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April 26, 2009

Bill, Aides Are Pen$ion Pals;

Ex-Thompson Bigs' Firms Nab Fund Deals

By SUSAN EDELMAN and GINGER ADAMS OTIS, THE NEW YORK POST

Three former deputies to city Comptroller Bill Thompson now own or work at firms that earn millions of dollars in fees to invest the pension funds he oversees, The Post has found.

Government watchdogs blasted the ex-employees for seemingly exploiting their connections to get high-paying jobs and bring government cash to their private businesses.

Two of Thompson's former top pension managers, Josh Wolf-Powers and Adam Blumenthal, quit their city jobs and founded Blue Wolf Capital Management in 2005.

The private equity firm landed contracts to invest $63 million of city pension funds - and will collect at least $1.2 million in fees, officials said.

Fees paid to firms that manage pension investments have soared in the past five years from under $100 million to $400 million a year, said a source close to the pension funds.

"They're huge moneymakers," said a source familiar with the deals.

Thompson was unavailable for comment, but his spokesman said Wolf- Powers and Blumenthal waited more than a year before seeking business with the pension funds, as city rules require, so "there was no conflict."

Another of Thompson's closest aides, Horatio Sparkes, the ex- deputy comptroller for pension funds, left in 2006 to join Yucaipa Companies, an investment firm led by supermarket magnate and Bill Clinton buddy Ron Burkle.

Yucaipa already had a contract to invest $170 million in 2003, according to city documents. The company got new contracts last year to invest another $360 million for four city pension funds, documents indicate.

While total payments to Yucaipa were not disclosed, records show the company has raked in $9.5 million in fees from the $347 million it invests for the city's biggest pension fund - NYCERS.

Even if the deals follow the letter of the law, they reek of preferential treatment, watchdogs say.

"They use their insider knowledge and past relationships to gain an upper hand and make a wad of cash," said Dick Dadey, executive director of Citizens Union.

A Yucaipa spokesman said that the firm didn't make an offer to hire Sparkes, who joined its Manhattan office, until he quit the Comptroller's Office in 2006 - and that Sparkes wasn't allowed to work on accounts related to the city for over a year.

Thompson's office has come under scrutiny in a widening pay-for- play probe by state Attorney General Andrew Cuomo.

Cuomo and the Securities and Exchange Commission last month indicted political adviser Hank Morris for allegedly steering state pension-fund business to investment firms in exchange for kickbacks. Morris denies the charges.

The state scandal was linked to Thompson's office last week, when The Post revealed that Morris had pocketed a placement fee on an $85 million deal between NYCERS and Quadrangle, an investment firm headed by Steven Rattner, now the chief of President Obama's auto- bailout task force.

In addition, Wolf-Powers, Thompson's former managing director for private markets, was quoted as telling Rattner that any investment firm doing business with the city needs a "placement agent," a middleman who charges a finder's fee.

Wolf-Powers has said he never told Rattner to hire Morris.

But Blue Wolf did not use a placement agent in 2008, when it landed contracts to invest $63 million of the city's pension money, the Comptroller's Office confirmed. Thompson's spokesman said the Blue Wolf investment was "reviewed and recommended" by two private- equity consultants hired by the pension funds.

Before getting the contracts, Blue Wolf donated $4,950 to Thompson's campaign for mayor in July 2007. At the same time, Blumenthal, Thompson's former first deputy comptroller and chief financial officer, gave $4,050.

FRIENDS IN HIGH PLACES

Three former deputies of city Comptroller Bill Thompson have gone on to lucrative careers

in private equity, investing pension money they once oversaw.

Josh Wolf-Powers - City comptrollers managing director for private markets (2003-2005)

Adam Blumenthal - First deputy comptroller and chief financial officer (2002-2005)

Blue Wolf lands contracts to invest $63 million in city pension funds in 2007 and 2008. It earns the firm at least $1.2 million in fees.

Wolf-Powers and Blumenthal leave the Comptrollers Office in 2005 and form Blue Wolf Capital Management, a private equity firm.

Blue Wolf donates $4,950 to Thompsons campaign for mayor in 2007; Blumenthal donates $4,050.

Yucaipa receives a contract in 2004 from NYCERS to invest part of its funds and earns $9.5 million in fees. In 2008, it lands other contracts and now handles $530 million in city pension-fund investments.

Until 2005, Yucaipas contacts in the City Comptrollers Office are Josh Wolf-Powers and Adam Blumenthal.

Bill Thompson City comptroller - Oversees $80 billion of city pension funds, including the New York City Employees Retirement System (NYCERS).

In 2006, Sparkes joins Yucaipa Companies, a private equity firm founded by Ron Burkle.

In January 2009, Wolf-Powers and Blumenthal hire Mike Musuraca, a NYCERS pension board member who had voted to approve the Blue Wolf investment contract.

Horatio Sparkes - The deputy comptroller for pension funds (2002- 2006)

Donated $500 to Thompson for Mayor in 2008.

(c) 2009 The New York Post. Provided by ProQuest LLC. All rights Reserved.

A service of YellowBrix, Inc.

http://www.americanchronicle.com/articles/yb/129165220


March 15, 2009

Bill Clinton severs ties

with Yucaipa: report

NEW YORK (Reuters) – Former President Bill Clinton has severed his connections to Ronald Burkle's Yucaipa Cos. and will not receive a payment once estimated to be up to $20 million, the Wall Street Journal reported on Sunday, citing a person familiar with the matter.

The Journal said Clinton decided not to claim additional money from Yucaipa earlier this year.

It said people familiar with the matter had thought last year that the payment could have been as much as $20 million. However, the size of the possible payment might have fallen because of the recent economic turmoil.

Clinton started distancing himself from Yucaipa, a private equity firm run by his friend Burkle, in 2007 because Hillary Clinton was planning a run for the Democratic presidential nomination, according to the report.

Hillary Clinton won U.S. Senate approval as secretary of state in January despite renewed Republican concerns about potential conflicts of interest created by her husband's foreign fund raising.

Spokesmen for Clinton and Yucaipa could not be immediately reached for comment.

(Reporting by Michael Erman; Editing by Kim Coghill)

http://news.yahoo.com/s/nm/20090316/pl_nm/us_clinton_yucaipa_1


June 17, 2008

Yucaipa to purchase Aloha suit

The airline will receive 5 percent
from any damages against Mesa

By Dave Segal, Star-Bulletin

Yucaipa Corporate Initiative Fund I, LP, the majority investor of Aloha Airlines, will be taking over the bankrupt carrier's 2006 lawsuit against go! parent Mesa Air Group Inc.

The Los Angeles-based company, headed by billionaire Ron Burkle, submitted the only bid by yesterday's deadline. Yucaipa, which is owed $116.7 million by Aloha, made a $10 million credit bid -- a noncash offer that will reduce the amount it is owed by Aloha. In addition, Yucaipa will pay Aloha 5 percent of whatever proceeds it receives from the suit.

A hearing to approve the sale of the lawsuit is scheduled for 9:30 a.m. today in federal Bankruptcy Court.

"If the lawsuit turns up zero, then the estate gets zero," said James Wagner, attorney for Aloha Chapter 7 trustee Dane Field.

Yucaipa is the second secured creditor in the bankruptcy while Aloha's primary lender, GMAC Commercial Finance LLC, is the first secured creditor and is owed about $40 million following the sales of Aloha's cargo and aviation contract services units.

Aloha is suing Mesa for alleged predatory pricing that helped force Aloha out of business, as well as for allegedly misusing confidential information obtained during Aloha's first bankruptcy.

Wagner acknowledged that if Yucaipa prevailed but Mesa were to file for bankruptcy, then Yucaipa "would hold a claim against a bankrupt company.

"Then there may be an issue of collectibility," he said.

A jury trial is scheduled to begin on Oct. 28 in federal District Court in front of Judge David Ezra.

http://starbulletin.com/2008/06/17/business/story02.html


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May 26, 2002

CalPERS invested $700 million

with Davis donor

Billionaire also made contributions to pension board members

Lance Williams, San Francisco Chronicle

The California Public Employees Pension System steered $700 million in investment capital to a wealthy financier who has donated more than $600,000 to Gov. Gray Davis and thousands more to officials who serve on the CalPERS board, according to state records.

According to the records, in the past year the CalPERS board has twice voted to make multimillion-dollar cash infusions in venture capital funds controlled by billionaire financier and supermarket magnate Ron Burkle of Los Angeles.

He is a heavy-hitting political donor with close ties to Davis and other top Democrats, including CalPERS board members San Francisco Mayor Willie Brown and state Treasurer Phil Angelides.

Since 1998, Burkle has donated $609,000 to Davis' gubernatorial campaigns, and last year his Golden States Foods firm hired Davis' wife to serve on its board of directors.

The governor controls four appointments to the 13-member CalPERS board, but a spokesman said Davis plays no role in CalPERS investment decisions.

A CalPERS spokeswoman said the investments in Burkle's concerns were thoroughly vetted and made on the merits. Brown and Angelides acted legally in voting for the Burkle investments, said the spokeswoman, Patricia Macht.

But James Knox, chairman of the reform group California Common Cause, said the affair was troubling on clean-government grounds.

He contended that Brown and Angelides should have recused themselves rather than vote on the Burkle investments because they had obtained donations from him. And Knox said the scenario of a major donor seeking investment funds from CalPERS was "a concern because it puts the governor's appointees in a position where they can show favor to a major campaign contributor."

Charlie Oates, who publishes an independent newsletter for CalPERS pensioners, said the board should pursue more conventional investments and steer clear of investments involving their political benefactors.

"It's a public pension trust fund for the benefit of the members of the system and not for the benefit of the politicians," he said. "As trustees, they should be more concerned with running the trust and taking care of the beneficiaries."

Roger Salazar, Davis' spokesman, said the criticism was unfair....

Burkle is a self-made billionaire who rose from grocery store clerk to owner of the Ralph's/Food 4 Less chain. Today he lives in Greenacres, a Beverly Hills estate once owned by silent film star Harold Lloyd, and is CEO of the Yucaipa Companies investment concern.

Burkle is a longtime Democratic activist, and since 1998 he has donated $1.9 million to Democratic candidates and causes in California, state records show. Davis is his single biggest beneficiary.

According to Yucaipa spokesman Ari Swiller, the financier's friendship with Davis goes back 20 years, to the days when Burkle was a supermarket owner and Davis was an assemblyman pushing the idea of putting photos of abducted children on milk cartons....

They share other connections as well. Swiller, Yucaipa's spokesman, also serves as Davis' campaign treasurer. Davis' wife, Sharon, helped run Burkle's charitable foundation in the 1990s, and last year she went on the board of Golden State Foods, a Yucaipa-owned firm.

Burkle also has a long-standing connection to Mayor Brown, whom Davis appointed to the CalPERS board. From 1993 through 1995, while Brown was speaker of the Assembly, he moonlighted as a lawyer for Burkle's Food 4 Less chain, earning more than $30,000, state records show. Burkle's companies also donated $59,000 to his legislative campaigns.

After Brown became mayor of San Francisco, Burkle donated $100,000 to help underwrite the 1997 U.S. Conference of Mayors meeting in San Francisco.

The billionaire also became involved in efforts to redevelop Treasure Island in San Francisco. In 1999, a firm backed by Burkle and headed by Darius Anderson, a Sacramento lobbyist who has worked as a fund-raiser for both the governor and Brown, was chosen by the mayor's office to develop a marina at Treasure Island...

CalPERS records show that Burkle's Yucaipa Corporate Initiative Fund obtained $200 million in investment capital via what the pension fund styled its "California initiative."

That strategy, announced in June 2000, is intended to boost economic development by pumping funds into what it called "underserved" areas, including rural and inner-city areas.

CalPERS consultants and staff reviewed more than 60 investment proposals, and finally recommended 11 investment firms, the records show.

In May 2001, the board unanimously approved the plan. Yucaipa's $200 million share was quadruple what any of the other firms obtained, the records show.

While the matter was pending, state records show Burkle hosted a fund- raiser for Davis and donated $20,000 to his campaign. He also donated $25,000 to Angelides, and made a series of other political donations, including $100, 000 to the state Democratic Party.

After Yucaipa obtained the $200 million investment, the firm pitched CalPERS on backing the Yucaipa America Fund, an investment fund that proposed to tap labor union pension funds for a venture capital fund....

In November, at a closed meeting, the CalPERS board voted to commit $500 million to the fund.

While that matter was pending, state records show Burkle hosted two more fund-raisers for Davis and donated $50,000 to his campaign. Less than three weeks after the vote, Burkle also hosted a fund-raiser for Angelides.

Macht said that in both Burkle investments the CalPERS staff had negotiated excellent terms to protect pensioners' investment and maximize return. No one in the governor's office ever contacted CalPERS staff about either matter, she said.

The $150 billion CalPERS pension fund is run by a 13-member board of state officials and representatives of pensioners and other interested groups.

Controversy over political donations has occasionally roiled CalPERS. In 1998, CalPERS voted to bar board members from obtaining political donations from firms that sought or were doing business with the pension fund.

The action came after the Los Angeles Times reported that state Controller Kathleen Connell and then-state Treasurer Matt Fong had obtained $400,000 in political donations from CalPERS contractors. Connell denied wrongdoing and successfully sued to overturn the ban, which is no longer in effect.

Earlier this month, the co-founder of a vineyard development firm that had recently obtained a $100 million investment from CalPERS hosted a $2,500-per- head political fund-raiser for Davis in San Francisco.

Backers of GOP gubernatorial candidate Bill Simon accused Davis of using CalPERS to raise funds for his re-election drive, but Davis and Richard Wollack, co-CEO of Premier Pacific Vineyards, said there was no connection between the investment and the fund-raiser...

San Francisco Chronicle

For more poop on CalPERS, GO TO > > > A Connecticut Yankee in King Kamehamehas Court; The Great Nest Egg Robberies  

* * *

December 4, 2005

Quiet firm rules

Waikiki gems

By Rick Daysog, Advertiser Staff Writer

Few people in Hawai'i have ever heard of Cerberus Capital Management LP, yet in the past year, the New York-based hedge fund has become a top hotel owner in the state and major lender to the state's No. 2 airline.

Cerberus took control of Waikiki's crown jewels — the Sheraton Waikiki, the Royal Hawaiian and the Sheraton Moana Surfrider — when it bought a 65 percent interest in the hotels' owner, Japan-based Kokusai Kogyo KK, for $2.4 billion in November 2004.

Cerberus is now acquiring a 30-percent interest in Japan-based Seibu Holdings Inc., which owns the Hawaii Prince Hotel Waikiki, the Hapuna Beach Prince Hotel, the Maui Prince and the Mauna Kea Beach Hotel.

"These properties are worth billions of dollars, making them (Cerberus) one of the biggest hotel owners in Hawai'i," said Mike Hamasu, director of consulting and research at Colliers Monroe Friedlander Inc.

The company also played a pivotal role in Aloha Airlines' reorganization. In March, Ableco Finance LLC, Cerberus' lending arm, teamed up with Goldman Sachs Credit Partners LP to provide up to $65 million in financing to help the bankrupt carrier continue operating.

The rapid rise of Cerberus on the Hawai'i business landscape comes amid a resurgence of investment from Mainland companies.

They include:

The Carlyle Group, based in Washington, D.C., which purchased Verizon Hawaii last year for $1.65 billion.

New York-based Cendant Corp., which in addition to running Avis, Budget, Century 21 and Cheap Tickets, bought the local Coldwell Banker residential real-estate franchise last month.

HRPT Properties Trust, based in Newton, Mass., which paid nearly $600 million to acquire more than 400 acres of industrial properties owned by the Damon Estate and the Campbell Estate.

While much of the outside investment in Hawai'i in the 1990s involved businesses that bought cheap, added improvements and sold three to five years later, today's investor is taking a more hands-on management approach and may end up waiting a decade before they see a big payoff.

"They're much more patient, and they're much more willing to take much more complex risk," said Jon Miho, co-founder of local real-estate investor Trinity Investment LLC, whose affiliate is purchasing the Kahala Mandarin Oriental Hawaii hotel.

Cerberus, a major global player with over $16 billion invested worldwide, declined to comment on its Hawai'i strategy for this story. Local executives who have dealt with the company say its record in the state is mixed.

Managers of the Sheraton chain say that Cerberus is committed to improving its Hawai'i properties, while representatives of Aloha Airlines paint a picture of a demanding lender keeping a close eye on all operations.

Keith Vieira, senior vice president and director of Hawai'i operations for Starwood Hotels & Resorts, which manages the five Sheraton hotels controlled by Cerberus, said Starwood had preliminary discussions with Cerberus about renovating its local properties.

He noted that Kamehameha Schools' $84 million facelift of the nearby Royal Hawaiian Shopping Center has prompted Starwood and Cerberus to consider upgrading the properties.

"We think they're going to be a good owner of our hotels in Hawai'i," Vieira said.

David McNeil, a spokesman for Prince Hotels, said the chain's Japan-based owners haven't planned any changes at this time.

Unlike the mid-1990s "vulture" investors like Colony Capital and the Blackstone Group that bought distressed Hawai'i real estate for as little as 25 cents on the dollar, Cerberus is paying nearly the full value of the properties.

"They're not buying on a huge discounted basis; they're buying on value," said Joseph Toy, president of the local consulting firm Hospitality Advisors LLC.

With Aloha Airlines, Cerberus has been much more hands-on.

In July, Ableco, Cerberus' lending arm, abruptly increased the interest rate on its multimillion-dollar loan to Aloha from 11.25 percent to 14.25 percent, Aloha said in Bankruptcy Court documents.

The following month, Ableco stopped lending money to Aloha until management agreed to hire a chief restructuring officer and reach an agreement to sell the airline. Aloha attorney Charles Dyke stated during a Bankruptcy Court hearing in October that Ableco and Goldman Sachs would consider liquidating Aloha if a deal to sell it fell through.

Aloha, which is being sold to a group headed by California billionaire Ron Burkle and former football star Willie Gault, won approval from Bankruptcy Court last week for its reorganization plan. Aloha could emerge from bankruptcy as soon as Dec. 15.

In a recent Bankruptcy Court filing, Jeffrey Kessler, Aloha's interim chief financial officer, described the pressure Cerberus put on the airline.

"For several days, funds were withheld as the lenders made daily sweeps of cash revenues from (Aloha's) accounts while refusing to re-advance the monies so swept," Kessler said.

"The lenders began demanding, as a condition to each daily advance under the loan, a daily 'deal report' detailing the company's progress in obtaining a transaction sufficient to repay the loan," Kessler added. "They further informed the company that financing would be cut off by Oct. 15, 2005, if a signed letter of intent from an investor were not secured by then."

Cerberus has been involved in a controversy in Japan over its planned investment in the parent of the Prince Hotels.

Cerberus' investment in financially troubled Seibu, one of Japan's largest real-estate firms and owner of the Seibu Railway, has led to legal action by the sons of the company's founder, Yasujiro Tsutsumi.

The brothers, Yuji and Seiji Tsutsumi, recently lost an appeal to Tokyo's high court to essentially block Cerberus' investment and Seibu's restructuring plan. The two brothers recently filed suit in Hawai'i Circuit Court, seeking to be recognized as the rightful owners of the Prince Hotels in Hawai'i.

Founded in 1992 by Stephen Feinberg, a former Drexel Burnham Lambert manager, Cerberus began as a vulture fund specializing in bankrupt and distressed companies. The name, Cerberus, comes from the mythical three-headed dog that guarded the gates of the ancient Greek underworld.

In recent years, the company, whose executives include former Vice President Dan Quayle, has branched out to lending and investing in less-risky companies, says the Wall Street Journal.

The closely held company shies away from publicity, preferring to work in the background. It has no local office or employees based in Hawai'i.

The firm has invested in a broad range of companies, including Mervyn's department stores, building products maker Formica Corp., Italian sportswear maker Fila and DaimlerChrysler's former aircraft leasing business, according to BusinessWeek.

In more recent years, the firm has taken huge bets in troubled companies in Japan, where restrictions on foreign ownership have relaxed in recent years.

Before its investment in Kokusai Kogyo, the company paid $850 million for a controlling stake in Aozora Bank Ltd., formerly known as Nippon Credit Bank Ltd. before it was taken over by Japanese regulators in 1998.

Kevin Aucello, senior vice president at CB Richard Ellis Hawaii who worked with Cerberus Japan executives in the mid-1990s, said that Cerberus' combined ownership stake in the local Sheraton and Prince hotels has advantages.

Owning several high-end hotels in Hawai'i means Cerberus can leverage the advertising, marketing and managing efforts. "It's much more efficient to manage a larger portfolio," Aucello said.

honoluluadvertiser.com

* * *

January 30, 2006

Bill and Hillary's Teacher Pension Perfidy

 

By: Peter Schweizer / NY Post


Clinton and Clinton screw the poor and minorities – and steer teachers' retirement money to Al Gore.

Bill Clinton has made corporate reform one of his top causes since leaving the White House. He calls for more "socially responsible" investing, better protection of workers and greater diversity in corporate management. At the same time, he condemns cronyism, excessive pay for top management and an alleged emphasis on short-term profits at the expense of workers.

Sen. Hillary Rodham Clinton — a member of the Senate Health, Education, Labor & Pensions Committee — has bashed corporations for their failure to live up to their pension obligations.

Yet, as the senior adviser to two investment funds managing public pension funds, Bill Clinton has himself promoted an investment fund that promises to put money into "lower-income urban and rural communities" — but instead devotes its cash to Al Gore's upstart cable channel and his wife's financial supporters.

At first glance, it seemed the perfect fit: Bill Clinton, corporate reformer, signing on as a senior adviser (and "active adviser," according to a company press release) to the Yucaipa Corporate Initiatives Fund and the Yucaipa American Fund. Both get all their cash from pension funds from public-school teachers and government workers in California and New York state.

CALPERS, the huge California public-employee retirement fund, has agreed to commit $500 million to Yucaipa, and the California State Teachers Retirement System (CALSTRS) another $150 million. Millions more are to come from the New York State Common Retirement Fund.

Clinton's job, when he joined Yucaipa in April 2002, wasn't just to help make the rich richer: These were to be "investment funds that specialize in lower-income urban and rural communities," as The New York Times reported. Yucaipa managing partner Carlton Jenkins told Black Enterprise magazine that the funds were seeking out "urban-based minority or female-owned businesses."

And Clinton's role in the fund, Yucaipa head Ron Burkle made clear, would not be passive. "He's invaluable," said Burkle, explaining that Clinton would help raise money and offer investment advice to the funds.

But a venture that was supposed to help minority businesses and secure the future of pensioners in two of America's biggest states seems to have done anything but.

The Yucaipa Corporate Initiatives Fund has already poured millions into Al Gore's new cable channel, Current Television. Gore's venture is headquartered in a tony neighborhood of San Francisco, which certainly doesn't seem to fit the definition of a "lower-income urban" community. Nor is it minority-owned — indeed, all the major investors are white males. (Indeed, by a who's who of major Democratic Party money people — including Joel Hyatt, former Democratic National Committee finance chairman, Rob Glaser of Realnetworks and Bill Joy of Sun Microsystems.)

Yucaipa told the San Francisco Weekly that Gore's enterprise "has a strong commitment to increase the representation of women and people of color." But the upper management of the network is completely white.

Indeed, one of the few signif icant minority-owned busi nesses that the funds have invested in is Sean John, the clothing enterprise run by that struggling representative of the "lower-income urban community," rap mogul Sean "Puffy" Combs. (A contributor to Hillary Clinton's campaigns with the potential of raising enormous sums for Democrats, Combs is likely to play a prominent role in supporting a Hillary run for the White House in '08.)

The funds' real emphasis, in short, seems to be Democratic cronyism.

Another example: The Yucaipa Corporate Initiatives Fund recently backed up a bid by Diversified Investment Management Group to take over Piccadilly Restaurants. DIMG is described by Fashion Week Daily "as a front for Ron Burkle," close friend and financial supporter of Bill and Hillary Clinton. He's also the chairman of Yucaipa.

Some of the pension money committed to the Yucaipa funds arrived with curious timing. Carl McCall, then the comptroller of New York and thus the sole trustee of the New York State Common Retirement Fund, began the ball rolling with the Yucaipa Corporate Initiatives Fund just as Sen. Hillary Clinton surprised many Democrats everywhere by endorsing his bid for governor — at a time when his chief opponent in the primary was Andrew Cuomo, who had served President Bill Clinton loyally as secretary of Housing and Urban Development.

The hundreds of millions flowing from California retirement funds come courtesy of California Treasurer Phil Angelides, a longtime Clinton political ally. Now running for governor, his bio mentions his important role (as state California Democratic Party chairman) in electing Bill Clinton to the presidency. The banner photo across his Web site features him standing side-by-side with the ex-president.

Yet, while all the players in the Yucaipa funds are Democrats, they seem a bit confused about their social mission.

When Clinton joined up, The Yucaipa American Fund proudly announced that its purpose was to invest in "industries and companies that maintain strong corporate governance practices and are sensitive to the interests of their employees."

Tell that to the employees of Aloha Airlines. The fund is backing a $100 million deal to take over the airline — but it has attached some very tight strings: It's making the deal contingent upon terminating the pilots' pension plan and contract. Yet the federal Pension Benefit Guaranty Corp. says the pension plan is not the problem; the airline can readily afford it. Pilots responded with a strike. (Just to round things out, the two major shareholders in the airline, Hawaii's Ching and Ing families, give overwhelmingly to Democrats.)

Meanwhile, the workers whose pensions have been invested in Yucaipa are getting a terrible deal. According to CALSTARS, California teachers have already committed $61.9 million of the $150 million that they promised Yucaipa. As of last March 31, three years after the venture started, they'd seen a grand total of $837 come back to them. Overall, the rate of return since the funds launched have been a loss of 12.1 percent.

CALPERS has not done much better. After pouring more than $116 million into various Yucaipa ventures since 2002, it's seen a return of $55,963.

At the same time, Yucaipa is also collecting hefty fees for managing the pension funds' investments — more than $3 million a year from CALPERS, and $3.5 million a year from the New York Common Retirement Fund. How much of this ends up in Bill Clinton's pocket is anybody's guess. He's not disclosing his fees. And why is Sen. Hillary Clinton, who appears to be so concerned about the state of our pension systems, silent about this?

Hypocrisy is not confined to one party or the other. But the coverage of it is partisan. The national media seem very interested in what Sen. Bill Frist might have done with money from his private trust. Why are they ignoring what Bill Clinton and Yucaipa are doing with hundreds of millions in pension money?

Peter Schweizer is a research fellow at the Hoover Institution and author of Do As I Say (Not As I Do): Profiles in Liberal Hypocrisy.

http://97.74.65.51/Printable.aspx?ArtId=5739

 


March 21, 2008

Aloha Airlines in talks to sell

all or parts of company

Rick Daysog, Advertiser Staff Writer

Aloha Airlines today said it is in discussions with several parties to sell the entire airline or parts of it.

Aloha, the state's second-largest carrier, filed for Chapter 11 bankruptcy protection yesterday with assets and liabilities both in excess of $100 million. Aloha also blamed unfair competition by low-cost carrier go!.

In a hearing in U.S. Bankruptcy Court this morning, Aloha said it was down to $3.5 million in cash and that its expenses over the next 10 days would eat away about $2.3 million of that.

Aloha said its main investor, Yucaipa Co., had plowed more than $110 million in the airlines since it emerged from bankruptcy in February 2006. Yucaipa said it is unwilling to provide further financing.

During the hearing, U.S. Bankruptcy Judge Lloyd King granted Aloha permission to pay some of its daily operating costs, such as utility bills and wages. King will hold further hearings this afternoon on Aloha's agreement with lenders to secure more financing.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.

The Honolulu Advertiser


January 22, 2008

Bill Clinton May Get

Payout of $20 Million

By: John R. Emswhiller

Former President Clinton stands to reap around $20 million -- and will sever a politically sensitive partnership tie to Dubai -- by ending his high-profile business relationship with the investment firm of billionaire friend Ron Burkle.

Mr. Clinton is negotiating to end his relationship with Mr. Burkle's Yucaipa Cos. as part of a broader effort to protect the presidential campaign of his wife, Sen. Hillary Clinton, from potential conflicts of interest. Details of Mr. Clinton's involvement in Yucaipa and his efforts to unwind it come from documents and interviews with people familiar with the matter.

The former president has had links to Yucaipa since early 2002, when Mr. Burkle -- a longtime friend and political contributor -- offered him a role there. Mr. Clinton's association with the firm began at a time when he was looking to earn large amounts of money, partly to pay heavy legal bills accumulated to defend himself and Mrs. Clinton from several investigations during his presidency.

Now, as he negotiates with Yucaipa to withdraw from the relationship, he is a wealthy man, thanks partly to tens of millions of dollars he has earned making speeches around the world.

Mr. Clinton initially signed on with Mr. Burkle as a senior adviser to closely held Yucaipa. As part of that arrangement, Mr. Burkle agreed to give Mr. Clinton a share of the profits from two Yucaipa domestic investment funds if their returns reached a certain threshold. Mr. Clinton's adviser arrangement ended in early 2007, five years after it began. But Mr. Clinton still hasn't settled the issue of his payout.

The sales in recent months of Wild Oats Markets Inc. and Pathmark Stores Inc. produced several hundred million dollars in profits for the two Clinton-related Yucaipa domestic funds, which had big shareholdings in the two supermarket chains. Profits from the sales helped to push the funds above the earnings threshold needed to generate a multimillion-dollar payday for the former president, according to public documents related to the sales and other information.

The deals were announced in February and March 2007, respectively -- around the time Mr. Clinton's involvement as an adviser to the domestic funds was set to expire. By not closing out his Yucaipa relationship before those sales were completed, President Clinton probably increased the amount of money ultimately due him, say people familiar with such transactions.

Mr. Clinton is also looking to close out partnership interests in a Yucaipa fund that focuses on investing in foreign companies. This fund -- called Yucaipa Global Partnership Fund LP -- has raised several hundred million dollars from a range of investors. Unlike his deal to advise the two Yucaipa domestic funds, Mr. Clinton invested an undisclosed sum of his own money in the global fund and has a limited partnership interest.

Mr. Clinton is also one of three owners of the global fund's general partner. The others are Mr. Burkle, who is the managing member, and an entity connected to the ruler of Dubai, Sheikh Mohammed bin Rashid al-Maktoum.

Severing the tie to Dubai, a U.S. ally, will remove a potentially tricky problem for Mrs. Clinton. Questions raised about the activities of sovereign wealth funds -- giant pools of money controlled by foreign governments -- have become a campaign issue, as the funds have made a spate of multibillion-dollar investments in such corporate giants as Citigroup Inc. and Merrill Lynch & Co. In a recent interview with The Wall Street Journal, Mrs. Clinton said such purchases are "a source of concern," partly because the foreign funds "lack transparency" and could be used by foreign governments as "instruments of foreign policy."

Mr. Burkle made his fortune by investing in a range of industries, particularly the supermarket business, and is believed to have become a billionaire. He also has become a major fund-raiser for and backer of Democratic Party candidates, including the Clintons. He often opens his Beverly Hills estate, Green Acres, for fund-raising events, and Mr. Clinton has been a frequent house guest there.

Mr. Clinton's duties and activities as a Yucaipa adviser have never been completely clear to outsiders. He has met at times with people involved in various Yucaipa business deals. And the former president's vast global network of contacts probably has been an asset for Mr. Burkle in dealings with business, labor and political leaders. Over the years, Mr. Burkle has said publicly that Mr. Clinton's prestige and connections have helped Yucaipa get its business proposals in front of top corporate decision makers.

Appropriate Transition

Asked about the unwinding of the Yucaipa relationship, a spokesman for Mr. Clinton said the former president "is taking steps to ensure" that there will be "an appropriate transition" for the business relationship should Mrs. Clinton win the Democratic presidential nomination.

The spokesman added it isn't yet known how much Mr. Clinton will receive from his involvement in Yucaipa. A Yucaipa spokesman declined to comment on the firm's relationship with Mr. Clinton.

As part of the effort to sever financial connections that could complicate Mrs. Clinton's presidential bid, the couple in June disclosed that they had sold millions of dollars worth of stock in public companies and put the funds in cash accounts.

The first public sign of Mr. Clinton's pullback from Yucaipa came recently when a Clinton spokesman confirmed, in response to questions from the Journal, that the former president hadn't participated in an investment that the Yucaipa foreign fund made in Xinhua Finance Media Ltd. Top officials of the Beijing-based news and information company have had close ties over the years to China's Communist government.

The Right to Opt Out

Under his arrangement with Yucaipa, Mr. Clinton has the right to opt out of a particular investment, according to people familiar with the matter. Mr. Clinton exercised that option in the Xinhua case -- possibly out of concern that such an alliance could cause headaches for his wife's presidential bid. Yucaipa invested about $25 million in the company.

In an October filing with the Securities and Exchange Commission concerning the Xinhua investment, Yucaipa disclosed that one member of its global fund's general partnership was Dubai Investment Group (YGP) Ltd., which is connected to a much larger group of entities owned by Sheik Mohammed that has investments around the world.

Since leaving the White House, Mr. Clinton has had various contacts with Dubai. For example, Sheik Mohammed last year pledged financial support to a Clinton charitable initiative, and the former president's foundation has a scholarship program at the American University in Dubai in cooperation with the emirate's ruler.

Other leading American political figures have had business connections with foreign countries, including Republican presidential hopeful Rudy Giuliani. Mr. Giuliani's consulting firm, Giuliani Partners, has provided security advice to the government of Qatar.

SOURCE: Wall Street Journal

The Hillary Project - 2007

http://www.hillaryproject.com/index.php?/en/story-details/bill_clinton_may_get_payout_of_20_million/


February 3, 2006

Pension agency settles

with Aloha Air

The carrier is cleared to leave a
yearlong bankruptcy this month

By Dave Segal, Star-Bulletin

It took a last-minute phone call from a court's restroom corridor, but Aloha Airlines overcame more last-minute opposition from the federal pension agency and signed a settlement yesterday that clears the way for the carrier to emerge from bankruptcy in the middle of this month.

About four hours later, federal Bankruptcy Judge Robert Faris approved both the settlement and the airline's modified reorganization plan to effectively put an end to the 13-month-old bankruptcy case.

David Banmiller, president and chief executive of Aloha, said the airline had been spending $60,000 to $70,000 a day on loan interest and attorney and consultant fees, and now management can focus on customer service and improving the airline. He declined to pinpoint a specific date for exiting bankruptcy.

Banmiller said he also was being pressured from Aloha's two lenders, Goldman Sachs and Ableco Finance LLC, who on Jan. 10 began reducing their loan exposure to Aloha by $200,000 a day, reducing the amount of liquidity available to the airline. Moreover, the Federal Reserve's decision to raise interest rates on Tuesday had boosted Aloha's interest payments to its lenders to 15 1/2 percent, or $28,000 a day.

"We were on a timeline because our economic situation needed to be satisfied," Banmiller said.

Under the modified reorganization plan, Aloha's unsecured creditors will get virtually nothing -- nearly the reverse of the 26-month Hawaiian Airlines bankruptcy, where creditors got paid in full. Aloha's unsecured creditors will receive 1/100th of a cent on the dollar compared with 86/100th of a cent on the dollar under the original plan.

Faris agreed with Aloha that it was impractical to delay yesterday's hearing to have unsecured creditors vote again on the reduced amount, since they had previously rejected the higher amount. The plan was confirmed the first time because other classes of creditors voted for it.

Banmiller, who had been hoping to get the airline out of bankruptcy in less than a year, nearly met his objective but was still happy.

"We got a bump along the way, but we did it," he said.

The bump came when the federal Pension Benefit Guaranty Corp. appealed the confirmation of Aloha's reorganization plan shortly before Dec. 15, when Aloha had planned to emerge from bankruptcy. The carrier filed for Chapter 11 protection from creditors on Dec. 30, 2004.

Until PBGC attorney Stephen Schreiber made the call yesterday morning to the agency's executive director, Brad Belt, it appeared that Aloha's attempt to get out of reorganization would be quashed again. The pension agency, which had reached a tentative settlement with Aloha in December, filed a motion before the hearing yesterday to oppose the confirmation of Aloha's reorganization plan, saying the airline repeatedly had sought modifications and additions to the agreement in principle.

"One thing the PBGC wants to make clear is the principle that we've been fighting for all along, which is that companies cannot merely transfer their pension plans to the PBGC as a matter of convenience or because an investor desires it," PBGC spokesman Randy Clerihue said. "You have to meet legal criteria ... which we don't think (Aloha was meeting) earlier on in this case."

The agreement with the federal agency calls for Aloha to keep a pension plan covering 28 employees in the Transport Workers Union but terminate three other pension plans covering the Air Line Pilots Association, the International Association of Machinists and Aerospace Workers, and nonunion employees. The pilots and machinists, who both had "me too" clauses in their new contracts that called for all the union pension plans to be treated the same, waived that provision to get the settlement approved.

In return, the pension agency agreed not to file any more appeals, and Aloha agreed to pay the agency $1.25 million to satisfy its administrative and priority bankruptcy claims. In addition, Aloha agreed to allow the PBGC to have unsecured claims of $154.4 million against the carrier for the terminated pension plans. The agency would be paid on a pro-rata basis with other unsecured creditors and would get 70 percent of the available proceeds.

Banmiller said all systems are now go for Aloha, which has been infused with $63 million in cash from its new investors, including Yucaipa Corporate Initiatives Fund I LP, headed by billionaire grocery magnate Ronald Burkle, and Aloha Aviation Investment Group, led by former National Football League star Willie Gault.

They will be joined by the Ing family partnership of Richard Ing and his sister, attorney Louise Ing Stich, both of whom are among the current owners of the airline; Hawaii developer Stanford Carr; Duane Kurisu, who has Hawaii commercial real estate and communications holdings; and Colbert Matsumoto, president of Island Holdings Inc. Kurisu and Matsumoto are board members of Oahu Publications Inc., publisher of the Honolulu Star-Bulletin and MidWeek.

GMAC, the finance arm of General Motors, is putting in $750,000 in cash.

Aloha said it will have available $35 million in exit financing but it plans to draw only $15 million of that.

"For '06, our plan is to stabilize with our new capital structure, which is going to be fabulous," Banmiller said. "We're going to have one of the best capital structures in the industry on (an equity-debt) ratio basis and focus on blocking and tackling and working with our employees who have gone through a lot this past year. There's no question ... our new ownership structure wants us to grow."

Article URL: http://starbulletin.com/2006/02/03/business/story02.html

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January 27, 2006

Aloha Airlines achieves deal to
ascend from bankruptcy

By Dave Segal, Honolulu Star-Bulletin

Aloha Airlines has reached a new deal with its investors that soon could fly the carrier out of bankruptcy.

The company, whose emergence from bankruptcy was delayed last month by an appeal from the federal agency that guarantees pension plans, filed a motion yesterday seeking a hearing Tuesday before Bankruptcy Judge Robert Faris on a restructured reorganization proposal.

A NEW BEGINNING

Key features of Aloha Airlines' modified reorganization plan:

» $43.25 million in cash from the Yucaipa Corporate Initiatives Fund I LP

» $16.8 million in cash and converted debt from the Aloha Aviation Investment Group

» $2.2 million from Aloha Hawaii Investors LLC, consisting of the Ing family partnership of Richard Ing and his sister, Louise Ing Sitch; Hawaii developer Stanford Carr; Duane Kurisu; and Colbert Matsumoto

» $750,000 from GMAC

» $35 million in exit debt financing

» $4.5 million in cost savings

Aloha also is asking for a waiver of the 10-day comment period if Faris approves the new plan....

David Banmiller, president and chief executive of Aloha, said in a statement yesterday that he hopes the modifications allow for a successful completion of Aloha's bankruptcy reorganization and the recapitalization of the company.

"The new equity investment clearly strengthens Aloha's financial position and has the added advantage of participation by new Hawaii investors," Banmiller said.

Aloha's new plan includes $43.25 million in cash from the Yucaipa Corporate Initiatives Fund I LP, headed by billionaire grocery magnate Ronald Burkle, and $16.8 million in cash and converted debt from Aloha Aviation Investment Group, led by former National Football League star Willie Gault. Yucaipa's cash investment is a $10 million increase from its previous proposal.

In addition, $2.2 million in cash is coming from a new group, Aloha Hawaii Investors LLC, which consists of the Ing family partnership of Richard Ing and his sister, attorney Louise Ing Sitch, both of whom are among the current owners of the airline; Hawaii developer Stanford Carr; Duane Kurisu, who has Hawaii commercial real estate and communications holdings; and Colbert Matsumoto, president of Island Holdings Inc., the parent company of Island Insurance.

Kurisu and Matsumoto are board members of Oahu Publications Inc., publisher of the Honolulu Star-Bulletin and MidWeek....

GMAC, the finance arm of General Motors, also is putting in $750,000 in cash....

Included in the new cost savings are the elimination of a proposed $2 million note and $175,000 cash distribution to Aloha's unsecured creditors. The total amount of unsecured claims against the carrier is approximately $207 million, according to the motion, and it is uncertain how many cents on the dollar unsecured creditors will get. However, the motion said the recovery to unsecured creditors under the modified plan will be reduced by less than 1 percent from what creditors were going to receive under the previous plan. Under that plan, unsecured creditors were expected to receive less than 5 cents on the dollar.

The attorneys and advisers connected with the case also have agreed to reduce their fees collectively by $1 million.

Aloha said in its filing that all key constituents support the plan and that it must be approved expeditiously.

"If not," the motion said, "there is the distinct possibility that (Aloha) could run out of cash and would be forced to cease operating, rendering 3,500 residents of the state of Hawaii unemployed, and severely harming the state of Hawaii's passenger and cargo operations."

The new deal became necessary when investors Yucaipa and AAIG balked after Aloha failed to emerge from bankruptcy by a Dec. 15 deadline. Aloha's first reorganization plan was approved on Nov. 29.

Aloha, which filed for bankruptcy on Dec. 30, 2004, saw its goal of emerging from Chapter 11 in less than a year thwarted when the federal Pension Benefit Guaranty Corp. filed several last-minutes appeals last month. The agency and Aloha have since reached a tentative settlement, though details have not been disclosed.

Aloha blamed the PBGC's appeals and rising fuel prices for the need to restructure the deal.

"These cost increases make the original plan's capital and price structure unworkable," the motion said.

http://starbulletin.com/2006/01/27/news/story04.html

Honolulu Star-Bulletin

BOARD OF DIRECTORS

David Black, Dan Case, Dennis Francis,
Larry Johnson, Duane Kurisu, Warren Luke,
Colbert Matsumoto, Jeffrey Watanabe, Michael Wo

Dennis Francis, Publisher

Lucy Young-Oda, Assistant Editor

Frank Bridgewater, Editor

Michael Rovner, Assistant Editor

Mary Poole, Editorial Page Editor


December 14, 2005

Ruling on pension critical for Aloha

By Dan Nakaso, Honolulu Advertiser

The future of Aloha Airlines will come down to an appeal that will be decided tomorrow in U.S. District Court over whether Hawai'i's second-largest airline can turn its pension responsibilities over to the federal Pension Benefit Guaranty Corp.

U.S. Judge Michael Seabright late yesterday agreed to rule on PBGC's appeal tomorrow afternoon, the same day that Aloha attorneys say the airline's current funding expires.

Aloha officials also hope that a ruling in their favor will clear the way for Aloha to exit bankruptcy under new owners, who will inject up to $100 million in new capital.

Attorneys for Aloha Airlines and Aloha Airgroup, Inc. have said that terminating the employee-defined benefit plans is a condition of Aloha's prospective new owners, California billionaire Ron Burkle's Yucaipa Companies and former NFL football star Willie Gault's Aloha Aviation Investment Group.

"Without a replacement loan, this company is dead," Aloha attorney David C. Farmer told Seabright. "It will shut down. These two events are on a collision. ... It's a matter of life or death to the company."

Seabright's decision to hear the PBGC's appeal capped a flurry of legal activity that began yesterday morning in U.S. Bankruptcy Court, where Judge Robert Faris told Aloha's attorneys there was "no way" they would be able to proceed with their plans to exit bankruptcy by tomorrow.

"I hope you have a Plan B," Faris said.

But Seabright agreed to speed up PBGC's appeal to meet Aloha's deadline tomorrow.

"It puts a lot of pressure on me," Seabright said. But he cited "the irreparable harm" to Aloha and its nearly 3,600 employees if he did not hear the appeal.

"Now that all of the facts have been established, new contracts have been ratified by all Aloha employee bargaining groups and creditor issues have been resolved," Aloha said in a statement yesterday, "it is unfortunate that the PBGC is challenging the court's order confirming Aloha's plan of reorganization. ... We believe that it is in everyone's best interest for the PBGC to revisit its appeal, respect the court's order confirming Aloha's plan to exit bankruptcy and work with Aloha to complete this transaction."

Attorneys for the PBGC did not return telephone calls seeking comment.


September 23, 2005

$100M bid made for Aloha Airlines

By Rick Daysog Advertiser Staff Writer

A California billionaire and his partners have agreed to buy Aloha Airlines with a $100 million investment that will allow Hawai'i's No. 2 carrier to emerge from bankruptcy by the end of the year.

Aloha has signed a letter of intent with billionaire Ron Burkle's Yucaipa Companies and Aloha Aviation Investment Group LLC, which is led by former professional football standout Willie Gault. Yucaipa will become the new majority shareholder.

The deal, which requires court approval, breathes new life into Aloha and ensures that travelers in Hawai'i will continue to have two fierce competitors in the interisland air market....

Hawaiian Airlines, the state's largest airline on the basis of revenue, was bought by a California investment company, Ranch Capital LLC, earlier this year and emerged from bankruptcy in June.

The $100 million investment into Aloha will allow the 3,600-employee company to preserve jobs, continue operating at current levels and pay off more than $65 million it owes to its lenders, the company said.

"This clearly gives us the platform to exit bankruptcy by the end of the year," said David Banmiller, Aloha's chief executive officer. "It creates a positive sense of momentum in the company."

Banmiller will remain as the airline's chief executive officer. The company's longtime owners–the heirs of local investor Hung Wo Ching and developer Sheridan Ing–will become minority shareholders.

The Ing and Ching families will continue to be represented on the company's board of directors. The airline's senior management team will remain in place.

Aloha will remain privately owned.

With nearly $500 million in annual revenues, Aloha operates about 700 weekly interisland flights and about 140 weekly flights to the Mainland. Aloha filed for bankruptcy protection in December because of rising costs due in large part to higher prices for jet fuel.

Banmiller met with about 400 of Aloha's employees at the Honolulu airport yesterday to announce the deal.

Banmiller said later in an interview that Aloha's primary concern will be to emerge from bankruptcy and stabilize its operations. During the past several years, the price for jet fuel has more than doubled to $2 a gallon, forcing the airline to make significant cost cuts.

Since December, the airline has reduced its costs by $60 million a year, Banmiller said.

According to Aloha, the new investors have a proven track record in working with distressed companies.

Yucaipa, founded by Burkle in 1986, is a private equity investment firm that has taken part in more than $30 billion worth of mergers and acquisitions. In June, the company invested $150 million for a 40 percent stake in Pathmark Stores Inc., a New Jersey-based grocery store operator.

AAIG is a private equity firm managed by Gault, a former All-Pro wide receiver for the Chicago Bears. Gault, who is a principal in Los Angeles-based IBS Capital Holdings, and other investors in AAIG recently acquired ERA Aviation Inc., a regional airline serving Alaska.

In a bankruptcy court filing yesterday, Aloha provided a summary of a reorganization plan, which it will submit in the next few months to the bankruptcy court for approval.

According to the summary, Aloha intends to pay off more than $65 million borrowed from Ableco Finance LLC and Goldman Sachs Credit Partners LP after the carrier filed for bankruptcy. The airline also will repay some $4.7 million in loans issued to the company from the Ing and Ching families.

The summary did not say how much other creditors will receive when Aloha emerges from bankruptcy.

Aloha also said that it may exclude payments to employees' pension plans but did not provide details.

Mike Feeney, a spokesman for the 340-member Aloha chapter of the Air Line Pilots Association, said union members look forward to working with the new investors. Since December, pilots have agreed to about $12 million in wage concessions, and many have been frustrated by the "slow pace" of the bankruptcy proceedings, he said.

"This will take us out of bankruptcy and it will help us explore new growth opportunities," said Feeney.

For Banmiller, the deal culminated several months of on-and-off deal-making. The airline, which was down to about $3 million in cash when it went into bankruptcy, initially courted Maitlin Patterson Global Opportunities Partners this past spring, but the deal fell through.

Founded in 1946 as TransPacific Airways by local publisher Rudy Tongg, Aloha has had a long tradition of local ownership. In 1986, then-Chairman Hung Wo Ching and Sheridan Ing fought off a takeover attempt from Dallas-based CNS Partners by taking the company private.

"The Ching and Ing families are proud to have supported Aloha for more than half a century," said Han Ching, chairman of Aloha Airgroup Inc., the airline's parent company, in a news release.

"We look forward to being actively involved in the future of this company with our new partners."


March 21, 2004

CONCERNS RAISED OVER

CONSULTANTS TO PENSION FUNDS

By MARY WILLIAMS WALSH, New York Times

A small but growing part of the $2 trillion in state and local pension funds is being steered into high-risk investments by pension consultants and others who often have business dealings with the very money managers they recommend. After making such investments, a few of these pension funds have come up short, forcing the governments to draw on tax dollars.

The Securities and Exchange Commission is so concerned that it has begun an inquiry into the practices of pension consultants, who serve as gatekeepers for thousands of money managers.

The regulators will find not just financial consultants but a web of intermediaries -- marketing agents, lobbyists, brokers and world leaders -- between pension funds and the investments they choose.

Some play surprising roles. Former President Bill Clinton meets with pension trustees on behalf of the Yucaipa Companies, a private firm that seeks financial returns through social investing. Ehud Barak, the former Israeli prime minister, persuaded the Pennsylvania teachers' pension fund to commit $125 million to SCP Private Equity Partners, a firm that invests in Israeli military technology. New York's former state comptroller, H. Carl McCall, encouraged the Illinois teachers' pension fund to place $20 million in Healthpoint, a private firm that invests in orthopedic devices companies.

Some pension consultants play host to gatherings that showcase such famous people to pension officials. Money managers may pay tens of thousands of dollars to participate and often supply the marquee talent. Consultants, meanwhile, are being paid by the pension funds to track and rate the money managers but may take money from the managers for other services.

Under the consultants' watch, more money is flowing into private or alternative investments, which are not publicly traded like stocks and bonds and whose performance cannot be tracked in any agreed-upon way. Private investment pools attracted virtually no state pension money a decade ago, but the typical state pension fund now has nearly 5 percent of its assets in them, and some states have far more.

Though such unregulated investments offer the potential for high returns, they carry more risk than conventional stocks and bonds. A few governments have lost money. Richard Holbein, a pension consultant in Dallas, put the Arkansas teachers' pension fund in touch with Andrew S. Fastow, then chief financial officer of Enron, who was pitching investments in one of Enron's off-balance-sheet entities. Arkansas committed $30 million and may have lost it all.

Another of Mr. Holbein's clients, the Louisiana teachers' pension fund, committed an unusually large part of its portfolio to private equities and other alternative investments at his recommendation. Because of recent losses, Louisiana and its taxpayers must contribute $589 million to the pension fund -- $147 million more than last year.

Louisiana fund officials and Mr. Holbein say that private equity tends to be a volatile investment with unexpected swings from year to year, but the overall approach remains sound and does not present a long-term problem for the fund.

In other cases, pension money is landing in investments that deduct big fees. Some of the costs may not be clearly disclosed, and some may be wholly unnecessary.

The Chicago teachers' pension fund was about to commit $35 million to a Boston real estate partnership last December when one official noticed that nearly 2 percent of the money would go to the consulting firm of Edward M. Kennedy Jr., the senator's son, which the real estate developer had retained to market the investments. Normally, pension funds are not billed for marketing fees. The teachers' fund refused to pay and was permitted to invest anyway.

Specialists say the structure of public pension funds leaves them particularly vulnerable. Fund boards are responsible for investing hundreds of millions of dollars, but only the biggest ones can afford professional investment staffs. Public trustees are often drawn from the ranks of firefighters, teachers and other public employees whose retirements they are protecting. They often have little financial training and are expected to serve as volunteers. Most public funds therefore rely heavily on consultants, even though the consultants may have business ties with the very money managers they are supposed to help select.

''In my opinion, there is a mismatch,'' said Brian N. Minturn, who was fired last year by the Louisiana teachers' pension fund. He said he was dismissed after he raised concerns that the prominent Dallas investment firm of Hicks, Muse Tate & Furst was plying the trustees and their consultants with food and drink, and taking them on golf excursions, hunting trips and other outings that he thought distracted them from their fiduciary duty to vet investments prudently. An ethics panel ultimately found that some pension officials, Mr. Holbein and Hicks, Muse had violated state ethics laws.

''On the side of the pension fund, you may have food-service workers on $35,000 a year, and they never get to do any of this kind of stuff,'' he said. ''And on the side of the alternative investments, there is very high-powered talent, and very strong motivations, to go out and get whatever you can.''

What the investment community wants, of course, is big blocks of money.

''If you look at where the money is, it's kind of what Willie Sutton said about why he robbed banks,'' said Mr. Minturn, who once worked for Fidelity Investments and the Invesco funds. ''Pension funds are just these huge piles of money.''

Consultants and many pension fund officials say that they are not being swayed by business relationships, and that private equities are an important tool in their portfolios, when used in moderation.

''Our board does believe in diversifying our portfolio into some active investments that are riskier,'' said Brad Pacheco, a spokesman for the California state employees' pension fund, known as Calpers. ''They do it to add value to the fund.'' In some cases, pension officials say they also choose alternative investments to achieve other goals, like local development.

Mr. Minturn and some other concerned pension specialists said they had no objection to private investment partnerships per se, but questioned the appropriateness of investing public pension money in them. Because the assets are not publicly traded, they cannot be sold quickly to raise cash; they have no listed price, and their performance cannot be tracked or evaluated in conventional ways. They also involve fees much larger than those for publicly traded stocks or simpler investments. They sometimes generate large profits, but not always, and the partnerships are usually structured so that the outside investors -- like pension funds -- bear most of the risk.

A few states and municipalities bar pension funds from investing in private equities. Most states limit these investments to a small share of their portfolios. Data compiled by Wilshire Associates, the investment advisory company, suggests that the average state pension fund had 4.7 percent of its assets in private equities last year.

By Wilshire's count, the Louisiana teachers' pension fund had 18 percent of its portfolio in such investments last year. But when its total commitment over time to various private partnerships is calculated -- and the state cannot really back out of these pledges -- Louisiana had at one point committed 42 percent of its assets to what it calls ''alternative investments,'' according to state pension plan documents.

Mr. Holbein said that Louisiana's investment problems were unforeseeable. Though some individual private equity funds may falter, he said he believed that they could produce higher returns than publicly traded stocks on the whole. He advocated a high level of alternative investments for Louisiana, he said, because a state law requires the teachers' pension fund to accumulate money quickly to reach full funding. More conservative investments will not provide adequate gains, he said.

In December, the S.E.C. sent 12-page letters to about two dozen pension consultants, requesting extensive information about what they do for pension funds, how they are paid and how their pension work may conflict with their other business operations. The agency appears to be trying to learn how often pension consultants work for both sides of the table, receiving compensation from their pension clients and money managers. Lori A. Richards, director of the commission's inspections unit, said the study was still in progress and the commission had not drawn any conclusions.

Pension consultants sort money managers into asset classes and build databases using their own criteria to help trustees compare and select managers. Some consultants also sell their databases and tracking software to money managers and even sell advice on how to achieve higher rankings.

A 2002 audit of Hawaii's pension fund found that its consultant, Callan Associates, had recommended 16 money managers over time -- and 14 of them were paying Callan for marketing advice and other services. ''The consultant's objectivity could be suspect,'' said the state auditor, Marion M. Higa, calling for further scrutiny. She noted that the Hawaii fund's overall five-year investment performance ranks in the bottom 5 to 15 percent nationwide.

A Callan spokeswoman said that Hawaii's trustees stood by Callan after the audit, issuing a statement calling it ''a highly regarded investment advisory firm with an unblemished reputation for integrity.'' In a statement, Callan said that it kept its various business lines separate and that it told all money managers that they would not win preferential treatment from Callan's pension consultants by buying other Callan services.

Early this year, Wilshire Associates took steps to make its pension consulting work more independent of its other lines of business, and the leader of its consulting and asset-management units left the firm. '”Wilshire has never participated in 'pay to play,'” a spokeswoman said.

Many consultants hold educational conferences for pension trustees. The trustees pay a modest admission fee or none at all; the costs are borne by money managers, who pay tens of thousands of dollars for the chance to attend and meet the trustees. The more they pay, the more influence they tend to have over content and the more access to trustees, from leading workshops to closer seating assignments.

CRA RogersCasey, a consulting firm, charges money managers $35,000 to $40,000 to send two representatives to its gatherings, which take place at resorts and in the past have featured speakers like retired Gen. H. Norman Schwarzkopf; Colin L. Powell, now the secretary of state; and Mary Matalin, the Republican political strategist.

Mercer Investment Consulting, a large firm that is a unit of the Marsh & McLennan Companies, charges money managers $35,000 to $58,000 a year to attend its conferences. This month, Mercer sent a letter to its clients, telling them it had complied fully with the S.E.C.'s request for information and outlining its other business activities, like software sales and investment conferences.

''Making these products and services available to the broader investment community does not in any way impact our objectivity,'' the letter said.

Bill Clinton addressed at least two public trustees' conferences last year and was well received, said Jack Silver, a former trustee of the Chicago teachers' pension fund who attended both. Mr. Silver has been an outspoken critic of the undisclosed business relationships of pension intermediaries, but he said Mr. Clinton made useful remarks about the economy -- not a sales pitch -- and that the trustees benefited from his appearance. So, he added, did Mr. Clinton's sponsor, Yucaipa. ''It's marketing,'' Mr. Silver said. ''When you have somebody like him, people remember.''

Yucaipa's managing partner, Ronald W. Burkle, is a billionaire and has been a substantial donor to many politicians, including Mr. Clinton and several past and present trustees of Calpers. In 2001, Calpers voted to commit $450 million to three Yucaipa private investment funds, which are designed to generate returns and societal benefits, by financing neglected businesses in poor neighborhoods and companies that treat workers conscientiously. Calpers' most recent annual report showed that these funds have drawn about $51 million in total investments and related fees, and have so far not produced returns.

A Calpers spokesman said that private investment funds routinely draw on the partners' capital in the first few years, and pay returns only later. He also said the commitment to Yucaipa's funds is only a small part of Calpers's $164 billion portfolio. Yucaipa said its fledgling investments were poised to bear fruit, but it could not provide additional information last week.

Some pension officials say they find the out-of-office politicians useful liaisons. Jon Bauman, the executive director of the Illinois teachers' pension fund, said his board had been considering an investment in Healthpoint when Mr. McCall became vice chairman. His arrival ''added to a favorable opinion,'' Mr. Bauman said.

 


< < < FLASHBACK < < <

April 11, 2002

Jobless no longer!

Bill Clinton has a steady job!

By Vasily Bubnov, Pravda

Finally, the ex-president of the USA has a steady job.

Now, Bill Clinton is a leading consultant with investment companies Yucaipa American Fund and Yucaipa Corporate Initiatives Fund, owned by Ron Burkle, a friend of Bill Clinton. Ron Burkle made his fortune on a network of grocery supermarkets.

The RosBusinessConsulting news agency reports that the ex-president will be in charge of meetings and talks with political leaders and presidents of companies for further investing.

Mr. Burkle says, “I am proud that Bill Clinton will be a consultant with our company.”

No information about the salary of the new employee was published, but it was said his salary will depend on the company’s financial showings. Still, the sum is sure to be large.

On the whole, it is not a sensation that the ex-president will be working as a consultant. The majority of his predecessors preferred to earn their living by consulting for different companies. Such people with their wonderful connections in politics and business are really useful for companies.

Bill Clinton had no regular work for two years already. He delivered lectures and wrote memoirs that brought large and easy earnings. The ex-president needed money to cover his debts to the attorneys who worked for Mr. Clinton during his presidency.

So, good luck with your new job, Mr. Ex-President!

Are any trainees coming to the office as well?

Translated by Maria Gousseva

Read the original in Russian: http://pravda.ru/main/2002/04/11/39605.html


 

April 14, 2002

Jesse lands sweet deal for buddy Bill

Pittsburgh Tribune-Review

BEST OF FRIENDS.

Looks as though the Rev. Jesse Jackson has helped his good buddy, former President Bill Clinton, land a cushy job with a California investment firm.

The Associated Press reported last week that Clinton will serve as counsel to the Yucaipa American Fund and the Yucaipa Corporate Initiatives Fund, both headed by billionaire former supermarket magnate Ron Burkle. He’s a good friend of Jackson’s and a significant campaign contributor to the Democratic National Committee.

Burkle has helped out Jackson in the past. In 1998, Burkle, then CEO of Ralph’s Food Stores, helped two of Jackson’s sons land a lucrative Budweiser beer distributorship in Chicago.

In 1997, Clinton, Jackson and Burkle appeared in Pittsburgh for the AFL-CIO annual convention. A year later, Jackson and Burkle were part of a large entourage that accompanied Clinton on a trip to Africa.

The Yucaipa American Fund was formed in February by Burkle’s company. It is funded primarily from investments by the California Public Employees Retirement System.

Curiously enough, Burkle has been a significant campaign contributor to both California Gov. Gray Davis and San Francisco Mayor Willie Brown, who just happens to be a trustee of the pension system.

Probably just a coincidence....

For more poop on Bill Clinton, GO TO > > > Hail to the Chief!


 

May 26, 2002

CalPERS invested $700 million

with Davis donor

Billionaire also made contributions
to pension board members

Lance Williams, San Francisco Chronicle

The California Public Employees Pension System steered $700 million in investment capital to a wealthy financier who has donated more than $600,000 to Gov. Gray Davis and thousands more to officials who serve on the CalPERS board, according to state records.

According to the records, in the past year the CalPERS board has twice voted to make multimillion-dollar cash infusions in venture capital funds controlled by billionaire financier and supermarket magnate Ron Burkle of Los Angeles.

He is a heavy-hitting political donor with close ties to Davis and other top Democrats, including CalPERS board members San Francisco Mayor Willie Brown and state Treasurer Phil Angelides.

Since 1998, Burkle has donated $609,000 to Davis' gubernatorial campaigns, and last year his Golden States Foods firm hired Davis' wife to serve on its board of directors.

The governor controls four appointments to the 13-member CalPERS board, but a spokesman said Davis plays no role in CalPERS investment decisions.

A CalPERS spokeswoman said the investments in Burkle's concerns were thoroughly vetted and made on the merits. Brown and Angelides acted legally in voting for the Burkle investments, said the spokeswoman, Patricia Macht.

But James Knox, chairman of the reform group California Common Cause, said the affair was troubling on clean-government grounds.

He contended that Brown and Angelides should have recused themselves rather than vote on the Burkle investments because they had obtained donations from him. And Knox said the scenario of a major donor seeking investment funds from CalPERS was "a concern because it puts the governor's appointees in a position where they can show favor to a major campaign contributor."

Charlie Oates, who publishes an independent newsletter for CalPERS pensioners, said the board should pursue more conventional investments and steer clear of investments involving their political benefactors.

"It's a public pension trust fund for the benefit of the members of the system and not for the benefit of the politicians," he said. "As trustees, they should be more concerned with running the trust and taking care of the beneficiaries."

Roger Salazar, Davis' spokesman, said the criticism was unfair....

Burkle is a self-made billionaire who rose from grocery store clerk to owner of the Ralph's/Food 4 Less chain. Today he lives in Greenacres, a Beverly Hills estate once owned by silent film star Harold Lloyd, and is CEO of the Yucaipa Companies investment concern.

Burkle is a longtime Democratic activist, and since 1998 he has donated $1.9 million to Democratic candidates and causes in California, state records show. Davis is his single biggest beneficiary.

According to Yucaipa spokesman Ari Swiller, the financier's friendship with Davis goes back 20 years, to the days when Burkle was a supermarket owner and Davis was an assemblyman pushing the idea of putting photos of abducted children on milk cartons....

They share other connections as well. Swiller, Yucaipa's spokesman, also serves as Davis' campaign treasurer. Davis' wife, Sharon, helped run Burkle's charitable foundation in the 1990s, and last year she went on the board of Golden State Foods, a Yucaipa-owned firm.

Burkle also has a long-standing connection to Mayor Brown, whom Davis appointed to the CalPERS board. From 1993 through 1995, while Brown was speaker of the Assembly, he moonlighted as a lawyer for Burkle's Food 4 Less chain, earning more than $30,000, state records show. Burkle's companies also donated $59,000 to his legislative campaigns.

After Brown became mayor of San Francisco, Burkle donated $100,000 to help underwrite the 1997 U.S. Conference of Mayors meeting in San Francisco.

The billionaire also became involved in efforts to redevelop Treasure Island in San Francisco. In 1999, a firm backed by Burkle and headed by Darius Anderson, a Sacramento lobbyist who has worked as a fund-raiser for both the governor and Brown, was chosen by the mayor's office to develop a marina at Treasure Island...

CalPERS records show that Burkle's Yucaipa Corporate Initiative Fund obtained $200 million in investment capital via what the pension fund styled its "California initiative."

That strategy, announced in June 2000, is intended to boost economic development by pumping funds into what it called "underserved" areas, including rural and inner-city areas.

CalPERS consultants and staff reviewed more than 60 investment proposals, and finally recommended 11 investment firms, the records show.

In May 2001, the board unanimously approved the plan. Yucaipa's $200 million share was quadruple what any of the other firms obtained, the records show.

While the matter was pending, state records show Burkle hosted a fund- raiser for Davis and donated $20,000 to his campaign. He also donated $25,000 to Angelides, and made a series of other political donations, including $100, 000 to the state Democratic Party.

After Yucaipa obtained the $200 million investment, the firm pitched CalPERS on backing the Yucaipa America Fund, an investment fund that proposed to tap labor union pension funds for a venture capital fund....

In November, at a closed meeting, the CalPERS board voted to commit $500 million to the fund.

While that matter was pending, state records show Burkle hosted two more fund-raisers for Davis and donated $50,000 to his campaign. Less than three weeks after the vote, Burkle also hosted a fund-raiser for Angelides.

Macht said that in both Burkle investments the CalPERS staff had negotiated excellent terms to protect pensioners' investment and maximize return. No one in the governor's office ever contacted CalPERS staff about either matter, she said.

The $150 billion CalPERS pension fund is run by a 13-member board of state officials and representatives of pensioners and other interested groups.

Controversy over political donations has occasionally roiled CalPERS. In 1998, CalPERS voted to bar board members from obtaining political donations from firms that sought or were doing business with the pension fund.

The action came after the Los Angeles Times reported that state Controller Kathleen Connell and then-state Treasurer Matt Fong had obtained $400,000 in political donations from CalPERS contractors. Connell denied wrongdoing and successfully sued to overturn the ban, which is no longer in effect.

Earlier this month, the co-founder of a vineyard development firm that had recently obtained a $100 million investment from CalPERS hosted a $2,500-per- head political fund-raiser for Davis in San Francisco.

Backers of GOP gubernatorial candidate Bill Simon accused Davis of using CalPERS to raise funds for his re-election drive, but Davis and Richard Wollack, co-CEO of Premier Pacific Vineyards, said there was no connection between the investment and the fund-raiser...

For more poop on CalPERS, GO TO > > > A Connecticut Yankee in King Kamehameha’s Court; The Great Nest Egg Robberies


 

January 4, 2005

Aloha Airlines in first

bankruptcy hearing

Pacific Business News

Federal bankruptcy judge Robert Faris, now handling the bankruptcies of both Hawaiian Airlines and Aloha Airlines, said at Aloha's hearing Monday that he will take care to see that neither airline is put at a disadvantage by his rulings concerning the other.

That promise by Faris will reassure Aloha CEO David Banmiller, who has said he filed for Chapter 11 bankruptcy last Thursday in part because receivership had allowed Hawaiian to obtain a cost edge by renegotiating leases and other contracts.

Companies in Chapter 11 have the power to back out of contracts. The implicit threat of this allows them to renegotiate agreements with lenders and vendors, obtaining better terms. Outside of bankruptcy, a contract is a contract. Hawaiian has won new terms for jet leases, while Aloha has been locked into much higher rates.

Aloha is privately held by two local families, descendants of Hung Wo Ching and Sheridan Ing, and the airline revealed Monday that the families had offered to lend the airline $3 million in operating cash.

The parallel bankruptcies put Faris in the position of having unique access to operating information about the rival airlines. Ordinarily the airlines would not share such information with other. Both airlines operate a combination of interisland short-haul and trans-Pacific long-haul flights, though Aloha has more of the former and Hawaiian has more of the latter.

www.bizjournals.com/pacific/stories/2005/01/03/daily22.html

# # #

 


 

MORE TO COME


Meanwhile, you can peruse more buzzard poop by flying to....

AIG: The American Idol of Greed

Allied World Assurance

Aloha Airlines: Flying with the Bankruptcy Buzzards

Tracking The Flock of AIPAC Vultures

Apollo Advisors

An Octopus Named Wackenhut

Bank of America

Bank of Hawaii: Behind the Blinds

Bank of Honolulu

The Bankruptcy Buzzards

The Strange Saga of BCCI

The Blackstone Group

Blackwater

The Boyd Group

Buzzards in the Halls of Justice

Buzzards of Paradise

The Carlyle Group

Central Pacific Bank

Cesspool

Chasing Down the Cerberus Vultures

The Chubb Group

Citigroup: Vampires in the City

Confessions of a Whistleblower

Conseco: Birds in the Trailer Park

The Story of Enron

Dirty Gold in Goldman Sachs

Dirty Money, Dirty Politics & Bishop Estate

Delta Airlines

First Hawaiian Bank

GM: Possessed by Legions of Demons

Hawaiian Airlines

Homeland Security

Marsh & McLennan: The Marsh Birds

Marsh & McLennan’s Mercer Consulting

Merrill Lynch

Nests of the Insurance Vampires

The Eagle Hooded

The Great Nest Egg Robberies

The Lizards in Lazard Freres

Northwest Airlines

Pan Am Airlines

PGMA

Predators in Paradise

The Eagle Hooded: The 9-11 Coverup

The Puna Connection

RICO in Paradise

Ron Rewald: Flying High in Hawaii

Sukamto Sia: The Indonesian Connection

The Vultures in Maunawili Valley

Vultures in The Meadows

Who’s Guarding the Hen House?

~ o ~


 

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Originally posted: November 14, 2007, by The Catbird

Last Updated: April 9, 2010

 

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