Sunday, December 17, 2017

DOJ Drops ManorCare Suit


The Carlyle Group breathed a sigh of relief after AG Jeff Sessions' Department of Justice dropped a False Claims Act lawsuit against HCR ManorCare with potential damages over $500 million. 

Carlyle purchased ManorCare for $6.3 billion in 2007.  Carlyle sold the buildings in 2010 to HCP for $6.1 billion, which then spun them off to QCP in 2016 to isolate its shaky portfolio.   

ManorCare has been on life support.  Two months ago it owed over $300 million in late rent to QCP.  How much will the DOJ's dropping of the suit help ManorCare's finances?  Will it enable Carlyle to salvage something from ManorCare's nearly lifeless husk?  The Carlyle Group, a private equity underwriter (PEU), shows ManorCare as a current investment on its website.

Whistleblower Attorney Jeff Downey wrote of his disappointment in DOJ's action:

"DOJ had obtained compelling evidence of fraud. Defendants had admitted to a 100% increase in their Ultra high billing level, the most expensive level of therapy services billable to Medicare. ManorCare had produced documents which showed that their administrators improperly attempted to influence the billing levels of therapists, with one stating, “if they have a pulse, they can get an RU” (the highest level of reimbursement). One Regional managers explained that “everyone should be an RU when they come in.” ManorCare even had training that depicted Medicare as a series of credit cards being handed to ManorCare and portrayed a fictional superhero named “Super RU.” 
Former AG Eric Holder would not pursue cases against banks as their failure would add to unemployment and harm the economy.  Did Session's "Just Us" Department do likewise for an imploding ManorCare and its 30,000 employees?

Surely Carlyle pulled billions more from ManorCare in special dividends, management and deal fees which contributed to its current predicament.  ManorCare CEO Paul Ormond received nearly $200 million when it sold to Carlyle.  How much more did he take from the company in the last decade before he stepped down?

Ethically QCP should go after Carlyle and Ormond for back rent, given their profitgasm deals.  However, the law is set up to protect Super PEUs.  The federal wallet exists to enrich the stinking rich, even on the backs of senior citizens with a pulse.

Nearly one year ago, Carlyle co-founder David Rubenstein met with President elect Donald Trump.

President-elect Donald Trump met Wednesday (12-28-16) with financier David Rubenstein.  The meeting at Trump’s Mar-a-Lago resort in Florida was among several post-holiday conversations between Trump and health care executives and agriculture secretary candidates.
Did Trump tell Rubenstein when punched to punch back twice as hard?  ManorCare did just that by asking the DOJ to pay its legal fees.  Did David ask Donald to make the ManorCare suit disappear?

Whatever happened, the suit is gone and ManorCare is financially better off as a result.

Bloomberg Charts Rise of the Billionaire Greed + Leverage Boys


For the last twenty five years the rich grabbed the lion's share of income gains.  This was a reversal of a thirty year period that began after World War II where the bottom 90% income earners received the majority of income gains. 

The recent "Rich 'R Rewarded" time period saw the birth of the greed and leverage boys and their subsequent proliferation.

Leveraged buyouts (LBO) first emerged as an important phenomenon in the 1980s. As leveraged buyout activity increased in that decade, Jensen (1989) predicted that the leveraged buyout organizations would eventually become the dominant corporate organizational form.
After junk bond king Michael Milken went to jail LBO got rebranded as private equity underwriters (PEU).  Prosecutors allowed Milken to keep most of his ill gotten gains.

The first private equity wave began in 1982 or 1983 and ended in 1989; the second began in 2003 or 2004 and ended in 2007.
University of Chicago Business School professors predicted PEUs would remain part of our economic landscape:

We expect that a significant part of the growth in private equity activity and institutions is permanent.
Michael Milken touted private equity as the major employer in America, holding eight of the top ten employers slots.

Twenty five years is a long time for the top to be milking nearly all of income gains.  Despite the predictions of PEU permanency, this too shall pass. It may take a decade or more, but their decline will come.

Friday, December 15, 2017

Carlyle Plans to Profit from Cashless India


The Carlyle Group announced the closing of its investment in cashless India.  Their press release stated

State Bank of India (SBI, NSE: SBIN) and The Carlyle Group (NASDAQ: CG) today announced that they have completed the acquisition of GE Capital Group’s (GE Capital) entire stake in SBI Card, the second-largest and fast-growing credit card franchise in India.
 
SBI Card is operated through two joint-venture companies, SBI Cards & Payment Services and GE Capital Business Process Management Services, which issue credit cards and process card transactions in the Indian market. SBI and Carlyle now own 74% and 26% respectively in each of the two entities. 
Six months ago Carlyle co-founder David Rubenstein met with India's Prime Minister Modi   Carlyle is now part of Western firms who want to foist card fees on Indian citizens.

Monday, December 11, 2017

Carlyle Hopes to Profit from PEU Bankruptcies


The Carlyle Group invested in Prime Clerk, a four year old company that helps bankrupt corporations with needed legal services.  PE Hub reported:

The company’s services include: pre-bankruptcy filing preparation, noticing solutions, claims administration, balloting and tabulation, secure disbursements, strategic communications and call center support, case specific websites and virtual data rooms.

"By leveraging Carlyle’s global network and providing the Company with growth capital, we will help take Prime Clerk to the next level of success. We are proud to partner with this management team."
Over one third of Prime Clerk's customers went bankrupt under private equity ownership.  

What does Carlyle see that leads them to believe their will be growth in the bankruptcy services sector?  How much of that might come from Carlyle's global network?

Sunday, December 10, 2017

PEUs Accelerate Future Scrooge Recruitment


Bloomberg reported:

The private equity recruitment cycle is starting earlier than ever, forcing firms and candidates into the frenzied process before Christmas.

While extending formal offers in recent years has started earlier and earlier in January, never has it come before Christmas.

Access to the best talent can go quickly, so the process works like a levy breach: Once one firm starts, the others flood in to follow suit.  

As the timeline moves earlier, the decisions get quicker. So-called exploding offers, which give candidates a day or even just hours to decide, have in some cases been replaced by a nuclear option: accept on the spot or pass it up.
 It's race to the top for future greed and leverage boys, also known as private equity underwriters (PEU).  The rise of PEUs corresponds to the death of America's middle class.  It's causation, not coincidence. 

Friday, December 8, 2017

Carlyle's Rubenstein Now Divorced


Carlyle Group co-founder David Rubenstein and his wife Alice Rogoff are officially divorced, according to today's WaPo

The couple, who married in 1983, was granted a divorce in Montgomery County on Friday morning. All financial and other terms were settled privately and will remain confidential, according to Rubenstein’s lawyer, Sandy Ain, and Rogoff’s lawyer, Linda Ravdin.
The divorce occurred nearly four months after Mrs. Rubenstein put Alaska Dispatch News into bankruptcy.  The article did not address how any divorce proceeds might go to make Alaska Dispatch News creditors whole.

Carlyle recently celebrated its 30 year anniversary as a private equity underwriter (PEU).  Mr. and Mrs. Rubenstein separated in 2005, when Carlyle was 18, a mere teen. 

The couple has three grown children and reports have David Rubenstein opening a family office with a daughter. 

Sunday, December 3, 2017

Billionaire Saudi Prince Detained 28 Days, Abandoned by Western "Friends"


Saudi Prince Alwaleed bin Talal hit four weeks in detention without word of his situation.  The billionaire prince, a frequent CNBC contributor, had few friends speak on his behalf since he was taken on November 4, 2017.  Prince Alwaleed bin Talal is being held at the Riyadh Ritz Carlton.

Fellow billionaires should know it could happen to them.   Like many of them Alwaleed bin Talal signed the giving pledge.  His Giving Pledge page states:

“It is our duty as philanthropists to harness the very best of human nature — generosity, innovation, creativity — to make the biggest possible difference in people's lives.” 
The prince's detention occurred right after Carlyle Group co-founder David Rubenstein suggested Saudi Arabia was safe for billionaire investment.

What value is there in being friends with the West?  We can ask Prince bin Talal if  he ever resurfaces.  Saif Gadhafi recently went public in Libya.  He may have advice for the world about his and his father's experience with the Western billionaire class.

Is it safe?  FT offered:

The Gulf state’s regulator has asked local and foreign banks to disclose if they have credit facilities and safety deposit boxes in the names of those arrested, including billionaire Prince Alwaleed bin Talal.
Nope.

Update 12-5-17:  Forbes shared the most substantive information to date on the plight of the billionaire prince. " the settlement offered to Alwaleed bin Talal requested that he hand over a large portion of his assets and agree to lifetime house arrest with no phone and no media interviews. Alwaleed has refused the offer, according to the source, and wants to go to court. The specific allegations against Prince Alwaleed have not been made public."  The story said some of quiet Western friends are worried about him.

Update 12-9-17:  NPR ran a piece on the missing prince and how it is making investors nervous.  It stated "detaining a key international financial player of Alwaleed's stature could harm potential investment in Saudi Arabia, some analysts say."  No word from Carlyle co-founder David Rubenstein if Saudi remains an attractive place to invest, a comment he made one week before bin Talal got taken.  Rubenstein has been busy ending a different relationship.  He divorced wife Alice Rogoff.

Update 12-10-17:  Saudi princes are moving money to Europe in the aftermath of the purge.

Update 12-16-17:  The prince's financial holdings fell nearly $3 billion