People in the media often ask me to give them examples of frauds that began in
Iran-Contra and continue to this day, albeit under different names.
It’s essentially the same fraud and the same cast of characters.
The examples I always give (about which I have substantive information, since I
was involved in all three of the original frauds and also involved in marketing some
of the partnerships for the secondary fraud) are the Ocean Reef Development
Group, Ltd., the Omni Development Group, Ltd., and the Tri-Lateral
Investment Group, Ltd.
Who are the common players who are links between all three deals during Iran-Contra?
They are Frank Carlucci and Richard Armitage.
When Frank Carlucci and Richard Armitage left government service immediately
after Iran-Contra (they literally had to leave in order to avoid being subpoenaed as
part of the overall coverup), they became principals with Pete Peterson, the
infamous Republican player and GOPAC money launderer, in the Blackstone
Investment Group, which is a big organization.
Then they simply continued the same real estate development frauds which
were begun under Iran-Contra.
This time all the original deals went bankrupt. A certain set of banks got burned.
The property reverted to them, and then they refinanced the property again
Subsequently they entered into an arrangement with another similar sounding
company (there’s always been some confusion) the Capstone Development Group,
which was also a post-Iran-Contra creature.
They are two separate organizations.
Some people will try to claim that Capstone was simply a subsidiary of Blackstone.
It is not. It is a separate company. Look at the directors. They are none other
than Larry Eagleburger and Bernie Aronson, former co-workers of Frank Carlucci
and Assistant Secretary of State, Richard Armitage.
However, the real estate frauds continued essentially until the early 1990s. It’s
interesting to note how former government officials who were in the Reagan-Bush
Administration during Iran-Contra profit by subsequent frauds – post-Iran-Contra
frauds, if you will.
For instance, in 1994-95, there was the great Mexican Diversion Fraud, when
Blackstone immediately opened an office in Mexico City to take advantage of
American taxpayers’ money being lent to Mexico vis-a-vis the OCED and OPEC and
other United States lending and/or guaranteeing agencies.
The opportunity to commit fraud against the United States Treasury during that
Mexican bailout was just like a walk in the park.
You buy a busted out Mexican company for pennies on the dollar, pump it up, make
it look nice, make sure you’ve got your hands out for a twenty or thirty million
dollar loan from somebody else, like the IMF, or a direct United States lending
agency, and you would be given Brady Bonds which could then be rehypothecated.
And it was such a scam.
Dinnerstein alone documented $130 million of fraud committed by former officials
of the Reagan-Bush Administration during the “Great Mexican Turkey Shoot” as
it became known.
And then what happened?
The Russian bailout.
Blackstone suddenly opened an office in Moscow and promptly proceeded to do
the same thing again. This time they were raping and pillaging the American
taxpayer with the same corporate schemes to get money out of U.S. agencies
and/or collateral guaranty or fidelity instruments that could be rehypothecated.
It’s exactly the same scheme.
It was another$38 million of fraud according to our estimates at the time.
To follow fraud from the Iran-Contra period and to continue to do it to this day –
just look at where the Blackstone Investment Group is opening up offices in the
Visit one of the best sites on the internet at: www.almartinraw.com/
$ $ $
Bush Donor Profile
Stephen A. Schwarzman
Occupation: President, CEO & Co-founder
Employer: Blackstone Group
Home: New York City, NY
Stephen Schwarzman joined Lehman Brothers investment bank (see Stephen
Lessing) in 1972, eventually heading its mergers and acquisitions unit. In fact,
Schwarzman initiated the failed 1980s merger of Lehman with American Express.
Schwarzman quit in 1985, co-founding the Blackstone Group with his ex-Lehman
mentor, Peter Peterson, who was commerce secretary under President Nixon.
Blackstone leveraged connections to become the biggest buyout fund in the world.
Early Blackstone hires included Reagan Budget Director David Stockman and
Roger Altman, a top Treasury official under Carter and Clinton. Blackstone also
hired Paul O’Neill as a senior advisor right after President George W. Bush
ousted his first treasury secretary.
Blackstone’s far-flung Hospitality Services Division went on a 1990s hotel-buying
binge that started with lower-end franchises and expanded to luxury hotels such
as London’s Savoy and Washington’s Watergate.
Blackstone’s hospitality division became Cendant Corp. in a disastrous 1997 merger
with CUC International that combined hotel assets with Avis rental cars and real
estate franchises Century 21, ERA and Coldwell Banker.
The next year Cendant reported that it was slashing its reported earnings over
the past three years by $650 million due to widespread accounting fraud at CUC.
Cendant sued Ernst & Young (see Les Brorsen) for certifying CUC’scooked books.
The company, with ex Defense Secretary William Cohen, ex-Canadian Prime
Minister Brian Mulroney and Craig Stapleton (see Dorothy Stapleton) on its
board, then settled investor lawsuits for a record $3.1 billion.
Ex-Cendant Vice Chair E. Kirk Shelton was convicted of federal fraud charges in
On October 17, 2000, eleven months before 9/11, Blackstone Real Estate Advisors,
of The Blackstone Group, L.P, purchased, from Teachers Insurance and Annuity
Association, the participating mortgage secured by World Trade Center, Building
April 26, 2001 the Port Authority leased the WTC for 99 years to Silverstein
Properties and Westfield America Inc.
The transaction was authorised by Port Authority Chairman Lewis M. Eisenberg.
This transfer from the New York and New Jersey Port Authority was tantamount
to the privatisation of the WTC Complex. The official press release described it
as “the richest real estate prize in New York City history”. The retail space
underneath the complex was leased to Westfield America Inc.
On 24 July 2001, 6 weeks prior to 9/11 Silverstein took control of the lease of the
WTC following the Port Authority decision on April 26.
Silverstein and Frank Lowy, CEO of Westefield Inc. took control of the 10.6
million-square-foot WTC complex. “Lowy leased the shopping concourse called the
Mall at the WTC, which comprised about 427,000 square feet of retail space.”
Explicitly included in the agreement was that Silverstein and Westfield “were
given the right to rebuild the structures if they were destroyed”.
In this transaction, Silverstein signed a rental contract for the WTC over 99
years amounting to 3,2 billion dollars in installments to be made to the Port
Authority: 800 million covered fees including a down payment of the order of 100
million dollars. Of this amount, Silverstein put in 14 million dollars of his own
money. The annual payment on the lease was of the order of 115 million dollars.5
In the wake of the WTC attacks, Silverstein is suing for some $7.1 billion in
insurance money, double the amount of the value of the 99 year lease.
Silverstein Properties Inc. is a Manhattan-based real estate development and
investment firm that owns, manages, and has developed more than 20 million square
feet of office, residential and retail space.
Westfield America, Inc. is controlled by the Australian based Lowy family with
major interests in shopping centres. The CEO of Westfield is Australian
businessman Frank Lowy.
The Blackstone Group, a private investment bank with offices in New York and
London, was founded in 1985 by its Chairman, Peter G. Peterson, and its President
and CEO, Stephen A. Schwarzman.
In addition to its Real Estate activities, the Blackstone Group’s core businesses
include Mergers and Acquisitions Advisory, Restructuring and Reorganization
Advisory, Private Equity Investing, Private Mezzanine Investing, and Liquid
Alternative Asset Investing.
Blackstone chairman Peter G. Petersen is also Chairman of the Federal Reserve
Bank of New York and Chairman of the board of the Council on Foreign Relations
(CFR). His partner Stephen A. Schwarzman is also a member of the Council on
Foreign Relations (CFR). Peter G. Petersen is also named in widow Ellen Mariani’s
widow civil RICO suit filed against. George W. Bush, et al.
Kissinger McLarty Associates, which is Henry Kissinger’s consulting firm has a
“strategic alliance” with the Blackstone Group “which is designed to help provide
financial advisory services to corporations seeking high-level strategic advice.”
For details on the insurance claims pertaining to the WTC, see Centre for
Research on Globalization, The WTC Towers Collapse: an Enormous Insurance
Scam (selected articles), http://www.globalresearch.ca/articles/WTC312A.html ,
19 December 2003…
Michel Chossudovsky is the author of War and Globalization, the Truth behind
September 11, Global Outlook, 2002
Mikhail Khodorkovsky, 40, Russia’s wealthiest man, made his first fortunes in
banking. Born in 1963, he was raised in a communal apartment in Moscow by factory
worker parents. As a child, he talked of becoming a factory director, and later he
became an active member in Kommosol (Communist Youth League). He studied
economics at the Mendeleeva Chemical Technical Institute, and in 1987, with
several of his fellow classmates, opened a cooperative, selling computers and
designing software. By 1990, Khodorkovsky had founded Menatep, a bank with
profits rumored to be supplemented by funds controlled by various Kommosol,
Central Committee and KGB groups attempting to divert state funds. When the old
order collapsed, Menatep provided credit to state enterprises and regional offices
while they waited for the new government to establish financial flows.
Khodorkovsky also set up a market for state vouchers, and at this time he gained
control of several enterprises. Through his holding company, Rosprom,
Khodorkovsky snatched up chemical, construction, textile, mining and oil
enterprises. In 1995, he won a controlling stake in the oil giant Yukos for less than
$500 million — today it is Russia’s largest oil company with market capitalization
of $15 billion. In 2003, he became a main target of the Kremlin’s anti-oligarch
crackdown. After raiding his offices and arresting Khodorkovsky’s close business
associate, investigators went after several other people and companies affiliated
with Khodorkovsky for fraud, tax evasion and even murder. In October 2003
Khodorkovsky was seized at gunpoint by Russian federal agents on charges of
fraud and tax evasion.
Founder, Menatep Group
Bank Menatep, Trust Investment Bank and Menatep
International Financial Alliance; investment firms Global
Asset Management, the Blackstone Group, the
Carlyle GroupandAIG Capital Partners: information
technology company Sibintek; telecom operators MKS,
Macomnet, Metrocom, Rascom and Magistral Telecom;
and, through his Open Russia Foundation, several
Russian news publications
Khodorkovsky cultivated relationships with government
officials through his bank, Menatep, which served the
accounts of many state enterprises and regional
governments. Three years before his acquisition of oil
companyYukos, Khodorkovsky was appointed to the
Ministry of Fuel and Energy. In 1996, he was among
the Big Seven, Russia’s most influential bankers who
backed the reelection of President Boris Yeltsin.
Khodorkovsky’s longtime partner, Leonid Nevzlin, is a
senator in the Federation Council (the upper chamber
of the Russian parliament; seats in the Federation
Council are appointed). Despite an informal pact
Russian oligarchs made with Putin in 2000 that they
would stay out of politics, Khodorkovsky has become
increasingly involved in the Kremlin’s affairs. He has
financed two liberal opposition parties, Yabloko and the
Union of Right Forces, upsetting Putin’s dominance in
the Russian parliament.
In April 2003, Khodorkovsky announced his intention to
merge Yukos with competitor Sibneft to create the
fourth-largest oil company in the world. Although
antimonopoly officials have approved the merger, with
the ongoing investigations into Khodorkovsy’s activities,
it may be delayed.
Khodorkovsky lives with his wife and four children in
Moscow. He frequently travels to the United States. He
reportedly dined with Condoleezza Ricelast year and
recently was a guest at Herb Allen’s Idaho ranch,
along with Bill Gates, Warren Buffett and other
luminaries, for an annual telecommunications
After a series of dubious business practices,
Khodorkovsy has struggled with a poor public image. In
1998, his bank Menatepcollapsed, yet Khodorkovsky
managed to protect himself, despite damage to his
depositors and creditors. (The bank also defaulted on a
$236 million loan from Western banks.) In 1999, he
moved the location of a Yukos shareholders meeting
160 miles from Moscow without advance notice to
minority stockholders, keeping them from voting against
the sale of Yukos’s assets to an offshore company.
That same year, he prepared a large issue of new
shares that diluted the stake of American investor
Kenneth Dart, who claimed Khodorkovsky defrauded
him of millions of dollars. Recently, however,
Khodorkovsky hired a Washington, D.C., public
relations firm, and he is presenting himself as a
crusader for stockholder and investor rights.
Khodorkovsky donated $1 million of Yukos profits to
the U.S. Library of Congress, and he set up the Open
Russian Foundation, with Henry Kissinger as a
member of its board of trustees, to donate to
museums, hospitals and universities. In 2001 and
2002, Khodorkovsky’s net worth increased fourfold.
Special Update – Oct 28, 2003
Just five days before FRONTLINE/World’s broadcast of “Rich in Russia,” Russian
oligarch Mikhail Khodorkovsky was seized at gunpoint by Russian federal agents
in Siberia while refueling his private jet. Khodorkovsky’s dramatic arrest and
detention on charges of fraud and tax evasion follows a months-long government
investigation of his company Yukos. Khodorkovsky claims the attack is
politically motivated, because he has bankrolled the campaigns of opposition
party candidates running in the December 2003 parliamentary elections.
(President Vladimir Putin is preparing to seek a second term in March 2004.) If
convicted, Khodorkovsky could face up to ten years in prison.
$ $ $
September 29, 2005
Emmis Sells 4 Stations to Blackstone, SJL
Katy Bachman, MediaWeek
Emmis Communications announced Thursday it has reached an agreement to sell
another four of its TV stations to affiliates of the Blackstone Group, a private
investment firm and the SJL Broadcast Group for $259 million. The sale follows
the Indianapolis-based company’s strategy, announced in May, to sell its TV station
group to improve its financial position and concentrate on its radio business.
The sale of KOIN-TV, the CBS affiliate in Portland, Ore.; KHON-TV, the Fox
affiliate in Honolulu; KSNW-TV, the NBC affiliate in Wichita, Kan.; and KSNT-TV,
the NBC affiliate in Topeka, Kan., leaves Emmis with three more TV stations to
In August, Emmis sold nine of its 16 TV stations for $681 million in three separate
transations, bringing total TV sales to $940 million. With three more stations to
sell, including a station in Orlando, the 20th largest TV market, Emmis is easily on
its way to bring in more than $1 billion, as analysts have estimated.
“We are engaged in discussions [for the remaining stations]. The entire process
has been slowed down because of Hurrican Katrina,” said Jeff Smulyan, chairman
and CEO for Emmis, during the company’s quarterly conference call.
Headquartered in Montecito, Calif., SJL Broadcast Group was formed in 1983 to
build a group of network-affiliated TV stations. The group currently owns and
operates five stations in San Luis Obispo, Calif.; Erie, Penn.; Hungtington, W.V.;
Altoona, Pa.; and Binghamton, N.Y.
$ $ $
January 28, 2006
On-air criticism lands KHON’s
Moore in hot water
The station’s new ownership disputes charges of lost quality
By Erika Engle. Honolulu Star-Bulletin
The new owners of KHON are not happy with their top-rated news anchor.
At issue are remarks by Joe Moore at the end of the 6 o’clock news Thursday
evening, reprinted in yesterday’s Star-Bulletin and repeated by Moore yesterday
during the also top-rated “Perry and Price Show” on KSSK-FM 92.3/AM 590.
“What was said last night was not the truth,” said Sandy Benton, chief operating
officer for Montecito Broadcast Group LLC, which has changed its name from
SJL Acquisition LLC. “I need to address it with Joe.”
Moore had said Montecito “is a virtual company with no office building.”
Benton said there is a home office. “Of course there is. It’s in Montecito (Calif.),”
Montecito’s founder, president and chief executive officer, George Lilly, lives in
Montecito. He could not be reached for comment.
Regarding the 35 job cuts the company has announced for KHON, Moore said, “A
small percentage of people will be replaced by automation. The rest will severely
reduce our ability to serve the community in the manner in which you, and we, have
Benton countered, “We have every intention of serving the community to the same
degree it has been served in the past. If somebody had asked, we would have told
them that. In fact, we did tell them that.”
Asked if the commitment could be maintained with one-third less staff, she said,
“I think you continue to forget that a good percentage of (the job cuts) will be
It has not been announced who will be laid off at KHON.
Benton said she is aware that Moore has a track record of being outspoken.
“I don’t mind that he’s outspoken, but I don’t want to see inaccuracy flying out of
here like that. I don’t know if our airwaves is the place to be outspoken,” she said.
Moore has four years remaining on his contract.
Wrapping up the 10 o’clock news Thursday night, Moore thanked the 6 p.m. viewers
who had communicated support to the KHON newsroom during the night.
He declined further comment yesterday afternoon.
Emmis Communications Corp., which announced last year it was selling KHON and
three mainland television stations to Montecito, completed the sale of KHON
Emmis still owns and operates KGMB in Honolulu, WVUE in New Orleans and WKCF
in Orlando, Fla., stations for which it is seeking a buyer.
The boilermakers Local 484 of Meredosia Illinois have ben locked out from the
Celanese Co. since June 5th, 2005, after the company broke off negotiations.
Attached is the information that we have sent out to other supporters. Check out
our struggles at www.boilermakers484.org….
For more, GO TO > > > www.lockout484.org/index.htm
Note: Celanese Co. is majority owned by Blackstone Group.
$ $ $
July 9, 2004
Outrigger selling 2 resorts
By Allison Schaefers, Honolulu Star-Bulletin
Outrigger Enterprises Inc. has agreed to sell its Waikoloa Beach Marriott and
Wailea Marriott resorts to affiliates of Blackstone Real Estate Advisors of New
York for an undisclosed price.
The Wailea Marriott is a 521-room hotel on 22 beachfront acres in the Wailea
Resort on Maui. The Waikoloa Beach Marriott is a 545-room hotel that sits on 16
oceanfront acres on the shore of Anaehoomalu Bay on the Big Island’s Kohala
Both hotels, which have been operated by Outrigger through a franchise
agreement with Marriott International, will continue to be affiliated with Marriott
International after Blackstone’s acquisition. The sale is expected to close as early
as July 30, said David Carey, chief executive of Outrigger Enterprises….
Under various management contracts and its two hotel brands, Outrigger Hotels &
Resorts and Ohana Hotels & Resorts, the company operates or has under
development 51 hotels and resorts throughout the Pacific region, Carey said.
Blackstone, a private investment firm, is most recently known in Hawaii for having
sold the Hyatt Regency Maui for $321 million in cash last year to Host Marriott
The company owns the Marriott Grosvenor Square Hotel in London, the Westin
St. Francis in San Francisco and the Hyatt Capitol Hill in Washington, D.C.
Outrigger could not comment on what will happen to employees at the two hotels.
$ $ $
September 10, 2003
Blackstone, Apollo and Goldman Sachs to Acquire
Ondeo Nalco from Suez for $4.2 Billion
A consortium of private equity firms comprised of The Blackstone Group, Apollo
Management, L.P., and Goldman Sachs Capital Partners (collectively, the
“Investor Group”) has signed a definitive agreement to acquire Ondeo Nalco from
Suez S.A. in a transaction valued at $4.2 billion.
Nalco is the world leader in providing water treatment and process chemicals and
services to companies in the general industrial, pulp and paper, and energy sectors.
With over 10,000 employees and operations in 130 countries, the company provides
innovative applications and solutions for the water and industrial process needs of
over 60,000 customers. Nalco generated revenues of over $2.5 billion in 2002 and
is based in Naperville, IL.
The transaction will be funded with approximately $3.2 billion of senior and
subordinated debt financing and the remainder in equity provided by the Investor
Group, and is expected to close in the fourth quarter of 2003, subject to
customary regulatory approvals.
Following the transaction, Nalco will operate as an independent company.
Source: The Blackstone Group
$ $ $
July 30, 1998
AIG to Invest $1.35 Billion in
The Blackstone Group and Its Funds
From Business Wire
NEW YORK – American International Group, Inc. (AIG) and The Blackstone
Group today announced the initiation of a long-term investment agreement valued
at approximately $1.35 billion. Under the terms of the agreement between the
two firms, AIG will acquire a 7% limited partnership interest in The Blackstone
Group and its affiliated companies for $150 million. In addition to its investment
in The Blackstone Group, AIG has agreed to invest over a number of years an
estimated $1.2 billion as a limited partner in future private equity, real estate, and
other funds The Blackstone Group sponsors.
The formalization of this relationship comes after years of close cooperation
between AIG, the global insurance and financial services organization, and
Blackstone, the private merchant bank.
M.R. Greenberg, Chairman and Chief Executive Officer of AIG, has served as an
Advisory Director of The Blackstone Group since Blackstone established its first
advisory board in 1989….
Blackstone’s co-founders, Peter G. Peterson (Chairman) and Stephen A.
Schwarzman (President and CEO), said in a joint statement, “AIG is one of the
very best managed and most profitable financial services organizations in the
world. … We deeply appreciate the fact that AIG has decided to make an equity
investment in our firm and a major new long-term commitment to our funds….”
American International Group, Inc., the Blackstone
Group L.P. and Kissinger Associates, Inc. Announce
a New Strategic Advisory Venture
From Business Wire
NEW YORK – American International Group, Inc. (AIG), The Blackstone Group
L.P. and Kissinger Associates, Inc. announced today the establishment of a new
venture to provide financial advisory services to corporations seeking high level
independent strategic advice.
Each party to the venture brings unique value, skills, and relationships. Kissinger
Associates, which is chaired by former U.S. Secretary of State Henry Kissinger,
is a strategic advisor to CEOs and senior executives of numerous global
corporations. AIG is the leading international insurance and financial services
organization with an unmatched worldwide network, and it also sponsors private
equity funds in many parts of the world, particularly in Asia.
The Blackstone Group, in addition to sponsoring private equity, real estate, liquid
alternative asset, and mezzanine funds, is a pioneer in cross-border mergers and
acquisitions and has advised on hundreds of billions of dollars worth of M&A and
Together, the three firms will enjoy excellent access to business leaders
worldwide and will offer a unique set of client services. The venture will operate
globally and will take advantage of the existing relationships between the partners.
– AIG has an ownership interest in Blackstone and is an investor in several of
Blackstone’s private equity funds;
– AIG and Blackstone have a joint venture, specializing in restructuring and M&A
advisory services in selected Asian countries.
– Henry Kissinger chairs both AIG’s International Advisory Board and the
advisory boards of several AIG-sponsored Infrastructure Fund….
Henry Kissinger, Chairman of Kissinger Associates said, “Hank Greenberg, Pete
Peterson and I have been close friends and business associates for decades. This
venture of our three firms is a great opportunity to provide a new level of service
to multinational companies in the contemporary political and economic
Kissinger Associates, which is chaired by the former U.S. Secretary of State
Henry Kissinger, is a leading consulting firm based in New York City. Thomas F.
McLarty, formerly Presidential Chief of Staff and Latin American Envoy,
recently joined the Firm as Vice Chairman.
Kissinger Associates provides strategic and geopolitical consulting services to
multinational corporations, including assistance in forming joint ventures and
guidance in solving business problems in foreign countries….
$ $ $
May 10, 2003
Blackstone M&A chief
builds a team
Tony James is hiring while others cut staff
By Luisa Beltran, CBS.MarketWatch.com
NEW YORK (CBS.MW) — While the rest of Wall Street sheds bankers and reels
under a declining equities market, Hamilton “Tony” James is quietly building a
merger and acquisition team at the Blackstone Group.
James, who oversees Blackstone’s private equity and M&A investment banking
groups, is looking to hire about 75 bankers, at all levels, by 2004. Blackstone
currently has 25 bankers within its M&A ranks, and hopes to add five to 10 in the
“We are in the process of team building,” James said. “Once we get the team
together, we’ll start transitioning client relationships and doing deals.”
James hopes to have the team in place next year and will be focusing on sectors
such as media and telecommunications, financial institutions, health care, and
energy and power. The Blackstone M&A team will likely be paired up with
full-service firms such as Goldman Sachs and Merrill Lynch on deals.
Such high-profile plans come during a drought for mergers. The number of global
announced transactions has dropped this year by nearly 12 percent to 8,215 deals,
while valuations fell 8 percent to $360.2 billion, according to data from Thomson
Because of the Iraqi conflict, many dealmakers have put M&A on hold. James
believes the current dry spell is due not only to war but also a general lack of
confidence, which is causing deals to stall. It’s not that companies are shunning
deals, he said, but they are starting transactions and then pulling out.
“Companies are reluctant to get committed,” James said. “They still like shopping
but they are stopping short of making the ultimate commitment.”
At Donaldson, Lufkin & Jenrette, James earned his stripes by successfully
housing private equity within an investment bank. Such an arrangement allowed
the private equity team to gain leads from the investment bank.
“At CSFB [Credit Suisse First Boston] and DLJ, we showed over 15 years that
you can run those business in a completely conflict-free way and have synergies by
having them so closely aligned,” James said.
He also founded DLJ’s merchant banking business in 1985, which made the firm
“tons of money,” one former co-worker told CBS.MarketWatch.com.
So it was a natural fit last November when James jumped to the Blackstone Group
from CSFB, where he had been chairman of investment banking and private equity.
CSFB is the banking unit of Credit Suisse Group.
New York-based Blackstone is the acquisitive private-equity firm which last year
acquired TRW‘s automotive business for $4.7 billion. This year, Blackstone is
believed to be in talks to buy the Vivendi Universal‘s theme parks.
“It a great fit,” said Charles Ward, president of Lazard. “He will add a lot to both
sides of Blackstone — the private equity and the investment bank.”
Ward and James have been seen as the driving forces behind Credit Suisse
Group’s$11.5 billion acquisition of DLJ in 2000. Once Credit Suisse acquired
DLJ, Ward and James were co-heads of investment banking and private equity at
CSFB before each left the firm at different times.
While James played a role in the megamerger, DLJ shareholders were happy to
sell, he said. “The management team decided to sell the company,” James said. “At
end of the day, I was the senior remaining executive from DLJ that was trying to
make the merger integration work.”
James joined Blackstone shortly before regulators clinched a $1.4 billion
settlement with 10 investment banks, including CSFB, last December. A formal
pact, signed on April 28, requires the firms to sever certain links that exist
between investment bankers and stock analysts.
The Securities and Exchange Commission, including regulators such as New York
state Attorney General Eliot Spitzer, accused CSFB along with Merrill Lynch and
Citigroup’sSalomon Smith Barney, of issuing fraudulent reports to win lucrative
investment banking business.
“Many of the big firms went way overboard in pursuit of short-term profits,”
James said.“For everyone’s sake, I hope we put it behind us because all it
does is weaken the public trust in the capital markets.”
James declined to comment on the fraud allegations against CSFB.
But the problems on Wall Street are proving to be a boon to Blackstone.
Clients are now coming to James because they are looking for an adviser who
is conflict-free and has an unblemished record, he said.
“That is exactly whatBlackstone is.Conflict-free,”said James’s old boss, John
Chalsty, the former chairman and CEO of Donaldson, Lufkin & Jenrette.
“They don’t have to provide analyst research.”
The DLJ connection
DLJ was also conflict-free when it was co-founded in 1959 by current SEC
ChairmanWilliam Donaldson. DLJ started as a pure provider of institutional
research and didn’t begin a serious move into investment banking until the early
James, 52, joined DLJ in 1975 when the firm had just a few bankers. He became
head of M&A in 1982. Under James, DLJ blossomed into a leading investment
bank, advising Qwest on its $48 billion buy of US West in 1999.
“Initially, Tony was involved in nearly every deal,” said Chalsty, who is now chairman
of Muirfield Capital Management. “As we grew he continued to have a role in nearly
every deal we were involved in. He was a remarkable banker.”
But some claim that the problems at CSFB over analysts’ conflicts were
inherited from DLJ. “DLJ went from being a pristine research house to the house
that kicked around analysts to get global finance business,” said analyst Richard
Bove, of Hoefer & Arnett.
The cult of James
As an investment banker, James holds the uncharacteristic title of being known as
a “people person.” One of his strongest talents is dealing with the many egos of an
investment bank, former co-workers said….
Clients are also a top priority for James. But unlike other rainmakers, he doesn’t
take them to basketball games and he rarely goes on fishing trips. Also, James
doesn’t golf. “CEOs can afford all the basketball games that they want
themselves,” he said.
Instead, he tries to understand client issues and gives them the fairest advice he
can. James pointed to long relationships with Sealed Air and Costco Wholesale.
“You always put the client’s interest first,” James said. “Always tell them exactly
what you think. And never do anything for the fee or because it’s in your firm’s
It is this strategy, which caused some former co-workers to say: “Clients love
“My clients always stay with me,” he said.
Luisa Beltran is a reporter for CBS.MarketWatch.com in New York.
By Shamarukh Mohiuddin with Kate Cloud and Nikhil Aziz
Treasury Secretary Paul O’Neill’s confidence in the “genius” of capitalism, even
as corporate scandals continue to unravel might be ironic, but it is certainly not
surprising. The defense of unfettered capitalism has been a trademark of the
contemporary U.S. conservatism ever since the political Right wedded moral
traditionalism with libertarian free market principles. Now, in the wake of a
corporate crisis that has global implications, the Right stands ready once again to
justify a free-market system that has sustained it for years….
Telecom giant Qwest Communications recently admitted to overstating revenues
by over $1 billion for the last three years. Frequent additions to the list of
corporate malefactors, since Enron, makes one wonder how a “few bad apples”
could be an apt description of the current scenario in corporate America. It is
notable that even some doyens of big business leadership such as Pete Peterson,
Nixon’s Secretary of Commerce and now chairman of the Blackstone Group, have
started smelling a “rotting orchard” (interview with Jim Lehrer on PBS NewsHour,
In spite of the government’s empty rhetoric that strict regulations are needed,
Right Wing commentators constantly assert that the market is able to self-regulate. The Right’s market fundamentalist prescription, per columnist Steve
Chapman, is for government to “step aside” and let the market run its course
James L. Gattuso of the conservative Washington think tank, Competitive
Enterprise Institute, has an equally ingenious solution. He agrees that accounting
standards need tightening, but “this can and should be done,” he says, “through
private, rather than political, regulatory bodies.” (www.cei.org, 07/28/02). The
Heritage Foundation offers a similar solution in its 07/12/02 issue of the
And what about President Bush’s resolve to punish those “corporate criminals.”
Bush, perhaps, has hopes that a discourse on morality (while posing in front of
Corporate Responsibility logos) would serve the dual purpose of spotlighting those
“bad apples” and helping the public forget about his Harken boardroom dealings.
Throughout right-wing commentary, one topic is seldom touched upon: the fate of
ordinary corporate stakeholders. Every time a scandal breaks, hundreds upon
thousands of ordinary workers are laid off. It is as if these workers are being
treated as collateral damage while the market runs its course. Collateral damage
will probably include millions more who would likely suffer if Social Security funds
were put into the stock market. The conservatives’ aggressive attempt to privatize
Social Security, just before the corporate scandals, has now subsided to a whisper,
at least temporarily. Still, there are many who continue to adhere to their
One of those values –– greed –– is defended by the Right as both unavoidable and
useful. Chapman argues in his column that capitalism functions to “channel greed
into activities that provide broad benefits.” Trefgarne supports this argument
when he posits that since markets are based on human nature, it is only inevitable
that they will “fall victim to humors and passions, such as greed and fear.” He
says that the very fact of the corporate scandals taking place shows that “rather
than the markets failing, they are working”.
Like many supporters of unfettered capitalism he fails to mention for whom they
The current Administration’s close ties to Enron, HalliburtonandArthur
Andersen, demonstrate the links between economic and political actors. While
many of our leading politicians, regardless of party affiliation, are now trying to
distance themselves from corporate fraud, they cannot erase their long history as
both beneficiaries and benefactors of the fallen corporations.
Arthur Anderson’s promotional video from 1996 shows Vice President Dick Cheney
(then CEO of Halliburton) applauding the accounting firm for providing advice “over
and above the just sort of normal by-the-book auditing arrangement.”
And not so long ago, President George W. Bush, a long time friend of Enron’s
Kenneth “Kenny Boy” Lay, was the head cheerleader for the superiority of US
business leaders. While campaigning in 2000 he said corporate CEOs were
“revolutionizing how businesses conduct their business.” (C-Span, 01/04/01). In
light of current events, this statement rings devastatingly true.
Even though Enron was just the beginning, administration officials are insisting
that “no new laws are needed to reform corporate America, only enforcement of
existing laws”, as pointed out economist Paul Krugman. (Op-ed, New York Times,
08/13/02). Accordingly, the Bush Administration championed a bill that allowed
minimal accounting reforms after trying to block it. When the bill was passed, it
“began issuing ‘guidance’ to federal prosecutors that will undermine the law’s
intent on whistle-blower protection, document shredding and more.”
Bush and Co., as Krugman observes, “just don’t get it.”
Shamarukh Mohiuddin was a PRA intern in the summer of 2002
* * *
THE CHINESE CONNECTION: US
WEAPONS AND HIGH TECH GRAFT
THE FINAL REPORT of the Congressional Select Committee, chaired by
Christopher Cox of California, has been released. His co-chairman Nelson Dix of
Washington, is a Democrat but essentially controlled by Republican interests, who’s
very close to the defense industry within the State of Washington.
They have released this Cox Report, wherein thy mention that illicit transfers of
high technology American weapons in exchange for political money have been going
on for over twenty years.
Of course, they just mention it as a matter of state policy.
In their draft report, they mention only two defense contractors – Loral and
Hughes Electronics. The only reason these two were mentioned is because they
have already been previously exposed vis-a-vis the illicit transfer of high
technology weapons to China.
However, no mention was made of political money in exchange for Department of
Commerce permits allowing these defense contractors to export weapons and
technology. Furthermore, no other defense contractors were mentioned in the
draft report of the Select Committee….
Back to 1978 – the balance had been restored in the sub-continent vis-a-vis our
interests, namely that India, although technically a non-aligned state and the
second power of the non-alighed association of states, was in fact a Soviet
India was financed by the Soviet Union. They received all of their arms from the
Soviet Union. In the United Nations, they would consistently vote with the Soviet
Union. Although they maintained the facade of independence and paid lip service
to the west, they were in fact a de facto Soviet state.
Pakistan was very pro-United States. Having been extensively armed by the
United States, it resumed its theater political and military position by being
hostile towards India and keeping India in check.
It was also hostile toward the Soviet Union and moving once again closer to the
People’s Republic of China, particularly the People’s Army and the Public Security
These events relate essentially to earlier doctrines – doctrines that had originally
been discussed in 1971 when Nixon first broke the ice with China with his meeting
with Zhou Enlai.
These were later consolidated into a CIA policy in 1973, which literally became
known as the “Colby China Doctrine.”…
Colby’s concept was to contain Soviet expansionism in all spheres simultaneously by
supporting opposite factions….
The policy towards arming China began to change in 1986, when relationships
between the United States and the Soviet Union began to thaw to some degree.
They continued to thaw in the years thereafter.
Some of my fellow cohorts knew – for instance, in discussions I had with Elliot
Abrams in 1986 (he was the Assistant Secretary of State for Latin American
Affairs) – what the bigger picture was.
The Republicans withing the Reagan-Bush regime knew as early as 1986 that there
was a potential scandal brewing, if the extent of indirect weapon transfers to the
People’s Republic of China in exchange for Chinese money ever came out.
This became an increasing detriment due to the shift in global strategic policy
from a hardline towards the beginning of a thaw between the US and the Evil
Empire of the Soviet Union.
By this time (1986-1987), the Chinese began to be regarded as a destabilizing
force geopolitically, whereas before they had been considered a stabilizing force.
The Soviet Union had not been particularly concerned about our weapons transfers
to China for twenty years (from 1966 to 1986) insofar as Chinese strategic nuclear
weapons had all been concentrated around the facilities where China produced
nuclear weapons, namely Lop Nor.
By 1986, however, much to our chagrin, Chinese strategic assets had been well
dispersed throughout the country in mobile launchers and in silos.
We also became increasingly aware that the bulk of Chinese strategic forces was
in fact aimed at the United States, not at the Soviet Union, as had been commonly
presumed earlier – and as the Chinese had informed us earlier.
Therefore, there was a period from 1986 to 1990 where weapons technology
transfers and sales to China via intermediaries were temporarily scaled down, just
at the Soviet Union began to convert from a communist country to a capitalist
However, when it became apparent in 1990 that the Soviet Union was effectively
unraveling, we returned to the situation that we were in previously. This time it
was for a different reason. It was that Russia was now a destabilizing factor
because of its own internal political chaos.
Therefore, a renewed effort with China to bolster Chinese technology and to
bolster the production of strategic systems in China was looked at as a
restabilizing influence against influence against Soviet internal instability instead
of external adventurism, as it had been ten years prior.
In 1991-1992, at the very end of the Bush administration, technology and weapons
transfer to China was ramped up again, which served Mr. Bush well in terms of the
amount of Chinese money that came into his 1992 presidential campaign.
However, this in not to say that the Chinese didn’t hedge their bets.
They had traditionally given money to both parties for years through a variety of
artifices. Before 1992, the bulk of political campaign contributions had always
been given to Republicans.
In 1992, even the Chinese sensed there was a shift coming. They made sure, for
the very first time, that the Democratic National Committee started to get six-figure Chinese money.
Fast forward to today, that amount of money has increased. The policy of covertly
arming China has really not changed. As Larry Klayman at Judicial Watch is
correct in pointing out, we are “Japanning” China….
What he’s saying is that by allowing China, ostensibly a hostile nation, to have
“most favored nation” status with the United States regarding trade policies, we
are allowing China to exercise a $3 to $4 billion a month trade deficit with the
Much of this trade deficit is then used to purchase weapons, which are used to
build strategic thermonuclear weapon systems pointed at the United States.
The long and short of it is that the American citizen acting in his capacity as both
a taxpayer and a citizen is essentially arming China to point weapons at the United
And that is the real nub and the real sizzle of the scandal….
What we have not discussed is the money coming through a variety of Chinese
agents. The crossover between the Republicans and the Democrats vis-a-vis
surreptitious Chinese political money coming into the national committees of both
coffers has been worked consistently over twenty years by the same
This is what has already been publicly revealed about Charlie Trie and John
Huang, for instance, and the 147 other Chinese that commonly mentioned in the
media as being “The Gang of 147″ identified by Congress.
The banks, which are the root of the money, start from the Bank of China and
filter out through the Hong Kong branch of the Hong Kong and Shanghai Bank,
the Industrial Bank of Indonesia, and the Riady family.
The notion of Clinton’s closeness to the Riady – this isn’t new. None of this is new.
The Riady family was also very close to the Bush people. It’s just that when the
money for Republicans left the Industrial Bank of Indonesia, it simply took
It is Chinese money (and this is little known) that principally caused the formation
of the Nugan Hand Bank.
When that fell apart and became exposed and some people in Australia died to
make sure it stayed covered up, there was simply a new artifice created for
Money from the Riady group was coming directly into Arkansas banks, principally
through the Stephens Investment Group. It was simply a different artifice when
the money went from the Orient to the United States.
When it got to the Democrats, it was simply a different set of banks and a
different set of brokerage firms. In Republican times, the money had often been
filtered through Merrill Lynch.
Now the money is filtered through Stephens Investment Group and other smaller
brokerage firms close to Clinton or other Democrats.
What has come to light recently is the Democrat side of the equation. This
includes the connection of Ron Brown, the DNC, Chinese weapons and licensing by
the Commerce Department for export of armaments and high-technology weapons,
which were winding up in China being mislabeled and so forth.
You start to understand the role of Ron Brown in all of this. And you start to
understand why he had to go.
Ron Brown suddenly died at the very same time the FBI received conclusive
information that John Huang and Charlie Trie and a few others were not only just
Chinese businessmen, but were in fact reserve officers (not just in the PSB) but of
the MSS, the Chinese Ministry of State Security.
If this were to become publicly known (the FBI already knew it and had leaked
some of this information, but not the proof to back it up, to Burton’s committee),
FBI Director Freeh has recognized the political implication.
This would constitute treasonable conduct by the Clinton administration….
It also represents treasonable conduct by the Bush administration. I imagine
that’s why certain Republicans aren’t all that enthralled about investigating it.
Look at the Republicans who are the most reticent in supporting a new and
expanded probe into Chinese money for Chinese weapons. They are the very same
Republicans of the old Bush group who were very close to the defense industry
before and continue to derive much money from the defense industry.
It struck me with some humor that the members of the Congressional Select
Committee investigating this includes the second most senior Republican member.
It’s none other than Congressman Porter Goss, who has the distinction of having
received more defense money from Loral and Hughes Electronics than anyone
So if anyone is looking for any astounding revelations from the select committee,
or even the Defense Intelligence Oversight Committee, which is also loaded with
Republicans close to the defense industry, I wouldn’t bet on it….
An interesting little double feature of this on the Republican side is how they’re
making money three ways to Sunday on this thing.
In 1991, the first people who set up export companies in the Soviet Union were all
part of the Old Bush Gang.
Frank Carlucci and Dick Armitage set up an export company, Blackstone
Investment Group, operating ostensibly for the CIA to purchase potentially
wayward nuclear materials out of the Soviet Union. This also involved some
technology that people weren’t aware of.
The stuff was getting repackaged and then surreptitiously sold back to China.
In other words, how can you sell the same nuclear components and technologies
five different times in ten years and keep selling them to the same parties back
It’s incredible. But, as I’ve said before, you could write a separate book on this….
Anyway, I think I’ll end it here because otherwise if I start getting into the banks,
it’s just endless – following this Chinese money around. And then how it gets
looped into deals in the United States and looped into transactions that are so far
removed, you would never believe that they originally extended from Chinese
They get guaranteed from all sorts of esoteric little agencies that don’t have
anything to do with the Department of Defense.
From “Agents of Influence: How Japan Manipulates America’s Political and
Economic System,” (copyright 1990)
by Pat Choate
JAPAN’S ECONOMIC PROPAGANDA techniques are remarkably similar to
America’s political propaganda techniques. A quick way to understand how Japan
spreads its propaganda in America is to look at how America spreads its own
America operates two propaganda program – one is overt, the other is covert. The
overt program is operated by the U.S. Information Agency (USIA), which
diffuses information about American culture, history, and political positions. USIA
employs all the standard public relations techniques – hosting lunches, arranging
interviews, distributing literature, providing American guest speakers, stocking
libraries, arranging cultural exchanges, sponsoring conferences, and financing trips
to America for students, academics, and foreign opinion leaders.
America’s covert propaganda program is directed by the Central Intelligence
Agency. By any measure, this is a massive undertaking. Loch Johnson estimates
that fully 40 percent of CIA secret operations are propaganda programs.
The substance of this covert propaganda is carefully monitored ot ensure that it
reflects the nuances of the government’s current policies. Policy papers describing
the intended message are prepared by the CIA and reviewed by the State
Department – even the White House. To spread its propaganda, the CIA has
recruited several hundred memebers of the foreign media. Johnson says:
“The CIA secretly provides a flood of supportive propaganda distributed through
its vast, hidden network of “media assets”: reporters, newspaper and magazine
editors, anchormen, television producers, camermen, broadcast technicians – the
whole range of media personnel. Whatever foreign policies or slogans the White
House may be pushing at the time … (there have been hundreds of such propaganda
“themes” over the years) … the CIA will likely be advancing these same ideas
through its covert channels.”…
In addition to advancing specific U.S. themes, the CIA also uses its media assets
to boost politicians and opinion leaders in other countries whose positions are
favorable to the United States and to tarnish those whose positions are not.
Other nations do the same, including Japan.
Why do foreign journalists free-lance as CIA propaganda promoters? Money is
generally the biggest incentive. Most work for a regular CIA salary or on a
piece/rate basis. Others volunteer. Ideology, patriotism, personal affinity for
Americans, social ties, and entrapment have each served as bonds. Some work for
America as a means of professional advancement: in return for their assistance,
the CIA, the Defense Department, and the State department give them privileged
access to officials, scoops, and inside information. Others are unaware that they
are being used. Regardless of the reason, the end result is the same.
Japan’s propaganda techniques are similar to those used by America. Much like an
enormous Wurlitzer organ, Japan pumps out a steady flow of propaganda through
thousands of outlets – books, speeches, reports, conferences, television, editorials,
articles, and whisper campaigns….
The overt propaganda largely is concerned with providing foreigners a better
understanding of Japanese history and culture. It is managed by government
agencies like the Japan External Trade Organization (JETRO) and Japan’s Foreign
Ministry, and surfaces in an array of official government publications.
Japan’s covert propaganda, on the other hand, has little to do with history and
culture. Not surprisingly, it aims to develop the Japanese economy, its industries
and its exports. MITI and a slew of Japanese agencies, foundations, companies,
and trade associations work quietly to further this end. Often, they see to it that
others – including Americans in the pay of Japan – further it for them.
A representative example of how the Japanese Wurlitzer works is its program to
blunt critcism of Japan’s rapidly growing, highly visible investments in many of
America’s most productive and most critical industries.
After the Reagan Administration began its radical devaluation of the dollar in
1985, Japan used its newfound purchasing power to acquire undervalued American
assets. The Japanese of such prominent properties and companies as Rockefeller
Center, CBS Records, and the Firestone tire company generated sharp but
generally unfocused political criticism….
In mid- and late 1988, conferences on foreign investment became an American
growth industry. Many were conducted by think tanks that were funded – in part
or whole – by Japanese sponsors. Others were organized by accounting and law
firms that had hefty Japanese client bases or by trade associations with extensive
Japanese companies urged still other policy organizations to hold foreign
investment symposia. Lawrence Baer, president of the Global Economic Action
Institute (GEAI), a think tank funded largely and initially by the Unification
Church, says a Japanese trading company approached him in 1988 aand encouraged
GEAI to sponsor a conference on foreign investment. The group complied. The
roster of forum participants featured leading Wall Street bankers, most of whom
were helping the Japanese buy more American assets.
All of these conferences were strikingly similar. For the most part, the speakers
were well-known investment bankers, lawyers, ex-officials, or academics with
personal or professional ties to Japan. Two of the most prominent speakers on
this conference circuit were Elliot Richardson and Peter Peterson.
Besides being founder, general counsel, and head of the Association for
International Investment, Richardson is a senior partner in the law firm of
Milbank, Tweed, Hadley & McCloy. One of the firm’s clients is the government
Peterson, once Secretary of Commerce, is chairman of the Blackstone Group, a
well-known Wall Street investment bank that is partially owned by Japanese
After the 1988 election, President Bush said that Americans should mute their
criticism of foreign investment, lest foreign investors refuse to finance the
federal budget deficit….
Japan got the Administration’s message. Soon after Bush’s announcement, a
Japanese diplomat reported that his embassy had concluded that the foreign
investment issue was no longer a pressing political problem….
In the spring of 1989, MITI contacted Japanese investors and “suggested” that
they be “sensitive” about making conspicuous purchases in America. The warning
came at a propitious moment. The Bush Administration was considering whether to
declare Japane an unfair trader. When the Administration decided to give Japan a
simple slap on the wrist, Japanese purchases of prestigious American assets soon
began surging again.
In the fall of 1989, Japanese investors bought Columbia Pictures, then New York’s
Rockefeller Center. At the same time, ex-President Reagan was paid a well-publicized $2 million for making a speaking tour of Japan. In combination, these
three events put Japanese investment back into the public spotlight. The
Japanese Wurlitzer went back to work.
On November 1, 1989, Richard Whalen’s firm WIRES sent a 23-page foreign
investment report to America’s newspaper editors, columnists, and foreign editors.
It looked like an official news release or wire report. The report’s principal
message: “In an increasingly interdependent world economy, investment across
borders is both inevitable and beneficial to the U.S.”
The balance of the report argued that Japanese and other foreign investment was
good for America, and that the Exon-Florio Amendment in the 1988 Trade Act –which gave the President the authority to investigate and block foreign
acquisitions that threaten national security – is bad.
Americans with ties to Japan echoed the same message in op-ed pieces, interviews,
It’s not surprising, Japanese investors provide much of the new money on which
Wall Street depends. And Japanese investors now own an extensive financial stake
in may of American’s leading investment firms. Nomura Securities, for instance,
owns 20 percent of Wassertein, Perella, the prominent merger and acq1uisition
(M&A) specialists. Yamaichi Securities holds 20 percent of the Lodestar Group,
which is led by the ex-vice chairman of Merrill Lynch & Company and former
chairman of Morgan Stanley & Company.
Sumitomo Bank bought a 12.5 percent share in Goldman, Sachs for $500 million in
1986. Former Federal Reserve chairman Paul Volcker works for Fuji-Wolfensohn,
a joint venture to which Fuji Bank contributed $52.5 of the $55 million start-up
One of the most prominent Wall Street firms that broker Japanese purchases of
American assets is the Blackstone Group, which is 20 percent owned by Nikko
Blackstone has been the investment banker for many Japanese acquisitions of
prestigious American companies, including the Sony buyout of CBS Records and
In the process, Blackstone has prospered. Financial World reports that Blackstone
chairman Peter Peterson earned at least $15 to $25 million in 1988.
To attract more business, Blackstone ran a full-page advertisement in Japan’s
largest daily business journal, Nihon Keizai Shimbun. The ad, written in Japanese,
encouraged Japanese companies to continue their acquisitions of American firms.
It extolled the economic advantages of such investments … As the ad makes clear,
Blackstone also offers the Japanese political advice about how to keep these
acquisitions “friendly” ones.
The promise is not hollow. Three of the firm’s key officers give Blackstone its
political leverage: Peterson, Secretary of Commerce under President Nixon and
onetime head of Lehman Brothers; David Stockman, who directed OMB in the
first Reagan Administration; and Roger Altman, Assistant Secretary of the
Treasury in the Carter years and an economic adviser to presidential candidate
Michael Dukakis in 1988.
Not surprisingly, Peterson and Stockman are two of the nation’s strongest
advocates for keeping America’s markets open to Japanese exports and
investment. Both men write articles, address conferences, and advise
policymakers on the topic.
At the same time, Peterson heads both the prestigious Council on Foreign
Relations and the Institute for International Economics – a Washington think
tank that has been most effective in enforcing a rigid “free trade” orthodoxy
over the past decade….
From Mills Law Firm website ( http://www.millslawfirm.com/media/media05.html):
Couple’s class-action suit settled
for $98.5 million
by Mary Fricker
A $98.5 million settlement reached in Chicago in a class-action suit begun by a
Santa Rosa couple could be shared by 165,000 real estate investors.
The settlement reached Monday is one of the five largest securities class-action
settlements in U.S. history, according to San Rafael attorney Robert Mills, who
represented David and Ilene Albert. . . .
“I’m so glad for the part that I played in this,” David Albert said Wednesday. “I’m
glad for the rest of the investors. It’s not often that you can take an action like
this and have it turn out so well. “
The defendants in the case were Chicago-based VMS Realty Partners, once a
high-flying real estate syndicator, and more than 45 associates and affiliates
involved in selling sophisticated real estate investments.
The case took two years and produced 20 million documents that a team of
attorneys, including Mills, had to warehouse in Chicago, enter into computers and
Although the Albert’s started the case alone in 1989, a flood of other lawsuits
soon followed. A judge eventually consolidated the suits into one case with about
30 plaintiffs, 50 defendants and 39 law firms.
“I hadn’t the slightest idea when I started how big this would be,” Albert said.
“But slowly I began to see the enormity of the thing.”
The plaintiffs alleged in general that the VMS empire engaged in a pattern of
deception to attract investors. The defendants, in agreeing to the settlement, did
not admit wrongdoing.
The $98.5 million will be divided as follows:
As many as 165,000 shareholders will share $45 million in cash, which is already in
escrow. The exact amount that each investor, including the Albert’s, will receive
depends upon how many respond to notices of the settlement, Mills said.
Sources close to the case estimated that if most investors respond, they will get
about 15 to 30 percent of their original investment.
Most of the shareholders own stock in eight troubled VMS investment funds.
Those funds will receive money, notes, real estate and other benefits worth at
least $48.5 million, in a complex workout of the labyrinthine VMS empire.
The shareholders hope that with the $28.5 million infusion, the funds will be able
to survive and eventually return a profit. The funds severed their ties with VMS
Realty Partners last year and changed their name to Banyan. . . .
The funds’ share of the $98.5 million that must be paid in the settlement is $25
million to $30 million, so they will pay out in cash about what they will receive in
assets from the settlement.
Plaintiffs’ attorneys will be paid $25 million, by court order.
The Albert’s bought shares in VMS Mortgage Investors Fund in 1988, and by
June 1989 they were concerned enough about the performance of their investment
to contact Mills, who specializes in representing small investors in securities
Mills brought in the nation’s leading law firm in shareholder litigation, Milberg
Weiss Bershad Specthrie & Lerach of New York and San Diego.
Among the defendants in the VMS case were numerous VMS entities –
partnerships, trusts, mortgage companies and others; former VMS officers,
directors and trustees;Prudential-Bache Securities Inc. (now Prudential
Securities, Inc.); several Xerox subsidiaries;securities brokers; real estate
appraisers; accountants; and other professionalsassociated with the VMS
Prudential-Bache was the key brokerage house marketing the VMS
investments, and Xerox Corp.’s credit subsidiary was a partner-investor.
The plaintiffs alleged VMS and its associates failed to disclose to investors
the riskiness of the investment, issued deceptive prospectuses, hid financial
problems and overvalued real estate.
They decided to settle, they said, because of the generous terms, the financial
weakness of some of the defendants and the difficulty in proving fraud by the
defendants in the complex transactions, among other reasons.
Defendant attorney Barry Gross in Chicago said the defendants settled because
the funds’ stock was depressed by the litigation and they believed it was time to
Gross said the stock value of the funds has gone up more than $40 million in the
two months since it was first announce in September that a settlement was in the
$ $ $
January 26, 2001
Maui Hyatt sold for $200 million
By Andrew Gomes, Advertiser Staff Writer
New York based private investment bank The Blackstone Group has contracted to
buy the Hyatt Regency Maui Resort for an estimated $200 million fromKM
Hawaii Inc., an affiliate of Japan-based transportation company Kokusai Jidosha,
according to people familiar with the deal….
Founded in 1985 in part by the former chief executive of Lehman Brothers,
Blackstone has been looking for upscale hotel investments in Hawai`i for several
years. In 1998, the company unsuccessfully pursued one of Waikiki’s finest, the
People with knowledge of the Maui Hyatt deal said a purchase agreement for the
806-room Ka’anapali hotel —— Maui’s largest —— has been reached, and said
Hyatt, which manages the property with about 1,000 employees, may be taking a
small ownership interest in the hotel in exchange for a long-term management
contract with Blackstone. . . .
If completed, the Hyatt sale would follow sales of four other major properties in
1998: the Maui Marriott Resort for $152.5 million; the Westin Maui for $132
million; the Grand Wailea for $263.5 million; and the Kea Lani for an undisclosed
The Hyatt Regency Maui, trophy of the Ka‘anapali resort, also has been attractive
to buyers. It was developed for $80 million in 1980 by luxury resort developer
Christopher Hemmeter and sold to KM Hawai‘i by Chicago real estate firm VMS
Realty for $325 million in 1987.
KM Hawai‘i spent about $30 million on renovations in 1990 and 1996. Last year, the
hotel opened a $3.5 million spa. . . .
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