Chasing down the...
CERBERUS
Vultures
Snapshots from The Catbird Seat
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December 25, 2008
J. Ezra Merkin Ordered Not To Destroy Records
by Darren
J. Ezra Merkin has been ordered to not destroy any financial records related to the dealings of Bernard J. Madoff. Merkin is the chairman of GMAC who runs several hedge funds which invested with Madoff. The dealings came to light when one of Merkin’s clients, New York University, learned that Merkin had lost $24 million of their capital.
The suit claims that Merkin and his hedge fund, Ariel Fund Ltd. and its’ management group Gabriel Capital Corporation, failed on their responsibility of cash management by turning the money over to Madoff for investment. The Ariel Fund Ltd has already announced plans to liquidate their holdings in light of the recent scandal. The suit also mentions Fortis, who partnered with Merkin in the creation of Ariel Fund Ltd. All told, NYU had invested a staggering $94 million into the fund.
As the losses come in from the Madoff scam, the elite of New York City Jewish philanthropy are among the victims, as well as helping to perpetrate the fraud. Merkin is the grandson of Hermann Merkin who was known as a titan of Jewish philanthropy. He donated gave millions to help build Yeshiva University, and the Fifth Avenue Synagogue.
Human loss mounts in Madoff Ponzi Scheme
The human expense of the Madoff scheme is mounting. Charitable foundations and lives have been destroyed. Merkin clearly used his influential position and the capital of Yeshiva University to invest $1.8 billion into Bernard Madoff’s firm.
That was little consolation, however, to Yeshiva University, said to have lost $110 million of its endowment; or to Congregation Kehilath Jeshurun, the Ramaz School of Manhattan and SAR Academy in Riverdale, said to have lost substantial sums; or to several family foundations belonging to Merkin’s fellow trustees at Yeshiva University, including Robert M. Beren and Ludwig Bravmann.
Another Ascot casualty was a charitable trust founded by real-estate magnate Mortimer Zuckerman, the chairman of real-estate firm Boston Properties and owner of the New York Daily News and U.S. News & World Report. That lost $30 million.
NYU said Merkin blindly turned the money over to Madoff.
“Without making disclosures in the quarterly reports to investors, and in the face of an extraordinary number of ‘red flags,’ Merkin, for years, simply turned over a substantial portion of Ariel’s funds to Madoff,” said NYU in their complaint.
Merkin has so far denied wrongdoing, laying the blame squarely on Madoff.
“Mr. Merkin remains committed to obtaining for shareholders the best results possible in the wake of the terrible fraud committed by Bernard Madoff,” Andrew Levander, attorney for J. Ezra Merkin said.
Madoff has caused huge damage to the work of Jewish philanthropic organizations
It’s safe to say the the amount of damage to Jewish philanthropic organizations is significant....
See also:
http://www.kycbs.net/No-Bailout-for-Billionaires.htm
http://www.youtube.com/watch?v=U_yA8J-oGQk
http://www.kycbs.net/Jews-Control-America.mht
http://www.voy.com/129276/1273.html
APRIL 16, 2007
Private Equity vs. China
How the Commerce Dept. crackdown on Chinese paper
exports will help Cerberus Capital and friends
It's hard to think of an American product that's less strategically important than the coated paper that magazines, annual reports, catalogs, and auto-dealer brochures are printed on. Yet there was Commerce Secretary Carlos M. Gutierrez, on Mar. 30, announcing tariffs on coated-paper imports from China—the first time in at least two decades that U.S. antisubsidy law has been applied to that country. By acting against unfair China trade, he said, the U.S. was standing up for "American manufacturers, workers, and farmers."
But Gutierrez left out one important group of beneficiaries: private equity investors. It turns out the paper manufacturer that brought the complaint, NewPage Corp., is owned, through several levels of intermediaries, by New York-based Cerberus Capital Management, the mammoth private investment group controlled by the wealthy and reclusive Stephen A. Feinberg. Another big industry player, Verso Paper, is majority-owned by affiliates of private investment firm Apollo Management.
The government action raises obvious questions about the political influence of private investment firms, especially since the chairman of Cerberus, John W. Snow, served as President George W. Bush's Treasury Secretary from February, 2003, to July, 2006. But Cerberus says Snow didn't make phone calls on NewPage's behalf. And Cerberus has investment interests far beyond coated paper—Snow recently toured China calling for closer business cooperation between that country and the U.S.
But in a broader sense, what's going on is nothing less than a showdown between two very different ways of financing business. On the one side is China, which is accused of lowering the capital costs of coated-paper makers through subsidies such as low-cost loans and debt forgiveness. On the other side are the private money outfits, which raise huge funding pools by promising investors high returns in a low-return world.
The trade sanctions—which the Commerce Dept. could still back away from—would protect private equity-owned paper mills from China's cheap capital and help private investors realize the high returns they want. This battle of financial systems may be a harbinger of the next wave of trade disagreements.
How did we get into this situation? Over the past couple of years, U.S. paper giants such as MeadWestvaco Corp. (MWV ) and International Paper Co. (IP ) wanted to shed some of their laggard divisions. They found ready buyers in the private equity firms, which saw a good deal.
In particular, in early 2005, MeadWestvaco sold its coated-paper mills and other assets to NewPage for $2.1 billion. The newly formed company took on about $1.8 billion in debt to finance the purchase. A Cerberus-owned affiliate tossed in $415 million in equity, according to documents filed with the Securities & Exchange Commission. (Disclosure: The same documents list The McGraw-Hill Companies Inc., the parent company of BusinessWeek, as one of NewPage's biggest customers.)
CHINESE LOCOMOTIVE
This leveraged buyout left NewPage with big debts and hefty interest payments totaling $165 million in 2006, roughly double the size of its $88 million in capital expenditures. Such heavy debt makes it harder for the company to compete against the Chinese, as well as big European paper manufacturers. NewPage filed the complaint against the Chinese in October, 2006, about 18 months after Cerberus took over. This was the first time since 1991 that any company had formally filed such a complaint against a nonmarket economy.
Now, the fact that NewPage is owned by a private investment firm doesn't make the trade sanctions wrong. Indeed, the big paper makers may have sold off their businesses in part because they saw the onrushing Chinese locomotive of cheap coated paper exports, which have soared from $21 million in 2004 to $224 million in 2006. The trade sanctions, if they stick, could help preserve the more than 4,000 jobs at NewPage, many in economically depressed areas of the U.S.
And it can be argued that China is at the point where such subsidies are unacceptable, just as capital subsidies to Airbus and Boeing Co. are unacceptable for Europe and the U.S. "Our view is very simple," says Mark A. Suwyn, NewPage CEO. "We will compete with anybody in the world if it's fair. China can't join the WTO and then choose to use my country as a dumping ground. That's illegal."
A lot of people who worry about the rising tide of Chinese imports agree with Suwyn. But would they want to start a trade war with China to protect private equity investors?
By Peter Coy and Michael Mandel
http://www.businessweek.com/magazine/content/07_16/b4030049.htm
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.
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"Our safety, our liberty, depends upon preserving the Constitution of the United States as our Fathers made it inviolate. The people of the United States are the rightful masters of both Congress and the Courts, not to overthrow the Constitution, but to overthrow the men who pervert the Constitution."
-- Abraham Lincoln
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For the panoramic views
GO TO
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A Connecticut Yankee in King Kamehameha’s Court
Another Reason for Bringing the Troops Home
APCOA: Vultures in the Parking Lot
Birds that Drink from Cesspools
The Bribes & Boondoggles of Boeing
Citigroup: Vampires in the City
Condoleezza & The Chicken Hawks
Confessions of a Whistleblower
Dahr Jamail’s MidEast Dispatches
Dirty Money, Dirty Politics & Bishop Estate
8th Estate Public Media & Researh
Flying High in Hawaii: The Ron Rewald Story
Marsh & McLennan: The Marsh Birds
Nests of The Insurance Vampires
Tarnished Wings: The Greed at Lockheed
Sukamto Sia: The Indonesian Connection
The Silence of the Whistleblowers
The United Defense Industries Matrix
Vultures in The Nature Conservancy
War Images from “Scoop” Independent News
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Originally posted July 10, 2008
Last Updated January 4, 2009, by The Catbird