So, here’s the front page story in my Gannett fishwrap today:
An alleged bid-rigging conspiracy among Bain Capital and other private equity firms to divvy up targeted companies — including Nashville-based HCA — may have taken as much as $1.6 billion out of HCA shareholders’ pockets by blocking rival bidders and keeping a lid on the final price when the hospital chain was sold in 2006.
“This is potentially a very big story,” said Randall Thomas, a professor at the Vanderbilt University Law School. “It’s all coming out slowly. We’ll see how it evolves. It’s lot more than just HCA.”
The notion that big private equity firms such as Bain, Goldman Sachs and the Blackstone Group engaged in a conspiracy to lower sales prices in leveraged buyouts from 2003 to 2007 remains a key claim in a federal lawsuit in Boston brought against those firms by former HCA shareholders, and by stockholders of other acquired companies — such as Neiman Marcus and Toys “R” Us — snapped up in Wall Street mega-deals before the recession.
HCA — then a public company — went private in 2006 in a $32.1 billion sale to private equity funds Kohlberg Kravis Roberts (KKR), Bain Capital and Merrill Lynch, as well as to family members of HCA’s co-founder Dr. Tommy Frist Jr. and other executives on HCA’s management team.
The size of the deal was a U.S. record at the time, but the federal lawsuit in Boston lays out the legal argument that the price tag was kept artificially low. Attorneys for the private equity firms being sued insist they did nothing wrong.
To me, this explosive story is far more damaging than the “Bain Capital shut down our factory and outsourced our jobs to China” thing because let’s be real here: the elite class does not care about people’s jobs. They care about profits. In their worldview, it’s the free hand of the market outsourcing those jobs, and people need to get trained for a different job that won’t get outsourced. That’s the meme that the elites in both parties spread, it’s what people like Fareed Zakaria and Nick Kristoff tell us in every column and we hear it even in President Obama’s speeches — it’s the global economy, stupid! Work-force retraining! Education! Etc. etc.
But this? This narrative is one of a rigged casino. This is allegations of collusion and price fixing by the big money boys — Bain, Carlyle, Blackstone, Goldman Sachs, as well as the Frist family. This is the big fish carving up the ocean for themselves, their investors be damned. This is the failure of a worldview which claims the profit motive is the perfect antidote to flawed human emotions and is always perfect.
This doesn’t look good for free market capitalism.
Ugh. I know it. I still consider myself a capitalist, but the lies that are coming out of the GOP totally ruin the system. They seem to confuse theft and graft with capitalism.
Fact is, I’ve become certain that both Capitalism and Communism have their flaws that are often exploited by despots and criminals and it’s the job of a functioning government in harmony with corporate interests that prevents the criminals from overtaking either system. Either system can work in a vacuum without any government intervention, but the criminals will always try to find a way to exploit people’s trust and ruin the system.
Seems us humans have to learn over and over that no heirarchy that can control for human nature. However every time I mention anarchy people get nervous and think I want to build bombs or something. Seems it’s time for some sort of alternative to at least enter the conversation.
“They seem to confuse theft and graft with capitalism.”
Theft and graft are just two of the tools of capitalism/communism as are fear, intimidation and oppression. Both systems exploit the workers and both manage, for some period of time, to cow or co-opt the peasantry and workers. Eventually, the guillotine and tumbrel are taken out of mothballs, either metaphorically or literally.
Well, of course there is not a whisper of the deal struck, around 2006, when the Frist boys merged HCA with Rick Scott’s rip off hospital chain, “Columbia Hospitals” to form ‘Columbia-HCA’ which STILL exists in Florida. Then Scott resigned right before the merged hospital giant was indicted and charged with MAJOR Medicare fraud…the result being that it had to pay the largest Medicare FRAUD claim in history, over $1.3 billion. And yet, Scott and the Frists escaped jail or even being an active part of the rip-off! WHY? Because Bill Frist was a U.S. Senator; back then a ‘sitting Senator’ was NOT to be charged with any crime…thus, this latest story of fraud related to these crooks is NO surprise…look where the major players are today! Frist is still making billions from his heart transplants, Dr. Tommy Frist, Jr, still connected to that hospital chain AND SCOTT…the worst crook ever to be elected Governor in Florida.
It is surprising that it’s even legal for current executives of a public company to invest in taking it private in a leveraged buy-out. Deals take time, and from the minute an executive starts even thinking about participating in such a deal he (or she) is in a conflict of interest with the shareholders whose interest he is supposed to be representing. LBOs are a better deal for the new private investors the lower the share price at the time of sale. They are a better deal for the departing public shareholders the higher the share price at the time of sale. I don’t see a way around that.
What you have described that Bain has done is not free market capitalism – it is corporate statism.
That said, I think we can agree that this is one more reason we CANNOT elect that anti-American known as Romney.
You confuse me, Usagi. You say you’re a Libertarian, and the regulation-free markets which your side embraces create exactly this kind of scenario.
Incorrect: regulation free markets could not create this kind of scenario. This kind of scenario is only created when the .gov interferes (in this case, heavy subsidization and regulation) to the point that these things are encouraged.
Private equity firms would uniformly support the lower rate, since it would benefit every one of their portfolio companies. But Obama also wants a reduction in the deductibility of interest payments on corporate debt – a longstanding exemption that is credited with helping to fuel the private equity industry’s massive growth. And for PE-backed companies with major leverage loads, this is not an even trade-off.
Southern Beale:
I think Usagi may be getting to this, soon.
“Regulation free markets don’t kill economies, people kill economies.”—NRBA* Spokesweasel
What is it they say about Libertarians? Oh yeah, they’re Republicans who like smoking dope and buying porn.
* National Robber Barrons Ass’n.
“I think Usagi may be getting to this, soon.
“Regulation free markets don’t kill economies, people kill economies.”—NRBA* Spokesweasel”
Nope – government kills economies: through tax burdens and regulations.
I have never taken a hit of dope, but do not mind if you do. The preservation of freedom is important enough to me to not enforce my religious beliefs on you.
“In their worldview, it’s the free hand of the market outsourcing those jobs, and people need to get trained for a different job that won’t get outsourced”
Right. That’s it. Time to sign up for Sniper Training School.
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