Archive for the ‘Uncategorized’ Category

See Previous Post on October 6 for Important Background Information.

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Photos:  Neil Goldschmidt and Gordon Sondand, Below

Not since Neil Goldschmidt has a public figure in Oregon wielded so much power on the national stage.   While Goldschmidt was a masterful politician and literally the political godfather of the Democratic Party in Oregon, he got very sloppy on the business side, which opened up his personal life to intense scrutiny.   In fact Nigel Jaquiss of Willamette Week ultimately won a Pulitzer Prize for his chronicle of Neil Goldschmidt.

Gordon Sondland has similarly been a masterful on the business side yet become sloppy regarding politics, opening up his business practices to similar scrutiny.

For investment advisors like myself, one of the great challenges given low interest rates is finding quality fixed income investments, especially given the proliferation of highly engineered products from non-traditional issuers of such debt, including private equity firms like KKR, TPG and Blackstone.  Remarkably, public pensions are heavy investors in such products, Oregon alone has a $2.5 billion portfolio what is called “non-traditional” fixed income.

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Given my reputation for reviewing these complex fixed income financial products, numerous journalists have contacted me in the past few days and asked that I look at Mr. Sondland’s financial disclosure and various businesses.  So here is a quick look, from an independent financial professional.  I’ll try and make extensive use of exhibits so that you can draw your own conclusions.

First thought.  Wow.  This all seems strangely similar to the Neil Goldschmidt saga.

A good place to begin is Nick Budnick’s October 15, 2019 story in the Portland Tribune titled “As Gordon Sondland nears impeachment spotlight, who is he?”   It is noteworthy that Sondland’s wife Katy Durant served on the Oregon Investment Council (OIC), the body that manages Oregon’s $90 billion in PERS assets from 2005-2016, 11 years.

Step 2 is to then bookend this article with another by Budnick, when he was with Willamette Week titled “Power Connection,” dated July 6, 2005.  This is when Gordon Sondland’s wife Katy Durant officially joined the OIC responsible for managing Oregon’s PERS investments.  Here is an excerpt from the article.

Screen Shot 2019-10-15 at 1.31.08 PM.pngAt the zenith of his power Neil Goldschmidt was set to assume control of the State System of Higher Education and become Chairman of the new Portland General Electric, an Enron subsidiary, as part of a bankruptcy buyout led by a leading private equity firm, the Texas Pacific Group (TPG).  He had already been in the Carter cabinet as Secretary of Transportation, Oregon’s Governor, Mayor of Portland and student body President at the University of Oregon.   And his lobbying client list was stellar.

At the time Goldschmidt’s best friend Gerry Bidwell,  and his wife Diana, both sat on Oregon’s powerful Oregon Investment Council.  As indicated in Budnick’s article, they both voted in favor of the TPG deal.

TPG’s plan for PGE was to peel off $1 billion the first year alone with Neil set to make at least $20 million.  The public was incensed and ignited a quick fall as scrutiny mounted regarding Neil’s TPG role, his role in predatory lending with Irvine Levin’s Renaissance Holdings, now renamed Genesis Financial,  his siding with Weyerhaeuser in a bitter hostile takeover of Portland based Willamette Industries, and other activities.

Like Diana Goldschmit, Gordon Sondland’s wife Katy Durant has been a big supporter of TPG on the Oregon Investment Council.  The following agenda item and minutes reap is from a December 2015 meeting, note that Durant made the motion for approving a $700 million investment in TPG.  OIC has invested almost $4 billion in TPG over 20 years yet this was the largest at one time.

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Yet unlike Diana Goldschmidt, who seemed to have been blind sighted by her husband’s business activities,  Katy Durant has boldly and knowingly stretched the boundaries of ethical conduct.

While on the OIC Durant remained active in commercial real estate deals,  often involving parties who dealt directly with the OIC. Here is a $75 million deal involving Sondland/Durant’s Atlas Investments made in 2007 while Durant was on the OIC.


The following is a rare abstention regarding a $300 million investment a JP Morgan fund at her last meeting on the Council.  A few months later JP Morgan provided Durant’s Atlas Investments $28M in financing for a real estate project. Of course such financings are usually months in the works.


$28 Million Financing Early 2017 with JP Morgan with Atlas Investments


This is where the State Treasurer is supposed to step in and unfortunately for Sondland and Durant,  Democrat Tobias Read has done just the opposite.  Read began by scrubbing away the archive of meetings and minutes as part of a web site overhaul.  This includes key audio from Wilbur Ross, now Commerce Secretary, whose firm has received almost $300 million from the OIC. Again Durant made the motion to approve the investment, which I am confident Wilbur appreciated.

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Rather than see the data rich archive that existed prior to Read assuming office in January 2017, complete with audio for all meetings,  the primary images on the website are of Read himself.



Even more surprising is that Read is also not ensuring public comments are accurately reflexted in the minutes, the most basic Democratic ideal.

At the April 2019 meeting I specifically addressed Read and encouraged him to restore the archive of minutes and data on past investments.   All he noted in the minutes was that I “suggested changes to the website.”

In 20 years or monitoring the OIC’s activities, it is my opinion that the current Chair Adams has been the finest member.   She asks the tough questions and tries to lead the council in the right direction yet the Wall Street influence seems too much for Read and others.  This poses a serious risk to PERS participants the day Adams leaves the council.

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Durant often went furthur with respect to scrubbing away public comment, see below, as Chair of the OIC in 2015 and 2016.  Imagine the ridiculousness of stating “addressed the council with prepared remarks,” with no reference to the actual content of the remarks.


Let’s now take a look at another example regarding why this archive is so important.

TPG and the OIC’s in Novalpina, a TPG spinoff, Making Oregon Public Employees the largest shareholders in a Cyber Weapon Software Company NSO/Pegasus

After a long career benefiting enormously from Oregon’s investments in TPG, senior partner Stephen Peel started his own fund Novalpina, with a helping hand from TPG.

The OIC in fact became the first and largest investor at almost 25 percent of the entire fund.  Here is a link to audio for this November 2017 monthly meeting.  You can hear Chair Adams asking all the right questions yet getting little support from other council members, in terms of scrutiny, regarding the investment:


In the audio Novapino Founder Stephen Peel and his partner note their focus will be mid-size European companies, using a wind power company as an example.

As it turns out they invested more than half the billion dollar fund, including debt, in a cyber weapons firm, NSO.  This essentially makes Oregon Public Employees the NOS’s largest shareholder.  Here is a series of visuals, note that acccording to Private Equity HUB Novalpina used Brooklands Capital Strategies, a division of TPG, on the fundraising. Not even the Willamette Week has reported on this investment.

A good question for Gordon Sondland on his special mission to the Ukraine to get to the bottom of the election interference scandal is whether Novalpina and its portfolio company played a role.

Novalpina’s entry into the Cyber Weapon software business was greased by OIC funds and TPG’s big entry into security software when it purchased a majority stake in McAfee from Intel in September, 2016.


NSO’s previous owner was Francisco Partners, another private equity firm in which the OIC has invested almost $500 million.  Here is a recap of the NSO sale from Francisco partners to Novalpina per Wikipedia.  Note the source. Whether or note Novalpina leveraged this up with debt is not clear.  What is clear is that Oregon’s public employees are its largest shareholder.

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MInutes at OIC Meeting,  Audio File of Peel’s Proposal Available on-line




Vanity Fair Article Describing How NSO Was Discovered by Engineer Now in Ukraine, A Fascinating Read


One More Example of Sondland and Durant’s Conflicts of Interest, Elliott Broidy’s Markstone Capital

The OIC invested $50 million in 2004 in Eliott Broidy’s new Markstone Capital and during Durant’s time on the Council significant issues regarding problems with the fund were discussed.  These included a major pay for play scandal brought by a New York Public Pension.  Broidy is also now the subject of a Department of Justice Investigation.

Sondland is a major investor with Broidy is a security surveillance firm, as reported by Nigel Jaquiss of Willamette Week.  What Jaquiss and other Journalists have not discussed is Durant’s role on the OIC overseeing the Markstone Capital investment while sensitive discussions were held.

Durant is quoted as saying that via her efforts the OIC has saved hundreds of millions in fees, which is simply ludicrous.  What she has done is stifle disclosure at every turn.

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Back To Gordon Sondland’s Business Finances

In 2015 while Durant was Chair of the OIC an additional $112 million was invested in Endeavour Capital.  Durant’s husband is invested in three Endeavour Capital funds per his January 2018 Public Financial Disclosure Report.


One of the great frustrations for an advisor like myself is seeing companies which could represent good investments if they went public, instead being sold to foreign firms.  For example, Endeavour orchestrated the sale of one of Portland’s most significant employers, and tax payers, Esco Steel, to a Scottish company.   What a shame that so many quality upper management jobs, and local tax revenues, are lost.


Endeavour has also an investor in predatory lending via Genesis Financial Solutions, as is Sondland, per his disclosure report.

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From the Endeavour description below, it is not clear who the “long term capital partner” it was sold to in 2019.   With Sondlan’s long history of “hard money lending,” is he perhaps that investor?  Who knows?

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Jeff Manning of the Oregonian wrote an excellent article on Jan 10, 2019 titled “Corinthian , giant for-profit college with 900 local students, accused of running predatory student loan program.”  The article outlines the relationship to Genesis and related predatory lending practices.  Bloomberg below shows the ownership migration from Renaissane Holdings to Genesis.


Gordon Sondlands Debts Per Public Disclosure, Something Looks Odd

When I did the original review of President Trump’s financials for Bloomberg’s Rich Rubin, now at the Wall Street Journal, Rubin was stunned that I concluded Trump was running to avoid bankruptcy.  It was genius, I noted.

The reason was that, while everyone was focused on his assets, no attention was being paid to his debts, which according to my calculation gave him only 18-24 months.  When Rubin concluded Trump’s net worth was only $2 billion, rather than $10 billion, President Trump publicly insulted him, saying I’ll have to tell Michael Bloomberg not to send a cub reporter who knows nothing about anything.

Of course if Steve Bannon is correct, President Trump’s net worth does not exceed $50 million about what Sondland’s has been estimated to be.  The key word is “net,” meaning after deducting debts.  It seems crazy that President Trump would not think $50 million was impressive enough.

Regarding Sondland and President Trump, many banks simply won’t lend to hotels because they are high risk loans.  They have been burned too many times due to overly aggressive assumptions.

What follows is a list of Sondland’s “disclosed debts”, a list that clearly does not include all his properties debts, likely because they are legally structured differently.  Based upon this disclosure,  he has spread things around quite a bit with Washington Trust, a fine Spokane based bank, holding perhaps at much at $30 million.

What Gordon probably never anticipated is that all his property debt can be analyzed in great detail given that the banks he used have securitized the loans into commecial mortgage pools and sold these to investors.

Each such sale requires a prospectus, filed with the SEC, that provides very detailed information on each property, for example the Paramount Hotel assumes an occupancy rate of 87 percent.  In addition, almost have his revenue comes from food and beverage.


Goldman Sachs SEC Filed Prospectus Holding at Least One Gordon Sondland Mortgage


So let’s start with this deal involving a mortgage pool created by Goldman Sachs on February 6, 2015, which by the way does a lot of business with the OIC and Durant is now Chair, that is 2015, which shows Sondland’s $25 million mortgage on the Paramount Hotel, which was previously securitized by JP Morgan.  In the prospectus Goldman claims the occupancy rate is 87 percent.   Of course this is critical for a hotel and why again many banks will simply not lend to hotels, given the high risk that occupancy should decline sharply.  Also noteworthy is that the President’s primary lendor, Deutsche Bank, President Trump’s primary lendor, was a key player in the issue.

Of course an obvious question might be, how has Gordon’s business mix changed since he joined the Trump administration.  For example, are there most government events being held there, etc.   This would be a good public records request since he is still the owner of the properties.  Simply saying he is not actively managing them is not adequate.

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Sondland’s Provenance Hotels recently filed an ethical complaint against Democratic Congressmen Earl Blumenhauer, and was allowed to do a major opinion piece in the Oregonian,  after Blumenhaeur suggested consumers boycott Sondland’s Hotels given his refusal to testify to Congress.  One food vendor, salt and straw ice cream, has already backed out.  Let’s just say chances are good the commercial lending officer at Washington Trust will be watching closely tomorrow.

This ethical complaint is particularly interesting because after years of frustration with Sondland’s wife Katy Durant not disclosing conflicts of interest while in charge of Oregon’s PERS investments,  I filed a complaint with the State Ethics division.   I am after all investment advisor to approximately 25 PERS participants.

Here is a copy of the response received.


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Final Thoughts:  The idea of public service is to serve the public, not have the public serve you.  And this whole idea of “let them eat cake” put forth by Sondland and Durant is probably a primary reason why politics is so divided.

Simply putting your name on art exhibits and using a foundation as a PR tool is also bad business, and worse politics.

My advice to Sondland is to look at the retirement plan for your 615 employees, to which you contributed $60,000 as the employer contribution in your most recent filing,  that’s about $97 per employee for the year.

And when you are in Europe please try not to personify the “Ugly American.”  That joke you tell about asking what time it is, and someone responding no, is a language thing.

It’s reported your father was a Russian citizen before fleeing to Germany.  As you should know, that is a language thing and all you do is display ignorance to slavic languages when you tell that joke.

In Russian the answer would be nyet, the same thing.  It means I don’t have the time.   Put another way, in Chinese ta means him or her, no gender to the pronoun.  Listen more Gordon and talk less.

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While many are focused upon Gordon Sondland purchasing the ambassadorship to the European Union for a bargain price of $1 million,  few understand how he became a successful hotel operator.  This is a fascinating story, inspired by Fred Trump, President Trump’s father.

In the commercial real estate world, few names are more highly regarded than those of the Sonnenblick family, see bio at end of post.   It was Bob Sonnenblick who originally had no interest in the family business, until hearing a presentation from Fred Trump at the Wharton School of Business

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This is indeed Gordon Sondland’s “secret sauce” because it is Sonnenblick-Eichner who arranges the financing allowing Sondland to purchase his hotels.  This includes a $240 million deal in 2015 and many others.  Sonnenblick essentially taps its clients, which include state pension funds, banks and private equity firms to extend the financing to borrowers such as Sondland’s Provenance Hotels.

Sondland has collected a terrific mix of vintage hotels yet one has to wonder how his business will be impacted by his political activities with respect to President Trump.  Even Trump supporters may cite Sondland’s poor judgement if President Trump is impeached.


It is not readily known exactly which pension funds, banks or private equity firms Sonnenblick is using.   Is it KKR, Blackstone, TPG or are state pension funds funding the private equity funds who in turn fund these deals?  One can only speculate and certainly more clarity in needed regarding state pension funds since these are our tax dollars at work.

Where this gets more interesting is upon realizing that Sondland’s wife Katy Durant at the time of his big $240 million deal with Sonnenblick was Chair of the Oregon Investment Council, which manages Oregon’s $70 billion public pension system and had extensive interaction with most of the leading commercial real estate firms, and related entities and consultants owned by private equity firms, including KKR and Blackstone.

Title Page from December 2015 OIC Meeting;


Durant is now Chair of the Provenance Hotel Partners, the finance side of Sondland’s business.  It Provenance Hotel Partners Fund 1 has more than $500 million in asset yet it is not known who the partners are.


Gordon and his key partners Bashar Wali and Steve Rosenberg run the Hotels and related real estate.

Org Chart for Provenance Hotels:


As an investment advisor I find retirement plans most revealing.  Poor plans usually indicate poor management.  And good plans, like Intel or Les Schwab, show good management and a potentially good investment.

Sondland’s plan is indeed very similar to the plan offered to Trump employees. The Provenance plan, which is 15 year old, has total assets of $2.7 million at 12/31/2017.   It indicates 615 active participants yet only 231 active accounts with balances at year end.   The total employer contribution was $60K or $250 per participant.   And remarkably there is a vesting schedule in which employees are not fully invested until after 6 years of service.

This is about as ridiculous as Sondland claiming one of his hotel rooms in Seattle is his primary residence so that he can avoid paying Oregon State income tax.   Perhaps one very successful local business owner put it best when saying via email  “I toured his residence at the Roosevelt Hotel and it was beyond absurd.  It was all staged with clothing and a kids room with toys on the floor (despite his kids being in high school at the time).”

Aspen Capital:

Sondland was Previously CEO of Aspen Capital, a hard money lender, which now lists his Provenance Hotels partner Steve Rosenberg, and Lawrence Mendelsohn as principals.

Mendolsohn was Andrew Weiderhorn’s partner in the failed Wilshire Capital mortgage collection firm that also took down Jeff Grayson’s Capital Consultants. Weiderhorn went to prison as several unions suffered permanent losses on what were supposed to be low risk short term fixed income investments.

Ryan Frank of the Oregonian did a story on Feb 28, 2010 “Foreclosure rescues by Aspen Capital affiliate — a lender of last resort — failed nearly half the time.”  highlighting that more than 50 percent of Aspen’s borrowers had their residential mortgages foreclosed on them.



Additional Supporting References for Post:

Bio for David Sonnenblick of Sonnenblick-Eichner


Hotel Publication Summarizing Key Financing Deal for Sondland


Bob Sonnenblick, Inspired by Fred Trump to Enter the Family Business

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February 11, 2019

By Luke Harding and Jon Swaine

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In January the Guardian asked me to review a set of tax facts regarding a prominent couple, not telling me who it was.  Later in February I learned that the story involved former Olympic ice dancing champion Tatiana Navka, who is married to Dmitry Peskov, Vladimir Putin’s longtime press secretary and the Kremlin’s deputy chief of staff.

Although there were certainly legitimate concerns here,  it is surprising how much news is being created to disparage Russia and Russian interests when in reality issues surrounding Chinese companies operating in the U.S. is much more concerning.

Read the full story below:

The Guardian story on Dmitry Peskov’s wife’s tax returns

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After President Trump fired widely respected Preet Bharara as the US Attorney for the Southern District of New York, he then personally interviewed candidates and selected Geoffrey Berman.

US Attorney for Southern District of New York, Past and Current

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Preet Bharara              Geoffrey Berman

Geoffrey Berman then made two major decisions, the first was to recuse himself from the Michael Cohen investigation and the second was to hire Robert Khuzami from Kirkland Ellis, who by default now leads the investigation.

Berman clearly knew there were major legal issues coming regarding Trump and Cohen and the question has to be asked, was Khuzami installed by Berman to be Trump’s “fixer?”

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Michael Cohen                Robert Khuzami


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While the media is sensationalizing Intel CEO Brian Krzanich’s recent stock sales as unusual given the recently disclosed security weakness in Intel’s chips,  a closer look reveals excellent tax planning, to the benefit of the company.

One of the key changes in the new tax law, a good one, is to expand the definition of compensation subject to the annual $1 million limit with respect to receiving a tax deduction.  Previously, only cash compensation was subject to the limit yet now all equity based compensation is also included, including stock options.

What this means is that if Intel’s CEO, for example, would have waited until after January 1st to exercise $25 million in options, the company would receive no tax deduction yet exercising prior to January 1 provides Intel a $25 million tax deduction.


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Disclosure:  This post is both broad and detailed so that interested analysts and journalists can gather key facts and form their own opinion.   Reviewing incredible schemes such as this orchestrated by Robert Mercer and Jim Simons often attract teams of analysts and reporters.  This post is original fact checked independent research available free on the internet.

In order to understand Robert Mercer’s brilliant financial engineering,  let’s begin our analysis using three outstanding local Portland beers.  They are Rogue Brewery’s Shakespeare Stout, Widmer’s Hefeweizen and Deschutes Breweries Fresh Squeezed IPA.

All three beers are distributed by Portland based Columbia Distributing, one of the nations largest beer distributors, which was purchased by the Jim Simons controlled investment fund Meritage in 2012.  Simons along with Robert Mercer is Co-CEO of the $100 billion Rentec hedge fund.

While Meritage CEO is listed as Nat Simons, Jim Simons son,  the elder Simons holds the controlling ownership position per SEC filings, owning more than 75 percent of the Meritage fund.

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This analysis will unravel the relationship between Rentec’s Medallion fund, its company retirement plan,  the Meritage private equity fund, which purchased Columbia Distributing in 2012, and numerous tax exempt foundations including those of Jim Simons, Nat Simons and Robert Mercer.

The key to understanding this financial engineering feat is analyzing the Medallion fund, which is managed by Renaissance Technologies.  This hedge fund is indeed the unifying thread.


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By Jon Swaine

November 7, 2017

Read full Guardian story here

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