Monday, September 26, 2022

PEU Unethical Waves


The SEC fined Wave Equity Partners LLC, an ESG oriented private equity underwriter (PEU).  

From May 2018 through October 2020, Respondent caused Fund II to pay certain organizational expenses specified in Fund II’s governing documents, including placement agent fees to a third-party vendor. The placement agent fees that Respondent borrowed from Fund II over this period of time totaled $1,096,443.

Pursuant to the terms of Fund II’s partnership agreement and private placement memorandum, this borrowed money was required to be paid back to Fund II promptly through an offset of the quarterly management fees charged and collected by Respondent for its management of Fund II. 

Respondent did not offset any of the money borrowed from Fund II against the receipt of management fees for 11 consecutive quarters, beginning with the second quarter of 2018 (the quarter ended June 30, 2018) and continuing through the fourth quarter of 2020 (the quarter ended December 31, 2020). Instead of paying back Fund II during this time period, Respondent used the management fees it charged and collected for its own operating expenses. 

From July 2018 to October 2021, Respondent never informed investors and potential investors in Fund II that it had failed to repay Fund II timely and was thereby in violation of Fund II’s governing documents.

Glenn Youngkin was once an ESG fan while co-CEO of The Carlyle Group He flipped his position after winning the Virginia Governor's race.

FT ran another story on PEU continuation deals and conflicts of interest in moving affiliates from one fund to another.  A Dutch pension fund investment professional equated continuation deals with ponzi schemes.

FT also reported that a PEU billionaire lamented that crypto is not as ethical as private equity.   

“I’ve gotten to know that world a little bit more, and some of the business practices don’t rise to the level of ethics that we’re all used to in private equity with your investors and your customers and your community, and that has been a bit disappointing.”

Opaque fees, a history of collusion via club deals, pay for play settlements indicate questionable PEU ethics.  The intense profit pressure put on affiliates frequently causes bad behavior (Carlyle = ARINC, SemGroup, Synagro, ManorCare)

Consider that Carlyle co-founder/crypto fan and policy making billionaire David Rubenstein has access to D.C.'s hallowed halls of governance.  He kept PEU preferred taxation despite widespread public opinion to the contrary.

Failing to meet the already low ethical standards of the greed and leverage boys...that shouldn't be the future of finance, much less its present.

Friday, September 23, 2022

PEU Party in Cannes

The greed and leverage boys gathered along the French Riviera to sell the private equity underwriter (PEU) method of investing.  It's high fee and low tax.  The PEU way leverages debt and political connections for profit.  

When times are good PEU sponsors bleed affiliates with dividend recapitalizations.  When times get tough affiliates can find themselves stressed for operating cash as the greed and leverage boys won't throw good money after bad.  If it gets bad enough affiliates can be cast into bankruptcy.

A newer option is to sell an affiliate to a sibling fund in the same PEU family.

FT reported:

Mikkel Svenstrup, chief investment officer at Denmark’s largest pension fund ATP, used his platform at the conference to compare private equity to a pyramid scheme

He complained about the industry’s use of “continuation funds”, a fast-growing model in which a private equity group sells a company to itself by shifting it between two of its own funds. And he said he was “looking very carefully” at “all those tricks they do to kind of manipulate” returns figures. 

 Bloomberg reported

... continuation funds allow buyout firms -- also known as general partners -- to keep raking in management fees from existing or new clients.

Neuberger Berman is planning to deploy a chunk of the $4.9 billion it has raised for second-hand private equity deals on so-called continuation funds.

Is Neuberger looking for PEU affiliates on life support?  It may find ample opportunities going forward. 

The greed and leverage boys want to open their offerings to the more common investor.   This PEU hunt for cash from individuals is characterized as the "democratization" of private equity.

Common Dreams reported on dark money in American democracy

Proponents of democracy responded with disgust Thursday after Senate Republicans filibustered the popular DISCLOSE Act, which seeks to expose the super-wealthy donors who are spending unlimited amounts of undisclosed money to ensure that the U.S. government advances their interests at the expense of the vast majority.  

PEU founders have long been policy making billionaires.  America's hallowed halls of government have long been occupied by greed and leverage boys.  

Politicians Red and Blue love PEU and increasingly, more are one.  One can keep the PEU party on the Riviera rolling, even as they take their last breath.  

Update 9-26-22:  FT ran another story on continuation deals and  conflicts of interest in moving affiliates from one PEU fund to another.  It also reported that a PEU billionaire lamented that crypto is not as ethical as private equity.  Ah, failing to meet the already low ethical standards of the greed and leverage boys...

Thursday, September 22, 2022

Rubenstein on Jay to Suppress Lee


Carlyle Group co-founder David Rubenstein filled the financial airwaves recently, previewing this week's Fed meeting and offering interpretive commentary after the Jackson Hole event.

Rubenstein advises the New York Fed via his service on the Investor Advisory Committee.  That committee will take up the following questions in October:

What are your expectations for the U.S. economic outlook for growth and inflation? How are you thinking about the trajectory of the U.S. economic outlook relative to other jurisdictions? Which developments have been most important in affecting your outlook?

What is your outlook for Federal Reserve monetary policy and the path of policy? How do you expect monetary policy to evolve internationally? What do you think has driven changes in currency markets recently and what are the potential impacts and implications of these moves?

What are your thoughts on the outlook for Chinese economic growth? To what extent do recent developments, such as conditions in the real estate market, the zero COVID policy, and the upcoming Party Congress affect your view of the near-term outlook. What are key risks further out?

Rubenstein's ubiquitous presence may be an attempt by Carlyle to change the subject from the founders' recent drubbing of former Carlyle CEO Kewsong Lee.

Fed Chair Jay Powell's job is to get the greed and leverage boys their next round of buying opportunities.

Thursday, September 15, 2022

Rise of the Salesmen


This morning a CNBC guest called Adam Neumann a "great salesman" but failed to endorse Neumann's latest enterprise in conjunction with Andreesson Horowitz.

Andreesson Horowitz is also behind online brokerage Titan which announced it would offer several private equity options offered by other great salesmen, Apollo Global Management and The Carlyle Group.

Titan and its PEU partners will take fees for their services. 

Carlyle co-founder David Rubenstein recently talked how buying cryptocurrencies is titillating.  Titan can help investors get into crypto and/or private equity products.  

Are you ready to be sold?

Update 9-18-22:  David Rubenstein's show is now on PBS as well as Bloomberg.  Crypto loving Rubenstein (Paxos investor) just put out a book on investing.

Update 9-21-22:  Rubenstein was on Fox yesterday and will open tomorrow morning for CNBC.  Both networks have him talking about Fed policy.  Few mention his advisory role for the New York Fed.

Wednesday, September 14, 2022

Rubenstein's Titillating View of Crypto


The allure, the privacy, the experience of "happiness and pleasure" are why people invest in cryptocurrencies noted Carlyle Group co-founder David Rubenstein.   One can be like James Bond given:

"There’s a lot of thrill in the secrecy of it, a lot of thrill that nobody knows what you actually own, a lot of Russian oligarchs saw their assets being taken away by Western governments and many other wealthy people around the world are probably saying, ‘well I want to have some assets that nobody can confiscate, nobody knows that I have [them],’ and that’s what cryptocurrencies do."

Rubenstein's family office Declaration Partners has a stake in crypto infrastructure firm Paxos.  I imagine Rubenstein received a capital call from Paxos given crypto's recent swoon.  

Hold me, thrill me, kiss me, kill my portfolio with spreads and fees.... 

Update 9-15-22:  Kim Kardashian of SKKY Capital is looking to date a doctor, lawyer or neuroscientist.  Why not a fellow private equity underwriter (PEU)?  That would be titillating.

Monday, September 12, 2022

Carlyle Forms Atmas Health


A Carlyle Group press release stated:

Global investment firm Carlyle (NASDAQ: CG) announced the formation of Atmas Health in partnership with long-time healthcare executives Kieran Gallahue, Jim Hinrichs, and Jim Prutow and Carlyle’s Global Healthcare team.

The formation of Atmas Health is a continuation of Carlyle’s long-term global commitment to the global healthcare sector, in which it has deployed over $22 billion of capital. Carlyle’s significant experience investing in medical products, tools, instruments, and contract manufacturing businesses includes Medline, Ortho Clinical Diagnostics, Resonetics, Unchained Labs, amongst others.
Carlyle's Global Healthcare team makes no mention of ManorCare, the giant nursing home it drove into bankruptcy.   Former Carlyle CEO Kewsong Lee drove the formation of a COVID-19 portfolio.  

With Lee effectively fired Carlyle has turned to outsiders to grow its healthcare portfolio.  Look for this group to leverage federal funds to re-shore pharmaceutical and life science manufacturing. 

KKR's ownership of HCA added billions in unnecessary costs to America's absurdly expensive healthcare nonsystem.  Making healthcare more expensive is the PEU way.

Wednesday, September 7, 2022

PEU Kim K. Partners with Taylor Swift Tormentor


Latest sign of the PEUpocalypse: 

WSJ reported Kim Kardashian and Jay Sammons have formed SKKY Partners, a private equity underwriter (PEU) focused on the consumer sector.  Kim's mother Kris Jenner will be a partner with the firm.  SKKY Partners expects to make its first investment before the end of the year.  Fundraising will begin after global high dollar investors digest the news.

Last month Bloomberg reported Jay Sammons left The Carlyle Group in July.   He was a partner at Carlyle until his departure and responsible for Carlyle cool alongside rapper co-founder David Rubenstein.

Sammons, who’s based in New York, joined Carlyle in 2006 and worked on the firm’s investments in companies including Beats Electronics, Beautycounter, Vogue International, Supreme and Grupo Madero. He was also involved in Carlyle’s bet on Scooter Braun’s Ithaca Holdings LLC, which owned six Taylor Swift albums that the artist has begun to re-record. 

Ye, Jay and Kim K.--all enemies of the Swifties. I guarantee Taylor Swift and her global fans will never put a penny in SKKY Partners.  

Kim K. said she wants to help entrepreneurs.  That can be done without taking an equity stake, bloating them with debt, milking them for management fees/special distributions or slashing staff.  


America has another billionaire who wants to grow their booty (loot and bounty combined into one).  Kim K. can reward family/friends while pinching the little person's pocketbook.  Davos and Milken deals await  It's the PEU rage, darling.

Who needs Pete Davidson when you can run with the greed and leverage boys?  

Update:  Fortune highlighted Sammons record with Beats and Supreme but no mention of Carlyle's making Taylor Swift spin in the wind like Mountain Water.  The piece did say fundraising would be tough.  If only she had a salesman who could make people laugh. 

Update 9-8-22:  Fortune asked why a Carlyle bigwig would leave to startup a PEU with Kim Kardashian.  Why would Bill Clinton and Tony Blair push crypto-trader FTX in an interview with founder Sam Bankman-Fried?  Because there is big money to be made/lost.....

FTX Ventures took a 30% stake in Mooch's SkyBridge Capital.  

Tuesday, September 6, 2022

Insitutionalized PEU Greed is Abnormal

 

President Joe Biden said "Too much of what is happening in our country today is not normal.”  To the average American:

  • An ever shrinking middle class should not be normal.  
  • Policy making billionaires are not normal
  • Key government positions are quietly occupied by private equity executives whose greed helped shrink the middle class.  (This applies to both political parties)
  • Politically connected people have multiple, high paying positions while the average person struggles..
  • Maintaining preferred "carried interest" taxation for private equity is a decade old disgrace
  • The distribution of reward is almost exclusively to the top 1%, especially the top 0.1%
  • The Biden Cabinet should not be stacked with private equity underwriters (PEU) who constrained fair pay, stopped raises, limited or eliminated 401(k) contributions and cut benefits at many affiliates.  PEU job elimination was mentioned in the third bullet.

It should be no surprise that citizen anger has to go somewhere as many feel abandoned by leaders who look out for themselves and cover for other insiders.  

Update 9-18-22:  The power to set government policy is becoming increasingly disconnected from public opinion.

Saturday, September 3, 2022

Rubenstein Pans Lee on NYT Dealbook


Former Carlyle Group CEO Kewsong Lee remains under a multi-year nondisclosure agreement while Carlyle insiders tell stories about Lee's management failures.

A Dealbook interview allowed Carlyle co-founder David Rubenstein to bust Kewsong's chops in his usual indirect, manipulative manner.

Rubenstein talked about the longevity of founders --"maybe God loves them" --and suggested a new CEO might want to spend time with them.  

Lee had been with The Carlyle Group for nine years, five as Co-CEO or outright CEO.  He'd experienced a number of performance feedback sessions with Carlyle's board.

Rubenstein said Carlyle's infamous founders were not kept informed, a grievous error given their status at the PEU's biggest shareholder.  He gave a dig at Lee for the stock being in low $30 a share range.  The price was $38 a share before the high level divorce.

So Carlyle didn't have a perfect #1.  How about the #2 guy?  Rubenstein said:

"And we didn't have a perfect #2 there.  That was one of the concerns the board had had for a long time, which is that there should be a person groomed to be a successor.  And there wasn't one groomed."


Recall co-#1 Glenn Youngkin left the firm in Fall 2019.  The board united firmly behind Lee at the point.

"We are fortunate that Kew is extremely well positioned to serve as our CEO, and I look forward to continuing to work closely with him on behalf of all of Carlyle’s stakeholders.”  --David Rubenstein

"The Board is confident that Kew will build on the current momentum that has been achieved and we are excited to watch him lead and support the exceptional global team Carlyle has assembled.” --Bill Conway

COVID hit in March 2020 and Lee spent considerable time building a COVID portfolio of companies with the OneCarlyle team. 

Rubenstein didn't mention the legions of top talent that fled Carlyle, mostly for other private equity firms.  Many exiters ended up at the Federal Reserve Bank as Fed Chair (Jay Powell) or in other senior roles (Randall Quarles).  One became CEO of Nasdaq (Adena Friedman), another CFO of Comcast (Mike Cavanaugh) and another CEO of General Motors (Daniel Akerson).  

When asked if Carlyle would ever sellout Rubenstein responded "it's a publicly traded firm."  Yes, Carlyle buys publicly traded firms all the time.  However, he noted a change of control allows limited partners the right to get out of their specific Carlyle fund(s).  LPs could pull their invested capital and not fulfill further capital commitments.   I would venture a few LPs are unhappy as to how Kewsong was treated and might wish to pull their capital.

Andrew Ross Sorkin asked about  Rubenstein's Family Office (Declaration Partners) and any problems that caused.  The "nearly every billionaire does it" answer did not address Declaration Partners may compete with Carlyle on any deal and is a financial conflict of interest.  

Generous Rubenstein closed his response with he'd referred deals Declaration Partners did not want to Carlyle.  How is a CEO supposed to deal with a board member and founder dumping second hand prospects in his lap?  Lee cannot legally give an answer.

"It's amazing how, if you have a good track record, you can charge almost anything."
That's David Rubenstein near the end of the interview, not Bernie Madoff.   

I'm sure Kewsong Lee felt he had a good track record as Carlyle CEO but founders and the board balked at his request, sent him packing and have been running him down since.  


Oddly, over his nine year tenure with Carlyle there are no public pictures of Kewsong Lee with any of the firm's co-founders (Google image search).  The public faces of Carlyle don't seem to share the spotlight.

Update 9-6-22:  BOA gave a double downgrade to Carlyle lowering its price target from $58 to $33 per share.  "We believe the management change could adversely impact employee retention, fundraising, and CG's business strategy, including M&A and signal risk to prior financial targets/guidance." 

"One upside risk for the stock is Carlyle's $80B+ of dry powder, which the company can invest into a cheaper asset backdrop."  The would be courtesy of former Carlyle managing director and current Fed Chief Jay Powell.

Making Money Off Disadvantaged: Legal and Not


What do poor people in Mississippi have in common with Alaskan Native Corporations?  Both groups were used by people wanting to achieve big profits.

Selling Alaskan Native tax losses to corporations produced the seed money to start The Carlyle Group.  Tax losses or tax credits offset a company's tax liability.    

Between 1986 and 1988, Alaskan Native Corporations sold an estimated $1.5 billion in losses, for $426 million in revenues.  Congress disallowed the practice in 1988.

David Rubenstein used the proceeds from those sales to fund The Carlyle Group, a politically connected private equity underwriter (PEU).  Policy making billionaire Rubenstein recently highlighted the benefits of Carlyle's being in our nation's capital.  The public noticed Congress maintained private equity's preferred "carried interest" taxation yet again.

Mississippi officials steered $2.15 million in federal TANF welfare money to fund a fledgling pharmaceutical company.  The money was routed through a nonprofit agency.  Involved parties believed they would make a fortune from "their" equity investment in Prevacus/PresolMD.

This group of PEU wannabees included Mississippi Governor Phil Bryant, the head of the state welfare agency John Davis, nonprofit leader Nancy New and her son Zach.  On the periphery sat Brett Favre, investor and believer in Prevacus/PresoldMD's concussion reducing drug treatment.  Mississippi Today reported:

Nancy New, a once prominent private school and nonprofit founder, and her son Zach New pleaded guilty to state criminal charges in Mississippi’s sprawling welfare scandal on Friday.
It's not clear how much equity the $2.15 million purchased.  Also, what happened to that stake when Odyssey Group International purchased Prevacus' drug candidate PRV-002, a concussion drug therapeutic compound (mild traumatic brain injury) in January 2021?

The prosecutor looking into the role of peripheral persons (Farve and Bryant) was let go.  Nothing to see here folks, just a few shady bureaucrats and a nonprofit who acted on their own.  Never-mind internal financial controls, audit trails or board of director decisions.

Friday, September 2, 2022

The Climate Money Funnel Giant


Politicians Red and Blue love PEU (private equity underwriters) and increasingly, more are one.  Headlines indicate:

White House National Climate Advisor Gina McCarthy will step down.  No word on whether McCarthy will rejoin Pegasus Capital Advisors.

McCarthy's successor Ali Zaidi represented big oil and private equity underwriters at Kirkland and Ellis before joining the Biden White House.

The Podesta name resurfaced as John Podesta has been appointed Senior Advisor for Clean Energy Information and Implementation.  John will dole out $370 billion while brother Tony lobbies for firms wanting a piece of that ka-ching.

The Blue Lucys are consistent in their alignment with the greed and leverage boys, maintaining their preferred "carried interest" taxation and tapping PEUs for critical government roles.  NYT reported:

Mr. Podesta will lead a task force of cabinet secretaries and the heads of 21 federal agencies that Mr. Biden created when he took office to mobilize the government to confront climate change. Mr. Zaidi will serve as vice chairman.
Many of those cabinet secretaries and agency chiefs are former PEUs.  They likely hold residual PEU stakes not included in their federal financial disclosures (like Obama White House Health Reformer Nancy Ann DeParle).  

Rest assured the greed and leverage boys want a share of that $370 billion.  It's the Blue Lucys vs. the Insane Reds this fall.  Both are beholden to the PEU class. 

“Too much of what’s happening in our country today is not normal.”
Biden pointed out the Insane Reds but avoided the Blue Lucys.  Neither are normal.

Thursday, September 1, 2022

Don't _uck with the Founders


It's difficult to lead in the shadow of politically connected billionaire founders.  Former Carlyle Group CEO Kewsong Lee learned that lesson while negotiating a contract extension with the Board of Directors. 

NYT ran a story on the conflict, citing sources with knowledge of the situation.  It stated:

 "the clash at Carlyle shows, there is little to stop their founders from clawing back power."

Billionaire founders never gave up their ability to direct government policy, especially taxes.  NYT referred to Carlyle co-founder David Rubenstein as "dispensing advice to presidents and senators" instead of undeclared lobbying for his private equity underwriting (PEU) interests.

Issues with Rubenstein got more press in the story.

Another source of friction was Mr. Rubenstein’s so-called family office, which makes multimillion-dollar investments with his personal funds, according to three people familiar with the matter. Mr. Lee and other leaders felt Mr. Rubenstein’s investments were becoming a distraction for Carlyle employees who had to navigate a thicket of rules that were intended to avoid Mr. Rubenstein’s prioritizing his personal interests over those of the firm and its clients.

Mr. Rubenstein represented Carlyle at places like the World Economic Forum in Davos, Switzerland.

Mr. Lee at times grumbled to colleagues about what he saw as Mr. Rubenstein’s attempt to serve as the face and voice of Carlyle.

Carlyle's super-rich white male billionaire founders are not to be messed with.  That's the takeaway from this crafted leak or series of leaks from inside Carlyle.  Kewsong Lee, like Glenn Youngkin, has an NDA he cannot violate.

The industry says it owns companies that collectively employ 12 million U.S. workers, or about 7 percent of the labor force.  

Many U.S. citizens know the harm done by private equity underwriters (PEU).  We've learned that executive changes can install someone even worse.  I imagine that's a current Carlyle employee fear.

Update:  Rubenstein was on CNBC for a half hour today.  He talked about what makes a good investor.  Political connections and access to Uncle Sam's wallet were obliquely mentioned.  He mentioned his cryptocurrency investment without saying his family office Declaration Partners or Paxos.  The billionaire policy maker said Congress will stay hands off on crypto regulation.  He offered his thoughts on China and Europe.  The face and voice of Carlyle remains David Rubenstein.

Saturday, August 27, 2022

Blue Star NBR Has PEU Roots


The Virginia Economic Development Partnership announced last fall:

...a major joint venture has committed to build a manufacturing operation that projects to employ 2,500 people and produce 60 billion medical gloves a year.

As a direct result of the Commonwealth’s investments, Blue Star NBR, LLC and Blue Star-AGI, Inc., a joint venture between Blue Star Manufacturing and American Glove Innovations (AGI), have committed to invest $714.1 million to establish the largest, most advanced, one-of-a-kind nitrile butadiene rubber (NBR) manufacturing facility and nitrile glove production operation in Wythe County’s Progress Park.  

OpenGovUS shows the company to be a Partnership or Limited Liability Partnership.  It was established January 8, 2021.  Ten months later Virginia Governor Ralph Northam attended a groundbreaking for the historic project.

Four names are associated with the project, Scott Maier (CEO), Marc Jason (co-CEO), Victor Galati (CFO) and Arthur Stark (Chairman).  Blue Star NBR's website has no information on the company's leadership or board of directors.

Scott Maier has PEU roots with Cotton Creek Capital Management, where he was an executive vice president, and Hela Capital Partners, a joint venture PEU with GTCR.  An old bio of his states:

Mr. Maier has 14 years of private equity, venture capital and operations experience. For the past 7 years, Mr. Maier has assisted private equity funds with the turnaround and management of their portfolio companies. His titles have included COO, CFO, and Director of Operations and Business Development.

Marc Jason is Founder and Chairman of London Luxury and had the time to be co-CEO of this major joint venture.  London Luxury sued Walmart in January 2022.  

London Luxury LLC filed a Jan. 5 lawsuit in New York State Supreme Court against Walmart Inc., charging that Walmart owes the company about $41 million for boxes of nitrile gloves produced in Malaysia and Thailand. The complaint goes on to state that London Luxury could lose more than $500 million on a deal to sell tens of millions of boxes of gloves to the retail behemoth.

“Walmart has created uncertainty regarding whether it intends to accept and pay for the vast majority of gloves it committed to buy,” the lawsuit claims.

In an emailed statement, a spokesperson for Walmart said the company has filed a counterclaim against London Luxury “for their repeated failure to meet product standards and delivery obligations.”

The case is scheduled to be heard in January 2024.

Virginia Business reported that lawsuit was the catalyst for a corporate divorce

Blue Star executives decided not to move forward with the partnership after learning of litigation involving Marc Jason, who was previously named co-CEO of the Blue Star-AGI joint venture.

...the joint venture may have fallen through, as Blue Star backed out of the partnership with AGI in January during the due diligence phase, according to Blue Star NBR CEO Scott Maier. “It’s just business,” Maier explained. 

Blue Star is moving ahead with the project on its own, Maier said, and the decision to exit the joint venture will not impact the amount of the planned investment or the number of jobs previously announced. “They weren’t bringing any capital,” he said of AGI.

However, AGI spokesperson Deborah Brown, a partner with global law firm Quinn Emanuel Urquhart & Sullivan LLP, said the situation isn’t so cut and dry. “AGI is at least a 50% equity owner in [the project] and does not agree that it has departed or split from the venture,” Brown said in a statement. “AGI is committed to seeing the project through."

Brown also took issue with Maier’s characterization, saying, “AGI brought substantial capital to the deal and has invested funds into the venture.”

How is a major joint venture still in the due diligence phase a year after formation and two months after project groundbreaking?  

Current Virginia Governor Glenn Youngkin knows how to exit a major joint venture.  The Carlyle Group dropped its lead developer role for the Harbor Island expansion at the Port of Corpus Christi.  Youngkin was co-CEO at Carlyle and over the firm's infrastructure projects.  Carlyle never gave a reason for exiting the planned port expansion to accommodate very large crude carriers.

Youngkin's Secretary of State Caren Merrick is also a private equity underwriter.  Merrick held positions with Bilbury Partners and Gladstone Capital.   All are familiar with holding multiple high paying roles simultaneously and slapping something together to take advantage of the latest trend or government opportunity.

Caren Merrick served on the board of Gladstone Acquisition Company, essentially an SPAC.

Gladstone Acquisition Corporation (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on January 14, 2021. The Company was formed for the purpose of acquiring, merging with, engaging in capital stock exchange with, purchasing all or substantially all of the assets of, engaging in contractual arrangements, or engaging in any other similar business combination with a single operating entity, or one or more related or unrelated operating entities operating in any sector (a “Business Combination”). While the Company may pursue an initial Business Combination target in any business or industry, the Company intends to focus its search on the farming and agricultural sectors, including farming related operations and businesses that support the farming industry, where the management team has extensive experience. 
If Bill Gates and Warren Buffet can buy farmland and farming operations so can Gladstone. 

American manufacturing left the U.S. for China courtesy of the greed and leverage boys.  The Carlyle Group sent auto parts jobs to China as Youngkin anchored his spot as a key top executive.  Before running for Virginia Governor Youngkin watched Beijing rush hour traffic as a sign of economic vitality.  

Re-homing manufacturing jobs is a national priority as the globe fractures.  

On Feb. 4, the Virginia House of Delegates overwhelmingly approved legislation to fund up to $4.6 million for VEDP to provide recruitment and training of employees for Blue Star operations in Wythe County.
Expect more public money for the PEU boys who earned big money offshoring jobs and want to do the same in bringing them back.

Friday, August 26, 2022

Creepy PEUs Seeking Immortality


Why is it the creepiest people want to live forever? 

Jared Kushner says he's keeping trim because he believes there's a chance he'll live forever.

Peter Thiel is on a mission to change the world through technology – and to find a cure for death.

Fee earning AUM in perpetuity for Peter Thiel (Founders Fund and Mithral Capital) and Jared Kushner (Affinity Partners).  That way they don't have to meet their maker and atone for their greed and misdeeds on this earthly plane.

Imagine private equity underwriters (PEU) waking up day after day, scheming to turn their billions into trillions at the expense of others.  Surprise medical billing, nursing home deaths up 10%, hollowed out local newspaper reporting, funneling money to Congress to keep PEU preferred "carried interest" taxation, finding PEU candidates for public office, the list goes on and on in a Greed-filled Groundhog Day. 

If Jared Kushner and Peter Thiel can live forever so can carried interest.  My rumination syndrome just returned.  

Politicians Red and Blue love PEU and increasingly, more are one.  Together the immoral can become immortal.

Update 8-29-22:  Imagine being able to permanently fund political campaigns in secrecy.

Thursday, August 25, 2022

PEU Ownership = Rise in Nursing Home Deaths


Private equity ownership of nursing homes is once again front and center in The New Yorker.

In the autumn of 2019, Atul Gupta, an economist at the University of Pennsylvania, set out with a team of researchers to measure how (private equity instituted) changes affected nursing-home residents. They sifted through more than a hundred private-equity deals that took place between 2004 and 2015, and linked each deal to categories of resident outcomes, such as mobility and self-reported pain intensity. The data revealed a troubling trend: when private-equity firms acquired nursing homes, deaths among residents increased by an average of ten per cent. 

The Carlyle Group ran nursing home giant ManorCare into bankruptcyIt had quality problems like those discovered in the Penn study.

At homes with fewer direct-care nurses, residents are bathed less. They fall more, because there are fewer hands to help them to the bathroom or into bed. They suffer more dehydration, malnutrition, and weight loss, and higher self-reported pain levels. They develop more pressure ulcers and a greater number of infections. They make more emergency-room visits, and they’re hospitalized more often.“They get all kinds of problems that could be prevented,” Charlene Harrington, a professor emeritus of sociology and nursing at the University of California, San Francisco, said, of residents at homes with lower nurse-staffing levels. “It’s criminal.”

The greed and leverage boys sponsor compliant lawmakers so consequences are few to nonexistent.  Instead elected officials maintain the PEU boys preferred "carried interest" taxation. 

Consider the case of Richmond, Virginia nursing home. 

Before St. Joseph’s was acquired, it had been a single nonprofit nursing home. (PEU Executives) Simcha Hyman and Naftali Zanziper created a corporate web. They formed one company for the home’s property (called Henrico Va PropCo L.L.C.) and another for the home’s operations (Henrico Va OpCo L.L.C.). Accordius Health was the management company. The Portopiccolo Group, at the very top, was insulated from the nursing home by at least two corporate layers. In the event of a lawsuit, the nursing home would “dissolve into this welter of different legal entities,” Hughes said. “It’s like a sandcastle—when you touch it, it starts to break apart.”

Carlyle broke ManorCare despite promises not to do so to former Medicare Chief Gail Wilensky.  It's hard to avoid responsibility for care debacles when the PEU charges a management fee.  Yet, they do just that while pursuing earthly Mammon at the expense of the elderly. 

...management hiked up rent in the home’s apartments—in some cases, from five hundred dollars a month to fifteen hundred. Under Portopiccolo’s ownership, the home had gone from about a hundred employees to sixty.

Revenue up, expenses down is the PEU way.  People being harmed is a several decade long byproduct.  They are good for funeral home job creation. 

Update 8-26-22:  Private equity owns eight of the biggest companies doing autism treatment.  Uh oh...

Wednesday, August 24, 2022

Amazon's Expansive Profit Plans

Amazon is known for denying workers do certain things like peeing in bottles to stay on the job and meet productivity requirements.  Denying a worker died from heat is a risk management no-brainer but what did the Amazon Smart Thermostat say about temperatures in the warehouse that day?

Amazon wants to take its hard charging human abuse skills and put them to work in your home while taking "care" of your health.

I expect an algorithm that adjusts the temperature in your home just enough to make you sick and have to use their One Medical clinic for a pharmaceutical packaged and delivered by, you guessed it, Amazon.  The I Robot Roomba is in your home to vacuum up any leftover change.

Someone has to fund the next Billionaire Space Penis Rocket.

Update 8-27-22:  Amazon plans to monetize video shot via its RING doorbell via a Ring Nation television series..  

...the show is proof of why “we need to regulate Amazon’s monopoly power. This ecosystem allows them to use all of their different lines of business in ways to only further their market dominance.

Saturday, August 20, 2022

PEU Attorney Defends Blue Lucy Kyrsten Sinema


The Co-Chair of Snell & Wilmer's Venture Capital and Private Equity Industry Group wrote a piece in The Arizona Republic defending Senator Kyrsten Sinema's preservation of private equity's preferred "carried interest" taxation.  Public will has long demanded this unfair tax break be eliminated.

His "practice is concentrated in the areas of mergers and acquisitions, securities, private equity/venture capital, corporate law, and advising corporate boards.

His bio includes:

  • Represented Phoenix-based private equity fund in the formation and raising of a $120 million fund
  • Represented and advised numerous private equity sponsors in the formation and raising of opportunity funds, venture funds and private equity funds from private investors that focus on the investment in or acquisition of identified operating businesses, real estate, and distressed loans or assets

Former Goldman Sachs CEO Lloyd Blanfein, who's son Alex is a private equity underwriter (PEU), congratulated the PEU lobby for once again keeping its deeply unpopular tax break.

Here's how the PEU shill characterized carried interest taxation:

"it is an enduring recognition of the risks taken to aid the entrepreneurial engine that has forged American prosperity for decades"

I did not know America's entrepreneurial engine involved loading up affiliates with debt, charging them deal fees/management fees, bleeding cash for sponsor dividends, borrowing even more later to fund a massive PEU payout, and/or spinning off physical assets into another highly leveraged entity for free shares in the original entity.

American prosperity for the middle class has not been aided by the greed and leverage boys.  As they've exploded in number and assets under management wages have stagnated.  The middle class is disappearing as those at the top take and take and take.

Private equity is wildly unpopular as many workers personally experienced consequences from their greed.  PEUs turned housing into a volatile asset with one private equity accounting for a third of house sales.

It should not be a surprise that someone who makes their living serving the PEU class would write a nonsense defense of the ethically indefensible.  But that's where we are.  He can write it but I call horse hockey.  

Sinema is but the latest politician to tilt the already imbalanced scales in further favor of the PEU boys.  The public remains Charlie Brown trying to kick the tax fairness football.  Senator Sinema is the latest to pull it away after a seemingly serious run up.  Politicians Red and Blue love PEU and increasingly more are one. 

Update 8-22-22:  NYMag's Intelligencer saw through the PEU attorney's puff piece defending Blue Corporacrat Sinema.

Yet Another PEU Vacation for Biden

President Joe Biden will vacation yet again at an investment manager's beach house

“They stayed here before and they’re not paying,” a source close to the family told the New York Post. “They’ve never paid. They’re just friends.”

The beach home is on Kiawah Island and owned by the co-founder of Aetos Capital.

The 10,500-square-foot, nine-bedroom oceanfront retreat is owned by Maria Allwin, the Connecticut-based widow of real estate and hedge fund manager James Allwin, and she has hosted Biden in years past, including while he was vice president.

Aetos divided in two after the death of Jim Allwin.

"Jim's original vision was to have several different alternative businesses--hedge funds, real estate, private equity and venture capital." 

Biden often spends Thanksgiving at the Nantucket home of Carlyle Group co-founder David Rubenstein.  It's almost become an annual event.

The Biden cabinet is chock full of former private equity underwriters (PEU):

Chief of Staff Ron Klain - Revolution LLC

Secretary of State Anthony Blinken - Pine Island Capital

Defense Secretary Lloyd Austin - Pine Island Capital 

Commerce Secretary Gina Raimondo - Point Judith Capital

Energy Secretary Jennifer Granholm - Ridge-Lane Limited Partners 

Agriculture Secretary Tom Vilsack - Ridge-Lane Limited Partners

Director of National Intelligence Avril Haines - Tikehau Capital

Biden just nominated yet another one for a Department of Energy infrastructure position. 

Politicians Red and Blue love PEU and increasingly more are one.  The Blue Lucys and Insane Reds do their best to keep this romance behind the public curtain.

Thursday, August 18, 2022

Mariner Finance Sued for Abusive Credit Practices


Reuters
reported:

A lender owned by private equity firm Warburg Pincus LLC was sued on Tuesday by several U.S. states, and accused of charging cash-strapped borrowers hundreds of millions of dollars for "hidden" add-on products that they never agreed to buy.

Mariner Finance, with more than 480 offices in 27 states, was accused of engaging in "widespread credit insurance packing," by selling costly policies and other products without telling borrowers or even after being instructed not to.

The plaintiffs - Pennsylvania, New Jersey, Oregon, Utah, Washington state and Washington, D.C. - also said Mariner encouraged employees to trick borrowers into refinancing loans unnecessarily, to generate higher fees and sell more add-ons.

"These kinds of predatory sales practices can lead consumers into a cycle of debt that's hard to overcome," the office of Pennsylvania Attorney General Josh Shapiro said.

Wells Fargo Bank got into trouble for similar practices.  

Mariner Finance is owned by Warburg Pincus (WP).  WP's President is Timothy Geithner.  On might expect a former New York Fed Chair and Treasury Secretary to be on the lookout for such misdeeds, especially as Geithner spoke out against predatory lending during his public service.

What other misdeeds is PEU greed driving in the WP finance family?

Warburg Pincus bought a 25% stake in Santander in 2011 and took it public in 2014.  

Under WP ownership Santander Consumer settled with the Justice Department for repossessing the vehicles of 1,112 servicemembers without a court order. 

Also, Santander settled a $550 million multistate investigation by various state attorney generals into their subprime lending practices.

Based on the multistate investigation, the coalition alleges that Santander, through its use of sophisticated credit scoring models to forecast default risk, knew that certain segments of its population were predicted to have a high likelihood of default. Santander exposed these borrowers to unnecessarily high levels of risk through high loan-to-value ratios, significant backend fees, and high payment-to-income ratios. The coalition also alleges that Santander’s aggressive pursuit of market share led it to underestimate the risk associated with loans by turning a blind eye to dealer abuse and failing to meaningfully monitor dealer behavior to minimize the risk of receiving falsified information, including the amounts specified for consumers’ incomes and expenses. Finally, the coalition alleges that Santander engaged in deceptive servicing practices and actively misled consumers about their rights, and risks of partial payments and loan extensions.

Under the settlement, Santander is required to provide relief to consumers and, moving forward, is required to factor a consumer’s ability to pay the loan into its underwriting.  Santander will pay $65 million to the 34 participating states for restitution for certain subprime consumers who defaulted on loans between Jan. 1, 2010 and Dec. 31, 2019.

The settlement period includes the time of Warburg Pincus sponsorship.

Due diligence is now PEU-diligence.  Steer the money to the people at the top of the economic food chain while starving the folks at the bottom of resources.  It's a PEU gang of dirty.

Matt Stoller Takes on Greed and Leverage Boys

The public has had enough in part because many have been employed by a private equity affiliate.  They've seen cash funneled up to their PEU sponsor and not used for wage increases or benefit improvements.  Many have seen their retirement benefits decrease under private equity sponsorship.

Founding private equity underwriters (PEU) became multi-billionaires while using their influence to set government policies.  This includes maintaining their preferred carried interest taxation in the face of widespread public opposition.

Matt Stoller's BIG suggests Garry Gensler's SEC will reign in the greed and leverage boys.  I hope he is right given how much Politicians Red and Blue love PEU.

Wednesday, August 17, 2022

"Much Wow" and Adam Neumann's Flow Raise Rumination Syndrome


The founders of crypto hedge fund 3 Arrows Capital ordered a $52 million superyacht named "Much Wow" before disappearing as their fund became insolvent.  Pictures of Much Wow circulated this week.  The founders were detained in a Dubai airport while waiting to board a private plane to Switzerland.

Former WeWork CEO Adam Neumann resurfaced with Flow, his new residential real estate company.  He plans to do for apartments what he did for office space.   It's not clear how Flow will benefit from Neumann's eccentric/erratic behavior and drug use.

Andresson Horowitz invested in Neumann's Flow.  Their website states:

Doing this requires combining community-driven, experience-centric service with the latest technology in a way that has never been done before to create a system where renters receive the benefits of owners.

Renters aren't owners unless their apartment goes condo.  Do I smell a bend in the tax code or is that to scent of Rumination Syndrome?  Mayo Clinic notes:

Rumination syndrome is a condition in which people repeatedly and unintentionally spit up (regurgitate) undigested or partially digested food from the stomach, rechew it, and then either reswallow it or spit it out.

I don't swallow either story as ethical examples for the citizenry.  

Update 8-20-22:  Penis rocket astronaut Jeff Bezos entered the real estate business via Arrived Homes which intends to buy more single family homes. 

Arrived is the first SEC-qualified real estate investing platform that allows virtually anyone to buy shares in single-family rental properties with investment amounts ranging from $100 to $10,000 per property.

The company acquires rental homes and allows individual investors to become owners of the properties by purchasing shares through the platform. Arrived Homes manages the assets, while investors collect passive income through quarterly dividends in addition to earning a return through appreciation.

The business model sounds like a fee generating extravaganza.

Bloomberg Outs PEU Calibrate Health


Founders Fund backed Calibrate Health sold itself to weight loss patients. Fierce Healthcare reported last August on a $100 million funding round.

The company’s most recent development expanded consumer access to medications like Novo Nordisk’s Wegovy, a weight loss injection recently approved by the FDA.

Calibrate’s proprietary integrated vertical pharmacy engine will help members obtain medications like Wegovy.

Bloomberg reported that "expanded access" involved signing people up for manufacturer coupons that provided the medicine at a deep discount for six months.  Patients were unaware access to Wegovy came from the manufacturer via a coupon program.  They were surprised to learn the cost would go much higher when the secret coupons expired.

Earlier this month Calibrate announced layoffs.

A year after raising $100 million, weight loss-focused digital health startup Calibrate has laid off 24 percent of its employees.

The move affected 156 of the company's 652 staff members. The July 8 job cuts came 11 months after the funding round.

Calibrate's founder is a former investment banker who ran strategic partnerships and communications teams at Capsule.  So why the poor communication with Calibrate patients on the coupon program?.

Peter Thiel's Founders Fund is a private equity underwriter (PEU).  Theil wants to live forever.  Hopefully he can find a coupon for that.

Tuesday, August 9, 2022

Tax Hating PEU Buys Tax Compliance Software Firm


The greed and leverage boys hate paying taxes.  Billionaire private equity underwriters (PEU) have relied on a compliant Congress to keep their preferred "carried interest taxation" in direct opposition to longstanding public will.  In the midst of this milieu Vista Equity Partners is buying Avalara, a tax compliance software company.  

Avalara's website states its software covers "various transaction taxes, including sales and use, VAT, GST, excise, communications, lodging, and other indirect tax types." 

The company stated it will "not host an earnings conference call or provide financial guidance in conjunction with this earnings release. We also will not participate in previously scheduled conferences including the Canaccord Genuity Growth Conference and the Goldman Sachs Communacopia and Technology Conference.

Vista Equity will pay 8.8 times Avalara's estimated revenue for the next twelve months. Avalara currently has less than $1 billion in debt via senior notes.  Vista will borrow at least $2.5 billion to fund the deal.  Much of that is from fellow private equity underwriters, Blue Owl Capital and Apollo.

PEU boys are happy to pay interest on debt.  They cannot stand giving Uncle Sam his fair share in taxes.  Vista Equity Partners founder Robert Smith is such an example.

Robert Smith, the billionaire chief executive of private-equity firm Vista Equity Partners, played a larger role than previously known in the $2 billion alleged tax evasion of his former business partner, recently filed court documents show.

Mr. Smith played a key role in a 2004 deal nicknamed “Project Hotrod” that was designed to allow Texas billionaire Robert Brockman to avoid U.S. taxes while transferring $635 million from his main U.S. holding company into his offshore entities, according to internal memos and other deal documents filed by the Internal Revenue Service in U.S. District Court in Houston as part of a civil dispute with Mr. Brockman.

The IRS, calling the Brockman offshore entities involved “shams,” claims in the court filings that most of the transferred funds were dividends on which Mr. Brockman should have paid taxes.

Mr. Smith isn’t a party to the court dispute, but the documents show that he was involved in the planning of the transaction and that a Cayman Islands entity named Vista Equity Fund III LP facilitated the transaction. He personally signed the deal-closing documents on behalf of that entity, the documents show.
These are the "little" people Senator Kyrsten Sinema wants to help.  Nurseries and car washes don't have billions to put on both sides of an $8.4 billion deal.  Tax dodgers do.

Monday, August 8, 2022

Carlyle Runs Off Yet Another Top Executive


Carlyle Group CEO Kewsong Lee's contract negotiations went so poorly he is no longer with the private equity underwriter (PEU).   It generally takes two to tango, however Carlyle's executive turnover has been far greater than other PEUs.  

Lee shared the CEO role with Glenn Youngkin in 2017.  He became sole CEO in 2020.  The relationship between Lee and Youngkin has been characterized as acrimonious.

Potential successors included Mike Cavanaugh, Daniel Akerson, Jerome Powell, and Randal Quarles.  All left to go to other firms, most private equity.  Carlyle's executive retention problem is more than doing soulless work.

Glenn Youngkin lasted a few years as co-CEO before leaving to start a nonprofit focused on job skills/training.  Carlyle co-founder Bill Conway promised $1 billion to organizations that would help get the unemployed jobs via his Bedford Falls Foundation..  It's not clear how much money Glenn's nonprofit received from his former boss.  Youngkin parlayed his short period in nonprofit work into the Virginia Governorship.  

Stepping back into the Carlyle's interim CEO role is the same Bill Conway.  Did Conway share any bitterness regarding the way Youngkin was treated by Kewsong Lee?  Or did Lee want "too much, too fast" for staid Carlyle co-founders, David Rubenstein, Bill Conway and Daniel D'Aniello?  

No one will know until someone breaks a non-disclosure agreement.  

Update:  Today's news revealed two other Carlyle departures, Jay Sammons and Ashley Evans (who recently made partner).

Update 8-9-22:  Insider's leaked the story of genteel co-founders taking umbrage at Lee's brusque management style.  And this is the fifth or sixth heir apparent to leave the firm?  Spin at best, horse hockey at worst.

Those genteel Carlyle co-founders rudely refused to respond to their CEO's contract proposal.  FT reported:

Lee’s proposed contract, which would have paid him hundreds of millions of dollars if Carlyle performed well, also risked expiring with little value if its shares fell. It also required Carlyle’s share price to remain high towards the later years of his contract.

Update 8-10-22:  Carlyle executives continue to flee the firm.  Global Head of Investor Relations Nathan Urquhart is headed to hedge fund Coatue Management.

Update 8-13-22:  FT ran another story on the conflict between Lee and Carlyle's founders.  The split resulted from to power struggles.  Carlyle's PEU triumvirate won.

Update 8-15-22:  Carlyle announced record assets under management of $376 billion and celebrated by canning CEO Kewsong Lee.

Update 8-18-22:  Bloomberg reported Kewsong Lee left due to conflicts with founders Bill Conway and David Rubenstein.

Update 9-1-22:  NYT ran a story on the conflict stating "the clash at Carlyle shows, there is little to stop their founders from clawing back power."

Another source of friction was Mr. Rubenstein’s so-called family office, which makes multimillion-dollar investments with his personal funds, according to three people familiar with the matter. Mr. Lee and other leaders felt Mr. Rubenstein’s investments were becoming a distraction for Carlyle employees who had to navigate a thicket of rules that were intended to avoid Mr. Rubenstein’s prioritizing his personal interests over those of the firm and its clients.

Mr. Rubenstein represented Carlyle at places like the World Economic Forum in Davos, Switzerland.

Mr. Lee at times grumbled to colleagues about what he saw as Mr. Rubenstein’s attempt to serve as the face and voice of Carlyle.

Carlyle's rich white male billionaire founders are not to be messed with.  That's the takeaway from this crafted leak or series of leaks from inside Carlyle.  Kewsong Lee, like Glenn Youngkin, has an NDA he cannot violate.