ERCOT Board Has PEU Connections

A relative informed me in the middle of the Texas electricity grid failure that a number of ERCOT board members weren't Texans.  It was our third day without power and we'd gone to their house to warm up, get a hot meal and a shower.  That tidbit planted a seed.  

I searched ERCOT's CEO and the five outside board members for private equity connections.  I found ERCOT CEO Bill Magness had an affinity for private equity underwriters (PEU) earlier in his professional career:

"We are in the middle of beginning to attract capital, but we want to attract institutional capital -- private equity funds as opposed to individuals," says Bill Magness, general counsel and vice president of business development. "The company has been currently capitalized by individuals. The maturity of the company needs to progress." 

This was 1999 before private equity had it's massive growth spurt.

ERCOT Vice Chairman and independent board member Peter Cramton wants to serve the PEU boys.  Crampton is a:

Member of Advisory Board, CartaX, a company creating a market for trading private equity and other financial securities.

Fellow ERCOT Board member Ray Hepper served as VP/General Counsel for a New England utility, thus Hepper knows what is required to provide power in bitter cold temperatures.  Board President Sally Talberg lives in Michigan and has similar experience with providing electricity in arctic-like environments. 

When ERCOT's board met on February 9th they knew a deep arctic blast was headed our way:

“One thing I want to say before I really get into the presentation is it’s actually going to be winter here pretty soon, as many of you -- those of you in Texas -- know. We do have a cold front coming this way. We’ll probably see our winter peak later this week or in the very early part of next week. And operations has issued an operating condition notice just to make sure everyone is up to speed with their winterization and we’re ready for the several days of pretty frigid temperatures to come our way. So more on that in the next few days, but it does look like we’ll have a little bit of winter weather to contend with during the course of the rest of this week,” Magness said during the virtual meeting.

Winter weather last ten days and produced three lows of less than 10 degrees F in my area.  Here's what ERCOT preliminarily planned for this winter:

The peak demand forecast was developed using revised Moody’s economic data obtained in  April 2020. The preliminary winter SARA includes a peak demand forecast of 57,699 MW, which is well below the winter peak demand record of 65,915 MW set on Jan. 17, 2018. The forecast is based on normal weather conditions during winter peak periods, from 2004 through 2018. 

An additional 1,359 MW of planned winter-rated resource capacity is expected to be added between now and the start of the winter season. 

The preliminary winter SARA includes a unit outage forecast of 8,617 MW based on normal winter weather conditions. For the extreme outage scenario included in the assessment, ERCOT is now using the region’s most recent cold weather event that occurred on Jan. 17, 2018 along with a three-year outage history to calculate the amount of potential outages. 

Due to the increased amount of renewables on the ERCOT system, the grid operator has also included a low wind output scenario in the preliminary winter SARA. Moving forward, ERCOT will begin including a low wind output scenario in all of its seasonal assessments.  

The final winter SARA for 2020-21 will be released in early November.

There is no reference to the 2011 winter storm that resulted in recommendations to winterize the state's various sources of energy for a prolonged arctic front or series of fronts. Texas Public Utility Commission did not fine ERCOT for allowing inaction on winterizing critical energy infrastructure.  

The Public Utility Commission (PUC) of Texas has directed the state's main grid operators to raise energy prices, as millions of people are enduring below-freezing weather without power in their homes.

The PUC met in an emergency open meeting on Monday evening to address concerns that "certain pricing mechanisms were not generating an optimal response" to the electricity crisis sparked by the extreme winter weather in the state, according to a news release issued on Monday.

Saving lives wasn't motivational enough.  Abandonment turned to abuse, a common PEU operational move.

We lost power Sunday afternoon, had it Sunday evening, then got dropped, like millions of others at 1:30 am Monday.  I called AEP the first two outages and neither of the people I spoke with informed me of the situation.  The third time I called I heard a recording about ERCOT and the need to reduce the power load and rotate power.  We did not participate in the rotation until Wednesday afternoon, getting less than 3 hours.

The Sheriff's Office encouraged me to look at the AEP outages webpage.  It still showed our outage as "under assessment", even after power came back on Thursday around 10:30 am.  When our house was 41 degrees I asked the dispatcher if our County Emergency Manager had any information for us about power restoration.  They said no but invited us to the local emergency shelter.  I said "I need to keep the fire going to have any chance of making it through without broken pipes and we have animals that need food and water to survive."

Our fireplace insert burned for six straight days, as did my anger at leaders who'd abandoned us.  I'd like to tell you that anger warmed me when I went outside in below zero wind chills to get firewood, feed and water the animals.  It didn't.

The order also directed the Electricity Reliability Council of Texas (ERCOT), which monitors the state's power grid, to adjust past prices to reflect the current shortage of energy.

There is a law against price gouging in an emergency.  The PUC and ERCOT should be charged with numerous crimes for their negligence and malfeasance.

People died as a direct result of their ignorance, arrogance and greed.  They are dishonorable PEUs in my book.  A Harris County Judge said:

"This was a man-made disaster that has cut lives short. When the dust settles, people deserve answers and accountability.”

Absolutely.  That said, I am grateful we survived the harrowing Texas Grid Failure of 2021, ten years after surviving the 2011 version.  Let's not do this again.

Update 2-23-21:  The five independent ERCOT board members resigned.

Update 2-24-21:  Texas energy executives are ecstatic over their huge profits while citizens suffered mightily.

PEU Customer Abuse

CBS News reported on stock investment app Robinhood:

Sources close to the matter told CBS News the company had terminated its customer phone line because the company couldn't keep up with the volume of calls. 

 The company's abysmal customer service resulted in the death of a college student.year old

The employees' descriptions echo concerns raised in a lawsuit filed Monday by the family of Alex Kearns, the 20-year-old college student who took his own life last June mistakenly believing he owed hundreds of thousands of dollars for stock market losses on his Robinhood account. In the hours before his death, he emailed Robinhood's customer service address three times to ask for clarification, receiving only automated responses before his death. 

His family's lawsuit filed Monday accused Robinhood of wrongful death, negligent infliction of emotional distress and unfair business practices. Alex's parents told CBS News they believe their son would still be alive today if Robinhood had answered his pleas before he died.

Add Robinhood to the likes of the greed and leverage boys, aka private equity underwriters.  They pretend technology will solve every problem, prioritize debt over equity and interest expense over employee raises/benefit improvements and .  At every chance they pull slugs of cash from affiliates before a final profitgasm that leaves the company vulnerable to the slightest economic downturn.

PEU contempt for customers is disguised at "technology enabled" whatever, stock trading, healthcare, even end of life hospice care.  I worked for a majority PEU owned hospice company.  Their new technology was unreliable, inefficient and made providing good hospice care much more difficult.  They wanted no feedback from staff or the people we cared for.  Management made that crystal clear.

In too many cases AI customer service leaves the customer enraged or distressed as there is no human being with which to communicate.  It's sad to think such greed exists to the detriment of human lives, especially those in their final days.

Update 3-20-21:  Square's Cash App is as abusive as Robinhood.

Six Cash App customers said repeated efforts to talk directly with a human being at the company to help them get their money back were largely unsuccessful, exhausting, and stressful. Cash App acknowledges that it has no live phone support "generally available," but says it views fighting fraud as critically important and has invested in technology to flag potential scams.

Cash App acknowledges that a phone number on its site prompts a recording instructing account holders to contact a Cash team member through the app. Customers say those options often spur a communication loop where bots rather than humans handle their reports of fraud.

“It's almost like an abusive relationship where you're trying to get a hold of somebody and they’re completely ghosting you,” said Jensen, the 24-year-old who says her account was drained overnight.

It is an abusive relationship.  Plain and simple.

Carlyle Fees Affiliates

 

 

Roughly half of The Carlyle Group's 2020 revenue came from management fees.  Carlyle charges affiliates fees, both management and deal fees.  It also mines them for dividends and special distributions.

The Carlyle Group cashed in a number of affiliates during 2020.  Often times management fees disappear in an IPO.  That did not happen with Carlyle's IPO of Ortho Clinical Diagnostics.   OCDX had a rough start but has since recovered.

New shareholders will continue funding annual management fees for The Carlyle Group to the tune of $3 million per year for 2021-2022.

OCDX's S-1 stated:.  

The Company entered into consulting services agreements with Carlyle Investment Management, L.L.C. (“CIM”), pursuant to which the Company pays CIM a fee for advisory, consulting and other services to be provided to the Company. Pursuant to the consulting services agreement, which has an initial term of ten years, the Company pays an annual management fee to CIM of $3.0 million (the “Management Fee”). The Management Fee is payable on a quarterly basis. The Company will also reimburse CIM’s reasonable out-of-pocket expenses incurred in connection with services provided pursuant to the consulting services agreement, and the Company may pay CIM additional fees associated with other future transactions or in consideration of any additional services provided to the Company under the consulting services agreement. During the fiscal years ended December 29, 2019, December 30, 2018 and December 31, 2017, the Company recorded $3.1 million, $3.0 million and $3.1 million of Management Fee expense and other out-of-pocket expenses, respectively.

The company paid Carlyle $12.1 million in management fees through 2020 with $10.5 million more due in the next four years (through 2024).  I hope shareholders read the fine print.

Update 2-10-21:  Moody's upgraded OCDX after the IPO:

Moody's-adjusted Debt/EBITDA declined from approximately 8.0x as of December 31, 2020 to approximately 5.5x.

That's PEU leverage.

No Rush to Tax Wealthy

 

The Biden Team indicated tax increases on the wealthy are down the recovery road:

With a narrowly Democratic-controlled Senate and House, we’re unlikely to see any major tax law changes early in Biden’s presidency, outside of the proposed Child Tax Credit and Earned Income Tax Credit expansion—and so far, that’s just a temporary measure. Biden’s top economic advisor, Jared Bernstein, said during a Politico event that tax increases early on are “going to be very dependent on economic conditions.”  

The uber wealth have already recovered:

Billionaires are minting money during the pandemic, even as millions of Americans join the ranks of the poor.

US billionaires have collectively become $1.1 trillion -- nearly 40% -- richer since mid-March, according to a report published Tuesday by progressive groups Institute for Policy Studies and Americans for Tax Fairness.

Twelve years I wrote:

Taxing wealthy people at rates imposed under Ronald Reagan produce cries of socialism and communism.

Since then billionaires called the shots in Washington.  Biden's team is chock full of greed and leverage boys.  Deferring to the billionaire private equity underwriter (PEU) class is a bipartisan tradition.  

Politicians Red and Blue love PEU.  The average citizen?  Not so much.

Update 3-14-21:  The PEU boys got a mention in Senator Sherrod Brown's Wall Street vs. Workers speech.

PEU Leon Black's Epstein Oddities

Apollo Global co-founder Leon Black was very close with serial child molester Jeffrey Epstein and funded the abuser's extravagant lifestyle with $158 million in payments between 2012 and 2017.  Apollo hired Dechert to investigate Eptein's ties with Leon Black. 

Black paid Epstein $50 million in 2013, $70 million in 2014 and $30 million the following year.

That sort of compensation is unusual. Estate planning attorneys and tax advisers are typically paid by the hour or by the transaction. IRS regulations forbid tax practitioners from charging contingent fees “in connection with any matter before the Internal Revenue Service.”

Private equity underwriters (PEU) hate paying money to Uncle Sam but love taking cash from the federal wallet.   If Jeffrey Epstein was such a tax genius why didn't Black use him at Apollo.

Apollo never retained Epstein for any services

Not that Black and Epstein didn't try, according to Dechert's report.

While Black did not try to pressure his co-founders to use Epstein, he did positively comment on the substantial value of Epstein’s services and, at Epstein’s repeated request, did try to introduce Epstein to his co-founders. In the end, neither co-founder hired Epstein or consulted with him on their personal matters. In light of these facts, the statement that Black “never promoted” Epstein is not false but could have been more precise. And it is clear that no Apollo employee other than Black ever seriously considered hiring Epstein, much less actually retained him. 

Extravagant payments for tax advice fail the smell test. 

Black was a frequent visitor to Epstein’s Manhattan mansion, confided personal matters to him and visited his homes around the globe.

In one dispute over Epstein's egregious fees Jeffrey "referenced personal matters shared in confidence."  Is that subtle blackmail?  Epstein is not alive to answer the question.

Dechert investigated on behalf of Apollo's concerns.  This was not a criminal investigation.  

Dechert interviewed more than 20 witnesses (some more than once), including Black, current and former Apollo employees, the co-founders of Apollo, current and former Family Office employees, and current and former legal counsel to obtain their recollection of events that may have been relevant to Dechert’s investigation. With only one exception, Dechert interviewed every witness that it had requested; that witness, a former employee of the Family Office, declined to participate in the investigation but is not believed to have any additional information likely to be material to the investigation.

Dechert did not interview Epstein's accomplice Ghislaine Maxwell, his chef Adam Perry Lang, chief pilot Larry Visoski  or any employees of Jeffrey Epstein.

As Dechert said they found no evidence of Black's involvement with Epstein's international pedophile operation despite Black having a "social relationship with Epstein from approximately the mid-1990’s to 2018." 

Payments were made on an ad hoc basis based on Black’s perceived value of Epstein’s work. Dechert has seen no evidence suggesting that Black ever compensated Epstein for any service other than Epstein’s legitimate advice on trust and estate planning, tax issues, issues relating to artwork, Black’s airplane, Black’s yacht, and other similar matters, philanthropic issues, and the operation of the Family Office. Moreover, such advice was vetted consistently by Black’s other advisors, including Family Office employees, Paul Weiss, and other outside legal, accounting and tax professionals.  

The above mentioned Paul Weiss refused to be interviewed by Dechert.

Black regularly visited Epstein’s townhouse in New York to either discuss business or to meet other prominent guests who were visiting Epstein, including well known businessmen, political figures, diplomats, scientists and celebrities. In general, one-on-one breakfast meetings between Black and Epstein would be more common for business meetings, whereas afternoon meetings with other guests would be more common for social visits.    

Leon Black recalls only flying on Epstein's Lolita Express one time.   He made two visits to Little St. James, Epstein's private island in the Caribbean.  Locals call it "Pedophile Island" and "Island of Sin."  Black had family with him for these trips.

As their relationship fractured Black loaned Epstein over $30 million.  Despite requests for repayment over $20 million stood outstanding when Epstein committed suicide in a New York City jail.  

"Good friend who frequently visited" does not fit with completely unaware of Espetin's pedophile engineered life.  Paying a friend for tax advice on a percentage basis (to the tune of $178 million) fails the smart investor test.  Black is way more than a smart investor.

Elements of Leon Black's Epstein story sound whitewashed.  That does not mean he is guilty of any crimes.  That would require an investigation into areas Dechert avoided. 

Update: 

Despite the broad mandate of “any Apollo affiliate” the report omits numerous ties between Epstein and Apollo executives. 

For example, John Hannan, a senior partner and co-founder at Apollo, reportedly made a $166,667 donation to Epstein's foundation and replaced Epstein on the Black Foundation Board in 2013. Those details were not included in the report. 

 On a similar note, Marc Rowan, an Apollo co-founder and senior director, reportedly met with Epstein at his townhouse a few years ago. That detail did not make into the Dechert report either. Mr. Rowan is expected to become Apollo’s CEO by July despite previously stepping away from day-to-day duties last summer to make “more time for his Hamptons restaurants.” 

Likewise, William Mack, a founder and former managing partner of Apollo Real Estate Advisors, reportedly donated to Epstein’s charity. That donation was not included in the Dechert report either. 

Dechert’s report says they were assisted in document gathering by Paul, Weiss, Rifkind, Wharton & Garrison LLP. A footnote in the report says that firm has previously served as Apollo’s outside counsel, which creates a potential conflict.

Update 1-28-21:  Ghislaine Maxwell said in a deposition that she learned of Epstein's child abuse from the newspaper when he was charged.  That's as laughable as Lord John Browne's deposition for the Texas City refinery explosion that killed 15 people and injured 180.

Update 1-31-21:  Someone else noticed the odd nature of Black hiring a nonprofessional and then paying him an outrageous sum of money

Update 12-31-21:  A jury found Epstein accomplice Ghislaine Maxwell guilty of sex trafficking underage girls. 

Update 1-9-22:  A jury convicted Ghislaine Maxwell, however the behavior of one juror could result in the judgement being thrown out of court.   That juror is an Executive Assistant for The Carlyle Group. What are the odds a low level PEU employee could indirectly help Leon Black?  Irony or just the ubiquitous nature of the greed and leverage boys?

Update 1-25-22:  Leon Black sued Apollo co-founder Josh Harris for conspiring against him with Black's illicit lover.  These people do not know when to shut up and slither away.  I imagine Black's wife has told him to keep his balls/wallet inside his pants and quit thinking with his crotch/billfold.  

Update 6-29-22:  Epstein associate Ghislaine Maxwell got 20 years for her crimes, however the powerful people who abused girls are yet to be named.

Update 11-29-22:  Reuters reported:

Leon Black, the billionaire co-founder of private equity firm Apollo Global Management Inc, was sued on Monday by a woman who said he raped her two decades ago in the late sex offender Jeffrey Epstein's Manhattan mansion.

Update 9-3-25:  Trump's calling the Epstein case "a hoax" is not aging well as calls for revealing the government's files by the young women abused by Jeffrey Epstein grows into a roar and calls to reveal Epstein's financiers amplifies the cry. 

Biden Missed Greed

 President Joe Biden's inauguration address cited many challenges facing our country.

Anger, resentment, hatred.

Extremism, lawlessness, violence.

Disease, joblessness, hopelessness.

Later he added:

This is a time of testing.

We face an attack on democracy and on truth.

A raging virus.

Growing inequity.

The sting of systemic racism.

A climate in crisis.

America’s role in the world.

He left out greed, which hollowed out Main Street over the last several decades.  Ten years ago a business reporter wrote me saying:

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 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!

Red and Blue political teams catered to the PEU class, (private equity underwriter).  

Billionaire PEU founders became household names as they made government policy, while eviscerating the middle class.

PEU owned companies rose dramatically over the terms of Presidents Cliinton, Bush (W), and Obama.  Trump gave the billionaire boys the tax cuts they said they deserved.  Virtually none of these new found riches went to workers.  Executives and sponsors took the proceeds for themselves.

Americans know the crumbs haven't fallen from the king's table, despite numerous assurances that something other than their lifeblood would trickle down.  Greed has done this.  The PEU boys had decades of not doing their part.  

The Biden Cabinet is chock full of PEUs.  I don't envision Biden's greed and leverage boys turning on their own, however that is required.  

America's rising middle class was the golden goose.  The PEU boys killed it.

Update 1-25-21:  This is what the greed and leverage boys helped create:

A study published a few years ago by two of America’s most respected political scientists, Princeton professor Martin Gilens and Benjamin Page of Northwestern, concluded that the preferences of the average American “have only a minuscule, near-zero, statistically nonsignificant impact upon public policy”. Instead, lawmakers respond almost exclusively to the moneyed interests – those with the most lobbying prowess and deepest pockets to bankroll campaigns.

The capture of government by big business has infuriated average Americans whose paychecks have gone nowhere even as the stock market has soared.

The populist movements that fueled both Bernie Sanders and Trump began in the 2008 financial crisis when Wall Street got bailed out and no major bank executive went to jail, although millions of ordinary people lost their jobs, savings and homes.

Update 2-1-21:  The Carlyle Group has a new affiliate, Two Six Technologies to pull millions from Uncle Sam's wallet for defense and intelligence.

Update 2-7-21:  Former Labor Secretary Robert Reich wrote " Many are understandably angry after being left behind in vast enclaves of unemployment and despair."  His piece ignores the role the Blue Team had in selling the average citizen down the road the last two and a half decades.

Billionaires Recommended Trump Pardons

Billionaire Peter Thiel recommended President Trump pardon former Google engineer Anthony Levandowski.  The judge called it "the biggest trade-secret crime I have ever seen."

As an employee, Levandowski downloaded more than 14,000 files containing the intellectual property of Google's former self-driving car division, Waymo, before leaving to found Otto, which was soon acquired by Uber.

Thiel is a private equity underwriter (PEU) with The Founder's Fund and  Mithril Capital

Last year Trump granted clemency at the request of billionaire David Rubenstein, co-founder of The Carlyle Group, a politically connected private equity underwriter.

U.S. President Donald Trump yesterday granted clemency to the so-called junk bond king Michael Milken, among a spate of pardons. Milken, 73, was sentenced in 1990 to 10 years in prison after pleading guilty to fraud and racketeering charges — of which he ultimately served only 22 months. His pardon was backed by a number of high-profile figures, including media baron Rupert Murdoch and Carlyle Group chairman David Rubenstein.

The billionaire PEU class has had outsized influence on public policy for two decades.  Trump tax cuts primarily benefited the super wealthy.  

Billionaires not only make policy, they use their power to push pardons.

Update 9-28-21:  Milken got mention as a bad guy in 2010 for rumor mongering and naked short selling.

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?