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The Profits Are in the Investments (ROI), Mergers/Acquistions, Sales, Dividends etc. — not the Wages!

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 ALEC’s Private Enterprise Board Chairperson & “Centerpoint360”

(Who??)

In a recent post, I put up some of the board members (Private Enterprise Board, and others) of “ALEC” the American Legislative Exchange Council. {pls. hover cursor for their “about us” History, which is significant} This is where corporations solicit — openly — American legislators (who sometimes get “scholarships” to attend!) and convene around initiatives, draft legislations, and then they get to go back home and pass the legislation, hopefully….

ALEC – American Legislative Exchange Council

It has a variety of Boards, Task Forces, etc.

About ALEC

I didn’t get to “profile” the corporation of the “private enterprise board’s” listed company, which was unfamiliar to me.  It’s called “Centerpoint360”  SourceWatch points out:


Centerpoint360 is a lobbying firm based in Greenwich, CT. According to its website, “Centerpoint360 serves as a complementary angle to the traditional government relations operations. We serve at the intersection of business and government in order to enhance a client’s ability to shape the debate as well as manage the legislative and regulatory processes.”[1]

The firm’s clients “include Fortune 100 companies with annual revenues in excess of $200 billion as well as not-for-profit and privately held enterprises, with clients in the consumer packaged goods, transportation, technology, supply chain & distribution, healthcare and sports marketing industries.”[2]

Support for the American Legislative Exchange Council

Centerpoint 360 President and CEO W. Preston Baldwin is the Chairman of the corporate (“Private Enterprise“) board for the American Legislative Exchange Council (ALEC) as of 2011.[3][4]

A list of ALEC Corporations can be found here.

About ALEC
ALEC is a corporate bill mill. It is not just a lobby or a front group; it is much more powerful than that. Through ALEC, corporations hand state legislators their wishlists to benefit their bottom line. Corporations fund almost all of ALEC’s operations. They pay for a seat on ALEC task forces where corporate lobbyists and special interest reps vote with elected officials to approve “model” bills. Learn more at the Center for Media and Democracy’s ALECexposed.org, and check out breaking news on our PRWatch.org site.

More about Baldwin’s background, and Centerpoint360, from SourceWatch shows he formerly worked for “UST” (smokeless tobacco) which was just bought up by “Altria” formerly Phillip Morris.  which brings up another point — when companies get that much negative publicity, how hard is it to simply change the name, and continue in the same or similar line of work?  Seems to me it should be easy.

I learned on about October 23, 2012 that Phillip Morris ended up buying the largest US Food Company around, “General Foods” and merged it under the name Kraft.     I did this as a direct result of following up on one of the largest nonprofits in the District of Columbia, whose business is promoting vaccination in some of the world’s poorest countries, and whose present CEO used to work for a vaccination technology company.  Looking up THAT company, I found the co-founder of it got his background in Biscuits and Confectionary (i.e., sweets).  Looking up THAT company, I found out how Kraft  bought it out in 2010, and immediately closed a factory moving the operations to Poland.

Looking up the background of KRAFT, I found out it had just split off its food from its snacks business, distributing dividends (or however this is done) as recently as this past month! (October 2nd).  I am very interested in the history of market-dominating foods, which General Foods (began as “Postum” in 1893, Battle Creek Michigan) was.   It developed one product — a ready-to-eat cold cereal (you may have heard of Grape-Nuts) and focused early on and from the start on advertising and education.  From there on (raising cash) it started buying up other companies.  The rest is history.  and Philip Morris is part of it.

By consistently looking things up, we can get a better picture of how some of the major players in THIS economy (and on the globe) got themselves going.  I learned yesterday just how significant Oxford University (England, obviously) was in this mix.  You can too — it’s on the ColdHardFacts blog.

I didn’t know when publishing THIS blog (and the Philip Morris stuff) re: Centerpoint360 (a lobbying firm from CT with connections to ALEC, which has connections to the US Congress)  that the same company was so much into the US food supply.

Then, the next day (Oct. 24, 2012) I then noticed another page on a Catherine Austin Fitts site I’ve been working through (it’s a lot of material), and how the EU had made the connection between the cigarette industry and money laundering, plus the drug (or if you will, criminal profits from illegal drugs) industry.  A lawsuit was actually filed by several sovereign nations in the EU against a United States Defendant, RJR (RJ Reynolds, i.e., a tobacco firm).

This parallels with the situation of judges buying some real estate cheap, then it’s suddenly appraised high, and they are able to miraculously pay off one lien after another (were they real mortgages?) (whose money paid them off) totaling FAR more than a judge’s salary.  I heard of this, but to see it in a series of real estate deeds, compared to mortgages on the same, is a whole other matter.

It sounds to me similar deal here.  THis will not make sense (obviously) until a person has looked at some of the company’s histories and starts thinking in these terms.  That’s what I’m asking us plain old worker bees, life-long job-holders, to start doing — understand more than before about how corporations operate!   That’s WHY I’m laying this stuff out.

It’s not enough just to be a good guy, an ethical person.  Collectively, we need to acknowledge (see, when it’s happening under our noses) and respond to how the bad guys are operating!  Unless it’s OK to turn the world into a single criminal enterprise and just be extorted into oblivion or worked into lesser and lesser subsistence lifestyles, you can’t support your kids — you can’t fight to keep your kids — you can’t find justice, and eventually after enough years of this, you simply die.   Is THAT OK???

That’s why I “converse,” this information onto a blog, month after month….It’s not OK to keep playing ‘pretend’ this isn’t happening.      Behaviors need to change!   Self-education needs to become the norm; does the information make sense, is it verified — or does it make NO sense, and it’s not verified?

 

Note:  This requires attention and mental exertion called reading, and mentally sorting and filing what is read:  front-burner, back-burner, trash heap.  The reward of understanding comes later, not up front!

FYI, some of my most valuable finds came from noticing details that may not have seemed important on their own.  I don’t know why I focused on Philip Morris a few days ago, but here we are.  They were accused of RICO over here, and another cigarette company, and some brands it was associated with, has been accused of RICO by the European Union.

I suggest that when the European Union files a lawsuit, it may have some basis for doing so . . . . . And it went after a huge cigarette company.

RJR Nabisco

Nabisco Logo

 

  • RJR Takeover Wars – The Next Episode by Catherine Austin Fitts (Scoop Media, November 2002) The European Union Sues RJR Tobacco for Two Decades of Global Money Laundering for Colombian Drug Lords, Russian Mafia, Italian Mafia, Saddam Hussein’s Family & New York Real Estate Investors * * *

Articles on the RJR Case and Other Tobacco Company Lawsuits:


This is from the FITTS (not, Phillip Morris RICO search) page…:

The European Union’s Lawsuit

If you are on a limited entertainment budget, have no fear. The legal complaint is available on line and is better than the latest James Bond movie or Tom Clancy novel. You don’t want to miss this primer on the real deal on corporate money laundering worldwide brought to you on behalf of ten sovereign nations of Europe (Finland, Germany, Sweden, France, Luxembourg, the Netherlands, Belgium, Holland, Portugal, Spain, no doubt, with the help of their law enforcement and intelligence agencies).

Here it is: HTML – http://www.scoop.co.nz/mason/stories/WO0211/S00142.htm

ADOBE PDF – http://www.nyed.uscourts.gov/coi/02cv5771cmp.pdf

For those who want the real short version, here is the EU’s press release of October 31, 2002 announcing the filing of their suit:

http://www.scoop.co.nz/mason/stories/WO0211/S00141.htm

***************

Who is RJ Reynolds Tobacco Holdings (RJR)?

R.J. Reynolds Tobacco Holdings (RJR) is the holding company for the second largest tobacco company in the US, manufacturing and distributing Camel, Winston, Salem, Doral and other cigarettes. RJR, headquartered in North Carolina, claims to manufacture one out of every four cigarettes in the US.

Here is RJR’s website: http://www.rjrholdings.com

The Complaint also names Nabisco Group Holdings, makers of Oreo cookies and numerous other consumer food products, which spun RJR out several years ago (that is Nabisco and RJR were one company until they split into two companies) and is now part of Kraft Foods, which also owns Philip Morris:

Here is Nabisco’s website. http://www.nabisco.com/

If what the EU says is true, every time you buy a pack of Winston cigarettes or a bag of Oreo cookies, you are voting with your money in the market for organized crime.

The RJR story continues at the next salmon-pink-background quoted section.  What’s inbetween is from a history of the company “Kraft, which I  learned the other day from the perspective of Kraft’s takeover of an old (since 1800s) British Chocolate/confectionary company, “Cadbury.”  (I also blogged this at ColdHardFacts, I believe, which is more propery a continuation of THIS post.)  The German word “Kraft” means “strength” but it has other connotations, I guess, as in “crafty.”

From my lookups the other day, on “Kraft” background — its timeline:

  • 1895 Charles William (C.W.) Post makes his first batch of Postum cereal beverage in a little white barn in Battle Creek, Michigan. With that step he enters the new retail cereal industry.
  • 1896 Post’s company incorporates as The Postum Cereal Company, Ltd.
  • 1897 C.W. Post introduces Post Grape-Nuts cereal, one of the first ready-to-eat cold cereals.
  • From the start (it says) advertising was significant.  $12 million in 20 years (a lot back then!)

OK, now they have a product and are incorporated (was “Ltd.” a British term at the time? Because over here we do Corp., Inc. etc. — maybe only since the income tax, 1913..  In 1922 it becomes an “Inc.”)  Look what comes next, notice this is after the creation of the federal reserve board and the income tax:

  • 1923 they create an employee stock plan.  What are “stocks”  They’re for trading, buying & selling, right?
  • 1924 they start educating the public on nutrition, publishing pamphlets, etc. aiming at kids, too.  I’m sure oatmeal (cooked) was just as nutritious as and cheaper than Postum, just slightly less convenient — so advertising would be required, right? Smart business moves, both of them.  They open offices on Madison Avenue, sales are $24 million.
  • 1925 Buys the Jell-O Company (being so into nutrition, right?)for $67 million cash and stock.  Now somebody who used to own Jell-O owns stock in Postum.
  • . . . . fast forward about 60 years…and many, many company purchases, expansions, — into coffee, frozen foods, coconut and chocolate products, COFFEE (Maxwell house), Decaffeinated Coffee (Sanka) Yuban, TV coverage of Sporting Events (with Ford/split the advertising airtime), the company that makes Kool-Aid and other powdered soft-drink mixes (no wonder our health is so good across the nation….), chewing gum, sponsors a TV show, encourages education philanthropy among its employees, Gevallia coffee, they buy “Oscar Mayer & Co.,” . . . . got the picture? in 1981.
  • 1983 Annual sales of more than $8 billion make General Foods the biggest U.S.-based company operating solely in the food and beverage business.
  • 1984  General Foods establishes joint ventures in the People’s Republic of China to produce Tang powdered beverage and for the sale of Maxwell House coffee.
  • 1985 (taking over more business in Spain & India) &  Philip Morris Companies Inc. acquires General Foods Corporation. General Foods Corporation then operates as a subsidiary.
  • 1989 Philip Morris Companies Inc. (having previously bought or started Kraft as a subsidiary) merges General Foods  + Kraft =  “Kraft General Foods, Inc.” = United State’s Largest Food Company.

The Inside Story of the Cadbury Takeover” (by Kraft, 2010) is interesting reading from the FT. I also learned that Warren Buffet was the largest shareholder in Kraft, and (twds the end) that “Fifty per cent of the company (Cadbury, I believe)  was purchased from an American drug company {{??}} – it simply wasn’t the business people believed it to be.”

Anyhow, Philip Morris Companies being into foods is rather interesting….

Here’s a reference dated January 19, 2010 as the takeover is about to happen.  Interesting stats, huh?  I’m putting this out to show scope of their markets, and how these things happen.  I.e., who owns the brand names?  Well, that depends on what year you’re dealing with ….  Right now, what used to be KFT is now KRFT (stock ticker) and the snacks part has been split off and has a classy-sounding name’ “Mondelez International.”  But a month ago, it was Kraft….

Facts about Cadbury’s Takeover by Kraft (CBY,KFT) by Benzinga (a “financial media outlet that empowers investors with high-quality etc. output coveted by the street’s top traders.”)

Kraft Foods (NYSE: KFT [FREE Stock Trend Analysis]) is set to buy Cadbury (NYSE: CBY) in an 11.9 billion pound ($19.55 billion) deal after the U.S. food giant raised its offer, winning over the management at the British confectioner and ending a four-month standoff. Here’s the skinny on the two companies, from Reuters.

The New Company:
* Combined group will be number one in chocolate and confectionery, overtaking Mars
* Combined revenues of close to $60 billion in 2008 mean Kraft remains the world’s second biggest food group behind Nestle
* Will have a leading position in developing markets, including in Brazil, Russia, India, China, and Mexico
* Cadbury brands such as Dairy Milk bars, Roses chocolates, Trident gum and Halls cough drops join Kraft products such as Toblerone and Milka chocolate bars and Oreo cookies

. . .Cadbury Facts:

* Cadbury is the world’s second-largest confectionery company after Mars-Wrigley, making brands such as Dairy Milk chocolate, Trident gum and Halls cough drops.
* Cadbury has the No. 1 or No. 2 positions in more than 20 of the world’s 50 biggest confectionery markets.
* Cadbury operates in more than 60 countries and employs more than 46,000 people.
* Full-year revenue in 2008 came to 5.38 billion pounds with an underlying operating profit of 638 million pounds.
The company has said unaudited figures showed 2009 revenue rose 11 percent, helped by currency movements.
HISTORY:
* Started life in 1824 with John Cadbury opening a shop in Birmingham selling tea and cocoa.
* Merged with Schweppes in 1969 to create Cadbury Schweppes.
* Became the world’s biggest confectionery group in 2003 after buying the U.S. Adams chewing gum business for $4.2 billion.
* Sold continental European business to Lion and Blackstone for 1.85 billion euros in February 2006.
* Demerged Cadbury Schweppes in May 2008 following shareholder pressure, creating the London-listed confectionery group Cadbury Plc and U.S. soft drinks group Dr Pepper Snapple Group.
* In March 2009, sold Australian beverage business Schweppes Australia to Asahi Breweries for A$1.185 billion, completing its exit from soft drinks.
* In January 2010 Kraft Foods Inc sweetened its cash and stock offer for Cadbury with more cash, as the U.S. food company’s hostile takeover attempt entered its final month.

Kraft Facts:
* Kraft is the world’s second-largest food group, after Nestle.
* The company’s origins date to 1903, when James L. Kraft began a business selling cheese from the back of a wagon in Chicago, Illinois. In 1914 the company started making its own cheese.
* Kraft was acquired by tobacco corporation Philip Morris in 1988 for $12.9 billion. (another record said 1985, oh well
* In 2000, Philip Morris bought Nabisco, the maker of Oreo cookies, for $19.2 billion, and merged it with Kraft.
* Kraft Foods Inc was listed on the New York Stock Exchange in 2001, with the spin-off completed in 2007.
* In 2007, Kraft bought the cookie business of Danone — which includes well-known French brand LU — for $7.2 billion. When the bid was announced, French Economy Minister Christine Lagarde is reported to have said: “We are not yet ready to put ketchup on our petits LU.”
* Kraft still sells cheese singles under the Kraft brand in some countries, including Britain, while in North America the Kraft brand adorns packets of macaroni and cheese.
* Kraft’s other major brands include Oscar Mayer hot dogs, Maxwell House instant coffee, Philadelphia cream cheese and chocolate brands Milka and Toblerone, acquired when it bought Jacobs Suchard in 1990.
* Kraft has 98,000 employees and 168 plants.
* Kraft had revenue of $42 billion in 2008.

(c) 2012 Benzinga.com. Benzinga does not provide investment advice. All rights reserved

Read more: http://www.benzinga.com/markets/company-news/91320/facts-about-cadbury’s-takeover-by-kraft-cby-kft#ixzz2AMh2cD7y

 A listing of articles on this event (Kraft/Cadbury) from the Economist (which I believe is based in the UK?) is interesting also.  One of them in particular, about NelsonPeltz, who was mentioned in the FT (Financial Times) “The Inside Story of the Cadbury Takeover” (link above, underneath bulleted list of “the history of General Foods, Philip Morris acquiring it and merging it with Kraft, above).

Pelz got 3% of Cadbury — and was pushing them in a certain direction — but he also had a chunk of Kraft stock also….

Cadbury Time to break off a chunk

A renowned activist investor (Mr. Pelz) turns his attention to yet another food company  Dec 13th 2007

NELSON PELTZ is stepping up his campaign for more influence over the management of Britain’s Cadbury Schweppes, the world’s biggest confectionery-maker measured by sales. In mid-March the activist investor, who specialises in big food companies, revealed that he had a 3% stake, spurring Cadbury’s management into disclosing its plan to demerge its American soft-drinks business. This week, in partnership with QIA, Qatar’s state-owned investment fund, Mr Peltz’s investment vehicle, Trian, increased its holding to 4.5%.

Cadbury Schweppes, which makes gum, sweets, chocolate, iced tea and fizzy drinks, is just recovering from a series of disasters. Todd Stitzer, who became the firm’s boss in 2003, had to preside over several profit warnings

Qatar’s State-owned investment fund?   Qatar is an absolute monarchy, “has the world’s largest GDP, formerly a British Protectorate, interesting history, etc.  “The most important positions in Qatar are held by the members of the Al Thani family, or close confidants of the al-Thani family. Beginning in 1992, Qatar has built intimate military ties with the United States, and is now the location of U.S. Central Command’s Forward Headquarters and the Combined Air Operations Center.”

Apparently Nelson Pelz & his fund Trian are pretty good at buying up chunks of companies and then demanding the increase shareholder profits, i.e., cut expenses.   Reminds me of what Browder was doing over in Moscow with Hermitage fund only he was trying to clean up corruption. ….  The guy sounds pretty pushy, real aggressive…

Last May from Bloomberg.com

Nelson Peltz’s Trian Fund Management LP took a 7.3 percent stake in Ingersoll-Rand (IR) Plc and is seeking to meet with management about ways to boost the industrial group’s underperforming stock.

(Turns out CalStateTeachers Pension fund are having Trian manage some of their stuff too)

Peltz, who is the largest investor in fast-food chain Wendy’s Co. (WEN), is known for buying stakes in companies and then pushing them to increase their value by cutting costs or merging. Suggestions to Ingersoll-Rand may include “enhancing operating margins to levels comparable to those achieved in peer businesses,” using “prudent amounts of leverage” for share buybacks, and “steps to better align management compensation” with the company’s performance, the firm said.

Ingersoll-Rand would rank as Trian’s largest stake in a U.S. traded company, based on data in a Form 13F that the hedge fund filed on its holdings as of Dec. 31. At that time, Family Dollar Stores Inc. (FDO) ranked as Trian’s biggest position with a market value of almost $575 million.

Trian had about $3.4 billion in assets under management as of Feb. 1, according to a March filing. Trian’s price objective for its investments is driven primarily by increasing earnings and cash flow, through higher sales and lower expenses, rather than by “financial engineering,” such as breaking up a company or recapitalizing it, according to the SEC registration.

One more — they got 5.1% of “Lazard” itself a merger and acquisitions company that says its compensation is 62% of revenues… Hmm…

Peltz’s Trian builds 5.1 percent stake in Lazard [Reuters, June 18, 2012]

(Reuters) – Shares of Lazard Ltd (LAZ.N) rose 5 percent on Monday after investment funds run by Nelson Peltz and Edward Garden said they had accumulated a 5.1 percent stake in the investment bank.

The investments overseen by Trian Fund Management L.P., which often wrestles with management of companies it considers undervalued or poorly managed, were welcomed by New York-based Lazard.”Trian Partners are experienced and successful investors, and we appreciate their confidence in Lazard’s franchise and strategy,” Lazard said in a statement. A spokeswoman at the firm declined to elaborate.

Lazard management said by 2014 it would reduce debt, lift profit margins to 25 percent from 16 percent last year, cut compensation expense to 57 percent of revenue from 62 percent in 2011 and pay shareholders higher dividends.

Lazard specializes in merger and acquisition and restructuring advice, a business that has suffered from a drought of deals since the credit crisis of 2008. It also oversees $157 billion of assets in mutual funds and other vehicles, with a specialty in global equity funds.

(Reporting By Jed Horowitz; editing by Carol Bishopric)

Nelson Pelz net worth as of Sept. 2012 (per Forbes) is $1.2 billion; he’s a Univ. of Pennsylvania Wharton School of business drop-out, married with 10 children (I’m thinking, more than one wife?) and #360 of Forbes 400.  His source of wealth is investments.  Guess he learned something at Wharton . . . .

Nelson Peltz

Well, good for him, I guess…. Anyhow… if you’re working at a corporation he decides to streamline (as were several Cadbury people, before an operation in England was outsourced to Poland), watch out for downsizing…. (I guess).

(BACK to Ms. Fitts’ Dillon & Read story, above.  Question:  Why would Cigarette companies be buying up Food companies...  And how come it’s not the other way around?).

Just for definitions, Dillon & Read is/was a brokerage firm that goes back a ways:

Origins

Dillon Read traces its roots to 1832 with the founding of the Wall Street brokerage firm Carpenter & Vermilye. This firm was succeeded by Read & Company in which chief principal was William A. Read.[1] An area of particular activity was underwriting the bonds of Latin American governments. However, it is best known for its actions during the 1920s. During that time Clarence Dillon managed the rescue of faltering Goodyear Tire & Rubber Company, engineered the buyout (in 1925) and subsequent sale of Dodge Motors (in 1928) to Chrysler, launched the first post-war closed-end investment trust (in 1924), and led the largest-ever stock offering (in 1926). By the end of the decade, Dillon Read was considered to be an investment-banking powerhouse, alongside J.P. Morgan & Co. and Kuhn, Loeb & Co.

Acquisition by SBC
Dillon Read was purchased by Swiss Bank Corporation (SBC) in 1997 and merged with London-based investment bank S. G. Warburg & Co. (purchased by SBC in 1995) to become SBC Warburg Dillon Read. The merged entity then became part of UBS AG when the latter firm bought SBC.

OK, I can’t ignore Warburg Dillon Read and I think this is interesting:

Warburg Dillon Read was an investment bank created by the Swiss Bank Corporation (“SBC”), following its 1997 acquisition of S. G. Warburg & Co. which it merged with Dillon, Read & Co., a firm it had acquired in 1995. {{or so — Wikipedia isn’t the most consistent with these things … see above}} SBC itself merged with the Union Bank of Switzerland in 1998, creating UBS AG. Warburg Dillon Read was subsequently renamed UBS Warburg and eventually just UBS.

OK, so what is a Swiss Bank Corporation doing forming an investment bank?  Did you ever think about how a corporation could create  – – – a bank???  What is it to be a “Bank Corporation”? (or in Switzerland, a “verein” I guess)

Well, trusty wikipedia says briefly….SBC

was a large integrated financial services company located in Switzerland. Prior to its merger, the bank was the third largest in Switzerland with over CHF300 billion of assets and CHF11.7 billion of equity.[1]

Throughout the 1990s, SBC engaged in a large growth initiative, shifting its focus from traditional commercial banking into investment banking, in an effort to match its larger Swiss rival Credit Suisse. As part of this strategy, SBC acquired US-based investment bank Dillon Read & Co. as well as London-based merchant bank S.G. Warburg in the mid-1990s. SBC also acquired Chicago-based Brinson Partners and O’Connor & Associates. These acquisitions formed the basis for a global investment banking business.

In 1998, SBC merged with Union Bank of Switzerland to form UBS, the largest bank in Europe and the second largest bank in the world. The company’s logo, which featured three keys, symbolizing “confidence, security, and discretion”, was adopted by UBS after the 1998 merger. Although the combination of the two banks was billed as a merger of equals, it quickly became evident that from a management perspective, it was SBC that was buying UBS as nearly 80% of the top management positions were filled by legacy Swiss Bank professionals. Today, what was SBC forms the core of many of UBS’s businesses, particularly UBS Investment Bank.

Warburg was listed on the London Stock Exchange’s FTSE (good stuff) and dates back to 1946:

The bank was founded in 1946 by Siegmund Warburg, a member of the Warburg family, a prominent German-Jewish banking family and Henry Grunfeld, a former industrialist in the German steel industry.[1] Warburg and Grunfeld, who was also Jewish, had fled Nazi Germany in the 1930s.[1]

S.G. Warburg and Co. was recognized for its pioneering mergers and takeover work in the UK in the 1960s, including the first ever hostile takeover in the UK and the first ever Eurobond issue, which fostered the new Eurodollar market. A significant event in the firm’s rise to prominence was the acquisition of Seligman Bros. in 1957; through this, Warburgs gained a place on the Accepting Houses Committee composed of the seventeen top merchant banks with access to cheap capital backed by the Bank of England.[2]

(See wikipedia page/s for more active hyperlinks to the various groups).

I found a 1995 NYT page about the impending historic takeover of Warburg:

Swiss Bank In Deal to Buy S.G. Warburg

S. G. Warburg of Britain, its aspirations of becoming a global financial powerhouse in tatters, agreed yesterday to sell its investment banking operations to the Swiss Bank Corporation for $1.37 billion.

The deal, assuming it is approved by Warburg’s shareholders, would leave Britain with no independently owned investment banks of any size less than a decade after the nation threw its financial services industry open to worldwide competition.

It would also effectively mean the end of Warburg, which was founded six decades ago by Siegmund Warburg, a member of a prominent Jewish banking family who fled Germany for London following the rise of Hitler. His firm evolved from an aggressive, innovative outsider in the clubby world of British finance into the reigning establishment firm, only to falter in the last year, a victim of its own missteps, difficult market conditions and an onslaught from rivals in the United States and Europe.

The deal, widely expected since the two firms announced last week that they were talking, follows the failure six months ago of merger discussions between Warburg and Morgan Stanley of the United States and ensuing approaches to Warburg by a variety of other possible partners. . . .

Warburg’s 75 percent interest in Mercury Asset Management, the largest money management firm in Britain and by far the most profitable unit of Warburg. Warburg said it would liquidate its remaining holdings by distributing its stake in Mercury to its shareholders, along with the cash proceeds from the sale to Swiss Bank. The share distribution would meet the desire of the management of Mercury for full independence

Please see title to this post.  See what I mean? Now Back to Ms. Fitts’ accounts….  I just wanted to establish that Dillon Read was a brokerage firm, and some of it ancestry.  For this woman to have been a partner in Dillon Read signifies a lot, not to mention her other positions held later…

…….

***************

The First RJR Takeover War

This story has personal meaning to me {{=Ms. Fitts}}. I was a partner and member of the board of directors at Dillon Read & Co. Inc on Wall Street during the 1980’s.

Dillon Read represented the RJR board during the famous takeover war in which Henry Kravis emerged as the lead investor for the takeover of RJR. The fight was so ugly that it resulted in a book and movie about the RJR “takeover war”. The Dillon partner involved in leading our role in the transaction left the firm and started a tree farm in rural Virginia — we all had the distinct feeling that the RJR transaction had helped inspire him to want to get himself, his family and his assets as far away from Wall Street as possible.

At the time, I could not figure out how Kravis and his leveraged buyout firm, KKR, could afford to pay the winning bid for RJR. I remember we would watch the price go up and up and say, “What’s that about?”

Here’s Mr. Kravis ( age 68) from a Forbes listing, worth about $4 billion….

Henry Kravis

  • Co-Chair and Co-CEO, KKR and Co
  • Age: 68
  • Source of Wealth: leveraged buyouts, self-made
  • Residence: New York, NY
  • Country of Citizenship: United States
  • Education: Master of Business Administration, Columbia University; Bachelor of Arts / Science, Claremont McKenna College
  • Marital Status: Married
  • Children: 2

A bit of wikipedia HERE shows what business KKR was in, also that it was a split-off from Bear Stearns at some point:

Founding and early history

Running the corporate finance department for Bear Stearns in the 1960s and 1970s, Jerome Kohlberg and later with protégés Henry Kravis and George Roberts completed a series of what they described as “bootstrap” investments beginning in 1964-65. They targeted family-owned businesses, many of which had been founded in the years following World War II which by the 1960s and 1970s were facing succession issues. Many of these companies lacked a viable or attractive exit for their founders as they were too small to be taken public and the founders were reluctant to sell out to competitors and so a sale to a financial buyer could prove attractive.[4][19

Now it shows me here that Oregon State Treasury Pension Fund helped KKR acquire some things.  This is why we should be looking at where the various (public) Pension funds are investing!  See your CAFRs– they have them!  Note they were doing some buyouts while still working for Bear Stearns, apparently . . . .

By 1976, tensions had built up between Bear Stearns and Kohlberg, Kravis and Roberts leading to their departure and the formation of Kohlberg Kravis Roberts & Co. in that year. Most notably, Bear Stearns executive Cy Lewis had rejected repeated proposals to form a dedicated investment fund within Bear Stearns and Lewis took exception to the amount of time spent on outside activities.[22]

The new KKR completed its first buyout, that of manufacturer A.J. Industries, in 1977. KKR raised capital from a small group of investors including the Hillman Family[23] and First Chicago Bank. By 1978, with the revision of the ERISA regulations, the nascent KKR was successful in raising its first institutional fund with over $30 million of investor commitments.[24] In 1981, KKR expanded its investor base significantly when the Oregon State Treasury’s public pension fund invested in KKR’s acquisition of retailer Fred Meyer, Inc. Oregon remains an active investor in KKR funds more than 25 years later.[4]

Later, as I read news reports that KKR was successful paying down the incredible debt load assumed by RJR to pay for the KKR bid, we would wonder, “How? How are they coming up with the cash?

That word “How?” precedes wisdom. Failure to notice and ask it does not.  

This woman had made a career decision early on to find out how money works, resulting in her ability to explain it to others. Apparently watching a philadelphia neighborhood she’d grown up in deteriorate, influenced that interest. On my part, losing custody of my kids to a batterer based on a series of falsehoods and thousands of dollars of child support arrears (i.e., there was a systematic creation of a financial crisis in MY life, a softening-up, involving several parties, before the “coups” which was an actual, bold (felony) move. That’s how my family line “speaks,” as it goes, which I already knew. However I didn’t know the court-speak. The court-speak resonates to the federal-funding & private money-speak. The systems are interlocking at places, but moreover, criminal enterprises resemble criminal enterprises. They have to have some fronts or legit, semi-legit organizations to wash (launder) the profits through. That’s probably why our federal agencies are as huge as they are now. The money’s going to a subterranean irrigation system, with collection pools to complex to be easily identified.

Well, many years later, if their allegations are true, the European Union has solved the mystery. KKR was paying for one of the premier global corporate money laundering networks — and that money-laundering network was paying down the KKR debt. The RJR Takeover War was an Organized Crime Fight.

***************

More wikipedia on this buyout:  LOOK who was backing KKR…. including some pension fund stuff:

After the 1987 resignation of Jerome Kohlberg at age 61 (he later founded his own private equity firm, Kohlberg & Co.), Henry Kravis succeeded him as senior partner. Under Kravis and Roberts, the firm was responsible for the 1988 leveraged buyout of RJR Nabisco. RJR Nabisco proved to be not only the largest buyout in history to that time, at $25 billion ($31.1 billion, including assumed debt) as well as a high water mark and sign of the end of the 1980s buyout boom. The RJR Nabisco, which would remain the largest buyout for the next 17 years, was chronicled in the book, Barbarians at the Gate: The Fall of RJR Nabisco, and later made into a television movie starring James Garner.[33]

In 1988, F. Ross Johnson was the President and CEO of RJR Nabisco, formed in 1985 by the merger of Nabisco Brands and R.J. Reynolds Tobacco Company, a leading producer of food products (Shredded WheatOreo cookies,Ritz crackersPlanters peanutsLife SaversDel Monte Fruit and Vegetables, and Snickers Chocolate) as well asWinstonCamel and Salem cigarettes.

What IS it with these cigarette companies?  Look who all is supporting KKR, as I said.

In October 1988, Johnson proposed a $17 billion ($75 per share)management buyout of the company with the financial backing of investment bank Shearson Lehman Hutton and its parent company, American Express.[34][35]

Days later, Kravis, who had originally suggested the idea of the buyout to Johnson, presented a new bid for $20.3 billion ($90 per share) financed with an aggressive debt package.[36][37][38] KKR also had the support of significantequity co-investments from leading pension funds and other institutional investors. Among KKR’s investors included, the Coca-Cola, Georgia-Pacific and United Technologies corporate pension funds as well as the Massachusetts Institute of Technology endowment, the Harvard University endowment and the New York State Common Retirement Fund[10]

However, KKR also faced criticism from existing investors over the firm’s use of hostile tactics in the buyout of RJR.[39]

Interesting that the pension funds are pooling wealth for takeovers and buyouts, to bring profit to the shareholders (i.e., who contributed to these pension funds?  They come from employee paychecks, whether a Coca-Cola paycneck, or a NYState civil servant paycheck, right?  That’s what Clint Richardson was putting into plain language over at Realitybloger.wordpress.com, in “CAFR School.”

Kravis comes from a Tulsa family whose father had been a business partner (oil?) with Joseph P. Kennedy.  Privileged schooling, Deerfield Mass (boarding?), etc.

Kravis was born in Tulsa, Oklahoma, the son of Bessie (Roberts) and Raymond Kravis, a successful Tulsa oil engineer who had been a business partner of Joseph P. Kennedy. Kravis began his education at the Eaglebrook School, (’60) followed by high school at the Loomis Chaffee School. He then majored in economics at Claremont McKenna College in Claremont, California and graduated in 1967 before going on to Columbia Business School, where he received an MBA degree in 1969.[6]

Now, to resume the Fitts narrative:

Is This Part of the Currency Wars?

In my various articles about the addiction of our economy and the stock market to organized crime profits and money laundering (See “Narco Dollars” & “The Myth of the Rule of Law” at articles links below), I have written that the real mission of the Department of Justice and the US enforcement and intelligence agencies is the “control and concentration of cash.”

That is, they are not trying to stop money laundering, rather ensuring that the US leadership and control of money laundering grows. The goal is to ensure that global money laundering and its reinvestment goes through our bank accounts and corporate stocks.

I didn’t know this when I first said it, in instinctive commentary on an earlier post. Some guy who was a great scam artist and had multiple names he was operating under got caught. I believe the post title reflected my belief that the federal government’s complaint (in prosecuting him) wasn’t that he was actually committing crimes, is that he was horning in on some of their line of work!

John Laughland, Chris Sanders and other observers of the European Union have noted the EU’s role as also the “control and concentration of cash.” With the competition between the dollar and Euro underway, is RJR’s use of cigarettes for money laundering part of the larger competition between the two trading blocs? Is the competition between dollars and Euros squeezing out cigarettes as currency?

***************

Phillip Morris Lawsuit Links:

  1. Tobacco politics – Wikipedia, the free encyclopedia

    en.wikipedia.org/wiki/Tobacco_politics

    The lawsuits brought against various tobacco manufacturers, attempting to hold  Los Angeles jury issued $28 billion in punitive damages against Philip Morris.

  2. Ex-Smoker Wins Against Philip Morris – The New York Times

    Nov 20, 2009 – Legal experts predict that thousands of tobacco lawsuits could gain momentum in Florida after a Fort Lauderdale jury ordered Philip Morris 

  3. Tobacco Litigation – Department of Justice

    Litigation Against Tobacco Companies  The Court precluded the eleven Philip Morris executives from testifying at trial and imposed sanctions against Philip 

  4. United States v. Philip Morris (D.O.J. Lawsuit) | Public Health Law 

    publichealthlawcenter.org › … › Tobacco Control Litigation

    Overview. In 1999, the United States Department of Justice (DOJ) sued several majortobacco companies for fraudulent and unlawful conduct and 

  5. United States v. Philip Morris | UCSF Library * * *

    Philip Morris. The following litigation resources document the U.S. Department of Justice civil lawsuit against the major tobacco companies under the Racketeer 

* * *And, from that last link:

Final Proposed Finding of Facts

The Final Proposed Finding of Facts outlines the US Government’s case that “substantial evidence establishes that Defendants have engaged and executed — and continue to engage in and execute — a massive 50-year scheme to defraud the public.”

The Final Opinion and Final Judgement and Order summarize the major findings and conclusions of the Court along with the remedies to be undertaken by the tobacco companies including provisions for corrective statements in the media regarding smoking and health, disaggregated marketing data, and internal document disclosure.

  • Complete Document – [PDF; 1683 pages; 5.6 MB]
  • Table of Contents – [PDF; 30 pages; 113 KB]
  • Sections 1 and 2 – Introduction and Procedural History
    – [PDF; 15 pages; 102 KB]
  • Section 3 – Creation, Nature, and Operation of the Enterprise – [PDF; 199 pages; 668 KB]
  • Section 4 – The Defendants are Engaged in and their Activities Affect Interstate and Foreign Commerce
    – [PDF; 7 pages; 69 KB]
  • Section 5 – Defendants Devised and Executed a Scheme to Defraud Consumers and Potential Consumers of Cigarettes in Most, but not all, of the Areas Alleged by the Government – [PDF; 1260 pages; 4.03 MB]
  • Section 6 – The Provisions and Implications of Settlement Agreements by Defendants – [PDF; 21 pages; 115 KB]
  • Section 7 – Defendants Have Violated 18 U.S.C. 1962(c)
    – [PDF; 90 pages; 369 KB]
  • Section 8 – Defendants Have Violated 18 U.S.C. 1962(d)
    – [PDF; 12 pages; 102 KB]
  • Section 9 – Altria is Liable for its Violations of 18 U.S.C. §1962(c) and (d) – [PDF; 3 pages; 60 KB]
  • Section 10 – There is a Likelihood of Present and Future Violations of RICO – [PDF; 20 pages; 128 KB]
  • Section 11 – Remedies – [PDF; 33 pages; 162 KB]

Final Judgement and Order

  •  . . .
  • Related Resources

    • Brief of Amicus Curiae – The Regents of the University of California in Support of the United States’ Proposed Final Judgment and Order – [PDF; 65 pages; 1.87 MB]

(From “SourceWatch”)

Executives

  • W. Preston Baldwin: President and CEO
    • Former Vice President of U.S. Smokeless Tobacco Company (UST) and Senior Vice President of UST Public Affairs, Inc. UST Inc.

According to his Linkedin profile, “From 1985 – 2009, Preston served as lead architect in building the UST state government relations department which included the recruitment and hiring of a 50 state lobbying network consisting of over 100 consultants and a 15 person internal management team, the restructuring and regionalization of internal operations as well as the oversight of day to day operations and strategies. UST managed over 800 pieces of legislation per annum with a success ratio in excess of 98 percent and enhanced return on investment to the corporation fourfold.”

Altria (formerly Phillip Morris) purchased UST in 2009. [5]

Federal Bills UST and Baldwin Helped Pass

Include, but are not limited to:[6]

  • Federal Tobacco Excise Tax
  • Commerce State Justice Appropriations Bill – S1217
  • Deceptive Mail Prevention & Enforcement – S335
  • Direct Shipping – S577
  • Smokeless Warning Labels – HR1532
  • Leahy – Bankruptcy – S625 and HR833
  • Emergency Supplemental Appropriations – HR1141

Lobbying

Baldwin has been a lobbyist for US Tobacco, among others.

Home

(Discussion of Citizens United, corporate “personhood” and “Americans Before Corporations“) (this gets into Title 28/Jurisdiction of the Constitution, and is not my topic today, although we can see how things are going!

(see also ColdHardFacts blog — the Harvard/Oxford post).
(see next post)….

Written by Let's Get Honest

October 24, 2012 at 6:46 pm

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martinplaut

Journalist specialising in the Horn of Africa and Southern Africa

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