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Pine Island Capital Partners (PICP)

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Pine Island Capital Partners (PICP) is an investment management firm based in Washington, D.C. that primarily invests in the aerospace and defense industries. The firm advertises its partners’ backgrounds as “deeply-connected” former high-level government and military officials. 1

In November 2020, the transition team of President-elect Joe Biden announced that several PICP partners were under consideration for top-level appointments. News aggregator Axios reported that the appointments could raise concerns about a “revolving door”-type conflict of interest between the defense industry and the Biden administration. 2 Biden announced that he would nominate two PICP partners for Cabinet positions: former Deputy Secretary of State Antony Blinken for Secretary of State, and retired Army general Lloyd Austin for Secretary of Defense. 3

Background

John Thain, former chief executive officer of the investment management firm Merrill Lynch, founded Pine Island Capital Partners (PICP) in 2018 with former Goldman Sachs partner Phil Cooper and former Coca-Cola executive Clyde Tuggle. The firm invests primarily in aerospace and defense companies. 2

Investments

As of late 2020, Pine Island Capital Partners (PICP) disclosed two portfolio companies on its website: Precinmac Precision Machining, a manufacturer with facilities in the United States and Canada that supplies parts to companies in aerospace, defense, and other industries, and InVeris Training Solutions, a Georgia-based provider of virtual and live-fire training systems to armed forces and law enforcement agencies worldwide. 4 InVeris was known as Meggitt Training Systems until October 2020. 5

Leadership and Partners

John Thain is the co-founder and chairman of Pine Island Capital Partners (PICP). 6 He previously served as chief executive officer of the investment management firm Merrill Lynch, which took significant losses during the 2008 financial crisis. Thain arranged the sale of Merrill Lynch to Bank of America in September 2008. 7 The deal, which Thain worked out in just two days, nearly fell apart less than a month later when the bank discovered more than $15 billion in losses at Merrill Lynch and forced Thain to resign. 8 In January 2009, then-New York attorney general Andrew Cuomo (D) issued a subpoena to Thain ordering him to testify about bonuses that he and other Merrill Lynch executives received just before Bank of America acquired the firm. 9 Thain served on the boards of the National Urban League, a left-of-center activist group, and the Trilateral Commission, an international society for government and industry leaders. 10

Former high-level military officers who became partners at PICP include retired Army general Lloyd Austin and retired Navy admiral Mike Mullen. Austin also sat on the board of the Carnegie Corporation of New York, a foundation that funds a variety of left-of-center initiatives. In December 2020, the Biden transition announced that it would nominate Austin to lead the Department of Defense. Austin’s confirmation would require Congress to waive the requirement that the Secretary of Defense be a civilian who has been retired from the military for at least seven years. 11

Former U.S. Senators Tom Daschle (D-SD), Saxby Chambliss (R-GA), Byron Dorgan (D-ND), and Don Nickles (R-OK) are partners, as is former House Democratic leader Dick Gephardt (D-MO). Daschle is the chair of the Center for American Progress, vice chair of the National Democratic Institute, and co-founder of the left-leaning Bipartisan Policy Center, where Dorgan is now a senior fellow. Former ambassadors Stuart Holliday and Capricia Marshall are also partners at the firm. 6

Two former Obama administration officials are partners at PICP: former Undersecretary for Defense for Policy Michele Flournoy, who also co-founded the Center for a New American Security, and former Deputy Secretary of State Tony Blinken, who is now on leave. 6 In November 2020, President-elect Joe Biden announced that he would nominate Blinken to be his Secretary of State and indicated that he was considering Flournoy for Secretary of Defense. 12

Controversy

In December 2020, Biden-Harris transition team announced it was considering Pine Island Capital Partners (PICP) partners Tony Blinken and Michele Flournoy for top Cabinet positions. Both Republicans and Democratic members of Congress criticized the move, claiming to be concerned by potential influence-peddling on the part of the PICP partners. Senator John Cornyn (R-TX) released a statement claiming “Mr. Biden’s transition office stopped short of saying that all clients would be disclosed” and that “the Senate is not obligated to confirm anyone who hides this information.” 13 Left-of-center media outlet Common Dreams was one of several to report on the PICP partners being considered, claiming their consideration for senior administration positions represented how PICP “cashed in on government service” while claiming the firm was “promising investors big profits off government business.” 14 Socialist-leaning magazine outlet Jacobin accused the PICP of “promising big profits off administration access.” 15

Both Flournoy and Blinken were co-founders of WestExec Advisors, a consulting firm run by former Democratic national security and foreign policy officials. Mandy Smithberger of the Project on Government Oversight told Politico magazine that firms like WestExec become “strategic consultants” instead of registered lobbyists in order to avoid disclosing their clients and services. 16

References

  1. Pine Island Capital Partners. Accessed December 8, 2020. https://pineislandcp.com
  2. Dan Primack, “What to know about the private equity firm linked to Tony Blinken,” Axios, November 30, 2020. Accessed December 8. 2020. https://www.axios.com/pine-island-private-equity-blinken-biden-06f8dd00-7ada-4a81-acd9-56801ea81b97.html
  3. Brian Schwartz, “SPAC with ties to Biden Cabinet picks sees surge in support from Wall Street after offering ‘access’”, CNBC, December 9, 2020. Accessed December 11, 2020. https://www.cnbc.com/2020/12/09/spac-with-ties-to-biden-cabinet-picks-sees-surge-in-wall-street-support.html
  4.        Portfolio Companies, Pine Island Capital Partners. Accessed December 8, 2020. https://pineislandcp.com/portfolio-companies/
  5.   Joe Gould, “Meggitt Training Systems changes name to InVeris Training Solutions,” DefenseNews, October 7, 2020. Accessed December 8, 2020. https://www.defensenews.com/2020/10/07/meggitt-training-systems-changes-name-to-inveris-training-solutions/
  6.        Our Team, Pine Island Capital Partners. Accessed December 8, 2020. https://pineislandcp.com/team/
  7.         “Bank of America Buys Merrill Lynch Creating Unique Financial Services Firm,” Bank of America, September 15, 2008. Accessed December 8, 2020. http://investor.bankofamerica.com/news-releases/news-release-details/bank-america-buys-merrill-lynch-creating-unique-financial/
  8. Jonathan Stempel and Elinor Comlay, “Thain ousted from Bank of America amid losses,” Reuters, January 22, 2009. Accessed December 8, 2020. https://www.reuters.com/article/us-bankofamerica-thain-idUSTRE50L4C720090122
  9.        Martha Graybow and Jonathan Stempel, “Thain subpoenaed as probe into Merrill widens,” Reuters, January 27, 2009. Accessed December 8, 2020. https://www.reuters.com/article/topNews/idUSTRE50Q4TR20090127
  10.       “Goldman’s Thain trades Money For Fame,” Forbes, December 19, 2003. Accessed December 8, 2020. https://www.forbes.com/2003/12/19/cx_da_1219topnews.html?sh=294091331b33
  11.        Franco Ordonez et. al., “Biden Expected to Nominate Gen. Lloyd Austin as Defense Secretary,” NPR, December 7, 2020. Accessed December 11, 2020. https://www.npr.org/sections/biden-transition-updates/2020/12/07/944049746/biden-expected-to-nominate-gen-lloyd-austin-as-defense-secretary
  12.        Dan Primack, “What to know about the private equity firm linked to Tony Blinken,” Axios, November 30, 2020. Accessed December 8. 2020. https://www.axios.com/pine-island-private-equity-blinken-biden-06f8dd00-7ada-4a81-acd9-56801ea81b97.html
  13.     Mark Moore, “Cornyn: Senate ‘not obligated’ to confirm Biden appointees,” New York Post, November 29, 2020. Accessed December 8, 2020. https://nypost.com/2020/11/29/cornyn-senate-not-obligated-to-confirm-biden-appointees/
  14. “The Revolving Door: Biden’s National Security Nominees Cashed In on Government Service—and Now They’re Back,” Common Dreams, November 28, 2020. Accessed December 8, 2020. https://www.commondreams.org/news/2020/11/28/revolving-door-bidens-national-security-nominees-cashed-government-service-and-now
  15. David Sirota, “BREAKING: Potential Biden Officials’ Firm Is Promising Big Profits Off Administration Access,” Jacobin, November 28, 2020. Accessed December 8, 2020https://jacobinmag.com/2020/11/biden-administration-access-sirota-flournoy-austin-pine-island-capital-partners
  16. Bryan Bender and Theodoric Meyer, “The secretive consulting firm that’s become Biden’s Cabinet in waiting,” Politico, November 23, 2020. Accessed December 8, 2020. https://www.politico.com/news/2020/11/23/westexec-advisors-biden-cabinet-440072
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