Sunday, June 13, 2021

PEU Tax Avoidance News

Private equity underwriters (PEU) firms have been front and center in the news.  NYTimes revealed policy making billionaires not only kept their preferred carried interest taxation, they'd neutered IRS checks making sure they paid what little actual taxes owed.

Ignored Americans have long wanted the wealthy to pay a higher tax rate.  Elected officials sided with the PEU boys over common constituents.  Consider this story from 2010.

Carlyle Group co-founder David Rubenstein’s cell phone rang as he was speaking to supporters of the Economic Club, at the Phillips Collection. He left the stage to take the call. Among those in the audience was Gary Shapiro, the consumer-electronics lobbyist who was Rubenstein’s travel companion to Japan in the eighties. After a few minutes, Shapiro recalls, Rubenstein returned and said, “That was a senator. That one call just saved us on carried interest."

The effort to remove preferred PEU taxation failed time after time.  

The Trump administration's farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses.  Private equity has conquered the American tax system.
Politicians Red and Blue love PEU.  The greed and leverage boys learned the importance of political connections early on and after decades of influence peddling private equity is intertwined with American government.  Obama's Health Reformer held residual, undeclared private equity holdings while ensuring health care costs remained absurd.  

The Carlyle Group's purchase of giant medical supplier MedLine will not bring down healthcare costs.  It will add huge interest costs, management fees, deal fees and intermittent dividend bleedings.   PEU healthcare brought surprise medical billing and giant nursing home/hospital bankruptcies (ManorCare and LifeCare Hospitals). 

The Biden cabinet is chock full of PEUs.  It's not clear if they will be more forthcoming about their residual PEU investments than Nancy-Ann DeParle.  


While writing this piece two Pine Island Capital directors, one former and another current, graced This Week with George Stephanopolis, Secretary of State Anthony Blinkin and panelist Michele Flournoy.  Blinken later showed up on Face the Nation.

Private equity has long tried to sell its business model as beneficial, yet that effort has been perennially unsuccessful.  Enough citizens have worked for a private equity owned affiliate and know their aversion to wage increases and benefit improvements rivals their unwillingness to pay taxes.

The American people know their wishes mean little to nothing to elected officials.

Wednesday, June 9, 2021

Watch Out for PEU Politicians

 

Propublica revealed how billionaires pay little in taxes, something that has long frustrated the general public.  Despite contributing little to public coffers these billionaires have outsized influence on public policy.  

Glenn Youngkin, Red Team candidate for Virginia Governor, spent his career with The Carlyle Group.  Carlyle founder David Rubenstein saved private equity underwriter's (PEU) preferred taxation numerous times over the last fifteen years.

Politicians Red and Blue love PEU.  That is a serious problem for the average American. 

Update 6-10-21:  George Carlin noted this long ago.  "They spend billions of dollars every year lobbying, lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else. But I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well-informed. Well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interest. That’s right. They don’t want people who are smart enough to sit around the kitchen table and figure out how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago. They don’t want that."

Saturday, June 5, 2021

Giant Medical Supplier to Go PEU


Americans can expect healthcare costs to continue soaring.  Bloomberg reported

A consortium of private equity firms reached an agreement to buy medical supply company Medline Industries Inc. in what would be one of the biggest leveraged buyouts of all time.

The group, comprising Blackstone Group Inc., Carlyle Group Inc. and Hellman & Friedman, will take a majority stake in Medline.

The deal is worth as much as $34 billion including debt and would include a $17 billion so-called equity check.

Medline is the biggest private U.S. manufacturer and distributor of medical supplies like medical gloves, gowns and exam tables to hospitals and doctor’s offices.  

At least eight buyout firms had last month been preparing offers for the company, some lured by the prospect of getting the first shot at slashing costs and maximizing profits at a massive company in Medline that’s never been touched by another buyout firm.

Blackstone's healthcare affiliates are known for surprise medical billing.  Carlyle bankrupted nursing home giant ManorCare and long-term acute care hospital chain LifeCare.  

Carlyle and Hellman & Friedman took out pharmaceutical testing firm PPD.  Initial purchase price was $3.9 billion.  They bought themselves out in 2017 for nearly $9 billion.  ThermoFisher will buy PPD from Carlyle/H&F for nearly $21 billion.  

PPD's PEU owners stuck the company for over $2.7 billion in dividends between 2015 and 2019.  

The greed and leverage boys dance in and out of healthcare.  Added interest costs, management fees, sponsor dividends and deal fees help healthcare consume a greater and greater portion of the U.S. economy.   

Patients can expect to pay more and get worse service.  

Update 6-9-21:  The PEU boys spent "decades focusing on labor as a cost to be managed and not an asset to be invested in."  Medline employees, prepare for PEU shafting.

Thursday, June 3, 2021

PEU Dividend Recaps Soar in Europe


Yahoo Finance reported:

Companies across Europe are piling on debt at the fastest pace in at least four years to enrich their private-equity owners.The controversial practice known as dividend recaps is growing as investors gorge on every credit risk.

They’re layering on extra debt to write themselves dividend checks at a time when central banks have driven borrowing costs to all-time lows to help foster a global economic rebound.

Consider the move a partial exit for the PEU sponsor..

Rising inflation could wipe out gains for buyers of low interest rate debt.  Gorging investors may want to slow their intake of highly levered debt from PEU owned companies.  I wouldn't want anyone to throw up.

Wednesday, June 2, 2021

Carlyle's Policy Making Billionaires Invest in Government Policy Software Firm

 

 A press release stated:

NEOGOV, a market leader in public sector human capital management and policy management software, today announced a significant investment from The Carlyle Group (CG), a global investment firm, and existing investor Warburg Pincus.

In addition to expansion into new markets, NEOGOV will continue to serve as a platform for meaningful M&A in the broader government technology landscape.

A Carlyle managing director said in the release:

"We are excited to partner with Warburg Pincus, Shane, and the rest of the NEOGOV team to leverage Carlyle's deep expertise in government and technology investing and support the Company's next phase of growth."   

Carlyle cut its teeth with government security clearance firm USIS, which was later renamed Altegrity.

NEOGOV is a leader in human capital management and policy management software.  The Carlyle Group's co-founders have long been recognized as policy making billionaires.  They'll now have a stake in government policy management for the policies they've made and continue to develop. That sounds like a sweet deal.   

The greed and leverage boys shared their excitement about partnering with NEOGOV CEO Shane Evangelist.  Executives and PEU investors spend little to reward employees, keeping the spoils for themselves.  How will NEOGOV continue to skew the rewards away from the people doing the work?   My guess is NEOGOV won't measure the spoils siphoned away by sponsors.

Wednesday, May 26, 2021

Carlyle Adds to COVID Portfolio with Vectura Pharma


The Carlyle Group announced its intended purchase of Vectura Pharmaceuticals, a maker of inhaled medications.  Bloomberg reported Vectura is working on COVID-19 medicine.

A study on treatments for COVID-19 long hauler stated:

“long-haulers” or individuals with Long COVID – experienced symptoms and complications beyond the initial period of acute infection and illness like difficulty breathing or pulmonary diffusion abnormality, for months following the onset of infection. For asthma sufferers with known or suspected COVID-19, breathing difficulty can be particularly debilitating making finding treatments that can be conducted safely at home an additional concern. 

BioSpace reported:

While there are a myriad of symptoms associated with the illness often referred to as long COVID, including brain fog and fatigue, a large number of the therapies currently in development are geared toward the lasting lung fibrosis and respiratory problems.

Seeking Alpha stated:

Vectura makes drug delivery solutions for inhaled pharmaceuticals. It has 13 key inhaled and 11 non-inhaled products marketed by partners with global royalty streams, and a "diverse partnered portfolio of drugs in clinical development."

The company's in-market products include Seebri, Breezhaler and Neohaler, a DPI device and bronchodilator; AirFluSal Forspiro for the treatment of asthma and chronic obstructive pulmonary disease (COPD); Breelib for the treatment of pulmonary arterial hypertension; Relvar Ellipta/Breo Ellipta that is used in treating asthma and COPD; and Incruse Ellipta, Anoro Ellipta, and Trelegy Ellipta for the treatment of COPD. It is also developing VR315 (US) for the treatment of asthma and COPD.In addition, the company offers dry powder inhalers, pressurized metered dose inhalers, and nebulized devices.

Carlyle built a robust COVID-19 portfolio since February 2020.  Vecture appears to be its latest addition. 

Vectura has a mere $5.7 million in debt and employs 502 people.  These can change dramatically after private equity underwriters take over.  The greed and leverage boys have plans to profit handsomely from Murano Bidco and  COVID long haulers.

Monday, May 24, 2021

Ivanka Latest to Get Boardroom Fog

Ivanka Trump is the latest executive to show boardroom fog in the midst of a civil or criminal investigation.  She was unable to recall the title of a fellow Trump Organization executive.  Her answer to "Who is Allen Weiselberg?"

“He is the — I would have to see what his, his — I don’t know his exact title but he’s an executive at the company.”

Recall Ivanka is employed by the Trump Organization and consulted for the company to the tune of almost $750,000. 

Forbes wrote:

In recent years, Ivanka has led the Trump Organization on some of its biggest deals…and has been given credit by those she’s negotiated with for her diligence and hard work.

Her father said "Ivanka specializes in acquisitions and design."  One of Ivanka's acquisitions was Trump Hotel in Washington, D.C.  The investigation targeted stratospheric hotel rates during Trump's inauguration.

Ivanka would have been paid by Allen Weiselberg.  Her expenses would've been reimbursed by Allen Weiselberg.  She would have negotiated deals with input from Allen Weiselberg.  

Her inability to "recall" Allen Weiselberg's title set the stage for other memory failures regarding the investigation.  This is a common practice by executives in trouble with the law.  

After a refinery explosion killed 15 people and injured 180, BP's Lord John Browne went to the Supreme Court to avoid giving testimony.  BP's executive in charge of refinery operations lost his memory under questioning from plaintiff's attorneys. 

Lord John Browne was finally deposed and appeared to be quite clueless.  BP CEO Tony Hayward also got boardroom fog after BP's giant Gulf of Mexico Oil Spew.  

Private equity underwrites like hiring smart executives after they recover from boardroom fog.  Browne went to Carlyle Group partner Riverstone Holdings.  Carlyle had its own refinery explosion in Philadelphia.  Hayward joined Vallares PLC, funded by Nathanial Rothschild.

Boardroom fog is a desirable skill of corporate chiefs, however jarring it may be to the general public.

Sunday, May 23, 2021

PEU Boys Outraged by Possible Removal of Preferred Taxation


Bloomberg
reported:

In the gilded realms of private equity, where mega deals and mega paydays beckon, the masters of leveraged buyouts are feeling a little put out.

From Park Avenue to Palm Beach, the conversation keeps turning to the same uncomfortable subject: an onslaught of taxes and the closing of the Billionaires’ Loophole.

After years of idle threats, Washington is talking seriously about ending the tax break that has helped private equity become one of the most lucrative corners of U.S. finance. Adding to the injury, other taxes on income and capital gains would also rise.

Private-equity types are, predictably, outraged.

For wealthy people like them, going after carried interest -- basically, their cut of the profits -- strikes many as anti-business, if not anti-American.

Preferred taxation for the greed and leverage boys has been a fixture under America's policy making billionaires.  Private equity founders like Carlyle Group's David Rubenstein and Blackstone's Stephen Schwarzman descended on Capital Hill to stymie past attempts to rectify this gross tax inequity.

Flash back to2011 when a former major business news reporter wrote:

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!

The private equity underwriter (PEU) lobbying group aided the blitz to keep preferred carried interest taxation intact.  I referred to the earlier version as PECKER, Private Equity Capital Knowledge Executed Responsibly.  In their name change they ignored my suggestion, settling on the vanilla American Investment Council.

Private equity’s formidable Washington lobby, the American Investment Council, is willing to talk. It’s working to convince members of Congress to protect the industry’s interests.

President Biden's cabinet and White House are chock full of PEUs.   Somehow with corporate valuations at stratospheric levels and a widespread proliferation of private equity firms, the amount of incremental taxes projected decreased

Scrapping the carried interest loophole could raise an estimated $15 billion from the wealthy over 10 years, according to a congressional committee.

When push comes to shove it will be interesting to see who's voice wins.  Will it be the general public who's long wanted the obscenely rich to pay more or policy making PEU billionaires?  The public is yet to win this battle.

Friday, May 21, 2021

Rubenstein Says Cryptocurrency is Here to Stay

 

Carlyle Group co-founder David Rubenstein is one of America's policy making billionaires.  Rubenstein held off the removal of private equity's preferred carried interest taxation over the last decade through his relationships with those in power.

Rubenstein indicated cryptocurrencies are here to stay.  

“I think it’s here to stay. Cryptocurrency is not going away, just like gold is not going away. Yes, it’s had its ups and downs and [Wednesday] was not a good day for it but that’s true of anything that is relatively new. … It’s here because people in the market want something other than just the traditional currencies that we’ve had and whether that’s right or wrong, it’s clearly something that the market wants.”

If the market wants it, it gets it.  Is there no role for government regulation to protect citizens?   

He also met with President Joe Biden in his role as Kennedy Center Chairman.  I imagine President Biden said something like "David, it is good to see you again."

Rubenstein's family office, Declaration Partners, is redeveloping a $1.4 billion housing complex on Boston's Bunker Hill.  He is personally planning to invest in Africa.  

His last three guests on Bloomberg's The David Rubenstein Show were Senator Tammy Duckworth, Commerce Secretary Gina Raimondo and Fed Chief Jerome "Jay" Powell.  The last two are former private equity underwriters and likely hold some residual stake in PEU affiliates.

Greed and the lust for power has overtaken our halls of government.  The Carlyle Group led the way.  Even in retirement David Rubenstein has to have more.  The system is designed for him to achieve just that and he had a major role in that design.

Update 5-26-21:  Rubenstein's Declaration Partners has a stake in cryptocurrency broker Paxos.  Did he declare that conflict in his interview?

Thursday, May 20, 2021

Florida Homeowners Squeezed by PEU Level Greed


Wall Street on Parade
stated:

Across Florida, struggling families and senior citizens are opening their homeowners’ insurance renewal notices to learn that their policy will now cost them $800 to $1200 more than it did last year.

Rates are going up by 30 to 40 percent in many cases – during a National Emergency. Making the outrage among residents more palpable is the fact that a hurricane didn’t even touch down in Florida in 2020.

That sounds like the legendary returns of private equity underwriters, also known as the greed and leverage boys.  Forbes wrote in 2012:

"People generally don't love investors and people who have made great wealth in every society," says Carlyle Group co-founder David Rubenstein. "In the past no investor ever asked me how many jobs I created; they never cared. But they did say, 'Give me my rate of return.' " Rubenstein adds: "We have made a lot of money for our investors, and most of them, not all, are big public pension funds who seem to like the returns."

Carlyle's private equity funds have averaged 18% annual net internal rates of returns since inception

Carlyle's co-CEO Glenn Youngkin spoke at the Morgan Stanley Virtual Conference in June 2020.  He highlighted Carlyle's 97% stake in re-insuror Fortitude Re.

Fortitude Re has $43 billion of total assets and as you will all remember, as part of this transaction, roughly $6 billion of those assets are being rotated into private capital strategies managed by Carlyle. So we're excited about this final step. It solidifies Fortitude as a source of long-term capital for us but on top of that, now, we're well positioned to grow through acquisitions by looking at adding on additional runoff blocks of insurance portfolios. 
We do make money here in three ways. We of course have our investment income off of the balance sheet investment that we made in Fortitude. And then as the assets rotate into Carlyle Funds or investment activities, we of course earn management fees from those assets and have the potential to earn performance revenues off of them as well. 


Youngkin is currently the Red team nominee for Virginia governor.  The Forbes piece noted Carlyle's mining of former government officials

Carlyle also amassed a slew of former government heavyweights--and an accompanying cloak-and-dagger reputation.

"The early success in defense helped us understand that we had a core skill of dealing with businesses that are heavily impacted by government policy and regulation such as transportation, health care, telecommunications, etc.," says Carlyle Group co-founder Daniel D'Aniello.

What could Glenn Youngkin do for Carlyle as Virginia's governor?  How will Virginia residents pay for Carlyle to earn profits in multiple ways?  

Sunday, May 16, 2021

Biden Cyber Nominee to Protect Morgan Stanley's Bitcoin Futures

 

President Biden nominated Jen Easterly for a key cybersecurity position in his White House.  Easterly works for Morgan Stanley defending the firm from cyber threats.  Morgan Stanley announced it would cram Bitcoin Futures contracts into a smattering of its mutual funds.  Bitcoin is the favored currency of ransonware pirates.  I imagine the head of cybersecurity had input as to the safety of Bitcoin and the risk's involved in investing in the cyber-currency. 

The SEC had this to say about Morgan Stanley's move:

Bitcoin is a “highly speculative” asset, according to the staff statement, published Tuesday by the Division of Investment Management. The note warned investors in mutual funds that trade bitcoin futures may be taking on more risk than they realize.

Goldman Sachs announced it would offer Bitcoin derivatives.  How long before Goldman is charged with manipulating that market?  Morgan Stanley also has a record of self dealing to the detriment of customers.

As a public official Easterly would be in a position to influence the direction of those Bitcoin futures.  Easterly knows how to defend Wall Street with its new Bitcoin bet products. 

Thursday, May 13, 2021

Biden's CyberSecurity Nominee Inglis is a PEU

 

Chris Inglis is President Biden's nominee for National Cyber Director.  He's also is a private equity underwriter for Paladin Capital.

Inglis joined Paladin Capital in 2014 and had six years to invest alongside Paladin's limited partners.  Those investments are private and difficult to shed.  

Inglis serves on two private boards, Blackpoint and Securonix, as well as two public companies, FedEx and Huntington Bankshares.

Biden's cabinet is chock full of PEUs.  The greed and leverage boys identified political connections as a way to make big money.

President Obama's health reformer, Nancy-Ann DeParle, came from the PEU world and returned to it afterwards.  Her financial disclosure omitted any residual PEU investments, yet a payout from MedQuest, appeared years into her public service.  

If approved as National Cyber Director how will Inglis divest himself of difficult to flip private equity holdings. Will he be paid for residual stakes years into his public service like Obama's health reformer?

Politicians Red and Blue love PEU.  And PEUs love what politicians can do for them. Uncle Sam's wallet is good for spending.  However, the greed and leverage boys are loathe to fill it with a slice of their massive profits.

Tuesday, May 11, 2021

Carlyle's Youngkin Gets Red Team Nomination for VA Governor

 Axios reported:

Virginia Republicans on Monday night nominated Glenn Youngkin, former co-CEO of The Carlyle Group, to take on Terry McAuliffe in the year's only open-seat governor's race.

Why it matters: Private equity candidates can become proxies for the industry, and how the public views it.

Youngkin wants Virginia voters to consider his record as a businessman, specifically a private equity underwriter (PEU).  The Carlyle Group located in Washington, D.C. in order to manipulate the levers of political power and access Uncle Sam's wallet.

PEUReport has five questions for Youngkin now that he's locked up the Republican nomination for Virginia Governor.  They are:

1)  Why did Carlyle withdraw as leader of the $1 billion Corpus Christie port expansion project on Harbor Island? 

Why did the Carlyle Group, Carlyle Investment Management LLC and Carlyle Global Infrastructure Opportunity Fund drop the 50 year lease project into the lap of partner The Berry Group less than a year after publicly announcing the venture?  

This is relevant as The Carlyle Group bid on Virginia port operations in the past and Youngkin was co-CEO of Carlyle when it reneged on the deal.

2)  Why did Carlyle allow affiliate SemGroup, a staid energy pipeline company, to repeatedly naked short oil futures?

Rampant financial speculation resulted in SemGroup declaring bankruptcy in 2008.  SemGroup made over $3 billion in bad energy bets undertaking financial activities not declared in the company's SEC filings.  

From 2005 to 2008, Mr. Youngkin was the Global Head of Carlyle's Industrial Sector investment team. Carlyle added funds to SemGroup to prop the company up in the midst of huge trading losses.  Former FBI director Lois Freeh investigated why the company failed so spectacularly. A settlement against defendants, including Carlyle, cited "a failure to develop or implement a suitable risk management policy."

3)  Why did Carlyle affiliate auto parts maker UCI cut jobs from 6,900 in 2004 to 4,350 in 2009?  UCI added jobs in China while it cut American jobs.  

 

UCI added seven subsidiaries in the People's Republic of China and six in Hong Kong between 2004 and 2009. 

Youngkin highlights his record of growing jobs.  He can speak to UCI's American job loss having served as Global Head of the Industrial Sector investment team during this period.

4)  What exactly did Carlyle affiliate ARINC do to earn a 33 month ban from the World Bank for procurement violations?  

The project involved airport development in Egypt.  The ruling came while Youngkin served as Carlyle's Chief Operating Officer.

Youngkin held a senior position at the time of the World Bank ban and the project involved public infrastructure.

5)  Why did Carlyle have over 180 subsidiaries in The Cayman Islands, a renowned tax haven?

As a senior executive for Carlyle Youngkin can explain to the taxpaying public why his employer located so many subsidiaries outside U.S. tax jurisdiction.

I expect candidate Youngkin to avoid any questions about his dealings at The Carlyle Group, citing confidentiality agreements or other such nonsense.  However, he is running for public office using his business experience as a bona fides.  

Youngkin brags on PEU contributions while running from Carlyle's dark history.  There are more questionable Carlyle dealings that I did not raise.  They may come to fore in due time.

Update 5-12-21:  Youngkin came out swinging, saying the Blue team ran Virginia into a ditch.  He said nothing about his questionable record at Carlyle.  The article said Youngkin grew up in Bon Air.  PEUReport grew up a few miles away in Stratford Hills.

Monday, May 10, 2021

Political Legends Behind Granholm's Proterra

Proterra made the news recently for former board member and Energy Secretary Jennifer Granholm's conflict of interest after President Biden and Vice President Harris toured Proterra's production facilities.  CNN reported:

That Granholm even promoted electronic cars as part of the administration's climate push is already ethically questionable, experts say, but Biden and Harris' direct highlighting of Proterra is even more problematic as it could increase the company's value when it goes public -- and increase Granholm's profits. 

So who stands behind Proterra?  Al Gore and Colin Powell are advisors for major investor Klein Perkins, which has two board slots.

Al Gore is also chairman and co-founder of Generation Investment Management, another early investor in Proterra. 

Energy Secretary Jennifer Granholm joined Proterra's board in March 2017.  Concerns have been raised about her divestment of Proterra stock and stock options.  As a private company a ready market does not exist for her to sell her shares.  

 Proterra will go public via ArcLight Clean Transition Corp.  

ArcLight Clean Transition Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on July 28, 2020. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses that the Company has not yet identified
Special purpose acquisition corporations (SPAC) are a sign of greed and compromised ethics.  

 

ArcLight has two top leaders who highlight their role with Clean Energy for Biden.  Generation Investment Management has one board slot which will remain after the SPAC combination

Other appointed and elected officials have kept residual private equity stakes while "ethically" serving the public.  White House health reformer Nancy-Ann DeParle and Florida Senator Rick Scott had questionable financial filings.  DeParle had a residual private equity stake in MedQuest that was undeclared in prior forms.  Both transferred assets to family members but could easily have retained control and benefited from conflicted holdings.  

Oddly Senator Scott made his fortune with hospital giant HCA.  Rick Scott left in disgrace as HCA paid a $1.7 billion fine for fraudulent billing.  Nancy-Ann DeParle joined HCA's board in 2014 and currently holds stock worth $3.8 million.

Politicians Red and Blue love PEU (private equity underwriters).  Some dance back and forth between the private and public sector.  Most make money regardless of which party is in power.  They designed a game where those who accumulate the most wealth win.  

These are the same people not wanting to pay higher taxes on their massive gains.  The size of Secretary Granholm's gains from Proterra remain to be seen.

Update 5-12-21:  The Carlyle Group is in energy as a service, electric bus recharging, via a joint venture with Schneider Electric.  Their first project is in David Rubenstein's backyard (not literally).

Tuesday, May 4, 2021

Cruz Confesses Red Team Loves PEU


Politicians Red and Blue love PEU (private equity underwriters).  Storied private equity firms prize their political connections.  Senator Ted Cruz (R-TX) shed light on this unseemly side of politics.

Cruz warned that CEOs opposing Republican threats to voting rights will be excluded from his party’s pay-to-play legislative operation — because they’re no longer conservative enough for the GOP.

For example, Republicans will stop accepting donations in exchange for “looking the other way” when corporate bigwigs dodge taxes, Cruz wrote in a stunningly honest admission of his party’s current modus operandi.

“This time,” he wrote, “we won’t look the other way on Coca-Cola’s $12 billion in back taxes owed. This time, when Major League Baseball lobbies to preserve its multibillion-dollar antitrust exception, we’ll say no thank you. This time, when Boeing asks for billions in corporate welfare, we’ll simply let the Export-Import Bank expire.”

That's right, the exercise of corporate free speech will not be tolerated by the Red team.  Trump like payback is the Red team's mantra.  Cruz's anger filled flailing resulted a few self punches, according to former government ethics chief Walter Shaub.

Cruz’s threat is a blatant admission that Republicans are selling corporate donors “access to the government.” In a clear swipe at Cruz’s clueless self-exposure, Shaub noted that most lawmakers have too much “sense” to say it quite so brazenly.

“It’s the part everyone knows: these crooks sell access,” Shaub tweeted. “Others have the sense not to admit it. This is why our republic is broken: Immoral politicians selling power we’ve entrusted to them like it’s theirs to sell.”

Buyers of influence kept private equity's preferred carried interest taxation in place for decades.  Red and Blue politicians catered to The Carlyle Group's David Rubenstein, Blackstone's Stephen Schwarzman, KKR's Henry Kravis and Apollo's Leon Black vs. public opinion.  

Watch for Cancun Cruz's vote on eliminating carried interest taxation.  Will he vote against Trump friend Stephen Schwarzman's PEU interest?

Monday, May 3, 2021

China Takes "Flash out of Pan" for Ant Financial

 

ZeroHedge reported Fidelty wrote down its Ant Group holdings after the Chinese government held up a planned IPO.

At a $144 billion valuation, Fidelity is signaling to investors that it believes Ant is worth less now than it was three years ago - now that the hope of a exit to China's army of retail investors has been forestalled, perhaps permanently - when Fidelity first purchased its stake. This roughly squares with what analysts have warned, as many have pointed out that Beijing's crackdown will put a lid on Ant's potential growth and profitability.

WSJ also pointed out that the $144 billion number represents "a big comedown from last August, when Fidelity's marks pinned the company's valuation at $295 billion, the filings showed.

The Carlyle Group invested in Ant Group the same time as Fidelity (three years ago).  The postponed IPO valuation was $315 billion.  Warburg Pincus valued Ant at $220 billion at the end of 2020.  A fall to $144 billion could cause lots of pain for the greed and leverage boys.

Former Carlyle co-CEO and seeker of Virginia's Republican gubernatorial nomination Glenn Youngkin is worried that President Biden's proposals will produce a "flash in the pan" economy.

Ant's valuation soared from $150 billion to $315 billion in a few short years.  Youngkin would have been ecstatic to monetize that flash rise.  

Fidelity wrote down its stake to below its initial investment.  Will Carlyle and company do the same?  How much hot air will come out of the PEU balloon?

Saturday, May 1, 2021

Candidate Glenn Youngkin Ignored Taylor Swift's Pleas as Carlyle co-CEO


Winchester Star
reported on a visit by former Carlyle Group co-CEO Glenn Youngkin, looking to garner the Republican gubernatorial nomination:

 “I have a 30-year business career that has real-world experience that is so different from any Republican, any Democrat,” Youngkin said. “It’s prepared me in a way on how to understand how to get things done in a complicated, big organization. How to deliver as opposed to making empty promises. How to set expectations and hold people accountable, including myself."

 Glenn Youngkin attended the World Economic Forum as Carlyle's co-CEO.  Interviewer Andy Serwer asked Youngkin about Taylor Swift's plea to Carlyle to help her buy the rights to her music owned by Carlyle affliate Ithaca Holdings.  Here's Youngkin's answer:

I think we all appreciate what a spectacular musician Taylor Swift is.  To disappoint you I can't give you an update.  But I do think that it does represent, I think a focus that private equity is getting today.  And I think that focus is the result of the fact that we haven't done a great job of helping everyone understand really what we do and the full nature of the economic contribution that we make.  And I think that's one thing our industry needs to do better.

Facts say Taylor Swift's music was sold to Carlyle backed Ithaca without her knowledge or opportunity to buy those rights.  Ithaca then sold those rights to Shamrock Holdings without Swift's knowledge.  Despite her pleas to The Carlyle Group Swift was not given the opportunity to buy the rights to the music she created.  In his defense of private equity underwriters (PEU) Youngkin said:

"We invest in companies to make them better, not to hurt them  We invest in projects to make them better, not to hurt them."

How did buying and selling the rights to Taylor Swift's music without her knowledge make that music better?   The one record Ithaca released of Swift's old music bombed without the artist's support.

Taylor Swift believes she was hurt by Carlyle backed Ithaca.  There is no evidence co-CEO Glenn Youngkin did anything to give the artist a shot at buying back her creations.  

Virginia voters may not care about Taylor Swift's music, but they should care about fairness.   

Saturday, April 24, 2021

Youngkin Worth Over $300 Million


Carlyle Group Co-CEO Glenn Youngkin officially resigned on September 30, 2020 to follow the call of public service.  Youngkin hopes to land the Republican nomination for Virginia Governor.  

Youngkin left Carlyle's platinum handcuffs, surrendering unvested shares of company stock from various pay programs.  

We have historically relied in part on the interests of these professionals in the investment funds’ carried interest and incentive fees to discourage them from leaving the firm

After 25 years public service called.  SEC filings showed Youngkin had as many as 8.9 million shares of Carlyle stock, vested and unvested.  After his retirement Carlyle records show him with 6.7 million shares.  It's not clear if Youngkin sold any stock between his retirement and Carlyle producing the 2021 SEC filing. 

Youngkin's 6.7 million shares were worth over $275 million yesterday. Private equity professionals are known for investing alongside limited partners, for having a "stake in the game."

In addition to his over $275 million in Carlyle stock Youngkin has personal funds invested alongside Carlyle Group investors.

The amount invested in and alongside our investment funds during 2018 stood at $14,272,206 for Mr. Youngkin.   

Certain of our directors and our executive officers (and their family members and investment vehicles) also made additional commitments to our investment funds during 2018.  Total unfunded commitments as of December 31, 2018 were $73,754,891 for Mr. Youngkin.

The amount invested in and alongside our investment funds during 2019 rose to $16,667,781 for Mr. Youngkin.  

Total unfunded commitments of our directors and executive officers (and theirfamily members and investment vehicles) to our investment funds as of December 31, 2019 was $78,307,824 for Mr. Youngkin.

The amount invested in and alongside our investment funds during 2020 rose to $18,582,584 for Mr. Youngkin.

Total unfunded commitments of our directors and executive officers (and theirfamily members and investment vehicles) to our investment funds was $65,724,694 for Mr. Youngkin.

Candidate Youngkin has a personal reason to protect private equity's preferred taxation of carried interest.  Carlyle filings state:

If the U.S. Congress or state, local or certain foreign governments enacted legislation to treat carried interest as ordinary income rather than as capital gain for tax purposes or impose a surcharge on carried interest, this could result in a material increase in the amount of taxes that our carry recipients would be required to pay.

As of 2020 Carlyle reported Youngkin had $16.7 million in carried interest .  Youngkin also received $8.5 million for his partnership units.

That adds up to $305 million from his Carlyle holdings.  Youngkin earned a combined $12 million in compensation outside stock awards from Carlyle for 2018 and 2019.  He had twenty five years to use his wealth to acquire/grow other assets, homes, cars, retirement accounts and other financial investments.  

Virginians will find out Youngkin's worth when he files financial disclosure forms, should he win the nomination and general election.  He could release his tax forms, which would provide insight as to Youungkin's finances.  

Update 4-30-21:  Youngkin is clearly part of the top 0.1% which has outsized influence on government from the outside.  Youngkin wants to serve the PEU class from the inside as Virginia governor.

Friday, April 23, 2021

Youngkin's Jobs Record Questionable in Texas


Former Carlyle Group co-CEO Glenn Youngkin cited his business background as qualifications for him to serve as the Republican nominee for Virginia Governor. 

“It’s important to provide all Virginia citizens with the opportunity to pursue a career,” Youngkin said. “Carlyle started as a small company and has grown into a large company.”

“What I learned in the process is that if you make a false promise and don’t fulfill it … you don’t understand how to solve various problems … you won’t succeed as a business or leader. Let’s do it." 

Youngkin served as the Global Head of the Industrial Sector investment team from 2005-2008.  During this time Carlyle affiliate Vought Aircraft sent promised jobs from Texas to South Carolina.  It reclassified $35 million in Texas taxpayer funding from "operating" to "financing activities".

Vought employed 3,350 people in the Dallas area when the grant was awarded in 2004.  At the end of the six year period Vought employed 3,315 around Dallas-Fort Worth, a decrease of 35 jobs.  

The Carlyle affiliate had $35 million in public money for six years and cut 35 positions.  That's $1 million per job lost.  

Carlyle Group owned Vought Aircraft made promises to Texans which they failed to meet.  The question is how did Glenn Youngkin touch this jobs debacle in his various roles at Carlyle.  He was high enough, COO, CFO and Industrial Sector Chief to have touched this issue.

From 2011 until May 2014, Mr. Youngkin was Carlyle’s Operating Officer. From October

 

2010 until March 2011, Mr. Youngkin served as Carlyle’s interim principal financial officer. From 2005 to 2008, Mr. Youngkin was the Global Head of the Industrial Sector investment team.   

Vought needed capital in 2006 to ramp up Boeing 787 production (promised Texas jobs that went to South Carolina).  Surely Youngkin became aware of this situation as Vought needed more investment to adequately serve Boeing. 

Last October, Vought CEO Elmer Doty acknowledged that Vought was the highest-risk supplier on the 787 industry team. At the time, Doty attributed Vought's struggles to an internal liquidity crisis in 2006 that prevented the company from ramping up investment in the 787 programme at a sufficient rate.

In 2007 Doty told the Dallas Business Journal:

To his disappointment, Doty added in an April 17 interview with the Dallas Business Journal, expanding in Dallas is unlikely, as are plans to buy the old Naval Air Station from the U.S. Navy. So a $35 million cash grant in 2004 from Gov. Rick Perry's Texas Enterprise Fund most likely will be repaid

Three years before the grant period ended Carlyle knew they would not add Vought jobs in Texas.

Youngkin says he is about promises and jobs, yet his former employer and Texas Governor Rick Perry (R) have egg on their face in both arenas.  

At age 15 Youngkin got a job washing dishes in a diner in Virginia Beach, before he "worked his way up to flipping eggs."  

Glenn is still flipping.  Virginia voters beware, some may land on your face.

Thursday, April 22, 2021

Ex-Carlyle Group CEO Youngkin Seeks Va. Governor Nomination


Glenn Youngkin spent twenty five years working for The Carlyle Group, a politically connected private equity underwriter (PEU).  Youngkin rose through the ranks, ending up as co-CEO.  

Youngkin retired from Carlyle last year to pursue political opportunities.  He currently is seeking the Red Team's nomination for Governor of Virginia as a "new kind of leader."

"I spent the last 30 years building business, creating jobs, and bringing people together to succeed. Guided by my faith, I will bring that same dedication to serving Virginians."

His record shows Glenn served on the board of Brazilian lingerie company Scalina and an early investor in the Professional Fighter's League.

His bio reveals: 

From October 2010 until March 2011, Mr. Youngkin served as Carlyle’s interim principal financial officer. From 2005 to 2008, Mr. Youngkin was the Global Head of the Industrial Sector investment team. From 2000 to 2005, Mr. Youngkin led Carlyle’s buyout activities in the United Kingdom and from 1995 to 2000, he was a member of the U.S. buyout team. Prior to joining Carlyle in 1995, Mr. Youngkin was a management consultant with McKinsey & Company and he also previously worked in the investment banking group at CS First Boston.

During Youngkin's tenure Carlyle hired many ex-politicians, including former British Prime Minister John Major  Major's hiring occurred while Youngkin led Carlyle's PEU activities in the U.K.

As Global Head of the Industrial Sector Team Youngkin oversaw the movement of U.S. jobs to China.  Consider United Components (UCI) which Carlyle owned from 2004 to 2010.

When Carlyle purchased UCI it had no Chinese subsidiaries.  By 2010 UCI had thirteen subsidiaries in China or Hong Kong.  The number of employees fell from 6,900 to 4,350.  Carlyle pulled $35.3 million from UCI via a special dividend in 2007.   Add their $2 million annual management fee and the total rises to $47.3 million.  How many U.S. jobs did The Carlyle Group send to China outside UCI?

UCI's is but one story Carlyle sending American jobs overseas.   Nature's Bounty had no Chinese facilities when The Carlyle Group bought the company in 2010.  The company took a $35 million jobs package from Long Island to relocate jobs from China and other U.S. facilities.

China. -- As of September 30, 2013, our subsidiary, Ultimate Biopharma (Zhongshan) Corporation ("Ultimate") owned in Zhongshan, China: a 50,000 square foot facility for manufacturing softgel capsules and for administrative offices, a recently built 75,000 square foot warehouse facility with packaging capabilities and 18.5 acres of vacant land adjacent to the manufacturing facility. In addition, Ultimate leased 11,300 square feet of dormitory space and 4,800 square feet of warehouse space in Zhongshan City. Also, one of our subsidiaries leased 84,800 square feet of warehouse space in Beijing. 
Note Nature's Bounty had no manufacturing facilities in China in its final 10-K filing before Carlyle's 2010 buyout. 

At the 2012 World Economic Forum in Davos, Carlyle co-founder David Rubenstein expressed his preference for the Chinese totalitarian model of central planning.  Rubenstein offered a dark vision for those not adhering to his advice.

"Our children are going to have and our grandchildren are going to have" a lower quality of life and a less affluent lifestyle than we enjoy today

In many ways PEU Rubenstein made his vision a reality with help from his Co-CEO Glenn Youngkin.  The greed and leverage boys used to hire former politicians.  Their innovation is to send PEUs into the political arena and pretend they didn't send millions of jobs overseas.  

Youngkin is running in the complicated Republican gubernatorial convention to be held on May 8th. The convention will have multiple voting sites, ranked-choice voting, an unlimited number of delegates and weighting by locality.  It's as simple as PEU return on equity calculations. 

Youngkin spoke against high taxes and said that he will “revitalize, reinvigorate and rebuild Virginia’s economy like never before.”

The tax avoidant billionaire class can count on Youngkin. 

Wednesday, April 21, 2021

PEU Super League Implodes

 

Manchester United owner Joel Glazer tried to undo the damage done to European football from the proposed Super League, which collapsed after all six English clubs withdrew.   Glazer owned ManU since 2005 and communicating with fans and building trust has not been a priority.  Making money has and that was the premise behind the Super League.

La Liga President Javier Tebas said:

“The Super League has made a fool of itself and its concept has shown the absolute ignorance of its leaders in relation to the industry and fans across the globe. When you do something in secret, what you’re hiding usually isn’t good.”

The PEU boys purposely work in secret while manipulating existing political structures to their advantage.  The Carlyle Group located in Washington, D.C. for that very reason.  While Carlyle was not involved in the announced Super League (financed by JP Morgan) its Co-CEO Glenn Youngkin helped start the Professional Fighters League from the ashes of the World Series of Fighting.  Youngkin retired from Carlyle and is currently a candidate for Virginia Governor, aiming for the Red Team's nomination.  

Stakeholders took down the greed-inspired PEU Super League.  What will Virginia voters do?

Tuesday, April 20, 2021

Carlyle Exits Ithaca Holdings

Korea Bizwire reported:

Hybe, the company behind K-pop phenomenons BTS, announced Friday a deal to buy a 100 percent stake in American music entrepreneur Scooter Braun’s Ithaca Holdings.

Under the deal, Hybe — formerly Big Hit Entertainment — will be acquiring the media company, which owns affiliates like SB Projects, founded by Ithaca chief executive Scott “Scooter” Braun and Big Machine Label Group, the company said in a statement.

In a separate regulatory filing, the company said it plans to buy the 100 percent stake in Ithaca Holdings for US$1.05 billion via its U.S. subsidiary Big Hit America Inc. The company will fund Big Hit America for the deal, which will increase its capital by 1.07 trillion won.

The Carlyle Group invested in Ithaca Holdings in 2017.  Carlyle's minority stake gave the private equity underwriter (PEU) a voice in Ithaca's secret purchase of Taylor Swift's music catalog.  

Carlyle co-founder David Rubenstein and co-CEOs Glenn Youngkin and Kewsong Lee ignored Taylor Swift's plea for help in acquiring the rights to her music from Ithaca.  She fired a shot over the PEU bow with her song "The Man."

Ithaca floated a Taylor Swift live album that bombed without the singer's endorsement  That motivated Ithaca and Carlyle to flip Taylor's music collection before she could begin re-recording her old music  

The PEU did not give Swift a chance to bid on her music, instead requiring buyer Shamrock Holdings to not communicate with Taylor until the deal was consummated. 

Taylor recently re-released her album Fearless and asked her loyal fans to bury the old versions of her songs on Spotify.  Swift's Fearless broke a record held by The Beatles for fifty four yeas.

Taylor has topped the Fab Four by making chart history with the re-release of "Fearless." Here's the chart history part ... the album hit #1 Friday in the UK, and with that Taylor has racked up 3, number-1 albums in 259 days. The albums ... "Fearless," "Folklore" and "Evermore." The Beatles hit #1 with 3 albums in a row, but it took them 364 days.

The Carlyle Group's investment in Ithaca Holdings is not clear

As part of the transaction, private equity firm The Carlyle Group is exiting its significant minority stake in Ithaca after initially investing in the company in 2017 by way of its Carlyle Partners VI fund.

Carlyle reported in June 2019:

The Carlyle Group, which initially invested in Ithaca in 2017, is supporting the (Big Machine) transaction, alongside Scooter Braun and Ithaca Holdings, through an additional equity investment by way of its Carlyle Partners VI fund. Carlyle will remain a minority shareholder in Ithaca and continue to support the combined company’s growth strategy with Jay Sammons, Head of Carlyle’s Global Consumer, Media and Retail team, remaining on Ithaca’s Board.

Business Insider reported:

Carlyle's involvement in Braun's $300 million deal to buy Big Machine is complex, but at the time the deal was announced, the group said it was "supporting" Braun, and his company Ithaca Holdings, in their purchase of Big Machine, which also owns the rights to music by country star Rascal Flatts.

Carlyle first invested in Ithaca Holdings in 2017, and according to a June story from The Wall Street Journal, Ithaca is now valued at $800 million.

Ithaca went from $800 million to at least $1.35 billion, the $1.05 billion from the sale of the company to Hybe and the $300 million from selling the Swift catalog to Shamrock Holdings.  That's a two year return of 68.75%.  Carlyle's return on equity is likely much greater, thanks to leverage.  Another PEU payday!