Wednesday, May 23, 2018

CPA Commits Medical Fraud for PEU like Returns

A Dallas area hospice owner committed medical fraud to the tune of $60 million according to a federal indictment.  Novus administrator Bradley Harris is a certified public accountant.  He did more than fraudulently bill for hospice services.  CPA Harris wrote physician orders for controlled substances and prescribed those at a level that caused patient deaths.  He did this in order to grow his company so he could flip it for a huge profit.

His nefarious means went toward a very familiar end, one Michael Milken, David Rubenstein and Stephen Schwarzman have pursued.  The Carlyle Group reached a number of settlements for untoward behavior, Synagro (bribe), Semgroup (fraud), LifeCare Hospitals (patient deaths), ARINC (lofty bribe) and was on the road to a federal fraud charge with ManorCare until the case was dropped.

PEU buyouts are now epidemic in healthcare.  Sponsors want to sell new affiliates at a profit after loading them with debt, charging annual management fees and pulling cash via dividends/special distributions.

The greed and leverage boys will not make our healthcare system more affordable.  They may not kill people directly like Mr. Harris, but they will prioritize returns over actual care, causing suffering and premature death. 

Tuesday, May 22, 2018

Leverage Up to 7x in PEU Deals

Bloomberg reported:

Debt in leveraged buyouts is creeping above the six times level that regulators said in 2013 was potentially too risky, after commitments to private equity deals scorched banks during and after the crisis. The average company in an LBO had borrowings equal to 6.4 times earnings before interest, taxes depreciation and amortization in 2018, according to Fitch Ratings. Last year it was 6.2 times Ebitda and in 2016, it was 5.9 times.

Federal Reserve Chairman Jerome Powell, separately said that the guidelines they offered before, including the six times level, were just guidance, and not hard-and-fast rules.

Leverage above seven times is somewhat of a recent phenomenon.” In certain cases, like if a company is strong, there may be room for that much leverage, he added.
Frothiness up, thanks to non-economist and ex-Carlyle Group partner Jerome Powell,  now Fed Chair.  

Sunday, May 20, 2018

Investor Sues BAH Management for Fraud in Carlyle Buyout

Military reported:

An investor, who sold or exchanged BAH securities in connection with the sale of Booz Allen Hamilton Holding Corporation (NYSE:BAH)’s Government Division to The Carlyle Group in 2008, filed a lawsuit in the U.S. District Court for the Southern District of New York against Booz Allen Hamilton and certain former BAH executives over alleged violations of Federal Securities Laws.

More specifically, the plaintiff claims that defendants engaged in a fraudulent plan to sell the Government Division to the Carlyle Group at a significant discount.

The plaintiff says that to implement this scheme, Defendants made false and misleading statements to Booz Allen Hamilton Holding Corporation (NYSE:BAH) shareholders about the sales process and the value of the Government Division, many of which were included in an Information Circular distributed to Booz Allen Hamilton Holding Corporation (NYSE:BAH) shareholders on May 22, 2008. Defendants intended to deceive Booz Allen Hamilton Holding Corporation (NYSE:BAH)’s shareholders so that they would vote to tender their stock at $763 per share, far below its actual value.

The sale to the Carlyle Group closed on July 31, 2008. Nearly two years later, on June 21, 2010, the Carlyle Group published a Form S-1 filing in connection with its planned initial public offering (“IPO”) of the Government Division, which disclosed new information demonstrating that certain of the statements contained in the Information Circular were false and misleading, that Booz Allen Hamilton Holding Corporation (NYSE:BAH) shareholders received consideration for their shares that Defendants knew was insufficient, and that Defendants personally benefited from the sale at the expense of Booz Allen Hamilton Holding Corporation (NYSE:BAH)’s shareholders.
Management partners with its new private equity underwriter (PEU) owners.  It took Carlyle's flipping of BAH for an investor to see inconsistencies between the go private solicitation and subsequent IPO documents

While The Carlyle Group is not the subject of the lawsuit it used a puffery defense in one investor suit.  Carlyle's recent earnings call produced the following statement:

Carlyle assumes no obligation to update any forward-looking statements at any time.
Once it is said it is done.  Carlyle is not responsible for what it says or does.  Should the BAH investor suit proceed management wishing to be PEU sponsored should pay attention.   Your words may come back to haunt you.  Unlike Carlyle management in publicly traded companies have an obligation to speak truth, not fraud. 

Wednesday, May 16, 2018

Carlyle's Supreme Holds Explosive Auction

The Carlyle Group bear hugged skater culture when it purchased a chunk of retailer Supreme in 2017.  Who knew urban teen skaters had $1 million to spend on collectables? 

A Bloomberg story characterized the crowd:

as “very young and urban” and mostly brand new to auction experience. Reached after the sale, Naudan characterized the excitement from this “new generation of collectors” as evidence of a new cultural moment.

“The prices obtained for both Supreme branded objects, but also the works of artists from the same generation who accompanied this unprecedented global movement, confirm the international interest in urban culture.”
The greed and leverage boys, now the Fu-K clan, are both international and multi-generational. 

The Supreme logo could have come off the side of a 1970's gas pump.  Customers once got green stamps for buying supreme gas.  I don't recall their prizes having four letter words in bold display. 

Bloomberg ran the picture on the Supreme auction run by a French auction house.  It was truly a PEU event.

Wednesday, May 9, 2018

PEU Golden Age of Carlyle

Forbes reported:

The Carlyle Group is investing billions in United States infrastructure the government can no longer afford, with particular interest in electric microgrids, a Carlyle executive said in Chicago Monday. 

"We think that actually we're in sort of the golden age of infrastructure in the United States," Andrew Marino, managing director of the Carlyle Group, said at the Microgrid 2018 conference in Chicago.
Microgrid Knowledge reported:

“We established a platform to own and operate microgrids and distributed energy resources (DER) to serve organizations and institutions – from campuses to hospitals and the military – that demand predictable pricing and efficient, reliable energy,” said DEN CEO Karen Morgan. “Working together with Schneider Electric and The Carlyle Group, we aim to transform the market to deliver holistic Energy-as-a-Service with innovative financial and technology solutions.” 

Funding and equity for future moves and investments for the new strategic alliance will stem in part from Carlyle Global Infrastructure Opportunity Fund—a Carlyle fund that makes infrastructure investments.

Carlyle's first target for electric microgrids?  It's Puerto Rico, America's private equity underwriter (PEU) friendly commonwealth.

"We're going to get some lights on down in Puerto Rico together," added Mark Feasel, vice president of utility and smart grids for Schneider.
This isn't Carlyle's first deal with Schneider Electric.  In April 2014 Carlyle purchased Custom Sensors and Technology from Schneider.  Carlyle flipped CST in July 2015 to Sensata Technologies.  No word on how much Carlyle made from that deal.

Carlyle plans to put hundreds of millions into owning and operating microgrids.  Typical PEU move picking off profitable customers from public electric utilities.  Now how can Carlyle and company get federal subsidies for their strategy?  They will find a way.

Sunday, May 6, 2018

Carlyle Sells Korean Security Firm for $800 Million Profit

The Carlyle Group will monetize ADT Caps, a South Korean security services provider.  Carlyle purchased ADT from Tyco International in March 2014 for $1.93 billion.  Sources say Carlyle will garner $2.78 billion for ADT Caps.  Three years ago Carlyle highlighted its long term commitment to South Korea.  Those words resonated in a country that values interdependence and long term thinking.

The United States is a near polar opposite on those two parameters.  Individualistic, short term thinking is personified by private equity underwriters (PEU). 

The greed and leverage boys are never satisfied. It appears Carlyle will make over $800 million from flipping ADT Caps.  Between deal fees, management fees, dividends, and/or dividend recaps Carlyle could've appropriated even more cash from ADT during its ownership.  News reports had Carlyle willing to arrange deal financing so it could make huge returns.

The Carlyle Group is known for its ability to read tea leaves and influence world events.

What makes this a good time for a PEU to sell a South Korean security firm?

Saturday, May 5, 2018

Carlyle Closes ManorCare Bankruptcy Chapter: Morocco to Read?

ToledoBlade reported:

HCR ManorCare has filed another amended bankruptcy plan to reflect last week’s decision by Toledo firms ProMedica and Welltower Inc. to purchase the skilled nursing home operator from real estate investment trust Quality Care Properties Inc.

On March 4, ManorCare had filed a 41-page prepackaged bankruptcy plan that had been agreed upon by all the parties involved at that time — ManorCare; its landlord, QCP, and chief investor private-equity firm The Carlyle Group.
The filings showed ManorCare with $7.1 billion in debts and $4.3 million in assets.  Carlyle bought ManorCare for $6.3 billion in 2007 then sold the nursing home facilities for $6.1 billion to HCP in 2011.  HCP later spun the toxic assets off to QCP.

On August 6, 2017 the  International Swaps and Derivative Association declared a "failure to pay credit event occurred in respect of Manor Care Inc."  That happened as a direct result of Carlyle's ownership

At the time of the bankruptcy ManorCare owed QCP $446 million in rent.  That's more than Carlyle lost when Moroccan oil refiner SAMIR went bankrupt.  The bankruptcy burned Carlyle's $400 million in oil held at the refinery.  Carlyle wants the Moroccan government to make it whole.

Moroccan lawyers should mine the ManorCare train wreck for bankruptcy statements it can hold up as a mirror to The Carlyle Group.  They can also search court testimony and records in Guernsey, where Carlyle successfully defended its $16.6 billion implosion of Carlyle Capital Corporation.

Below is a partial list of Carlyle bankruptcies:

When Carlyle fails it's not their fault.  Morocco would be wise to dig deep into Carlyle's bankrupt affiliates, especially oil refiner Philadelphia Energy Solutions, which declared bankruptcy in January 2018.

The material could be explosive.