How Politics Affect Yucaipa


By: Wall Street Journal

Bill Clinton Looks To Limit Ties To Avoid Conflicts
By JOHN R. EMSHWILLER

When billionaire Ronald Burkle’s Yucaipa investment operation agreed to put more than $25 million into a Chinese media company this fall, the investor group didn’t include one of Yucaipa’s high-profile partners: former President Bill Clinton.

The absence of Mr. Clinton from Yucaipa’s investment in Xinhua Finance Media Ltd. appears to be the first tangible sign of a parting in the much-followed, five-year-old business relationship between Messrs. Clinton and Burkle. Mr. Clinton has been a senior adviser at Yucaipa and also had a financial interest in certain investments there.

But this week, Mr. Clinton indicated he plans to curtail his ties to Yucaipa should his wife, Hillary Clinton, win the Democratic presidential nomination. This follows a disclosure by the Clintons in June that they had sold millions of dollars of stocks to avoid situations — like the one that a China-related investment might raise — that could pose problems for Mrs. Clinton’s campaign.

This week, in response to a report that a breakup between Messrs. Clinton and Burkle had already occurred, a Clinton spokesman said the former president hadn’t severed his ties to Yucaipa. But the spokesman said there would be an “appropriate transition” of Mr. Clinton’s Yucaipa investment if Mrs. Clinton becomes her party’s candidate. As part of his Yucaipa arrangement, Mr. Clinton has had the right to opt out of individual investments and he chose not to participate in the Xinhua deal, said a person familiar with the matter. It wasn’t clear whether Mr. Clinton had ever opted out of any other Yucaipa investment.

Mr. Clinton’s business relationship with Yucaipa began in early 2002, a year after he left the White House. He became a “senior adviser” to a pair of Yucaipa funds and stood to make money if those funds generated a sufficient level of profits.

One reason Mr. Clinton might have chosen to stay in the Yucaipa arrangement as long as he has is to be able to receive profits from some of the Yucaipa deals that have recently come to fruition. Based on Mr. Clinton’s arrangement with Yucaipa, waiting for such profits could have brought millions of dollars to the Clintons.

In required financial disclosure forms for the Senate, Mrs. Clinton reported that her husband also had a partnership interest in a third Yucaipa fund, called Yucaipa Global Opportunities Fund I LLC. In those statements, Mrs. Clinton disclosed that her husband’s interest in that partnership was paying him more than $1,000 a year.

Mrs. Clinton’s most recent financial disclosure statement, dated May 15, provided additional information about Mr. Clinton’s Yucaipa holdings. The report said the name of the fund in which Mr. Clinton had an interest had changed to Yucaipa Global Holdings. It also disclosed that he had an interest in a related entity, the Yucaipa Global Partnership Fund LP, which invested in “securities of corporations that conduct significant operations in foreign countries.” The report noted holdings in two overseas companies, a London-based chain of jewelry stores and a transaction-processing company in India.

In September, The Wall Street Journal reported on a dispute between Mr. Burkle and Italian businessman Raffaello Follieri that involved Mr. Clinton’s top aide, Douglas Band. Mr. Band introduced Mr. Follieri to Mr. Burkle, who subsequently committed as much as $100 million to a real-estate joint venture with the Italian businessman. Yucaipa sued Mr. Follieri in Delaware state court in May, contending he had misappropriated at least $1.3 million to fund a lavish personal lifestyle. Mr. Follieri denied wrongdoing and the suit is near settlement, according to a recent court filing in the case.

Xinhua Finance Media is a Nasdaq-listed subsidiary of Shanghai-based Xinhua Finance Ltd. Loretta Fredy Bush heads both companies, which publish economic news, market indexes, credit ratings and news releases. In 1999, Xinhua News Agency, an arm of China’s government, helped Ms. Bush start the parent company and for years held a major stake in it. Early this year, Xinhua Finance said the Chinese government agency had sold its remaining stake in the company. Xinhua News Agency later said it had “terminated” its relationship with the company.

While being feted as a successful female entrepreneur in China, the Utah-born Ms. Bush has also attracted attention because some of Xinhua Finance group’s deals appeared to benefit her personally. She also had a tax dispute with the Internal Revenue Service related to her Xinhua holdings that she settled earlier this year by paying more than $800,000 in back taxes and penalties. Ms. Bush has denied wrongdoing in her Xinhua-related dealings.

In an early October filing with the Securities and Exchange Commission, Yucaipa provided new details on its Xinhua Finance Media investment, which involved spending about $25.7 million for nearly 8.6 million shares, or a little more than 6% of the company’s stock. The report said Yucaipa bought the stake for “investment purposes” and because it believed Xinhua “should have substantial opportunities for future growth.”

Coincident with the investment, Xinhua Finance Media brought in five new directors in a move that appeared aimed at improving board independence and corporate governance.

The SEC filing also disclosed the makeup of the Yucaipa investment group in Xinhua Finance Media. Included were Yucaipa Global Holdings and Yucaipa Global Partnership — the two entities in which Mr. Clinton had an interest, according to his wife’s May disclosure statement.

However, this week, in a written response to questions, a Clinton spokesman said the former president “does not participate, nor have a financial or other interest, in the Yucaipa Xinhua Finance Media Venture and he therefore is not listed as an investor.” The statement didn’t elaborate.

–James T. Areddy and Chip Cummins contributed to this article.

Write to John R. Emshwiller at john.emshwiller@wsj.com

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