Biden PEU Diligence 2008

Politicians Red and Blue love PEU (private equity underwriters) and increasingly, more are one.  The greed and leverage boys cut their teeth aligning their investment fortunes with political stars.  Such was the case with Paradigm Global Advisors and two Biden family members, Hunter and James.  

An SEC filing showed:

...PGA reorganization was modified effective August 11, 2006, so that PGA is now controlled by R. Hunter Biden, its Chief Executive Officer, and James B. Biden through an entity currently wholly-owned by them. 

A different SEC filing showed Paradigm partnered with Allen Stanford to form Paradigm Stanford Capital Management.  From that entity they offered their Core Alternative Fund in the ash heap of the 2008 financial crisis.  

A November 2008 filing indicates the fund to be both a hedge fund and a private equity underwriter (PEU).

 

The Justice Department charged Allen Stanford with fraud in February 2009.  The press was assured there was no connection between any Biden and the fraudster.  Except there is....

It's all PEU diligence.  

(The Red Team's sudden titillation would feel more sincere if they'd also exposed insider deals on their side.  PEU Report has been on this case for over a decade.)

PEU Rubenstein on Homeless Problem

Carlyle Group co-founder David Rubenstein stated in a recent CNBC Squawk Box interview with Joe Kernen:

"We haven't solved the (homeless) problem." 

Private equity underwriters (PEU) have done their part to make housing less affordable.  

As San Diego becomes increasingly unaffordable, throwing more families into homelessness, Blackstone’s aggressiveness as the third largest landlord in the area in hiking up rents for its thousands of units only adds to the problem. 

Carlyle made significant investments in New York multi-family real estate.  The Real Deal indicated Carlyle is buying "market rate" properties and is free to raise rents and alter operations.

The Lever reported how private equity is changing the apartment application process.

Landlords are increasingly turning to private equity-backed artificial intelligence (AI) screening programs to help them select tenants.... 

The prevalence of incorrect, outdated, or misleading information in such reports is increasing costs and barriers to housing, according to a recent report from federal consumer regulators.

The PEU boys will continue contributing to the number of homeless.   

Mr. Rubenstein has been known to provide his Nantucket compound over Thanksgiving for Vice President/President Biden.  He has a multi-year track record of doing that.

Rubenstein (as part of his "we") hasn't solved the homeless problem.  I didn't realize he was trying.

Update:  At least one multi-family investor is in financial trouble.

Macron: PEUs Solution for Global Poverty

French President Emmanuel Macron told Fareed Zakaria that private equity underwriters (PEU) are part of the solution to global poverty, climate change and biodiversity.  The French leader hosted a Summit for a New Global Financing Pact. 

I had a feeling Macron would mention the PEU boys once he stressed the World Bank and IMF use leverage and access private money.

The rise of private equity in the U.S. corresponded with the relative decline in wealth for the vast majority of citizens.

So the group that contributed to inequality is touted as a critical part of the solution?  Promoting the greed and leverage boys is a strategic priority for U.S politicians and our close allies.  Macron punctuated that fact.

Update:  Macron's former employer Rothschild has a PEU division, Corporate Private Equity.  Their website states:

Our Corporate Private Equity business focuses on investing in lower-middle market companies in Western Europe through Five Arrows Principal Investments (FAPI) and in the US through Five Arrows Capital Partners (FACP).

PEUs On Both Sides of Buyouts

Advent International and Warburg Pincus will buy Baxter's BioPharma Solutions business for $4.25 billion.  The two private equity underwriters (PEU) will close the deal in the second half of 2023.

At least four PEUs will provide funding for the deal.  They include Ares Management, Blackstone, Blue Owl Capital and HPS Investment Partners.

Bloomberg reported how PEUs have become the "Kings of Debt, Suppliers of Private Credit."  The Carlyle Group's new CEO cited private credit as a critical growth area for the firm.

Carlyle employed private credit in the past to conduct backdoor takeovers, via "loan to own" strategies. It took over Brintons' and Mrs. Fields using that method.

Retirement funds don't have to look far to identify the risk of PEUs being on both sides of a deal.

KKR is handing over mattress maker Hilding Anders International to creditors as it did with Telepizza in early May.  Telepizza bondholders – Oak Hill, Blantyre, HIG, Fortress and Treo funds-- became equity owners after KKR, Artá, Torreal, J Safra Group and Altamar surrendered the company to creditors.

Retirement funds may wish to consider whether the greed and leverage boys are planning to fund each other's junk.  

A friend recently wrote on the PEU move to supply credit:

During the 2008 crisis private equity almost met it's death knell but were rescued by the Fed... After the next 15 years the banking sector, especially the regionals, have been dying on a vine, some say to targeted regulations that pushed them into a precarious situation by default... Who comes in to replace that piping in the system.  It's our saviors, the private equity capital guys... So they have the funds to lend and they are also the holders of those credit instruments, i.e. blink-blink they make the rules, the accounting, the marks, the leverage, who defaults, who doesn't... Hmm, kind of reminds me of the rules of the ISDA.  They get to determine when a default is a default.  It's a circuitous reward system, like its own ecosystem.. 

CalPERS wants to put more money into private equity to supercharge returns.  They should know given their prior equity stake in Carlyle.

With PEUs on both sides of buyouts, it's a loan to own era.

Update 6-23-23:  Regarding "the accounting" the SEC and the Public Company Accounting Oversight Board fined Marcum LLP a combined $13 million for piss poor audits of SPACs.

The SEC found the deficiencies were not limited to Marcum's SPAC clients.

Someone has to look the other way at multiple junctures for things to occur as they have.   

Update 8-23-23:  It took 15 to 20 lenders to refinance Vista Equity's Finastra Group.

Friendly Advice Re: PEUs

A friend kindly sends articles and video complete with his commentary.  I asked if it was OK to share some and he gave permission.  Here goes:

...remember money flows where it's treated best, not where it acts best.  Thank God we're exceptional... poof...remake

I was just listening to Senator Cruz on CNBC talking about the debt ceiling. One of his comments mentioned something about privatization. I'm starting to wonder if this whole situation was contrived to create a catalyst for such a move ............... something to watch. 

I think default is too hard now......the Fed enabled the worst actors.......now emboldened.......and protected.....unless externality.........perhaps a war?   hmmm........but then again inequality has worked so well.

There is an unholy alliance between the government and Silicon Valley........but you know that......and it will get worse.

There are so many overlaps of the same types of behavior I cannot leave it to happenstance.

Sodom and Gomorrah had nothing on us... The Feds have fostered and condoned bad financial actors through all their management tools for the inflated Ponzi collateral of the undeservingly rich and infamous financial community... By allowing them to fail they would have changed behavior but instead they allowed them to weave themselves into our system as to become one... whatever laws regulations and conflicts held in the past have been corroded, diluted,and tossed in the garbage.

The other thing I've been wondering about is the term national security interest ... It's been popping up a lot lately and I'm starting to believe private equity is going to fall into that category . We all know that they were saved in 2008 and now they are even stronger but no one's going to admit they were part of a policy agenda. I think they're working their way right into that ... We'll see every rule and every line I ever thought existed has been crossed and there are no penalties.  So as they said in Caddyshack "WE'VE got that going for us." 

Schwartzman and company are worms . So we are to believe that China snookered the PE brain trusts or maybe the PE guys are the betrayers on all of us . They don't care where they get their fees from only that they control it all . All this capital should have been vetted 30 years ago. The narratives we swing to avoid accountability would make Faust blush.

...all the debt, all the market cap, all the offshore tax havens, all this wealth (which is fine).... I'm not against wealth but this is how it randomly gets distributed in a normal curve universe?

He's helped me see that government inaction is a form of preferential action.  I knew private equity underwriters had co-opted government but never thought of them as a preferred strategic industry, one the levers of government actively support on an international stage.

To think that during a budget crunch the PEU boys could be our saviors?  That's truly rich.

Update 6-25-23:   French President Emmanuel Macron offered private equity as part of the solution for global poverty, climate change and biodiversity.  He did so in an interview with Fareed Zakaria on CNN. 

Carlyle CFO Buser to Retire

The Carlyle Group is losing yet another top executive.  Chief Financial Officer Curtis Buser is retiring and will be replaced by John Redett, Chief of Carlyle's Global Financial Services Division.  Redett will become CFO and Chief of Corporate Strategy on October 1st.

Buser is 59 while Redett is 55.  The move takes place as Carlyle wants to lend more to finance deals.  CEO Harvey Schwartz cited financing Carlyle's private equity buyouts as a way to reduce fees and add to profitability.  

With banks less interested in funding buyouts the greed and leverage boys see opportunity.  It's also a way to reduce the numbers and size of sphincter moments as affiliate debt comes due and needs refinancing.  

Ironically Carlyle's co-founders got cross-ways with former CEO Kewsong Lee who pushed Carlyle to offer more corporate financing.  Lee left suddenly last fall.  Peter Clare left after not getting the top job.  Buser is the latest 2022 top executive to leave the firm.   

UVA Board of Visitor Candidate's Rich History

Virginia Governor Glenn Youngkin dropped his ESG evangelism once sworn into office.  As Carlyle Group co-CEO Youngkin displayed a long, vocal record of supporting environmental, social and governance (ESG) efforts.  He called it good business.  

The governor has a real opportunity to impact governance at the University of Virginia.  The Daily Progress reported:

Gov. Glenn Youngkin is close to appointing four new members to the University of Virginia’s Board of Visitors, according to sources close to the governor. And Joel Gardner, a vocal critic of UVa — especially its diversity initiatives — is slated to be one of those appointees to the body that governs the school, those close to the decision-making process told The Daily Progress.

Joel Gardner is senior managing director at Burnham Securities.  The Burnham comes from Drexel Burnham Lambert.  CNBC noted in 2015:

Drexel Burnham Lambert collapsed in scandal 25 years ago, but alumni of the once-powerful investment bank are now in some of Wall Street’s most powerful posts. The firm famous for high-yield or “junk” bonds filed for bankruptcy on Feb. 13, 1990 after several years of legal troubles. Thousands were out of work the next day, which was dubbed the “Valentine’s Day Massacre.” Drexel’s bond department head Michael Milken would pay huge fines and serve nearly two years in prison for securities fraud.

Drexel alum went on to fame and fortune at storied private equity underwriters (PEU), Apollo, Blackstone, Cerberus, Ares and Moelis.  Michael Milken spent a fraction of his sentence in jail and he kept the vast majority of his ill gotten gains.  Milken's image rehab tour climaxed with an expungement of his felony criminal record by President Donald Trump.

Back to Governor Youngkin and Joel Gardner, his likely UVA Board of Visitors appointment.  

He is now a senior managing director at investment firm Burnham Securities.

FINRA's BrokerCheck report on Burnham Securities indicates the firm ceased to operate as a broker in May 2016.  It also shows six regulatory events where Burnham paid fines for SEC violations.

The Texas Comptroller Taxable Entity Search showed two Burnham Securities entities, both ceased paying franchise taxes.

Gardner should appreciate this history given his undergraduate major (History 1970).  His 4th year was the first year 450 undergraduate women were admitted.   

His law degree places him in a unique position to understand the many ways private equity underwriters frame legislation and state budgets to their advantage.  

Governor Youngkin could appoint a young visionary Red Team leader to UVA's Board of Regents.  Maybe a libertarian minded doctor who wants to prevent disease instead of enrich healthcare corporations, many of which are PEU owned.  

That said, university board slots are ways to payback donors and benefactors.  Most of Youngkin's PEU kind are white guys who got out of college before cell phones were invented.  I should know because I am one.  This UVA graduate wants the Board of Visitors to be a true mix of society, not a bunch of people with PEU founder/managing director titles.

Also, if the guy in his mid 70's is retired and his firm no longer operates, just say so.   Governor Youngkin has a history problem, his record at Carlyle.  He wants to change it, just like his new Board of Visitor appointees.  Make UVA white and male again.

Update:  Bloomberg interviewed Gov. Youngkin at the International Paris Air Show.