Tag Archives: private equity

Private Equity Firm CEO Leon Black Paid Epstein $150 Million

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From The Daily Beast:

“The CEO of the private equity firm Apollo is stepping down after the company’s board discovered he paid out $150 million to convicted sex offender Jeffrey Epstein. Leon Black, who is also the chairman of the Museum of Modern Art, said Monday he would be stepping down sometime before his 70th birthday in July. Apollo’s board had ordered an inquiry into Black after The New York Times reported in October that he had wired up to $75 million to Epstein after his 2008 conviction for soliciting prostitution from a teenage girl. Black has denied any involvement in Epstein’s international sex trafficking ring and has not been accused of sexual misconduct.”

Bloombergquint has more details about the networks which helped both:

[Lila: Can we say Mossad agent?]

“Epstein, a Brooklyn native, was an enigma to many inside and outside of finance. He attended Cooper Union and New York University’s Courant Institute of Mathematical Sciences but left both without a degree. He briefly had a job at Bear Stearns Cos. and before his first arrest worked extensively for lingerie mogul Les Wexner. The L Brands founder severed ties with Epstein after his first conviction.”

Read more at: https://www.bloombergquint.com/business/what-leon-black-got-for-paying-jeffrey-epstein-158-million

 

Leveraged Buy-Outs Make Come Back In Private Equity Market

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The report I’ve posted below illustrates why most regulatory efforts are completely counterproductive.

By the time enough bureaucrats are convinced there’s a problem, by the time enough of the public has been educated…or miseducated about it..so there’s enough public pressure to call for hearings, by the time the SEC and the DOJ have been able to gather enough evidence to cobble together charges, the swindles move onto some other part of the system, the crooks cover over their tracks, reinvent themselves, put old wine in new bottles and new wine in old, and, in general, outpace the local flatfoots about 100-1, so that they’re nearly always playing catch-up and dissecting history, rather than actually safeguarding the public from the current perils of the market.

Goldman Sachs is the outrage du jour. But much of the really bad stuff Goldman’s been involved in over several decades has nothing to do with the technicality on which it’s being grilled now, a deal that’s no different from hundreds done on Wall Street by every other bank. Meanwhile, what about the dirty laundry of the hedge-funds, of private equity, of sovereign wealth funds – to take just the private sector? And what of the government’s own culpability in financial wrong-doing? And worse yet, its blunders in financial “right-doing”? Don’t count on the SEC to look at all that.

That’s the intrinsic problem of a statist solution…it’s always a day late and a dollar short.

Thus the LA Times reports on where the action is in the financial world, as evidenced in the glee of some participants at the Milken Institute’s Global Conference [that’s Michael Milken, former convicted junk bond financier turned philanthropist and alleged master mind of global market manipulation}:

“Unemployment is high and the housing market remains weak. But in Beverly Hills on Tuesday, private equity players could hardly be more upbeat.
A panel of private equity fund managers at the Milken Institute’s annual Global Conference celebrated the comeback of highly leveraged deals — which had ground almost to a halt during the financial crisis.
“What a difference a year makes,” enthused Leon Black, head of Apollo Management in New York.
Black and the other buyout honchos attributed the return of debt-financed acquisitions to the recovery in the credit markets and the overall economy.
“The high-yield market is probably better today than it ever has been,” said Scott Sperling, co-president of Thomas H. Lee Partners in Boston, referring to the junk bonds that finance many private equity transactions.
A new problem faces private equity investors now: The prices of target companies have shot up faster than fund managers have been able to scoop up bargains.
“A lot of the low-hanging fruit, frankly, is gone,” Black said. “The snapback has been unbelievably dramatic.”
Not surprisingly, the managers bemoaned what Black termed the “populist wave” helping to fuel the Obama administration’s effort to boost oversight of the financial industry.
“You’re seeing some wacky regulation, which makes running our business a lot more difficult,” said Ted Virtue, chief executive of MidOcean Partners, which buys midsize companies.
Still, the private equity business has largely escaped the scrutiny aimed at other areas of Wall Street. “I’m glad I’m not Goldman Sachs today,” Black said with a wide smile.”

Pete Peterson’s Not-So-Clean Crusade Against Entitlements

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Peter G. Peterson, the co-chairman of the private equity firm, The Blackstone Group, is also president of the  Concord Coalition , a bi-partisan group devoted to what it calls “fiscal responsibility,” which seems to be largely given to public advocacy of social security and medicare (entitlements) cuts.

I’m interested in Peterson, because of the way he keeps popping up into things.

First, as I noted in a blog post a couple of months back, he’s become the backer of the film, I.O.U.S.A., directed by Patrick Creadon, which is loosely based on the book, “Empire of Debt,” (Bonner & Wiggin, 2005).  I noted at the time the difference between the libertarian arguments of the book (which critiques the Federal Reserve) and the film’s noticeable silence on the Federal Reserve. In fact, the film spends a great deal of time on some of the very people who enabled the current debt crisis, including Alan Greenspan.

Second, I notice that Peterson has been using the film to argue that entitlement spending is out of control and needs to be cut back, etc. etc., an argument that progressive economist Dean Baker correctly calls morally bankrupt, given that this administration just bailed out some of the most irresponsible gamblers in the banking industry.

Third, I notice that Tim Geithner has given BlackRock three no-bid contracts to manage the Fed’s portfolio of troubled securities, according to a NY Times piece yesterday (April 27). BlackRock has close connections to Blackstone (where it was once the asset management division) and to the NY Fed.

That prompted me to do some digging around and I came across this interesting piece on Peterson, “A Crusader in Clover,” by John Hess at FAIR (Fairness and Accuracy in Reporting).

“While he is reticent about his [Peterson’s] income, Vanity Fair put his take-home in 1992 at $7 million, not an excessive sum for an investment banker of his rank. His partner Stephen Schwartzman, who is regarded in the financial press as the sparkplug of their firm, the Blackstone Group, said that year that investors in its venture fund should expect returns of 25 to 30 percent during the 1990s—again, not unreasonable, since the Dow Jones average rose more than 26 percent last year.

Such rates of return are, again, piquant, because Peterson has described the indexation of Social Security, which lately has raised benefits by roughly 3 percent a year, as “one of the greatest fiscal tragedies of American history.” Piquant? Wait. Peterson was at President Nixon’s side as his economic adviser and secretary of commerce when that “tragedy” was enacted in 1972. (Conservatives thought making the cost-of-living adjustment automatic would deter Congress from voting more generous benefits.)

Peterson denounces the “mad, drunken bash” of the Reagan years. That would be the time when the top income-tax rate was cut from 70 percent to 28 percent, military spending went sky-high, and trillions were made (and lost) on savings and loans and takeovers financed by junk bonds. He was himself, of course, making out like a bandit, hustling for his share of the action, and contributing his bit to Republican campaign funds. He also led a chorus of corporate executives who keened about the exploding federal deficit. His contribution was a key series of articles in the New York Review of Books in 1982 (12/2/82, 12/16/82) that prepared the intellectual climate for the 1983 Social Security “rescue,” which raised payroll taxes and lowered benefits.

The series purported to prove with mathematical certainty that the entitlements of the elderly were snatching food from babies and driving the nation toward bankruptcy. George Will called it “the most important journalism of 1982.” (Washington Post, 12/19/82). Its charts persuaded such liberals as Tom Wicker and Anthony Lewis. Leslie Stahl of ABC said Peterson “really began to educate me.” (She has since repaid the favor with appearances by her mentor on 60 Minutes.)

All the journalists he met seemed impressed by his expertise, and by his generosity in offering to surrender his own entitlements. It does not seem to have occurred to any of his interviewers that a rise of 1 percentage point in his income tax rate would cost him perhaps twice as much as his Social Security and Medicare benefits combined. Nor have any observed how policies he has supported have transferred the tax burden from the wealthy to the wage earner.

Indeed, in Facing Up, Peterson remarks with pleased surprise that nobody had clamored for a cut in the Social Security payroll tax to match cuts in benefits….”