Who Would You Clawback?

Consider the following scenarios where people received bonuses as a result of fraud:

1)  Short of troops to fight in Iraq and Afghanistan a decade ago, the California National Guard enticed thousands of soldiers with bonuses of $15,000 or more to reenlist and go to war.  Audits reveal widespread bonus overpayments by the California Guard at the height of the wars.  Investigations determined that lack of oversight allowed for widespread fraud and mismanagement by California Guard officials under pressure to meet enlistment targets.  Army Master Sgt. Toni Jaffe, the California Guard’s incentive manager, pleaded guilty in 2011 to filing false claims of $15.2 million and was sentenced to 30 months in federal prison. Three officers also pleaded guilty to fraud and were put on probation after paying restitution. (source:  Los Angeles Times)

2)   For years, mortgage giant Fannie Mae has produced smoothly growing earnings. And for years, observers have wondered how Fannie could manage its inherently risky portfolio without a whiff of volatility. Now, thanks to Fannie's regulator, we know the answer. The company was cooking the books. Big time.  Fannie set aside an artificially large cash reserve. And -- presto -- in any quarter its managers could reach into that jar to compensate for poor results or add to it to dampen good ones. This ploy, according to Ofheo, gave Fannie "inordinate flexibility" in reporting the amount of income or expenses over reporting periods.  This flexibility also gave Fannie the ability to manipulate earnings to hit -- within pennies -- target numbers for executive bonuses.  In one particularly volatile year  target EPS for maximum payout was $3.23 and Fannie reported exactly . . . $3.2309. This bull's-eye was worth $1.932 million to then-CEO James Johnson, $1.19 million to then-CEO-designate Franklin Raines, and $779,625 to then-Vice Chairman Jamie Gorelick.  (source:  Wall Street Journal)

Here's what our government did.  In the case of Fannie Mae it identified $10.6 billion in fraudulent accounting motivated by greed, executive's desire to receive maximum bonuses. The report showed over $87 million in bonus payouts during the period of accounting fraud by "arrogant and unethical executives."

James Johnson, the recipient of nearly $2 million in fraudulent Fannie Mae bonuses in the report, helped Democratic Presidential Candidate Barack Obama pick his running mate.  Johnson received much of the blame for Fannie Mae's collapse in the 2008 financial crisis, according to two investigative reporters.

Fannie Mae Vice Chair Jamie Gorelick garnered nearly $4.5 million in fraudulent bonuses.  She went to work for the law firm that defended Fannie's fraudulent accounting, WilmerHale.  She led the BP Deepwater Horizon Oil Spew defense team.

 
Executive Vice President for Law/Policy Tom Donilon defended Fannie Mae by going after the investigating agency.  Donilon received nearly $3 million in ill begotten gains from his time as a Fannie Mae executive.  He became President Barack Obama's National Security Advisor.  Currently Donilon is Vice Chair of O'Melveny, a giant law firm, and Senior Director, BlackRock Investment Institute.  BlackRock featured Donilon in a Russia-Ukraine scenario planning section of a 2014 investment report.

The government let Johnson, Donilon and Gorelick keep every penny of their fraudulent gains.  That same government is going after 10,000 soldiers who received re-enlistment bonuses as a result of Pentagon incompetence or malfeasance:

Nearly 10,000 soldiers, many of whom served multiple combat tours, have been ordered to repay large enlistment bonuses — and slapped with interest charges, wage garnishments and tax liens if they refuse — after audits revealed widespread overpayments by the California Guard at the height of the wars last decade.  

Roughly 9,700 current and retired soldiers have been told by the California Guard to repay some or all of their bonuses and the recoupment effort has recovered more than $22 million so far. 

There are two systems of justice in our country.  Rules for the politically connected, the "Just Us" crew, are far different from those for common folk.  The soldier bonus clawback is but one example.

Update 2-12-17:  Only two Fannie Mae executives had to return a small portion of their ill gotten gains.  Johnson, Donilon and Gorelick got to keep every rotten penny.

Carlyle's Marchick in Podesta e-mails

 

The Carlyle Group is renowned for its Red and Blue political connections.  This is but one of many blue team connections.

On Feb 18, 2015 2:14 PM, "David Marchick" wrote: > 

Enjoy your downtime and good luck with Hillary. Let me know how I can help.

(Link to source)

On 2-12-16 David Marchick advised Hillary to stay on the offensive against Bernie Sanders.  

Laying out her plans, her credentials, her vision and not just responding to Bernie and saying "we need to be more practical"

Practical is the Obama legacy, a time during which most Americans lost ground. 

Update 7-16-22:  American University and just hired former Carlyle Group Managing Director David Marchick as Dean of AU's business school. 

Gates First Guest for Billionaire TV

Bloomberg's new Billionaire Television kicks off with an interview with the world's richest man, former Microsoft CEO Bill Gates.  The net worth of two hundred Bill Gates equals the annual U.S. GDP. 

Host David Rubenstein co-founded The Carlyle Group, which invests money on behalf of family foundations.  It was nice of Bloomberg to give Rubenstein a forum to sell his private equity underwriter (PEU) services. 

The producer might want to review the IMF tape on inequality, where Mr. Rubenstein closed the hour long panel with a nearly four minute PEU infomercial. 

Bloomberg Launches Billionaire TV

Bloomberg launched its latest show starring billionaire Carlyle Group co-founder David Rubenstein.

Renowned financier and philanthropist David Rubenstein travels the country talking to leaders to uncover their stories and their path to success. Each episode features an interview with one business leader.

Oddly, Bloomberg did not cite Rubenstein's primary job as a private equity underwriter (PEU).  Five years ago an ex-Bloomberg reporter wrote:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

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 reporter cited the new host of Bloomberg's Billionaire Television:

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!

Bloomberg's host personally lobbied Congress each time elected officials considered changing private equity's preferred carried interest taxation  Rubenstein won every time.

Carlyle's co-founder no longer has to shun enterprising business reporters probing shady PEU business practices.  He gets to frame the questions to maximize Carlyle's image.  If you doubt this assertion watch his private equity infomercial at the end of an IMF panel on inequality.

At 55:35 Rubenstein dubbed himself moderator and offered the "Private Equity Answer" for investors seeking out-sized returns in a low interest rate environment.  The Carlyle infomercial lasted three minutes and virtually closed the session on inequality.  Frankly, it couldn't have ended on a worse note.
 
The rise of private equity corresponds with the rise in income inequality

And that's why a PEU is hosting Billionaire TV. 

Sisters of Providence Must be Horrified

Saint Vincent Hospital in Worcester, Massachusetts removed a kidney from the wrong patient.  The AP reported:

The surgeon in July was supposed to remove a kidney with a tumor from a patient at St. Vincent Hospital in Worcester, but instead removed a healthy kidney from a different patient with the same name.

Authorities say the hospital failed to follow proper patient identification protocols by checking birth dates. The patients were several years apart in age.

The AP did not report St. Vincent's ownership history:

In January 2005, Vanguard Health System purchased the facility. In 2013, Tenet Healthcare acquired Vanguard and continues to follow the longstanding Catholic tradition of quality care first established by the Sisters of Providence.

I'd venture the Sisters knew their patients well enough to not perform a procedure on the wrong patient. 

Given the hospital's for-profit status I'll venture the wallet biopsy was successfully done on the right patient.  Time will tell if other Sisters will regret their decision to sell to the greed and leverage boys.

Carlyle Working with Former BP CEO Tony Hayward on Colombian Oil

Sky News reported:

Sky News has learned that Mr Hayward, who stepped down from the top job at BP soon after the Gulf of Mexico Deepwater Horizon oil disaster in 2010, is seeking to identify oilfields to purchase in countries including Colombia and Argentina.

If successful, Mr Hayward is expected to be paid a fee by The Carlyle Group for introducing the deal to the firm, although it is not clear whether he would have an ongoing role in the management of the new venture.

The former BP chief is understood to have lined up a team of oil executives to run the business under Carlyle's ownership.

If Argentina hated hedge funds they won't like private equity underwriters (PEU) like Carlyle.  Colombians learned what private equity can do from The Clinton Foundation, which owns PEU Acceso.  One Colombian citizen stated The Clinton Foundation has done "nothing for workers."

Another local fish merchant took out a large loan and later experienced Clinton bait and switch:

Instead, she would sell her fish directly to Acceso — at sharply reduced prices — and Acceso would resell them. In other words, the Clinton Foundation would act as a middleman and profit from margins supplied by the people it was supposed to be helping.

That's the PEU way.

South Americans should know this isn't the first time Carlyle worked with a BP merchant of death.  Lord John Browne headed BP when its Texas City refinery exploded, killing fifteen workers and injuring 180.  Tony Hayward's Deepwater Horizon explosion also killed fifteen people.

The Carlyle Group's LifeCare Hospitals had 26 deaths in the toxic aftermath of Hurricane Katrina.  That's nearly the combined death toll of the two BP explosions.

It's fitting that Tony Hayward is working with The Carlyle Group.  They are cut from the same greedy cloth.  Based on their prior experience I imagine Colombians get nervous when Western billionaires come snooping for their next profitpalooza. 

Hillary Finds Rules Onerous and Unnecessary

From the John Podesta e-mails Presidential hopeful Hillary Clinton spoke about federal rules to ensure appointees don't have conflicts of interest. 

"But you know, part of the problem with the political situation, too, is that there is such a bias against people who have led successful and/or complicated lives.  You know, the divestment of assets, the stripping of all kinds of positions, the sale of stocks.  It just becomes very onerous and unnecessary.” [Goldman Sachs Builders And Innovators Summit, 10/29/13]

John Podesta served as the head of President elect Obama's transition team, which had health reform a top priority.  White House Health Reformer Nancy-Ann DeParle supposedly disposed of all conflicting assets in 2009.  How then did she receive a gain from her earn out from MedQuest, a medical imaging company?  Nowhere on her prior two disclosures did she indicate residual private equity stakes in MedQuest or any other healthcare firms, where she served as a board member.

After designing PPACA Nancy-Ann DeParle returned to her private equity underwriting (PEU) roots.  PEUs leverage political connections to earn monstrous gains.  It appears public servants can keep their residual private equity stakes and not declare them.  For the greed and power class it's all so onerous and unnecessary.