From the T in GTCR

PEHub reported:

“Somewhere along the way, the PE industry lost its way,” he says. “Our industry is about moving capital and supporting companies so they can grow and create jobs. Nothing more, nothing less…Somewhere along the way it got to be about ‘private equity is about people getting rich.’”

“I didn’t get into this business to get rich,” (Carl) Thoma adds.

How much did Mr. Thoma make from selling LifeCare Hospitals to The Carlyle Group?  Weeks after GTCR liquefied its stakes in LifeCare, Hurricane Katrina struck.  Twenty five people died in the LifeCare unit at Memorial Medical Center.

A Toledo Sun reporter placed the blame on GTCR,. suggesting The Carlyle Group hadn't owned it long enough to be responsible for faulty disaster response.  Where were LifeCare's clinicians when Katrina struck, in or out of New Orleans?

Greed has long been a foundational feature of private equity underwriters (PEU's).  Failure to accept accountability is another.  Those two memes intersect in Thoma's remarks. 

Thoma downplayed his PEU's 45% return on investment, likely the reason for his latest PEU offering to overfill in five short months. 

Rubenstein's Tired Refrain

Carlyle Group co-founder David Rubenstein might have shouted this comment in Davos, Switzerland, years ago and the press just tuned into its echo.  This is his worn line:

"We need to do a better job of explaining what we do."

Rubenstein went on to say:

"No one wants to work in an industry that most people don't like," Rubenstein said, suggesting that only Congress and bankers enjoy less popularity than does private equity."

More people know about Congress and Banksters. Private equity underwriters (PEU's) are a new phenomenon for the mainstream press given Mitt Romney's time with Bain Capital. However, PEUReport chronicled private equity machinations over six years.

Rubenstein offered his remarks in a keynote speech at the SuperReturn International conference in Berlin.  Rubenstein enjoyed regular access to Congress and the White House.  President Obama just caved for PEU founders, like Rubenstein, to cash in their billions at a deeply discounted tax rate.

David Rubenstein will be one big draw in D.C. for the upcoming CES on The Hill event.  The Carlyle Group's Rubenstein is quite popular for a top dog in a hated industry.

Carlyle Does Double Monetization with Boston Private

American Banker reported:

Boston Private Financial Holdings Inc. put some of its excess capital to work by repurchasing 5.4 million warrants in a move that would eliminate potential dilution. The warrants were mostly held by private-equity firm Carlyle Group, Boston Private's largest shareholder

The warrant purchase gives Carlyle its first chunk of cash.  Here's the second:

Boston Private will sell "Davidson Trust Co. to Bryn Mawr Bank Corp. for $10.5 million."

How much of the sale proceeds will turn into a special dividend/distribution for Carlyle?  Recall Uncle Sam provided $153 million in TARP funding to Boston Private, a lender to high net worth individuals, during the financial implosion. 

PEU Banksters keep cashing in...

Abu Dhabi to D.C.: For the Private Planeless

AMEInfo reported:

Etihad Airways announced the launch of non-stop daily flights to Washington, D.C., the airline's fourth destination in North America, from March 31 2013, subject to regulatory approvals.

The Washington region is home to America's second largest market flying to the Middle East, after New York. Etihad Airways' new service will link D.C. with Abu Dhabi, a vibrant and growing hub for business, culture and tourism.

James Hogan, Etihad Airways President and Chief Executive Officer, said: "No other UAE carrier is offering nonstop services between D.C. and the UAE, so this capital-to-capital link is a huge opportunity for Etihad Airways."

The article highlighted trade relations between the two countires:

The new service will further strengthen the already strong political and economic ties between the National Capital Region and the UAE. Last week, the US Department of Commerce released data showing that total trade volume between the US and the UAE rose to $18.3bn in 2011, a 43% increase from the year before.

This increase represents the highest trade volume to date between the US and UAE. It also means that, for the third consecutive year, the UAE is the single largest export market for US goods in the Middle East. The US is the fifth largest trade partner worldwide for the UAE.

How much of the increase was military related?  The UAE Embassy in D.C. reported:

The UAE has turned to the United States as a major defense supplier, to help ensure interoperability of forces. In 2009, the US Congress approved a UAE request to purchase more than $15 billion in US defense equipment. Included in this package is the world’s most sophisticated missile defense system, making the UAE the only country, other than the United States, to deploy this technology.

The UAE currently has a number of military equipment programs with the United States, including:

• Patriot PAC-3 (Raytheon and Lockheed Martin)
• HAWK Air Defense Missile System (Raytheon)
• AH-64 Apache Longbow Helicopter (Boeing)
• UAE Air Force Command and Control System (Northrop Grumman)
• C-130 Cargo Aircraft (Lockheed Martin)
• C-17 Aircraft (Boeing)
• F-16 E/F Advanced Fighter Aircraft (Lockheed Martin)
• Multiple weapon systems associated with F-16 E/F (Northrop Grumman, Raytheon)
• UH-60 Blackhawk Helicopters (Sikorsky Aircraft)
• High Mobility Artillery Rocket System (Lockheed Martin)
• Maverick air-to-surface missiles (Raytheon)
• In the pipeline: AVENGER, SLAMRAAM, Terminal High Altitude Area Defense missile system, known as THAAD.

President Dwight D. Eisenhower's Military Industrial Complex ballooned since his prescient warning.  It's now the Government Corporate Monstrosity, fueled by trillions in federal budget steroids.

Roid Rage means more wars. YNET reported:

Officials said that the Pentagon submitted a request to Congress on February 7 on behalf of Central Command seeking to reallocate $100 million in defense funding to "bridge near-term capability gaps" in the Persian Gulf.

US special-operations teams stationed in the United Arab Emirates would take part in any military action in the strait should Iran attempt to close it, defense officials told the WSJ

Etihad Airways expects players from the Government Corporate Monstrosity to buy seats:

12 Diamond First Class
28 Pearl Business Class
200 Coral Economy Class

Etihad knows who might fill their luxury seats:

In the Washington region alone, there are a number of organizations that have a strong business presence in the UAE, or deep relationships with UAE institutions. Among those companies are the Carlyle Group, Hilton International, Lockheed Martin and Children's National Medical Center. Respected local think tanks and policy organizations, such as the Brookings Institution and the US Institute of Peace, are also working closely with their counterparts in the UAE.

Carlyle co-founder David Rubenstein is known for his global travels, only he doesn't buy seats.  WSJ reported:

The Carlyle Group paid $4.75 million in 2010 for business-related flights made by David Rubenstein, the private-equity firm’s co-founder, according to Carlyle’s IPO documents.

WSJ added Rubentein's Gulfstream IV  is "registered to a Delaware letter-box firm, Rabbit Run LLC. Rubenstein has owned a home on Nantucket – on Rabbit Run Road."

Maybe Etihad can hire the UAE's Rabbit Control Systems LLC and get David Rubenstein in a Diamond First Class seat.

Carlyle's Latest Bankruptcy: Medicaid Dental for Kids

The Tennessean reported:

A Nashville-based company that manages dental care centers in 22 states has filed for bankruptcy to restructure its debt and eventually attempt to sell its operations and assets.

Church Street Health Management LLC’s filing with the Middle Tennessee U.S. Bankruptcy Court this week listed roughly $85 million of assets and $300 million of liabilities.

How much goodwill did it take to get Church Street's sheet to balance?  Owners not only stretched the value of the company, they took liberties with kid's teeth and billing Uncle Sam.

That debt includes $150 million owed to its lenders and $17 million owed to several states and the U.S. Department of Justice under a settlement of charges that it billed Medicaid for unnecessary dental procedures for low-income children.

The settlement period runs from September 2006 to January 2010, all years under PEU ownership. Church Street's sins include:

(1) causing claims to be submitted by the Centers for reimbursement for performing pulpotomies that were not medically necessary and/or were performed in a manner that did not meet professionally-recognized standards of care

(2) causing claims to be submitted by the Centers for reimbursement for placing crowns that were not medically necessary and/or were performed in a manner that did not meet professionally-recognized standards of care

(3) causing claims to be submitted by the Centers for reimbursement for the administration of anesthesia (including, without limitation,nitrous oxide) that was not medically necessary, that was performed in a manner that did not meet professionally-recognized standards of care, and/or was administered by an unlicensed, non-certified, or otherwise unauthorized individual

(4) causing claims to be submitted by the Centers for reimbursement for extractions that were not medically necessary and/or were performed in a manner that did not meet professionally recognized standards of care

(5) causing the Centers to fail to obtain informed consent for certain dental procedures and services

(6) causing claims to be submitted by the Centers for reimbursement for fillings that were not medically necessary and/or were performed in a manner that did not meet professionally-recognized standards of care

(7) causing claims to be submitted by the Centers for reimbursement for sealants that were not medically necessary and/or were performed in a manner that did not meet professionally-recognized standards of care

(8)causing claims to be submitted by the Centers for reimbursement for radiographs (i.e., x-rays) that were not medically necessary, were taken in a manner that did not meet professionallyrecognized standards of care, and/or were taken by an unlicensed, non-certified, or otherwise unauthorized individual

(9) causing claims to be submitted by the Centers for reimbursement for behavior management techniques, including without limitation those techniques involving a papoose board, that were not medically necessary and/or were performed in a manner that did not meet professionally-recognized standards of care.

The above behavior resulted in a $24 million (plus interest) fine.  It seems Carlyle and Church Street are morally bankrupt as well as literally.

Did Church Street pay dividends or special distributions since The Carlyle Group invested in the company in September 2006?  If so, did PEU owners load Church Street with debt to fund payouts?

Medicaid considers management fees and capital cost reimbursable items on the acute side of health care.  Does it do the same for dental? 

How much did Carlyle, American Capital Strategies and Arcapita pull out of Church Street before it imploded?  Did any buy credit default swaps on Church's debt?  That could help ease the ache, but it would continue the morally bankrupt theme..

Private equity purports to be the savior of America's lopsided health care system.  Greed won't help, not in the least.

Update 1-29-13;  Senator Chuck Grassley lambasted Church Street, but gave their PEU owners a free pass.   Rubenstein et al oversaw an organization which traumatized children and bilked taxpayers 

Obama to Cover PEU Founders' Risk

FT reported on risks associated with The Carlyle Group's independent public offering:

Carlyle has to confront not only a sharply weaker business environment but a threat to the favourable tax treatment it has had.

A rise is in prospect in the US – from a preferential 15 per cent rate to being treated as ordinary income – and possibly in several European countries as well.

Carlyle has at least a two pronged strategy for ameliorating this risk.  The first is to prevent the rise or ensure it's watered down in such a way as to have no real impact.  This isn't difficult for power players inside the Government Corporate Monstrosity, Eisenhower's MIC on trillions in federal steroids.

Power Player and Carlyle co-founder David Rubenstein has direct access to Congress and the White House.  President Obama hosted Rubenstein six times in his first year in office.  Rubenstein loaned his copy of the Emancipation Proclamation to the Oval Office.

The second strategy is for the little people to pay.  

If this occurs, the (IPO) document suggests, the firm may increase the money it pays its executives to compensate for (their increased tax) bill and could also issue more equity. That means shareholders rather than the principals would pay the price and face dilution.

President Obama indicated he would accept a compromise, where private equity underwriters (PEU's) could cash in their stakes at the preferred rate  

It's Obama's PEU-liquefication Proclamation, which I expect David Rubenstein to preserve and frame.

Track the latest PEU arc in our PEU World.  Founders win emancipation from taxes.

Update 2-26-12:  Bloomberg noted Obama's move. Taxing carried interest like ordinary income never got through Congress, even when Democrats controlled the House of Representatives, Senate and White House, an exclamation point on our PEU World.

Carlyle's Rubenstein: Ain't No Steve Jobs

CES on the Hill will host a technology session for federal policymakers, members of Congress and the media.  CES will honor two Congressmen and honor Carlyle Group co-founder David Rubenstein for "his role in advancing technology." 

Advancing technology?  When BusinessWeek cited Rubenstein as a member of the Most Influential Fifty people, they wrote:

The secretary of state of private equity travels more than two-thirds of the year,raising new money. Rubenstein, 62, owns a copy of the Magna Carta that is more than 700 years old.

How does someone traveling more than two thirds of the year raising money advance technology?  Rubenstein is no Steve Jobs, who spent his life innovating technology.  Past winners of this award include Bill Gates and Michael Dell. FT reported:

The workaholic Mr Rubenstein denies saying that the happiest day of his life was the day he could send emails from the air.

Rubenstein's innovation pulls management fees and special dividends from Carlyle's tech investments.  It loads firms up with debt, because PEU's would rather pay interest than taxes.  It cut head count and the pension for Brintons, a recent acquisition, albeit not a tech company.

Why would CES on the HIll award a tech prize to David Rubenstein?  It's their technology field of dreams.  Invite Rubenstein and they will come.    "They" are members of the Government-Corporate Monstrosity, Eisenhower's MIC on trillions in federal steroids.  What will pandering to a Carlyle co-founder get CES on the Hill, besides attendees? 

Ironically, there's a different David Rubenstein, one at home in the high tech world.  That Rubenstein doesn't draw crowds like the PEU.

Carlyle's David Rubenstein, Secretary of our PEU State, I like that.

Update 3-13-12:  Rubenstein will get the Digital Patriot award. I wonder how many Carlyle affiliates rooted through citizens' digital information on behalf of Uncle Sam.  Start with Booz Allen Hamilton and follow the Carlyle trails.

Update 4-17-12:  The event begins next week.