I've been reading this book. I’m not actually done with it, but I’ve gotten through a pretty substantial portion of it. The author clearly has a bias, having worked as the DOJ as a prosecutor, but also has the facts to back up what he’s saying. It’s not like this bias makes him not credible. However, there were times when reading I would say to myself, “yeah but a company would probably justify things this way…” I’ve seen firsthand a lot of rationalization of things that seem bad, so maybe this is just how I am now.

My takeaways thus far:

1. The author seems to put the blame squarely on the shoulders of private equity firms. While they’re obviously not blameless, a lot of the blame should also go toward the C-suite executives and the boards that run the companies that are eventually bought by these firms. I’m guessing that for the most part, these schemes, like taking out massive debt to pay the PE firm, also hugely benefits the executives that are probably agreeing to sign over the firm for a payday. If I’m understanding ‘dividend recapitalization’ correctly, it’s unsurprising that an executive at a target company would turn down a “loan” that they themselves literally never have to pay back. I mean, corporate executives are probably the kind of people that have been waiting their whole lives for someone to make them this exact offer.

2. I’m getting to the part on how some of these cases have been prosecuted, but it doesn’t seem like the fines for doing anything illicit ever outweigh the benefit of doing so in purely dollar terms… as the author says, the lawsuits and fines faced by these firms are “just a cost of doing business.” If the government is getting paid the fine out of the profits made by illicit activity, then this pretty much fits the definition of extortion by the government as David Graeber has pointed out (somewhere, I don’t remember where). PE is definitely not the only industry that this occurs in but I guess I wasn’t aware of how entrenched they are, especially with the GOP.

3. The easiest way of thinking about these PE firms is almost as if they weren’t run by humans but as if someone wrote a program to extract profits over a 5-year horizon by any means possible. You almost have to admire some of the legal loopholes that they’re able to exploit (and question why they exist). Usually there is at least some potentially fake virtual signaling that comes with “public” capitalism, but in the PE world, it seems like none of that exists (with the pretty hilarious exception of Tom Gores, who released this statement while benefitting from charges from prison phone calls). Most “steady revenue streams” and things that make sense on paper AND abide by the social contract are probably already owned, and anything left screws someone over, somewhere in a pretty unethical way.

4. Following from the last two points, my guess is that the thing that PE firms fear most is press and journalism, not because it affects them directly (they probably don’t care about that) but because it puts pressure on companies and funds and whoever else is involved with them to divest if they don’t want to be considered evil. Like I said before, profits that look good on paper and in Excel are almost undoubtedly screwing someone over somewhere, and people (read: executives) want these profits, but they don’t want to know how they’re obtained. PE firms do this dirty work. A big, underrated selling point of PE seems to be blame avoidance – if you’re the CEO at a major retailer, you hate your job, and you want to retire in Beverly Hills now with absolutely no mortgage payments, then PE is your answer. If someone starts attacking you on Twitter when the benefits get cut, you’ve got a great alibi – “I had no idea Blackstone was gonna do this!”