Saturday, September 1, 2012

Adelson to Simmons Billionaires Seen Getting Romney Return

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By Alison Fitzgerald and Julie Bykowicz

Wealthy donors and corporations are more heavily invested in this presidential election than at any time since the 1972 Watergate scandal led to stricter campaign- finance laws.
A series of court decisions and regulatory changes in 2010 unraveled federal limits on donations, paving the way for a return of the big players. They are pooling their money in nonprofits, which keep contributor names secret, and super- political action committees, which amassed $350 million through the end of July.
One-quarter of that money comes from just 10 donors, led by Las Vegas casino billionaire Sheldon Adelson, according to data from the Center for Responsive Politics, a Washington-based group that tracks such spending.
Top Republican contributors say they back the party’s presidential candidate Mitt Romney because they agree with his small-government philosophy or oppose President Barack Obama’s new regulations on banks and the health-care industry.
Yet Romney is more than just a political kindred spirit; he’s a sound investment. Here’s how a Romney presidency might pay off -- literally -- for some of these super-donors.
Sheldon Adelson
Adelson, 79, who is this election’s biggest spender, could see his casino profits soar if Romney’s pledge to crack down on China turns out as planned.
More than half of Adelson’s gambling-empire profits come from his four casinos in the Chinese territory of Macau. Adelson’s Sands China Ltd., which develops, owns and operates the resorts, accounted for $2.95 billion of the company’s total $5.34 billion in revenue in the first half of this year, according to its second-quarter earnings report.
If the value of the Chinese currency were higher against the dollar -- as Romney has demanded -- it would give a boost to Adelson’s bottom line. That’s because gamblers from China, who make up the bulk of visitors to Macau’s casinos, would bring the same amount of yuan for betting no matter the exchange rate, said Grant Govertsen, an analyst with Union Gaming Group. So, in dollar terms, they’d be spending more.
Sands officials were asked in a 2010 earnings call what would happen if China loosened restrictions on its currency, which may prompt it to rise.
“It’ll have a big meaning in Macau, and, of course, we’re all in favor of that,” Adelson said. Neither he nor his company representatives returned calls for comment.
Yuan Appreciation
Even a small adjustment would have a multimillion-dollar impact. If the yuan appreciated only 5 percent this year, and just half of Macau gamblers changed their money from yuan, Sands China’s revenue for the first half of this year could rise by as much as $73.8 million.
China manages how the yuan trades against the dollar, allowing it to rise and fall within a limited band around a daily fixing set by the central bank. The currency has weakened 0.9 percent this year, trimming its advance since a dollar peg ended in July 2005 to 30.2 percent.
Romney has said China should be called a currency manipulator for suppressing the yuan’s value, a move that would pressure Beijing to allow it to strengthen. Obama also says the yuan should rise, although he hasn’t been as aggressive as Romney has promised to be.
Adelson’s company is also under investigation by the Justice Department and the Securities and Exchange Commission, which have asked it for documents relating to its Macau unit. A former Sands employee alleged that the company used improper leverage to obtain concessions from the Chinese government. Adelson has said his company did nothing illegal.
Adelson, worth about $20 billion according to the Bloomberg Billionaires Index, and his wife have given about $36 million to Republican super-PACs so far this election cycle. The couple contributed $10 million in June to Restore Our Future, which is dedicated to backing Romney.
The Adelsons also are avid supporters of Israel, Miriam Adelson’s native country, and the couple joined Romney when he traveled there last month to declare his unwavering commitment to the Jewish state.
Harold Simmons, 81, may see Romney as a way to turn a money-losing company into one that could print cash with a single regulatory change.
Simmons’s Contran Corp. owns 90 percent of the publicly traded Valhi Inc. The weakest Valhi entity is Waste Control Specialists, which lost $38 million last year, according to its annual report. It wasn’t a blip: Waste Control Specialists has lost money in each of the last five years, the report shows.
Washington Lobbying
The Houston-based company could become profitable, gaining access to a market worth billions, if the Nuclear Regulatory Commission changes a rule. That change would allow Simmons’s 1,338-acre West Texas dump to accept depleted uranium left over from weapons manufacturing during the Cold War and from the production of fuel for nuclear power plants. The dump could even vie to replace Yucca Mountain in Nevada as a high-level nuclear waste disposal site.
The NRC has spent six years weighing whether private companies could safely dispose of depleted uranium, and Simmons’s lobbyists have attended public hearings on the matter, transcripts show. The deadline for a decision is in 2014.
Simmons declined Bloomberg’s interview requests through representatives. Chuck McDonald, a spokesman for Waste Control Specialists, said “there really is no connection” between Simmons’s political contributions and the waste site.
Romney is more receptive than Obama to allowing companies, rather than government, handle radioactive waste.
“Let other states make bids and say, ‘Hey, look, we’ll take it,’” he said during an Oct. 18 debate, referring to Yucca Mountain alternatives. “‘Here’s a geological site that we’ve evaluated. Here’s the compensation we want for taking it.’”
Simmons has a net worth of at least $6.5 billion, by Bloomberg estimates. He and his wife have contributed more than $15.7 million to Republican super-PACs, including American Crossroads. That super-PAC is guided by fellow Texan Karl Rove, a onetime political strategist for former President George W. Bush, and has the stated goals of defeating Obama and electing more Republicans to Congress.
John Childs
Romney has vowed to protect many of the tax breaks that John W. Childs, a Boston-based private-equity investor, and his company enjoy. J.W. Childs & Associates has invested in more than 40 companies since 1995 in deals totaling more than $14 billion, according to a company press release.
Under the tax code, private-equity managers pay only capital-gains taxes on their firm’s investment gains, a rate that’s currently 15 percent. Obama has vowed to change that in two ways, by raising the capital gains rate and by requiring private-equity managers to pay taxes at an individual rate as high as 39.6 percent.
Exceeding 8%
Childs’s firm raised $1.75 billion in the last 10 years for its investment funds, according to Preqin, a London-based alternative asset data provider.
Private-equity firms routinely take 20 percent of the investment gains, after investors reach an 8 percent return. Childs’s funds, which have taken over companies including Brookstone, Sunny Delight and NutraSweet, regularly exceeded that 8 percent, according to a person with knowledge of the firm’s returns who declined to be identified so as not to jeopardize his professional relationship.
It isn’t clear how much of that income goes to Childs himself. The firm lists seven people as partners. Childs, who turns 71 this month, lives in Vero Beach, Florida. He has given more than $2.6 million to super-PACs supporting Romney and Republican congressional candidates.
Deduction Change

Beyond his own taxes, Childs may see Obama as a threat to his way of doing business because the president has proposed reforming the corporate tax code -- including a proposal to make it harder to deduct interest paid on debt.
Firms like Childs’s borrow money to buy companies and they boost their profits in part by deducting the interest on that debt from their taxes. J.W. Childs borrowed $210 million of the $450 million it paid to buy the company Mattress Firm Holding Corp. in 2007. Any change to the treatment of debt would complicate the ability to structure a profitable transaction. Childs didn’t respond to an e-mailed request for an interview, and a J.W. Childs & Associates spokesman didn’t respond to requests for comment.
David and Charles Koch
For Charles and David Koch, owners of closely held energy conglomerate Koch Industries, Romney’s pledge to repeal the Dodd-Frank financial-regulation law could lead to less regulation and more profit at one of their biggest units.
Charles Koch, 76, is chairman and chief executive, and his brother, David, 72, is executive vice president. They’re the seventh- and eighth-richest people in the world, according to the Bloomberg Billionaires index, with a combined net worth of at least $70 billion.
Their multifaceted conglomerate includes oil and ethanol refiners, pipelines, minerals and even cattle, all of which rely heavily on the use of physical commodities. The brothers are also major players in commodity derivatives through a subsidiary, Koch Supply and Trading LP, one of the world’s largest energy traders, which also deals in swaps for clients including hedge and pension funds.
Swaps are contracts in which two parties trade the cash flow or gains from a financial instrument. They are commonly used to hedge energy risk, where the parties exchange a spot price for a fixed price on a crude oil or natural gas contract.
Tightened Oversight
In response to the 2008 financial meltdown, Congress tightened regulations so that swaps dealers with more than $8 billion in open contracts will be subject to higher capital and collateral requirements, tying up cash they may want to otherwise use. That threshold could fall to $3 billion in five years if regulators at the Commodity Futures Trading Commission determine that too much of the swaps market remains unregulated.
In early 2010, Koch hired Greg Zerzan, the former head of public policy for the International Swaps and Derivatives Association, as a lobbyist in Washington. Zerzan and an outside lobbyist for Koch met with SEC Commissioner Troy Paredes in April 2011 to discuss the derivatives rules. Neither Koch spokesman Rob Tappan nor Paredes responded to requests for information about the meeting. A Koch representative also met with CFTC commissioner Mark Wetjen in May. Wetjen didn’t respond to a request for comment on the meeting.
CFTC Chairman Gary Gensler’s term expires at the end of 2013 so the next president will appoint a chairman who will determine where to set the threshold for the regulations.
Biggest Trader
Koch, which is known for creating the first oil price swap in 1986, doesn’t disclose Koch Supply’s revenue; it’s described as one of the biggest energy traders in the world and bills itself as a market maker. Tappan declined to say whether the company falls under the $8 billion threshold.
Charles Koch considers trading a “core capability” of Koch Industries, according to an internal company publication from January 2009. The article compares Koch’s trading arm with those of BP Plc and Goldman Sachs Group Inc.
“They offer themselves up as providing risk management to potential customers,” said John Parsons, a derivatives expert and lecturer at the Massachusetts Institute of Technology’s Sloan School of Management. “They run a book so they have a dealing business as a part of their operation.”
The Koch brothers founded Americans for Prosperity, which has vowed to spend $100 million on television ads and in a voter-contact program designed to motivate people to go to the polls for Romney and other Republican candidates who agree with their free market, small-government philosophy.

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