The Bush administration’s new Secretary of Transportation believes in privatizing U.S. transportation infrastructure. This places her in good company as the famously insider connected Carlyle Group started up a division with that aim earlier this year.
Carlyle has a strong history in transportation. They announced their intention to acquire CSX Lines LLC from CSX Corp. in December 2002, before closing on the deal in February 2003. CSX received $240 million in cash and $60 million in securities.
They renamed the company Horizon Lines LLC. In May 2004, Carlyle sold the company to Castle Harlan for $650 million. Goldman Sachs advised Carlyle on the deal.
In holding the company for just over a year, Carlyle more than doubled their initial investment. Does this seem a bit fishy to you? Did the first group undersell or the second group overpay? Does this sound a bit like Randy “Duke” Cunningham’s house flipping?
U.S. Secretary of the Treasury John Snow served as Chairman and CEO of CSX prior to his appointment to the Bush administration. Sec. Snow served from January 2003 until June 2006.
His replacement, Henry M. Paulson Jr. served as chairman and chief executive of Goldman Sachs from 1999 to 2006. Mr. Snow’s firm sold Carlyle the company for $300 million while Mr. Paulson’s company advised Carlyle on the sale for $650 million a mere 13 months later.
Now what about Mary’s background? She was head of the Federal Highway Administration while CSX settled with a whistleblower for operating unsafely and billing the government for uncompleted work. The whistleblower called Mary another Bush cover-up artist for making the CSX investigation go away. The White House had no comment. Why am I not surprised?
While Mary pushes for privatization that benefits a new Carlyle sub, who else was on the Hill recently? Another ex-Bush bureaucrat, Charles Rossotti, Senior Advisor for the Carlyle Group testified before the Senate Finance Committee on September 20th. He spoke of how to simplify the taxation of businesses in America. Mr. Rossotti served as IRS Commissioner for two years under President Bush before joining the Carlyle Group.
Guess what he proposed? Remember that $350 million profit Carlyle made off the sale of CSX/Horizon Lines? It would be taxed at just 8.25% since it was held longer than a year. 75% of the gain would be excluded from tax per his proposal.
Not only will your government be giving away, selling or contracting out infrastructure development to the private sector, but if Mr. Rossotti’s proposal goes through when those companies flip their properties held more than one year, they will pay very little in taxes. I pay 8.25% in sales taxes in my town in West Texas.
If I’m paying the same rate as a huge corporation managing over $44.3 billion in assets, does that make me rich? Nope, but it does make them richer….