Hastert Resigns from CME for Paying to Hide His Bad Behavior

Eight days after being re-elected to the Board of the CME Group Former Speaker of the House Dennis Hastert resigned.  The FBI charged Hastert for concealing payments to someone he knew to hide prior acts by Hastert.  The misconduct was not described in the news piece:

According to the indictment, Hastert met with the person several times around 2010 and discussed past misconduct by the former lawmaker. Eventually, Hastert agreed to pay the person $3.5 million in compensation to conceal the misconduct, the indictment said. 

Shortly afterward, Hastert began making cash payments to the individual, according to the indictment.

That's serious money for "misconduct."  I hate to think what someone might have gotten if they were the victim of a crime by Dennis Hastert.  

The Illinois Republican, who left office in 2007, was charged with structuring the withdrawal of $952,000 in cash in order to evade the requirement that banks report cash transactions over $10,000, and lying to the FBI about his withdrawals.

Hastert served on CME Group's Board since 2008  He's also on the board of Rex American Resources Group.  Consider what Rex's latest proxy statement said about Hastert:

Mr. Hastert is currently also a director of CME Group, Inc., a derivatives marketplace that includes the Chicago Merchantile Exchange (CME), Board of Trade of the City of Chicago (CBOT), New York Merchantile Exchange (NYMEX) and Commodity Exchange (COMEX). Mr. Hastert is Chairman of the Compensation Committee and serves on the Governance, Nominating and Strategic Steering Committees of CME Group. Mr. Hastert’s prior government service, government leadership roles and experience in commodities markets will assist the Board and management in governmental and regulatory matters affecting our business. 

 I'll venture Dennis Hastert treated someone like a commodity and that's why he secretly agreed to pay $3.5 million.  It seems fitting that a key leader of a major financial institution would be so ethically tainted.  

Bermuda's Tax Loopholes Enticing for Walkers

Bloomberg reported:

Walkers Global doesn’t offer English or U.S. legal services, but the 400-lawyer international offshore law firm with roots in Grand Cayman, counts companies from those countries as its clients, including Blackstone, The Carlyle Group, Merrill Lynch and others.

This month, it announced two expansions: Opening an office in Bermuda; and the launch of Walker Professional Services, which will provide companies in Cayman with a registered office, registered agents, corporate secretarial services and other services. It hopes to launch Walker Professional Services by mid-June, marking its re-entrance to what it calls “the corporate and fiduciary services business,” after selling a similar business in 2012.

Carlyle has hundreds of Cayman Islands subsidiaries.  Walkers spread internationally since its Cayman founding in 1964.  Both Walkers and Carlyle make huge money avoiding U.S. corporate taxes.  It's the water in which they swim and drive their yachts.  

Private Equity Targets Family Wealth

Australia's BrisbaneTimes reported:

Private equity firms want wealthy families for more than just their money.

Family offices bring expertise in buying companies, usually have fewer regulatory restrictions and can take bigger risks than pensions or endowments, Michael Arpey, a managing director at Carlyle who oversees fundraising, said in an interview.

Some private equity firms are enticing family offices to invest with the promise of co-investment opportunities. That's when families invest alongside the firms rather than through a pooled vehicle, and are charged reduced or no fees.

The story highlights efforts by The Carlyle Group, KKR, Blackstone and Blackrock to recruit wealthy family offices for investment.

"There's been an explosion of family offices," Feurtado said. "It's a very, very vibrant and growing industry."

As worker's income stagnated, wealthy families' assets exploded. 

There are an estimated 4000 family offices globally, according to London-based researcher Campden Wealth.  

Private equity underwriters follow big money.  They trot out their heavy hitters to entice wealthy family offices to invest.  KKR had General David Petraeus meet with a middleman for several rich families. 

Family offices and their advisers manage an estimated $US4 trillion.

 And the rest of the world has how much?

Feds Push No Raise Meme

Bloomberg reported:

The Fed asked non-self-employed workers whether they'd prefer to work more, less, or the same amount that they now work if their hourly wage was unchanged. The goal of the question was to help gauge the amount of underemployment in the economy, according to the report.

The Fed signaled corporations they can continue with their lid on wage increases:

Still, if a large enough share of people are willing to work longer hours at their current rate, that limits the pressure employers feel to raise wages. Average hourly earnings were up just 2.2 percent in the year ended April.

A Jeffries LLC money manager offered:

"Until workers perceive that there are more opportunities available that offer higher wages, they will be content to work for the same rate rather than take a risk for more."  

I saw no question about worker contentment with current wages.  In addition, there were no questions on risks employees might take to increase their income.   Chairwoman Yellen, signal delivered.

Higher Learning Bows at PEU Feet

Rennselaer Polytechnic Institute President Dr. Shirley Ann Jackson wrote on HuffPo:

During the course of this month, millions of American students will graduate from institutions of higher learning, only to enter a world beset by challenges that threaten the stability of societies around the globe: new geopolitical tensions and the rise of radical non-state actors; new forms of cyber-aggression; a changing climate; health-related challenges that include infectious diseases such as Ebola; the global competition for natural resources; and growing income inequality in developed economies, as well as inequalities between nations.

Tackling these interconnected global challenges requires a new type of leader who themselves embody a new type of resilience.

This vision of preparing and challenging the next generation of leaders lies at the core of our mission, and annual Commencement exercises present an ideal opportunity to both assess our progress and - more importantly - continue the conversation with our community. In that spirit, each year at Commencement we invite a group of leaders such as Admiral Howard to join us and help our students and faculty think through the hard problems of the day in a lively panel conversation we call the President's Colloquy. This year, Adm. Howard will be joined by three other leaders who have also demonstrated remarkable resilience in their own careers and lives: Award-winning filmmaker and scholar Dr. Henry Louis Gates Jr.; cybersecurity and technology policy visionary Craig Mundie, the former chief strategy officer at Microsoft; and financial industry pioneer and Carlyle Group co-founder David M. Rubenstein. 

Five years ago an ex-financial reporter wrote:

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!

Dr. Jackson, you've invited the cause of growing income disparity in our country, mean and greedy leadership.  But that is the fishbowl you swim in:

Board of Directors -- Marathon Oil, FedEx Corporation, International Business Machines Corporation, Medtronic, Inc.and Public Service Enterprise Group Incorporated
Former Chairman of NYSE Group, Inc.
Former Director of AT&T, U.S. Steel, KeyCorp and NYSE Euronext 

Ms. Jackson has by far the most corporate board positions and director income (on President Obama;s Intelligence Oversight Board).  Also, four of the five public companies are global.  

She knows well the drive to the lowest global common denominator on worker pay/benefits, taxes and regulations.  That what Rubenstein and American branded corporations inflicted on the world the last two decades.  Resilience is a trait displayed by workers in far more instances than unbalanced management with its obsession on ever growing profits, massively better metrics, and compliance, the absurd legalization of every aspect of business.

Our new type of leader is rooted in our past and will be based on fairness, balance, ethics and an understanding of management theory, specifically the teachings of Dr. W. Edwards Deming.  He's not alive to attend, but many of disciples remain.  They should be at the table counterbalancing The Carlyle Group's meanness, greed and numerous ethics abuses.

The ex-financial reported commented on the impact of Carlyle and private equity underwriters (PEU):

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.

Resilient workers should also be represented.  Rubenstein is not the tonic our world needs from leaders.  His management theory and methods are toxic.

Update 5-29-15:  Rubenstein is getting an honorary degree from RPI.  His ilk continues to do quite well relative to everyone else.

Financial Crime Flashback Is Flashforward under Obama

President Obama wouldn't go after criminal behavior contributing to the financial crisis and that practice seems to apply to long term financial fraud by big banks.  NYT reported:

,,, nothing much has changed for the banks. And that means nothing much has changed for the public. There is no meaningful accountability in the plea deals and, by extension, no meaningful deterrence from future wrongdoing. 

Flashback to 2009 when the Obama team represented:

The task force of top federal officials will work with state and local authorities to pursue financial fraud cases stemming from the crash of the housing market and the Wall Street meltdown, administration officials said 

The Financial Fraud Enforcement Task Force will attack what Holder called "unscrupulous executives, Ponzi scheme operators and common criminals."
But Holder said the mandate of that task force wasn't broad enough to go after all the types of crimes involved with the financial crisis.

President Obama's sees no jailable crimes in a five year currency rigging scam, most of which occurred on his shift in office.  At least one SEC Commissioner protested the absurd decision as unconscionable. 

The Commission has granted:

• Barclays its third WKSI waiver since 2007;
• UBS its seventh WKSI waiver since 2008; 
• JPMC its sixth WKSI waiver since 2008; and 
• RBSG its third WKSI waiver since 2013.

 Allowing these institutions to continue business as usual, after multiple and serious regulatory and criminal violations, poses risks to investors and the American public that are being ignored.  It is not sufficient to look at each waiver request in a vacuum. 

Obama has a Government Corporate Monstrosity to protect and serve.   

Update 11-18-18:  NYT Columnist Maureen Dowd wrote about President Obama's abdication from prosecuting financial fraud.

Carlyle's Refinery Has 3rd Fire in 2015

Philadelphia Energy Solutions' refinery, a joint venture between Sunoco and The Carlyle Group, experienced its third fire this year.  As usual Carlyle's name did not make the banner screen.  Sunoco got full billing.  

Bakken oil is more volatile for shipping and pipelines.  It might also be more explosive in refining.