PEU Insurance Investments Soar

Insurance Journal reported

Private equity and venture capital firms have been pouring capital into insurance companies despite the uncertainties about claims and losses from the pandemic.

Actually the PEU boys are pouring insurance company reserves into their fund offerings. 

PE-backed M&A in the sector globally reached $19.28 billion in disclosed value in the year to Aug. 20, already exceeding the full year 2020 total of $12.88 billion,

The five big public PE firms — Apollo, Blackstone, The Carlyle Group Inc., KKR & Co. Inc. and Ares Management Corp. — have all bought into insurance companies over the past two years.

It remains to be seen how regulators view private equity underwriter (PEU) ownership of insurance companies.  

The largest deal has been Apollo Global Management Inc.’s planned merger with retirement services company Athene Holding Ltd. in deal suggesting a total equity value of roughly $11 billion for Athene.

The greed and leverage boys also want access to the common person's retirement funds.   Could buying insurance companies be an interim step to achieve that aim?

Update 6-29-23: Investor Kirk Simon called out the PEU boys buying insurance companies and steering insurance reserves into their PEU offerings.

The whole private equity thing of buying up life insurance companies then investing the premiums just seems a bit sketchy.

I'll shorten it to the whole private equity thing seems a bit sketchy.

Update 4-6-25:  "Is the flow of toxic waste pouring from busted private equity portfolios into credit trades a threat to insurance companies? Yup."

Update 2-4-26:   An X post by Whitney Baker offered:

In case you’re curious where the losses are, the PE industry has been acquiring and then raiding the floats of c.10% of US life insurance assets. They’ve been filling them with private credit and direct lending, all using the same private ratings agency to misclassify the loans.

Paulson Pans Crypotcurrencies to Paxos Investor Rubenstein

 

“I wouldn’t recommend anyone invest in cryptocurrencies,” John Paulson told David Rubenstein, co-founder of Carlyle Group, on Bloomberg TV.

Rubenstein:  What about cryptocurrencies? Are you a believer?

Paulson:  No, I’m not. And I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing. So to the extent there’s more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.

Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies.

Rubenstein's family office was the lead investor in the Series C funding round for cryptocurrency play Paxos.   The press release on Declaration Partners investment in Paxos stated:

• The launch of Paxos Crypto Brokerage, a platform solution that powers crypto services for PayPal and Revolut US; 
• The issuance of more than $7.5 billion in stablecoins across three of the leading US dollar-backed stablecoins; 
• Becoming the first company to settle US equity trades on a blockchain outside of the legacy system (under No-Action relief from the US Securities and Exchange Commission staff); and
• Confirmation of more than $3.5 trillion in commodities trades with its Post-Trade automation service.

Rubenstein's Declaration Partners threw more money at Paxos in its $300 million April 2021Series D funding round, which valued the firm at $2.4 billion.  That press release stated:

• Supported the launch of crypto buying and selling services on Venmo through its partnership with PayPal;
• Received conditional approval for the first de novo Trust Bank charter for digital assets from the Office of the Comptroller of the Currency;
• Completed same-day settlement of traded stocks for Instinet and Credit Suisse via the Paxos Settlement Service;
• Grew total stablecoin assets across three of the leading US dollar-backed stablecoins to nearly $10 billion; and
• Tokenized more than 100,000 oz of the highest quality investment-grade gold with PAX Gold.

Paxos latest press release stated:

Paxos is building a new system that allows assets to move instantaneously, anywhere in the world, at any time, in a trustworthy way. Paxos uses technology to tokenize, custody, trade and settle assets. It offers crypto solutions for enterprises, crypto trading and settlement solutions for securities and commodities. 

That would be powerful tool for billionaires and their sponsored government officials.  An Afghan President could leave the country with only the clothes on their back after Paxos'ing millions to their desired destination, say Dubai.

Update 3-11-22:  On Tuesday, PAX Gold reached $2,071, its highest price in the last three months.

Update 5-27-22  Paxos received a federal trust charter from the Office of the Comptroller of the Currency.  Paxos National Trust entity is a federally regulated entity offering custody services, stablecoin management, payment, exchange and other services.  It is different from New York Department of Financial Services-chartered Paxos Trust Co. 

Update 8-2-22:  A number of FDIC insured banks ran with the crypto devils and may go under as a result.  How this is remotely OK is a question one should ask David Rubenstein and his former employee Jerome Powell/

Afghan People Got PEU Model

The Afghan military evaporated in the midst of the U.S. withdrawal from Afghanistan.  Ides of August reported:

Afghans did not reject us. They looked to us as exemplars of democracy and the rule of law. They thought that’s what we stood for.

And what did we stand for? What flourished on our watch? Cronyism, rampant corruption, a Ponzi scheme disguised as a banking system, designed by U.S. finance specialists during the very years that other U.S. finance specialists were incubating the crash of 2008. A government system where billionaires get to write the rules. 

The U.S. government has long catered to billionaire private equity underwriters (PEU).   The bipartisan effort started under Bill Clinton and every following president furthered the PEU agenda.  

BIG by Matt Stoller wrote:

U.S. military leaders, like bad consultants or executives, lied about Afghanistan to the point it was routine. Here are just a few quotes from generals and DOD spokesmen over the years on the strength of the Afghan military, which collapsed almost instantly after the U.S. left.  

In 2011, General David Petraeus stated, “Investments in leader development, literacy, marksmanship and institutions have yielded significant dividends. In fact, in the hard fighting west of Kandahar in late 2010, Afghan forces comprised some 60% of the overall force and they fought with skill and courage.”

In 2015, General John Campbell said that the the Afghan Army had “proven themselves to be increasingly capable,” that they had “grown and matured in less than a decade into a modern, professional force,” and, further, that they had “proven that they can and will take the tactical fight from here.”

KKR, a New York based PEU, hired General Petraeus in 2013. As a KKR partner Petraeus serves on the board of OPTIV, a government cybersecurity contractor.  General Campbell also serves a middle market PEU.

J.F. Lehman & Company, a leading middle-market private equity firm focused on the defense, aerospace and maritime sectors, is pleased to announce the addition of General John F. Campbell, U.S. Army (Ret.) to its Operating Executive Board (””OEB””). The OEB is a group of seasoned industry and government executives who have significant experience in the firm's target industries. Through key relationships and sector-specific knowledge, OEB members contribute to sourcing and evaluating transactions, advising on portfolio company strategy and recruiting senior level portfolio company management.

The greed and leverage boys are happy to partner with Middle East strongman Saudi Crown Prince Mohammed Bin Salman.  

Afghan President Ghani fled with either millions of dollars or just the clothes on his back.  Using wire transfers he could have left with both.  Ghani ended up in the United Arab Emirates (UAE), a haven for western financial interests and Afghan graft.  

Former Pentagon CFO and PEU Dov Zakheim wrote for The Hill.

For years it was widely known that Afghan leaders were acquiring estates in Dubai with embezzled funds they had deposited in that city state. 

DealBook reported in 2008, as did FedInsider:

The Carlyle Group has a scroll like list of ex-government insiders. They even have one of their own, Dov Zakheim, on the President's Commission for Wartime Contracting in Iraq & Afghanistan.

Zakheim facilitated The Carlyle Group's sale of Standard Aero and Landmark Aviation to Dubai Aerospce in 2007

Private equity greed retrograded management practice in their flipping companies for massive profits.  Public companies copied PEUs overuse of debt, over-reliance on technology and over-emphasis on achieving that final profitgasm.  Government leaders catered to PEU founders, policy making billionaires.  Former elected officials and public servants did their best to steer government purses to their private equity affiliates.  

The 2020 U.S. State Department report on Afghanistan states:

Officials frequently engaged in corrupt practices with impunity. Reports indicated corruption was endemic throughout society, and flows of money from the military, international donors, and the drug trade continued to exacerbate the problem. Local businessmen complained government contracts were routinely steered to companies that paid a bribe or had family or other connections to a contracting official.

According to prisoners and local NGOs, corruption was widespread across the justice system, particularly in connection with the prosecution of criminal cases and in arranging release from prison. There were reports officials received unauthorized payments in exchange for reducing prison sentences, halting investigations, or outright dismissing charges.

Freedom House reported inadequately trained judges and extensive corruption in the judiciary, with judges and lawyers often subject to threats and bribes from local leaders or armed groups.

During the year there were reports of “land grabbing” by both private and public actors. Most commonly, businesses illegally obtained property deeds from corrupt officials and sold the deeds to unsuspecting prospective homeowners who were later prosecuted. Other reports indicated government officials confiscated land without compensation with the intent to exchange it for contracts or political favors. There were reports provincial governments illegally confiscated land without due process or compensation in order to build public facilities.

Afghans understood exactly what the U.S. brought them.  Management greed and self service is not an inspiring model for the common person, be they citizen or worker.

Update 9-21-21:  Former Treasury Secretary Steve Mnuchin formed PEU Liberty Strategic Partners, a $2.5 billion PEU fund whose initial investment came in Cybereason.

Mnuchin will join the Cybereason Board of Directors, and Liberty’s Senior Advisor General Joseph F. Dunford (Ret.), who served as the 19th Chairman of the Joint Chief of Staff (2015-2019), will join the Cybereason Advisory Board.

The Saudi Public Investment Fund provided a significant portion of Liberty's initial cash raise.  Mnuchin should ask Carlyle Group co-founder David Rubenstein about losing Middle East investor money.  He could also look at how the Saudi's treated journalist Jamal Khashoggi.

Carlyle's Rubenstein Holds Over 33 Million CG shares

Carlyle Group co-founder David Rubenstein recently sold 4 million shares of CG stock for nearly $190 million.  It is his third sale of Carlyle Group stock this year.  

Fellow founder Daniel D'Aniello also sold a 5 million share chunk of CG stock.  He hold almost 39 million shares in the private equity underwriter (PEU).

Carlyle monetized Novetta with a sale to Accenture Federal Services.  Twilio agreed to pay a 10% premium for a SPAC investing in Carlyle affiliate Syniverse.

Another profitgasm for the greed and leverage boys.

Frances Townsend Defends Activision Employee Harrassment

In an odd move for someone so politically connected Frances F. Townsend joined game maker Activision Blizzard in March 2021 as Chief Compliance Officer, Corporate Secretary and Executive Vice President of Corporate Affairs.  

Townsend remains on the Council for Foreign Relations, the Trilateral Commission and sits on the boards of Freeport McMoran, Chubb Ltd. and Investcorp.

California's Department of Fair Employment and Housing brought a lawsuit against the company for. gender pay discrimination and allowing ongoing sexual harassment complaints to go unresolved.

Townsend's risk management response of denying all accusations did not go over well with employees, referred to as "everyone."  Many workers planned to walkout today.

The walkout comes after more than 2,000 current and former Activision Blizzard employees signed an open letter to management regarding the lawsuit from the state of California.

Harmed employees expect leadership to repent (turn around) after the lawsuit, not deny the charges and discount those injured.  

Many corporate compliance programs are an exercise in legal defense and used to identify problem employees that need to be nudged out the door.  The income earning franchise of top executives and board members must be protected.  That is world Fran Townsend swam in for the last decade.   

Townsend wrote the Lessons Learned report after Hurricane Katrina and protected The Carlyle Group's LifeCare Hospitals and Tenet Healthcare.  Together they had 35 patient deaths in Memorial Medical Center in Katrina's aftermath.  

Who omitted the hospital with the highest death toll in the aftermath of Hurricane Katrina from the Bush White House Lessons Learned Report?  Frances Townsend.  The Carlyle Group, a private equity underwriter (PEU), owned Lifecare Hospitals, which was responsible for 25 patients deaths.  Ten other people perished under Tenet Healthcare's umbrella.  Fran successfully managed these two companies' risk with her vacuous collection of hero stories and "we can do betters."

Tenet Healthcare's lobbyists visited the White House several times while Fran's "researched" her report.  Jeb Bush joined the Tenet Healthcare Board of Directors a year after brother W.'s White House foisted Fran's whitewash on the public.

Frances Townsend has been richly rewarded for putting corporate loyalty above public service.  President George W. Bush refused to release e-mails from Townsend, Andy Card, Joe Hagin and others involved in his hapless Hurricane Katrina response.  I imagine those e-mails are buried under legal protection, "state secrets" or otherwise.

The public has no right to know how insiders protect and enrich each other as they dance between public service, private equity underwriters (PEU) and government front groups. 

Reports written to minimize corporate liability are not inspiring to harmed employees.  Activision Blizzard learned that lesson very quickly.

Oddly, the company hired Wilmer-Hale, the law firm that defended BP for their Gulf Oil Spew.  They did not offer Jamie Gorelick, the Queen of Crisis Management.  Instead they selected the former enforcement head of the SEC.  

The WilmerHale team will be led by Stephanie Avakian, who is a member of the management team at WilmerHale and was most recently the Director of the United States Securities and Exchange Commission’s Division of Enforcement.

The SEC is one of many compromised federal agencies.  Hiring a toothless former regulator should be less than inspiring to aggrieved workers.  WilmerHale had this to say when she rejoined the fold in February 2021.

Stephanie is returning to a practice that she helped lead as the vice chair based in New York before she left the firm in 2014 to become the SEC’s Deputy Director of Enforcement.  She will lead one of the nation’s premier groups of lawyers in counseling and defending financial institutions, public and private companies, hedge funds, accounting firms, investment advisors, boards, corporate executives, and individuals facing regulatory and criminal investigations and litigation with the government.

Activision's CEO wrote a letter to employees.  One line stated:

"There is no place anywhere at our Company for discrimination, harassment, or unequal treatment of any kind."

There is vast unequal treatment between the executive and worker class in terms of pay and benefits.   

"To put it clearly and unequivocally, our value as employees are not accurately reflected in the words and actions of our leadership," employees said in the petition.

Fran has a way of finding the hot seat in her repeatedly defending the indefensible.  It's a pattern.

Update 8-2-21:  The SEC fined Bausch Health (Valeant Pharmaceuticals) $45 million and left the door open for executives to repeat their improper actions at another company.  Investors have a $3 billion lawsuit against the company.  Bloomberg noted:

Formerly known as Valeant Pharmaceuticals International Inc., Bausch Health previously settled claims for $1.21 billion that it misled investors about the company’s financial performance. In several related lawsuits, investors accused Valeant of deceptive business practices, including price gouging and a kickback scheme that led to the conviction of a former executive on bribery charges in 2018.

After being enforced by the DOJ Columbia HCA's Rick Scott became a U.S. Senator for the state of Florida.  

Circle the legal wagons, wait out and water down the regulators.  Then resume getting one's part of the financial and power pie.

Update 8-3-21:  FT reported the resignation of Blizzard Entertainment President J. Allen Brack.  It stayed away from directly naming Fran Townsend in this statement:

Activision Blizzard’s initial reaction to the lawsuit dismissed it as “irresponsible behaviour from unaccountable state bureaucrats” who had “rushed to file an inaccurate complaint”. The company’s chief compliance officer said in an internal memo that the case “presented a distorted and untrue picture of our company, including factually incorrect, old and out of context stories”.

Fran's memo inspired a walkout at Activision Blizzard which resulted in Brack's resignation. Townsend's job got harder with a shareholder lawsuit citing executives' failure to disclose the California state investigation in SEC filings. 

An Activision Blizzard employee group rejected the hiring of WilmerHale and Stephanie Avakian.  Their letter citing Avakian's history of protecting the wealthy and powerful.  They added Frances Townsend's connections to the law firm. 

A colleague commented on Townsend's representation on the Council for Foreign Relations and the Trilateral Commission.  They said "Churches must shake when she drives by."

Update 8-6-21:  Fran avoids direct naming in most stories on Activision's employee harassment:

Activision Blizzard’s initial response to the lawsuit was tragic, with one leader calling the allegations meritless and distorted. 

The tragic response came from Frances Townsend. 

Update 8-8-21:  Townsend resigned from her role as executive sponsor of Activision Blizzard King's Women's Network.  She remains an executive for the company.

Townsend told employees over Zoom that her statement was following “legal counsel’s guidance on language, and that the end result no longer sounded much like her voice[.]”

Despite claiming the statement was not her voice, Townsend was criticized again for tweeting a link to an article titled, “The Problem With Whistleblowing,” on her personal social media account. The article which calls out whistleblowers was seen as inappropriate given many current and former Blizzard employees were sharing stories of their abuse online or to the press.

After being criticized for her tweet, Townsend seemingly began blocking Blizzard employees and journalists (myself, included) before deactivating her Twitter account altogether.

Fran also serves on the Leadership Council for Concordia, the Red Team's attempt to emulate the Clinton Global Initiative.  It was started by two politically connected college grads, now Concordia's board chair and CEO.

Update 11-22-21:  The CEO "knew of sexual harassment and rape claims at the gaming giant but failed to report some of them to the board."  The article did not say what role, if any, Fran Townsend played.

Carlyle Launches Copia Power

 WSJ reported:

Private-equity giant Carlyle Group Inc. is launching a company to develop renewable-power-generation and storage projects in a push to reorient its energy business toward sustainable investments.

Funds Carlyle operates will inject as much as $700 million in the new venture, Copia Power, enabling it to arrange projects worth over $6 billion. Copia will focus on developing large-scale solar generation projects and battery facilities to store power and distribute it after sunset.

 PE News added:

Copia will launch with several projects acquired from Omaha, Neb.-based power developer Tenaska Inc., which are slated to produce about 6 gigawatts of clean energy. The startup will also join with Birch Infrastructure to help negotiate future power-purchase agreements with large corporate buyers.

Carlyle will work with Tenaska and Birch, much like it planned to work with The Berry Group on a Texas deep-water oil terminal.  Both projects were launched with considerable excitement.

Copia Power--“The formation of Copia Power and relationships with Tenaska and Birch highlight Carlyle's continued commitment and focus on finding differentiated and attractive investment opportunities that will drive the energy transition. We feel strongly that the combination of leading and proven management teams such as Tenaska and Birch, along with the scale and capabilities of our platform at Carlyle, we can drive significant growth and accelerate the development of utility scale sustainable infrastructure in the United States.”

Corpus Christi--"Sean Strawbridge, the Chief Executive Officer of Port of Corpus Christi. “In partnering with such an experienced and well-capitalized firm as The Carlyle Group, the market should take notice and have a high degree of confidence of this project’s success.”

Carlyle appreciates the steadfast, prescient leadership provided by the Port of Corpus Christi Authority in advancing this project. Providing VLCC access at the Port is of critical importance to the United States, and we will collaborate with all stakeholders to ensure such service is provided.

Carlyle’s equity for this investment will come from its Global Infrastructure Fund.”

Partners and potential customers may wish to ask why Carlyle suddenly dropped its development role and fifty year lease with the Port of Corpus Christi in October 2019.  Reuters reported:

Sean Strawbridge, chief executive of the Port of Corpus Christi, said Carlyle notified the port on Oct. 8 it would no longer proceed with its investment. That left construction company Berry Group as the sole backer.

Carlyle said in a statement Berry Group was “now the sole owner of Lone Star,” but did not comment on why it dropped out of the project, which it said continues to be actively developed.

Lone Star in September filed a lawsuit against Carlyle in a Texas state court, alleging the private equity firm breached its contract to jointly pursue the project and asking the court to award it full ownership. The lawsuit also sought unspecified damages.

Will Copia end up like Corpus Christi?   Maybe not.  However, one should be concerned when the greed and leverage boys target their industry for massive profits.  That's the PEU game.  Their green is the color of money.  

The Port of Corpus Christi ended its fifty year lease with Lone Star Ports in March 2021.  Without Carlyle's capital the project imploded. 

Billionaire Yachts Rise with Tide

Billionaire owned yachts float on their ability to make public policy and garner government subsidies, direct and indirect.  

Nearly four years ago a Reuters columnist wrote:

As the debate over wealth inequality rages, a paradox is expected to play out over the next five years: the share of people in the lowest strata will decline, while the wealth of the world’s richest will grow faster than any other group.

These projections from Credit Suisse’s Global Wealth Report will be seized upon by proponents of the view that the wealth gap is narrowing, however slowly, and those who argue that the ultra-rich getting richer is no cause for celebration.

The “Paradise Papers” leaks this month revealed the lengths to which some of the world’s wealthiest individuals and institutions go to minimize their tax payments, and re-ignited the debate over wealth inequality.

Whether it’s tax avoidance (technically legal but morally questionable) or tax evasion (outright illegal), the documents shone a light on the financial affairs of the rich and ultra-rich. “One rule for them and one for everyone else” was a common reaction to the revelations.

The richest 1 percent of the world’s population now owns half of its wealth. And there’s no sign of that receding.  A rising tide lifts all yachts.

CommonDreams reported today:

Under pressure from well-heeled conservative advocacy organizations and donors, Republican senators have removed funding for IRS enforcement from an emerging bipartisan infrastructure plan, threatening to tank a proposed crackdown on rich tax cheats.

The scrapped provision would have increased the IRS budget—a frequent target of GOP cuts in recent years—by $40 billion over the next decade to help the agency combat tax dodging, which is depriving the federal government of trillions of dollars in revenue. An analysis released earlier this year by academics and IRS researchers estimated that 36% of unpaid federal income taxes are owed by the top 1%.

MarketWatch reported on the wealthy's use of debt to avoid taxes.

ProPublica’s investigation into billionaires’ tax returns has more people paying attention to the strategies wealthy Americans use to avoid paying taxes. As it turns out, one of those tactics involves the advantageous use of debt. There’s even a catchphrase for it — Buy, Borrow, Die.  

You don’t pay taxes on an asset until it produces cash.  That allows for the wealthy to build up their assets tax free. To most of us, it would seem that the problem with that method is that “sooner or later you’re going to have to sell,” he said. But that’s actually not the case. As long as someone is wealthy enough to live on a percentage of their assets, they never have to sell.

Instead, they can borrow against those assets at an interest rate that’s much lower than the rate at which the assets will appreciate over time, McCaffery said, and use those funds as spending money. But unlike the wages and salary most people use to pay for living expenses, the borrowing isn’t taxed, so they face a relatively low tax bill. Once they die, the assets pass to their descendents tax-free or with minimal tax treatment.  

Private equity underwriters (PEU) are masters at the use of debt to minimize taxes.  Politicians Red and Blue love PEU.  While the rising tide lifts all yachts, the rest of us are treading water.

Update 8-2-21:   Recently released wealth data reinforced the themes in this post.  Yahoo Money reported "The share of wealth held by the top 1% continues to climb while those at the lower end lost ground … by that measure, inequality worsened.” 

Update 8-14-21:   Policy making billionaires ensured the Trump tax cuts benefited them in an outsized way.

Update 8-26-21:  "Afghans did not reject us. They looked to us as exemplars of democracy and the rule of law. They thought that’s what we stood for.  And what did we stand for? What flourished on our watch? Cronyism, rampant corruption, a Ponzi scheme disguised as a banking system, designed by U.S. finance specialists during the very years that other U.S. finance specialists were incubating the crash of 2008. A government system where billionaires get to write the rules." 

Update 2-2-22:  A historic bridge in Rotterdam will be dismantled so billionaire Jeff Bezos' super-yacht can pass through.  Locals are livid given officials promised the bridge would never be dismantled again.  Can't his spaceship lift the yacht over the bridge?  

Update 3-1-22:   Young workers understand how they are judged on their productivity and the never ending drive to squeeze more out of them.  For executives and the PEU boys it is never enough.  

Update 5-30-22:  Billionaire Elon Mush tweeted it is morally wrong and dumb” to use the word “billionaire” as a pejorative, adding, “If the reason for it is building products that make millions of people happy.”  What if the reason for that billionaire is decades of preferred taxation?  What if that billion in wealth arose from surprise medical billing?

Update 10-5-22:  Treasury Secretary Janet Yellen said the U.S. economy failed to live up to the nation's promise of equal opportunity for all."