyle Group's taking a majority interest in disguise, a firm involved in extended reality and virtual production.  Extended reality consists of three altered realities.

Carlyle owns thousands of companies and is able to drive significant new business to disguise.  Carlyle co-founder David Rubenstein has long lamented private equity's poor public perception.  That might be because most workers have experienced a PEU buyout and post closing carnage in their lifetime.  

Carlyle has a new tool to sell the PEU model to the public.  Ironically it's called disguise.  disguise could team up with new Carlyle affiliate 1E to truly torment the average worker.  

Update 7-14-21:  Someone else noticed a gathering of policy making billionaires like Carlyle's David Rubenstein.  It wasn't Davos or the Milken Institute gathering but it attracted the same crowd.  

We are developing a private class of billionaire kings whose will is omnipotent and untouchable by any democratic force.

The greed and leverage boys perfected the model.

Update 7-20-21:  Carlyle bought LiveU, another video streaming and remote production solutions company.  Does this mean more David Rubenstein videos? Can we get him live talking to Congressional representatives about retaining preferred carried interest taxation?

Saturday, July 10, 2021

Pandemic Gives Trans Maldavian Airways to Carlyle Group


Reuters
reported:

Carlyle Group Inc said on Thursday it has taken a majority stake in Trans Maldivian Airways (TMA), the world’s largest seaplane operator, from buyout firm Bain Capital following a debt restructuring deal.

TMA began negotiating debt relief with Carlyle and its other creditors after the airline grounded most of its fleet of 56 seaplanes last year, as the COVID-19 pandemic halted travel and tourism into the Maldives.

Terms of the transaction were not disclosed, but people familiar with the matter, who requested anonymity, said Carlyle took majority ownership of TMA from Bain in exchange for agreeing to restructure the airline’s outstanding debt of about $300 million.

The Carlyle Group backdoored TMA, stressed by plummeting travel in the global coronavirus pandemic.  CNN ran a story on the Maldive's barefoot pilots in 2019.

If you're heading to the Maldives for a holiday, there's a strong chance your journey will include a flight on a seaplane.

This popular Indian Ocean destination is made up of 26 atolls filled with over 1,000 islands occupied by dozens of resorts, all spread out over 90,000 square kilometers. 
 
That's where Trans Maldivian Airways comes in. 
 
The world's largest seaplane operator, it has a fleet of 50 aircraft flown by about 200 pilots and operates more than 100,000 flights per year, carrying passengers to dozens of Maldives resorts. 
I take it the Maldives didn't throw buckets of cash at its airline industry.  However, the World Bank did provide economic support to the Maldive Islands, as did the United Nations Development Program (UNDP) and USAID.  It's not clear how much World Bank, UNDP or USAID money TMA received, but Bain and Carlyle are very skilled at leveraging public dollars.  

Reliefweb reported:
 
The Maldives Development Update (MDU) notes that the country, post a massive pandemic led downturn, is firmly on the road to recovery. Thanks to successful marketing campaigns and relatively straightforward entry requirements, Maldives received more than 300,000 tourists in the first quarter of 2021. Assuming that a million tourists visit the country this year, the World Bank forecasts real GDP to grow by 17.1 percent in 2021.  
Oddly, unsustainable debt is what took TMA from majority Bain control to The Carlyle Group.  Blackstone once owned TMA, selling it to Bain for more than $500 million.
 
Consider the state of the Maldives given the impact of the pandemic:

The fiscal deficit reached nearly USD 900 million or 20 percent of estimated 2020 GDP. Total public and publicly guaranteed debt reached USD 5.6 billion or nearly 140 percent of estimated 2020 GDP. Although the recovery is now underway, Maldives’ fiscal deficit and debt ratio are expected to remain elevated over the medium term.
If the Maldives go under who takes them over?  Hopefully not a private equity underwriter (PEU).  Whole countries could be next for the greed and leverage boys, Blackstone, Bain, and Carlyle?