PUBLIC
MONE
FOR
PRIVATE
EQUIT
PANDEMIC RELIEF EN O
COMPANIE BACKED
B PRIAE EQI IAN
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Public Money for Private Equity: Pandemic Relief Went to Companies
Backed by Private Equity Titans
AUTHORS
Americans for Financial Reform
Education Fund
Oscar Valdes-Viera
Patrick Woodall
Anti-Corruption Data Collective
David Szakonyi
Public Citizen
Miriam Li
Taylor Lincoln
Michael Tanglis
The authors thank the Project on
Government Oversight for graciously sharing
data from their COVID-19 Relief Spending
Tracker, and Good Jobs First for sharing
data on the health care industry.
Every effort has been made to verify the
accuracy of the information contained in this
report. All information was believed to be
correct as of September 3, 2021.
Nevertheless, the authors cannot accept
responsibility for the consequences of its use
for other purposes or in other contexts.
2021 Anti-Corruption Data Collective, a
project of the Fund for Constitutional
Government.
Except where otherwise noted, this work is
licensed under CC BY-ND 4.0. Quotation
permitted.
Contents
1. EXECUTIVE SUMMARY ...................................................................................... 2
2. PRIVATE EQUITY-BACKED COMPANIES RECEIVED $5.3 BILLION IN
PANDEMIC RELIEF .......................................................................................... 8
A. Private Equity-Backed Healthcare Companies Received $3.9 Billion. .............................. 10
B. Private Equity Captured $1.2 billion in Funds Earmarked for Small Businesses ................. 16
C. Private Equity’s Lobbying Efforts Helped Secure Access to Public Funds ......................... 21
3. PRIVATE EQUITY WAS POSITIONED TO THRIVE DURING THE PANDEMIC
WITHOUT PUBLIC SUPPORT ........................................................................ 24
4. PRIVATE EQUITY’S PREDATORY PRACTICES HAVE BEEN ESSENTIALLY
SUPPORTED BY PUBLIC MONEY .................................................................. 27
A. Private Equity-backed Companies Accepted Public Support but Shed Workers ............... 28
B. Private Equity Firms Pursued Hundreds of Takeovers During the Pandemic ..................... 30
C. Private Equity Firms Took Dividends out of Companies that Received Pandemic Relief ... 34
D. Private Equity Firms Charged High Fees to Portfolio Companies Struggling in the Pandemic
............................................................................................................................................ 36
E. More Public Aid Flowed to Portfolio Companies than Some Private Equity Firms Paid in
Taxes ................................................................................................................................... 36
5. CONCLUSIONS & RECOMMENDATIONS .......................................................... 39
6. METHODOLOGY ............................................................................................... 41
7. ENDNOTES ....................................................................................................... 45
PUBLIC MONEY FOR PRIVATE EQUITY
2
1. Executive Summary
This study estimates that at least $5.3 billion in CARES Act money
went to 611 portfolio companies owned or backed by private
equity firms that held $908 billion in cash reserves.
Hundreds of companies owned or backed by some of the largest, best financed private
equity firms secured an estimated $5.3 billion in public funding under the Coronavirus
Aid, Relief, and Economic Security (CARES) Act. Federal pandemic relief efforts
provided trillions of dollars in response to the twin public health and economic crisis.
Yet the legislation imposed few conditions on recipients — such as requirements to
support workers and maintain business operations — and failed to prohibit recipients
from using public money to enrich investors.
This lack of binding statutory requirements has enabled the private equity industry to
continue its typical extractive and predatory practices. Private equity firms take over
companies as investment vehicles, and then use aggressive tactics and financial
engineering that often undermine the portfolio companies’ financial viability. They
frequently extract substantial value from their takeover targets through debt-financed
leveraged buyouts, excessive fees, dividends, and stripping out valuable assets such
as real estate. Workers, consumers, and patients pay the price for the aggressive cost-
cutting strategies that private equity firms use to siphon revenues from the companies
they own.
Public money for private equity-backed companies not only went to companies that
already had deep-pocketed backers, but also effectively allowed private equity owners
to continue and even expand their predatory tactics during an economic and public
health emergency. With improved balance sheets shored up by government money,
private equity firms were able to finance a buyout spree during the pandemic-driven
economic downturn as well as to extract dividends and fees from their portfolio
companies.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
3
The private equity industry captured funds that should have supported small,
independent businesses, especially those owned by women and people of color.
Private equity firms could have tapped their own cash reserves (known as dry powder)
to help their portfolio companies, which would have left more public resources
available to help other struggling companies, especially smaller businesses owned by
women and people of color.
This study estimates that 611 portfolio companies received nearly 16,000 CARES Act
loans or grants worth at least $5.3 billion. These portfolio companies were owned or
backed by 113 private equity firms that collectively held $908 billion in cash reserves.
It is a conservative estimate, because this analysis looked only at private equity firms
with more than $5 billion in assets under management and because the opacity of the
private equity industry makes it impossible to make a comprehensive list of private
equity-backed companies that may have received pandemic relief. Private equity firms
buy and sell assets — including entire companies or single facilities — constantly and
it is not possible to have a perfect list of portfolio firms based on publicly available
information at any one point in time.
Our calculations rely on information on specific recipients of CARES Act funding
through December 2020 from the Project on Government Oversight (POGO), which
graciously shared the data collected through its COVID-19 Relief Spending Tracker.
(The data sources and analytical approach are fully described in the Methodology
appendix on page 41.)
Nearly all of the funding for private equity-backed companies came through the CARES
Act programs operated by the Department of Health and Human Services ($3.7 billion
or 69 percent), the Small Business Administration ($1.2 billion or 23 percent), or the
airline payroll protection program ($341 million or 6 percent).
Even within the private equity industry, a small number of large investors dominated
access to CARES Act funds. Over $4 billion (76 percent of the total pandemic relief to
the industry) went to portfolio companies owned by just 10 private equity firms.
Leading the way, companies backed by the private equity firm Apollo Global
Management (Apollo) received $1.4 billion. The portfolios of Cerberus Capital
Management (Cerberus) received $883 million and Welsh, Carson, Anderson & Stowe
received $436 million. In total, these top ten private equity firms reported $245 billion
in dry powder cash reserves during 2020 that could have shored up their own portfolio
companies, meaning they did not need to take public funding.
PUBLIC MONEY FOR PRIVATE EQUITY
4
This report identifies some of the more troubling and problematic practices which
were essentially tolerated or facilitated with public support. Key findings include:
More than $5 billion in pandemic relief went to the largest
private equity firms:
At least $5.3 billion in CARES Act loans or grants went to 611 portfolio
companies owned or backed by 113 private equity firms that each had more
than $5 billion in assets.
Private equity-backed healthcare companies received
$3.9 billion but continued many practices that undermine
patient health and finances:
143 private equity-backed hospitals, physician groups, and other health
companies, received over $3.9 billion in pandemic support, including some
troubled hospital chains and companies responsible for surprise medical
billing, charging patients out-of-network fees for services like ambulance rides,
emergency room visits, or x-rays at in-network hospitals or clinics. At the
height of the pandemic, Cerberus’ Steward Health Care threatened to close its
hospital in Easton, Pennsylvania, if it did not receive a $40 million public
bailout. The state wound up having to pay the hospital $8 million to keep it
open for four weeks and provide essential healthcare services.
Private equity-backed companies secured $1.2 billion in
pandemic relief that was intended for small businesses:
The small business programs included exemptions that allowed private
equity-backed companies to access public funding that should have gone to
genuinely small and independent businesses. A large amount of this funding
($224 million) went to private equity-backed fast-food and other restaurant
chains that prospered during the pandemic while thousands of independent
restaurants closed forever. Some small business money went to private
equity-backed chains that were already financially compromised, including Art
Van Furniture and Chuck E. Cheese — both of which collapsed under private
equity-imposed debt. In fact, Art Van received public support although it was
already in bankruptcy.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
5
Largest private equity firms held $908 billion and
were well positioned to thrive without public support:
The private equity firms included in this study had $908 billion in cash reserves
known as dry powder during 2020, meaning that they could have helped their
portfolio companies to weather the pandemic without relying on public
funding.
Largest private equity firms and trade association
spent $32 million in lobbying around the CARES Act:
Eighteen private equity firms and the industry’s primary trade association
spent almost $32 million on lobbying during 2020, including on pandemic
related issues, based on lobbying disclosures data.
Some private equity-backed companies
that received support shed workers during the pandemic:
Apollo-owned LifePoint Health received over $1.4 billion in public support yet
furloughed workers at its hospitals around the country. Blackstone Group’s
TeamHealth reduced hours for emergency room workers at a number of its
facilities, and even went as far as firing one ER doctor in Seattle after he
warned about the lack of personal protective equipment and unsafe working
conditions. TeamHealth received more than $2.8 million in pandemic relief.
The CARES Act aviation payroll protection program was the only program that
did have strong provisions to make sure that workers kept their jobs and
benefits during the pandemic. Private equity-backed air transport companies
received $341 million in pandemic relief, but three of the firms that the House
Select Committee on the Coronavirus Crisis identified as firing workers after
agreeing to accept payroll support funding were backed by private equity
firms. Two were owned by the Carlyle Group and one was owned by JLL
Partners, see airline workers box on page 29.
.
PUBLIC MONEY FOR PRIVATE EQUITY
6
Private equity firms whose portfolio companies received
public support pursued new leveraged buyouts:
The private equity industry made a wave of highly profitable leveraged
buyouts in the wake of the 2008 financial crisis. During the pandemic, the
industry similarly capitalized on the economic downturn by aggressively
buying up companies. The 10 private equity firms whose portfolio companies
received the most public money executed 230 leveraged buyouts from March
to December 2020, with a disclosed value of more than $45.1 billion. For
example, Roark Capital Group bought Dunkin’ in an $11.3 billion buyout in
October 2020 after the chain received $27 million in public support.
Private equity firms extracted dividends and fees
from portfolio companies that received pandemic relief:
There were no provisions in the CARES Act that prevented private equity firms
from extracting fees or debt-funded cash dividends from their portfolio
companies. At least five private equity firms extracted dividends from
companies that received pandemic relief. One such company, DuPage Medical
Group, received $79 million in CARES Act funding and paid a $209 million
dividend to its owners, including Ares Management Corporation’s private
equity arm (Ares). Private equity firms also continued to charge exorbitant
management fees to their portfolio companies during the pandemic, including
those that received millions in public support after claiming financial distress.
Publicly traded Apollo, Blackstone, Carlyle Group, and Kohlberg, Kravis and
Roberts (KKR) disclosed a combined $5.4 billion in management fees in 2020
even as their portfolio companies received $1.8 billion in public aid.
Several private equity firms got more in pandemic
aid to their portfolio companies than they pay in taxes:
Private equity firms receive beneficial tax treatment that significantly lower
their effective tax payments. The portfolio companies of Apollo, Ares, Carlyle,
and KKR received more public support than the private equity firms paid in
taxes. The Apollo portfolio companies received nearly 50 times more in
pandemic relief ($1.4 billion) than the firm’s average tax payments of $30
million between 2018 and 2020.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
7
This report first describes the main findings on the volume of pandemic relief money
going to private equity backed portfolio companies, with detailed explanations of
assistance given to healthcare companies and small businesses. A short history of the
private equity industry on the eve of the pandemic then lays out the strong financial
position that many private equity firms were in prior to receiving public money. The
report then outlines five predatory practices that the private equity industry uses to
enrich investors, all of which continued after CARES Act money was distributed to their
portfolio companies. The report concludes with a list of recommendations to
strengthen the guardrails on accessing public money from future relief efforts.
PUBLIC MONEY FOR PRIVATE EQUITY
8
2. Private Equity-Backed Companies
Received $5.3 Billion in Pandemic Relief
This study estimates that $5.3 billion in CARES Act loans or grants went to 611 portfolio
companies owned or backed by 113 private equity firms (those with more than $5
billion in assets under management) that collectively held $908 billion in cash reserves.
The largely opaque private equity industry makes it impossible to make a precise
determination of the number of private equity-owned or -backed companies that may
have received funding under the CARES Act, but these numbers reflect a conservative
estimate of the public support that flowed to the companies owned or backed by the
largest private equity firms during the pandemic.
Almost all of this funding came through the programs operated by the Department of
Health and Human Services (HHS) ($3.7 billion or 69 percent), the Small Business
Administration (SBA) ($1.2 billion or 23 percent), and the Treasury Department’s airline
workers relief program ($341 million or 6 percent — see Figure 1). Unsurprisingly,
healthcare companies received more than two-thirds of the pandemic relief funding
(73 percent), followed by air transportation companies (6 percent), restaurants (4
percent) and energy companies (2 percent, see Energy Box on page 14).
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
9
TABLE 1: TOP 10 PRIVATE EQUITY FIRMS WHOSE PORTFOLIO
COMPANIES RECEIVED THE MOST PANDEMIC RELIEF
Private Equity Firm
No. Awards
Pandemic Relief ($M)
Apollo
362
$1,489.3
Cerberus
71
$883.3
Welsh, Carson, Anderson & Stowe
309
$436.3
TPG Capital
746
$428.6
Leonard Green & Partners
253
$419.3
Kohlberg Kravis Roberts
447
$198.4
Roark Capital Group
7530
$183.4
Ares Capital
172
$164.8
Bain Capital
146
$142.1
Carlyle Group
16
$131.0
Source: POGO Database
Most of the funds (60.1 percent) were loans or loan guarantees with the rest coming
as direct payments or grants (39.9 percent). Because of the way the lending programs
were structured, many loans were forgivable, and therefore effectively functioned as
grants or direct payments.
1
For, example, early figures show that 99 percent of the
value of SBA’s Paycheck Protection Program loans have been forgiven.
2
Additionally,
although the Medicare Accelerated or Advanced Payment program technically
distributed loans against future reimbursable healthcare services, the $2 billion spent
under this program would not have to be repaid unless the funding exceeded the
amount of services that were ultimately provided.
3
These findings include all identifiable pandemic relief grants and loans that flowed to
portfolio companies backed by the biggest American private equity firms. The included
firms all had more than $5 billion in assets under management (AUM) as of August
PUBLIC MONEY FOR PRIVATE EQUITY
10
2020, according to Pitchbook. By restricting the sample to this minimum AUM
threshold, this analysis focuses squarely on those private equity firms that had the
internal resources to assist their portfolio companies in managing the fallout from the
pandemic. This analysis uses multiple data sets and independently verified research
to make as careful a list of portfolio firms and assets during 2020 as is possible given
the opacity of the private equity industry.
The portfolio companies were identified using private equity firm websites and
databases that track private equity ownership (Pitchbook, Preqin, and Orbis). The
pandemic relief data came from the Project on Government Oversight’s COVID Relief
Spending Tracker. The companies that received CARES Act funding were not required
to identify their parent companies or investors in many cases used corporate names
based on historical state incorporation. This analysis made every effort to accurately
connect these recipients to their parent private equity-backed portfolio companies
based on their names and locations and connection to private equity-backed
companies, but in some cases the similarity of names may incidentally include firms
that are not backed by private equity. Based on quality control checks, we estimate
this potential error is quite small, affecting less than 1% of the recipients identified in
the dataset. (See Methodology at page 41 for a more detailed explanation of this
matching process.)
Per Table 1, over $4 billion (76 percent of the total pandemic relief to the industry)
went to portfolio companies owned by just 10 private equity firms. Leading the way,
companies backed by the private equity firm Apollo Global Management (Apollo)
received $1.4 billion. The portfolios of Cerberus Capital Management (Cerberus)
received $883 million and Welsh, Carson, Anderson & Stowe received $436 million.
A. Private Equity-Backed Healthcare Companies Received
$3.9 Billion.
Private equity has surged into the healthcare sector over the past two decades with
the number of healthcare leveraged buyouts in North America doubling from 80 deals
in 2014 to a record of 159 deals in 2019.
4
Private equity firms now own healthcare
companies of every kind, including hospitals, clinics, ambulances, nursing homes,
physician groups, and dentists’ offices, among others. The predatory strategies they
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
11
use — such as debt-financed leveraged buyouts, stripping real estate assets out of
acquired companies, and severe cost cutting strategies — imperil the viability of
healthcare companies and threaten patient health.
In the wake of the pandemic, 143 healthcare providers backed by the largest private
equity firms secured at least $3.9 billion in public relief funds. Most of the money came
through accelerated Medicare payments to fund future services ($2.0 billion), provider
relief grants ($1.6 billion), and small business loan programs ($221 million). As
described above, several of these programs had provisions for loan forgiveness, and
a significant portion of this aid does not need to be repaid and effectively functions as
grants or direct payments.
Unsurprisingly, most of this money went to chains that operate hospitals ($2.69billion
or 74 percent of the healthcare support in this study). But funding also flowed to home
health companies ($231 million or 6 percent), physician groups ($194 million or 5
percent), and ambulance and air ambulance companies ($96 million or 2 percent).
More than 98 percent of the public support went to portfolio companies held by just
10 private equity firms (see Table 2). Apollo, alone, captured 35 percent of healthcare
pandemic relief uncovered in this analysis, primarily because of the $1.4 billion
received by its LifePoint hospital chain. Cerberus’ only healthcare portfolio company
that received support, the Steward Health Care hospital chain, received 20 percent of
all healthcare money while Leonard Green’s healthcare portfolio companies received
$389 million, most of which went to its hospital chain Prospect Medical Group ($336
million) and Aspen Dental ($21 million).
Despite the public health emergency, many of private equity’s practices that threaten
communities and patients continued unabated even as their portfolio companies
received billions of dollars in public money. Private equity’s playbook of raising prices
and cutting costs is often antithetical to providing quality and accessible healthcare.
Before the pandemic, private equity hospital chain acquisitions led to record high
prices and declining staffing.
5
Despite the public health emergency, many of private equity’s practices that threaten
communities and patients continued unabated even as their portfolio companies
received billions of dollars in public money. Private equity’s playbook of raising prices
and cutting costs is often antithetical to providing quality and accessible healthcare.
Before the pandemic, private equity hospital chain acquisitions led to record high
prices and declining staffing.
6
PUBLIC MONEY FOR PRIVATE EQUITY
12
TABLE 2: PANDEMIC RELIEF TO HEALTHCARE COMPANIES OF TOP 10
PRIVATE EQUITY FIRMS
Private Equity Firm
No. Awards
Pandemic Relief ($M)
Apollo
292
$1,405.0
Cerberus
70
$776.1
Welsh, Carson, Anderson & Stowe
309
$436.3
TPG Capital
268
$401.3
Leonard Green & Partners
169
$389.5
Kohlberg Kravis Roberts
407
$178.9
Ares Capital
161
$151.2
Bain Capital
142
$141.6
American Securities
111
$109.5
Levine Leichtman Capital Partners
133
$57.2
Source: POGO Database
During the pandemic, one private equity-owned chain proposed consolidating
hospitals as a cost-cutting measure — and another threatened to close a hospital
unless it received public support. Leonard Green’s Prospect Medical proposed
merging two facilities in Connecticut in late 2020, which would have essentially
eliminated a full-service rural community hospital and turned it into a remote
emergency room.
7
Cerberus’ Steward Health Care effectively held the community of Easton,
Pennsylvania, hostage during the early days of the pandemic by threatening to close
its Easton Hospital if it did not receive pandemic relief. Steward acquired Easton as
part of an eight-hospital leveraged buyout, loading the operations with debt and
higher costs to pay rent on hospitals they used to own.
8
In late March 2020, at the
height of the pandemic, Steward sent a letter to the Pennsylvania governor
threatening to close the hospital within days if it did not receive a $40 million public
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
13
bailout.
9
Pennsylvania paid $8 million to keep the hospital open for four weeks.
10
Steward received $3.1 million for Easton among the $776 million in federal pandemic
relief that flowed to the chain. In July 2020, the non-profit St. Luke’s University Health
Network signed a $15 million promissory note to absorb Easton into its network.
11
Public support flowed to private equity backed companies behind epidemic
of surprise medical billing
The private equity-owned companies that profit from the practice of surprise medical
billing received generous public support even as they continued to gouge patients
during the pandemic. Surprise medical billing — charging patients out-of-network fees
for services like ambulance rides, emergency room visits, or x-rays at in-network
hospitals or clinics — enables private equity-owned healthcare companies to increase
prices, extract more money from patients, and increase their own revenues. In cases
of surprise billing, unknowing patients are treated by doctors who are not network
hospital employees but, rather, employees of third-party staffing services that
contract with the hospital. These staffing services charge outrageously for the care
doctors provide, leaving patients to cover the out of network bill.
Several of the most infamous culprits behind these practices received significant
amounts of public pandemic relief money.
12
The two largest physician staffing firms
received nearly $65 million in pandemic relief: KKR-owned Envision Healthcare
received $61.8 million and Blackstone-owned TeamHealth received $2.8 million. The
rates these staffing services charge can be far higher than ordinary prices, and
because they are out-of-network, patients bear the brunt of these sky-high bills.
Private equity-owned ambulances and air ambulance companies have also sent prices
skyrocketing, often through the use of surprise bills. Patients have no choice about
which ambulance transports them to the hospital, so they are especially vulnerable to
surprise ambulance bills. Before 2000, ambulance services were primarily furnished
by public emergency services and non-profit hospitals (especially for air ambulances).
But the private equity industry rolled up the ambulance industry in a series of
leveraged buyouts. By 2017, nearly three-fourths of air ambulances were provided by
three for-profit companies and two were owned by private equity: American Securities’
Air Methods and KKR’s Global Medical Response.
13
Costs of air ambulance rides have
skyrocketed. The Government Accountability Office found that from 2010 to 2014, the
median price of an air ambulance ride increased 76 percent, about nine times faster
than inflation.
14
In 2020, the New York Times reported that prices continued to rise
about 15 percent a year after 2015.
15
PUBLIC MONEY FOR PRIVATE EQUITY
14
Air Methods received $59 million in pandemic relief funding while Global Medical
Response received $36 million. During the pandemic, an intubated 60-year old woman
suffering life threatening coronavirus symptoms in Pennsylvania was airlifted by Air
Methods from one hospital to another with better emergency resources.
16
The patient
was charged over $52,000 for the air transport and initially her insurance offered to
pay little or nothing. After the state insurance commission contacted the insurer, her
bill was resolved.
17
Box A: Private equity-backed energy companies with histories of
violations received millions
Private equity-backed energy companies collected more than $154 million from
pandemic lending programs, drawing largely from the PPP and the Main Street
Lending Program. Notably, companies with histories of environmental and safety
violations were not prohibited from receiving support. Private-equity backed
companies with long lists of violations received millions, despite public accusations
of cutting corners at the expense of workers and the public. Ramaco Resources, a
mining company owned by Energy Capital partners, has also racked up a long list of
worker safety violations, including $43,000 worth of fines since 2020.
18
Despite
receiving multiple citations by federal mine safety regulators, the company received
an $8.4 million PPP loan, placing the company in the top 0.1 percent of PPP
recipients in 2020.
19
More than 80 percent of ground ambulance trips also result in surprise medical bills
that can run from $2,000 to $4,000.
20
While the bills are lower than for helicopter trips,
ground ambulance trips are far more common and, nationally, patients pay $129
million annually in surprise ground ambulance bills, according to a 2020 Health Affairs
study.
21
These bills continued during the pandemic. A Consumer Reports writer was
charged an $1,800 out-of-network surprise bill for an ambulance ride when sedated
for his coronavirus treatment.
22
Millions of people receive surprise medical bills annually and these private-equity
imposed bills have worsened the widespread and significant burden of medical debt,
which contributes to two-thirds of household bankruptcies.
23
Some private equity
firms aggressively pursue this medical debt in court. One TeamHealth subsidiary filed
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
15
more than 4,800 bill collection lawsuits against patients in a single Tennessee county
between 2017 and 2019.
24
For years, the private equity industry staved off any congressional efforts to address
surprise medical billing. In 2019, amid rising public outrage over surprise billing,
Congress began contemplating legislation that would rein in abusive bills for out-of-
network care. In response, an anonymous group called Doctor Patient Unity launched
fear-mongering advertisements nationwide warning of horrors if hospital bills were
subject to “government rate setting.” In one commercial, a patient arrived via
ambulance to a hospital only to find the lights turned off and the hospital empty.
25
TeamHealth and Envision Healthcare were the largest funders of Doctor Patient Unity,
which spent over $50 million in lobbying and advertising to derail surprise billing
legislation in 2019.
26
In 2020, Doctor Patient Unity invoked the coronavirus to bolster its case against
surprise billing legislation. The private equity-backed front group ran ads implying that
efforts to curb surprise medical billing would compromise coronavirus treatment, with
one stating “During this crisis, Congress needs to ensure they have the resources they
need to continue saving lives.”
27
The ads omitted the fact that staffing firms including
TeamHealth and Envision quickly cut emergency room doctors’ hours and pay soon
after the pandemic struck.
28
When some CARES Act provisions were extended in December 2020, Congress passed
a measure to address surprise billing. But the legislative fix left gaps and loopholes
that may allow private equity-backed companies to charge higher bills. The provisions
did not ban higher out-of-network charges; instead, billing disputes will go to
arbitration, in what Bloomberg called a “win for the [private equity] healthcare
companies.”
29
The legislative changes should provide patients with some insulation
from these charges, but do not seem to fully solve the problem. It did cover air
ambulances, but ground ambulances were totally excluded from the legislative fix and
can still charge surprise bills.
30
In addition, none of the protections are expected to
take effect before 2022,
31
allowing private equity-backed surprise billing to continue
for at least another year.
32
PUBLIC MONEY FOR PRIVATE EQUITY
16
B. Private Equity Captured $1.2 billion in Funds Earmarked
for Small Businesses
More than 14,000 private equity-backed entities — restaurant chains, service
franchises, medical offices, and others — received more than $1.2 billion under the
Small Business Administration (SBA) programs that ostensibly were created to keep
independent and small businesses afloat during the pandemic. Generally, SBA loan
programs exclude companies owned by private equity firms with a controlling,
majority stake. But special statutory carve-outs and lax enforcement allowed private
equity-backed companies to freely access the CARES Act’s new Paycheck Protection
Program (PPP) and CARES Act funding through the SBA’s existing Economic Injury
Disaster Loan (EIDL) programs intended to shore up independent small businesses.
Even though the private equity firms in this analysis collectively had $908 billion in dry
powder, their portfolio companies still qualified for assistance under SBA loan
programs.
These SBA loans provided immense financial benefit to private equity-backed
companies. The PPP loans were forgivable if the recipients used the funds to keep
workers employed or pay essential expenses like rent or utilities, and verification of
these conditions has been slight.
33
Yet even if recipients did not qualify for loan
forgiveness, the loans were extremely attractive for larger firms that typically borrow
in the private markets; PPP interest rates were only 1 percent, which is less than one-
fifth the interest rate that borrowers were paying before the pandemic.
34
Even under
the conservative assumption that none of the loans in this analysis were forgiven, the
cheaper loan rates would represent a $128 million savings in interest payments.
35
Small Business Administration programs are intended to provide support for small
and independent businesses that are typically governed by rules that limit the size of
recipients, and specify that they should not be owned or controlled by large
companies or private equity investors through the affiliation rules.
36
The affiliation
rules apply to the existing EIDL program and the PPP. These rules were designed to
limit aid to companies that lacked access to private market credit and capital; private
equity firms that were flush with cash should be able to provide financial support to
their portfolio companies without outside help.
37
Private equity investments that were
not a controlling, majority stake in companies did not, however, run afoul of the
affiliation rules. Businesses also had to “certify in good faith that their PPP loan was
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
17
necessary” and whether they could “access other sources of liquidity sufficient to
support their ongoing operations,” which was intended to preclude affiliates of large
companies from receiving support, according to the Treasury Department.
38
The business 500-worker size limits apply to the affiliation rules, so that total
combined employees of the private equity firm and the portfolio company applying
for an SBA loan were required to be below the 500-employee size limit.
39
Most private
equity firms do not advertise the number of employees, but publicly traded private
equity firms like Apollo, Blackstone, Carlyle and KKR all have more than 500
employees, meaning that all their portfolio companies should have been ineligible for
any SBA loans under this criteria.
40
But exceptions to the CARES Act allowed private equity-backed companies to avoid the
SBA size and affiliation requirements. The affiliation rules were waived for restaurants,
hotels, and other franchises.
41
This allowed a host of private equity-backed companies
to access the program. For example, Roark Capital-owned franchises Massage Envy
and Anytime Fitness each received SBA loans worth $8.1 million; Blackstone-owned
Motel 6 received $6.3 million; and 3G Capital-backed Burger King received more than
$9.3 million.
Other private equity-backed companies that received money may in fact have been
ineligible for the PPP because they were wholly owned by large private equity firms
and did not meet any of the statutory hospitality or franchise exemptions. It appears
that neither the SBA nor the banks adequately ensured that applicants did not run
afoul of the affiliation and size rules of the program.
Some portfolio companies lobbied for access to the program and may have urged
their individual stores or locations to apply for loans. Aspen Dental (owned by Leonard
Green, American Securities, and Ares) helped its locations successfully apply for PPP
loans.
42
The Roark Capital-owned Inspire Brands which holds many of Roark’s
restaurant franchises, stated that the SBA programs were “designed to help
independently owned and operated restaurants, whether or not they are affiliated
with a broader franchise system.”
43
PUBLIC MONEY FOR PRIVATE EQUITY
18
TABLE 3: 10 LARGEST PRIVATE EQUITY FIRM BENEFICIARIES OF
SMALL BUSINESS LOANS TO PORTFOLIO COMPANIES
Private Equity Firm
No. SBA Loans
SBA Funding ($M)
Roark Capital Group
7,523
$180.4
Riverside Company
188
$51.6
Leonard Green & Partners
171
$49.2
H.I.G. Capital
56
$47.9
Levine Leichtman Capital Partners
600
$46.0
Ares Capital
93
$44.3
Invus Group
9
$36.5
L Catterton
17
$32.4
Blackstone Group
910
$31.5
Harvest Partners
1,160
$31.0
Top 10 Total
10,727
$550.8
Source: POGO Database
The ten private equity firms with portfolio companies receiving the most SBA support
in this analysis captured more than one-third of the funding through the program to
private equity-owned or controlled companies that we identified ($550 million, see
Table 3).
Private equity backed companies capture funds that should have supported
small businesses, especially those owned by women and people of color
The volume of lending to private equity-backed companies effectively made it harder
for genuinely small and independent businesses to access the pandemic loan
program. The $349 billion in initial PPP funding ran out within weeks, largely driven by
big chains and larger companies getting access to a program meant for small
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
19
businesses.
44
Many smaller businesses were deterred from applying because they
lacked existing banking relationships the program favored, had concerns about the
complexity of the application process, were worried about repayment, or simply
believed that they would not get approved for the program.
45
Even when the program
received a new round of funding in December 2020, more than 90 percent of PPP
lending went to companies that had already received loans from the earlier CARES
Act funding.
46
The impact was especially pronounced for small businesses owned by people of color
and women, which were more vulnerable during the pandemic. According to reporting
by the Associated Press, companies owned by people of color “were at the end of the
line in the government’s coronavirus relief program as many struggled to find banks
that would accept their applications or were disadvantaged by the terms of the
program.”
47
In the first months of the pandemic, the number of businesses owned by
people of color and women plummeted far faster than those owned by white men.
48
Yet a Goldman Sachs survey found that Black-owned businesses were less likely to
apply and more likely to get rejected for PPP loans.
49
Private equity fast food chains gobbled up small business loans
Restaurant chains captured over one-sixth (18 percent) of the small business loans
that went to private equity portfolio companies. Private equity firms have invested
heavily in restaurants including fast food, fast casual, and even higher-end fine dining
establishments, buying nearly 850 chains or locations from 2010 to 2017, more than
100 every year.
50
Many private equity-backed fast-food chains flourished during the pandemic.
51
The
CEO of Oak Hill Capital-owned Checkers/Rally’s chain claimed the chain experienced
“pandemic tailwinds” that gave the chain “an extremely good year.”
52
Other
restaurants were not so lucky. Nearly 30 percent of restaurants — most of which are
independent — are expected to close permanently because of the pandemic and over
110,000 were already out of business by October 2020.
53
Although firms were
supposed to certify that they needed the small business loans, more than 5,800 SBA
loans worth over $224 million were awarded to private equity-backed restaurants.
PUBLIC MONEY FOR PRIVATE EQUITY
20
TABLE 4: TOP 10 PRIVATE EQUITY-BACKED RESTAURANT CHAINS THAT
RECEIVED SBA LOANS
Chain
Private Equity Firm
No. SBA
Loans
SBA Loans
($M)
Sonic
Roark
707
$53.1
Dunkin’
Roark
2,248
$27.3
Mod Super-Fast Pizza
Clayton, Dubilier & Rice
3
$15.5
Zoe’s Kitchen
The Invus Group
2
$10.0
Torchy's Tacos
General Atlantic
1
$10.0
Sbarro
Apollo
15
$9.9
Hopdoddy Burger Bar
L Catterton
1
$9.5
Burger King
3G Capital
205
$9.4
Tastes On The Fly
H.I.G. Capital
5
$8.7
Jimmy John’s
Roark
500
$8.4
Top 10 Total
3,687
$161.8
Source: POGO Database
More than half the small business loans to private equity-backed restaurants went to
Roark Capital. Roark’s portfolio of restaurants including Dunkin’ Donuts, Sonic, Arby’s,
Jimmy John’s, Hardees and Buffalo Wild Wings received 4,447 small business loans
worth $115 million. More than two-thirds of all restaurant support ($161 million) went
to the 10 largest restaurant recipients including Sonic, Torchy’s Tacos, and Burger King
(see Table 4).
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
21
C. Private Equity’s Lobbying Efforts Helped Secure Access
to Public Funds
Part of the success private equity-backed portfolio companies have enjoyed in
accessing public funding can be attributed to the lobbying efforts of their parent firms.
Private equity firms have long been among the major players on K Street, spending
tens of millions every year lobbying the federal government. In most cases, these
expenditures were ramped up as Congress began debating how to best respond to
the economic crisis caused by the pandemic.
This analysis shows that eighteen private equity firms and the industry’s primary trade
association spent almost $32 million on lobbying during 2020, including on pandemic
related issues, based on lobbying disclosures data from the Center for Responsive
Politics.
54
Federal rules do not require registrants to break down how much was spent
lobbying each issue, but Oak Hill Capital and Searchlight Capital Partners never
reported any lobbying expenditures before the pandemic, yet reported spending
$180,000 and $100,000 on lobbying in 2020, respectively. The only issue listed on their
disclosures was the CARES Act.
55
The five biggest spenders (Blackstone, Apollo, Carlyle, Cerberus, and Energy Capital
Partners) all spent more than $3 million each on lobbying during 2020 (See Table 5.
Apollo increased its spending on lobbying by 77 percent between 2019 and 2020;
Blackstone and Carlyle both increased their spending on lobbying by more than 50
percent. It appears this lobbying was a good investment. Apollo spent $4.4 million
lobbying during 2020 and its portfolio companies received $1.49 billion in pandemic
support; Cerberus spent $3.2 million lobbying and its portfolio companies received
over $883 million.
The industry lobbied both Congress and the Small Business Administration to
specifically allow all private equity-owned companies to be eligible for the PPP.
56
Leading many of the lobbying efforts was the major trade group representing the
industry, the American Investment Council, which spent over $2.2 million in 2020,
including $640,000 in the first quarter of 2020 in an attempt to shape the rollout of
the pandemic relief funds.
57
The Small Business Administration officials privately told
the private equity industry to use its own cash reserves instead of the PPP to support
their struggling portfolio companies.
58
Nonetheless, one private equity firm
threatened to fire workers unless it was given access to the small business loans,
PUBLIC MONEY FOR PRIVATE EQUITY
22
TABLE 5: TOP PRIVATE EQUITY LOBBYING EXPENDITURES 2019-2020
Private Equity Firm
2019
Lobbying
Spending
(All
Issues)
2020
Lobbying
Spending
(All
Issues)
2019 to
2020
Lobbying
Spending
Increase
CARES Act
Money
Received by
Portfolio
Companies
The Blackstone Group
$3.6
$5.6
55%
$34.3
Apollo
$2.4
$4.3
77%
$1,489.3
The Carlyle Group
$2.2
$3.3
52%
$131.0
Cerberus
$2.3
$3.1
33%
$883.3
Energy Capital Partners
$5.9
$3.0
-49%
$9.4
Kohlberg Kravis Roberts
$1.6
$2.4
46%
$198.4
American Investment
Council (trade association
for the private equity
industry)
$2.0
$2.1
5%
N/A
Morgan Stanley Energy
Partners / Morgan Stanley
Capital Partners
$2.6
$2.0
-21%
$0.5
TPG Capital
$1.5
$1.5
-1%
$428.6
Ares Capital
$1.0
$1.4
38%
$164.7
AEA Investors
$0.9
$1.0
6%
$2.9
Total
$26.5
$30.2
14%
$3,343.4
Source: All figures are in millions USD. Center for Responsive Politics and POGO Databases
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
23
telling the Financial Times that “if the government wants to limit [PPP] funding for
companies we own just to punish the private equity industry, we will have to take
drastic measures…That means cutting costs aggressively and restructuring.”
59
Notably, some pandemic relief loans may have essentially subsidized anti-worker
lobbying efforts. In 2021, Roark Capital’s Inspire Brands (the operator of restaurant
franchises like Sonic and Arby’s) told its workers and franchises that it had successfully
lobbied against measures to raise wages from being included in the Biden
administration’s pandemic stimulus legislation and against legislation to protect
workers trying to form unions.
60
The Inspire memo stated clearly “We were successful
in our advocacy efforts to remove the Raise the Wage Act, which would have increased
the federal minimum wage to $15 and eliminated the tip credit.”
61
PUBLIC MONEY FOR PRIVATE EQUITY
24
3. Private Equity Was Positioned to Thrive During the
Pandemic Without Public Support
The private equity industry was sitting on a record-breaking
mountain of cash headed into the pandemic — nearly $1.5 trillion
at the end of 2019.
Private equity firms use money from both wealthy individuals and institutional
investors like pension funds, university endowments, and sovereign wealth funds to
take over companies as investment vehicles. Purportedly, these firms deliver
management expertise and needed financing to struggling or undervalued companies
in order to improve their performance. Then they either sell these portfolio companies
or launch them onto the stock exchange through initial public offerings. In reality, the
private equity industry deploys predatory practices and exploits regulatory blind spots
to shift value and profits from the real economy to Wall Street firms and executives.
The private equity industry’s predatory practices generate outsized profits for
investors but can imperil portfolio companies and workers. The industry’s tactics
include aggressive cost cutting, imposing high debt loads from leveraged buyouts,
wringing out value in fees and dividends, and stripping out valuable real estate and
other assets from portfolio companies. The absence of binding conditions in the
CARES Act allowed the unabated continuation of these practices during the pandemic.
Private equity firms have taken over a larger and larger share of the economy. In the
decade between 2010 and 2019, the number of private equity leveraged buyouts
doubled, with the value of the deals surging 175 percent from $2.7 billion in 2010 to
$5.5 billion in 2019 (see Figure 2).
62
Although private equity takeovers declined in 2020,
the decline was far smaller than immediately after the 2008 financial crisis, which saw
a 31 percent decline in the number of deals from 2008 to 2009 compared to a 3
percent decline from 2019 to 2020. The private equity industry had a substantial grip
on the real economy on the cusp of the pandemic. In May 2020, U.S. private equity
firms controlled 8,000 companies amounting to 5 percent of the economy and
workforce.
63
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
25
Private equity takeovers often overburden portfolio companies with so much debt and
fees that the companies slide into bankruptcy. The target companies — not the private
equity investors — are responsible for repaying the debt from leveraged buyouts and
dividend recapitalizations. Highly leveraged buyouts mean that the private equity
firms and executives can generate more profits from successful investments, but the
high level of debt the acquired companies are saddled with can cause portfolio
companies to collapse. A 2019 California Polytechnic State University study found that
20 percent of companies taken over by private equity went into bankruptcy — a rate
ten times higher than the non-private equity-backed companies.
64
Private equity-
driven bankruptcies have become especially common in the retail industry. From 2015
to 2019, all before the pandemic, nearly two-thirds (62.5 percent) of retail companies
that went into bankruptcy were owned by private equity.
65
Although their portfolio companies are more vulnerable to bankruptcy, private equity
firms had ample financial resources to support them during the pandemic yet still
accessed public support that could have gone to those with fewer reserves. The
private equity industry was sitting on a record-breaking mountain of cash headed into
the pandemic — nearly $1.5 trillion at the end of 2019.
66
This huge amount of cash on
hand (including money already committed from outside investors), known as dry
powder, was available to take over more portfolio companies or shore up struggling
ones during the pandemic. The 113 private equity firms analyzed in this study had
$908 billion in dry powder during 2020.
PUBLIC MONEY FOR PRIVATE EQUITY
26
Using public money to stabilize their portfolio companies during the pandemic,
allowed private equity firms to hoard their dry powder to pursue new investments and
extend their reach even further, taking advantage of other distressed firms. Some
private equity firms even asked their portfolio companies to use their own credit lines
— e.g., take on even more debt — to pump cash into struggling businesses.
67
The private equity industry contends that dry powder reserves are not always
available to support portfolio companies — older private equity funds may have
exhausted their reserves and newer funds may be dedicated to new leveraged
buyouts.
68
But the reality is that most of the dry powder is from funds raised in the
past few years, and these funds could be used to shore up older investments (known
as cross-fund investments).
69
And many older funds do have sufficient capital to
backstop struggling portfolio companies. For example, about one-fifth of Blackstone’s
dry powder was in older funds that could “support companies on the defensive,”
according to one Blackstone advisor.
70
The private equity industry was more interested in the greater potential for profits
from new leveraged buyouts and takeovers than reinvesting dry power in struggling
companies, even when there were funds available.
71
The industry has touted the
golden opportunities to capitalize on the pandemic recession and eventual recovery.
Blackstone chief executive Steven Schwarzman said his firm was “looking aggressively”
for “very significant investments” to deploy its dry powder.
72
Apollo’s Leon Black stated
that the pandemic presented a “massive” investment opportunity for private equity
firms.
73
A Bain & Co. presentation to investors cheered that “during and post this crisis,
private equity firms will be presented with unique opportunities to invest — important
to be ready to act.”
74
One Goldman Sachs associate said that “corporate raiders and
private equity firms are already sharpening their knives because prices are obviously
very low right now.”
75
This mirrors the vulture capitalist strategy the private equity industry followed after
the 2008 financial crisis: Use its mountain of cash to buy distressed companies and
make a killing.
76
It appears the public pandemic support for private equity portfolio
companies may have facilitated the ability of the industry to go on another takeover
tear. In 2020, one KKR official told investors that the firm had “invested into the
recovery” after the 2008 financial crisis and was eager to profit on the country’s
recovery from the pandemic.
77
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
27
4. Private Equity’s Predatory Practices Have Been
Essentially Supported by Public Money
The CARES Act provided about $2 trillion in support during the pandemic,
78
but the
legislation provided few requirements to ensure public funding was used to support
workers and business operations, rather than enrich investors or executives.
Advocates and some members of Congress were only minimally successful in
including binding conditions on the receipt of public money that would direct funding
to workers, prevent the extraction of dividends and fees, or prohibit the acquisition of
additional companies.
Private equity firms that owned or backed companies receiving public money were
largely free to continue their predatory practices of extracting value through
dividends, cutting costs (including layoffs), and pursuing more takeovers. The result
was that the public support that flowed to the private equity portfolio companies
effectively subsidized these private equity practices that could enrich investors, harm
workers, and undermine the viability of portfolio companies during the pandemic-
driven economic slump.
The largely unconditional public financial support that flowed to private equity-backed
companies poses unique risks because of the industry’s extractive business model.
Public support could easily be diverted from portfolio companies to the private equity
firms. The general lack of guardrails to protect jobs and workers or prevent the
diversion of public funds to investors meant that there were no limits on private equity
firms’ ability to siphon away pandemic relief expenditures.
Collectively the industry’s predatory practices generate outsized revenues and profits
that are shifted from the real economy to the private equity firms and can put target
companies at higher risk of failure. As Vanity Fair observed, “the fear, of course, is that
private equity will do what private equity does best, which is pocket the money
themselves rather than devoting it to the businesses they’ve invested in.”
79
There are
five common private equity financial engineering schemes that extract value from
portfolio companies: cost cutting that harms workers, leveraged buyout acquisitions,
extracting debt-funded dividends, charging exorbitant fees, and exploiting tax
loopholes.
PUBLIC MONEY FOR PRIVATE EQUITY
28
A. Private Equity-backed Companies Accepted Public
Support but Shed Workers
The CARES Act had few binding requirements that companies receiving aid keep
workers on payroll or maintain critical benefits like healthcare or sick leave during the
pandemic. A common tactic used by private equity to make money off their
acquisitions is to impose severe cost cutting on their portfolio companies. According
to Businessweek, this cost-cutting “inevitably means job cuts;” layoffs and/or downsizing
help lower expenses and increase revenues.
80
Many CARES Act provisions lacked any job retention requirements (like the healthcare
grants), others had imperfect provisions that did not require recipients to keep
workers on the payroll. Only the aviation payroll program had binding measures that
directed the funding to safeguarding workers. The Treasury programs that provided
loans to businesses only required a limited subset of companies (airlines, air cargo,
and defense) to maintain their workforce “to the extent practicable.”
81
The airline
program was largely successful in terms of job retention (but thousands of workers
were furloughed when the program expired for a period in late 2020
82
). Three air
transport companies owned by the largest private equity firms took public funding
that was supposed to protect workers’ jobs and nonetheless laid off workers (see Box
B). Other programs administered by the Treasury Department did not have
meaningful requirements to protect workers, allowing some recipients to skirt
oversight.
83
Although the Federal Reserve’s Main Street Lending Program instructed
borrowers to make “commercially reasonable efforts to retain employees,” companies
that fired or furloughed workers were still eligible for the loans.
84
For the more than 73 percent of the public funds that flowed to the largest private
equity-owned and -backed companies went to the healthcare industry, there were no
requirements that recipients keep workers on the job even though healthcare workers
were essential during the public health crisis. While some of the public money was
used to provide Coronavirus treatments, much replaced lost revenues caused by the
sharp decline in non-urgent, elective health services during the pandemic.
85
Companies that received public funds were able to keep facilities afloat, but did not
need to maintain their workforce or to direct the public funding to maintaining
previous operational levels.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
29
BOX B: Private equity-backed airlines fired workers in apparent violation of the
aviation payroll protection requirements
Some private equity-backed air transport companies received funding under a
program designed to protect aviation workers but nonetheless furloughed workers.
The CARES Act aviation worker payroll protection program contained the only
binding protections ensuring relief recipients retained workers and prohibited
beneficiaries from shifting public funds to executives or investors.
86
The air transport
companies that received CARES Act support were required to maintain 90 percent of
their workforce through the end of September 2020, to use the funding exclusively
for payroll support, to protect existing agreements with unionized workers, and to
prohibit airlines from furloughing workers or cutting pay or benefits.
87
The Air Line
Pilots Association reported that the program was quite successful and estimated that
83 percent of airline and air cargo workers still were working for the industry a year
later and the worst impacts of the pandemic on the industry had been successfully
mitigated.
88
These aviation-specific conditions applied to the private equity-owned air transport
companies that received nearly $341 million in public support. Nonetheless, some
appear to have reduced payrolls even after they agreed to take aviation payroll
support. Three air transport companies that the House Select Subcommittee on the
Coronavirus Crisis found had laid off workers after they signed agreements under
the aviation payroll program were backed by private equity firms. Carlyle’s
PrimeFlight and Nordam Group (nearly $120 million in public support) as well as JLL
Partners-owned Aviation Technical Services (ATS) (nearly $40 million) laid off workers
after they applied for the aviation payroll program.
89
Two private equity owned aviation companies laid off workers before the legislation
was finalized, and then applied for and received money. PrimeFlight and ATS laid off
workers as the CARES Act was being finalized,
90
which sidestepped the requirement
to keep workers in their jobs. ATS slashed nearly one-fifth of its jobs before it
finalized its aviation payroll support agreement and implied that it would be forced
to fire more workers without federal support.
91
PUBLIC MONEY FOR PRIVATE EQUITY
30
Some healthcare companies that received public support furloughed or reduced the
hours for medical workers during the pandemic. In April 2020, Apollo-owned LifePoint
Health hospitals began laying off workers, typically announcing that furloughed
workers would receive 25 percent of their pay and full benefits. The chain’s hospitals
offered nearly identical quotations: “these are necessary measures to ensure we are
maximizing our resources and supporting our teams on the front lines of battling
COVID-19.”
92
The LifePoint chain received over $1.4 billion in federal assistance even
as it furloughed workers. While LifePoint’s workers struggled during the pandemic,
Apollo and its investors had already realized profits of more than $800 million as of
March 2020.
93
Other companies let healthcare workers go during the pandemic while receiving
public support. KKR-owned Envision Healthcare received $61 million and New
Mountain Capital-owned Alteon Health received over $3 million, but both reduced
medical staff hours, and Alteon furloughed staff and reduced benefits, according to
ProPublica.
94
Blackstone-owned TeamHealth received $2.8 million in public support
but apparently fired one of its doctors for raising concerns about worker safety during
the pandemic. A Seattle TeamHealth emergency room physician warned early in the
pandemic that the hospital was not taking basic safety precautions, such as separating
coronavirus patients from other patients or adequately protecting workers from
exposure.
95
The doctor, who was warned that the hospital was upset about
statements he had made on Facebook, was fired at the end of March 2020.
96
B. Private Equity Firms Pursued Hundreds of Takeovers
During the Pandemic
Private equity firms continued a takeover tear during the pandemic even as their
portfolio companies received public funding. The CARES Act had no provisions that
would prevent the recipients of public money or their investors from acquiring other
companies during the economic downturn. Federal support could subsidize or
encourage consolidation by making it easier for private equity firms to use resources
to purchase rival or complementary businesses, as happened in the aftermath of the
2008 financial crisis.
97
The ten private equity firms whose portfolio companies received
the most pandemic relief acquired 230 companies in leveraged buyouts with a
disclosed value of over $45 billion from March to December 2020.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
31
Private equity firms are relentless acquirers, purchasing companies through leveraged
buyouts that force the target companies to take on debt to finance their own takeover.
The huge debt loads imposed on target companies to finance these buyouts are the
“core of the business” according to Businessweek.
98
The leverage can produce outsize
gains for private equity executives, while the portfolio company is responsible for
repaying the loans, creating a debt burden that requires it to divert revenues to pay it
back, and that can overwhelm its finances and lead to bankruptcy, costing workers
their jobs and economic security. The portfolio companies are forced to divert
revenues to service the debt loads. The CARES Act did not prevent recipients from
using public money to repay private equity-imposed debts, meaning funds could be
diverted from keeping workers on the job to those payments.
Public funds flowed to portfolio companies already struggling from
leveraged buyouts
Several private equity-owned companies that received pandemic relief have massive
leveraged buyout debt loads. Cerberus-owned Steward Health Care network of
hospitals received over $776 million in public support. The chain has struggled under
$1.3 billion in debt rooted in a 2010 leveraged buyout, compromising the quality of
care and its financial viability according to Bloomberg.
99
Cerberus sold the hospital
chain during the pandemic (and after much of the public support had been doled out),
but not before quadrupling its investment and pocketing $800 million in profits.
100
Most of the profits were not from successful hospital operations, but were from
Cerberus selling the hospital real estate to other investors, generating profits for
Cerberus but forcing the hospital to pay rent on facilities the chain previously owned,
known as a sale-leaseback.
Multiple portfolio companies that received CARES Act funding were teetering on the
brink of bankruptcy before the pandemic because of private equity-imposed debt
loads and financial engineering. For example, Apollo bought the Chuck E. Cheese's
restaurant chain in a 2014 $1.3 billion leveraged buyout that imposed a $925.9 million
debt burden on the company.
101
The kids-oriented restaurant chain was struggling
before the pandemic because its debt load constrained its ability to update its
business.
102
Nine Chuck E. Cheese restaurants received a combined $110,000 in CARES
Act funding before the chain slid into bankruptcy in June 2020 as the debt burden
made it impossible to cope with the pandemic’s impact on the chain’s business.
103
PUBLIC MONEY FOR PRIVATE EQUITY
32
Six Art Van Furniture stores received $298,000 in CARES Act funding, even though the
T.H. Lee Partners-owned retailer was already in bankruptcy by March 2020 as a result
of the $400 million in debt from its 2017 leveraged buyout.
104
In March 2020, before
the CARES Act was enacted, Art Van had closed all of its stores and laid off 4,500
workers and refused to repay workers for the money they deposited in their flexible
health savings accounts.
105
It took fired workers organizing and pressing T.H. Lee for
a year to get the company to establish a $2 million fund to provide about $1,200 each
to those who lost their jobs.
106
Public funds fuel private equity takeovers
The private equity firms that held portfolios that received the most in public money
were highly acquisitive after the CARES Act was enacted. The public support that went
to the portfolio companies provided more latitude for new acquisitions and could even
subsidize the debt used to finance these leveraged buyouts. The ten private equity
firms whose portfolio companies received the most CARES Act funding made 230
leveraged buyouts (LBOs) in the United States with a disclosed value of over $45 billion
from March 2020 to December 2020 (see Table 6).
107
The number of leveraged buyouts
stalled in the early months of the pandemic but rose steadily over the rest of the year,
exceeding 50 LBOs in December alone (see Figure 3).
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
33
Some private equity-backed companies that received pandemic relief subsequently
bought up more companies. Kindred Healthcare (owned by TPG Capital and Welsh,
Carson, Anderson & Stowe) received more than $240 million in public support. In the
summer of 2020, it announced the takeover of two behavioral health hospitals in
Dallas for an undisclosed sum.
108
Table 6: Leveraged Buyouts by Top 10 CARES Act Private
Equity Firms
Private Equity Firm
CARES Act
($M)
No. of LBOs*
LBO Value
($M)°
Apollo
$1,489.3
13
$9,353.0
Cerberus
$883.3
7
$250.0
Leonard Green & Partners
$419.3
36
$5,226.0
Welsh, Carson, Anderson & Stowe
$436.3
12
$700.0
TPG Capital
$428.6
24
$3,198.6
Roark Capital Group
$183.4
5
$10,310.0
KKR
$198.4
46
$8,808.1
Ares Capital
$164.8
16
$1,118.0
The Carlyle Group
$131.0
61
$6,123.2
Bain Capital
$142.0
20
$2,501.2
Top 10 Total
230
$45,116.0
Source: Pitchbook and POGO databases.
*
Number of LBOs includes 10 club deals where more than one firm
participated in the takeover, total reflects the number and value of the target LBOs.
°
LBO value reflects reported
values; 80 percent of the LBOs did not report deal value.
PUBLIC MONEY FOR PRIVATE EQUITY
34
North American Partners in Anesthesiology (owned by American Securities and
Leonard Green) received more than $15 million in pandemic relief before buying
American Anesthesiology in an estimated $250 million deal.
109
American
Anesthesiology had also received $13 million in funding before the takeover, meaning
the federal government supported both the acquirer and the target. Other leveraged
buyouts targeted companies that had been big recipients of CARES Act funds. For
example, Dunkin’ received $27 million in CARES Act support before Roark Capital
bought it in an $11.3 billion leveraged buyout in October 2020.
110
Levine Leichtman
Capital Partners bought the nearly 900-location Tropical Smoothie Café after it
received $6.6 million in small business loans during the pandemic.
111
And, the tear is not over. Apollo is aggressively pursuing more hospital acquisitions. In
March 2020, an Apollo partner said that pandemic was Apollo’s “time to shine.”
112
In
May 2020, the firm wrote to investors: “Independent hospital systems have greater
difficulty weathering prolonged periods of financial stress … A consolidation strategy
will provide meaningful upside for Apollo funds' investment.’’
113
In 2021, Apollo’s
LifePoint announced intended deals to buy Kindred Health’s network of about 190
rehabilitation facilities and reportedly was in serious discussions to buy Ardent Health
Services’ chain of 30 hospitals.
114
C. Private Equity Firms Took Dividends out of Companies
that Received Pandemic Relief
Private equity firms managed to extract debt-funded dividends from companies that
received public support. Private equity firms often require portfolio companies to
borrow more money to pay a dividend to the private equity firm, known as dividend
recapitalization.
115
This extraction delivers instant cash to the private equity firm but
adds to the portfolio companies’ debt loads and can contribute to bankruptcies.
116
Dividend recapitalizations actually increased during the pandemic, reaching a record
level of $6 billion in September 2020 alone.
117
The CARES Act had few prohibitions to keep private equity firms or other companies
from extracting dividends from companies that received public support. Most
programs had no statutory limitations on recipients paying dividends, with only the
airline workers program, the SBA’s Economic Injury Disaster Loan programs and the
Main Street Lending Program banning the practice (in the latter case, the Treasury
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
35
could waive the requirements).
118
Participants in the healthcare programs and the
small business Paycheck Protection Program were free to pay out dividends.
Several of the largest private equity firms capitalized on this leniency, and took out
dividend recapitalizations from their portfolio companies that received public support
(see Table 7). Ares-backed DuPage Medical Group received over $79 million in CARES
Act funding and in 2020, it announced it would pay a $209 million dividend payment
to its owners including Ares.
119
In February 2020 before the pandemic hit, Aspen Dental paid a $50 million dividend
recapitalization to American Securities, Ares, and Leonard Green & Partners just
before Aspen received $21 million in pandemic relief; in December 2020, Aspen paid
another dividend of an undisclosed amount to its private equity owners.
120
Dividend
recapitalizations are rarely publicly reported, so there could be more companies that
received public support while also paying dividends to their private equity backers.
Table 7: CARES Act Recipients that Paid Dividends to Private
Equity Backers
Portfolio Company
CARES Act
($M)
Dividends
($M)
Date
Private
Equity
Firms
DuPage Medical Group
$79.5
$209
Mar-21
Ares Capital
Aspen Dental
$21.2
$50
Feb-20
American
Securities, Ares,
Leonard Green
& Partners (also
Candescent
Partners, not in
this study)
Undisclosed
Dec-20
Nothing Bundt Cakes
$2.5
Undisclosed
Dec-20
Levine
Leichtman
Iron Bow Technologies
$0.05
Undisclosed
Aug-20
H.I.G. Capital
TruGreen
$0.04
$349
Oct-20
Clayton,
Dubliner & Rice
Source: Pitchbook and POGO Databases
PUBLIC MONEY FOR PRIVATE EQUITY
36
D. Private Equity Firms Charged High Fees
to Portfolio Companies Struggling in the Pandemic
Private equity firms continued to charge high fees to portfolio companies that
struggled to stay afloat during the pandemic. Private equity firms charge high fees for
their purported management expertise, which, according to Bloomberg, now “yield a
geyser of profit.”
121
The Center for Economic and Policy Research has criticized these
charges as “excessive, unnecessary consulting fees.”
122
These fees include monitoring
fees that are often really a disguised dividend paid to private equity firms and not a
service provided to investors.
123
A 2016 University of Oxford study estimated that
private equity firms charged 600 companies $20 billion in monitoring and
management fees over two decades that should have been counted as dividend
income.
124
These fees add to the higher operating costs portfolio companies face (on
top of rising debt servicing costs), adding to financial trouble and threatening portfolio
companies’ financial sustainability in hard times.
The CARES Act did not prevent companies from using public support to pay
management fees to their private equity owners. Most private equity fee revenue is
not publicly disclosed, but the portfolio firms owned by the largest, publicly traded
private equity firms (Apollo, Blackstone, Carlyle, and KKR) owned or backed portfolio
companies that received $1.8 billion in CARES Act money while charging all their
portfolio companies and investors over $5.4 billion in management fees in 2020.
125
These four private equity firms actually received 9 percent more in fees during the
2020 pandemic year than in 2019, amounting to a nearly $470 million revenue
increase.
126
These four public private equity firms report their fees; the other private
equity firms in this analysis likely continued to charge management fees, including to
companies that received CARES funds, but do not disclose that information publicly.
E. More Public Aid Flowed to Portfolio
Companies than Some Private Equity Firms Paid in Taxes
The private equity industry and its executives rely on extensive tax benefits to bolster
income and minimize the taxes they pay. This tax avoidance has been thrown into
higher contrast given the public support flowing to private equity portfolio companies
during the pandemic. Four out of five publicly traded private equity firms in this study
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
37
(Apollo, Ares, Carlyle Group, and KKR) paid less in average taxes over a three-year
period than their portfolio firms received in support.
Favorable tax treatment is a key element of the industry’s financial engineering that
extracts value from the economy. As a Financial Times editorial observed, “offering
taxpayer money to an industry whose financial model is based in part on reducing the
amount of tax it pays would be controversial at the best of times, and even more so
today.”
127
The private equity industry has generated excessive untaxed revenues over the past
decades by structuring their funds to avoid taxes and through a strategy of
misclassifying certain earnings, exploiting tax loopholes, and utilizing complex and
opaque business structures to shield earnings from IRS scrutiny. Private equity
executives and firms generate most of their profits from the sale of portfolio
companies and other assets that are taxed at a much lower rate than ordinary income
as long-term capital gain investments.
Private equity firms’ significant revenues from monitoring can be deducted from their
income as a provided service, significantly lowering their tax burden. But monitoring
fees are often really a disguised dividend paid to private equity firms from the portfolio
companies and not a service provided to investors.
128
A 2015 Oxford paper estimated
that private equity firms charged 600 companies $20 billion in monitoring fees over
two decades that should have been counted as dividend income.
129
Firms also can
waive their fee income in lieu of a higher share of any profits, which are taxed at an
even lower capital gains rate that can be deferred for years. Since management fee
waivers are widely used by a majority of private equity firms, the income tax revenue
lost is likely to be in the billions.
130
And U.S. based private equity firms and their
investors can and do avoid taxes by domiciling their funds in tax havens such as the
Cayman Islands, now home to one-third of all private funds.
131
Private equity executives further benefit from the carried interest loophole, that
applies a lower 20 percent long-term capital gains tax rate to what are basically their
management fees that would otherwise be taxed as ordinary income (where rates
currently top out at 37 percent).
132
As a result wealthy private equity executives wind
up paying lower income tax rates than teachers and firefighters.
133
Treating the profits
that flow to private equity partners and managers as ordinary income would generate
between $1.4 billion and $18 billion in revenues annually.
134
PUBLIC MONEY FOR PRIVATE EQUITY
38
The private equity industry successfully fought to protect the carried interest loophole
in the 2017 Tax Cuts and Jobs Act. The industry’s primary trade association, the
American Investment Council (AIC), pushed for “tax reforms that would keep carried
interest — the tax-advantaged profit share keeping private equity managers wealthy
— in play,” according to Institutional Investor.
135
The 2017 tax law maintained the carried
interest loophole for investments held over three years, which includes virtually all
private equity investments.
136
As the Biden administration considers closing corporate
tax breaks and loopholes, AIC and individual private equity firms are aggressively
lobbying to try to retain their preferential tax treatment.
137
Most private equity firms do not disclose their tax payments or any other financial
information — it is the private part of private equity. But portfolio companies owned
or backed by five large, publicly traded private equity firms in this study received more
than $2 billion in support combined, nearly five times the combined $441 million
typical annual taxes paid by these firms from 2018 to 2020 according to their Securities
and Exchange Commission filings (see Figure 4).
138
The portfolio companies of Apollo,
Ares, Carlyle, and KKR each received more pandemic relief than the private equity
firms paid in taxes (only Blackstone paid more in taxes than its portfolio companies
received). Apollo portfolio companies received nearly 50 times more than the firm paid
in taxes on average. Similarly, portfolio companies of Ares received nearly five times
more in pandemic relief and those held by the Carlyle Group portfolio received over
three times more than the private equity firms paid in taxes on average from 2018 to
2020.
139
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
39
5. Conclusions & Recommendations
Companies owned by the largest private equity firms were able to access nearly 16,000
awards worth at least $5.3 billion in public support under the CARES Act. The difficulty
of matching public funding to specific private equity-backed companies due to the
fundamentally opaque nature of the industry means that the private equity firms in
this study likely received even more pandemic support. Companies owned by private
equity firms with under $5 billion in assets also were probably recipients of funds.
The CARES Act largely failed to prevent the public funds from being used to support
predatory practices of private equity firms, which include downsizing, dividend and
fee extraction, acquisitions, and other practices that can imperil their portfolio
companies, the workers at those companies, patients and consumers, and
communities. Good government, public interest, labor, consumer, community and
other civil society organizations made these precise demands when the CARES Act was
being negotiated in 2020 and the failure to adopt binding conditions allowed the well-
financed private equity firms and their portfolio companies nearly unfettered access
to public support.
Private equity firms should use their own dry powder to shore up their portfolio
companies during economic crises and not seek public money. Any future economic
stimulus needs strong guardrails that direct the money to workers, their safety, and
keeping the portfolio companies afloat and prevent public funds from being diverted
to enrich private equity firms. These requirements should include:
Binding requirements that put workers first:
All companies that receive public
support during an emergency must keep workers on payroll, halt offshoring or
outsourcing of jobs, maintain benefits (especially healthcare and sick leave during a
public health crisis like the pandemic), refrain from undermining collective bargaining
agreements, and endorse neutrality in union organizing efforts. The CARES Act
aviation worker program had similar binding conditions and it largely succeeded in
keeping workers employed and the companies afloat during the pandemic.
Prohibit private equity firms or other investors from extracting value from
companies that receive public support:
Firms receiving public money should be
prohibited from paying out dividends to investors, making stock buybacks, and paying
lavish executive salaries. Private equity firms should be prohibited from taking
PUBLIC MONEY FOR PRIVATE EQUITY
40
dividend recapitalizations, shifting real estate or other assets from their portfolio
companies, and from charging management fees to their portfolio companies during
the public assistance period.
Acquisition moratorium as a condition of receiving public support:
This analysis
found that the private equity firms with portfolios that received the most public
support bought up hundreds of U.S. businesses within ten months of the CARES Act
enactment. Companies that receive public support and private equity firms that own
or back recipients should be prohibited from acquiring rival or complementary
companies for two years to prevent public funds from subsidizing a consolidation
wave during economic downturns.
Small business programs should exclude investor-owned firms like those owned
by private equity:
Companies owned by the largest private equity firms managed to
capture $1.2 billion in pandemic relief, taking for themselves funds that should have
supported small, independent businesses, especially those owned by women and
people of color. Programs should not create exceptions to the size and affiliation rules,
and the SBA must rigorously enforce them so that large companies or investment
firms cannot indirectly access programs intended for genuinely small and
independent businesses.
Strengthen public disclosure for any public stimulus measure:
The CARES Act
lacked strong statutory disclosure provisions to enable the public and public officials
to assess the federal measures that were taken to provide economic and public health
relief and monitor compliance with the relief programs’ rules.
140
Private equity firms’
indirect receipt of public money to their portfolio companies was largely shielded from
public view because the legislation did not require recipients to disclose parent
companies or controlling investors. The limited and fragmented disclosure prevented
the public from clearly understanding which companies received money and how
these recipients used the relief to protect workers and the public health.
The CARES Act and subsequent pandemic relief measures were essential to keep the
economy afloat and shore up a struggling healthcare system during the pandemic.
The federal relief measures did not include sufficient safeguards to protect workers
nor did they prevent well-financed private equity firms from accessing public funds
that should have gone to companies with fewer resources. Future funding programs
for emergencies should ensure that relief flows where it is most needed, not to further
enrich private equity firms.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
41
6. Methodology
This study estimates the volume of public pandemic relief funding that flowed to the
portfolio companies of the largest private equity firms. The analysis in this report relies
on a unique dataset of private equity-owned or -backed portfolio companies receiving
various types of direct COVID relief assistance, primarily loans and grants delivered to
companies. This analysis does not cover either contracts or secondary market
transactions where the Federal Reserve purchased bonds or equities in private
companies.
Private equity firms do not have to disclose to the general public the companies they
own through leveraged buyouts and other types of acquisitions or investments. This
lack of transparency has resulted in a somewhat fragmented data environment, with
private companies such as Preqin, Pitchbook, and Orbis using proprietary methods to
collect information on private equity activities and portfolios. Over the last year, the
team of authors on this report combined these private data sources with publicly
available data from the internet and media coverage to estimate the private equity
holdings of the largest firms during the pandemic.
The private equity industry’s general opacity means these findings are necessarily an
estimate. Some private equity-backed companies or subsidiaries that were invisible to
the authors were likely to have received CARES Act money that could not be assessed.
The estimates of CARES Act support of private equity firms’ portfolio companies are
not adjusted for the share of their investments when multiple firms have invested in
the same company that received pandemic funds. This study attributes CARES Act
funding to portfolio firms and funding to their private equity owners and backers. In
some cases, CARES Act recipients were owned by more than one large private equity
firm in this analysis (or other private equity firms that are below the study’s size
threshold) and all the public funding is included in each of the private equity firm’s
portfolio receipts. Only 18 portfolio companies of 611 in this study were owned by
more than one private equity firm and they received $538 million, or ten percent of
the $5.3 billion that went to all portfolio companies in this study.
This section provides more detail about how this investigation was constructed. First,
we identified 148 private equity firms that had at least $5 billion in assets under
management (AUM) as of August 2020. These represent the largest private equity
firms that were likely to own or back businesses, although AUM also can include real
PUBLIC MONEY FOR PRIVATE EQUITY
42
estate or other assets like mineral rights or infrastructure. We selected this minimum
AUM threshold in order to better focus our efforts on those private equity firms which
had the internal resources to assist portfolio companies in managing the fallout from
the pandemic.
Next, we constructed a list of all the investments each private equity firm had in
portfolio companies during the pandemic, starting with the portfolio holdings as of
May 1, 2020. The process first involved scraping each firm’s public-facing website,
which in many cases listed the name and address of their portfolio investments. We
supplemented this self-reported information with data from Preqin, Pitchbook, and
Orbis (a service of Bureau van Dijk) to arrive at a list of 11,493 unique portfolio
companies owned fully or partially by our master list of private equity firms.
Private equity firms are constantly buying and selling portfolio companies and during
economic downturns these firms aggressively pursue vulnerable and potentially
undervalued companies for acquisition, as the industry did in the aftermath of the
financial crisis. This analysis begins with the private equity portfolio in May 2020, after
the CARES Act was in effect, and is supplemented with available information on
leveraged buyouts during 2020. For example, Roark Capital purchased Dunkin’, the
owner of Dunkin’ Donuts and Baskin-Robbins, during the pandemic after the chain
had received $27 million in CARES Act money. It includes portfolio companies that
received CARES Act money that were subsequently sold.
Many of these private equity-backed companies, particularly those in the healthcare,
retail, and food services sectors, operate subsidiaries and franchises across the United
States. These independently registered businesses were eligible to receive CARES Act
money. To locate such subsidiaries, we adopted a two-pronged approach. First, we
used company industry codings from Preqin to identify 172 portfolio companies
working in healthcare. We then manually scraped data on subsidiary names and
locations from each of these companies’ websites where it was available (such
information usually was stored on Locations, Branches, Offices or other tabs
accessible from the main page). Next, we built a list of the most common franchises
operating in the United States based on a disclosures directory from Franchise
Information Services, Inc.
141
Using publicly available data on acquisitions, we then
identified all franchises that were owned by one of the private equity firms on our
master list.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
43
Altogether, we were able to identify 611 unique businesses backed by 113 private
equity firms, a total that includes direct, indirect, add-on, and subsidiary investments.
We applied a simple cleaning algorithm to remove stopwords from company names,
as well as standardized and geolocated addresses.
We matched this list of private equity investments to COVID-related spending data
through December 2020 compiled by the Project on Government Oversight (POGO),
which graciously shared the data collected through their COVID-19 Relief Spending
Tracker, which “includes all transactions listed for 13 assistance programs specifically
created to respond to the coronavirus crisis.”
142
These data include over 15 million
assistance transactions from 13 different federal government programs introduced in
the wake of the pandemic.
143
To prepare this raw data for matching to our private
equity database, we applied the same standardizing algorithms on recipient name and
address.
Matching between the PE and COVID spending databases was done iteratively using a
fuzzy string algorithm on name and address. Each match was manually reviewed for
accuracy by multiple members of the team with each match receiving two or more
levels of manual quality assessment. All transactions over $100,000 received an
additional review.
For chains or franchises with multiple locations, we only included locations with an
exact legal name or doing-business-as name match to establishment names listed on
portfolio company websites. Additionally, we spot-checked addresses on Google
Street View to confirm these locations featured the brand names. However, some
franchise owners likely filed for pandemic relief at their homes and not their stores or
restaurants; we did not exclude residences associated with unique brands. It is
possible that this analysis unintentionally includes a small number of identically
named locations that are different businesses (a Popeyes optometrist, for example),
but even these inclusions would represent an insignificant share of the total pandemic
relief flowing to any given private equity-backed portfolio company and the entire
public support for private equity-backed companies.
For health care companies, we used the Centers for Medicare and Medicaid Services
National Provider Identifier to match locations, doing-business-as names, the portfolio
firms' location lists, and the POGO database. To further ensure quality control, we
compared our findings to other investigative work on private equity and covid relief,
such as those compiled by Bloomberg and the Washington Post.
PUBLIC MONEY FOR PRIVATE EQUITY
44
While we believe our approach accurately uncovered the vast majority of portfolio
companies receiving assistance, no set of automated or manual tools can match all
data perfectly. There are undoubtedly portfolio companies backed by the largest
private equity firms that are not included in this analysis because it could not connect
CARES Act recipients to portfolio companies. For example, if CARES Act recipients use
historical incorporation names that cannot be connected to any current corporate
brand of the private equity-backed firms, it would be impossible to attach that firm to
any private equity-backed company.
It is likely that the undercount exceeds any incidentally but erroneous firms included
in this estimate. Because we are reliant on self-reported data from private equity firms
as well as third-party data from aggregators to build our database, we do not accept
responsibility or liability for any inaccuracies in these data.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
45
7. Endnotes
1
Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Pub. L 116-136.
March 27, 2020 at §1102(a)(2)(F), §1102(a)(2)(Q), and §1106.
2
DePills, Lydia. “This Company Got a $10 Million PPP Loan, Then Closed Its Plant and
Moved Manufacturing Jobs to Mexico.” ProPublica. June 30, 2021
3
Hahn, Jim and Marco A. Villagrana. Congressional Research Service. “Medicare
Accelerated and Advance Payments Frequently Asked Questions.” Report No.
R46698. April 8, 2021 at 1 to 2 and 5 to 6.
4
Healthcare deals declined slightly during the pandemic in 2020, but there were still
142 deals worth $34.7 billion. VMG Health. “Healthcare M&A Report: 2020 Trends
and 2021 Expectations.” 2021 at 41.
5
Bruch, Joseph D., Suhas Gondi, and Zirui Song. “Changes in hospital income, use,
and quality associated with private equity acquisition.” JAMA Internal Medicine. Vol. 180,
No. 11. August 2020; Offodile, Anaeze C. et al. “Private equity investments in health
care: An overview of hospital and health system leveraged buyouts.” Health Affairs.
Vol. 40, No. 5. May 2021.
6
Bruch, Joseph D., Suhas Gondi, and Zirui Song. “Changes in hospital income, use,
and quality associated with private equity acquisition.” JAMA Internal Medicine. Vol. 180,
No. 11. August 2020; Offodile, Anaeze C. et al. “Private equity investments in health
care: An overview of hospital and health system leveraged buyouts.” Health Affairs.
Vol. 40, No. 5. May 2021.
7
Singer, Stephen. “Plan to consolidate Rockville Hospital in Manchester draws
criticism from unionized workers.” Hartford Courant. December 8, 2020.
8
Brian Spegele, Brian and Laura Cooper. “As Coronavirus Cases Climbed, Private-
Equity-Owned Hospital Demanded Bailout.” Wall Street Journal. April 26, 2020.
9
Bresswein, Kurt. “Easton Hospital owner to ‘proceed immediately’ on closure
without state takeover by midnight.” Easton Express-Times. March 27, 2020.
10
Bresswein, Kurt. “Deal is reached to keep Easton Hospital open at least a month.”
Easton Express-Times. March 28, 2020.
11
Harris, Jon. “Here’s how much St. Luke’s paid for Easton Hospital and its real
estate.” Allentown Morning Call. July 6, 2020.
12
Cooper, Zack, Fiona Scott Morton and Nathan Shekita. Yale University. “Surprise!
Out-of-Network Billing for Emergency Care in the United States” March 2018.
13
U.S. Government Accountability Office. “Air Ambulance: Data Collection and
Transparency Needed to Enhance DOT Oversight.” GAO-17-737. July 2017 at 19; ;
Roumeliotis, Greg. “Exclusive: KKR nears $2 billion deal for Air Medical.” Reuters.
March 10, 2015.
14
Ibid at 11
15
Kliff, Sarah, “A $52,112 Air Ambulance Ride: Coronavirus Patients Battle Surprise
Bills.” New York Times. October 13, 2020.
PUBLIC MONEY FOR PRIVATE EQUITY
46
16
Ibid.
17
Ibid.
18
Good Jobs First. Violation Tracker. Ramaco Resources LLC. Accessed July 2021.
19
SBA. Paycheck Protection Program (PPP) Report Approvals Through 08/08/2020.
2020 at 6.
20
Webb, Olivia. “Private equity chases ambulances.” American Prospect. October 3,
2019; Bailey, Melissa. “Ambulance trips can leave you with surprising – and very
expensive – bills.” Washington Post. November 20, 2017.
21
Chhabra, Karan R. et al. “Most patients undergoing ground and air ambulance
transportation receive sizeable out-of-network bills.” Health Affairs. Vol. 39, No. 5. April
15, 2020.
22
Rosato, Donna. “Your ambulance ride could still leave you with a surprise medical
bill.” Consumer Reports. February 27, 2021.
23
Kliff, Sarah and Margot Sanger-Katz. “Surprise medical bills cost Americans
millions. Congress finally banned most of them.” New York Times. December 22, 2020;
Ford, Jonathan. “Private equity has inflated US medical bills.” Financial Times. October
6, 2019; Himmelstein, David U. et al. “Medical bankruptcy: Still common despite the
affordable care act.” American Journal of Public Health. Vol. 109, No. 3. March 2019 at
431 to 433.
24
Thomas, Wendi, C., et al., “This Doctors Group Is Owned by a Private Equity Firm
and Repeatedly Sued the Poor Until We Called Them,” ProPublica, Nov. 27, 2019.
25
Sanger-Katz, Margot, Julie Creswell and Reed Abelson, “Mystery Solved: Private-
Equity-Backed Firms Are Behind Ad Blitz on ‘Surprise Billing’,” New York Times, Sept. 13,
2019.
26
Dexheimer, Elizabeth. “Blackstone-KKR hidden hand in ad blitz unleashes
Washington fury.” Bloomberg. January 8, 2020; Lewis, Adam. Pitchbook. “PE digs in as
battle to end surprise medical bills wages on.” March 6. 2020.
27
Arndorf, Isaac, Medical Staffing Companies Cut Doctors’ Pay While Spending
Millions on Political Ads, ProPublica. April 20, 2020.
28
Ibid.
29
Perlberg, Heather and Melissa Karsh. “Private equity dodges worst from surprise-
billing crackdown.” Bloomberg. December 22, 2020.
30
Kliff and Sanger-Katz (December 22, 2020).
31
Kaiser Family Foundation. “Surprise medical bills: New protections for consumers
take effect in 2022.” February 4, 2021.
32
Kliff and Sanger-Katz (December 22, 2020).
33
CARES Act §1102(a)(2)(F) and §1102(a)(2)(Q).
34
U.S. Small Business Administration (SBA). Business Loan Program Temporary
Changes; Paycheck Protection Program. 85 Fed. Reg. 73. April 15, 2020 at 20812 to
20813.; Federal Reserve Bank of Kansas City. “Small business lending survey.”
December 21, 2020 at aggregate survey data Table A.16
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
47
35
The difference between $156 million in interest payments for the prevailing 5.38
percent interest rate pre-pandemic and $28 million in interest payments for a 1
percent PPP loan, based on a 5-year repayment period.
36
U.S. Department of the Treasury (Treasury) and Small Business Administration.
“Affiliation rules applicable to U.S. Small Business Administration Paycheck
Protection Program.” April 3, 2020; SBA. “Business loan program temporary changes;
Paycheck Protection Program—requirements—promissory notes, authorizations,
affiliation, and eligibility.” Interim final rule. 85 Fed. Reg. 82. April 28, 2020 at 23451;
13 CFR §121.103.
37
Leonnig, Carol D., Jonathan O’Connell, and Michelle Ye Hee Lee. “Private equity
angles for piece of stimulus windfall.” Washington Post. April 6, 2020.
38
Treasury. “Paycheck Protection Program Loans: Frequently Asked Questions.”
Question 31. January 29, 2021 at 12 and 13.
39
SBA. “Business loan program temporary changes; Paycheck Protection Program.”
Interim Final Rule. 85 Fed. Reg. 73. April 15, 2020 at 20818.
40
Apollo reports over 1,700 employees, Blackstone’s private equity business reports
555 employees, the Carlyle Group reports over 1,800 employees, and KKR reported
nearly 1,600 employees. Apollo Global Management, Inc. U.S. Securities and
Exchange Commission (SEC) filing 10-K (SEC 10-K). Fiscal year end (FYE) December 31,
2020 at 9; The Blackstone Group Inc. SEC 10-K. FYE December 31, 2020 at 8; The
Carlyle Group Inc. SEC 10-K. FYE December 31, 2020 at 6; and KKR & Co. Inc. SEC 10-
K. FYE December 31, 2020 at 29.
41
CARES Act §1102(a)(2)(D)(iii) and(iv)(I and II).
42
Perlberg, Heather. “Rescue cash too hot for KKR proves irresistible to many PE
peers.” Bloomberg. July 2, 2020.
43
O’Connell, Jonathan and Andrew Van Dam. “McDonald’s, Subway and other
franchises got $15.6 billion in small-business funds.” Washington Post. January 28,
2021.
44
Mercado, Darla. “The Paycheck Protection Program has run out of money — meet
the entrepreneurs left in the cold.” CNBC. April 17, 2020; Amoani, Selasi. “Will the
Paycheck Protection Program run out of money.” Barron’s. June 20, 2020; Cole, Devan
and Kevin Bohn. “$175 billion in small business loans given out in the second round
of the Paycheck Protection Program.” CNN. May 3, 2020; O’Connell, Jonathan. “White
House, GOP face heat after hotel and restaurant chains helped run small business
program dry.” Washington Post. April 20, 2020.
45
Rosenberg, Joyce M. and Justin Myers. “Minority-owned companies waited months
for loans, data shows.” Associated Press. December 31, 2020.
46
Reosti, John. “Most PPP loans going to repeat customers.” American Banker.
February 10, 2021.
47
Rosenberg and Myers (December 31, 2020).
48
Fairlie, Robert W. National Bureau of Economic Research (NBER). “The impact of
Covid-19 on small business owners: Evidence of early-stage losses from the April
2020 Current Population Summary.” NBER Working Paper No. 27309. June 2020.
PUBLIC MONEY FOR PRIVATE EQUITY
48
49
Goldman Sachs. “Help (still) wanted.” April 27, 2020.
50
Aaron Allen & Associates. “Most active PE restaurant chains globally.” July 31, 2017;
Dubey, Akshat, Claire Davies, and Piyush Gupta. PwC. “The Growth Menu.” 2018 at
10.
51
Hirsch, Lauren. “Do Dunkin’ and Arby’s go together? Private equity group bets $11
billion they do.” New York Times. October 30, 2020.
52
Gurbal Kritzer, Ashley. “Revving up for growth.” Tampa Bay Business Journal. January
29, 2021.
53
Lucas, Amelia. “These restaurant chains filed for bankruptcy during the pandemic.”
CNBC. July 20, 2020; Creswell, Julie and Gillian Friedman. “How may we serve you? For
restaurant chains, it depends on the location.” New York Times. December 18, 2020.
54
Center for Responsive Politics. www.opensecrets.org. Accessed April 2021.
55
Federal lobbying disclosure reports filed with the secretary of the Senate. Blue Oak
and Searchlight Capital Partners; analysis of lobbying expenditures for Center for
Responsive Politics at www.opensecrets.org.
56
Schmidt, Robert and Heather Perlberg. “Private equity frets that it’s a loser in the
$2 trillion virus bill.” Bloomberg. March 31, 2020; Schwartz, Brian. “Private equity
lobbyists were involved in the push for $500 billion coronavirus bailout fund.” CNBC.
March 31, 2020.
57
Lewis, Adam and Janet Thorne “Has private investor lobbying for pandemic loans
been successful?” Pitchbook, May 21, 2020; analysis of Center for Responsive Politics
data for American Investment Council. www.opensecrets.org. Accessed April 2021.
58
Wassan, Eric. “Private equity denied access again in Senate’s new loan bill.”
Bloomberg. April 8, 2020.
59
Fontanella-Khan, James, Mark Vandevelde, Sujeet Indap, and James Politi. “Private
equity groups seek US small business rescue loans.” Financial Times. March 31, 2020.
60
Sirota, David, Andrew Perez, and Walker Bragman. “This fast food giant bragged
about killing the $15 minimum wage.” Newsweek. March 27, 2021.
61
Ibid.
62
Fernyhough, Wyllie and Rebecca Springer. Pitchbook. “US PE Breakdown 2020
Annual.” January 11, 2021 at 4.
63
“Can private-equity firms turn a crisis into an opportunity?” Economist. May 30,
2020.
64
Ayash, Brian and Mahdi Rastad. California Polytechnic State University. “Leveraged
Buyouts and Financial Distress.” July 19, 2019.
65
Analysis of ownership of 175 retail firms that entered bankruptcy from 2015 to
September 2020. The retail chain bankruptcies were derived from “Here’s a list of
113 bankruptcies in the retail apocalypse and why they failed.” CB Insights. Research
Brief. July 30, 2020; “The running list of 2020 retail bankruptcies.” Retail Dive.
September 14, 2020. This analysis excludes chains on these lists that do not sell
merchandise at brick-and-mortar stores such as restaurants, service sector chains, e-
commerce, or brand manufacturers and distributors. Ownership based on corporate
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
49
documents, reports, and filings as well as media reporting and determination from
the Pitchbook database.
66
Espinoza, Javier and Eric Platt. “Private equity races to spend record $2.5tn cash
pile.” Financial Times. June 27, 2019.
67
Perlberg, Heather. “Wary private equity with $2 trillion war chest sits out carnage.”
Bloomberg. March 23, 2020.
68
Cumming, Chris. “Private equity’s trillion-dollar piggy bank holds little for struggling
companies.” Wall Street Journal. June 28, 2020; Witkowsky, Chris. “Private equity and
the dry powder fallacy.” Buyouts Insider. April 30, 2020; Economist. May 30, 2020.
69
Cumming (June 28, 2020).
70
Economist. (May 30, 2020).
71
Cumming (June 28, 2020).
72
Perlberg, Heather. “Steve Schwarzman sees virus wiping $5 trillion from GDP.”
Bloomberg. April 7, 2020.
73
Economist. (May 30, 2020).
74
Dayen, David. “Unsanitized: Private equity licks its chops.” American Prospect. March
19, 2020.
75
Stewart, Emily. “Exclusive: Goldman warns clients about a rise in hostile takeovers
amid coronavirus market meltdown.” Vox. March 18, 2020.
76
Economist. (May 30, 2020).; Oguh, Chibuike. “Investors see ‘king of distress’ Apollo
having its best ever crisis.” Reuters. June 26, 2020; Goldstein, Matthew. “Some big
investors smell profit in virus-plagued companies.” New York Times. April 3, 2020.
77
Idzelis, Christine. “KKR raked in management fees as funds lost value.” Institutional
Investor. May 6, 2020.
78
Pramuk, Jacob. “Trump signs $2 trillion coronavirus relief bill as the US tries to
prevent economic devastation.” CNBC. March 27, 2020.
79
McLean, Bethany. “Too big to fail, COVID-19 edition: How private equity is winning
the Coronavirus crisis.” Vanity Fair. April 9, 2020.
80
Kelly, Jason. “The magic formula is leverage…and fees.” Businessweek. October 3,
2019.
81
CARES Act §4003(c)(2)(G).
82
Aratani, Lori. “Airlines, public transit agencies say $1.9 trillion relief plan would
prevent deep cuts, job losses.” Washington Post. March 8, 20201.
83
CARES Act §4003(c)(3)(A)(iii).
84
Federal Reserve Bank of Boston. “Main Street Lending Program: Frequently Asked
Questions.” December 29, 2020 at 38.
85
Stuart, Bruce. “How the COVID-19 pandemic has affected provision of elective
services: The challenges ahead.” Health Affairs. October 8, 2020.
86
CARES Act §4114(a)(2-3); §4003(c)(2)(E-F); and §4116.
87
CARES Act §4112(a); §4003(c)(2)(G); §4003(c)(3)(D)(II); §4114(a)(1); §4115; and
§4003(c)(3)(D)(IX).
88
Captain DePete, Joseph G. President Air Line Pilots Association, International.
Testimony before the Subcommittee on Aviation. U.S. House Committee on
PUBLIC MONEY FOR PRIVATE EQUITY
50
Transportation and Infrastructure. “COVID-19’s Effects on U.S. Aviation and the Flight
Path to Recovery.” March 2, 2021 at 1 to 2.
89
Ibid.
90
Lauer, Claudia. “Hundreds of Philly airport workers laid off amid COVID-19
outbreak, union says.” Channel 10 NBC Philadelphia. March 19, 2020; California
Employment Development Corporation. “WARN Report.” July 1, 2019 to June 30, 2020
at page 180; Gates, Dominic. “Layoffs begin as aviation collapse due to coronavirus
hits Washington companies.” Seattle Times. March 24, 2020.
91
Dickson, Gordon. “Fort Worth aviation company may cut jobs due to lack of COVID
aid, leadership says.” Fort Worth Star Telegram. May 27, 2020.
92
“UPHS gives statement on adjusting staff hours, salary reductions for hospital,”
WMUC. April 10, 2020 ; Slaven, Janie, “LCRH temporarily reduces workforce amid
COVID-19 pandemic 17 percent on temporary leave, others face reduced hours,”
Commonwealth Journal. April 16, 2020. Marchant, Bristow. “Another SC hospital puts
workers on leave, cuts pay because of coronavirus outbreak.” The State. April 14,
2020.
93
Willmer, Sabrina. “A Wall Street Giant Tapped $1.5 Billion in Federal Aid for Its
Hospitals.” Bloomberg. September 14, 2020.
94
Arnsdorf, Isaac. “Overwhelmed hospitals face a new crisis: Staffing firms are
cutting their doctor’s hours and pay.” ProPublica. April 3, 2020.
95
Judd, Ron, ER doctor who criticized Bellingham hospital’s coronavirus protections
has been fired, The Seattle Times (March 27, 2020).
96
Stone, Will, An ER Doctor Lost His Job After Criticizing His Hospital On COVID-19.
Now He's Suing, NPR, May 29, 2020.
97
Action Center for Race and the Economy, American Economic Liberties Project,
Americans for Financial Reform, Center for Economic and Policy Research, Demand
Progress, Institute for Local Self Reliance, Main Street Alliance, and Public Citizen.
Letter to Federal Reserve Board Chairman Jay Powell and Treasury Secretary Steven
Mnuchin. May 7, 2020.
98
Kelly, Jason. “The magic formula is leverage…and fees.” Businessweek. October 3,
2019.
99
Hechinger, John and Sabrina Wilmer. “Life and debt at a private equity hospital.”
Bloomberg. August 6, 2020.
100
Willmer, Sabrina. “Cerberus quadruples money after unusual exit from hospital
giant.” Bloomberg. May 27, 2021.
101
“Chuck E. Cheeses sold to private equity firm Apollo.” CNN Money. January 16,
2014; Pitchbook. CEC Entertainment profile. Deal #5 LBO Completed. February 14,
2014.
102
Maze, Jonathan. “Chuck E. Cheese’s parent company declares bankruptcy.”
Restaurant Business. June 25, 2020.
103
Durbin, Dee-Ann. “Pandemic takes a bite: Chuck E Cheese files for bankruptcy.”
Associated Press. June 25, 2020.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
51
104
Reindl, JC. “Art Van Furniture files for Chapter 11 bankruptcy, could still face
liquidation.” Detroit Free Press. March 9, 2020; Walsh. Dustin. “How Art Van went from
a retail juggernaut to a house afire.” Crain’s Detroit Business. March 8, 2020; “Here’s a
list of 113 bankruptcies in the retail apocalypse and why they failed.” CB Insights.
Research Brief. July 30, 2020.
105
Ronalds-Hannon, Eliza and Lauren Coleman-Lochner. “Art Van workers demand
owner pay back benefit accounts lost in bankruptcy.” Bloomberg. September 29, 2020;
Ronalds-Hannon, Eliza and Lauren Coleman-Lochner. “T.H. Lee $1 million for workers
called ‘grossly inadequate.’” Bloomberg. June 10, 2020; Rahal, Sarah. “Art Van closes
stores, lays off nearly all employees due to COVID-19.” Detroit News. March 20, 2020.
106
Unglesbee, Ben. “Former Art Van employees win $2M hardship fund from private
equity firm.” Retail Dive. March 11, 2021.
107
Analysis of POGO CARES Act database and Pitchbook data for American Securities,
Apollo, Ares, Carlyle Group, Cerberus, KKR, Leonard Green, Roark Capital, TPG
Capital and Welsh, Carson, Anderson & Stowe. Includes only U.S. leveraged buyouts
(excluding other private equity investments like growth, mezzanine, or venture
capital). The total counts the number of leveraged buyouts of target portfolio firms;
10 of the reported leveraged buyouts were so-called club deals where more than
one of the top 10 private equity firms joined together in a leveraged buyout. There
were 230 target firms taken over by leveraged buyouts of top 10 firms. The majority
of the LBOs did not disclose the value of the takeover.
108
Kindred Healthcare. [Press release]. “Kindred Healthcare to expand behavioral
health services with acquisition of two hospitals in Texas.” June 1, 2020; Kindred
Healthcare. [Press release]. “Kindred Healthcare completes acquisition of two
behavioral health hospitals in Texas.” July 1, 2020.
109
North American Partners in Anesthesia (NAPA) and MEDNAX, Inc. [Press release].
“North American Partners in Anesthesia (NAPA) acquires American Anesthesiology
from MEDNAX, Inc., to create one of the most comprehensive anesthesia, pain
management, and perioperative care companies in the U.S.” May 6, 2020; Bandell,
Brian. “Mednax sells anesthesia division to avoid coronavirus-related losses.” South
Florida Business Journal. May 6, 2020.
110
Hirsch (October 30, 2020).
111
Littman, Julie. “How Tropical Smoothie’s new owner will accelerate growth.”
Restaurant Dive. September 9, 2020.
112
Kocieniewski, David and Caleb Melby. Private Equity Lands Billion-Dollar Backdoor
Hospital Bailout. Bloomberg. June 2, 2020.
113
Willmer, Sabrina. A Wall Street Giant Tapped $1.5 Billion in Federal Aid for Its
Hospitals. Bloomberg. September 14, 2020.
114
Muoio, Dave, LifePoint Health purchases post-acute services company Kindred
Healthcare, commits to 3-year, $1.5B investment. Fierce Healthcare. June 22, 2021;
Lombardo, Cara and Miriam Gottfried, Apollo’s LifePoint in Talks to Buy Ardent
Health Services. Wall Street Journal. February 11, 2021.
PUBLIC MONEY FOR PRIVATE EQUITY
52
115
Ronalds-Hanon, Eliza and Davide Scigliuzzoo. “Sycamore pockets $1 billion from
deal that amazed Wall Street.” Bloomberg. April 11, 2019; Slavkin Corzo, Heather.
Testimony before the House Financial Services Committee, Subcommittee on
Investor Protection, Entrepreneurship, and Capital Markets. U.S. House of
Representatives. Promoting Economic Growth: A Review of Proposals to Strengthen
the Rights and Protections for Workers. May 15, 2019 at 13.
116
Lewis, Adam. Pitchbook. “PE firms keep deploying dividend recaps despite the
risks.” August 15, 2019.
117
Rennison, Joe. “Private equity owners pile on leverage to pay themselves
dividends.” Financial Times. September 17, 2020.
118
CARES Act §4114(a)(3), §4003(c)(2)(F), and §4003(c)(3)(A)(ii and iii); 13 CFR
§123.303(5).
119
Hemingway, Jonathan. S&P. “DuPage Medical Group allocates $650M term loan
for refinancing, dividend; terms.” March 5, 2021.
120
Pitchbook. Aspen Dental Management company profile. Accessed May 2021.
121
Basak, Sonali and David Carey. “Private equity’s biggest backers are tired of the
fees.” Bloomberg. October 26, 2017.
122
Eagan, Eleanor and Eileen Appelbaum. “A day one agenda for private equity.”
American Prospect. August 7, 2020.
123
Polsky, Gregg D. UNC Legal Studies Research Paper No. 2461733. “Private Equity
Monitoring Fees as Disguised Dividends.” June 2, 2014.
124
Phalippou, Ludovic, Christian Rauch, and Marc P. Umber. University of Oxford
Said Business School. “Private Equity Portfolio Company Fees.” April 5, 2016 at 3.
125
Blackstone CARES Act receipts include Blackstone Life Sciences. Apollo Global
Management, Inc. SEC filing 10-K (SEC 10-K). FYE December 31, 2020 at 134; Ares
Management Corporation. SEC 10-K. FYE December 31, 2020 at F-8; The Blackstone
Group Inc. SEC 10-K. FYE December 31, 2020 at 112; The Carlyle Group Inc. SEC 10-K.
FYE December 31, 2020 at 103; KKR & Co. Inc. SEC 10-K. FYE December 31, 2020 at
198.
126
Ibid.
127
“Private equity should help itself.” Financial Times. August 17, 2020.
128
Polsky (June 2, 2014).
129
Phalippou, Rauch, and Umber (December 2015).
130
Appelbaum, Eileen and Rosemary Batt. Center for Economic and Policy Research.
“Fees, Fees and More Fees: How Private Equity Abuses Its Limited Partners and U.S.
Taxpayers.” May 2016 at 25.
131
SEC Private Funds Statistics. December1, 2020.
132
Marples, Donald J. Congressional Research Service. “Taxation of Carried Interest.”
Report No. R46447. July 9, 2020 at 3.
133
Rep. Pascrell, William. [Press release]. “Pascrell, Levin, Porter move to close
infamous tax loophole favored by Wall Street bankers.” February 16, 2021.
134
Marples (2020) at 5; Merle, Renae. “What is ‘carried interest’ and why it matters in
the new GOP tax bill.” Washington Post. November 7, 2017.
PANDEMIC RELIEF WENT TO FIRMS BACKED BY PRIVATE EQUITY TITANS
53
135
McElhaney, Alicia. “Inside the private equity lobby.” Institutional Investor. November
8, 2017.
136
Marples, (2020) at 4.
137
Schwartz, Brian. “Investment firms, private equity advocacy group hires lobbyists
as lawmakers target tax loopholes.” CNBC. March 8, 2021.
138
Taxes based on 3-year average total taxes from 2018 to 2020; Blackstone CARES
Act receipts includes Blackstone Life Sciences. Apollo Global Management, Inc.
Securities and Exchange Commission filing 10-K (SEC 10-K). FYE December 31, 2020
at 142; Ares Management Corporation. SEC 10-K. FYE December 31, 2020 at F-8; The
Blackstone Group Inc. SEC 10-K. FYE December 31, 2020 at 88; The Carlyle Group Inc.
SEC 10-K. FYE December 31, 2020 at 160; KKR & Co. Inc. SEC 10-K. FYE December 31,
2020 at 180. The federal support of portfolio firms is not adjusted for ownership
stake; some private equity firms may not own 100 percent stakes in the portfolio
companies that received aid.
139
Ibid.
140
Coalition Letter Urging Congress to Strengthen and Clarify Coronavirus-Related
Data Disclosures. July 18, 2020.
141
Franchise Information Services, Inc. Franchise Directory. Accessed 2021.
142
Project on Government Oversight. Covid Relief Spending Tracker Methodology.
Accessed 2021.
143
POGO. COVID Relief Spending Tracker. Accessed 2021.
