New York Post, Sunday, October 25, 2020nypost.comT
HE prospect of Joe Biden be-
coming president has large
swaths of corporate America
scared, and none more so than
the whipping boys who run the pri-
vate equity business.
Private equity is mainly in the busi-
ness of buying public companies —
many of them hurting from bad man-
agement and financial distress —
and then running them as private
concerns so the problems can be
fixed without having to answer to
shareholders on a daily basis.
But if you read up on the exploits
of the big PE firms — Blackstone
Group, KKR, Carlyle Group, Apollo,
etc. — in the liberal media, you
would think the guys running these
outfits are modern-day robber bar-
ons. For every 10 success stories
where workers’ jobs were saved,
there is breathless coverage of one-
off disasters (read up on Toys ‘R’ Us).
This is why during every presi-
dential election — and this one is no
exception — PE becomes a target of
progressives looking to give some
opium to the masses by drumming
up class warfare. They highlight al-
legedly unfair tax breaks, and claim
PE destroys jobs.
And like clockwork, PE outfits are
now rushing to complete deals on
the notion that major changes are
coming under a potential Biden ad-
ministration if he wins in November
as the polls suggest.
“What we see every election year
is an uptick in private equity M&A
[mergers and acquisition] activity,
but this year is more,” said Paul
Aversano, a managing director at
Alvarez & Marsal, a global profes-
sional-services firm. “People just
want to get ahead of any changes
that might be coming.”
So why are PE executives so wor-
ried this time around?
Biden has been fairly quiet on the
matter probably because some ofhis most prominent financial back-
ers are Wall Streeters. But that
doesn’t mean he isn’t gunning for
the business, PE executives tell me.
While Barack Obama talked a good
game attacking PE, he backed off
eliminating some of PE’s cherished
tax breaks, like the so-called carried-
interest deduction. Carried interest
does allow PE investors to make a lot
of money; it also incentivizes them to
take the risk and fix companies they
would otherwise ignore.
Most Democrats these days are
more determined than Obama and
want carried interest gone for good.
Ex-VP and Dem nominee Biden
sees ditching carried interest, and
other investor-friendly tax breaks,as a “moral issue,” I am told. He will
likely do this through a backdoor
method by increasing long-term
capital gains on millionaires that
will make carried-interest deduc-
tions largely obsolete.
Then down comes the hammer on
private equity: if Massachusetts Sen.
Elizabeth Warren is in the majority
and free to enact her ludicrously
titled piece of legislation known as
the “Stop Wall Street Looting Act.”
Warren proposed this bill last
year while running for the Demo-
cratic nomination. She lost, of
course, and the GOP thwarted her.
But the fringe is no longer the
fringe of the Democratic Party —
it’s the mainstream.If Biden wins the presidency and the
Dems keep the House and win the
Senate, her legislation would pass, PE
execs tell me. That would usher in a
sweeping restructure of the PE busi-
ness by increasing firms’ legal liabili-
ties and pension-fund obligations,
making it next to impossible for PE
firms to take risks on many deals.
“In that scenario there could end
private equity as we know it,” one
veteran PE executive apocalypti-
cally predicted. “It’s scary.”
Not for progressives like Warren,
and latter-day progressives like the
once-moderate Biden, who don’t
mind destroying a great business to
score some points with their base.
[email protected]THE WEEK’S
WINNERS
LOSERS
EVAN SPIEGEL
The CEO of Snapchat saw his
firm’s shares soar 30 percent
on news of a 52 percent
increase in ad-fueled revenue.
JACK MA
The Alibaba founder
maintained his title as China’s
richest tycoon with a $58.8
billion fortune fueled by
online pandemic shopping.TIM COOK
The Apple CEO saw the firm’s
new iPhone 12 receive twice
as many preorders as the
previous version received.JEFFREY KATZENBERG
The Hollywood mogul decided
to pull the plug on his short-
lived, short-form video app
Quibi amid low demand.
ADAM NEUMANN
The ex-WeWork CEO blew the
$185 million consulting fee he
had won from the firm he
founded after its new owner
said he violated his deal.DAVID SOLOMON
The Goldman Sachs CEO saw
his firm agree to pay the DOJ
$2.8 billion to settle charges
in the 1MDB bribery scandal.‘privaTe’ panic
PE firms
fear Biden
in the Oval
S
PEAKING of private equity, it’s hard to imagine
Apollo Global Management without Leon Black,
the PE firm’s founder and a Wall Street icon after
40-plus years in the business. But Black now finds
himself in an unwelcome spotlight because he did
business with convicted sex offender Jeffrey Epstein.
Some context: Epstein is now best known as a child-
abuser after his 2008 conviction and subsequent indict-
ment (and suicide) last year on additional charges. But
before that he was considered a high-end wealth man-
ager for a coterie of rich people in addition to Black.
What is most baffling to people — including inves-
tors in Apollo — is why Black did business with Ep-
stein even after he got out of jail several years ago,
and why Black still has yet to fully explain this.
That’s about to change. Amid client concerns, the
firm hired prominent white-collar attorney AndyLevander, of Dechert LLP, to investigate the matter
and provide the full story.
As part of the probe, I am told Black is willing to ac-
count for every penny he paid Epstein during their
years doing business together. Black believes the
record will show that Epstein did real work for him,
and Black had no involvement in Epstein’s sordid pri-
vate life. The investigation, which Black himself
called for, will take about six weeks. Black is likely to
address the matter at this Thursday’s earnings call.
“If Leon can account for all the money he paid
Epstein and why,” the matter will be put to rest, said
one person close to Black.
A spokeswoman for Black tells me that Epstein’s
work was vetted by outside law firms and Black was
“unaware and appalled” by Epstein’s conduct.
Levander didn’t return a call.Leon bid to clear name
Black mark
Wall Street iconLeon Black of Apollo
Global Managementsa ys he was
“unaware and appalled”by the perverted
conduct of JeffreyEpstein(below), who
did businesswith the legendary investor.
Black has hireda prominent attorney to
investigateand provide the fullstory.Post Busine ss
Charles
Gasparino