The spokesman for the State Investment Council (SIC) is taking issue with a recent New York Times’ article related to the controversy surrounding third-party marketers in New York, New Mexico and elsewhere.
The newspaper, citing minutes of a 2005 SIC meeting, quoted David M. Leuschen, a go-between who helped The Carlyle Group get big contracts, as saying this while helping the company win a $40 million investment in New Mexico:
“We may be slow, we may be old, we may be plodders,” Leuschen said, according to the SIC minutes, “but we think we know the right people, and this is very much a relationship business.”
In my own posting about the Times article, I called the newspaper’s reporting “stellar” and “contextual.” Charles Wollmann, the SIC’s public information officer, said it “may or may not be stellar,” but it’s definitely not contextual. He said the article implies that Carlyle and Riverstone, another company involved in that deal, won investment contracts “because they knew people.”
But Wollmann pointed out, the Times left out the context of the quote from the 2005 meeting. Here’s the full quote about the energy-related investment:
“If you take any large private equity firm or any hedge fund, they have somewhere between zero and one guy from the energy business. We have seventeen,” Leuschen said, according to the minutes. “And we may be slow, we may be old, we may be plodders, but we think we know the right people, and this is very much a relationship business that we can find deals that others won’t see. Out of 16 deals we’ve done so far, pushing $2 billion of equity committed, we had one deal that went to an auction. … The other 15 nobody else saw until we signed the paper.”
What Leuschen was saying, according to Wollmann, “is that they know how to find deals in the energy industry due to the vast experience of their organization. They were referring to what’s known in their industry as deal flow. Identifying investment opportunities is at the core of private equity.”
“Most disappointing, the NY Times reporter even cut the sentence down to make the quote appear to refer to something it did not,” Wollmann said. “If that’s not out of context, I don’t know what is. It may be ‘interesting’ (he used quotes because I called the Times article interesting), but it’s not very accurate, and it’s not good journalism.”
Wollmann also said his criticism “shouldn’t in any way minimize the concern we have regarding some of the placement fees paid to third party marketers. This is a big issue and in some instances — as evidenced in New York certainly — a big problem. But it is one that’s nationwide, with dozens of states now looking at this practice and what needs to be done going forward.”
“I just have problems when someone — especially someone as respected as the NYT — goes out of their way to make it look like there was an obvious red flag at the time that was simply ignored,” Wollmann said.