Carlyle Buys Minority Stake in Turkish Hospital Chain

The Carlyle Group purchased a 40% stake in Turkey's Medical Park Hospital Group. Zaman reported:

Operating in the Turkish medical sector since 1995, the Medical Park Hospital Group owns 11 hospitals and two hospital complexes in a number of cities. It employs more than 6,000 doctors and workers. With the new ownership structure, the joint stake of hospital partners Ethem Sancak and Muharrem Usta will decrease to 60 percent.

Here's how it sold in Turkey:

The Carlyle Group, known for its ties to former US presidents George H.W. Bush and George W. Bush, is one of the world’s largest private equity firms, managing more than $86.1 billion in equity capital.

Let's hope Carlyle doesn't turn Medical Park into a serial ethics abuser like Tenet Healthcare. Funny, Jeb Bush is on Tenet's Board of Directors. One doesn't have to look far to find a disturbing Bush. Will it be profits before patient care? Americans could soon find out, as Turkey promotes Medical Tourism.

Carlyle not only owns PPO provider Multiplan and Private Healthcare Systems, its cost cutting subsidiary. It will have Turkish hospital beds to offer Americans needing surgeries. Now, how to get medical expenses in lira's tax deductible?  The investment is parked in The Cayman Islands, away from the tax man.

(Should patients need long term acute care or nursing home beds, Carlyle owns LifeCare and ManorCare.) 

Update 12-24-13:  Carlyle sold its stake in Medical Park.

Emanuel Wants to Embellish Fictional Financial Statements

SEC rules apply to publicly traded companies. Off balance sheet items and "fair value accounting" rule changes make financial statements opaque. A proposed rule change could increase this opacity. Bloomberg reported:

The Obama administration is pushing House Democrats to spare small public companies the cost of complying with investor-protection rules imposed after the accounting frauds at Enron Corp. and WorldCom Inc., according to people familiar with the efforts.

Chief of Staff Rahm Emanuel is seeking the reprieve from audit requirements under the 2002 Sarbanes-Oxley Act.

Payback and politics. Isn't that Rahm's specialty?

Protecting the Fed

Rep. Mel Watt (D-NC) vigorously defended the Federal Reserve Bank at a Congressional hearing in September. He followed up by gutting Rep. Ron Paul's "Audit the Fed" bill. Bloomberg reported:

Paul, a member of the House Financial Services Committee, said Mel Watt, a Democrat from North Carolina, has eliminated “just about everything” while preparing the legislation for formal consideration. Watt is chairman of the panel’s domestic monetary policy and technology subcommittee. Paul said he intends to introduce an amendment to the bill when it comes to the House floor for a vote restoring the legislation’s original language.

Financial firms sponsored Rep. Watt and his leadership PAC in 2008. Mel's PAC donated to Rep. William Jefferson's 2008 run. Did Mr. Jefferson run out of cold cash?

The timing of Mr. Watt's gutting is odd, given the Fed's admission it manipulated gold prices. The Government-Industrial Monstrosity hates investigations and accountability. Watt is but the latest silver tongued thwarter.

(Thanks to Economic Policy Journal)

Governor Rick Perry's Empty Promise: 3,000 New Jobs

Dateline, February, 2004.

Press release from the Office of the Governor:

Gov. Rick Perry today announced a $35 million commitment by the Texas Enterprise Fund to Vought Aircraft Industries, Inc., to assist the companies’ expansion in Texas. Vought, the largest privately owned aerostructures manufacturing company in the nation, will bring 3,000 jobs to the Dallas area by 2009.

“With this commitment in Texas Enterprise Fund money, we are doing our part to leverage a major economic expansion by a valuable Texas employer that will bring 3,000 new jobs to Texas, attract additional employers to our state, and provide the revenue we need to sustain important public investments in areas like education and health care,” Perry said.

“Taxpayers can know that this is a wise investment of public dollars because, once this expansion is finalized, the annual return will be more than twice the original investment,” he added.

Vought is planning to bring jobs from facilities in two other states to Texas. The two facilities will be transitioned gradually to the Dallas manufacturing location over the next 18 to 36 months.

“Today Texans have great cause for celebration,” Perry said. “A historic company with deep ties to Texas is taking the next big step, adding 3,000 direct jobs over the next five years and helping to boost the Texas economy, expand opportunity in related fields, and prompt other employers to look to Texas as the model for economic growth and a great place to do business.”

Perry also said that both state and local government are committed to making sure that Hensley Field is open in time so that Vought has access to a 24-hour, private airfield for the shipment of all goods and parts. He also announced that Texas will provide job training assistance through the Texas Workforce Commission.

“The creation, retention and attraction of jobs is one of my top priorities as governor of Texas,” Perry said.

At the time of the announcement, Vought employed approximately 3,350 people according to BizJournals.

The Texas target is 6,350 jobs by 2009. With two months to go, Vought won't make their commitment. Data from the company's website shows:

Dallas (Jefferson Street) with 2,680 employees
Grand Prairie (Marshall Street) having 635 employees

That totals 3,315 workers. Rick Perry gave Vought $35 million to reduce 35 jobs over a five year period? That's $1 million per job cut.

Where did the jobs go? 950 stayed in Nashville, TN in a plant Vought promised to close. The big chunk went to South Carolina, which provided $66.7 million and an influential defense oriented Senator in Lindsey Graham.

Vought's corporate parent, The Carlyle Group, knows how to garner a return on Texas taxpayer money. If they got 10% annually, measly by Carlyle's 25-30% track record, Rick's grant gift provided Vought with $3.5 million a year. That's more than enough to fund the firm's $2 million annual management fee paid to Carlyle headquarters.

Vought gunked up the 787 Dreamliner production line, such that Boeing bought out a joint venture with Alenia and the firm's North Charleston operations, a combined 2,500 jobs. In a Rick Perry like move, Governor Mark Sanford heralded his state's economic development win.

South Carolina wants more, specifically a second Boeing 787 production line. Other potential sites included California, Washington, and Texas (San Antonio). Mark Sanford showed his hand:

The state offered Boeing $170 million in upfront grants for start-up costs, plus multiple tax breaks that would be worth tens of millions of dollars more. But there's a catch -- if Boeing doesn't invest $750 million and create 3,800 new jobs in South Carolina within seven years, all the money from South Carolina to Boeing vanishes, according to the Seattle Times.

What ever Governor Perry offered Boeing wasn't enough. Like Vought, Boeing chose South Carolina.

Vought used Rick's $35 million as a "cash spin off" kitty, but don't worry. They plan to pay it back.

We reclassified $2.1 million related to the Texas grant to the Accrued and Other Liabilities caption in our Consolidated Balance Sheet due to a potential repayment of grant funds in 2010 based on the agreement. The liability reclass is an estimate as no payments are due as of June 28, 2009. (page 14 of Vought's most recent 10-Q)

The Carlyle sub plans to return Texas taxpayer money very slowly. At that rate it will take 16 years for Vought to pay back our $35 million. Who knew a Texas Governor would impersonate a New York financier?

Jamie Diamond Goes to Washington

In the first six months of the Obama Presidency, JP Morgan CEO Jamie Diamond visited the White House six times. How might money play into White House access?

JP Morgan contributed nearly $5 million to candidates in the 2008 election cycle. Nearly $3 million went to Democratic candidates.

Thus far in 2009 JP Morgan spent $4.3 million on lobbying. That doesn't include £2million paid to Tony Blair for "part-time lobbying."

Here are some of JP Morgan's issues:

1. Discuss the issue of cross border market access with trade representatives

2. Promote legislation that would create a physical presence standard under which a state may tax the income of business

3. Extend the active finance exception to Subpart F of the IRC, which requires current taxation of income earned overseas

4. Discuss various proposals for immigration reform with members of Congress

5. Discuss the USDA rural housing program

6. Discuss the value of preserving health savings accounts in health reform legislation and the savings to be achieved by simplifying the payment system

7. Discuss short selling practices with members of Congress and agency officials

8. Discuss the value of derivatives with members of Congress

9. Discuss with members of Congress various aspects of a proposed "cap & trade" regime and the creation of a federally chartered financial institution to encourage renewable energy and energy efficiency

10. Discuss the use of electronic benefits transfer in the WIC program

What is JP Morgan not involved in? How many topics did he broach with White House officials?

The list is worthy of America's Government-Industrial Monstrosity, Eisenhower's MIC on steroids. Big ka-ching is washing around between the moneyed gentry. Detailing that would be "vigorous disclosure."

Apollo & TPG Shaft Harrah's Bondholders

DealBook reported:

Harrah's Entertainment, he struggling casino operator, said Friday it had agreed to pay $250 million to buy back some commercial loans at a fraction of their face value.

The company said in a regulatory filing on Friday that it agreed to the loan buyback last week, The Associated Press reported.

Harrah’s, based in Las Vegas, said it would pay 25 cents to 30 cents per $1 in principal, and would cancel the loans it buys.

The privately held company runs more than 50 casinos worldwide. It said it had $19.3 billion in debt as of June 30.

Apollo Management and TPG loaded Harrah's with debt when they purchased the company in 2006. Seeking Alpha reported:

Harrah's Entertainment has approved the $17.1 billion buyout offer from Apollo Management LP and Texas Pacific Group. The is the fourth largest private equity buyout ever.

When Harrah's pays 25 to 30 cents on the dollar, will the bonds default, triggering credit default swaps or other hedges? Uncle Sam provided an estimated $25 billion tax break for firms buying debt on the cheap in the Stimulus Bill. With all the companies buying back severely discounted debt, how big is the tax break?

The big money boys gambled. How will taxpayers cover the PEU boys losses?

Geithner's Impressive TARP Returns to Take CIT Hit?

WSJ reported:

One loser from a bankruptcy would be the U.S. Treasury. Late last year it injected $2.3 billion of funds from the Troubled Asset Relief Program to help stabilize the lender (CIT), which was weighed down by billions of dollars of bad student loans and subprime mortgages. The government investment is likely to be wiped out, said people familiar with the matter. Common shares would likely drop to zero, too, these people said.

I thought TARP funds were senior capital injections, i.e. collateralized investments. Add the $7 billion Chrysler write off and taxpayers are out $9.3 billion. Did Secretary Geithner include these losses in his calculation of TARP's impressive returns?

Guess who is next up for TARP aid? It's small businesses, CIT's lending target. Will CIT loan to financially sound small businesses, with Uncle Sam guaranteeing funds for small employers at risk? It could be another step in socializing losses, while privatizing gains.