Thread by @doctorow

During a 2007 trip to NYC, while taking long walks from one indie bookstore to the next, lugging increasingly heavy bags of pressed vegetable matter, I stumbled on Simon Lovell's HOW TO CHEAT AT EVERYTHING at the St Mark's Bookshop.

runningpress.com/titles/simon-l…

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Despite the title, its really about about NOT getting cheated: anatomical dissections of scams that show you how they work. One thing that stuck with me from all that is how to spot a dirty "proposition" bet, a variable-odds bet on a specific outcome from a range of outcomes.

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Lovell's rule of thumb is the more complicated a bet is, the scammier it is. If it pays 2:1 for one outcome, 5:1 for another, and 100:1 for a third, it's probably a scam. Complexity confounds your ability to match odds to payouts - to intuit whether it's a good bet.

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I remember being at Defcon one year and going into a Vegas casino and asking a craps croupier to explain how the game worked, and as he rattled off the different odds on the different paylines, I was like, Ohhhhh, I get this. This is a scam.

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The next time I had that feeling was during the financial crisis, when I started to learn about CDOs and other complex derivatives, and how their originators presented them to investors, using esoteric math to prove they were safe. Ohhh, I thought. Oh, I get it.

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The more I learned about finance, the more this insight came back to me. Because so often the complexity was revealed to be an ornament, a form of dazzle there to confuse the eye about the true shape of the transaction.

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The rococo equations where set-dressing to support the idea that mere mortals are disqualified from discussing, understanding, or regulating the finance industry. And nowhere is that more in evidence than in the private equity world.

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Because the underlying scam is pretty simple, tbh. Borrow money using the company you're acquiring as collateral (that's right: you're using an asset you don't own as collateral to acquire it - like a mortgage, except the transaction is nonconsensual for the "seller").

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Sell off the company's assets, especially real-estate holdings, so the company now has to pay rent for its own buildings (this is very popular with PE takeovers of chain restaurants, exposing them to rent-shocks).

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Eliminate cost-centers that provide long-term value to the company, but whose absence isn't felt in the short term - like buying up newspapers and firing the local sales staff who know local merchants, consolidating sales to a national office.

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(If you think Google and Facebook killed newspapers, you're not wrong, but you're not right either: they'd been consolidated and asset stripped for decades, had their cash reserves, plant and real estate sold off, and were weak and flailing when the internet came along)

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Declare a special dividend for the PE owners and their investors, in which the cash you realize from the selloffs disappears into offshore tax-havens, leaving behind a damaged, failing business.

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When the company fails, restructure it through bankruptcy. Take special care to zero out obligations to suppliers (the entire US independent toy industry was annihilated by the PE shutdown of Toys R Us) and workers (bye, Sears pensions).

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Engage in predatory conduct. Buy doctors' groups that serve hospital emergency rooms and opt them out of all insurance plans. Stick people who show up in ambulances, unconscious or in extremis, with titanic bills. $5k for an icepack? Why not!

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Make minimal payments to the creditors who loaned you the money to do the leveraged buyout. Maybe buy the debt from them at pennies on the dollar and start extracting debt payments from the company - predatory behavior can help with this!

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Hospitals and newspapers are really great for this, because they're important so they get bailouts. Canada's giant newspaper bailout will direct millions in taxpayer funds to the US vulture capitalists who tanked Postmedia and the National Post.

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Hospitals are an AMAZING storefront for this kind of long-con, especially in a crisis. There are so many ways to cash out. They're like the craps-table of The Pandemic Casino, a moneyspinner for the casino boss.

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Like, if you happen to own a beloved low-income hospital that has served poor people in a city with some of the worst poverty in America, you can offer to rent it to the city for $1m/month!

pluralistic.net/2020/04/02/eff…

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Or if you're a PE company that staffs about half of the country's hospitals (especially their front-line ER docs and nurses), you can slash their pay and benefits and they'll keep showing up for work!

pluralistic.net/2020/04/01/plu…

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Or you can just demand a bailout. Steward is a PE-backed hospital chain whose debt-loaded acquisition of Easton Hospital in Lehigh Valley (PA) left the region's major hospital saddled with so much debt it was already on the brink of collapse.

counterpunch.org/2020/04/03/hos…

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It's owned by Cerberus, a giant and notorious PE looter. Cerebus is about to pocket $8m in bailout money approved by PA governor Tom Wolf, who was responding to Steward's threat to shut down the hospital effective Mar 27 if it didn't get a payout.

lehighvalleylive.com/coronavirus/20…

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The $8m is a downpayment, and there's $24m more to come. It's true that when Cerebus bought Easton Hospital, it was struggling...because it had ALREADY been debt-loaded by another PE looter, Forstmann Little & Co.

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And while Cerebus's investors have made huge profits from the transaction, the Steward hospitals are the worst-performing in PA, with $592m in losses in 2017/8.

chiamass.gov/assets/Uploads…

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When PE companies acquire doctors' groups, they argue that they're merely investing in the front-line caregivers, and that these are still owned and representative of those doctors who save our lives. But that's a lie.

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Dr Ming Lin is a 17-year ER veteran who was just fired from Bellingham, WA's Peacehealth St. Joseph Medical Center after going public about the lack of PPE and the unsafe conditions for caregivers and patients at his hospital.

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The company that fired him is Teamhealth, owned by Blackstone. the largest PE company in the world. Teamhealth says that the doctor's practices it owns are actually run by doctors, but has refused to publish the operating agreements it has with those docs.

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Docs like Ming Lin. If you believe Teamhealth practices are run by docs, then you have to believe that Ming Lin fired himself. Otherwise, Blackstone fired him.

nakedcapitalism.com/2020/04/what-w…

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Blackstone has ordered ALL of its docs to be silent on lack of PPE, on pain of immediate dismissal. Its CEO, Stephen Schwarzman, is a Trump insider, and the order protects Trump from negative news stories that reveal his complicity in the negligent homicide of Americans.

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Private equity is a scam. The math that shows that it's providing value - as opposed to helping socially useless parasites loot real businesses that provide real value - is a window-dressing, like the fake investor reports Bernie Madoff once manufactured.

eof/