FAT CATS

[lady*b]

BX: Posted by: downtimepg
In reply to: None Date:6/25/2007 8:09:11 AM
Post #of 114743

interesting twist, bx

Republicans Say Democrats Interfered With Blackstone IPO
Last update: 6/25/2007 7:30:00 AM


By Siobhan Hughes
Of DOW JONES NEWSWIRES


(This article was originally published Friday.)
WASHINGTON (Dow Jones)--Republicans on the House Oversight and Government Reform Committee are accusing Democratic colleagues of engaging in "raw political interference" in a high-profile stock sale by Blackstone Group (BX).
Rep. Tom Davis, the Virginia Republican who is the ranking member on the panel, and Rep. Darrell Issa, the California Republican who leads an oversight subcommittee, say Democratic leaders applied political pressure by asking the Securities and Exchange Commission to delay allowing the offering to proceed.
Blackstone shares began trading Friday on the New York Stock Exchange one day after the SEC declared the investment firm's registration statement effective. House Oversight and Government Reform Committee Chairman Henry Waxman, a California Democrat, and his colleague Rep. Dennis Kucinich, an Ohio Democrat, had appealed to the SEC to slow the sale. They said Congress needed time to study the issue, citing concerns about whether an investment in Blackstone would give ordinary investors access to hedge funds and private-equity funds that may not be suitable.
"The Waxman/Kucinich request is an unwarranted interference in capital markets, which if successful will have a chilling effect on those markets," Davis and Issa wrote on June 22 to SEC Chairman Christopher Cox. "Their behavior attacks the very underpinnings of the American economy by exerting political interference in the rights of American entrepreneurs to raise money from the public."
Natalie Laber, a spokesperson for Kucinich, called the letter "a perfect example of the pot calling the kettle black. They are charging us with engaging in raw political interference - which we're not - yet they are telling the SEC what to do.
"Our comment to the SEC was on the process - which is within our rights - to ask them to slow down the process so that we can hold congressional hearings. We were not telling the agency how to determine a case."
Blackstone manages about $88 billion, with more than half in private-equity funds and hedge fund-related investments. Hedge funds and private-equity funds are little-regulated investment vehicles aimed at wealthy investors on the assumption that the affluent are better able to manage the risks associated with such investments. Under current SEC policy, an individual investor must have $1 million in net worth - including the value of a home - before investing in a hedge fund, although regulators have proposed raising that hurdle.
"The value of public investors' interests in Blackstone LP would be tied to the performance of the underlying hedge and private-equity funds, which have not been considered suitable investments for the general public because of their high risks and speculative nature," Waxman and Kucinich wrote. "While exposing unsophisticated investors to new risks, the Blackstone LP IPO would also apparently deprive them of control over the management of the funds and of many of the protections provided by fiduciary duties typically owed to them by management."
Blackstone has been drawing outsized attention from Congress amid broader scrutiny of private-equity funds and hedge funds. The Senate Finance Committee has already introduced legislation that would bar publicly traded partnerships that derive income from asset management services from qualifying for lower tax rates. Besides the letter from Waxman and Kucinich, Sen. James Webb, a Virginia Democrat, has raised national security concerns, citing Blackstone's holdings in satellite technology companies and firms that provide software and applications for use by the U.S. military.
The Chinese government purchased a $3 billion stake in Blackstone, and Webb wrote the SEC, the Treasury secretary, and the Homeland Security secretary on Friday that he was "disappointed to learn that the public offering has gone forward, without an indication that you have addressed the serious national security concerns inherent in the government of China's $3 billion investment, since the Blackstone Group owns companies that provide software and applications for use by the military and in satellite technology."
SEC spokesman John Nester declined to comment.
The SEC is an independent agency that reviews stock-offering documents before the offerings are allowed to proceed. Nester on Thursday noted that the agency may only refrain from declaring a statement effective in the case of "material misstatements or omissions." He also pointed to the protections offered by existing securities laws, "which the commission has rigorously applied."
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