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.

Update 11-25-22:  Peter Thiel backed "freedom loving" bank GloriFi burned through $50 million in investment money, laid off most of its staff on Monday, and informed workers it was shutting down.

Update 11-28-22:   While tech giants pursue immortality they may end life for the rest of us.  Extinction is on the table.

“People survive by passing information between themselves.  We’re putting that fundamental quality of humanness through a process with an inherent incentive for corruption and degradation. The fundamental drama of this period is whether we can figure out how to survive properly with those elements or not.”

Update 3-9-23:  Hollywood's new preferred villain is an:

...immediately recognizable type we've grown well acquainted with: a visionary (or so everyone says), a social media narcissist, a self-styled disrupter who talks a lot about “breaking stuff.”

So why do voters keep electing them? 

Update 8-27-23:   "Tech execs are buying $150,000 red light therapy beds and $70,000 hyperbaric chambers."  How lovely.

They may be behind large land purchases next to a California Air Force Base. 

Update 9-24-23:   A Greek economist says capitalism has been replace by technofeudalism. I'll amend that to PEUdalism.

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. 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.

Update 12-9-22:  Sinema hung her independent shingle to drum up funding from the billionaire boys.

Update 12-22-22:  Sinema expects aides to pick up her groceries, fix her internet, book her weekly massage and learn her criteria for choosing an airline seat.  That and more queenly expectations reside in a 37 page guide for staff. 

Update 1-24-23:  Sinema is fresh from attending the World Inequality Forum in Davos and rubbing elbows with the billion class.  It turns out the PEU boys were very generous with the Independent Senator after she saved their preferred taxation.  

Senator Krysten Sinema received at least $526,000 from donors in the private equity, hedge fund, and venture capital industries after killing a bill closing tax loopholes for private equity.

It sounds like the bidding has already started for her future services. 

Update 10-24-23:  Kyrsten Sinema said she doesn't care if she loses reelection because she 'saved the Senate by myself' and can go serve 'on any board I want to.'  For saving PEU preferred taxation I'll wager she gets more than a board seat.

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.

Update 1-4-23:  Raimondo has been mentioned as a future Treasury Secretary should Janet Yellen move on. 

Update 10-31-23:  Forbes asked one contributor covering Raimondo to back off before stopping his articles altogether.

Thursday, August 18, 2022

Mariner Finance Sued for Abusive Credit Practices


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. 

Update 2-8-23:  Neumann and Andresson continued their usual word overstuffed nonsense.  Apparently it is too difficult to clearly explain Flow's business model.  WeWork's valuation went from a high of $47 billion to $1.4 billion today.  

Update 8-10-23:  WeWork's stock imploded to 13 cents a share and its debt traded at $13 per $100 valuation.   It issued a going concern warning.

Update 8-28-23:  Tech bros are behind the purchase of over 55,000 acres of farmland with the intent of building a new high tech city.

One local rancher told the San Francisco Chronicle that Flannery Associates' buying spree "was like a hostile takeover ... it was Shakespearian, a 'Game of Thrones' kind of thing."

Andresson is part of Flannery Associates.

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. 

Update 8-27-23:   "Tech execs are buying $150,000 red light therapy beds and $70,000 hyperbaric chambers."  How lovely.

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.

Update 10-12-22:  Mike Cavanagh got promoted to President of Comcast.  Their press release mentions Cavanagh's brief stint as co-President of Carlyle.

Update 11-9-22:  Carlyle reached a separation settlement with Kewsong Lee:

Carlyle said it will pay Lee $1.405 million as base salary and bonus as well as $1.95 million as stock dividends as a part of the separation agreement that terminates at the end of this year. The Washington, D.C.-based firm also agreed that most of Lee's restricted stock options would be allowed to vest between November and February next year.

Update 12-20-22:   The Grinch will not bring Carlyle a new CEO this year as the search will push into 2023.  Peter Clare finally could get his chance, now that Glenn Youngkin and Kewsong Lee are gone.

Update 12-22-22:  BlackRock considered buying Caryle in a move into alternatives but decided it would be an ill fit.

BlackRock, the world's largest asset manager, had been considering acquiring Carlyle, to expand into alternative assets, but decided against pursuing it, three people with knowledge of the talks told FT. The size of the deal, the firm's turmoil, and a cultural mis-match played parts in the decision, they said.

Update 1-14-22:  Carlyle's search for a CEO to replace Kewsong Lee may be nearing a close.

Transdigm Aspires to PEU Returns

by Matt Stoller reported on the state of the U.S. defense industry.  He wrote:

Transdigm is a company that bought up sole source providers of spare parts and raised prices; in one case they overcharged DoD as much as 4,451% on certain items. Indeed, according to the Pentagon’s inspector general, current regulations “enable sole-source providers and manufacturers of spare parts to avoid providing uncertified cost data, (which, if you want to get technical, is a much weaker and less reliable version of the certified cost data that contractors were routinely required to submit prior to the Clinton Administration’s embrace of defense contractors). Numerous government reports have repeatedly shown that the Pentagon pays too much for spare parts. For example, IGs found that companies charged DoD $71 for a pin that should have cost less than a nickel and $80 for a drainpipe segment that should have cost $1.41.
The company shared its goal to make private equity like returns in April 2017.   Grossly overcharging the Defense Department is akin to surprise medical billing.  Greed is as greed does.  

Private equity underwriters (PEU) got to keep their preferred "carried interest taxation" and PEU affiliates will not be subject to the minimum 15% corporate tax on income   Senator Kyrsten Sinema (Blue Team - Arizona) delivered for donors KKR and The Carlyle Group.  Her rewards on this earth for serving the billionaire class will be grand.

A retired accountant from Arizona said:

"No, they're just going to go after the little guy. They really will. And they're never going to go after the rich people. Never. Or else they would have done it already because they're not paying their fair share of taxes right now," he said.

"Little guys like me — you know, I'm retired, and I hate to see that. I really do. I was an accountant all my life, and I don't want to see that. And I hope they don't. They're going to hunt the little guy, people who make less money, and make them pay. Because they have to pay for this bill.

Politicians Red and Blue love PEU and increasing, more are one. 

Sunday, August 7, 2022

Blankfein Calls Out PEU Lobby

The Private Equity lobby did double duty preserving carried interest and exempting PEU affiliates from the 15% minimum corporate income tax.  Former Goldman Sachs CEO noticed!

Goldman Sachs has long had a private equity division.  Blankfein's son Alex joined The Carlyle Group in 2016.  He is now a Principal at Redbird Capital Partners.  Lloyd knows that of which he speaks.

Update 8-8-22:  WSJ noted PEU lobby's latest wins.  Lobbies don't win unless politicians cave.  Elected officials have done this over and over and over.  The PEU lobby calls carried interest the billionaire tax subsidy with nine lives.  Buyouts remain hot, even during a down market.

It's the Blue Lucys vs. the Insane Reds.

Update 8-10-22:  CNBC did a story on the PEU lobby.  A flashback to 2011 showed the same lobby working overtime to save "carried interest" taxation.  The former name of the trade group was Private Equity Growth Capital Council- PEGCC.  It initially rolled off the tongue, then turned into a gag reflex.  I changed it to something easier to say PECKER (Private Equity Capital Knowledge Executed Responsibly).   Congress remains hands off on PEU financial engorgement.

Biden Nominates Infrastructure DOE PEU


President Biden nominated David Crane, an operating executive with Pegasus Capital Advisors since April 2016.  Crane's White House bio omits this key position while the Yale Center for Business and the Environment highlights Crane's role as a private equity underwriter.

Not disclosing private equity conflicts is a longstanding practice of Red and Blue White Houses.

Also not mentioned by the Biden White House:

Mr. Crane also serves on the board of directors of the Saudi Electricity Company, the national electricity company of Saudi Arabia.

The general public may or may not be interested in The White House appointment of a private equity executive connected enough to the thuggish Saudi government to garner a board appointment. 

However, they should have an inkling something is not right as the greed and leverage boys have kept their preferred "carried interest" taxation for the last fifteen years in direct opposition to public will.

Politicians Red and Blue love PEU and increasingly, more are one.

Update 8-8-22:  Robert Reich believes Biden's big vision (yet to be revealed) could cast aside the Blue Team's sellout to high dollar donors. It's hard to swallow given the Biden team's reliance on PEUs. 

Saturday, August 6, 2022

Carlyle Co-founders' Latest Financial Bonanza Draws Pension Fund Ire

Bloomberg Law

A pension fund sued Carlyle Group Inc.'s senior leaders in Delaware, challenging a $344 million payment to the private equity firm’s founders in connection with the end of tax agreements they reached when taking the asset manager public. 

When Carlyle went public it committed 85% of its cash tax savings to its three founders, stiffing new unit holders which includes pension funds.

Glenn Youngkin played a major role in taking Carlyle public, supervising the initial public offering in June 2014.
Youngkin is now Virginia's Governor.  Did the pension fund name Glenn in their lawsuit?

The American Accounting Association writes about a company's use of cash tax savings.

...our results suggest cash tax avoidance is associated with important firm decisions.

And for The Carlyle Group enriching already stinking super-rich founders is an important firm decision, one supported by the current Governor of Virginia.

Today KKR announced a deal which improves their ability to take a private company public. 

Underwriting IPOs and other stock sales has become a big business for KKR, a pioneer in leveraged buyouts.

So a PEU could take another PEU public and this would be considered due diligence?  That is patently laughable.

Maybe this pension fund can do what Congress cannot and seek justice/equity in the tax arena regarding private equity underwriters (PEU).

Politicians Red and Blue love PEU and increasingly, more are one.  Conflicts of interest are now fractals in the financial PEUniverse.  It's going to take alot of court action to clean up the greed and leverage boys' mess.

Update 8-14-22:  The lawsuit names individual Carlyle executives, including Glenn Youngkin.

The 136-page lawsuit alleges that Youngkin received about $8.5 million of a $344 million payday engineered for a small group of top executives in 2019 and 2020, when he served as co-CEO.The executives “were unjustly enriched at the expense of and to the detriment of Carlyle and its stockholders,” according to the suit.

Update 8-18-22:  NBC News reported:

...Carlyle insiders who received the payouts escaped a tax bill that would have exceeded $1 billion, according to the complaint, which accuses Rubenstein, Youngkin and other Carlyle officials of lining their own pockets at the expense of people like police officers and firefighters. 

Under the deal, approved by the Carlyle board and code-named “Project Phoenix,” Youngkin began receiving $8.5 million in cash and exchanged his almost $200 million stake in the company for an equal amount of tax-free shares, according to court documents. 

The Carlyle payout exemplifies the private equity industry’s laser focus on avoiding tax bills.

... the cash payout and tax-free exchange was “an extreme outlier” among such agreements, designed by the Carlyle insiders “to maximize the benefits for themselves in every possible way, to the detriment of the company and the public stockholders.” 
It helps to have compliant politicians who create and maintain PEU tax loopholes. 

Youngkin managed the IPO from within Carlyle   PEU self service is a core value.

A book review revealed information on David Rubenstein's lesser seen side:

....was not prepared for the turbulence he encountered when David M. Rubenstein, chair of the Kennedy Center, forced him out as producer of “The Kennedy Center Honors.” Stevens writes that Rubenstein came to his office on a Good Friday in what “proved to be a disturbing and somewhat bizarre meeting…[Rubenstein] seemed to apologize, saying this was his most difficult meeting since the time he fired George H.W. Bush and James A. Baker from his Carlyle enterprise.” He continues: 

“Again, insufficient paranoia had let me down. David’s riches, after all, had come from hostile takeovers of corporations — ousting existing management, cutting costs and reaping windfalls. On reflection, my response was less tempered than I would have liked. ‘I think you’ll have to look around for a long time to find producers who will give you five consecutive Emmys.’ ” 

I imagine for Kewsong Lee is was also disturbing and somewhat bizarre.

Friday, August 5, 2022

PEU Carried Interest Saved Again!

The greed and leverage boys favored "carried interest" taxation remains thanks to Senator Kyrsten Sinema (Blue Team-Arizona).  WaPo reported:

Sinema said Democrats had “agreed to remove” a key tax policy targeting wealthy investors that aimed to address what is known as the “carried interest loophole.”

Blue Corporacrat Sinema's backers include The Carlyle Group and KKR.  Carlyle Group co-founder David Rubenstein called the tax system a disgrace in 2012 for allowing such an inequity.  Two faced Rubenstein fought hard for decades to keep his preferred private equity underwriter (PEU) taxation, deeply unpopular with the general public. 

Private equity raised rents and evicted tenants of trailer parks, Brooklyn apartment buildings and can't get enough suburban homes (where rents are soaring).  The greed and leverage boys bought citizens surprise medical billing and regularly add costs to an already ridiculously expensive healthcare system.  One cannot even die on hospice without private equity taking its final share.

So why can't Republicans and Democrats who've "long opposed" the carried interest loophole get together after an election and eliminate the break?

This "tax disgrace" remains in place as Politicians Red and Blue love PEU and increasingly, more are one.

Sinema should have lifetime PEU employment after trashing public will, which has long wanted the wealthy to pay their fair share of taxes.  

Did the Senator call Mr. Rubenstein at the Washington Economic Club to share that she alone would save the billionaire PEU boys?  Did he personally thank Sinema for "dis" grace?

Update:  Others noted Sinema's increased odds of PEU employment post "public oligarchy service."

Update 8-7-22:  Insulin dependent diabetics younger than Medicare age did not get the political aid extended to the greed and leverage boys.  No savings for you!

Senator Kyrsten Sinema (Blue Team-Arizona) backed a Republican amendment shielding businesses that rely on capital investment from private equity groups from the 15 percent corporate minimum tax.  Politicians Red and Blue love PEU. 

The PE lobby did double duty preserving carried interest and exempting PE affiliates from the 15% minimum corporate income tax.  Someone noticed!

Blankfein's son Alex worked for The Carlyle Group.  Alex is now a Principal at Redbird Capital Partners.

Update 8-9-22:  Insider noticed Sinema's love for the PEU boys.  Consummate insider Larry Summers noted:

"There is no legitimate public policy argument for the maintenance of carried interest or @SenJohnThune /@SenatorSinema's private equity carve out from the bill."

FT reported:

Sinema has received more than half a million dollars in campaign donations from private equity group executives in this election cycle alone, representing about 10% of her fundraising from individual donors. This includes individual donations totaling $54,900 from executives at KKR, $35,000 from Carlyle, $27,300 from Apollo, $24,500 from Crow Holdings Capital and $23,300 from Riverside Partners.

She will never have to sleep in a car again.

Update 8-10-22:  Larry Summers is appalled by the Senate's catering to the PEU boys with tax carve outs.

Update 8-11-22:  A former BlackRock executive blew holes in Senator Sinema's rationale for siding with the greed and leverage boys.

Update 8-14-22:  Senator Kyrsten Sinema received "nearly $1 million over the past year from private equity professionals, hedge fund managers and venture capitalists whose taxes would have increased under the plan."

Update 8-22-22:  Blue Corporacrat Sinema never said the words "carried interest" in public as she water carried for the PEU boys.

Update 9-2-22:  I found Senator Sinema's Arizona car wash PEU.  Quick Quack Carwash is sponsored by Seidler Equity Partners and some of its debt was underwritten by Golub Capital.  Senator Sinema may not drive dirty but she votes PEU.

Update 12-9-22:  Sinema hung her independent shingle to drum up funding from the billionaire boys.

Update 1-24-23:  Sinema is fresh from attending the World Inequality Forum in Davos and rubbing elbows with the billion class.  It turns out the PEU boys were very generous with the Independent Senator after she saved their preferred taxation.  

Senator Krysten Sinema received at least $526,000 from donors in the private equity, hedge fund, and venture capital industries after killing a bill closing tax loopholes for private equity.

It sounds like the bidding has already started for her future services. 

Update 2-16-23:  Thirteen years ago Senator Max Baucus dropped a provision that would have taxed the greed and leverage boys more appropriately.

Baucus went on to deform healthcare for the PEU boys before stepping down from the Senate and serving as U.S. ambassador to China where he helped Hunter Biden form a $1 billion PEU with a large China bank.  

Max began carrying the PEU water in summer 2007.

Update 3-9-23:  The Biden budget proposal includes elimination of carried interest preferred taxation.  The measure has zero chance of passing given all the political PEU love in Congress and the White House.  It makes nice theater.

Update 10-24-23:  Kyrsten Sinema said she doesn't care if she loses reelection because she 'saved the Senate by myself' and can go serve 'on any board I want to.'  For saving PEU preferred taxation I'll wager she gets more than a board seat.

Thursday, August 4, 2022

Latest Run at Eliminating PEU Carried Interest

Carlyle Group co-founder David Rubenstein is likely pulling out the political stops once again to fend off a Senate Bill eliminating private equity's preferred carried interest taxation.  He nixed numerous efforts to do so in the last two decades (2007, 2012 and 2016).  After the 2012 failure Rubenstein had the gall to call his preferred taxation "a disgrace."

A key vote for the measure is Senator Kyrsten Sinema (Blue Team-Arizona).  She received $38,300 from KKR and The Carlyle Group has donated $10,000 to her campaign in this election cycle. 

Estimates indicate such a change would add $14 billion to federal coffers over the next ten years.  Eleven years ago the estimate was $22 billion when private equity underwriters (PEU) managed a fraction of today's assets under management.

A 2016 New Yorker piece stated:

Had the loophole been closed, the Treasury would have taken in eight billion additional tax dollars, or eighty billion over ten years.

Rubenstein's personal lobbying to keep the tax loophole bought the greed and leverage boys over a decade to shift compensation away from carried interest to dividends, also taxed at a preferred rate to income.  That's why the ten year Treasury gain fell from $80 billion to $14 billion.  Blue Team corporacrats like Joe Manchin know this. 

The public will see how much politicians Red and Blue love PEU.  It may be the last chance to eliminate this unfair tax break.   Increasingly more elected officials/candidates are former private equity underwriters.  This is a worrying sign for those interested in real equity, the fairness version.

Update:  Blackstone co-founder Stephen Schwarzman is lauded as a hero for relaying a message to Canadian President Justin Trudeau on updating NAFTA.  There must be an effort to eliminate PEU preferred "carried interest" taxation.  Cue to the PEU hero stories and ignore the billionaire villains not paying their fair share for decades.

Blue corporacrat Kyrsten Sinema may come to the rescue of the PEU boys.  Reportedly she wants to block the measure narrowing the carried interest loophole.

Duplicitous David Rubenstein received his founders' share of a $344 million payout for the termination of a cash tax agreement with Carlyle.  A pension fund is suing Carlyle's board over this blatant handout to billionaire founders.

Update 8-7-22:

Blankfein's son Alex worked for Bain Capital and The Carlyle Group.  Alex is now a Principal at Redbird Capital Partners.

Update 12-9-22:  Sinema hung her independent shingle to drum up funding from the billionaire boys.

Update 1-24-23:  Sinema is fresh from attending the World Inequality Forum in Davos and rubbing elbows with the billion class.  It turns out the PEU boys were very generous with the Independent Senator after she saved their preferred taxation.  

Senator Krysten Sinema received at least $526,000 from donors in the private equity, hedge fund, and venture capital industries after killing a bill closing tax loopholes for private equity.
It sounds like the bidding has already started for her future services.