PEU Dash for Cash

Bloomberg reported Wells Fargo sold $2 billion of private equity assets to other private equity underwriters (PEU).  It's not clear what they sold, stakes vs. affiliates or a combination of the two.  Until the sale Wells Fargo was the sole institutional LP in NMP and NEP.

Norwest Mezzanine Partners made two SEC filings today, one for NORWEST MEZZANINE PARTNERS V, LP and another for NORWEST MEZZANINE PARTNERS V-A, LP.  Lazard was listed as the firm receiving compensation for selling the offerings.  Both filings stated:

The general partner is entitled to a carried interest. The investment manager is entitled to a management fee. The carried interest and management fee are fully discussed in the Issuer's confidential offering materials.

Bloomberg Law reported how the greed and leverage boys plan to screw their limited partners:

Investors with money stranded in private equity funds are weighing an expensive solution: borrowing against their stakes, sometimes at double-digit interest rates, until the market for their holdings turns around. 

“Net-asset-value” financing to free up cash has already taken off among private equity firms holding $4.8 trillion of assets who’ve balked at selling investments amid a soft market for mergers and acquisitions. 

Now lenders are pitching those firms’ clients on the loans as well. Lenders such as 17Capital, Apollo Global Management Inc. and Ares Management Corp.see a growing market targeting investors in the PE funds.  

The dash for cash is on.  Oh, and the Bank of England established a special loan facility to help non-banks, i.e. insurers, pensions and PEUs.....  Oh my!  

Something wicked this way comes.

Carlyle Negotiating with Medtronic

Reuters reported:

Private equity firm Carlyle Group Inc (CG.O) has entered into exclusive negotiations to acquire a majority stake in two medical device businesses of Medtronic Plc (MDT.N) at a valuation of more than $7 billion, according to people familiar with the matter.

Were an agreement to be reached in the coming weeks, it would mark the culmination of Medtronic's 12-month review of its patient monitoring and respiratory interventions businesses.  

Given Carlyle's ability to cross sell within its affiliate pool, what can a healthcare patient expect?  How about some music?

Litmus Music — a music catalog rights company backed by private-equity firm Carlyle Group LP

Maybe some respiratory therapy intervention dancing to Katy Perry or Keith Urban?

Carlyle drove two post acute care companies into bankruptcy, nursing home giant ManorCare and long term acute care hospital company LifeCare, so those cross selling options have closed for the politically connected private equity underwriter (PEU).  

Rest assured the greed and leverage boys will continue to crapify healthcare.  Profit over patients, it's in their nature.

Politicians Red and Blue love PEU, and that's why so many parasitic PEUs are deep in healthcare.  The PEU boys love the security of Uncle Sam's wallet!

Update 1-3-24:  NakedCapitalism did a great piece on the PEU boys bleeding healthcare firms and harming quality care.

Michelle Obama's Juggernaut Speaking Fee: $741,000

Former First Lady Michelle Obama received 700,000 euros or $741,000 as the headline speaker at the Bits and Pretzels Founders event in Munich, Germany.  That's a massive fee for a one hour talk, one reserved for insiders.

Mrs. Obama co-founded Plezi Nutrition, a public benefit company focused on healthy food and drink products for children.  PLEZi Nutrition is backed by Juggernaut Capital Partners, a private equity underwriter (PEU).  

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

 

What's in the Box Mr. Griffin?

The SEC recently asked at least sixteen investment firms for their WhatsApp messages for the first half of 2021.  The list included five major private equity underwriters (PEU), several hedge funds and huge market maker Citadel.

Citadel is fresh off a $7 million settlement with the SEC for "alleged order placement errors and misrepresentation of short sales."

It appears Ken Griffin's firm will fight the SEC's request and may do so in conjunction with the PEU boys.  Billionaires have access to elected official at all levels.  

Politicians Red and Blue love PEU and increasingly, more are one.  Is any of that love in WhatsApp messages during the first half of 2021?  What kinds of evil may be lurking in PEUdora's Box?  Ken Griffin wants it kept closed.

SEC to Open PEUdora's Box?

Seeking Alpha reported:

The U.S. Securities and Exchange Commission has escalated its investigation into the financial industry's use of personal devices for communicating about business matters by collecting thousands of messages, according to a media report.

Now the SEC is asking at least 16 investment firms for messages from the first half of 2021 that pertain to their businesses, Reuters said, citing four people with direct knowledge of the matter. The companies include Blackstone (NYSE:BX), Apollo Global Management (NYSE:APO), KKR & Co. (NYSE:KKR), Carlyle Group (NASDAQ:CG), and TPG (NASDAQ:TPG), three of the people told the news organization. Another person said some hedge funds, including Citadel, were also involved.

Private equity underwriters (PEU) brought us nonlobbyist lobbying where billionaire founders set U.S. policy via "personal relationships" with legislators, governors and Presidents.

Indicted Blue Team Senator Bob Menendez had Blackstone and Apollo in his top five donor list.  Did any PEU insiders use their nonlobbyist lobbying relationships to fuel their insatiable greed?  PEU personal devices may shed light on that question.  

It will be interesting to see what evil flies out of PEUdora's WhatsApp box.

BIG's Take on PEU WCAS

Matt Stoller wrote on BIG:

“Awesome! Cha-ching!” 

That’s the phrase that an executive at private equity-owned financial firm U.S. Anesthesia Partners (USAP) used after acquiring yet another Texas anesthesiology practice, with the intent of hiking prices on Texas patients. And “Cha-ching!” was the right way to put it, since the excess profits amounted to tens, or even hundreds of millions of dollars, in just one medical specialty, in just one state. 

But the new quote should be ‘uh oh.’ Because today, the Federal Trade Commission, led by Chair Lina Khan, filed suit against USAP for monopolization, as well as its owner, New York City-based private equity firm Welsh Carson, which from its offices on Park Avenue engineered the entire strategy of gouging patients in Texas. It’s an important suit, for reasons I’ll go into, and it also reflects a more aggressive antitrust enforcement regime, and skepticism of private equity in health care.

Stoller quoted a NYT piece that concluded "private equity funded consolidation led to price increases" in a number of medical specialties.  He stated Welsh Carson ripped from that playbook.  

Actually WCAS wrote the playbook.   Brian Regan, General Partner in the Healthcare Group, implemented it at USAP.   Also in the Healthcare Group, former Medicare Chief Tom Scully.

WCAS is currently employing that very strategy in orthopedics with United Musculoskeletal Partners.  The December 2021 press release stated:

Welsh, Carson, Anderson & Stowe ("WCAS"), a leading private equity firm focused exclusively on the healthcare and technology industries, and Resurgens Orthopaedics, one of the nation's largest orthopaedic practices, today announced the formation of a new venture focused on building the premier physician-owned orthopaedic platform in the country.

The press release referenced WCAS past medical practice companies that rolled up

WCAS has deep experience building industry leading companies in partnership with physicians, including: US Radiology Specialists, US Anesthesia Partners, US Acute Care Solutions, US Oncology and USPI, among others.

WCAS' man at US Oncology is now CEO of Humana.  Bruce Broussard continues to use Humana funds for joint ventures with WCAS.  Humana makes significant profits from Medicare and Medicaid.  It invested alongside WCAS in occupational medicine, urgent care, primary care and home health/hospice ventures.

WCAS cashed out of its stake in Kindred Hospice, since renamed Gentiva by another private equity underwriter (PEU), Clayton, Dubilier and Rice. I'm sure WCAS's profit on Kindred Hospice was a majorly awesome cha-ching!

Tom Scully's ability to quote statistics supporting WCAS' greed is analogous to the Saudi Crown Prince bin Salman's recent data filled slide show.  They both have nefarious ends, more money, power, and influence....

Matt Stoller does fine work.  Consolidating and overcharging, it's been going on for a long time.  Yet, the future holds more threats than simple roll-ups.

In 2021 WCAS started Valtrius.  It is essentially a healthcare venture capital company.  Valtrius sounds like a herpes medicine and its aims to grow healthcare profits in virus like fashion.

Valtrius recently launched TailorCare:

Valtruis, a WCAS company, announces the launch of TailorCare, a risk-based company that provides evidence-based, clinically-designed care navigation to patients living with joint, back, and muscle pain.

TailorCare partners with in-market providers to deliver high-quality MSK care. This includes primary care and specialty providers, such as United Musculoskeletal Partners (UMP), TailorCare's anchor strategic orthopedic partner.

Layering of PEU affiliates will be the next challenge for any Federal Trade Commission. 

A round of applause for anyone who can hold, even turn back the PEU surge overrunning our healthcare system.  

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

Update 9-25-23:  KKR owns healthcare provider Brightspring and appears ready to take it public.  Buzzfeed found serious care problems at the company.

Update 9-28-23:  Matt Stoller writes on Twitter/X:

Private equity is furious at Lina Kahn, everyone else is furious at private equity.

Private equity doesn't care if people are furious. They feel removed from affiliate customers and have the politicians at their beckon call.

Update 10-26-23:  Big by Matt Stoller reported the Pentagon's "hand's off position" on defense company buyouts has consequences:

Higher prices, worse quality, lower output. Wall Street and private equity firms prioritize cash out first, and that means a once functioning and nimble industrial base now produces more grift than anything else.  

Update 1-3-24:  NakedCapitalism did a great piece on the PEU boys bleeding healthcare firms and harming quality care.

Senator Bob Menendez Indicted for Self Serving

U.S, Senator Bob Menendez (Blue Political Team- New Jersey) got caught with his hand in the halal jar.   NBC News reported federal agents found forbidden booty during their years long investigation:

Agents found more than $480,000 in cash, “much of it stuffed into envelopes and hidden in clothing, closets, and a safe,” including jackets bearing the senator’s name that were hanging in his closet, as well as more than $70,000 in Nadine Menendez’s safe deposit box, the indictment alleges. 

Menendez "dismissed the allegations against him in a statement, saying prosecutors have 'misrepresented the normal work of a Congressional office.'"

So the "normal work" of a Congressman is to personally profit from the application of influence on behalf of "insiders?"  Thank you for that clarification, Senator!

Menendez' insiders included the founder of IS EG Halal.   In early 2020 the Egyptian Prime Minister decreed the company as the only entity capable of granting halal certification. 

This decree legitimizes the establishment of IS EG Halal (Edgewater, New Jersey) as Egypt’s sole authorized halal certification entity in the United States for food and beverage products exported to Egypt.

It also established IS EG Latin America SRL for certifying food exports from Latin and South America.

IS EG Halal's website states:

“Halal” in Arabic means permissible or lawful. When it is applied to food or other goods it denotes specific regulations as to which types of food/drink Muslims can consume as well as how those products are prepared. 

So why did IS EG Halal's founder need Senator Menendez?   The indictment states:

Menendez "provided sensitive U.S. Government information and took other steps that secretly aided the Government of Egypt." It also says the senator pressured an official at the U.S. Agriculture Department for the purpose of protecting a business monopoly granted by Egypt to Hana, who is an Egyptian American. 

According to the indictment, Hana and Nadine Menendez "were friends for many years" before she started dating the senator. In early 2018, she informed Hana that she was dating Menendez and "in the following months and years," they worked to introduce Egyptian intelligence and military officials to the senator "for the purpose of establishing and solidifying a corrupt agreement" in which Hana, with assistance from the two other businessmen, "provided hundreds of thousands of dollars of bribes" to the senator and his wife "in exchange for Menendez's acts and breaches of duty to benefit the Government of Egypt, Hana, and others, including with respect to foreign military sales and foreign military financing," the filing alleges.

With Senator Menendez even the date he met his current wife is under a cloud of suspicion.

Open Secrets showed Menendez' top donors from 2017-2022.  Two of the top five are private equity underwriters (PEU).  Blackstone and Apollo Global Management came in at #3 and #5.  The PEU boys are masters at tapping Uncle Sam's wallet and keeping their unjust preferred "carried interest" taxation in place.  

Everything about IS EG Halal reads PEU.  Worldwide franchise established by Egyptian government. Check.

Product becomes prohibitively more expensive due to change.  Check.

After Egypt disqualified the four previously designated companies, the price paid by retailers to get certified halal beef was expected to increase to about $200 a metric ton, up from about $20, according to a USDA report.

History doesn't repeat, but it echoes.  Recall the bribery of the wife of Congressman John Conyers by Synagro Corporation, an affiliate of The Carlyle Group, another politically connected PEU?  Conyers said at the time:

"Public officials must expect to be held to the highest ethical and legal standards."

The system is designed to produce otherwise.  

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

Update 9-26-23:   The indictment can be found here.

Scheming Billionaires: PEUs Red and Blue

Blue Team Senator Sheldon Whitehouse gave compelling testimony about billionaire efforts to control parts of our national government.  He cited Red Team oriented billionaires shaping the Supreme Court and then currying favor with conservative appointees.  Congress enacted legislation that enables special interest organizations to influence elected officials and impact government operations.

The U.S. grew a new class of billionaires over the last three decades. Co-founder David Rubenstein located The Carlyle Group in Washington, D.C. to tap Uncle Sam's wallet and influence policy.   Carlyle is a politically connected private equity underwriter (PEU).

Rubenstein descends on Capital Hill every time Congress pretends to take a serious run at eliminating PEU preferred "carried interest" taxation.  He dines with Presidents regardless of their political stripes.  

He benefacted his Nantucket estate for many of President Biden's Thanksgiving vacations.  Surely, Sheldon is aware of this given Rhode Island's proximity to Nantucket.

I am grateful the Senator pointed out decades of undue influence by a few of our wealthiest citizens.  It's happened on many fronts and the people steering the politicians reap the benefits.  That's not the common citizen.

Congress designed a system that enables people with more resources to have significantly more influence.  Politicians Red and Blue love PEU and increasingly, more are one.

Musicco Latest to Leave CalPERS CIO Role

Yet another CalPERS Chief Investment Officer is stepping down.  Nicole Musicco leaves the end of September after eighteen months in the role.  Chief Investment Officer reported Musicco is leaving to address the needs of her family.  She is leaving an empty seat at CalPERS, one that has taken considerable time to fill in the past. 

The CIO piece provided some interesting history:

Musicco, the second woman to ever lead the investment division, took the role in March 2022, more than a year after the departure of Ben Meng, who was embroiled in controversy after he approved a $1 billion investment into a Blackstone private equity fund while personally holding $100,000 in Blackstone shares in 2021.

Musicco is a former partner at Redbird Capital Partners, a private equity underwriter.  Watch where she lands once her family situation settles down.  

Not long ago Musicco had a nice interview with Carlyle Group co-founder David Rubenstein.  He hammered the point that she could make bigger money elsewhere.  Might Carlyle or Rubenstein's family office (Declaration Partners) need someone with Musicco's skills?  

Start the music.  There are seats to fill in this version of Musicco Chairs.

Texas Senate OK's PEU Sponsorship in Paxton Acquittal

The Texas Senate acquitted Attorney General Ken Paxton of all impeachment charges.  Texas Red Team senators carried the voting load that let Paxton stay in office.  

Only two Red senators out of nineteen voted to convict Paxton and they did so on twelve of the sixteen charges.  The other seventeen Red senators found Paxton's actions not to rise to the level of impeachment.

This is good news for Texas elected officials who wish to cozy up to billionaire private equity underwriters (PEU) and marshal state resources on those billionaire's behalf.  It is even better news for Human Abuse Department chiefs who wish to dismiss pesky whistleblowers.  And it means Ken Paxton can once again ask Texas taxpayers for $3.3 million in settlement money for his untoward actions towards the people trying to uphold state ethics standards.

Yeeeehaaawwww! Texas Reds vote for PEU sponsorship!  Line 'em up boys.  We'll have the best billionaire sponsored government anywhere!  Yeeehaawwww!!!

Politicians Red and Blue love PEU and increasingly, more are shamelessly attached to at least one.  Ken Paxton/Nate Paul 2026!

Update 9-17-23:  Paxton never testified to any legislative body on the charges but plans to go on Tucker Carlson's Twitter/X channel to "address the nation."  I hope his future running mate Nate Paul joins him on Carlson's podcast.

Paxton warned the Biden administration to "buckle up."  Paxton would have been wise to have never unbuckled for a lady other than his wife.   Ken, it was your own political party that impeached you in the Texas House.  

I guess it's the Insane Red Team and their billionaire sponsors vs. the Blue Lucys and their billionaire backers.  May the biggest bankroll win.  Ken Paxton/Nate Paul 2026!

The Fort Worth Star Telegram ran an editorial titled:  "A sad day for Texas:  Acquitting Ken Paxton condones corruption, abuse of power."  A Tarrant County judge blamed the "corrupt media" for Paxton's ethical lapses.

Update 9-18-23:  The Texas Senate ensured the Attorney General's office will remain a hostile environment for ethical employees.

Update 9-23-23:   Unfortunately Paxton's unethical behavior was both defended and tolerated.

The evidence is explicit and undisputed that Attorney General Paxton blatantly and continually abused his office and power for personal gain. Time and time again, General Paxton put his own interests above that of Texans. His actions are an unequivocal breach of public trust in the Office of the Attorney General. As legislators, it is our responsibility to ensure that such actions from the chief law enforcement officer in Texas are neither tolerated nor defended.

Update 10-4-23:  The Texas House of Representatives released more information, i.e. evidence they considered in filing articles of impeachment against Paxton.

Paxton's Impeachment Has PEU Odor

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Rep. Andrew Murr (Red Team-Junction) said the following in his closing of the Attorney General Ken Paxton's impeachment trial in the Texas Senate:

"Nate Paul brought incredible wealth and a lavish lifestyle to the partnership.  Ken Paxton brought the incredible power of the state.  The defense isn't that he didn't do it.  It's that it doesn't matter because he won the election."

Several months ago PEU Report found that Nate Paul is a World Class private equity underwriter (PEU).  

Texans will soon learn if elected officials are public servants or PEU sponsored.

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

Update:  Texas Reds vote for PEU sponsorship!  They acquitted Paxton on all charges.  Line 'em up boys.  We'll have the best billionaire sponsored government anywhere!  Yeeehaawwww!!!

BX Joins S&P 500 Index

S&P 500 index holders saw the planned addition of Blackstone (BX), a giant private equity underwriter (PEU).  Those indirect holders have no say in the company's board of directors.  

BX's most recent 10-K states:

Because the Series II Preferred Stockholder holds more than 50% of the voting power for the election of directors, we are a “controlled company” and fall within exceptions from certain corporate governance and other requirements of the rules of the New York Stock Exchange. Pursuant to these exceptions, controlled companies may elect not to comply with certain corporate governance requirements of the New York Stock Exchange, including the requirements (a) that a majority of our board of directors consist of independent directors, (b) that we have a nominating and corporate governance committee that is composed entirely of independent directors, (c) that we have a compensation committee that is composed entirely of independent directors, and (d) that the compensation committee be required to consider certain independence factors when engaging compensation consultants, legal counsel and other committee advisers. While we currently have a majority independent board of directors, we have elected to avail ourselves of the other exceptions. Accordingly, our common stockholders generally do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

And who might these preferred stockholders be?

Blackstone Group Management L.L.C., an entity owned by senior managing directors of Blackstone and controlled by Mr. (Stephen) Schwarzman, is the sole holder of the Series II Preferred stock. As a result, conflicts of interest may arise among the Series II Preferred Stockholder, on the one hand, and us and our holders of our common stock, on the other hand. The Series II Preferred Stockholder has the ability to influence our business and affairs through its ownership of Series II Preferred stock, the Series II Preferred Stockholder’s general ability to appoint our board of directors, and provisions under our certificate of incorporation requiring Series II Preferred Stockholder approval for certain corporate actions (in addition to approval by our board of directors). If the holders of our common stock are dissatisfied with the performance of our board of directors, they have no ability to remove any of our directors, with or without cause. 

Further, through its ability to elect our board of directors, the Series II Preferred Stockholder has the ability to indirectly influence the determination of the amount and timing of our investments and dispositions, cash expenditures, indebtedness, issuances of additional partnership interests, tax liabilities and amounts of reserves, each of which can affect the amount of cash that is available for distribution to holders of Blackstone Holdings Partnership Units. 

In addition, conflicts may arise relating to the selection, structuring and disposition of investments and other transactions, declaring dividends and other distributions and other matters due to the fact that our senior managing directors hold their Blackstone Holdings Partnership Units directly or through pass-through entities that are not subject to corporate income taxation.

Adding Blackstone to the S&P 500 increased demand for BX stock.  Famed investor Bill Fleckenstein calls automated index investing "the robot" that keeps stock indices up.

BX has provisions to keep common stockholders down.

Subject to applicable law, our certificate of incorporation contains provisions limiting the duties owed by the holder of our Series II preferred stock and contains provisions allowing the Series II Preferred Stockholder to favor its own interests and the interests of its controlling persons over us and the holders of our common stock. Our certificate of incorporation contains provisions stating that the Series II Preferred Stockholder is under no obligation to consider the separate interests of the other stockholders.

It's a sweet arrangement for the PEU boys.  How kind of the S&P 500 to include BX in the robot's automated stock buying.

Lower the bar and the barbarians rush right in....

Update 9-19-23:  Billionaire policy maker Stephen Schwarzman boldly predicted other candidates will come to the fore in the 2024 White House race.  Will it be former Carlyle Group co-CEO Glenn Youngkin or another PEU politician?

Update 9-30-23:  Top Red Team donors push Youngkin to join the Presidential race.

Rubenstein Explains PEUmerica

Another major media organization gave Carlyle Group co-founder David Rubenstein a public platform.  WaPo joined Bloomberg, PBS and CNBC in handing Rubenstein a microphone and cameraman.

A large public pension is suing Carlyle over huge sums paid to Carlyle's founding triumvirate.  Rubenstein cited the distortions money cause on our political system.  He should know as Carlyle innovated in that regard, locating the firm in Washington, D.C. to mine Uncle Sam's wallet.

Rubenstein did not explain why private equity underwriters (PEU) continue to pay lower taxes via their "carried interest" tax break. 

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

Elon Musk PEU

Last year Bloomberg reported Elon Musk created "X Holdings" as a possible parent company for SpaceX, Tesla and other Musk founded companies.  Musk formed a trio of holding companies as he pursued Twitter.  Elon said he'd thought about forming a holding company since 2012.  Musk said he faced challenges in bringing all his corporations under one holding company.

A different model exists for Elon, private equity.  It's the tax advantaged rage in powerful circles.  

Even Musk's biographer is a private equity underwriter (PEU).

Issacson is an Advisory Partner with Perella Weinberg Partners

Issacson noted Musk's lack of empathy, which is a trait commonly shared by PEUs.  Looking to Elon for leadership wisdom to emulate is a fool's errand.   Musk frequently drives in fear with his propensity to "break things."

Disruption is part of the PEU gospel.  Elon's disruptive cybertruck is yet to hit the roads.  Musk plans to disrupt his way into a giant integrated artificial intelligence corporate monstrosity.  

Funded by Uncle Sam with preferred "carried interest" taxation, that would be the PEU way.

Update 9-14-23:  The cybertruck is coming, the cybertruck is coming.  Really?

Update 9-25-23:   Musk's biographer paints a disturbing picture of his subject in an interview with Carlyle co-founder David Rubenstein at the Economic Club of Washington. 

Update 3-7-24:  Musk slammed MacKenzie Scott for donating to causes that advance women and minorities.

Predatory Tech in Headlines

Tech promised to be the great equalizer.  It turned into the great predator.

A friend rented an apartment here.  I asked about rent.  She said it changed by the hour based on some national rate.  That sounded like nonsense to me until I read the following:

An antitrust class-action lawsuit was filed today in Seattle alleging property management software giant Yardi Systems and 18 property management companies colluded to fix rent prices in multifamily markets across the country. 

The suit accuses the companies of using Yardi’s pricing software RENTmaximizer and revenue management software Revenue IQ in a coordinated effort to raise costs at the same time while maintaining occupancy.

And how does a music streaming service become a tool for the bad guys?  Money laundering. 

 ....criminal organizations have been exploiting Spotify for money laundering purposes since 2019.

Intelligencer did a story with Ponzinomics and Crypto Hype in the title.  It is a scathing take on the many charlatans in crypto tech.

Institutional Risk Analyst reported:

The question is how state and federal regulators, as well as elected officials in both political parties, did not see that the entire construct of crypto currency was at best a form of money laundering and at worse outright fraud.

State and federal regulators, as well as elected officials in both political parties bear hugged the crypto hype and swallowed tech's "great equalizer" promise.   It's time they regurgitated those up into the tech predator barf bag.  

What happens when AI supercharges the lies and chicanery?  Face it, you are on your own.

Private Equity: Rascals, Scoundrels, Villains, and Knaves

Less than a month after Donald Trump's term as President expired his former White House Senior Advisor and son-in-law Jared Kushner had incorporated A Fin Management LLC as a foreign limited liability company in Florida.  State records reveal a 2-18-2021 incorporation date.  

A May 2023 SEC filing indicated Kushner's A Fin Management LLC had six beneficial owners, had a sub fund based in the Cayman Islands holding over $3 billion in assets under management.  It also characterized the fund as a private equity underwriter (PEU).

Kushner supercharged the often driven path between White House service and private equity.  Carlyle Group co-founder David Rubenstein blazed the trail in the early 1980's.  Now ubiquitous, one can turn over a rock near Washington, D.C. or New York and find a PEU.

Congressman Jamie Raskin should know that given his district's proximity to our nation's capital.  His concerns about rascal Kushner would have more credibility if he'd raised the specter of  private equity when President Biden appointed his cabinet.  It's chock full of greed and leverage boys (and a girl or two).

Affinity reached its first deal in Israel.  Axios reported:

Affinity is investing $150 million for a 10% stake in the auto services unit of Shlomo Group

Politicians Red and Blue love PEU and increasingly, more are one. The road between the White House and PEUville is filled with rascals, scoundrels, villains and knaves.  Expect more of them, many more...

Billionaire Leon Cooperman Cries Again

Hedge fund giant Leon Cooperman cried on CNBC in November 2019 in fear of the possibility of an Elizabeth Warren presidency.  He cried again this morning because he is "concerned about the lefties."

Cooperman's Omega Advisors has Apollo Global as one of its top five holdings.  Apollo is a private equity underwriter (PEU).

Flash back to April 23, 2020 (twelve days after the death of New York real estate magnate Stanley Chera):

Billionaire investor Leon Cooperman said Thursday on CNBC’s “Squawk Box” that the coronavirus crisis will “likely” change capitalism forever and that taxes will need to be raised soon.

“When the government is called upon to protect you on the downside, they have every right to regulate you on the upside,” Cooperman said. “So capitalism is changed.”

The chairman and CEO of the Omega Family Office said the country is shifting to the left and that taxes will have to go up regardless of who wins the presidential election in November. 

“Quickly if Biden wins, slowly if Trump wins, but taxes have to go up. So things like carried interest, capital gains taxes, the ability to roll over real estate sales tax-free, all that stuff is going to have to be eliminated. For the good, by the way,” Cooperman said.

Taxes weren't raised.  All "that stuff" remains firmly in place.  The PEU boys wouldn't have it any other way.  They have their fee/income cake and can eat it nearly tax free too.

Politicians Red and Blue love PEU and increasingly, more are one.  How generous for them to protect the billionaire boys on the downside and ask for nothing in return.

NextGen Healthcare to Go PEU

NextGen Healthcare will be taken private by Thoma Bravo in a $1.8 billion deal, including debt.  Thoma Bravo bills itself as "a leading private equity investment firm building on a 40+ year history." 

NextGen's long term debt (convertible notes) will soar from $267 million to what?   Sponsor deal fees, additional interest expenses and annual management fees add how much to the expense side?  Those items were left out of the press release as was the following recent news (June 2023):

NextGen settled with the Justice Department for $31 million. 

 ...the government alleges that NextGen relied on an auxiliary product designed only to perform the certification test scripts, which concealed from the certifying entity that NextGen’s EHR lacked critical functionality. 

...the government contends that, notwithstanding this prohibition, NextGen knowingly gave credits, often worth as much as $10,000, to current customers whose recommendation of NextGen’s EHR software led to a new sale. The government alleges that other remuneration, including tickets to sporting events and entertainment, was also provided to induce purchases and referrals. 

Fraud and bribery are longtime features of private equity underwriters (PEU).  Thank heaven so many billionaire PEU founders now own professional sports teams to facilitate illicit activities.

As for our obscenely expensive healthcare it just gets crappier.  Primary care physicians are quitting in droves.  "Patient centered care" turned into "profit centered care" as PEUs bought large hospital companies, nursing homes, hospices, specialty pharmaceutical companies, physician staffing companies, dental practices and specialty physician groups.

Consider what an Emergency Room physician wrote in Time:

 We are burned out and overwhelmed. Violence against healthcare workers is a regular occurrence. We are worn down by the daily roadblocks set up by intransigent health insurers, error-promoting electronic health records, and C-suite executives with little understanding of the boots-on-the-ground perspective.

People are dying that would not be dying, if we (physicians) only had the time and resources to do our jobs as we were trained to.

The Thoma Bravo press release stated:

“We look forward to partnering with the NextGen Healthcare team to further accelerate product investments to better support the increasingly complex needs of ambulatory providers and ultimately improve patient outcomes.”

Uncle Sam's wallet funds much of our national healthcare non-system.  The greed and leverage boys have bleed it for huge profits for decades.  To see what the PEU boys do to turbocharge complexity simply look at the corporate structures set up for any one deal. 

One Thoma said in 2012:

"Somewhere along the way it got to be about ‘private equity is about people getting rich.’”

A PEU founder would know.  It's about getting rich and not paying your fair share of taxes.  Crappifying healthcare is a spinoff effect.

Update 9-11-23:  PEU healthcare bankruptcies are way up this year.  Lawmakers ignored private equity's advances into healthcare over the last two decades.  Nearly every former Medicare Chief became a PEU.  Congress couldn't undertake the wildly popular action of eliminating private equity's preferred "carried interest" taxation.  How are they going to get them to turn over more information? 

Nearly Everything about PEUs is Artificial

Blackstone stock will join the S&P 500 on September 18th.  It will join an index that receives huge amounts of automatic investment money.  Famed investor Bill Fleckenstein refers to automated index investing as "The Robot."

Blackstone is the first private equity underwriter to join the index, although KKR and Apollo could soon follow.

Meanwhile, Blackstone's REIT gated withdrawals for nine straight months.  In June investors asked to redeem $3.8 billion while BREIT returned only $628 million.  Reuters reported:

Blackstone has been exercising its right to block investor withdrawals from BREIT since November after requests exceeded a preset 5% of the NAV of the fund.

July saw Blackstone return $1.3 billion of $3.7 billion requested.  Excess demand remains from investors to get their money out of BREIT.

In two weeks Blackstone will see demand increase for its stock simply from S&P index inclusion.  These guys have all the luck! 

A Harvard law and economics professor is concerned about private equity and its concentration of political and economic power.

"Private equity funds, such as Apollo, Blackstone, Carlyle, KKR, are doing as much, if not more, than index funds to erode the legitimacy and accountability of American capitalism, not by controlling public companies, but by taking them over entirely and removing them from the SEC disclosure regime..."

"....private equity as a mechanism for ownership has been increasing its share of the economy at a 15% plus compound annual growth rate for 30 years. That's through ups and downs. Right now, they're probably facing some headwinds in their core buyout business from rising interest rates. I don't think buyouts are necessarily going to keep going up every single year, but they're moving into credit markets. They're adapting in ways that allow them to continue to grow through ups and down cycles in the macroeconomy. Okay, that's the first point. As I said earlier, currently 15%, 20% of the overall corporate sector, one in seven or eight of all workers in the US, whether they know it or not, work for a private equity firm. That's also continuing to go up. By design, they do not have to report anything to the public or even really to their own investors as a result of regulation. They're designed to not trigger SEC disclosure. They also lobbied very effectively in the '90s to get the laws changed in ways that make it easier for them to not trigger disclosure."

In addition to luck, the PEU boys have the skills of political insider-ship.  That's how they became giants, owning professional sports teams while continuing to pay preferred "carried interest" taxation.

If you believe someone is protecting the small investor, much less the unwary PEU employee, think again.  Doomberg notes major games are being played with valuations and conflicted insider deals.  The greed and leverage boys play the same dirty games.  Regulators are AWOL as are the major business media. 

Blackstone and its PEU peers want other things to happen automatically, via artificial intelligence.   S&P Global Market Intelligence reported:

The Carlyle Group Inc. and Blackstone Inc., which have discussed the deployment of AI internally and at portfolio companies on recent earnings calls. Blackstone employs a 50-plus member data science team and is "rapidly and significantly expanding" its AI capabilities, CEO Stephen Schwarzman said on the firm's second-quarter earnings call. 

"We believe that the new generation of AI has the potential to transform companies and industries. And the timeliness and effectiveness of its implementation will be determinative of who the winners and losers will be," Schwarzman said.

In the article an AI consultant asked several PEU questions. 

Do I own any companies that are going to have their value significantly impacted by generative AI? 

Question number two shortly behind that is:  Do I have any companies that need to move quickly to take advantage of an opportunity to become much more valuable because of generative AI?

A third priority, especially for software-focused funds, is identifying those sectors or subsectors at the greatest risk of disruption by AI and incorporating that knowledge into the due diligence process for new investments

AI is not without concern in PEUville. 

....touches on a serious concern for private equity and possibly the greatest impediment to more widespread adoption of the technology: that allowing the software to access private equity firms' proprietary data could erode the firewall they use to keep that data away from competitors.

One fear of allowing AI into PEU information systems is their bogus valuation methods will be discovered and exposed.

What can go wrong with all this?  Workers and PEU investors, gird yourself. 

Addendum:  I have to thank my wise friend who sends me stories with his "spot on" thoughts.  This post would not exist without that.

Update 10-9-23:  The PEU boys are adept at keeping regulation at bay.  This could bode poorly for citizens seeking basic safeguards, i.e. regulatory constraints on AI.

Update 1-24-24:  Carlyle's new HR Chief wants to do at least two things, put AI to work in HR and give performance feedback to staff more frequently.  

Dating "ROI" is Shocking

"Return on investment" has become so pervasive it's infecting the dating world:

A new dating trend has been popping up, where men send money requests to women after they decline a second date. Some even express they’d like their date’s share of the bill back since they didn’t get a return on their “investment.”

In its coverage, CNBC found relationship experts and women were equally outraged by this trend — with one dating coach going so far as to call it “pathetic and unethical.”  

Might these men be private equity underwriters (PEU)?  They pull in the big money and are used to getting their way.  Shocking, unethical and pathetic are terms I might use to describe the PEU boys.  

Alpha, ROI and ROE, there the PEU boys go.....