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The hedge fund owner who compared the Labor Dept.'s attempt to bring fiduciary care to more assets to the infamous Dred Scott decision is being dinged, ostensibly, for a business combination with Chinese Communists
February 2, 2017 — 7:02 AM UTC by Brooke Southall
Brooke's Note: Last week we wrote of a plan to undo the DOL rule in a Texas court that had the mark of evil genius written all over it: DOL rule will be undone, in a cruel twist, by the Department of Labor -- essentially by a Trump order to cut red tape by staying the Texas court case. Now maybe its impetus is gone. We put this story together by midnight oil from a New York Times report. Anthony Scaramucci, a hedge fund billionaire, appears to have hit the wall in Trumpland. The Times is using an anonymous source but not one that it felt the need to hedge on much.
Anthony Scaramucci will not get any official say in the Trump administration -- perhaps shifting the conversation in Washington about how aggressively to try to undo the DOL rule.
The CEO and owner of SkyBridge Capital, Scaramucci was passed over for a White House appointment as liaison to the business community, according to The New York Times, which cites a senior administration official who spoke anonymously, Wednesday.
Chief of Staff Reince Priebus and strategist Stephen K. Bannon will look for another job for Scaramucci, a large donor to the Trump campaign, down the road, the report says.
Preparing to join the administration, Scaramucci was lining up buyers for New York and Palm Beach Gardens, Fla.-based SkyBridge in order to divest himself of conflicts of interest as he prepared to lead the Office of Public Liaison and Intergovernmental Affairs. But he was tripped up by the prospective majority owner: HNA Group, a Chinese conglomerate, whose interests range from aviation to supermarkets and which has presumed ties to the Chinese government and whose owners are hard to identify.
The Chinese have been working hard of late to enter the U.S. asset management business. Charles Goldman's turnaround of Genworth castoff leads Chinese investor to pay stunning price.
The deal, which includes a reported $180 million price tag for Skybridge, according to the Times, could close as late as summer. Typically asset management firms of Skybridge's size -- it has $12 billion of AUM -- sell for much higher prices, suggesting it may have been less of a divestiture and more a sale of a stake.
Fiduciary advocates may breathe a sigh of relief now that the highest-profile DOL rule basher has been cut adrift by Trump's inner circle. Scaramucci has made clear his view that the Labor Department's fiduciary rule would divert too much capital into low-cost passive ETFs and index funds.
"We’re going to repeal it,” the hedge fund king told InvestmentNews at the Securities Enforcement Forum in Washington in October. “It could be the dumbest decision to come out of the U.S. government in the last 50 to 60 years.” See: The DOL rule is DOA -- and that's just the beginning, says RIA champion Brian Hamburger, law school chum of odds-on chief of staff Reince Priebus.
Scaramucci also infamously proclaimed the rule akin to the Dred Scott case of 1857, where a slave sued for his own freedom and was rebuffed by the highest court.
"The left-leaning Department of Labor has made a decision to discriminate against a class of people who they deem to be adding no value” he wrote in an email to InvestmentNews.
He added: “They are judging what should happen in a free market and attempting to put financial advisors out of work. When market forces cyclically adjust again, they will be having congressional hearings about how big the mistake was to do this.” See: The time is now for the investment industry to shed its shameless culture or pay a steep price.
These comments stoked the eager anticipation of attendees at last December's MarketCounsel Summit to hear Scaramucci, who was slated to appear with Reince Priebus. At the last minute, however, both were no-shows and Kellyanne Conway was sent in their place. See: MarketCounsel Summit weathers Trump mayhem as Scaramucci and Priebus bail and Kellyanne Conway makes a night flight to Miami
Factors in play
Still, given the apparent level of infighting in the new administration, it's possible that not just left-leaners disliked Scaramucci.
“[The prospective sale] does not seem to me to be a clear disqualifying factor,” said Richard W. Painter, the chief White House ethics lawyer for two years under President George W. Bush, to the New York Times.
“Another possibility is they decided not to keep him for a political reason and cited an ethics conflict as a cover.”
To read the Times article, click here.
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