Bolstering their defenses

The battle over increased carried interest taxation may be over in Westminster (see page 4), but there is still a ways to go on Capitol Hill. Hence two US private equity giants have armed themselves with sophisticated ammunition to do battle in Washington and with other governments.
Recently IPOed Blackstone Group has poached long time media relations veteran Peter Rose from Goldman Sachs to focus on public affairs at the New York buyout firm, while Washington, DC, rival The Carlyle Group has hired international trade and policy expert David Marchick from law firm Covington & Burling as its in-house lobbyist and regulatory expert.
The hirings come as regulators in the US, as well as the UK and throughout the world, have been increasingly scrutinizing the private equity industry. Members of the US Congress have been debating the increase of taxation on carried interest, the lifeblood and raison d’être of private equity dealmakers, from the current rate of 15 percent to 35 percent, on par with taxes on ordinary income. The UK recently raised its tax on carried interest from 10 percent to 18 percent.
The appointment of Rose as managing director for public affairs befits the increased public profile of Blackstone, which in June this year became a publicly listed company. In his 20 years at Goldman Sachs, Rose was responsible for media relations and government relations as the firm transitioned from a private partnership to a public company. Both firms also have similar businesses, including corporate finance advisory, restructuring, private equity, real estate and hedge funds.
Rose’s political acumen will be welcome at Blackstone, which through its IPO inadvertently created another bill that is working its way through the US Senate. Dubbed “The Blackstone Bill,” if passed would cause publicly traded partnerships to be taxed as corporations.
In his new role, Rose works alongside longtime Blackstone spokesman John Ford, but will have under his purview issues relating to politics and labor unions. At Goldman Sachs, Rose has been a lobbyist and political analyst in the firm’s Washington office and has set up media and communications practices for the firm in New York and Asia. Before joining Goldman Sachs, the Yale-trained lawyer was the chief of staff for Congressman Mike Synar (D-Okla) and a partner at government affairs law firm Williams & Jensen. At Carlyle, one of the most politically connected private equity firms and ardent pursuer of new business opportunities and markets, Marchick will provide in-house government affairs, regulatory and strategic advice to the firm’s fund managers. The scope of his activities will include advising on issues pertaining to global private equity, as well as issues for the firm’s portfolio companies, including acquisitions, sales and ongoing operations.
“As transactions get larger and our business expands globally, so does the complexity of the issues,” said David Rubenstein, Carlyle’s co-founder, in a statement. “Actively engaging policymakers and other stakeholders is more critical than ever to our business.”
Formally a partner in the Washington, DC office of Covington & Burlington, Marchick has previously advised on big-ticket transactions including Carlyle’s recent sale of aviation assets to Dubai Aerospace Industries, Saudi Arabia Basic Industries’ acquisition of GE Plastics and IBM’s sale of its PC division to China’s Lenovo. Before joining Covington & Burlington in 2002, Marchick held various trade positions in the Clinton administration and also helped coordinate efforts to secure passage of NAFTA and the creation of the World Trade Organization.
Marchick’s appointment was announced the day before Carlyle agreed to sell a minority stake in itself to a longtime Middle Eastern investor for $1.35 billion. In owning 7.5 percent of Carlyle’s management company, Mubadala Development Company, the strategic investment arm of Abu Dhabi Investment Agency, has also agreed to commit $500 million to one of Carlyle’s buyout funds.
The announcement of Marchick’s hire also came the same day as the US’ largest healthcare workers union held a demonstration outside Carlyle’s headquarters to protest the $6.3 billion acquisition of HCR Manor Care, a nursing home chain. The union urged Carlyle to “put patient care above CEO profits” amidst concerns of worsening conditions for nursing home residents post-buyout.
Both Blackstone and Carlyle have retained lobbying firm Ogilvy Government Relations to block proposed legislation to raise taxes on private equity. Ogilvy is led by Wayne Berman, a former Assistant Secretary of Commerce for Policy under President George Bush, and a major player in Republican campaigns and fundraising.