(upbeat music) - Hello, Hello, hello. Robert Kiyosaki, the Rich Dad Radio Show, the Good News and Bad News about Money. - So, so let me start with, so Brendan, you are a federal prosecutor and served a special
counsel for private equity in the Justice Department's
antitrust division. What does that mean? What do you do? - Thank you so much, and for the time. And I should say off the bat that I'm speaking in my personal capacity, not as an employee of
the Justice Department. So they were kind enough to give me leave to write this book, which I was very interested in
on private equity generally. - Oh, fantastic.
- So. Yeah, yeah. So it might be helpful
for me to talk about generally what private equity is, just so that we--
- Oh please. - We sort of have some ground rules, and I think you sort of
alluded to this earlier, that it's a term that I think
a lot of people have heard, but very few people
really know what it means. And I confess that I
didn't know what it was until after I had gotten the book deal. So the general idea is, you know, private equity firms use a
little bit of their own money, some of their investors' money, and a whole lot of borrowed
money to buy up companies. They then try to
transform those companies, either operationally or
financially, and then sell them, hopefully in their minds for
a profit a few years later. To your point earlier
about what distinguishes private equity from sort
of the public markets, it is in large part a matter of regulation and a matter of control. You know, when a big company needs money, they'll do an initial public offering. And in exchange for being able to broadly solicit for investments, they have obligations, you know, they have to file
quarterly or annual statements, things like that. They have obligations for
their boards of directors, independence and so forth. Private equity is a lot looser. Because it's a more focused investment, they don't have the same sort
of disclosure obligations. They don't have the same sort of duties. And as I argued, that leads to some of the problems that we've seen in the
private equity industry. - First off Brendan, is
not the problem with SVB, Silicon Valley Bank, Deutsche Bank, Suisse Bank, Suisse, I mean, Credit Suisse and all that is that the rules they played by are different as far as the finance rules. And that's why some--
- I can't-- - They're in trouble today because they played by
different sets of rules and they broke the banking rules. So--
- Yeah. - I see it all day long. You
know, that's my business. - Well, I'm an antitrust
lawyer, not a securities lawyer. So any, any good securities lawyer will, you know, or banking regulation lawyer will hear me spouting
off and they'll get mad. So I don't wanna get too
far away from my expertise, but, you know--
- But I, I just want to let people
know it's every day I see it. When I drive in a poor neighborhood, what I see them is breaking the law. And today they wanna defund
the police and all this stuff. They break, they break zoning laws, they break zoning codes. Anytime you break the
law, you have problems. And so, I'm just, that's what I'm trying to say to you, being court marshaled twice made me this reformed
alcoholic on the laws. So anyway, I hope--
- Well it-- - Your day in court is perfect, Brendan. You're a young guy, but you deal with old
guys like me all the time. (Robert laughs) - Well, it is very
important to follow the law. - Yes.
- And I will say whether or not, you know, any individual
bank is breaking the law. One of the challenges that we've got is there's a whole lot of
sort of regulatory arbitrage. You know, banks have
a lot of opportunities to choose who their regulator will be, both at the state and federal level. And that can be a problem
for, you know, for banks, it can be a problem for regulators. And obviously it can be a
problem for customers too. The challenge that we
got with private equity is they essentially are unregulated, at least compared it to banks, you know. A national bank might be, you know, regulated by the Fed, the
FDA, FDIC, or the OCC. A private equity firm,
there's complications to this. I don't wanna oversimplify
it, but you know, their main regulation is just a few forms that they have to file with the Securities and Exchange Commission. Now again, lawyers that
work on securities will, I'm sure be having a little bit of a headache hearing me say that, but the point is just that private equity is a vastly less regulated world compared to--
- Amen. - The Banking industry.
- So Brendan, when you say it's unregulated, what, how does that play out? How do they use their position to do what they do? - Yeah. So one of the challenges that we've got is private equity firms are
very rarely held legally or financially responsible for the consequences of their actions. So one of the, one of the stories that I
think is really distressing is a private equity firm bought the second largest nursing
home chain in America. So the firm was called Carlyle, It bought up HCR ManorCare. For a variety of reasons, it dramatically cut staffing, it levered the company up with debt, and it drove down the quality of care. And unsurprisingly, when family members, you know, saw that their parents were suffering, people were actually dying
in these nursing homes. You know, some families
sued both the nursing home and the private equity firm. But at that point, the
private equity firm said, oh, no, no, we are not the technical
owners of this nursing home. In fact, we merely
manage a series of funds that are limited partners through a series of shell companies, that ultimately own the
assets of this nursing home. And the result was that their case against the private
equity firm was dismissed. So the private equity firm had the control over the nursing home, but it didn't have any
of the responsibilities. A classic principle agent problem.
- And it also had the profits. - One more second. And everybody what,
Brendan is talking about, his book is called Plunder, Private Equities Plan to Pillage America. And Brendan, Plunder Private Equities
Plan to Pillage America, the right book at the right time. So, congratulations. Because I'm on the plunder site. (Robert laughs) Legally, legally, I don't want, I've already done my time in court and I don't wanna do that again. So just to let you know, well what Brendan's book is talking about is essential for you guys to read. If you guys own a 401K or a stock, or you invest in Amazon and all that, Amazon started off as private equity. Most of these companies do. And if you understand that, then you'll understand what
Brendan's talking about and how the whole system is different. So when that goes public through
an initial public offering, like Kim and I have done three of them. It's a whole difference
set of laws and rules. But the same thing you read in my book, Cashflow Quadrant, ESB and the I, but tax laws are different. And what Brendan is talking about, being a young attorney right now, like I said, he deals
with old guys like me all the time in court. So Brendan, congratulations to the book. Your timing is impeccable. - And Brendan, you made
a really good point. You talked about the company that came in and they started cutting jobs. So a lot of these private equity firms to get their bottom line--
- Yes. - Bottom dollar up, they cut, they cut people, they cut services, they cut, cut, cut, at the expense. How does government play into this? Did they, are they in collusion
with these firms or did, what's the, what's the deal? Because they're very tough on the IPO, on the public companies,
why not private equity? - I think private equity firms have been tremendously successful in
advancing their policy agendas through the various arms of government. Whether that's congress
regulators at the federal level, at the state level, or you know, independent agencies or essentially non-governmental agencies like Fannie Mae and Freddie Mac. I wouldn't necessarily put, lay the blame for layoffs
on the government, but maybe to give you an example of how government can kind of help these sort of extractive schemes, one of the things that
private equity firms have been really successful at doing is in sloughing off the pension obligations of the companies that they buy. So, to take one example, Friendly's was a, was an ice cream--
- Oh, I remember Friendly's, yeah, yep.
- Yeah, yeah, yeah, yeah. Was an ice cream and diner shop
primarily in the northeast, started during World War II, or the Great Depression. A private equity firm bought it, I believe in the 2000s. Ultimately laid off a lot of employees and declared bankruptcy. But what they did is they, they did this little maneuver
that was really clever. They sold the company Friendly's from itself to itself in
the bankruptcy process. And now why would you do that? By doing that, they were able to sort of sloth off the pension obligations
that the company had onto a quasi-government agency called the Pension Benefit Guarantee Corporation. So what it meant is they, no, they got to retain control
of the company in bankruptcy, but they no longer had the pension obligations and the bankruptcy for it.
- And Brendan, it's also called a 401k. - Well 401ks are interesting
too, because traditionally-- - No but based on what I'm
saying, that's what happened. It was a shift from defined benefit to define contribution pension plan. And that's why in 2000 I wrote the book, Who Stole My Pension. Is the pensions, the reason they were 401k
is very simply because for big corporations like
Ford Motor Company and, IBM and Xerox, the biggest
expense are employees' pensions. And so what the reason,
the reason my generations, the bloomer generations
in '74 ERISA was passed, you know what ERISA is, Employee Retirement Income Securities Act. It was a shift from the 4-O, from a defined benefit pension plan to a defined contribution pension plan, which is the IRA and a 401k. I mean this is, I understand
what you're saying, but the employees don't. But that's why we can enrich that company and why I wrote the book ESB and I, you know, Cashflow Quadrant as some employees could understand the idea of going to
school and getting a job. Probably the riskiest thing you can do. - Well, it's interesting
that you mentioned 401ks, because private equity firms need money. They need money to, to fund.
- That's where they got the money from. - Well historically, this is the really interesting thing, is private equity firms have historically gotten their money from pension funds. But to your point, pension funds are a smaller
and smaller piece of the pie. - Yes.
- So there has been a move to get for private equity firms to
get access to 401K money. - Yes.
- And historically they haven't gotten that. But thanks to an concerted lobbying effort in 2020, they have essentially
gotten the legal sign off to start getting 401K money. So ordinary--
- So they take, so they take the 401K money
and the employees never get it? - Well the danger would be that they take the 401K money and then use it to buy up a company that perhaps they, you know, do a layoff on, push into bankruptcy, something like that. So it could ultimately be, be destructive for a
lot of ordinary workers. - And that's what, that's a lot of the guys
in our neighborhood does, what Scott does. So if you understand that the
pension money is big money, it's huge money. And the employees, you know, in our school systems that go to school, get a job and get a 401k, I'm going to, teachers are
complicit in the crime. That's my point of view. Do I mean, they don't educate the, they don't educate the people on the finance side how risky that is. I'm--
- The challenge-- - I'm just coming from the
other side of the coin, Brendan, you're a young guy. You deal with guys like me all the time. - The challenge that we've got that private equity firms
face with pension money isn't whether pensions
themselves are good or bad, It's that they've run out of them. You know, that they need more money and they have essentially, I don't wanna overstate the
case, but they've, you know, they're increasingly
exhausting the amount of money that they can get from pension funds, which is why they're increasingly turning to plans like 401ks. - Yeah, so can I say one
more, ask you one more thing? How do they get the
government to change the laws? - So there was really
interesting reporting about this, is that there was a concerted
decade long lobbying campaign. To--
- Of course, that's called the politicians. It's called Nancy Pelosi and those guys. All those characters take
money from rich guys. You know that--
- Well-- - You know that, why don't
you just tell the truth? - Ultimately, it's a bipartisan-- - Yeah, so.
- Campaign which, to give these firms access to 401K money. Now there are still legal issues that are going to hold up a private equity firm from getting 401K funds. It hasn't quite happened yet, but that's certainly on their agenda. - I, Brendan, you're a great man. I'll tell you what, I love
talking here right now. Your book, Plunder Private
Equities Plan to Pillage America is the right book at the right time. I mean, you and I are on the same team. - And we're gonna take a break right now, but when we come back, I
wanna find out, Brendan, why, why you're sounding this
warning to everybody and what is in it for, what, how is that gonna
affect the average individual? - Amen brother, you're at the right time. The right, I mean, please everybody get Brendan's book because he does it from the other side. We'll be right back.
- Be right back. (upbeat music) - [Kim Recorded] Robert already warned us. 2023 is going to be the
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now at richdadfree.com. Don't wait, access is limited. Go to richdadfree.com. That's richdadfree.com. (upbeat music) - Welcome back, Robert Kiyosaki,
the Rich Dad Radio Show, the good news and bad news about money. Today our guest is Brendan Ballou. The perfect time, the
perfect book at the perfect, I mean, I cannot believe Brendan, I'm gonna sell as many
books for you as I can. Because his name is Brendan
Ballou, B-A-L-L-O-U. His book is called, Plunder Private Equities
Plan to Pillage America. And as Brendan knows, and most of the people
listen to Rich Dad know, I always talk about all
coins have three sides. Heads, tales, and the edge of the coin. And Brandon comes from the
other side of the coin. And he's gonna tell you what
happens from the other side. It is, in my opinion, for those you're really concerned about what's going on in the world of money. You know education, when they
say go to school, get a job, get a 401k, or an IRA, Brendan's book, Plunder Private Equities
Plan to Pillage America is the single most
important book you can read, especially for your
kids who are in college thinking that a 401K is
gonna save your life. So Brendan, thank you for
being part of this show. You and I are on the
opposite sides of the coin. What I'm honored--
- Well, thank you again for the time. - I'm honored to be
pitching your book for you. (Kim and Robert laugh) - So Brendan, what is it that the, what do people need to know? What, come down to the nitty gritty, what do people need to know? - Sure. So my argument is that private equity, it's not about people
there being good or bad or nefarious, or broad minded. It's that the private
equity business model is essentially broken. There are three basic
problems with private equity. They invest for the short term. They tend to load up
the companies they buy with a lot of debt and extract fees. And they tend to be insulated
from their consequences, their actions, both
legally and financially. And what those three problems mean is that when private equity firms buy companies, it often leads to really bad consequences, whether it's layoffs or bankruptcies. Sometimes companies are pushed into actions that violate the law. It's not that the people that run private equity firms are good or bad, it's that they've got a
broken business model. Broken in the same way
that savings and loans were broken in the 1980s, broken in the way that
conglomerates were in the 1960s, broken in the way that the
trusts in the 2010s were, you know, in the 1910s were. So it's trying to help people understand what's not working in the business model and how we can fix it. - So if a private equity
firm comes into the company, are the chances of that
company going bankrupt greater? - According to at least one
study, about 10 times greater. So the--
- Oh, that's a hell of a study.
(Kim and Robert laugh) Wow. - The overall bankruptcy
rate in the control group was about two percent, I
think it was 20 percent, for the ones that were purchased
by private equity firms. Now obviously that's--
- And any people that don't go bankrupt, the
employees get screwed. That's what you're saying. - The challenge that you've got is that these firms tend to hold the
companies only for a few years. You know, you guys are, you know, investors and exec, you know, have been executives before. If you're thinking about a
company for 10, 20, 30 years, you invest in the company. You know, physically,
operationally and the employees. If you plan to hold a company for five years, four years, three years, you're not gonna invest in
employees in the same way. And in fact, you might see a quick profit by laying a lot of employees off. - Yeah, yeah, yep. So--
- Amen brother. - And what--
- Amen. You're saying it man, you and I on the, No Brennan, you and I on the same side. I am not kidding you, you have no idea how
much it pisses me off. - Well it's like the wild west. You know, and the, I think the key, one of the key points for me, what you're talking about
is there's no consequences. So how, is there a solution to this? Is it regulation? Is it, what would be a solution? - Yeah, there's a, and there's a very long chapter at the end that lays out very specifically
what needs to happen. Now, obviously Congress could
take action if it wants to, to essentially change the incentives of private equity firms to
think for the long term, to not load companies up with debt, to hold them legally responsible. But in a world of gridlock, we have to think about where else are there the levers of power. There's a lot that things that can be done at the federal level and the agencies, whether we're talking about the SCC, the treasury department,
the federal reserve, HHS and so forth. There's also a lot that can
be done at the state level. Whether it's state legislatures, making sure that private equity
firms don't do excessive, you know, dividend recapitalizations or other sort of tactics that drain companies of resources that are headquartered in their states. Things the state attorney's
general can take on. Things that private litigants can do. Things that ordinary citizens can do. I always try to explain
to people, you know, I've been a federal government employee for a little while now. It's a little hard to overstate how much the conversations
and the protests outside actually impact the decision making of people on the inside. You know, people tweeting their
complaints, their concerns, actually does resonate to the, you know, ordinary bureaucrats like me. So, I think just people
making their voices heard, that by itself is important. - So--
- And you're not allowed to say, I know you're not
allowed to say anything, but you know what influences legal system. It's always this. It's always this. - I certainly can't say about in general--
- I know you can't say it, but that's what you and I, that's how I make my campaign
contributions, Brendan. (Kim laughs) - Well one thing you know, you know, independent
of sort of discussions, of general corruption
or anything like that, one thing that's really.
- Corruption, campaign contributions
are illegal, Brendan. Don't say as corruption because that's a socialist point of view. - Well they certainly are illegal, but one thing that's
really interesting to watch is just how much, how outgunned people tend to be when they go up against
private equity firms. One of the, one of the stories that was
really distressing for me was reading about Mariner Finance, which is owned by the private
equity from Warburg Pincus. It's a payday lender,
an installment lender. And what they would do is they would send out checks to people. And they would just, all you
had to do was sign the check and you could get a thousand dollars for whatever it happened to be but, obviously once you did, you would pay an extremely
high interest rate. Well, there's a story of
this one woman who made, I think it was $800 a month and she got a check
for a thousand dollars. She knew that she couldn't afford it, but she needed to repair her
boiler, so she cashed it. Ultimately Mariner goes after her. She tries to sue them, but she gets diverted into
the arbitration system, private arbitration where, you know, it's very hard
for plaintiffs to succeed. But conversely, when Mariner
wanted to go after her, they could use the state court system and potentially even garnish her wages through the state court system. So you got a system--
- So-- - Go ahead.
- I'll say this, the reason she can't go after them is she doesn't have money. - She doesn't have money and
she signed an agreement that-- - I understand. But what happens to most
employees and small people, they don't have the
money to hire an attorney to go after the system. That's--
- Exactly. - Hey Brendan, that's the fact, Jack. - And one of the concerning things is because private equity is so profitable and such a increasingly
large part of the economy, they've really been able to
dominate the largest law firms. If you look at the history of some of the sort of name brand law
firms that are out there, you can see that, I
wouldn't say a majority, but a large percentage of their work is coming from private equity firms, so--
- Yes, thank you brother. - Yeah, when a firm gets into trouble, the chances are, not
only are they gonna have the money to litigate it for a long time, they're gonna be represented by some of the highest paid
lawyers in the country. - Amen brother.
- And, And then so, so to put it in perspective, I'm going back to the consequences thing. So if a private equity company came in and bought the Rich Dad company, and they do fire employees and do all these things, and the employees come and sue or somebody come, a
customer comes and sues, we, because we're the
owners of the company or we are the-- - We were the owners.
- Executors, we were the executives of the company, we are, are we then held responsible and the private equity firm is not? - Generally, at a very high level typically, that's how it would often happen. So, if somebody wanted to sue a private equity owned company, they could sue for the
assets of the company. It would be very hard for them to sue for the assets of
the private equity firm through a doctrine that's called Piercing the Corporate Veil. - Yeah. - One of the really
challenging things is-- - Is that what we teach? - That's what we teach. - We teach that, you can't do that. You don't have enough money to do that. - Well you guys, you know, one of the things that's
really interesting is private equity firms have gotten really invested into nursing homes. And there's some academic
work out there that says that private equity purchases in nursing homes are responsible for an estimated 20,000 premature deaths over a
little more than a decade. - Wow.
- So very concerning. The problem is when families try to sue, they're blocked by these sort of, you know, corporate
veil piercing doctrines and things like that. But also there's really
interesting reporting about how private equity firms
and other investors will often shift the
assets of the nursing home to shell companies that
are very hard to track. - Yep.
- And so what this means is, if your, you know, mother or
father dies in a nursing home and you try to sue, it may be very hard for
you to recover any money because the entity that you sue on paper doesn't have any assets. And in fact those assets have been moved to related companies. - You have no idea. Brandon, I love you man. You have no idea, you sing
the same song we sing. - Well I appreciate the time. - No, no, no, no, you really do. I mean, I'm gonna use this interview this week because I'm, that's what we're teaching. - Okay.
- I asked my attorney, because we do these public workshops and I asked my attorney to wear a suit. And he says, but it's
a public kind of off, you know, weekend seminar. I said, I want you to give
dignity to the justice system because it's been gone, it's gone. And what you're saying, my friend, is crucial for everybody to understand. I am not kidding you. - And I think it's so crucial for, for companies who are bringing in a private equity firm to understand this. I mean this is, you know, a lot of people, most people, especially small companies, aren't gonna be aware that they're gonna get raped and pillaged by
these private equity firms and they're gonna be on the hook for the consequences if it goes south. - No, no, the employees don't
know what they're doing. - Well, the employees, but also the owners of the company who bring in the private equity firms, they're not aware either of what could happen happen.
- Brendan, there are some of the
speakers at this weekend event is how they did it. How they took a private company public. I mean--
- Well-- - They took a private company
and sold to private equity. I want you to know, man, your book Plunder, Private Equity's Plan to Pillage America, can you send me some copies, I will promote the shit out of it for you. - That's very kind of you. We'll talk to the public--
- No, not kind. I have, I do have a conscience left. (Robert laughs) - Well, and I don't wanna talk
your ear off, but you know, one of the the really
interesting things is, you know, this is not to say that every private equity firm is evil or you know, or any private equity firm is evil or that, you know, every private equity acquisition
is gonna end in disaster. But to your point, you know, a lot of small business owners just don't really understand what's involved.
- Amen. - Yeah.
- Amen. - Part of that position.
- Yeah. I mean, we've, I've been talking to some firms lately who have been interested and this, we've decided we're not
gonna go that route. But I didn't have all, even what you're just saying
today is eye-opening for me. Eye opening.
- Yeah. Yeah, and we've been seeing this happen with small medical
professions that, you know, you know, practices that have
been getting bought up and, you know, a lot of the employees, doctors, nurses and so forth, have really been regretting
those acquisitions. - Yep.
- And Brendan, you may not know this, but one of our biggest
acquisitions, nursing homes. - Yep, but I do. - So I mean--
- But not private equity. (Kim laughs) - Not private equity.
- Not private equity. - But we do own the nursing homes. - Yeah.
- And what you're saying is terrifying. I am really not kidding Brendan. Can you, how fast can
you get me some books? I'll promote the heck
out of it this weekend. - That's kind of you. We'll talk, and we'll coordinate. - Yeah, I'll get with the Paul.
- Well, if you're not a salesman, I would sell
them to you tonight. (Kim laughs) - That's a (indistinct). (Kim and Brendan laugh) You wanna talk about it, the seminar will be over and you're gonna miss
one of the biggest sale, I'm a best selling officer, I'm never gonna get a Pulitzer Prize from my writing ability, but I can sell the shit out of books. - This is this why--
- Your book, your book Plunder Private Equities
Plan to Pillage America. So I'm gonna give you an extra
10 minutes when we come back. I never do this for any guests, but I want you, within the legal parameters
of your profession, your professional, you know law, your code of ethics. What can you say to people about why your book is
important they read. You just--
- Yep. - Within the confines of
your legal profession, okay? So when we come back, Brendan, we're gonna give you an extra 10 minutes. Pitch your heart out
man, we'll be right back. (upbeat music) Welcome back, Robert Kiyosaki,
the Rich Dad Radio Show. We have a very special
guest, a very courageous man. His name is Brendan, B-R-E-N-D-A-N, Ballou, B-A-L-L-O-U. Great movie called Cat Ballou years ago, starring Lee Marvin. But also, oh there's
another great movie called My Cousin Vinny. And in there it talks about, and Brendan says is one of the
more accurate shows there is, starting Joe Pesci, I think as all it is. And he shows up, and he's up in, shows up in court in a
leather jacket and he says, the judge says, never wear anything that's
made of animal skins. But anyway, with that Brendan's book, his private, you know, Plunder, Private Equities
Plan to Pillage America. He's on the same time, on the same side as Kim and I are. You're educating people on what's really happening in the world. You know, companies like Blackstone, what's going on with Credit Suisse, What's going on with bank, Deutsche Bank. It's all of these companies, all these so-called assets going bad, but they're not assets because private equities
are screwing it up. Now Brendan may not know this, but that's my business, is how we do that. So you have 10 minutes to
pitch your book legally within the confines of your straight jacket suit there, okay? What can you say, why should people read Plunder Private Equities Plan
to Pillage America by Brendan? B-R-E-N-D-A-N, B-A-L-L-O-U. - Pitch it.
- Well I don't, I don't think anybody wants to listen to a lawyer talk for 10 minutes. (Kim and Robert laugh)
- No I thought, we'd give it shot. - Yeah. I think I can do it in two. (Robert laughs) Private Equity firms are entities that a lot of
people haven't heard of, but they are transforming your life. When you go to a gas station, you may be inadvertently helping to pay a private equity firm. When you buy contact lenses
or go to a veterinarian, If you go to an OBGYN or visit a family member in a nursing home, you may be helping a private equity firm. Firms like Carlyle, KKR and Blackstone, these are names that most
people haven't heard of. But if they were considered
together with their portfolio companies, they
would be the third, fourth, and fifth largest employers in America. - Please say those names again, because what you're talking about are the Amazon of the legal system, what you're talking about.
- Yeah so, it's KKR, Carlyle and Blackstone, and they would be the
largest employers in America with their portfolio companies after only Walmart and Amazon. - Oh, wow. - They, despite their relative anonymity, I always say private
equity firms are poised to transform the economy in this decade, the way that subprime lenders
did in the decade before that. And the way that, and Big Tech did this in the 2010s. And the really important point is they are doing all of this with
the help of the government. From state and local regulate, you know, state and local police to, nursing home regulators,
to Fannie and Freddie Mac. - Hey and, why are, you have a legal jacket on, it's also called a straight jacket. You know, you have a, you have a Armani suit on I hope. - I'm a government employee,
It's not that expensive. (Kim and Robert laugh) - So what is the constraint? Why are you so hesitant to say what you, I mean, I know you're not supposed to, but what are the constraints? Why are you guys put on a straight jacket? - Oh, I don't, well actually I pushed back on that ever so slightly in that, I don't think that I've gotten a straight jacket from my employer who actually was, you know, incredibly kind and giving me the time to, time off to write this book.
- And who's your employer? Who's your employer? - The Department of Justice, ultimately. Which is where I--
- Amen brother, thank you. Tell them thank you for me. - Yeah, well and you know, the interesting thing is there's a huge agenda of
things that can be done by the federal government, but
also by the state government, local governments, you know, ordinary citizens to sort of constrain the power of private equity. One thing that I don't think
people really understand is how much of police and prison work is now owned by private equity. So for instance, if you, if you're in prison
and need to make a phone call, the chance is really
good that that phone call is being managed by a private equity firm. If you need to get healthcare in a prison, that also is probably managed
by a private equity firm. If you get, you know,
let's say you, you know, you drink too much one night and have to spend a night in jail, they take your money, nowadays there's a good chance you won't get your cash
back the next morning. In fact, you'll get a debit card that is owned by a private equity firm. And using that card will
have an activation fee, a activity fee, a balance inquiry fee, and a closing fee. So all the operations of prisons, or many of the operations of prisons, are controlled by private equity firms. And that's something that really the state and local
governments can move on. So there's a lot that can be done within the government and outside of it, we just need the ambition to act. - So Brendan, would you say that, you talk about the impact of the future and how private equity is such as like the next subprime and all of this, is the problem that now our companies are only looking at the bottom
line profit, no fundamentals, they don't care about the employees, and I'm not saying every
private equity company, but that is the problem that
you are making people aware of that are, how we do business
is now totally changed? - It's a great question. I think that, you know, people have always been ambitious. People have always wanted to make money. That's not a problem at all. You know that's, you know, how the capitalist system works. One of the basic challenges that we have with private equity isn't that they wanna make money, but that they aren't
thinking long-term at all. You know, often their investment horizons are three, four--
- Yeah. - Or five years.
- Yeah. - And if you've only got a
few years to make, make money, you're not gonna invest in the long-term sustainability of the
companies that you buy. - Correct.
- Brendan, Bless you. Bless you, my friend. - Nicely said, thank you. - So another thing like with Blackstone, one of the reasons your
gas prices are going up is because they shut down drilling. They work, they work with, you know, and this is my world man. I'm a driller. You know, or you're a criminal because you provide gasoline for the public, I mean, if we didn't provide
gasoline for the public, guess what happened? The economy would stop. But--
- Well-- - They work for it, now please hear me. You can learn. because you don't, you don't have to say
something to get in trouble. But that's what Blackstone's doing. They're just like Biden, they're
shutting down our drilling. Which is why, you just two days ago, Saudi Arabia just shut down, they're not gonna allow, they're not gonna pump as much oil. What that does is raise
prices on gasoline. That's called inflation. Everybody's gonna pay for that, Brendan. Everybody's gonna pay for that. - Well ultimately the, the sort of fight over
ESG is slightly separable. So it's, you know, Blackstone has gotten a
little bit of criticism. It's actually BlackRock
that, you know which is, which is not a private equity firm, has been getting most
of the ESG criticism. You know the interesting things about, about a lot of private
equity firms is that they've actually been very invested in, in you know, a non-renewable resources. So, I think that's a slightly
separable debate. But I think the common story is that private equity firms, you know, aren't thinking, often are
not thinking long-term. - Amen, amen.
- Whether that's long-term for employees or long-term
for the environment. - Yeah.
- Brendan-- - Yeah.
- What you're saying, you and I are on the same team, except that you're on the legal side. - Well, I appreciate, I appreciate the endorsement and I really appreciate the time. This is very kind of you. - And I would love to have you, I don't know if you can do it, but next time I have this event, you can be our star speaker. I'll make sure you're
recorded so your boss will know that you abided by the laws. Because I don't, not that I don't, but I have more free
freedom to say than you do. - Well, I appreciate the invitation. And really I appreciate just the time to talk about this.
- Thank you Brendan. - And tell your boss, thank
you, thank you, thank you. Again the book is called, Plunder Private Equities
Plan to Pillage America. And we need more people
like Brendan Ballou, who abides by the rules and
will write a book about it. So Brendan, thank you very much.
- Thank you Brendan. Appreciate it. - Thank you both.
- Appreciate what you're doing. - Thank you, thank you,
thank you, my friend. I will sell a lot of books for you. We'll be right back
with, Brendan thank you. Really sincerely, thank you. We'll be right back.
- Thanks Brendan, take care. (upbeat music) - Welcome back, Robert Kiyosaki,
the Rich Dad Radio Show. The good news and bad news about money. I wanna thank our, very sincerely thank our
guest Brendan Ballou, B-A-L-L-O-U. His book is, Plunder Private Equities
Plan to Pillage America. It pisses me off that people don't care. So anyway, the book is called, Plunder Private Equities
Plan to Pillage America. Please get the book. Especially if your school
teacher told you to go to school, get a job and get a 401k,
you're being screwed. Comments, Kim? - So the main takeaways for me, from what Brandon is saying
and with his book Plunder, is number one, their, the private equity
firms are in it for short term. They wanna get, make as much money as they
can in the short term. They don't think long
term about employees. They don't think long
term about the company. They don't think long term. And that the fact that
private equity companies, if they take over a company, your chance of bankruptcy
is 10 times greater than if you don't have
a private equity firm. Now, I'm not saying old
vibrant equity firms are bad because they're not,
they do some good things. But their fundamentals,
or what they're after is very different than maybe
what you and I want. - But that's why Credit
Suisse and Deutsche Bank and Bank of Japan are in serious trouble is because of their short term thinking. - Yeah.
- If you understand a financial statement, the balance sheet, you'll understand what
Brendan's talking about. Unfortunately he doesn't,
because he's an attorney. Sara, comment on this. - [Sara] I think the biggest, oops, I think the, the biggest takeaway for me is just how far reaching
private equity is. Nursing homes I would've never, never associated that with private equity. And you know so many things. And they kind of get you on the inside, you know, on both ends. So if they take over a company, they're gonna like get rid
of employees most likely. Because like you had mentioned, they want a healthy bottom line. - Their employees are expensive and the pensions are extremely expensive. - [Sara] Yep, and so here's the case is don't be an employee. (group laughs) - No, no, no--
- Because, no I mean it just, it's another layer of, of becoming an entrepreneur and not relying on anybody else. - [Kim] Which you might wanna check out If you are looking for a job,
who really owns the company, you might wanna check that out. - [Sara] That's a great point. Because if it's a three to
five year kinda lifespan-- - [Kim] Yep. - You--
- So in, so in personal defense
of what Kim and I do, our first attorney and account
wanted to put a 401K in. This is 25 years ago, we refused to do it. So what do we tell you guys instead? - [Sara] Oh, we're all encouraged to start our own businesses or become investors and-- - Good.
- Not rely on a 401k. - Yeah, yeah.
- Yeah, Yup. And that was, that was the
importance of this show is because it's, that's just another
layer of making our case of why that's so important. - [Robert] Final words, Kim. - Final words, I just wanna say thank you to Brandon Ballou and I really thank him for speaking out, opening up people's eyes to what's happening in the world and keep getting educated. - Please all of you, thank you for listening to this program. Please get Brendan's book, Private Equity Plunder, Private Equity's Plan to Pillage America, because they are. What Brendan is saying
is, I could never say, so I'm gonna do my best to make his book a bestseller. Final words, Sarah. - [Sara] No, just appreciate his time and appreciate the conversation because I learned a lot in this episode. Definitely more than I've learned, you know--
- Now you know why I'm such an asshole on stuff. (Sara and Robert laugh) - [Sara] That has nothing
to do with this show. (Kim, Sara and Robert laugh) But no, it's great. I learned so much honestly
in the research for, to even understand what is private equity. I was like, oh okay. Like--
- Yeah. - [Sara] So that was great. - Go to the play of the cashflow game. The fast track is private equity, sports fans.
- It's all make, yeah, it all makes sense now.
- Yeah It's called private equity. So, I might have, I might sell his book with my fast track on
the cashflow board game. (Kim laughs) Just all of you guys
that go to school say, oh my kids can get good education. And someday they'll have job security, a steady paycheck and
then they'll get a 401K or pension. You're being set up by
the academic system. Thank you for listening to Rich Dad Radio. (upbeat music)
