Rogoff Rubenstein in Unique Position to Clarify Hilcorp's Relationship with Carlyle

Alaskan Dispatch News Publisher Alice Rogoff Rubenstein, the wife of Carlyle Group co-founder Devid Rubenstein, could quickly disclose any interests her family has in Alaskan oil.  Reuters reported on December 18, 2015:

Hilcorp Energy Co, a closely held U.S. independent exploration and production company, on Friday said it had formed a partnership with private equity firm Carlyle Group LP to acquire and develop North American oil and gas properties.

Carlyle's Energy Mezzanine Opportunities Fund, LP and Carlyle Energy Mezzanine Opportunities Fund II, LP have agreed to invest up to $1.24 billion in the newly formed partnership called Hilcorp Energy Development LP.

Houston-based Hilcorp, founded by Jeffrey Hildebrand in 1989, has operations in the Gulf Coast of Texas and Louisiana, the U.S. Northeast and Alaska.

ADN missed the founding of Carlyle's joint venture with Hilcorp.  A different Hilcorp story stole the headlines that December day of 2015.

"Houston oil and gas company Hilcorp goes viral after giving six-figure bonuses to every employee "

ADN ran several pieces on Hilcorp Alaska.  They ranged from Hilcorp's aggressive plans to develop Arctic oil/gas fields to concerning pieces on employee health and safety practices. 

Since its founding in late 2015 Hilcorp Energy Development LP has produced no news. The Reuters' piece stated:

Oil and gas companies are increasingly looking to private equity firms as low commodity prices sap cash flow and access to capital markets is squeezed. 

This would lead one to believe Hilcorp put some of its existing energy portfolio into the Carlyle joint venture.  An enterprising journalist might enlighten Alaskans on such developments.  That is if they want the public to really know. 

Celebrating PEU Fee-dom this July 4th

This 4th of July elected officials all over the United States are celebrating the freedom of private equity underwriters to profit handsomely from investing public pension funds.  The NYT reported:

It began last year as a promising push by a few states to require private equity firms that invest on behalf of public pension funds and university endowments to be more forthcoming. But the effort has hit a wall as bills in California and Kentucky intended to shed light on fees and practices at these powerful firms have been either killed or watered down.

One of the bills proposed in California would have required only modest disclosures: the publication of a handful of pages from confidential limited partnership agreements. It was shot down.

Even worse, another private equity transparency bill in the state was recently amended to eliminate disclosures about related-party transactions between private equity firms and the portfolio companies they oversee. Fees paid by portfolio companies to private equity funds ultimately come out of the pockets of fund investors, so more sunlight in this area would have been beneficial.

Billionaire PEUs like Carlyle's David Rubenstein, Blackstone's Stephen Schwarzman, Apollo's Leon Black and KKR's Henry Kravis have carte blanche access to America's Red and Blue political ruling class.  Those elected officials preserved private equity's preferred carried interest taxation for over a decade in direct contrast to public opinion that the super wealthy should not pay a lower tax rate than their gardener or limo driver.

Here's another reason why the public and elected officials should care about the business of private equity, which relies on leverage and financial manipulations to garner outsized returns or cause their affiliate to go bust.  Moody's is a credit rating agency and it had this to say about The Carlyle Group's financial practices regarding affiliate Vogue International, which Carlyle is selling to Johnson & Johnson for $3.3 billion.

Moody's Investors Service, ("Moody's") placed the ratings of Vogue International, LLC (Vogue) under review for upgrade, including the company's B2 Corporate Family Rating and B3-PD Probability of Default Rating.

The review for upgrade is based upon Moody's view that, should the acquisition by Johnson & Johnson be consummated, Vogue will become part of an enterprise with a significantly stronger overall credit profile than if Vogue remains a standalone entity. 

Vogue's existing B2 Corporate Family Rating reflects its modest scale, limited operating history at current sales levels, narrow product focus, and high customer concentration. The rating also incorporates Vogue's very aggressive financial policies including large debt-funded shareholder distributions. Revenues and earnings are vulnerable to changing customer preferences and competitor actions. 

Vogue International LLC (Vogue), headquartered in Clearwater, FL, develops, markets, and sells hair care products marketed as having natural ingredients primarily through mass market retailers. The company is 51%/49% owned by founder Todd Christopher and The Carlyle Group. Revenue for the 12 months ended March 31, 2016 was approximately $319 million.  

Aggressive financial policies brought us more than one asset bubble, which later burst badly.  The business and buying and selling companies becomes the public's business when PEUs are investing public funds.

PEU freedom means the greed/leverage boys are above paying regular taxes and making proper disclosures regarding their fees.   Fireworks both please and divert the attention of the masses.

Carlyle Group's AUM Drops Again

The Carlyle Group's website stated today:

The Carlyle Group is a global alternative asset manager with $178 billion of assets under management across 125 funds and 164 fund of funds vehicles. 

Assets under management fell from $203 billion across 129 funds and 141 fund of funds vehicles as of September 30, 2014.  Most recently Carlyle had $183 billion in AUM, down from $188 billion.

Carlyle's AUM dropped $25 billion in less than two years, with the last two drops being $5 billion apiece.   

Alaska Governor Appoints PEU to Critical Role

Alaska Governor Bill Walker appointed a private equity underwriter (PEU) to head the state's Department of Natural Resources.  Andrew T. "Andy" Mack is Managing Director of Pt Capital, the only Arctic focused private equity firm.

The Governor's Office and news reports omitted Mack's other roles as President of Pt Public Policy, a sister company to Pt Capital that focuses on public policy consulting, and principal of Andrew Mack and Associates, a boutique consulting operation based in Anchorage.  Mack and Associates received a $50,000 contract from the Governor's Office to produce an Arctic Oil and Gas Master Plan.  

They also failed to note his role as a public board member for the Alaska Board of Marine Pilots.  When Mack applied to serve in February 2012 he indicated that he or family members could be affected financially from his being in this role.  Mack did not to go on to explain the "potential financial benefit."

The Governor appointed a man with significant interests in the areas he will oversee.  Mack admitted that himself in 2012 in applying for a much smaller role.

Private equity underwriters generally hold an equity stake in their firm and its offerings.  Government has been supremely bad in making these known, often acting like no conflict exists.  Mack has much to declare in regard to any holdings in Pt Capital, Pt Public Policy and any of their holdings.  However, in the shadowy world of PEUs most things remain secret.

Partnering with Mrs. Rubenstein Distatsteful

The Alaska Dispatch News reported on a lawsuit against its owner Alice Rogoff-Rubenstein:

The former president and editor of Alaska Dispatch News has filed a lawsuit against Alaska Dispatch Publishing LLC and its owner, Alice Rogoff, asserting she failed to pay money he says was promised to him.

Tony Hopfinger now lives in Chicago and hasn't been involved in the operations of the newspaper since the end of 2015. The suit was filed on Wednesday in state Superior Court in Anchorage. 

Hopfinger co-founded the news website Alaska Dispatch in 2008 with his then-wife Amanda Coyne. Rogoff purchased a majority of Alaska Dispatch Publishing LLC in 2009, and Hopfinger and Coyne each retained 5 percent of the company. 

Hopfinger asserts he did not wish to retain his 5% ownership of the company when Rogoff sought to buy the Anchorage Daily News from McClatchy.  

Hopfinger approached Rogoff to discuss the buyout in April 2014, the suit says. That's when, it continues, Rogoff wrote a promise to Hopfinger on a cocktail napkin that read: "I agree to pay Tony $100K at end of each calendar year (beginning '14) for 10 years."  

Buying someone's equity stake is different than paying them a salary for services provided. 

Hopfinger's employment contract, attached in court records, shows his annual salary was $190,000.

The question is now does Mr. Hopfinger's 5% equity stake fit in the complex corporate structure Rogoff likely learned from her PEU husband?

A company called AK Publishing LLC now owns Alaska Dispatch News' assets, and is entirely owned by Rogoff through another company called The Moon and the Stars LLC.

Rogoff is married to billionaire David Rubenstein, co-founder of the Carlyle Group.

Alaska Dispatch News did not report their paper is bleeding cash  Nor did it mention their $700,000 lawsuit against McClathy for not fulfilling contractual commitments in the sale of the Anchorage Daily News to Rogoff's Alaska Dispatch. 

Rogoff's lawyer characterized Hopfinger's lawsuit as:

“On June 15, 2016, Tony Hopfinger, former executive editor and president of the Alaska Dispatch News, filed suit against Alice Rogoff and Alaska Dispatch Publishing, LLC, a now-defunct online news outlet."

Oddly, the "now defunct online news outlet" has the $700,000 lawsuit against McClatchy 

Rogoff shouldn't be able to have it both ways.  However she's married to a master of the PEU world where greed and power rule.  Language and law are something to be distorted in their favor.

Okumus Talks Long on Carlyle Group After Selling 500,000 Shares

WaPo reported on June 3rd:

Some big shareholders such as Okumus Fund Management have pounced on Carlyle shares. Okumus began buying Carlyle shares late last year and now owns more than $100 million.

“We don’t agree with how the public market values the company,” said Tim McAlea, director of research at Okumus. “Over the long run, the earnings will grow more with the assets under management and the fees Carlyle earns. Through the cycle, Carlyle will make a lot of money for its shareholders.”

Franklin Independent reported on June 10th:

Ahmet Okumus decreased its stake in Carlyle Group LP (NASDAQ:CG) by 6.95% based on its latest 2016Q1 regulatory filing with the SEC. Okumus Fund Management Ltd sold 532,678 shares as the company’s stock rose 8.48% with the market.  

It wouldn't be the first time an investment expert screamed buy while selling.  We'll see what Okumus Q2 filing shows in regard to Carlyle. 

CalPERS CEO Sentenced for PEU Activity (Bribes)

Zero Hedge reported:

Former California Public Employees' Retirement System (CalPERS) CEO Federico Buenrostro was sentenced Tuesday by a federal judge to four and a half years in prison for accepting more than $200,000 in bribes trying to steer investments.

Buenrostro pleaded guilty to fraud and bribery charges two years ago, saying he started taking bribes around 2005 to try and get CalPERS staff members to make investment decisions that helped Alfred Villalobos, an investment manager and former board member of the fund. The judge called the case "seriously troubling", and said it reflected a "spectacular breach of trust for the most venal of purposes, which is self-enrichment."

CalPERS owned 5% of The Carlyle Group at the time CEO Buenrostro started taking bribes to steer investments to former board member Alfred Villalobos, an investment placement agent.

Buenrostro acknowledged giving Villalobos access to confidential investment information and forging letters that enabled firms connected with Villalobos to collect a $14 million commission on $3 billion worth of pension fund investments.

Carlyle settled a New York pension pay to play investigation in 2009.  One has to wonder if this was accepted behavior among PEUs and their part owners.  A NYT article on Carlyle's $20 million settlement mentioned CalPERS Villalobos.

In 2007, Fernando Ferrer, the former Bronx borough president, introduced Mr. DiNapoli to Alfred Villalobos, who runs Arvco Capital, a Nevada placement agency. Seven months later, an Arvco client landed a $10 million investment from the state pension fund. Mr. DiNapoli’s staff has said he was not aware that Mr. Ferrer was a paid consultant to Arvco, and the relationship was never disclosed.

Even though CalPERS CEO Buenrostro started taking bribes in 2005 his most egregious behavior happened in 2008-2009.  Bloomberg reported:

After Calpers’ legal and investment offices declined to sign a letter, Villalobos and Buenrostro allegedly conspired to create a series of fraudulent letters that were transmitted to Apollo in 2008 and 2009, according to the indictment.

Villalobos committed suicide five weeks before his trial was to start in 2015.  Thus the voice that could have shed light on both sides of the CalPERS situation was silenced.  It's amazing how PEU money washing gets swept under a rug with a huge settlement.  It almost feels like a bribe to public officials to make their former bribes to public pension officials go away.  

Update 5-5-22:  The PEU "public pension savior" narrative may burst if one New York Assemblyman gets his wish for PEUs to reveal their contracts and fee arrangements with New York's public pension funds.