Dems Must Do Better

Updated House Democrats think they have found a stateside version of Nick Ferguson, the SVG Capital chairman who famously broke ranks by saying that he unfairly paid a lower tax rate than the woman who cleans his office. Their “star” may play well for the cameras and mainstream media, but he doesn’t have much wattage within private equity circles.

It’s Leo Hindery, the former AT&T Broadband CEO who now runs a media-focused private equity firm called InterMedia Advisors. peHUB has learned that Hindery will be among those who testify during this Thursday’s Ways & Means Committee hearing on carried interest tax policy. He presaged his testimony with a recent column, where he wrote the following:

“I know firsthand that carried interest is nothing more than a form of performance fee and that a manager receiving carried interest can only gain and never lose, which of course flies in the face of the manager then receiving capital gains tax treatment. And to argue that the fiduciary investors whose capital is being managed care a whit about this issue is misleading and, frankly, dead wrong — in fact, every fiduciary investor I know would be thrilled to see fairer taxation of investment manager income, which ordinary income taxation would ensure.”

But Hindery is a relative newcomer to private equity, having only formed his firm back in 2005. Its debut fund had a $1 billion target, with $670 million committed as of a May 2007 regulatory filing. It’s done a few deals, but is still in its infancy. His only other semi-private equity experience was as president of N.Y. Yankees broadcaster The YES Network, which was backed by Goldman Sachs and Providence Equity Partners. The rest of his resume is as an operator rather than an investor – save for his generous donations and fundraising efforts for various Democratic candidates.

No aspersions on the man or his accomplishments – but he just doesn’t match up to Nick Ferguson as a private equity spokesman. Ditto for his comparison with Bruce Rosenblum, the Carlyle Group managing director who will testify against a change to tax treatment, on behalf of the Private Equity Council. Rosenblum has been a private equity pro for seven years with major deals under his belt, including PanAmSat and Dex Media. He also spent the prior 18 years as a corporate M&A attorney. The Dems just have to do better.

peHUB has obtained a preliminary witness list for the hearing, which is as follows:

Panel 1: Effects of 2001 & 2003 Tax Cuts
Larry Summers, former U.S. Treasury Secretary
Len Burman, Urban Institute
Phil Gramm, former U.S. Senator
Jason Furman, Hamilton Project.
Robert Rubin was invited, but declined.

Panel 2: Carried Interest Tax Policy
Peter Orszag, Director of the Congressional Budget Office
Douglas Holtz Eakin, former Director of the Congressional Budget Office

Panel 3: Hedge Fund Consequences
Steve Shay, tax partner with Ropes and Gray

Panel 4: Private Equity Consequences
Leo Hindery, InterMedia Partners
Orin Kramer, chairman of the New Jersey State Investment Council
Gene Steurle, Urban Institute
Bruce Rosenblum, managing director with The Carlyle Group & chairman of the Private Equity Council


Update A reader submits the following:
“Leo has a long history as an investor prior to the YES deal – he built the 6th largest cable company Intermedia / Intermedia Partners via a private equity fund he ran – it was built over a decade plus and was eventually sold to another private equity firm. It is what made his career (and probably wealth)…this led to him teaming with Malone to run TCI which he sold to ATT and then bought MediaOne.”