Photograph by Ken Cedeno/Bloomberg

Retired Army General David Petraeus, pictured as the top U.S. commander in Iraq, in 2007. Photo by Ken Cedeno / Bloomberg

KKR & Co.  the private-equity firm run by Henry Kravis and George Roberts, is in discussions with former Central Intelligence Agency Director David Petraeus about a role at the company, according to a person with knowledge of the talks.

It hasn’t been decided yet what role he would have at KKR, said the person, who requested anonymity because the discussions are private. Petraeus and Kravis are friends and talk often, according to the person.

Petraeus, 60, resigned from the CIA on Nov. 9 after a probe by the Federal Bureau of Investigation uncovered evidence of an extramarital affair with Paula Broadwell, the author of a biography about the former commander of U.S. military forces in Afghanistan and Iraq entitled “All In.” Last week, City University of New York named Petraeus a visiting professor starting Aug. 1.

Kristi Huller, a spokeswoman for New York-based KKR, declined to comment on the possible hiring. Robert Barnett, a lawyer for Petraeus, didn’t respond to an e-mail requesting comment.

KKR has more than 25 senior advisers, who help the firm find and evaluate investment opportunities, according to its website. Some of them advise KKR-owned companies or serve on their boards.

The firm last year named former Morgan Stanley Chief Executive Officer John Mack as a senior adviser to help make KKR “smarter investors,” Kravis said at the time. Other KKR advisers include Honeywell International Inc. (HON) CEO David Cote, former Caterpillar Inc. CEO James Owens and Qantas Airways Ltd. Chairman Leigh Clifford.

Private-equity firms pool money from investors including pension plans and endowments with a mandate to buy companies within about five to six years, then sell them and return the funds with a profit after about 10 years. The firms, which use debt to finance the deals and amplify returns, typically charge an annual management fee equal to 1.5 percent to 2 percent of committed funds and keep 20 percent of profit from investments.

Kravis, Roberts and their partner Jerome Kohlberg Jr. started KKR in 1976, joining a small group of firms doing leveraged buyouts. Kohlberg left the firm in 1987. Today the industry manages about $3 trillion of assets, according to research firm Preqin Ltd. KKR oversees $78 billion, investing in buyouts, energy, real estate and hedge funds.

See the full report on Petraeus and KKR at Bloomberg.com.

Original post is Petraeus ‘All In’ for Private Equity? by Political Capital.

Photograph by David Paul Morris/Bloomberg

Larry Ellison, chief executive officer of Oracle Corp., at the Oracle OpenWorld 2011 conference in San Francisco.

Technology and pharmaceutical companies such as Cisco Systems, Oracle and Johnson & Johnson have formed a new coalition to push for lighter taxes on income earned outside the U.S.

The LIFT America Coalition — that’s Let’s Invest for Tomorrow — will urge Congress to adopt a so-called territorial tax system that would exempt most income earned around the world. Most other major industrialized countries use such a system.

Currently, companies face U.S. taxes on income they earn around the world; they can defer that tax until they bring the money home and offset it with foreign tax credits.

The biggest challenge in designing such a system is creating rules that prevent companies from shifting the U.S. tax base abroad. Rep.Dave Camp, chairman of the House Ways and Means Committee, suggested options to prevent such “base erosion” in 2011 that some companies objected to.

Other members of the group are Procter & Gamble., United Technologies and International Business Machines.

In part because of the U.S. tax code, companies have stockpiled about $1.9 trillion in profits outside the country.

“Having competitive tax rates and a competitive territorial system are worthy goals that ultimately increase confidence, create certainty, and ensure good jobs for America,” Greg Hayes, the chief financial officer of United Technologies said in a statement. ” These reforms will enable both old and new companies with American headquarters to succeed today and in the future, sharing their products, services, talents and technologies with the world.”

Original post is Techs, Pharmaceuticals Seek Territorial Taxation by Political Capital.

Photograph by Ethan Miller/Getty Image

A Bushmaster Firearms rep, right, shows an attendee a semi-auotmatic Bushmaster Enhanced Adaptive Combat Rifle (ACR) at the Bushmaster Firearms booth at the National Shooting Sports Foundation's 34th annual Shooting, Hunting, Outdoor Trade (SHOT) Show.

It didn’t take long for Cerberus to remember who its masters are.

The New York-based private equity firm, which takes its name from the mythical three-headed dog that guards the gates of Hell, said late yesterday it would sell Freedom Group, the largest U.S. gun-maker and part of its $20 billion portfolio of assets.

The move was stunningly swift. Earlier in the day, California’s treasurer said he’d ask the state’s pension funds to examine their investments in firearms in the wake of last week’s massacre in Newtown, Connecticut. One of those pensions, the California State Teachers’ Retirement System, has $751 million committed to Cerberus, according to Bloomberg’s Devin Banerjee’s reporting.

In the wake of the Newtown deaths, smart journalists including Fortune’s Dan Primack followed the money behind the guns back to its source, revealing that the Bushmaster rifle used in the killings was made by Freedom, the gun conglomerate Cerberus assembled beginning in 2006. Primack and others then went a step further, noting where Cerberus’s money ultimately comes from.

Private equity firms pool money from public pensions, endowments, sovereign wealth funds and wealthy families, then usually pair that money with debt to take over companies. The money’s origin was highlighted yesterday in a column on Slate by Eliot Spitzer,  the former attorney general of New York turned media commentator, who noted that investors “wield vast power.”

“Ownership has both responsibility and power,” Spitzer wrote. “It is time for every comptroller and pension fund manager with an investment in Cerberus to use that power.”

California used that power, and to great effect. Cerberus said it will hire a financial adviser to shop Freedom Group, allowing it to remove itself from the increasingly raging debate about gun control.

“Our role is to make investments on behalf of our clients who are comprised of the pension plans of firemen, teachers, policemen and other municipal workers and unions, endowments, and other institutions and individuals,” according to Cerberus’s statement. “It is not our role to take positions, or attempt to shape or influence the gun-control policy debate. That is the job of our federal and state legislators.”

While an extreme example, California’s public stance underscores an ongoing shift in the dynamics of the private equity business. Investors’ won’t-get-fooled-again attitude from the 2008 financial crisis, coupled with the scrutiny around PE brought on by former practitioner Mitt Romney’s presidential candidacy, has emboldened investors to press for more information and demand a bigger voice.

Private equity firms themselves have responded to this in different ways. The industry has bolstered its nascent lobbying effort in Washington, industry titans like KKR and Carlyle release annual reports on social responsibility, and a number of players have increased their efforts to work with labor unions, a category long skeptical of buyouts and their consequences.

Whether the Cerberus decision marks an inflection point in this long-complicated relationship between private equity and its backers/benefactors/beneficiaries remains to be seen.

Original post is Guns and Private Equity – Cerberus: Teacher-Clients’ Interests in Mind by Political Capital.

Photograph by Victor J. Blue/Bloomberg

Stephen Schwarzman, chairman and chief executive officer of Blackstone Group LP.

Steve Schwarzman doesn’t want to lose his right-hand man.

Asked whether his chief operating officer, Hamilton “Tony” James, could be the next Treasury secretary, the Blackstone Group CEO told CNBC this morning that such a prospect worries him — not because James wouldn’t fit the role, but because of his loss to Blackstone.

“That would be terrible for us for sure,” said Schwarzman, co-founder of what is today the world’s largest private-equity and alternative-asset manager. “It’s the last thing I would want.”

James, a supporter of President Barack Obama who held a campaign fundraiser for the president earlier this year, has been rumored to be a contender for the position that will be left by Treasury Secretary Tim Geithner after January, as Obama says he would “love” l to pick a business leader for his economic team.

Schwarzman — who in 2002 hired James in somewhat of an act of faith, yielding some power within rapidly growing Blackstone — said his No. 2 “would be terrific” in the role. “He’s a terrific guy,” Schwarzman said, smiling.

That said, James might not be the absolute best choice, given conditions in Washington. In Schwarzman’s thinking, Obama will probably choose someone already involved in the current fiscal negotiations, such as White House Chief of Staff Jack Lew.

“It would be somebody who is dealing with these types of complex issues,” he said, “because I don’t think they’ll all get resolved.”

Among the rumored, Lew remains a likely choice. Erskine Bowles, who co-chaired Obama’s fiscal commission, told CNBC last month that he wouldn’t be the next Treasury secretary, and Larry Fink, co-founder and CEO of the money manager BlackRock, said last week he won’t leave his job for a role in Washington.

Original post is Schwarzman Hopes to Hold James by Political Capital.

Photograph by David L Ryan/The Boston Globe via Getty Images

Mitt Romney, head of Bain & Company, Inc.

We’ve heard from Bain, the Firm. Now there’s something (a little something) from Bain, the Man.

The Daily Beast coaxed the hyper-private Bill Bain into addressing the criticism directed at his namesake firm and his protégé Mitt Romney’s tenure there with “Powerpoint-style precision.”

Says Bill Bain: “The unfair attacks are not worth responding to,” according to the story, but he kind of does: “Bain Capital was founded in 1984 to create value. The founding partners took risk in starting this venture, but succeeded in raising their first fund and in investing it well to create value for their investors.”

Bain Capital, which Bill Bain tapped Romney to start almost three decades ago, has backed and bought the likes of Sports Authority, Domino’s Pizza and Dunkin Donuts over the years, pushing it deep into the fabric of the U.S. and global economies. Romney has touted his experience at Bain until 1999, when he left to run the Salt Lake City Olympics and subsequently run (successfully) for governor of Massachusetts and (we’ll see in two weeks) for president.

His opponents, starting last year in the Republican primary and now in the general election, have said Romney’s experience shows a record of closing factories and outsourcing or slashing jobs. Bill Bain says: “Business is a risk-reward proposition,” says Bain. “For over 28 years, Bain Capital has invested in many great success stories and some failures.”

Romney has touted his record of creating jobs while at Bain, claiming responsibility for more than 100,000 during his time atop Bain. It’s a key part of his pitch to an electorate that’s laser focused on economic issues.

Bain Capital has been relatively quiet amid the criticism of its former chief, its history, and the private equity industry at large. The Boston firm has continued about its business, raising a new Asia focused fund earlier in 2012 as well as a new flagship fund and nurturing its investments in companies like Bloomin’ Brands (operators of Outback Steakhouse) and scrapbooker heaven Michaels Stores. The broader industry, through occasional interviews and speeches and a campaign by the Private Equity Growth Capital Council, has sought to counter the portrayal with case studies about successful investments at companies like KKR-backed Dollar General.

The private equity meme has gone well beyond the argument about its practitioners and Romney’s role in the broader economy. Its historical secrecy, and some business practices like its tax treatment and sometimes hard-edged strategies, play well in a country still licking its financial crisis wounds. Romney’s tenure in business, critics argue, also taught him how to pay less taxes and accrue wealth reaching a quarter-billion dollars.

Being a rich guy with what he thought was a sterling resume has brought him to the brink of the election in what’s basically a tie.

Still, having his mentor — a slightly older, very successful white man and reliable Republican contributor — may not sway a lot of undecided voters to the Romney camp.

Bill Bain may be a big name, but Romney’s got binders full of guys like that.

Original post is Bain (The Man) Speaks Out by Political Capital.

Priorities’ Bill Burton says the ad, “Stage,” is back by popular demand.

Priorities USA Action, the super-PAC backing President Barack Obama, has spent millions portraying the business career of Republican Mitt Romney as ruinous to the lives of people who worked for some of the companies that Romney’s Bain Capital took over.

Now it’s commercial featuring Mike Earnest, who built a stage at his plant only to to see executives use it to announce his firing, is returning to the air in several critical states where Obama hopes to build his Electoral College victory: Colorado, Florida, Iowa, Nevada, Virginia and Wisconsin.

Priorities’ Bill Burton says the ad, “Stage,” is back by popular demand:  “In our Ohio focus groups this week, we asked swing voters to name the television ads that stood out most to them, in all the welter of advertising they have seen. `Stage’ is the ad that most frequently came to mind: participants were able to describe it in detail and recall theemotional impact it had on them, despite the fact that it had not run in that market for over six weeks.

Priorities USA Action, run by former Obama aides, is reporting $15.2 million in September contributions today at the Federal Election Commission, according to an aide with knowledge of the report.

That marks its best fundraising month yet, as Bloomberg’s Julie Bykowicz reports.

Restore Our Future, a pro-Romney group, reported to the FEC yesterday that it collected $14.8 million in September, making it the group’s second most lucrative month. Restore Our Future raised about $21 million in June after Romney defeated a field of primary competitors.

Restore has raised $111.5 million since the beginning of 2011, more than double the $50.9 million Priorities has collected.

Original post is `The Stage’ is Set in Ohio: Priorities by Political Capital.

The morning after, the “binders full of women” are lighting up the Internet.

During the second of three presidential debates last night, when the town hall-styled questions from voters turned to equal pay for men and women, President Barack Obama pointed to his first piece of business as president, signing the Lilly Ledbetter Fair Pay Act.

Republican Mitt Romney, calling it an “important topic,” spoke of reaching out to women’s groups and being handed “whole binders full of women” to consider when he was appointing members of his Cabinet as governor of Massachusetts and his advisers hadn’t found enough female candidates.

The pro-Obama American Bridge 21st Century super-PAC is out this morning with its own assessment, starting with the former governor appointing white men as judges “disproportionately.”

And the Obama campaign this morning is following up on Obama’s attempt to take the debate further, talking about contraception for women as well. “These are not just women’s issues. These are economic issues,” he said in debate, maintaining that what makes the economy grow is men and women getting the same “fair deal.”

There could be a reason Romney was talking about state hiring in debate.

As Bloomberg’s Devin Banerjee reported in September: “At nine of the 10 largest U.S. private-equity firms, women account for an average 8.1 percent of managing directors and senior executives, the highest-ranking and best-paying jobs, according to data compiled from the companies and their websites. The comparable figure for the country’s six biggest investment and commercial banks is 30 percent, while women make up 13 percent of the senior ranks at 10 of the largest traditional-asset managers.”

“The dearth of women at the top of private-equity firms hasn’t been an issue in the campaign, where Romney, the Republican nominee, has faced questions about his role in cutting jobs at companies controlled by Boston-based Bain and the preferred tax rates on buyout profits. Bain, which Romney ran for 15 years until 1999, counts seven women among its 87 managing directors and senior executives, or 8 percent.

In a campaign notable for its gender gap, with Obama enjoying more support among women than Romney — and with that gap narrowing in polls since the first debate two weeks ago — the binders full of women are sure to either unfold or unravel in the final weeks of the contest.

Original post is Binders Full of Women: Open Book by Political Capital.

Photograph by Jin Lee/Bloomberg

Vikram Pandit, chief executive officer of Citigroup Inc.

Vikram Pandit’s abrupt departure from Citigroup today is yet another reminder that Wall Street, while healing, is still in a state of existential crisis.

Big questions abound about the future of the big banks in the face of a sluggish global economy and governments across the world looking at those institutions like a teenager who’s just been handed the keys to the car after a long punishment.

Henry McVey, KKR’s head of global macro and asset allocation, put out a 15-page analysis of the financial services industry yesterday and it’s a good read. The observations come from what he dubs his “macro perch” at the well-known private-equity firm that’s more recently branched into real estate, hedge funds and lending.

McVey drops in some amazing stats about Wall Street’s outsized role in the economy five years ago. In the first half of 2007, Citi, Bank of America and JPMorgan had profits of $31.3 billion — a total that was just slightly smaller than the entire materials, telecom and utilities sectors combined.

Today, he sees “an unsettled environment where many of the underpinnings of the sector’s advance are being called into questioned…while deregulation has been replaced by re-regulation.”

McVey takes the last point a step further, in a way that may send chills down the spine of bankers already leery of Washington. He predicts regulation will get more intense still, noting that real implementation of the Volcker Rule — which limits banks’ ability to take risk with their own money — would mirror the schedule of heightened regulation after the stock market crash of 1929.

While McVey doesn’t address it directly, KKR and competitors like Blackstone and Carlyle are among the firms that stand to benefit from more regulation on traditional Wall Street players. KKR, founded more than 35 years ago and long the premiere private equity deal shop, now is in the business of underwriting stock and bond offerings, and even has its own long/short hedge fund.

One of the last sections of the report especially resonates in light of the Pandit news, as McVey zeroes in on what he sees as the key intangible of “leadership.”

New Citi CEO Michael Corbat may arrive with an advantage under the McVey school of thought. He says, “Great leaders inspire their employees to ‘wear the brand,’ using their actions and words to continually reinforce the culture and vision of the organization.”

Corbat, who’s worked at Citi and its predecessors since 1983, described himself in a memo today as “a true believer.”

Original post is From a KKR Perch, More Scrutiny Ahead for Wall Street by Political Capital.

Photograph by Victor J. Blue/Bloomberg

Stephen Schwarzman, chairman and chief executive officer of Blackstone Group LP.

Could all this madness actually be good for business?

After enduring almost a year of attacks on private equity, one of its chief practitioners seems to think the industry could come out ahead when the November dust settles.

Steve Schwarzman, chairman and CEO of the Blackstone Group, sees this in all the attention paid to Republican Mitt Romney’s history at Bain Capital — including negative ads that paint his former business as plant-closing, job-slashing mercenaries.

“Ironically, it gave the public and other people a chance to think through these arguments,” Schwarzman said during an interview at the Waldorf-Astoria, the famed New York hotel that Blackstone counts among its vast corporate and real estate holdings totaling almost $200 billion. “I don’t think they come down with a huge negative on private equity despite the attacks.”

Schwarzman, whose interview aired today on Bloomberg Television’s “Money Moves with Deirdre Bolton,” argued his investors are willing to wade through the political noise to focus on the literal bottom line: What private equity funds like make for their backers. That’s more important than ever, as investors like public pensions struggle to reach the thresholds they need to actually keep their promises to retirees.

The election also has helped – or forced – private equity to come further out of the shadows. Blackstone alone has stakes in everything from Motel 6 to SeaWorld and the Weather Channel. Schwarzman’s competitors control Toys “R” Us, Outback Steakhouse and the gaming empire Caesars Entertainment.

A Romney supporter, Schwarzman spoke with the statesman-like sweep he’s adopted in recent years, painting a scenario “where we sentence ourselves to years of below expected growth and keep taking debt on, which ultimately is a drag not just for ourselves, but for future generations.”

He conceded that his firm has been among the beneficiaries of tighter regulation on traditional Wall Street players, as Dodd-Frank and the Volcker Rule have changed strategies of the likes of Goldman Sachs, one of Blackstone’s closest private-equity rivals during the LBO boom of 2005-2007.

Schwarzman has methodically expanded Blackstone to comprise far more than private equity. Its real estate business accounted for half its 2011 profits. The business of lending to companies and buying distressed debt has blossomed in a troubled global economy. Asked if his firm was, as some have surmised, the new Goldman, he struck a lighter tone.

“Given Goldman’s publicity, I hope that’s not the case,” Schwarzman said. “We’d rather just be the same old Blackstone.”

Original post is Private Equity’s Election Bounce? by Political Capital.

Mother Jones, the magazine that first publicized the comments of Republican nominee Mitt Romney describing 47 percent of Americans as “victims” dependent on federal largesse, has released another video showing the former Massachusetts governor characterizing Bain Capital LLC, the firm he co-founded, as a partnership to invest in companies, help manage them and then “harvest them at a significant profit.”

The 1985 video was on a CD-ROM marking the 25th anniversary of Bain & Co., the consulting firm that Romney left to help form Bain Capital, according to the magazine.

“In addition to starting new businesses,” Romney campaign spokesman Ryan Williams responded in an email, “Mitt Romney helped build Bain Capital by turning around broken companies, creating and saving thousands of jobs. The problem today is that President Obama hasn’t been able to turn around our economy in the same way.”

The Obama campaign responded with a statement from Randy Johnson, a former worker at American Pad & Paper, a Marion, Indiana-based company once owned by Bain that closed in 1995.

“Romney’s business experience was never about creating jobs,” Johnson said. “Romney’s own words prove that his focus was putting profits before people from the very beginning.”

Original post is Romney: Bain `Harvested’ Profits, Seen in Newly Unearthed Video by Political Capital.