Sunday, September 26, 2021

Reich Ignores PEU Greed


 Former Clinton Labor Secretary Robert Reich wrote:

The most telling trends over the last three decades have been the growing share of the economy going into corporate profits – generating ever-greater compensation packages for top executives and ever-higher payouts for big investors (all of whom live off shares of stock) – and the declining share going to most Americans as wages and salaries. 

He said this after suggesting greed had been "laundered out" of corporate contracts.  

The specific people who enter those contracts (on behalf of big corporations as well as thousands of people who run vast investment funds on behalf of millions of shareholders) are neither greedy nor socially responsible. They’re merely doing what they understand to be their jobs. Greed and social responsibility have been laundered out of these transactions.

Horse hockey!  Greed drove the three decades old trend, nothing else.  The PEU boys played a major role as founders became multi-billionaires with direct access to elected officials.  Reich's former boss helped the greed and leverage boys get a foothold.

Oddly, Carlyle co-founder David Rubenstein and Reich worked for President Jimmy Carter's administration.  The former Mrs. Rubenstein highlighted her husband's underlying greed.

In 2016, Rubenstein gave the National Park Service $18.5 million to help restore the Lincoln Memorial. In private, Alice Rogoff Rubenstein has described those acts as publicity grabs and claimed all her financier husband really cares about is making money.

Reich's worry came true.  Ignoring underlying greed takes the focus off policy making billionaires, the elephants in the economy.

Update 9-29-21:  Doomberg noticed with his statement:

"the grotesque exploitation of political power for personal financial gain is so common that it dulls one’s capacity for outrage."  

PEUReport tried to document that pattern since 2007.  Later Doomberg said:

What is the future of a country in which minor offenses by “everyman” individuals are prosecuted, and major offenses committed by powerful figureheads are permitted?

Not satisfied with mere good fortune, America’s elite are indulging in an orgy of staggering self-enrichment, the scale of which would make even Bacchus blush. As the embers of disgust take hold, one wonders how long until a full-on fire rages from below to spoil the party.

That's why regional Fed Chiefs get to resign after years of insider trading.  Individuals giving up their jobs to avoid ethics concerns are analogous to corporations settling investigations with no admission of guilt.  Not justice, but "just us" elites looking out for one another.

Update 10-4-21:  Wolf Street reported how former PEU, now Fed Chief Jay Powell helped the billionaire boys.  Cheap debt is a huge boon to the greed and leverage boys.

The Fed’s doctrine of the “Wealth Effect” is designed to enrich the top 10%, particularly the top 1%, particularly the top 0.01%, and particularly the Billionaire Class. The more they have, the more they benefit. This is official Federal Reserve policy.

Blue PEU Hunter Biden still owns 10% of a Chinese private equity firm through Skaneateles LLC.  Hunter is the sole owner of Skaneateles.  

Update 10-5-21:  Tax Justice Network wrote in regard to the Pandora papers:

The Pandora Papers document 14 offshore professional service providers, and the way in which a mass of politicians, public officials and celebrities have utilised the offshore system to hide the true value of their wealth, and in some cases pay less tax than they owe. 
Public outcry following the Panama Papers forced governments to adopt tax transparency measures but they stopped short of full transparency. The biggest blockers to transparency are the US, which the Pandora Papers confirms is the world’s biggest peddler of financial secrecy, and the UK, the leader of the world’s biggest tax haven network. We need full transparency so we can hold tax abusers accountable, especially when our politicians are among them.

I expect many Western greed and leverage boys, besides the outed Tony Blair, to be in the treasure trove of documents.  This release of information makes Robert Reich's column even more odd in his discounting the role of greed and illicit financial behavior in record income inequality.

Thursday, September 23, 2021

Air, Water and Healthcare: PEU Targets

India's government failed to protect air and water for citizens.  This may turn into a profit opportunity for at least one U.S. private equity underwriter (PEU).  

More than 50% of India’s population has no access to clean water. While for many that means a struggle to fetch water, urban families who can afford to are investing in home water purifiers. As air quality deteriorates, they’re buying air purifiers too. And US equity firm Advent International has just swooped in on a long-term investment opportunity that addresses those problems.

What role did PEU affiliates play in creating India's pollution problems?  

Growing industrialisation is making the existing problem of the lack of clean drinking water in India worse.

The Carlyle Group owns a number of pharmaceutical manufacturers in India.  They are part of Carlyle's healthcare push in midst of a global pandemic. 

Bain Capital sees healthcare as a profitable space to conduct more deals.  TPG Capital just promoted to President a person who led their healthcare investments.

Healthcare, air and water have gone PEU.  Next, they'll corner the market on sunshine. 

 

Wednesday, September 22, 2021

PEU Role in Corporate Tax Decline


Private equity underwriters (PEU) are experts at tax avoidance.  Each year the PEU boys buy thousands of companies, load them with debt, deal and annual management fees.  PEU ownership often turns profitable companies into unprofitable one.  That means affiliates pay no taxes or garner tax loss carryforwards.  MarketWatch reported:

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

Fourteen years ago I attended an open house hosted by Congressman Mike Conaway, Certified Public Accountant (CPA).  I asked a question about the impact of private equity buyouts and future lower tax receipts in the Treasury:

Q:  As an accountant you are aware of the need to balance revenues with expenses. What is the impact of the recent flurry of private equity deals on expected Treasury receipts in 2008 and beyond? In the case of recently bought out HCA and Triad Hospitals, the additional interest for their new owners is a combined $2 billion. As private sector companies have to balance the revenue expense equation, this means more health care price increases or significant hospital expense cuts. Spreading the new Community Health Systems debt over their facilities amounts to $2 million per hospital. The new debt taken on by SACMC’s corporate parent is enough to wipe out their merged company’s bottom line for all of last year. This would be a $200 million hit to the Treasury. HCA just announced their profits are down 50%, mainly due to increased interest costs. What are you as an accountant doing to monitor and address this, and specifically the revenue side of the federal government?

Response:  Conaway used it as a softball. "He trusts the capital gains from those sales make up for any decreased business income taxes." After a five minute answer, the end result is the federal government does not monitor major shifts like buyouts and their subsequent impact on tax receipts. There is nothing concerning about private equity firms in his mind. (Note: he does receive donations from PAC's of firms owned by major PEU's. Carlyle's Vought Aircraft Industries, WCAS's U.S. Oncology, and soon to be KKR's TXU. Vought benefited from the largest earmark to date, $2.4 billion to buy new military planes).
My grandfather was an accountant with Price Waterhouse before they added consulting divisions and merged with other former Big Eight accounting firms.  

Private equity's use of nonstandard measures steamrolled the accounting profession.  Financial beat cops folded under the widespread influence of policy making billionaires, as did elected officials.

This citizen saw in 2007 how the spread of PEUs would negatively impact the federal Treasury.  My conflicted Congressman ignored his professional duty as he spoon fed me bull excrement.  My grandfather would've been sorely disappointed in the accounting profession.

The greed and leverage boys anti-tax predilections have been fully enabled by elected officials.  Politicians Red and Blue love PEU.

Update 9-23-21:  Carlyle Group co-head of European buyouts Marco De Benedetti said:

“We are peak in the terms of deal activity,” De Benedetti said, adding that the ramping up of capital deployment and fund raising cycles would also likely remain. “Speed is here to stay,”

Update 9-25-21:  The White House said the 400 richest Americans paid a tax rate of 8.2% over the last decade.  The calculation includes unrealized gains on stock holdings, public and private.

Update 9-26-21:  Former Clinton Labor Secretary Robert Reich wrote:

The most telling trends over the last three decades have been the growing share of the economy going into corporate profits – generating ever-greater compensation packages for top executives and ever-higher payouts for big investors (all of whom live off shares of stock) – and the declining share going to most Americans as wages and salaries. 

He said this after saying greed had been "laundered out" of corporate contracts.  Greed drove the three decades old trend, nothing else.

Tuesday, September 21, 2021

Mnuchin Goes PEU with Saudi Money


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

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

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

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

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

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

Sunday, September 19, 2021

PEU Love Continues in Washington

MarketWatch reported:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Forbes reported how good times continue for the PEU boys.

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

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

 

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

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

Update 9-24-21:  Barron's reported:

A key tax break for private-equity and hedge-fund managers that has been targeted for elimination by every president since George W. Bush survived the latest attempt to kill it.

Last week, the House Ways and Means Committee voted to preserve the low tax rate that fund managers enjoy on their biggest paydays: compensation known as carried interest.

Update 9-25-21:  The White House said the 400 richest Americans paid a tax rate of 8.2% over the last decade.  The calculation includes unrealized gains on stock holdings, public and private.

Wednesday, September 15, 2021

Carlyle Co-founder to Get Doctor of Humane Letters


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

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

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

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

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

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

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

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

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

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

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

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

Sunday, September 12, 2021

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

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

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

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

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

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

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

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

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

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

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

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

The Guardian highlighted concerns shortly after 9-11:

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

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

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

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

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

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

Saturday, September 11, 2021

Another Disturbing David Rubenstein Interview


Yahoo Finance
reported:

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

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

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

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


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

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

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

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

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

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

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

Update 10-13-21:  Rubenstein is worried about the democracy he crafted as a policy making billionaire.  Politicians greed for power is matched by the PEU boys' desire for money.  Together they divided the country for their own spoils. 

Friday, September 3, 2021

Carlyle's Rubenstein Hosts Elected Officials, Finds Cryptocurrencies Enjoyable


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

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

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

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

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

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

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

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

Thursday, September 2, 2021

Jessica Simpson in Taylor Swift Position with PEUs


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

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

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

Apollo owned Yahoo Finance reported:

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

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