Random Ramblings on Carlyle Announcement
I'm still trying to digest everything from Andrew Cuomo's announcement regarding The Carlyle Group, which has agreed to repay $20 million and sign a "code of conduct." Here are my gut reactions, which I hope to refine later today: * Cuomo is kidding himself, if he truly believes that his "code of conduct" will be adopted by the private equity market at large. First, it is obvious that Carlyle only adopted it under duress. Second, Carlyle did not agree to apply the code's principles outside of the U.S. (i.e., outside of Cuomo's jurisdiction). Third, most firms do not have the in-house resources of a Carlyle, which negates the possibility of following its lead vis-a-vis not using placement agents. Moreover, this isn't a high school sport where the freshman follow the senior captain's example. Private equity firms -- big and small -- pay attention to Carlyle, but don't necessarily try to mimic it. * The $20 million is a slap on the wrist. Here's some context: Carlyle co-founder David Rubenstein paid more than $20 million for a copy of the Magna Carta (which he's loaned to The National Archives). * The $20 million isn't even a real slap, because everyone is calling it a "payment" instead of a "fine." If Carlyle is repaying ill-gotten gains (even if the ill was caused by someone else), why repay so little of them? Imagine I steal a diamond bracelet and give it to my wife, without telling her of its origins. When the police come knocking, she can't keep some of the diamonds for herself, even though she wasn't the bad actor.
