Dirt Diggers Digest No. 76

Editor: Philip Mattera

April 13, 2007



-- 1. The private equity challenge for corporate researchers

-- 2. It’s proxy season, and oversized corporate pay packages are blooming

-- 3. OMB launches database on Congressional earmarks

-- 4. Congress moves toward better disclosure on federal contracts

-- 5. Access to CRS reports is narrowing rather than expanding

-- 6. Documents disappearing from the National Archives but FOIA may be strengthened

-- 7. Paranoia about identity theft is decimating public records databases

-- 8. Quick Hits: OSHA, Pennsylvania, state ethics laws, and mapping site fights

1. The private equity challenge for corporate researchers


Leveraged buyouts dominate the business news these days, and private equity firms such as Blackstone and KKR are being hailed as masters of the financial world. For corporate researchers, the expansion of private equity represents a significant challenge. The buyout firms are not subject to much in the way of disclosure requirements, and they tend to be secretive both about their own operations and those of the companies they have bought out.

Yet there are some sources to consult. In the course of writing a recent essay on private equity for the Digest’s sister publication the Corporate Research E-Letter, your editor collected information on these sources and presents the results here.

The most detailed data on private equity firms and their deals seem to reside in the high-priced services sold by financial information giants such as Thomson and Standard & Poor’s. Thomson’s SDC Platinum database includes a private equity feature called VentureXpert. Similar information can be obtained through S&P’s Capital IQ service. There are also some specialized data providers focusing exclusively on private equity deals, such as Private Equity Intelligence.

One of the most frequently cited publications in the field is Private Equity Analyst, an expensive monthly newsletter published by Dow Jones that has news as well as data. Dow Jones also publishes a daily service called LBO Wire.

Two other prominent publications are produced by Thomson: Private Equity Week and the biweekly Buyouts, content from which is also available on a subscription website. Both publications are available via aggregators such as Nexis.

There are two main directories of private equity and venture capital firms: Galante’s Venture Capital & Private Equity Directory, a Dow Jones annual that contains detailed profiles of more than 3,000 firms, and Pratt’s Guide to Private Equity Sources, published by Thomson.

As for free websites, see PrivateEquity.com , which has links to firm websites and other resources, and Private Equity Hub, a forum on private equity issues sponsored by Thomson. The website of the Center for Private Equity and Entrepreneurship, based at Dartmouth’s Tuck School of Business, has research papers and reference material on the subject. Some useful information can also be found on the websites of trade associations such as the European Private Equity & Venture Capital Association.

The recent announcement of an initial public offering by Blackstone has lifted its veil of secrecy somewhat. The firm’s recent (March 22) S-1 filing with the SEC reveals information such as the fact that 39 percent of its invested capital comes from public pension funds (p.125).

Unions around the world are paying more attention to the private equity phenomenon. The IUF global union federation for food, farm and hotel workers has created a website called Buyout Watch. In the United States, the Service Employees International Union recently launched a blog focused on Blackstone.

As for researching the operations and finances of the companies bought out by private equity firms, these sources have little to offer. Blackstone’s S-1 listed only a portion of the firm’s holdings and the equity investment in each. (A fuller list with brief company profiles can be found on Blackstone’s website.) These portfolio companies have to be researched like other privately held firms, meaning that you have to depend on uneven sources such as D&B, state corporate filings, and documents from government regulatory agencies. But remember that some companies that are private in the sense that their stock does not trade on exchanges may still have bonds that are held by the public—and this means they have to file 10-Ks.


2. It’s proxy season, and oversized corporate pay packages are blooming


Now is the time of year when most U.S. public traded companies issue their proxy statements, the SEC documents that serve as the vehicle for disclosing the salary and other compensation of top executives (and directors). Last year the SEC instituted new regulations (see DDD 71) that were supposed to make it easier to understand how top managers are being paid. Instead, it appears that many companies are providing so much fine print that proxies are more impenetrable than ever. It’s almost as if the agency wanted to drum up business for expensive executive compensation analysis services such as Equilar.

The denseness of this year’s filings is not deterring the business press from publishing its annual surveys of the highest paid executives, such as the one in the April 9 Wall Street Journal—and many of the numbers are eye-popping. Researchers at the Institute for Policy Studies and the Center for Corporate Policy used the Journal list as the basis for a report titled Selfish Interest: How Much Business Roundtable CEOs Stand to Lose from Real Reform of Runaway Executive Pay. It tabulates the extraordinarily high compensation levels being enjoyed by the chief executives who participate in the Roundtable, which is lobbying vigorously against efforts in Congress to reform executive pay, such as Rep. Barney Frank’s bill (H.R. 1257) that would give shareholders the right to cast an advisory vote on executive compensation packages.

When researching executive comp, don't forget the invaluable Executive Paywatch website produced by the AFL-CIO.


3. OMB launches database on Congressional earmarks


In a rare move by the Bush Administration to expand public access to government information, the Office of Management and Budget has launched an online database tracking earmarks— appropriation or authorization measures that bypass the usual review process and are targeted to a particular location to provide political benefit for a member of Congress. Earmarks, at least those of the more egregious kinds, were supposed to have been banned by the new Democratic-controlled Congress, but they are apparently popping up in new forms.

The OMB database, which is presented as “part of an effort to bring greater transparency and accountability to federal spending,” does not identify the member of Congress associated with the earmark, and it currently includes only those that appear in appropriation (but not authorization) bills. Searching is by federal agency or state, with full-text searching to come later.

A recent blog posting on the website of the Sunlight Foundation discussed the use of the OMB database to tie earmarks benefiting specific corporations to their political contributions.


4. Congress moves toward better disclosure on federal contracts


The Accountability in Contracting Act (H.R. 1362) recently passed by the House includes provisions that would improve disclosure on federal contracts. For example, the bill would require that contract overcharges of $10 million or more discovered in audits be disclosed to Congress (the Bush Administration has tended to sweep such information under the rug). It would also oblige agencies to make public their justifications for awarding no-bid contracts, which the bill would otherwise restrict.

Meanwhile, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council recently proposed a rule for implementing the provision of last year’s Federal Funding Accountability and Transparency Act dealing with the creation of a public database on subcontract awards. The resource would be part of the larger database on federal spending and contracting that OMB is creating under the Act.


5. Access to CRS reports is narrowing rather than expanding


The perennial battle over public access to the reports issued by the Congressional Research Service has been heating up again, this time causing turmoil within CRS itself. Recently, the agency’s director, Daniel Mulhollan prohibited his staff from sharing reports with anyone outside Congress without the approval of a supervisor. The policy represented a crackdown on the informal practice by CRS researchers of providing copies of their work to fellow researchers in other parts of the government, in non-governmental organizations and in the media. Mulhollan affirmed the basic rule that dissemination of the highly regarded reports remains under the control of members of Congress.

Congress, meanwhile, continues to drag its feet on making CRS material routinely rather than selectively available. Some Republicans openly oppose public access, claiming, in the recent words of a spokeswoman for Republicans on the House Administration Committee, that “it would be straying from [its] mission if CRS were required to provide such services directly to the public.” There are also vested interests who would lose out if the reports were distributed to the public. A service called Gallery Watch claims to collect all CRS publications and makes them available to its subscribers, who pay about $4,000 a year for the privilege.


6. Documents disappearing from the National Archives but FOIA may be strengthened


The Associated Press recently reported that the National Archives has removed more than 1 million pages of historical government documents from public view following the September 2001 attacks. AP found that in some instances entire file boxes were removed without careful consideration because the Archives did not have time for a more thorough review. As a result, the pages now off limits to the public include some sensitive materials but also much that would only be of interest to researchers, including “a 1960 map of the Melton Hill Reservoir in east Tennessee—now perhaps best-known as the spring training site for collegiate rowing teams” and “1967 architectural drawings for the Lyndon B. Johnson Presidential Library.”

On the bright side, the House recently passed a bill (H.R.1309) that would expedite the processing of Freedom of Information Act matters and impose stricter penalties on agencies for capricious rejections of information requests. A similar bill (S.849) is making its way through the Senate. Both bills have enjoyed significant bipartisan support but resistance from the White House.


7. Paranoia about identity theft is decimating public records databases


State and local government agencies around the country are yanking public records databases from the internet amid paranoia that some of those records are being exploited by identity thieves. The stampede away from disclosure is being instigated in large part by a former insurance claims supervisor named Betty Ostergren, who launched an amazing successful campaign on the issue through frequent media appearances and her website, The Virginia Watchdog.

Recently, the Arizona Secretary of State, under pressure from Ostergren, terminated internet access to uniform commercial code filings because they contained social security numbers. This followed similar moves by states such as Colorado, California and Missouri.

The more level-headed officials are arranging for truncated SSNs to be used on document databases, but in other places all personal identifiers are being removed, which makes the documents much less useful, or the material is being taken offline entirely.


8. Quick Hits: OSHA, Pennsylvania, state ethics laws, and mapping site fights


The Occupational Safety & Health Administration has released the latest in its series of lists of the most dangerous workplaces in the country. Employers at each of the 14,000 worksites on the list were recently sent letters in which OSHA “explained the notification was a proactive step to motivate employers to take steps now to reduce those rates and improve the safety and health environment in their workplaces.”

Pennsylvania has joined the rest of the states in making available an online database of lobbyists and their clients.

The website of the National Conference of State Legislatures now has a database providing access to legislation enacted in each state on ethics issues such as lobbying, conflicts of interest and contracting.

There's a new web resource that maps the location of site fights against big box retailers around the country. It is part of the Big Box Tool Kit created by the Institute for Local Self-Reliance. For example, if you go to the following URL you'll see an overview map of fights against Wal-Mart around the country (zoom in to focus on a particular state). If you click on any of the markers you get details on the fight.