Tuesday, October 12, 2010

Columbia University's Kravis/KKR/TASC Connection--Conclusion

(To help fund the construction of a new Columbia Business School on Columbia University's 21st-century landgrabbing, private university real estate development/campus expansion project in West Harlem, the co-founder, co-chairman and co-CEO of Kohlberg Kravis Roberts [KKR]--Henry Kravis--recently gave a $100 million "gift" to the Columbia Business School. Coincidentally, Kravis is also the co-chair of the Board of Overseers of Columbia Business School. And since 2009, Kravis's KKR investment firm has been a co-owner of the TASC firm which obtains 40 percent of its annual revenues from Pentagon military contracts.

The following article about Henry Kravis and KKR's pre-1992 hidden history first appeared in the July 22, 1992 issue of the now-defunct Lower East Side alternative newspaper weekly, Downtown, during the period when Kravis's KKR firm still owned New York magazine--prior to its sale to Bruce Wasserstein in 2003 for $55 million).

Like George W. Bush [II]’s father and grandfather, Henry Kravis’s father—a Tulsa, Oklahoma petroleum engineer and oil industry investor named Ray Kravis—was also extremely interested in Republican Party national politics (although he had worked for President Kennedy’s father, Joseph P. Kennedy in the 1940s by investing Kennedy Dynasty money in southwestern oil properties). By the 1970s, Henry Kravis’s father regularly gave about $40,000 a year to the Republican Party’s national and senatorial committees.

In the 1970s, Henry Kravis’s father was also worth about $50 million [in 1970s money]. And in the 1970s, the Tulsa businessman also “began launching the next generation, working his network of New York cronies to position his son for great things to come,” according to The Money Machine.

Henry Kravis’s father had gained entry into the U.S. Establishment after he discovered a tax loophole which enabled investors in oil properties to be taxed at a greatly reduced rate; and, in addition to working for President Kennedy’s father, Ray Kravis also became friendly with Gustav Levy, the then-senior partner of Goldman Sachs & Co. and Co. and with Cy Lewis, a Bear Stearns senior partner. Coincidentally, after Henry Kravis secured his MBA from Columbia University’s Business School in 1969, his father’s friend, Cy Lewis of Bear Stearns, offered him a high-paying job at Bear Stearns.

When an older Bear Stearns partner named Jerry Kohlberg decided that money could be made quicker if he founded his own partnership to specialize in leveraged buy-outs [LBOs], Henry Kravis and his cousin George Roberts (who was also then a Bear Stearns partner) decided to become Kohlberg’s partners in the 1976-founded Kohlberg-Kravis-Robersts [KKR] firm. By the late 1980s, however, Jerry Kohlberg decided he wanted to leave the firm, and did so, although it still bears the Kohlberg name.

Although Henry Kravis and his cousin George Roberts each increased their individual personal wealth too over $325 million by the late 1980s as a result of KKR’s 1980s business activity, some critics of KKR held the firm responsible for breaking up U.S. companies unwisely, destroying thousands of jobs and loading up companies with irrational amounts of debt. By 1989, other critics were warning that “because Kravis and other takeover artists typically finance their deals with enormous amounts of debts…the highly leveraged financial structure of the corporations…may come crashing down at the next recession with dire consequences…for the economy at large,” according to 1989 Current Biography Yearbook. And James Ledbetter characterized Kravis in the Village Voice’s May 26, 1992 issue as “the takeover magician whose greed-driven mergers and acquisitions helped wreck the U.S. economy in the 1980s (a point that even Fortune magazine conceded in a recent issue).”

Kravis’s 1980s business activity was also criticized on ethical grounds by at least one business journalist. In her The Money Machine book, for example, Sarah Bartlett wrote:
“…Was it good public policy for [Oregon Investment Council Member] Roger Meier to be able to commit several hundred million dollars of other people’s money to KKR and then several months later move into a position where he was personally enriched by the firm?...Did it make sense for KKR to be the largest source of financial support to state treasurers or comptrollers who, after their election, were in a position to assign to KKR state employees’ money?

Ironically, despite his enormous wealth, Kravis’s first marriage apparently fell apart in the late 1970s, after he fathered three children, because “he was so preoccupied with work that he barely noticed his wife’s growing frustration” and “some times the only time she would see Henry was when he would come staggering into their bedroom very drunk, and collapse fully-clothed onto the bed” and his wife “found out that Henry was fooling around with a barmaid at a downtown restaurant,” according to Sarah Bartlett’s The Money Machine.

After divorcing his first wife, Kravis began seeing a dress designer named Carolyne Roehm, whom he married in 1985. In the early 1990s, Kravis and his second wife shared a $5.5 million duplex apartment in Manhattan, a farmhouse in Sharon, Ct., a ski house in Colorado and a home on Long Island. In addition, in the early 1990s Kravis also owned a personal jet, a personal helicopter and a $14 million painting, besides also being a member of many exclusive country clubs.

[But after divorcing his second wife in 1993, Kravis then married a politically conservative Canadian policy wonk named Marie Josee Drouin-Kravis, who currently sits on the executive committee of the right-wing Hudson Institute think-tank’s board of trustees and on the corporate board of Ford Motor Company. In addition, the wife of the billionaire who's paying for the new business school building on Columbia University's new campus construction project in West Harlem--in which Columbia hopes to train more Wall Street executives--is also currently the president of the Museum of Modern Art.].

(end of article)

(Downtown, 7/22/92)