The SEC Has Revealed Astounding Corruption in Private Equity

[okaawhatever]

And, for once, the commission is not letting them get away with it

hen liberals talk about economic regulation, they often use eye-rolling abstractions like “accountability” and “transparency.” What do those things even mean? How are those objectives enforced, and what would this enforcement even look like? Luckily we have a real-time example of what it all means, courtesy of Dodd-Frank and the SEC. It involves one of the more controversial parts of the financial markets, and it gives us a view into how reform happens.

As a result of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, private equity firms must register with the Securities and Exchange Commission (SEC). This, in turn, allows the SEC to examine the behavior of private equity firms on behalf of investors. The SEC just completed an initial wave of 150 firms, and what it found is shocking.

These results were unveiled last week when Andrew Bowden, the director of the SEC’s examinations office, gave a speech titled “Spreading Sunshine in Private Equity.” The big takeaway: Half of the SEC’s exams find corruption in the way fees and expenses are handled. Or as Bowden forcefully describes it: “When we have examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50 percent of the time.”

SNIP

Bowden’s speech has numerous examples. One scam is to fire employees of the private equity firm and rehire them immediately as “consultants.” The investors are responsible for consultants’ salaries, where private equity employees are paid out of their own pockets. Another is taking what most private equity investors believe to be part of management fees, things like legal and compliance costs, and billing their investors for them without the investors properly knowing it. A third is private equity firms lying about the valuation methods they use to tell investors about the returns they make each year. All of these are ways for private equity firms to take money from their investors for themselves.

Continued at Link:
http://www.newrepublic.com/article/117735/private-equity-fraud-how-firms-are-ripping-their-investors

[blkmusclmachine]

1. ,

,

[Rod Beauvex]

2. In other news, septic tanks are filled with shit.

Corruption in Corporate America. Who'd a thunk it, eh?

[intaglio]

4. and the really big lumps float to the top n/t

[KT2000]

3. I would call them looters

they do not create businesses, they go after cash rich companies - move manufacturing overseas, degrade product quality and ding the company for fees and more.

In short, they turn a functioning business into a financial instrument - and we all know how those are handled.

[bemildred]

5. That's what they do, that's who they are. nt

[Enthusiast]

6. Kicked and recommended a whole bunch!