Part Eight: Blum Capital Partners Gets Lucky: UC owns stocks in all of the public companies in Regent Richard C. Blum’s portfolio
As of December 2009, the external management firms hired to handle UC investments have invested a total of $304 million in all 18 of the public companies held by Blum Capital Partners. These management firms act under the supervision of UC Treasurer Marie Berggren and the regents’ investment committee, which receives periodic reports on specific investment transactions.
The 100 percent overlap in the public securities portfolios of UC and Blum Capital Partners poses at least the appearance of a conflict of interest. It is a truism that UC’s sizeable investments enhance the value of Blum Capital Partners’ portfolio by increasing demand for those particular stocks. This is not a case of two investors coincidentally investing in a blue-chip stock such as Coca-Cola. The companies in Blum Capital’s public securities portfolio are relatively unknown, and his firm has significant or controlling interests in many of them. From an ethical standpoint, it would have been to the UC’s benefit to instruct its external managers to refrain from investing UC monies in these companies, but it did not.
Through a spokesperson, UC Treasurer Berggren said that her office does not track the regent’s personal investments in conjunction with UC investments. However, at our request, UC produced an electronic spreadsheet that made it possible to do exactly that. Each regent’s personal investments are a matter of public record (provided that they disclose them), so it should not be difficult for the treasurer to monitor them; conversely, each regent could refrain from investing in the same entities as UC.
For example, UC could have refrained from investing (but did not) in the following companies that appear in the SEC filings of Blum Capital Partners:
American Reprographics Company, LLC
Avid Technology, Inc.
Career Education Corp.
CB Richard Ellis, Inc.
Collective Brands
Echostar Holding Corp.
Electronics for Imaging, Inc. (EFI)
Eresearch, Inc.
First American Corporation
ITT Educational Services
Kinetic Concepts, Inc.
Moneygram International, Inc.
PRGX, Inc.
Rovi Corporation
SBA Communications, Inc.
SEI Investments Company
Symmetry Medical, Inc.
Williams-Sonoma, Inc.
Note: The term “controlling shareholder” is used to denote a firm or individual owning more than 10 percent of the stock in a company, either singly or in combination with others. The controlling shareholder is in a position to exert some control over the company’s activities; a “majority stockholder” owns more than 50 percent of the stock.
American Reprographics Company, LLC
Glendale, California
The Company: Provides printing and document management services.
Blum and UC Investments: Blum Capital Partners owns nearly 10 percent of the shares in this privately owned company, making it the second-largest shareholder. At the end of 2007, Blum Capital Partners reported its initial purchase of American Reprographics stock. From that date until the end of 2009, UC has invested $1.57 million in the company’s stock.
Avid Technology, Inc.
Tewksbury, Massachusetts
The Company: A digital media hardware and software developer and retailer.
Blum and UC Investments: Blum Capital Partners owns the largest block of stock in the company, and one of the investment firm’s executives serves on Avid Technology’s board of directors. Blum Capital Partners reported buying stock in the company around May 2006. From that date until the end of 2009, UC has invested $3.4 million in the company’s stock.
Career Education Corp.
Hoffman Estates, Illinois
The Company: For-profit vocational training schools.
Blum and UC Investments: Blum Capital Partners is a controlling shareholder and one of its executives sits on the board of directors of Career Education Corp. Blum Capital Partners reported buying stock in the company at the end of 2005. From that date until the end of 2009, UC has invested $15.7 million in the company’s stock.
CB Richard Ellis, Inc.
Los Angeles, California
The Company: An international real estate firm that operates private investment partnerships. (This is getting nauseating...it's not the tasty wine, I swear!! It's the company!)
Blum and UC Investments: As of the end of 2009, Blum Partners was a controlling shareholder, with a $512 million stake in the company. Mr. Blum is the chairman of the board of directors, and Jane Sue, a Blum Capital Partners executive, also sits on the board. CB Richard Ellis holds a range of state and federal government contracts for real estate management and sales. (Last year, Sen. Dianne Feinstein faced allegations of a conflict of interest from a Washington D.C. newspaper after she wrote a letter to the FDIC supporting a program to contract out the disposal of foreclosed properties that was later awarded to CB Richard Ellis.) (We mustn't forget about the good Senator's continued contributions to our Ringling Brothers Circus, now could we?!) Blum Capital Partners helped purchase all of the public stock to take CB Richard Ellis private in 2001. It then took the company public again in 2004, which is when UC began trading CB Richard Ellis stock. Since that date, UC has invested $43 million in the company’s stock. (Again...)
Collective Brands
Topeka, Kansas
The Company: A discount shoe retailer; subsidiaries include Payless ShoeSource.
Blum and UC Investments: Blum Capital Partners owns nearly 5 percent of the company. Since Blum Capital Partners began investing in Collective Brands in February 2008, UC has purchased $2.1 million of the company’s stock. (Why am I not surprised?? That store smothers me with chemical rubber smell every time I walk into that place...I no longer walk into that place!)
Echostar Holding Corp.
Englewood, Colorado
The Company: Operates satellite communications equipment, including digital recording devices.
Blum and UC Investments: Blum Capital Partners is the fourth-largest shareholder of Echostar, and began investing in the company in the third quarter of 2008, a year in which the UC endowment and retirement funds directly purchased $15.6 million in Echostar stock. After Blum Capital Partner’s initial investment, UC bought $10.5 million worth of Echostar stock through its external managers, for a total of $26.1 million. (Of course they would...it is now S.O.P.)
Electronics for Imaging, Inc. (EFI)
Foster City, California
The Company: Digital printer wholesalers.
Blum and UC Investments: Blum Capital Partners is the second-largest shareholder of EFI, with a 10 percent stake. The investment firm initially purchased EFI stock in early 2005. From that date until the end of 2009, UC has purchased $7.9 million worth of the company’s stock.
Eresearch, Inc.
Philadelphia, Pennsylvania
The Company: Designs database technology for testing pharmaceutical and medical devices, and for use in clinical procedures.
Blum and UC Investments: Blum Capital Partners bought shares in the company in the first quarter of 2005, and as of March 2009 it owned 13 percent of Eresearch. During this time period, UC has purchased $8 million worth of the company’s stock.
First American Corporation
Santa Ana, California
The Company: Home equity lender and appraiser.
Blum and UC Investments: In early 2008, after First American was sued for falsifying appraisals to boost sub-prime mortgage loans (the lawsuit is ongoing) [see Washington Mutual in Part Four], Blum Capital Partners purchased a significant number of First American shares. In so doing, the firm entered the group of controlling shareholders, which included TPG Capital (where Mr. Blum is an executive and investor). From 2008 to the end of 2009, UC invested $7 million in First American stock.
ITT Educational Services
Carmel, Indiana
The Company: For-profit vocational training schools.
Blum and UC Investments: Blum Capital Partners is a controlling shareholder, and initially reported buying shares during the second quarter of 2004. From that date until the end of 2009, UC had invested $38 million in ITT.
Kinetic Concepts, Inc.
Santa Rosa, California
The Company: Medical equipment manufacturer.
Blum and UC Investments: In 1997, Richard C. Blum & Associates, the predecessor to Blum Capital Partners, acquired a majority stake in Kinetic Concepts. After Mr. Blum became a regent, UC invested $8.2 million in a private equity partnership connected to the acquisition. When Blum Capital Partners took Kinetic Concepts public in 2004, UC purchased stocks through the initial public offering. Through the end of 2009, while Blum Capital Partners remained a controlling shareholder, UC traded Kinetic Concepts stock extensively, purchasing $46.8 million worth of shares for an investment that totals $55 million. (You know this investment...one of many with blood all over it.)
Moneygram International, Inc.
Minneapolis, Minnesota
The Company: Corporation that specializes in money wire transfers, money orders, and bill payment services.
Blum and UC Investments: Blum Capital Partners owns 21 percent of Moneygram’s shares, and reported its first purchase of the company’s shares in February 2008. From that time through the end of 2009, UC has invested $1.5 million in Moneygram stock. (From here on out, it's Western Union!!)
PRGX, Inc. (formerly PRG-Schultz International, Inc.)
Atlanta, Georgia
The Company: Provides “recovery audit services” for large businesses and government agencies.
Blum and UC Investments: Blum Capital Partners is the company’s largest shareholder, and owns 17 percent of its stock. The investment firm’s managing director also sits on the PRGX board of directors. Since Mr. Blum became a regent in 2002, UC has invested $1.5 million in the company’s stock.
Rovi Corporation (formerly Macrovision)
Santa Clara, California
The Company: Entertainment technology company.
Blum and UC Investments: Blum Capital Partners began purchasing Rovi stock in late 2005 and owned about 5 percent of the company as of March 2008. Since 2005, UC has invested $6.8 million in the company’s stock. UC has also invested $67.1 million in two private equity partnerships operated by Oz Master Fund, an investment firm based in New York City, which had a $107 million investment in Rovi, making Oz a controlling shareholder in 2008.
SBA Communications, Inc.
Boca Raton, Florida
The Company: Owner and operator of wireless communications towers.
Blum and UC Investments: Blum Capital Partners and Goldman Sachs Group, in which UC is heavily invested, are major shareholders. Blum Capital Partners began purchasing shares in May 2009. At the end of 2009, UC owned $4.1 million of the company’s stock.
SEI Investments Company
Oaks, Pennsylvania
The Company: Provides software and consultation to financial institutions for asset allocation.
Blum and UC Investments: Blum Capital Partners and Goldman Sachs Asset Management, in which UC is heavily invested, are major shareholders. Blum Capital Partners began investing in the company in the fall of 2008. Since then, UC has purchased $5.2 million worth of the company’s stock.
Symmetry Medical, Inc.
Warsaw, Indiana
The Company: A medical implant and orthopedic device supplier.
Blum and UC Investments: Blum Capital Partners began buying Symmetry stock in the second quarter of 2007, and owns nearly 9 percent of its stock. The firm is the second-largest shareholder after a partnership between Wells Fargo & Co. and Wachovia Bank, which owns 10 percent. Since Blum Capital began investing in Symmetry, UC has purchased $1.5 million worth of the company’s stock.
Williams-Sonoma, Inc.
San Francisco, California
The Company: Home furnishings retailer; Pottery Barn is a subsidiary.
Blum and UC Investments: Blum Capital Partners began purchasing shares in Williams-Sonoma in early 2007. It owns 2.5 percent of the company, putting it in the controlling group of shareholders. Since 2007, UC has purchased $9.2 million worth of the company’s stock. (Gee...thanks for ruining THIS one for me, too...I refuse to spend my consumer dollars at anything Blum and Reilly/TPG own...any my friends, that's a LOT of enterprises I will not do business with...Consumer dollars, one of the last real weapons we Americans still wield...we just forget the power of that collective dollar in boycotts...that is certainly one way to start starving the beast.)
Posted by Peter Byrne on 09/22/10The 100 percent overlap in the public securities portfolios of UC and Blum Capital Partners poses at least the appearance of a conflict of interest. It is a truism that UC’s sizeable investments enhance the value of Blum Capital Partners’ portfolio by increasing demand for those particular stocks. This is not a case of two investors coincidentally investing in a blue-chip stock such as Coca-Cola. The companies in Blum Capital’s public securities portfolio are relatively unknown, and his firm has significant or controlling interests in many of them. From an ethical standpoint, it would have been to the UC’s benefit to instruct its external managers to refrain from investing UC monies in these companies, but it did not.
Through a spokesperson, UC Treasurer Berggren said that her office does not track the regent’s personal investments in conjunction with UC investments. However, at our request, UC produced an electronic spreadsheet that made it possible to do exactly that. Each regent’s personal investments are a matter of public record (provided that they disclose them), so it should not be difficult for the treasurer to monitor them; conversely, each regent could refrain from investing in the same entities as UC.
For example, UC could have refrained from investing (but did not) in the following companies that appear in the SEC filings of Blum Capital Partners:
American Reprographics Company, LLC
Avid Technology, Inc.
Career Education Corp.
CB Richard Ellis, Inc.
Collective Brands
Echostar Holding Corp.
Electronics for Imaging, Inc. (EFI)
Eresearch, Inc.
First American Corporation
ITT Educational Services
Kinetic Concepts, Inc.
Moneygram International, Inc.
PRGX, Inc.
Rovi Corporation
SBA Communications, Inc.
SEI Investments Company
Symmetry Medical, Inc.
Williams-Sonoma, Inc.
Note: The term “controlling shareholder” is used to denote a firm or individual owning more than 10 percent of the stock in a company, either singly or in combination with others. The controlling shareholder is in a position to exert some control over the company’s activities; a “majority stockholder” owns more than 50 percent of the stock.
American Reprographics Company, LLC
Glendale, California
The Company: Provides printing and document management services.
Blum and UC Investments: Blum Capital Partners owns nearly 10 percent of the shares in this privately owned company, making it the second-largest shareholder. At the end of 2007, Blum Capital Partners reported its initial purchase of American Reprographics stock. From that date until the end of 2009, UC has invested $1.57 million in the company’s stock.
Avid Technology, Inc.
Tewksbury, Massachusetts
The Company: A digital media hardware and software developer and retailer.
Blum and UC Investments: Blum Capital Partners owns the largest block of stock in the company, and one of the investment firm’s executives serves on Avid Technology’s board of directors. Blum Capital Partners reported buying stock in the company around May 2006. From that date until the end of 2009, UC has invested $3.4 million in the company’s stock.
Career Education Corp.
Hoffman Estates, Illinois
The Company: For-profit vocational training schools.
Blum and UC Investments: Blum Capital Partners is a controlling shareholder and one of its executives sits on the board of directors of Career Education Corp. Blum Capital Partners reported buying stock in the company at the end of 2005. From that date until the end of 2009, UC has invested $15.7 million in the company’s stock.
CB Richard Ellis, Inc.
Los Angeles, California
The Company: An international real estate firm that operates private investment partnerships. (This is getting nauseating...it's not the tasty wine, I swear!! It's the company!)
Blum and UC Investments: As of the end of 2009, Blum Partners was a controlling shareholder, with a $512 million stake in the company. Mr. Blum is the chairman of the board of directors, and Jane Sue, a Blum Capital Partners executive, also sits on the board. CB Richard Ellis holds a range of state and federal government contracts for real estate management and sales. (Last year, Sen. Dianne Feinstein faced allegations of a conflict of interest from a Washington D.C. newspaper after she wrote a letter to the FDIC supporting a program to contract out the disposal of foreclosed properties that was later awarded to CB Richard Ellis.) (We mustn't forget about the good Senator's continued contributions to our Ringling Brothers Circus, now could we?!) Blum Capital Partners helped purchase all of the public stock to take CB Richard Ellis private in 2001. It then took the company public again in 2004, which is when UC began trading CB Richard Ellis stock. Since that date, UC has invested $43 million in the company’s stock. (Again...)
Collective Brands
Topeka, Kansas
The Company: A discount shoe retailer; subsidiaries include Payless ShoeSource.
Blum and UC Investments: Blum Capital Partners owns nearly 5 percent of the company. Since Blum Capital Partners began investing in Collective Brands in February 2008, UC has purchased $2.1 million of the company’s stock. (Why am I not surprised?? That store smothers me with chemical rubber smell every time I walk into that place...I no longer walk into that place!)
Echostar Holding Corp.
Englewood, Colorado
The Company: Operates satellite communications equipment, including digital recording devices.
Blum and UC Investments: Blum Capital Partners is the fourth-largest shareholder of Echostar, and began investing in the company in the third quarter of 2008, a year in which the UC endowment and retirement funds directly purchased $15.6 million in Echostar stock. After Blum Capital Partner’s initial investment, UC bought $10.5 million worth of Echostar stock through its external managers, for a total of $26.1 million. (Of course they would...it is now S.O.P.)
Electronics for Imaging, Inc. (EFI)
Foster City, California
The Company: Digital printer wholesalers.
Blum and UC Investments: Blum Capital Partners is the second-largest shareholder of EFI, with a 10 percent stake. The investment firm initially purchased EFI stock in early 2005. From that date until the end of 2009, UC has purchased $7.9 million worth of the company’s stock.
Eresearch, Inc.
Philadelphia, Pennsylvania
The Company: Designs database technology for testing pharmaceutical and medical devices, and for use in clinical procedures.
Blum and UC Investments: Blum Capital Partners bought shares in the company in the first quarter of 2005, and as of March 2009 it owned 13 percent of Eresearch. During this time period, UC has purchased $8 million worth of the company’s stock.
First American Corporation
Santa Ana, California
The Company: Home equity lender and appraiser.
Blum and UC Investments: In early 2008, after First American was sued for falsifying appraisals to boost sub-prime mortgage loans (the lawsuit is ongoing) [see Washington Mutual in Part Four], Blum Capital Partners purchased a significant number of First American shares. In so doing, the firm entered the group of controlling shareholders, which included TPG Capital (where Mr. Blum is an executive and investor). From 2008 to the end of 2009, UC invested $7 million in First American stock.
ITT Educational Services
Carmel, Indiana
The Company: For-profit vocational training schools.
Blum and UC Investments: Blum Capital Partners is a controlling shareholder, and initially reported buying shares during the second quarter of 2004. From that date until the end of 2009, UC had invested $38 million in ITT.
Kinetic Concepts, Inc.
Santa Rosa, California
The Company: Medical equipment manufacturer.
Blum and UC Investments: In 1997, Richard C. Blum & Associates, the predecessor to Blum Capital Partners, acquired a majority stake in Kinetic Concepts. After Mr. Blum became a regent, UC invested $8.2 million in a private equity partnership connected to the acquisition. When Blum Capital Partners took Kinetic Concepts public in 2004, UC purchased stocks through the initial public offering. Through the end of 2009, while Blum Capital Partners remained a controlling shareholder, UC traded Kinetic Concepts stock extensively, purchasing $46.8 million worth of shares for an investment that totals $55 million. (You know this investment...one of many with blood all over it.)
Moneygram International, Inc.
Minneapolis, Minnesota
The Company: Corporation that specializes in money wire transfers, money orders, and bill payment services.
Blum and UC Investments: Blum Capital Partners owns 21 percent of Moneygram’s shares, and reported its first purchase of the company’s shares in February 2008. From that time through the end of 2009, UC has invested $1.5 million in Moneygram stock. (From here on out, it's Western Union!!)
PRGX, Inc. (formerly PRG-Schultz International, Inc.)
Atlanta, Georgia
The Company: Provides “recovery audit services” for large businesses and government agencies.
Blum and UC Investments: Blum Capital Partners is the company’s largest shareholder, and owns 17 percent of its stock. The investment firm’s managing director also sits on the PRGX board of directors. Since Mr. Blum became a regent in 2002, UC has invested $1.5 million in the company’s stock.
Rovi Corporation (formerly Macrovision)
Santa Clara, California
The Company: Entertainment technology company.
Blum and UC Investments: Blum Capital Partners began purchasing Rovi stock in late 2005 and owned about 5 percent of the company as of March 2008. Since 2005, UC has invested $6.8 million in the company’s stock. UC has also invested $67.1 million in two private equity partnerships operated by Oz Master Fund, an investment firm based in New York City, which had a $107 million investment in Rovi, making Oz a controlling shareholder in 2008.
SBA Communications, Inc.
Boca Raton, Florida
The Company: Owner and operator of wireless communications towers.
Blum and UC Investments: Blum Capital Partners and Goldman Sachs Group, in which UC is heavily invested, are major shareholders. Blum Capital Partners began purchasing shares in May 2009. At the end of 2009, UC owned $4.1 million of the company’s stock.
SEI Investments Company
Oaks, Pennsylvania
The Company: Provides software and consultation to financial institutions for asset allocation.
Blum and UC Investments: Blum Capital Partners and Goldman Sachs Asset Management, in which UC is heavily invested, are major shareholders. Blum Capital Partners began investing in the company in the fall of 2008. Since then, UC has purchased $5.2 million worth of the company’s stock.
Symmetry Medical, Inc.
Warsaw, Indiana
The Company: A medical implant and orthopedic device supplier.
Blum and UC Investments: Blum Capital Partners began buying Symmetry stock in the second quarter of 2007, and owns nearly 9 percent of its stock. The firm is the second-largest shareholder after a partnership between Wells Fargo & Co. and Wachovia Bank, which owns 10 percent. Since Blum Capital began investing in Symmetry, UC has purchased $1.5 million worth of the company’s stock.
Williams-Sonoma, Inc.
San Francisco, California
The Company: Home furnishings retailer; Pottery Barn is a subsidiary.
Blum and UC Investments: Blum Capital Partners began purchasing shares in Williams-Sonoma in early 2007. It owns 2.5 percent of the company, putting it in the controlling group of shareholders. Since 2007, UC has purchased $9.2 million worth of the company’s stock. (Gee...thanks for ruining THIS one for me, too...I refuse to spend my consumer dollars at anything Blum and Reilly/TPG own...any my friends, that's a LOT of enterprises I will not do business with...Consumer dollars, one of the last real weapons we Americans still wield...we just forget the power of that collective dollar in boycotts...that is certainly one way to start starving the beast.)
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