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.

Update 7-9-21:  VA Scope reported Democrats are attacking Youngkin for his Carlyle Group dealings.  The story mentioned sending jobs overseas but nothing about Carlyle's numerous ethical lapses or widespread use of tax havens.

Update 8-6-21:  Youngkin's checkered career with Carlyle included infrastructure funds.  "He
oversaw a push into infrastructure projects that dogged him, as a $2.2 billion fund for clients struggled to make deals."

But the infrastructure push haunted him. The fund that Carlyle raised in 2018 struggled to move large deals forward, such as the redevelopment of Terminal One at New York’s John F. Kennedy Airport. According to Carlyle, the fund had invested just $466 million as of last December, when a new head was brought in.

One customer, the Teacher Retirement System of Texas, said it was told the fund had a negative return of 51% at the end of 2020.