Carlyle Co-founders 2014 Pay & Texas Taxpayers

WaPo Business reported:

The Carlyle Group’s three co-founders took home about $750 million between them in 2013, mostly from their dividends in the private equity firm and the gain they received from their investments. 

The vast sums earned by Daniel D’Aniello, 67, William E. Conway Jr. 64, and David M. Rubenstein, 64, known in the firm as the “DBD” after their first initials, came from salary and stock dividends from their Carlyle holdings and payouts from investing personal money in the firm’s funds. 

The triumvirate could easily refund Texas taxpayers their $35 million gift to the DBD's in 1994.  The money was to provide 3,000 new jobs in the DFW area.  Carlyle affiliate Vought Aircraft Industries decided to send Boeing 787 Dreamliner jobs to South Carolina, then held on to the $35 million for six years.

Rather than refund the job incentive money when The Carlyle Group looked to cash in Vought, Carlyle worked with Governor Rick Perry to redo the deal.

The DBD's 2013 take home pay could refund Texas taxpayers over 11 times.  I'd consider that patriotic, living up to one's commitment to provide promised jobs or give a full refund with accrued interest.  The DBD's did neither.

A refund would be Texas Justice, the status quo is Texas "Just Us" billionaires and their purchased politicians.

Carlyle's Rubenstein on CNBC

CNBC reported:

"We believe healthcare, because of what is going on in the United States and the aging of the population in Europe, the United States and Japan, is a pretty good investment," said David Rubenstein, who co-founded private equity giant Carlyle Group, which manages $185 billion.

CNBC researchers have catching up to do given Carlyle's assets under management were $188.8 billion at year end.   As for what's going on in the U.S. it's PPACA, designed by a private equity underwriter (PEU) for PEU's. It's the nature of the game.

It is nice of CNBC, Dealbook and Bloomberg to give Rubenstein free air time to promote Carlyle.  Business reporters know what happens if they don't play nice with modern day Robber Barons.  It's a PEU world.

Nader's Billionaire PEU Presidential Candidates

The Carlyle Group's co-founders are so beloved, two of the three made Ralph Nader's list of promising Presidential candidates. 

11.  David Rubenstein – former, energetic White House assistant to President Carter and co-founder of a successful venture capital firm – the Carlyle Group – expanding philanthropist and convener.

15.  William Conway – co-founder of Carlyle Group – whose priority philanthropic mission is to generate job producing activities.

It must be for the Greed Party.  Nader may need a history lesson on private equity underwriters. 

Carlyle Co-founder to Grow More Conservatives

Carlyle Group co-founder Daniel D'Aniello gave $20 million to the American Enterprise Institute, a Red Team D.C. based think tank.  St. Louis Post Dispatch reported:

The contribution by D'Aniello — set to be announced Tuesday — marks a new foray into policy advocacy by the top Carlyle executive, who has maintained a much lower profile than co-founder David Rubenstein. It also represents the marriage of one of Washington's business titans to one of its top think tanks.

AEI will name its new building after D'Aniello before moving in late next year. The building, at 1785 Massachusetts Ave. NW, formerly owned by Andrew Mellon.

Fitting that a modern day robber baron would have his name on a building formerly owned by a historical robber baron.  As for the money it's going toward more than a building:

The expansion will allow AEI to continue to grow rapidly, from 140 staffers in 2009 to 206 today. AEI will build radio and television studios, classrooms and other meeting spaces in an effort to expand its influence.

As for the 24 hour 365 day a year permanent political campaign, it will become the annual 31,536,000 second permanent political campaign.

Consider D'Aniello's motivation:

"One of the biggest problems we have in the United States is really [that] the family is so diluted in many sectors of the economy that there's no support system at home," he said. "What that means is obviously education and instilling in young people the belief that they can have a better life."

In light of Carlyle's impact on the family and this belief in a better life, as shared by a former business reporter:

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out. 

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent. 

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

I imaging this ex-business reporter would feel similarly about Daniel D'Aniello.

Note:  Think tanks are ofter the initial landing spot for retired public servants, prior to their making their move to private equity underwriting (PEU).  D'Aniello's donation can fund a number of retired Congressmen and White House appointees.  This is the Red side of Red and Blue love PEU. 

SEC on PEU Deal Fees: Decision Looming

Bloomberg reported yesterday:

The U.S. Securities and Exchange Commission is considering granting private-equity firms a reprieve after they collected billions of dollars in deal fees without being registered to do so, according to a person with knowledge of the matter. 

The SEC staff is weighing a special exemption for private-equity firms to continue collecting deal fees in the future, said the person, who asked not to be named because the deliberations aren’t public. An exemption would mean the agency is unlikely to pursue enforcement action over past deals, the person said. A final decision hasn’t been made and the agency could still require the firms to register or seek sanctions for past deals. 

The issue arose nearly a year ago:

The issue first flared up last April when David Blass, chief counsel for the SEC’s trading and markets division, said in a speech that private-equity firms’ routine practice of taking transaction fees appeared to “fall within the meaning of the term ‘broker.’” 

The speech set off a flurry of calls from fund managers to securities lawyers to understand whether the speech raised issues for them and what new regulatory obligations may await.

Since Blass’s April speech, the industry has pressed for an exemption, arguing that investment advisor rules provide sufficient protections for investors, making the added broker-dealer requirements -- registration with a self-regulatory organization, training for staff and additional SEC inspections -- unnecessary.

This theme continued in August 2013:

John Ramsay, the acting direct of the SEC’s Division of Trading and Markets, said that the group is continuing to look at broker-dealer registration matters as they relate to the private fund sector.

Ten days ago DealBook ran a story on Stephen Luparello, the man likely to replace Ramsay, who will return to the private sector.

(Luparello) works in the securities department at Wilmer Hale, a go-to firm for Wall Street banks.

Recall that BP hired WilmerHale to smooth waters after their summer long Oil Spew in the Gulf of Mexico.

Luparello's bio (on WilmerHale's website) states:

Stephen Luparello is a partner in the Securities Department, and a member of the Broker-Dealer Compliance and Regulation, and Litigation and Enforcement Practice Groups. He joined the firm (WilmerHale)  in 2012 after a 16-year career with the Financial Industry Regulatory Authority (FINRA), where he most recently served as Vice Chairman.

Practice
During his time as vice chairman, Mr. Luparello was responsible for all aspects of FINRA’s examination, enforcement, market regulation, international and disclosure programs. He also served as a primary staff representative to the Board, alongside the CEO, and to its outside constituencies, including the Securities and Exchange Commission (SEC), Congress, industry groups, media and other regulators. Mr. Luparello was part of the team to oversee the merger of NASD and NYSE Regulation programs, and assisted with the consolidation of their rulebooks into the FINRA Rulebook.

Prior to joining the FINRA, Mr. Luparello briefly worked for the Commodity Futures Trading Commission, where he served as Chief of Staff to Chairman Mary Schapiro. He also spent nine years at the Securities and Exchange Commission, serving as branch chief in the Office of Inspections in the Division of Market Regulation, and prior to his departure, as Counsel to the Commissioner, where he advised on regulatory and enforcement matters.

To show how small the appointee group is in Washington, D.C., Luparello once worked with John Ramsay, the man he is to replace.  Two different times the pair served Mary Schapiro in staff roles.  All are self-regulation proponents from inside the financial industry. 

Dealbook article on Luparello's likely appointment -- 2-13-14
SEC announces Luparello's appointment -- 2-20-14
Bloomberg on SEC likely waiving PEU Deal Fees -- 2-22-14

These appear to be smoke signals to the PEU class that their deal fees are safe.
 

To think they could've just gone down the street or met at the White House.  Time will tell if this is the correct interpretation.

Will the private industry trade group, which I peg as PECKER, get its way?  PECKER stands for Private Equity Capital Knowledge Executed Responsibly.  Anyway joke delivered, their head lobbyist had this to say:

“Private equity investment advisers perform a fundamentally different service than broker-dealers, and should not be required to register as such.  Layering broker-dealer regulations on private equity will be of no meaningful benefit to investors and would levy significant costs on private equity firms.” 

Translation:  PEU's aren't done being served by Uncle Sam, in this case Stephen Luparello. 

The decision on whether to give the industry a pass is being deliberated by SEC staff, not the presidentially appointed five-member commission, the person said. SEC staff are authorized to issue rule exemptions without putting it to a commission vote.

Luparello could ensure a fine future for himself and his family with this one decision.  Also, watch where John Ramsay lands post public service.  That may be another indicator of how pervasive private equity has become.  It's PEUbiquitous. 

PEU Sustainability

WaPo "Business with Bloomberg" reported:

The Carlyle Group of the District appointed Jackie Roberts chief sustainability officer.

Her first act should be to explore the sustainability of her employer and other private equity underwriters.  How sustainable are they when their impact studies only count their winners?  It takes pathology to exclude affiliates who failed the sustainability test by going bankrupt.   

How sustainable are they when Carlyle made over $650 million in capital calls to CalPERS during the financial crisis?  That doesn't count Carlyle's other owners who kicked in how much cash to keep the PEU afloat?  What if they declined?  How sustainable would've Carlyle been?

Image is everything in our PEU world.  The profitability of corporate flipping is dependent on a number of factors, massive tax breaks/direct government subsidies, leverage and cheap debt, management fees to investors, management/deal fees to affiliates,  bleeding affiliates via dividends/distributions and growing asset prices.

Right now the system is stacked in Carlyle's favor.  For private equity to be sustainable its needs someone to buy their companies.  That will stop at some point.  The question is when.

Consider what Carlyle affiliate Commscope said about sustainability:

“It's easy to think of a few things that definitely shouldn't be sustained, such as traffic jams, head colds and boring lectures.” 

I’d add private equity to the list.

Rubenstein's Decade of Tax-Break Funded Philanthropy

The latest NYT billionaire pander piece lathered Carlyle Group co-founder David Rubenstein with praise over his "patriotic philanthropy."

“The United States cannot afford to do the things it used to do,” Mr. Rubenstein said.

Nearly fifteen years of out of control federal deficits coincided with the virus like spread of private equity underwriters (PEU's).  Both the Red and Blue political teams set the stage for corporate flippers to profit handsomely.  In return flippers, or their affiliates, gave generously to both parties and their candidates.

Many public servants ended up on Carlyle's or other PEU payrolls after leaving office.  This is the system that caused the United States to not be able to afford the things it used to do.  In that system Rubenstein profited mightily. 

Carlyle intends to monetize a portion of its equity in PQ Corporation via an independent public offering.  PQ started its PEU sentence under CCMP Capital Partners.  A look at PQ's PEU history and Carlyle's concomitant growth show:

Carlyle's assets under management grew ten times in the last ten years.  The Grinch's heart only grew three sizes when he heard the Who's singing Christmas morning with no presents, food or trappings?    How many people working in PEUville wake up and sing with their pension plan frozen or gone, their retiree benefits jettisoned to an individual exchange so the employer can limit their contribution, or their job eliminated and sent south or overseas?

Carlyle's Rubenstein is a lifelong student of history.  His $10 million donation to Monticello becomes more interesting when one realizes Thomas Jefferson had the funds to free his slaves from the death of a good friend.  Jefferson's friend bequeathed his fortune under that sole condition.   The man who wrote "All men are created equal" turned down the offer, instead taking out a loan using slaves as collateral.  One might say Jefferson was a PEU founder, or at least, an early visionary.

Rubenstein and his PEU brethren profited handsomely through the federal government's creating and funding favored industries, whether those be defense, homeland security, infrastructure or healthcare.  Also, the federal government taxes the Carlyle's like a nonprofit, community hospital.  That's charity if I've ever seen it.  Rubenstein is clearly one major recipient.

It's nice he gives a smidgen of it back.

Bonus fact:  CCMP Capital Partners employed White House health reformer Nancy-Ann DeParle, who after crafting PPACA returned to her PEU ways with Consonance Capital.  There are curious financial filings while she served as Counselor to President Obama.  Post public service she was also named to the boards of giant hospital company HCA and CVS-Caremark.

Update 2-24-14:  Rubenstein's fellow co-founder Daniel D'Aniello gave $20 million to the American Enterprise Institute, a Red Team D.C. based think tank.   Note that think tanks are ofter the initial landing spot for retired public servants, prior to their making their PEU move.