Yves Smith

Caught on Tape – SEC Director Grovels for a Private Equity Job for His Teenage Son While Speaking on Panel

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The following video clip will make you extremely sick to your stomach. Not that we didn’t already know the U.S. economy is nothing more than a rigged oligarch shell of its former self, but to see SEC Director of the Office of Compliance Inspections and Examinations, Andrew Bowden, grovel for a job for his son in front of a private equity industry audience certainly represents a new low.

If you recall, Andrew Bowden was first brought to your attention last year in the post, SEC Official Claims Over 50% of Private Equity Audits Reveal Criminal Behavior, which discussed how Mr. Bowden admitted in a talk that “more than 50 percent of private equity firms it has audited have engaged in serious infractions of securities laws.” This sort of honesty is never rewarded within a crony, corrupt economic system that depends so heavily on regulatory capture for riches. As such, he quickly recognized the gravity of his error, and has since decided to get on his hands and knees and pucker up to the private equity industry whenever possible.

Nowhere was this more apparent than at a recent event at Stanford Law School, where Mr. Bowden ended his resounding endorsement of the private equity industry by begging the audience to one day give his son a job. At this point the audience burst into laughter and someone can be clearly heard yelling “I would love to hire your son by the way.” More laughter.

The joke’s on us.

Watch the video below:

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Meet Janet Cowell – The North Carolina Treasurer Desperately Pushing to Keep Criminal Public Pension Fees Secret

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Screen Shot 2014-06-30 at 11.07.57 AMOne of the most important revelations to emerge in 2014 to-date, is the fact that public pensions are taking on an increasing amount of irresponsible risk in order to meet return targets. The primary way they are doing this is by investing a larger and larger percentage of assets with “alternative investment” managers such as hedge funds and private equity firms.

Specifically, states have increased allocations to alternatives to $460 billion, or 15.3%, from only 3.3 percent in 2001, according to the National Association of State Retirement Administrators. However, this is just the tip of the iceberg. What is really shocking, and extraordinarily disturbing, is the fact that the deals these public pensions enter into, and associated fees paid, are intentionally kept secret from the public, and the people’s whose assets are at stake have absolutely no idea how their money is being invested.

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SEC Official Claims Over 50% of Private Equity Audits Reveal Criminal Behavior

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Last week, Yves Smith of Naked Capitalism penned a fantastic piece leveraging a talk by SEC official Drew Bowden. Mr. Bowden heads the SEC’s examinations unit, and at a private equity conference he explained that “more than 50 percent of private equity firms it has audited have engaged in serious infractions of securities laws.” What is so incredible about the talk, is that while Bowden goes into details of shady practice after shady practice, he ultimately admits that the SEC isn’t being particularly aggressive with the private equity industry because “we believe that most people in the industry are trying to do the right thing, to help their clients, to grow their business, and to provide for their owners and employees.”

Yes, go ahead and read that again. The industry regulator is assuming that private equity firms are trying to do the right thing, despite the fact that audits demonstrated to a tune of greater than 50% the opposite to be true.

Private equity managers are some of the savviest people in finance and they know exactly what they are doing. What the SEC is basically admitting, is that private equity firms are also “too big to regulate” and, of course, “too big to jail.” After all, every single person at the SEC is likely angling for a big payday at a PE firm via the revolving door. Of course they aren’t going to regulate.

Meanwhile, if you are just an average citizen, you will be prosecuted to the fullest extent of the law if you commit even the most minor infraction. This sort of behavior led to the death of prodigy Aaron Swartz, the incarceration of political prisoner Barrett Brown, a swat team raid on a young kid in Peroia, Illinois for a parody Twitter account, the firing of a constriction worker for not paying for a $0.89 soda refill. This list goes on and on. Yet private equity crimes, which likely run into the billions collectively, are treated with kid gloves. As I have maintained many times before, this is how the social fabric of a society dies.

From Naked Capitalism:

At a private equity conference this week, Drew Bowden, a senior SEC official, told private equity fund managers and their investors in considerable detail about how the agency had found widespread stealing and other serious infractions in its audits of private equity firms.

In the years that I’ve been reading speeches from regulators, I’ve never seen anything remotely like Bowden’s talk. I’ve embedded it at the end of this post and strongly encourage you to read it in full.

Despite the at times disconcertingly polite tone, the SEC has now announced that more than 50 percent of private equity firms it has audited have engaged in serious infractions of securities laws. These abuses were detected thanks to to Dodd Frank. Private equity general partners had been unregulated until early 2012, when they were required to SEC regulation as investment advisers.

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