Carlyle Number One at Numerous Things

Private Equite International Magazine rated The Carlyle Group number one in funds raised last year. The politically connected private equity underwriter (PEU) raised $52 billion for investment purposes. It beat out Goldman Sachs, TPG, and KKR for the top spot. While Carlyle is good at raising funds and earning stellar returns, it has another skill. The Pennsylvania Avenue PEU can shut the media out like no other firm. Consider the following:

1. Boeing canned Carlyle's Vought Aircraft Industries from a joint venture as it was the sticking point for Dreamliner 787 production. Despite Vought's paying Carlyle $2 million a year for management services, the JV had liquidity problems which prevented it from ramping up production. That came from the mouth of Vought's CEO. How did Carlyle sell Boeing's yanking their share of the joint venture? Vought spokeswoman Lynne Warne said “This was purely a financial transaction.” Hogwash! (As for value from that multimillion dollar management fee, Vought just agreed to pay $1.5 million for employment discrimination. Its screening process discriminated against women, black men, and Asian men.)

2. Carlyle sold Landmark Aviation and Standard Aero to Dubai Aerospace with virtually no media coverage. Some fifty domestic airport operations went to a Middle Eastern sovereign wealth fund with barely a peep from the business media. This deal was sandwiched between the Dubai Ports World brouha and the contentious Nasdaq sale to a Dubai firm. It closed around the time President Bush signed a new law "strengthening the oversight of acquisitions of U.S. companies by foreign firms." It seems that law facilitated investment more than anything else.

3. Carlyle's LifeCare affiliate lost 24 patients after Hurricane Katrina. Their attorneys blamed rogue clinicians first. When that strategy failed, they pointed their finger at the feds. Carlyle claims their long term acute patients became wards of the federal government as soon as FEMA evacuation teams set up in New Orleans. After failing patients in one of twenty on LTAC's, the PEU purchased ManorCare with over 500 facilities, mostly nursing homes. None of the this came up in the media during coverage of the purchase. Given their track record of failure, no Congressional committees asked how Carlyle planned to protect patients in future disasters. It must help to have a Pennsylvania Avenue address!

Carlyle's Red & Blue Connections

The lobbying arm of The Carlyle Group has a distinctly bipartisan flavor. The infamous private equity underwriter flashed its red and blue credentials this past week. News reports indicated chief lobbyist, David Marchick, testified before a Senate Committee on foreign investment in the U.S. Mr. Marchick worked for many years with Bill Clinton, beginning in Arkansas and ending in the White House. Private Equity Hub reported on David's new assistant in its piece "Carlyle Bolsters Lobbying Team":

Bryan Corbett has joined The Carlyle Group as a principal on the firm's Government and Regulatory Affairs team. He will be based in Washington DC, and will report to David Marchick. Corbett most recently served in the Bush Administration as a Special Assistant to the President for Economic Policy and as Senior Advisor to Deputy Secretary Robert Kimmitt at the Treasury Department. He also served as Majority Counsel on the Senate Banking Committee.

Carlyle has both American political dynasties covered, Marchick from the Clinton's, and Corbett for the Bush's. Guess which Senate Committee heard the testimony of Carlyle's chief lobbyist? It would be the same Senate Banking Committee mentioned in Mr. Corbett's bio. Coincidence or intelligent design?

David's testimony is laughable from several perspectives. After the usual compliments, honoring, and boot licking, Mr. Marchick proceeded to talk about the review of foreign purchases of U.S. assets, complete with a reference to Dubai Ports World. He neglected to mention the sale of two Carlyle aviation companies to Dubai Aerospace. The transaction occurred between the failed Ports deal and the NASDAQ, both of which broadly made the news. How did Carlyle keep the sale of operations at over 50 U.S. airports quiet? Now, that takes connections as well as the leverage of corporate advertising on behalf of over 1,000 companies.

Marchick called for the usual voluntary code of conduct for investment firms, both foreign and domestic. He saw a dark cloud on the horizon, citing numerous instances where other countries blocked foreign investment. Isn't that their sovereign right, even the result of democratic processes? One deal involved New Zealand blocking a potential investment from Dubai in the Auckland airport. That would be the same Dubai Aerospace, the sovereign wealth fund that bought Landmark Aviation and Standard Aero from Carlyle back in August 2007.

This all points to Carlyle's ability to manage deals regardless of the political environment. This is also how they keep their good name. Know or employ the right people. Use those contacts to grease deals or stuff negative news. But most of all, stifle any real oversight by offering "voluntary codes of conduct" solutions. Did we learn anything from Enron or the current credit meltdown? Will Carlyle keep their preferred private equity taxation on carried interest? What will happen with sovereign wealth funds, one of which owns 7.5% of The Carlyle Group. Stay tuned, the board is stacked in the Pennsylvania Avenue PEU's favor. That's exactly what co-founder William Conway wants.

Who ever heard that a Carlyle joint venture botched the job so badly, Boeing nudged them out of their new Dreamliner production? After the hullabaloo over Hurricane Katrina and its aftermath, who knows the hospital with the largest patient death toll in New Orleans belonged to a brand new Carlyle affiliate, LifeCare Hospitals? Very few, my friend. And Carlyle likes it that way. They do have their good name to maintain.

PEU Driven Domestic Policy

No matter who wins the White House this fall, high dollar corporate donors will have direct access to the President's ear. The pressure to privatizate more government services will likely grow. How might some of these requests influence policy? Below is one David Letterman like dream scene:

President John McCain sits in the Oval Office with the head of the Veterans Administration. The crimson faced Chief Executive spit out his nail-like words. "Your budget increase is shit. It's fucking unacceptable. How dare you bring this crap to me!"

"But sir, we have to pay for the benefits promised to the men and women who agreed to serve," pleaded the senior bureaucrat. "Their war injuries need lifetime treatment."

"We don't have to do any God damned thing. Fuck them and fuck you. Get out. Get the hell out! And don't come back. I'm privatizing your ass!" The Chief Executive barked out an order. "Get me Ken Mehlman on the line!"

"Ken, I need HCA to buy out the VA system. Don't worry, I'll make KKR a good deal on the purchase price and guarantee long term revenues. You can hold it a few years and spin it off for billions more than you paid. And yes, I'll veto any bill that increases the taxes you patriotic private equity boys pay on carried interest. Yes,, it is a new kind of capitalism."

Ken Mehlman Joins PEU Boys, Celebrate Good Times, C'mon!

Ex-Republican National Committee head Ken Mehlman parlayed his political experience into a high dollar job with Kohlberg, Kravis & Roberts, a huge private equity underwriter (PEU). PRNewswire reported:

Kenneth B. Mehlman, noted counselor on national legislative and public affairs initiatives, will join the firm (KKR) as Managing Director and Head of Global Public Affairs, a new position. Mr. Mehlman will focus on constructive outreach to the numerous stakeholders of KKR and its portfolio companies around the world, including relationships with governments, third parties, and NGOs.

Translated, it means Ken will use his insider political influence to steer large amounts of government work to KKR subs. The military industrial complex morphed into a government industrial monstrosity (GIM). Given the GIM's rage filled growth, one might think it's on steroids. Ken's background as a pusher of candidates certainly qualifies him to supply that list of governments, third parties and NGO's.

Carlyle JV Partner, Billionaire Bob Johnson Slams Obama

CNN's Jack Cafferty asked the following question yesterday:

What is your reaction to BET founder and Clinton supporter Bob Johnson saying Barack Obama wouldn’t be where he is if he were white?

Out of 191 comments, only one knew Robert L. Johnson was affiliated with the politically connected private equity underwriter (PEU) known as The Carlyle Group. Derwin Jones got the relationship wrong, but at least he sat in the correct ballpark. The billionaire's RLJ Companies did a joint venture deal with Carlyle in December 2005. Nearly a year later local community banker Bob Johnson met with President George W. Bush. But back to Hillary Clinton and her presidential aspirations.

Mrs. Clinton recently spoke at Allison Transmission, another Carlyle affiliate. Two of her husband's ex-employees, Mack McLarty and David Marchick, sit on the infamous PEU's payroll. First, Carlyle stooge Sen. Evan Bayh comes to Hillary's aid. Now it's PEU Bob Johnson to the rescue on the race front. How many more Carlyle Buffalo Soldiers are needed to clear the range for Hillary?

Grab Your Buyer Beware Boots in Pharma's New Wild West

If past behavior is indicative of future performance, hold onto your buyer beware boots. Not only can airlines treat customers like prisoners and not offer refunds, drug companies can manufacture data on the efficacy of their drugs. The New York Times reported:

The drug maker Merck drafted dozens of research studies for a best-selling drug, then lined up prestigious doctors to put their names on the reports before publication, according to an article to be published Wednesday in a leading medical journal.

The Journal of the American Medical Association said the analysis showed that Merck had apparently manipulated dozens of publications to promote Vioxx.

“It is clear that at least some of the authors played little direct roles in the study or review, yet still allowed themselves to be named as authors,” the editorial said.

Combine this with a new Food and Drug Administration rule relaxation, and America faces the prospect of more drug company fiction to increase sales, revenues and profits. The FDA plans to allow drug companies to market "off label" uses of their products as long as an article on the practice has been published by a trade magazine.

Let's see, if they gamed the old system with all its controls, what will they do with a virtual Wild West for off label indications? I smell some snake oil coming, and guess who's ready to help? An affiliate of the infamous, politically connected Carlyle Group specializes in helping big pharma market their goods.

Clinton's Savior is Carlyle's 007

After Barack Obama's stumble on people in small towns being "bitter", a crowd gathered to kick the presidential hopeful while he lay on the ground. Barack could clearly see Hillary and John McCain, but who was the third guy, the one who said Democratic super delegates needed to take these remarks into consideration? Here are your hints:

1. He's also a Senator, so much for professional courtesy.
2. After building the best organization in Iowa and two weeks after announcing his presidential aspirations, this gentleman dropped out of the race.
3. Seventh place on his lifetime donor list (at $75,000) is The Carlyle Group, an infamous, politically connected private equity underwriter (PEU).
4. His wife is on the Board of giant health insurer WellPoint. The family grossed $1.5 million from cashing in her stock option awards. The day after I e-mailed the Senator with this information, he dropped out of the race.
5. He recently went to the United Arab Emirates to investigate sovereign wealth funds investing in U.S. companies. The aforementioned Carlyle Group sold 7.5% to Abu Dhabi's government owned investment fund for $1.35 billion.

Got it? It's the esteemed Senator from Indiana, Evan Bayh, or is it Buy?