Filed under: Deals, Bain Capital, Thomas H. Lee Partners, Private equity industry, Public or private?

Clear Channel Communications Inc. (NYSE: CCU) looks like they’re just going to have to stay public. Shares shut down over 5% to $32.56 on the day but shares are down over 15% to $27.40 in after-hours trading. The Wall Street Journal has reported that the $19 Billion club-deal with private equity firms Thomas H. Lee and Bain Capital Partners LLC and their bankers is all but dead.

This has been covered here with more than skepticism as the real chances of the merger closing, usually with plenty of email responses claiming all is well.

If this deal does end up getting closed, it might get to apply for the Guinness Book of World Records for the biggest and longest merger in history. This volatility behind this merger is starting to look like a soccer match played by kindergartners on a hockey rink.

Someone please just turn out the lights and call this game a loss or a draw.

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Filed under: Financials and analyticals, Private equity industry, Management fees

It’s been a year since Fortress Investment Group (NYSE: FIG) went public. At that time, the offering got a nice reception. After all, investors were hungry for hedge fund and private equity operators.

Of course, that’s no longer the case. And the stock of Fortress has gone from $34 to a low of $9.50.

Well, this week, the firm announced its fiscal Q4 results. There was a net loss of $29.3 million, or $0.43 per share and pre-tax distributable earnings were down 43% to $78 million, or $0.18 per share. Revenues were also lackluster - falling 22% to $196 million. Although, with a big amount of assets under management (roughly $33.2 billion), Fortress saw a 43% spike in management fees.

With the roiling credit and equity markets, it’s tough to finish deals. As a result, there hasn’t been much opportunity to realize gains.

Despite all this, the Fortress conference call was upbeat. Keep in mind that the company focuses on asset-based investments, which tend to have less leverage and lower valuations. Besides, as major banks repair their balance sheets, there should be opportunities for players like Fortress to get some choice deals.

Interestingly enough, Fortress thinks that the second half of 2008 will be quite active. And, if the company can scoop up some transactions at compelling valuations, it could position itself nicely for the next couple years, when things get back to normal.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Deals, Venture capital industry, Private equity industry, Investments

This morning there was a rather interesting private equity venture. The AES Corporation (NYSE:AES) and Riverstone Holdings LLC, a New York-based energy and power-focused private equity firm, have announced that they have committed up to $1 billion as part of a new joint venture. This joint venture will develop utility-scale solar photovoltaic (PV) projects. Translation: big projects for communities more than small individual projects. This deal isn’t one-of-a-kind, but it is rather unusual for traditional private equity.

This will be called AES Solar, and AES and Riverstone will each provide up to $500 million of capital over five years to invest in PV solar projects globally. This follows the traditional independent power producer and wind business growth models noted geographically with favorable tarrifs and incentives. AES also noted that alternative energy currently accounts for 20% of its global generation capacity. The joint venture will be managed by a seven-member board of directors and three directors each will be appointed by AES and Riverstone. It noted that the target is for power grids that range from two to fifty Megawatts in size.

This is not the first such venture in the sector, but this is a rather massive commitment in the current environment. This nearly sounds like chasing a hot sector after the likes of Al Gore’s deeper involvement in investing in the sector from November. It also seems more “VC-esque: than traditional private equity. The lines between private equity and venture capital may be blurring further as capital competes for more deals.

Riverstone has invested in other green and traditional ventures, and here are its other portfolio companies.

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Filed under: Ripoffs and Scams, Tax

The Internal Revenue Service has released its 2008 list of the 12 scammiest tax scams, with internet phishing and frivolous tax arguments topping the list. The IRS puts this list together each year to keep consumers aware of the latest and greatest tax scams — and to help them avoid being taken in by them.

The key to avoiding IRS scams is no different than any other scam consumers might encounter: If it sounds too good to be true, it probably is. There are a lot of claims about mysterious free money and magical tax refunds you never knew about. Well, they’re simply not true.

Here are the top scams the IRS has identified this year and how you can spot them:

1. Phishing - You get an email that tells you that information is needed from you to in order to process your refund or clarify a tax problem. You click on the link and provide all kinds of personal information that helps criminals empty your bank account or get credit in your name. Never respond to an email that purports to be from the IRS and never use a link in an email to provide private information.
2. Economic Stimulus rebate scams - Con artists are trying to get their hands on your tax rebate, and you haven’t even gotten it yet! They’re trying to get you to turn over bank account information and social security numbers, saying this information is necessary to process your check. Don’t believe them! The IRS is not operating this way!

3. Frivolous tax arguments - Criminals are promoting fraudulent tax avoidance schemes that promise you won’t have to pay income taxes. Don’t pay them a fee for what amounts to wrong advice. The IRS has published a long list of excuses that taxpayers might try to use to avoid paying taxes, but they don’t work. Don’t get caught up in a scheme like this that’ll cost you lots of money in terms of tax, interest, penalties, and legal assistance down the road.

4. Fuel tax credit scam - The IRS has a legitimate tax credit related to certain nontaxable uses of fuel, often correctly claimed by farmers. Other taxpayers have been trying to claim this credit when they don’t qualify, so you should be careful to follow all the rules related to this credit.

5. Hiding income offshore - Putting money in overseas banks to try to conceal your income is illegal. Don’t fall for the claims of an offshore bank that wants your business and is willing to give you a debit card or credit card for access to your money. Income must be reported according the tax laws, and using a foreign bank account to hide your income will get you into a lot of trouble.

6. Abusive retirement plans - Some investment advisers help taxpayers avoid contribution limits for Roth IRAs by lying about the values of assets that are moved into the accounts. If you’re moving assets into a retirement account, make sure that the correct fair market value is being properly claimed so you don’t run into troubles later if the IRS examines your tax returns.

7. Zero wages - Tax cheats might tell you that you can file a “zero” wage tax return to avoid paying taxes. They’re wrong. If you’ve income listed on a W-2, you’re not allowed to “correct” that information to show zero wages and therefore avoid taxes. It’s not legit, and can get you in trouble.

8. False claims for refunds - Some scammers try to get refunds for tax returns that they’ve never filed. If you don’t file a tax return, the IRS will calculate and assess a tax liability for you based upon the information they have. You can’t just throw out their numbers and demand a refund of all your taxes. That’s not how the law works, and don’t let anyone convince you to pay them to help you go down that path.

9. Return preparer fraud - Yes, tax return preparers can commit fraud and can be on the hook for it. There are some out there who are charging inflated fees for their services or who are stealing a portion of people’s refunds. Buyer beware!

10. Disguised corporate ownership - Taxpayers have been known to create shell corporations with no real operations that are simply used to hide or disguise income. Using such entities to under report income, avoid filing tax returns, launder money, or engage in other financial crimes is wrong, and the IRS is on the lookout for these schemes.

11. Misuse of trusts - Tax scammers have long been promoting the use of trusts to avoid paying income taxes. There are legitimate uses for trusts, and they can help shield money legally from income taxes. But consumers must be very careful that what they’re doing is legal. The way you do that is by working with reputable professionals who are known for doing the best trust and estate work.

12. Abuse of charitable organizations and deductions - Taxpayers have been creating allegedly tax-exempt organizations to try to shield income or take bad deductions. They’re also trying to take deductions for items that aren’t charitable contributions — such as private school tuition — and the IRS is cracking down.

So long as our tax code is this complex, there will always be scams that prey on the ignorance of consumers. Each year this list of scams is a tiny bit different, but taxpayers should be aware that there are many more tax scams than just those listed here. Be on the lookout for unusual schemes that are presented to you. When in doubt, contact the IRS directly for assistance in determining whether or not you’re being scammed.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Bookkeeping, and is the author of Essentials of Corporate Fraud.

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