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.

Update 11-22-21:  The CEO "knew of sexual harassment and rape claims at the gaming giant but failed to report some of them to the board."  The article did not say what role, if any, Fran Townsend played.

Wednesday, July 21, 2021

Carlyle Launches Copia Power


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." 

Update 2-2-22:  A historic bridge in Rotterdam will be dismantled so billionaire Jeff Bezos' super-yacht can pass through.  Locals are livid given officials promised the bridge would never be dismantled again.  Can't his spaceship lift the yacht over the bridge?  

Update 3-1-22:   Young workers understand how they are judged on their productivity and the never ending drive to squeeze more out of them.  For executives and the PEU boys it is never enough.  

Update 5-30-22:  Billionaire Elon Mush tweeted it is morally wrong and dumb” to use the word “billionaire” as a pejorative, adding, “If the reason for it is building products that make millions of people happy.”  What if the reason for that billionaire is decades of preferred taxation?  What if that billion in wealth arose from surprise medical billing?

Update 10-5-22:  Treasury Secretary Janet Yellen said the U.S. economy failed to live up to the nation's promise of equal opportunity for all."

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.

Update 6-29-23: Investor Kirk Simon called out the PEU boys buying insurance companies and steering insurance reserves into their PEU offerings.

The whole private equity thing of buying up life insurance companies then investing the premiums just seems a bit sketchy.

I'll shorten it to the whole private equity thing seems a bit sketchy.

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


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?

Thursday, July 1, 2021

RLJ Equity Partners CEO wants Slavery Reparations

Billionaire and private equity underwriter Robert L. Johnson suggested the U.S. government pay reparations to Black Americans for lost income due to slavery.  Johnson said:

"Reparations would require the entire country to … admit that the result of slavery has been 200 years of systemic racism and for that reason Black folks have been denied $13-15 trillion of wealth."

Johnson said that reparations should reach Black Americans of all walks of life, even those who have accumulated wealth. Johnson named successful Black people such as Oprah Winfrey, Lebron James, Micheal Jordan, and even himself, of all being deserving of a check.

"If you're a successful Black business, the idea is you've had enough," Johnson told Vice News. "But no one ever asks if [a white-owned business] is too rich to benefit from investing in a football stadium, or receiving other benefits like preferential tax treatment or liquidity injections from the Federal Reserve."

Johnson is a joint venture partner with The Carlyle Group.  Both Johnson and Carlyle are politically connected.  PEUs receive preferential tax treatment via carried interest taxation. Bob Johnson defended his preferred taxation in 2010.

Despite claims by policymakers and others that raising taxes on so-called “carried interest” will only affect a small group of wealthy fund managers, the real impact will be felt by workers and small business owners on Main Street who desperately need access to private capital to survive, prosper and grow.  

As a community banker how many liquidity injections has Urban Trust Bank received from the Federal Reserve window?  His RLJ Western Assets received over $1.8 billion in funding from President Obama's Financial Stability Plan:

The RLJ Western Asset joint venture was one of the original nine fund managers pre-qualified to raise private investment capital and administer investing for the Legacy Securities Public-Private Investment Program. 

A billionaire PEU with access to Department of Treasury 100% match funding wants a nearly $400,000 check from Uncle Sam?   Pffftttttt.  Consider what RLJ said to Mergers and Acquisitions in 2012

I accomplished what I did because I was the beneficiary of someone giving me a chance. Because John Malone, who at the time was the chairman of Telecommunications Inc., invested half a million dollars in my vision, BET became the most successful minority-owned company ever created and the first to go public on the New York Stock Exchange.

John Malone is a fundamental believer in the merit system and a non-believer in handouts.

RLJ took his billion dollar profit and joined the greed and leverage boys.  Maybe two hundred years from now PEUs will atone for the harm they've done to working class people.  There is zero chance of that happening as Politicians Red and Blue love PEU.