Wednesday, June 30, 2021

CEO Resigns in Disgrace from Clinton and Blair's Teneo


Teneo's politically connected CEO Declan Kelly resigned in disgrace after behaving badly at a Global Citizen charity concert in May.  Teneo was a corporate sponsor of the event.

VAX LIVE: The Concert to Reunite the World is executive produced by Global Citizen, the Ad Council & COVID Collaborative, YouTube Originals, iHeartMedia, Teneo and Live Nation

Teneo is part owned by CVC Capital.  Kelly got drunk and groped women in front of his private equity sponsor at an event his company supported.

Chris Stadler is co-chair of the Global Citizen board of directors and a managing partner at CVC Capital Partners

PRWeek reported:

The allegations were that Kelly had behaved inappropriately at a party on 2 May linked to the high-profile concert put on by Global Citizen, chaired by Prince Harry and Meghan Markle, which featured artists including Jennifer Lopez. According to the FT, several sources claimed the inappropriate behaviour included the non-consensual touching of a number of women. 

PageSix reported:

The insiders at Teneo — the Manhattan firm that promotes itself as helping Fortune 500 CEOs maintain their pristine reputations and avoid scandals — claim that Kelly has been “having an affair with a subordinate for years.”

Another Teneo insider said of the alleged relationship, “It has been an open secret at the firm.”

Former President Bill Clinton and former British Prime Minister Tony Blair worked as advisors for Teneo.  They also rode multiple times in Jeffrey Epstein's plane, known as the Lolita Express. 

In 2006 Epstein donated $25,000 to the Clinton Foundation. Bill Clinton made more than two dozen trips on Epstein’s jet around this time, Epstein’s flight logs show. In January 2003, according to Band, Clinton visited Epstein’s private Caribbean island, Little St. James.

Consider this story from Vanity Fair

Around the time Doug Band launched Teneo in June 2011, Chelsea summoned Band and his cofounder Declan Kelly to the Clinton office in Harlem. Band walked in to find Bill flanked by Chelsea and her husband, financier Marc Mezvinsky. According to Band, Chelsea said Band’s $2.5 million offer to put her dad on Teneo’s advisory board wasn’t enough. She wanted Band to give her and Mezvinsky an ownership position in Teneo. To Band, it felt like a shakedown. “I thought she was kidding or deeply sick,” he told me. Band looked across the table at Bill, but he sided with Chelsea. Band refused to give up an equity stake.

Teneo's roots are private equity underwriting (PEU) level greed. 

Teneo aspired to be a communications firm, investment bank, and management consultancy all in one, with fees to match: Teneo’s retainers would start at $150,000 a month and reach into the millions.
The Clinton Global Initiative and Teneo were intertwined until Bill's charity shriveled.

Teneo recently expanded with the purchase of another advisory firm:

In March, they invested in WestExec Advisors, a Washington geopolitical risk consulting company.

WestExec Advisors was founded by Anthony Blinken and Michele Flournoy in 2108  Both also worked for PEU Pine Island Capital.  Blinken is President Biden's Secretary of State.

President Biden tapped more than one Pine Island Capital advisor for his cabinet.  Defense Secretary General Lloyd Austin is also a PEU.

Teneo doesn't just cater to the Blue political team.  Former House Speaker Paul Ryan works for Teneo and former White House Press Secretary Sarah Sanders interviewed with Teneo after leaving the Trump White House.

Teneo executives are supposed to save reputations.   One has to wonder the series of selfish decisions that contributed to Declan Kelly's downfall.  How many ethical lines did he cross on his way to imploding at a high profile charity event?  It's PEU level arrogance. 

Saturday, June 26, 2021

PEU Microscope Reveals Greed Stained Healthcare Policy


Private equity underwriters (PEU) bet on making big money in healthcare, primarily funded by Uncle Sam's wallet.  A May press release stated:

Welsh, Carson, Anderson & Stowe (WCAS), a leading private equity firm focused exclusively on the healthcare and technology industries, announced today that Dr. Adaeze Enekwechi will join the firm in June as an Operating Partner.

Dr. Enekwechi is a well-known expert on health policy. She has served at the highest level of government and as a leader in the private sector. Most notably, Dr. Enekwechi headed health programs at the White House Office of Management and Budget under President Obama. In that role, she provided policy, management, and regulatory oversight for more than $1.6 trillion in federal government health spending, including Medicare and Medicaid. She had primary responsibility for all operating divisions of the Department of Health and Human Services such as the Centers for Disease Control and Prevention, the National Institutes of Health, and the Food and Drug Administration.  

WCAS has former Medicare Chief Tom Scully as General Partner.

"I have been friends with Adaeze for many years, so I couldn't be happier for her to join WCAS.  We've made a significant investment at WCAS in understanding and engaging healthcare policy makers, and I look forward to partnering with Adaeze on this," said Tom Scully, a General Partner at WCAS and a former Administrator of the Centers for Medicare and Medicaid Services (CMS). 
Dr. Enekwchi will keep her board positions and academic position as professional lecturer.

She also will keep her academic position with the Milken Institute School of Public Health at the George Washington University.

Michael Milken is the founding father of leveraged buyouts.  President Trump removed Milken's conviction for unbridled greed during his reign as Junk Bond King.  Milken was allowed to keep most of his ill gotten gains which enabled him to return to the world of politically connected wealth.

President Biden's cabinet is chock full of PEUs.  Everything about private equity is unbalanced.  Employees bear the brunt of PEU ownership via job cuts, stagnant wages and deteriorating health benefits.  Company chiefs get a stake and often make a huge payday.  Employees do not benefit when the company is sold and resold.  That was my experience, having worked for more than one WCAS affiliate.

Politicians Red and Blue love PEU, as do healthcare policy makers.  Citizens will be worse off for this tangled web of greed. Healthcare will not get cheaper with widespread PEU infection.

Tuesday, June 22, 2021

Cerberus Four Bagger Steward Healthcare Ready to Fail?

The deal between a hell hound and Catholic hospital system resulted in an $800 million profit for Cerberus, a New York City based private equity underwriter (PEU)  Bloomberg reported:

Cerberus Capital Management, demonstrating the rewards of Wall Street’s rush into health care, made a roughly $800 million profit on its investment in struggling Catholic hospitals, records show.
In 2016, Cerberus made most of its money by selling valuable hospital property to the real estate investment trust, which then leased it back to the hospitals. That transaction enabled Cerberus to extract hundreds of millions in dividends for its investors. Medical Properties Trust also ended up owning a stake, now almost 10%, in Steward.

Medical real estate investment trusts are often the canary in the bankruptcy coal mine.  Before The Carlyle Group drove nursing home giant ManorCare into insolvency it sold the nursing home facilities to HCP.  As ManorCare paid less and less in rent HCP ring-fenced the poorly performing assets into QCP.  

ManorCare board member and former Medicare Chief Gail Wilensky promised Carlyle's buyout wouldn't harm quality.  Carlyle's shenanigans killed the whole company.  Wilensky is yet to comment.

Medical Properties Trust did more than make a one time buy of "valuable hospital property".  It propped up an imploding Steward.  WSJ reported:

When Steward ran into financial trouble, Medical Properties Trust provided it more than $700 million through a series of complex deals, the documents show. It provided $200 million to buy Steward assets valued at $27 million. Then it refinanced debts Steward owed Cerberus.
Cerberus made out, over and over in the Catholic hospital deal. 

The greed and leverage boys love accessing Uncle Sam's wallet, much of which is spent on healthcare.

The federal government provided Steward a total of $675 million in grants and loans

Steward executives wanted their share of the green, also known as a conflict of interest.  Becker's Hospital Review reported:

Medical Properties Trust formed a new joint venture with the founder of Steward, Ralph de la Torre, MD, and other executives  The real estate firm agreed to lend the joint venture $205 million so it could acquire the international assets from Steward. Financial documents show that the assets that were sold were valued at $27 million.

This is why many people hate healthcare.  Those talking "value" have their hand in the pocketbook and rely on impersonal technology to develop a "relationship."   Costs never go down, as an ever increasing amount is shifted to those with supposedly good health insurance.

PEU deal makers brought us surprise medical billing, safety net hospital closures, and billions more in healthcare costs at hospital giant HCA.  Carlyle just struck a deal for Medline, the nation's largest medical supplier.  

The greed and leverage boys ensure their financial needs are met first.  Patients are but an afterthought in a healthcare system where U.S politicians serve the investor class.   

Update 6-23-21:  Rather than ring fence Steward properties MCP went even further in by buying five former Tenet Healthcare hospitals in Florida and leasing them back to Steward.  This capital injection should enable Steward to pay rent for awhile.

 An odd story revealed the Saudi assassins of journalist Jamal Khashoggi trained the prior year at Cerberus affiliate Tier 1 Group.

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.

Update 6-17-21:  Outrage over the revelations are mostly aimed at the leaker within the IRS.  When will we stop shooting the messenger and act on the very disturbing message?

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."

Update 7-2-21:  Former Carlyle co-CEO Glenn Youngkin referred to Asian people as "Yellow" Virginians.  Youngkin's co-CEO Kewsong Lee of Korean descent.

Update 7-8-21:  Youngkin answered a question on abortion saying "When I’m governor and I have a majority in the House, we can start going on offense. But as a campaign topic, sadly, that in fact won’t win my independent votes that I have to get.”

Update 7-18-21:  Youngkin is proving to be an elusive candidate on issues.   He does know how to use debt to enhance his financial position and avoid taxes.

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.

Update 6-17-21Bloomberg echoed the PEU dividend bleeding theme.with:

Europe’s private equity patrons are piling debt onto the books of their companies to support dividend payouts, a move which could threaten these firms’ prospects when the fiscal and monetary stimulus of the pandemic era starts to wind down.

Just under 13 billion euros ($16 billion) of leveraged loan deals linked to dividend recapitalizations took place by early June -- the highest level in 14 years -- according to S&P Global Market Intelligence’s Leveraged Commentary & Data unit. That’s only 4 billion euros shy of the total for the same period in 2007, on the eve of the great financial crisis.

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.