Former Gov. Terry McAuliffe (D-VA), who is once again the Democratic nominee to be governor of Virginia, has gotten fact-checked quite a bit, including by The Washington Post. What is perhaps the most memorable one came last week, to do with a September 24 ad from McAuliffe claiming that Republican nominee Glenn Youngkin "took over" predatory dental clinics. These claims also came during the second gubernatorial debate, mere days after the ad.
Fact-checker Glenn Kessler highlights the voice-over claim from the ad's narrator that "Small Smiles, a string of dental clinics preying on unsuspecting poor families. As a Wall Street executive, Glenn Youngkin took over this chain of dental clinics, increasing corporate profits through serious abuse and the performing of unnecessary procedures on children."
In conducting the fact-check, Kessler noted a colleague of his dug up relevant documents flashed in the campaign ad showing a 2013v Senate investigative report. "The bottom line: When the problems highlighted in the ad emerged, Carlyle was not involved in the management of this company and did not own it," Kessler wrote.
The private equity firm buyer involved, according to Kessler, "was a Bahrain-based investment firm called Arcapita. This added a level of complexity because the financing needed to comply with sharia practices."
Kessler went on to write, with added emphasis:
Arcapita also reports the Small Smiles deal as a 2006 acquisition on its website.
So where was Carlyle? The Carlyle Mezzanine Partners fund was one of the firms supplying the loans underwriting the deal — second-tier debt worth $85.5 million and what are known as payment-in-kind notes worth $21 million. (The top-tier loan was supplied by another banker, CIT Group.) PIK notes are another type of mezzanine financing, in which interest on the debt is not paid at first but instead is added to the debt.
At the time, Youngkin was global head of the firm’s industrial-sector investment team, which focused on a different fund — Carlyle Partners IV. So he played no role in this transaction.
Recommended
What makes this perhaps the most memorable fact-check in a while is what strong words Kessler had for the McAuliffe ad when it comes to giving his rating of Four Pinocchios.
Emphasis is added:
On just about every level, this campaign ad is flat-out false. It claims that Youngkin “took over” the dental clinics. Not only was he not part of the original transaction, but Carlyle did not own or manage the clinics; it merely helped fund the deal with loans.
After the problems were exposed and the company failed to make good on its loans, in 2010 (before Youngkin became chief operating officer), the loans were renegotiated to give Carlyle a relatively small equity stake. Only at that point did Carlyle even have the right to name a board director. But the company still was mostly owned by Arcapita, the Bahrain investment firm. One might fault the terms of the Arcapita purchase for increasing pressure on company executives to maximize profits — but again, Youngkin had no role in the original deal.
Given that the ad displays an image of the Senate report — which says that Arcapita owned the holding company of Small Smiles — there is no excuse for such flimflammery.
When was the last time you heard "flimflammery" used in a sentence? I don't remember either, but I do know it's now my new favorite word.
Kessler also noted early on in the fact-check that this particular falsehood "is part of a general attack by McAuliffe on Youngkin’s business career."
Curiously enough, as The Washington Post admitted in a correction to Gregory S. Schneider's article from July 2, "McAuliffe maintains a minimal investment in a Carlyle Group private equity fund."
Join the conversation as a VIP Member