Wednesday, April 25, 2007

Big Union Takes Skeptical Look at Private Equity

The Service Employees International Union, which represents nearly two million workers including health care employees and janitors, on Tuesday released a report that takes a skeptical look at the private equity industry. While the report stops short of being openly hostile to buyout firms, it sets forth a series of “public policy concerns” related to the recent run of large buyout deals.
The union held a conference call Tuesday, in which officials said the main goal of their report was to start a conversation about private equity funds, which have gathered billions of dollars from investors (including, in some cases, corporate pension funds for workers in the S.E.I.U.). In the past year or so, private equity funds have used that cash to sweep dozens of large public companies, such as hospital chain HCA and office landlord Equity Office Properties, into private hands.
The union’s report took pains to quantify the riches that private equity firms have reaped by acquiring companies and then selling them again — sometimes after making drastic cuts in jobs or worker benefits.
The union also put a spotlight on certain tax breaks that accrue to private equity firms. One of these — the ability to pay a lower tax rate on certain kinds of private equity fees — seems to be of particular interest to the union — as well as some lawmakers in Washington.
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