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Life in the Rest Stop off the Fast Lane

'Privy' Equity: Carlyle's Latest

November 20, 2009

Private-equity firm Carlyle Group has struck an agreement with the state of Connecticut to rebuild and operate the state's 23 rest stops in return for share of their revenues.

The so-called public-private partnership calls for Carlyle and its partners to invest $178 million in the service areas. Carlyle-owned Dunkin' Donuts restaurants will be added to the rest stops. They will also house Subway sandwich shops, whose parent company is joining Carlyle in the investment.

Though a relatively small deal, the transaction could serve as a harbinger of bigger things to come, as state and municipal officials are looking to private capital to meet their infrastructure needs amid deep budget shortfalls.

At the same time, private-equity firms are increasingly pursuing infrastructure targets—which encompass airports, utilities and highways—as they look to diversify away from the their core buyout businesses. Carlyle was one of the first private-equity firms to start an infrastructure fund, raising about $1.1 billion in 2006.

Other large buyout firms including Blackstone Group and Kohlberg Kravis Roberts & Co. are in the market raising infrastructure vehicles, thought their plans have been slowed by the difficult fund-raising environment.

Some privatization deals have stalled in recent years over concerns about handing government assets over to private investors, including last year's unsuccessful effort to lease the Pennsylvania Turnpike. The Carlyle transaction is structured as a 35-year agreement.

In a strange twist, the deal includes the Service Employees International Union, Carlyle's longtime nemesis. The SEIU will provide custodial jobs at the rest stops, most of which are located on Interstate 95 and the Merritt Parkway.


Updated 2:28 p.m. EDT, Mon October 27, 2008
Operation frees dozens of children
By Kevin Bohn, CNN

FBI Deputy Director John Pistole says some of the alleged sex traffickers were working in networks of six to 10 pimps

WASHINGTON (CNN) -- Dozens of juveniles have been freed from forced prostitution by a nationwide operation that resulted in the arrests of hundreds of other people, the FBI announced Monday. In the three-day operation, which began Thursday night, the FBI, along with local and state law enforcement agencies, took the 46 girls and one boy -- all of them U.S. citizens ages 13 to 17 -- into protective custody.

"Operation Cross Country II" involved efforts in 29 cities and resulted in the arrest of 73 pimps and 518 adult prostitutes, the FBI said. Those arrested could face federal or state charges, depending on their alleged activities.

FBI Deputy Director John Pistole said some of the alleged sex traffickers were working in networks of six to 10 pimps. "Sex trafficking of children remains one of our most violent and unconscionable crimes in this country," he told reporters.

Authorities said some of the alleged prostitutes were found at casinos and truck stops. Others were advertised on the Internet. Ernie Allen, president of the National Center for Missing and Exploited Children, likened teen prostitution to "21st century slavery" and estimated that tens of thousands of teens may be involved. He said it is "happening on Main Street U.S.A. ... These people are moving kids city to city."

Information from last summer's first "Operation Cross Country" led agents to some of the targets identified in the latest initiative, the FBI said. When authorities received a tip about a possible juvenile prostitute, an agent would set up a sting operation to determine the person's age; anyone under age 18 was taken into custody. In all, the initiative has freed 576 child victims from forced prostitution, the FBI said.


[Image: seal.gif][Image: 1b.gif][Image: 2.gif]

Press Release
For Immediate Release
October 26, 2009

More Than 50 Children Rescued During Operation Cross Country IV

Over the past 72 hours, the FBI, its local and state law enforcement partners, and the National Center for Missing and Exploited Children (NCMEC) concluded Operation Cross Country IV, a three-day national enforcement action as part of the Innocence Lost National Initiative. The operation included enforcement actions in 36 cities across 30 FBI divisions around the country and led to the recovery of 52 children who were being victimized through prostitution. Additionally, nearly 700 others, including 60 pimps, were arrested on state and local charges.

“Child prostitution continues to be a significant problem in our country, as evidenced by the number of children rescued through the continued efforts of our crimes against children task forces,” said Kevin Perkins, Assistant Director of the FBI’s Criminal Investigative Division. “There is no work more important than protecting America’s children and freeing them from the cycle of victimization. Through our strategic partnerships with state and local law enforcement agencies, we are able to make a difference.”

Task Force operations usually begin as local actions, targeting such places as truck stops, casinos, street “tracks,” and Internet websites, based on intelligence gathered by officers working in their respective jurisdictions. Initial arrests are often violations of local and state laws relating to prostitution or solicitation. Information gleaned from those arrested often uncovers organized efforts to prostitute women and children across many states. FBI agents further develop this information in partnership with the U.S. Department of Justice’s Child Exploitation and Obscenity Section (CEOS) and file federal charges where appropriate.

To date, the 34 Innocence Lost Task Forces and Working Groups have recovered nearly 900 children from the streets. The investigations and subsequent 510 convictions have resulted in lengthy sentences, including multiple 25-years-to-life sentences and the seizure of more than $3.1 million in assets.

“It is repugnant that children in these times could be subjected to the great pain, suffering, and indignity of being forced into sexual slavery for someone else's profit,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division, “but Cross Country IV has shown us that the scourge of child prostitution still exists on the streets of our cities. The FBI, the National Center for Missing and Exploited Children, and all the state and local law enforcement agencies that contributed to this operation are to be commended for their dedication to this cause. We will all continue to work tirelessly to end the victimization of innocent children.”

In the spring of 2003, the FBI’s Criminal Investigative Division, in partnership with the Department of Justice’s CEOS and NCMEC, formed the Innocence Lost National Initiative to address the growing problem of children forced into prostitution.

“Child trafficking for the purposes of prostitution is organized criminal activity using kids as commodities for sale or trade,” said Ernie Allen, President and CEO of the National Center for Missing and Exploited Children. “These kids are victims. They lack the ability to walk away. This is 21st century slavery. We are proud to have worked hand-in-hand with the FBI and Justice Department in a partnership that is unprecedented, historic, and working.”

This program brings state and federal law enforcement agencies, prosecutors, and social service providers all from around the country to NCMEC, where the groups are trained together. In addition, CEOS has reinforced the training by assigning prosecutors to help bring cases in those cities plagued by child prostitution.

The FBI thanks the 1,599 local, state, and federal law enforcement officers representing 112 separate agencies who participated in Operation Cross Country and ongoing enforcement efforts.

The charges announced today are merely accusations, and all defendants are presumed innocent until and unless proven guilty in a court of law.

For more information on Operation Cross Country and the Innocence Lost National Initiative, visit, or


Phone sex firm's odd bedfellows

David Lazarus
Wednesday, August 3, 2005

What do Microsoft, eBay and the Carlyle Group -- employer of a number of former high-ranking government officials -- have in common?

Phone sex.

And pet psychics.

The two West Coast tech titans, along with the influential Washington financial firm, are investors in a small San Francisco company called Ingenio, which offers pay-per-minute telephone advice on a variety of topics.

Some of those topics, such as accounting and personal finance, will cause no eyebrows to be raised.

Others might seem, well, a bit unusual for respectable outfits like Microsoft and eBay, not to mention Carlyle, which in recent years has counted among its associates the likes of ex-President George H.W. Bush and former Secretary of State James Baker.

One Ingenio service, NiteFlirt, essentially serves as an online mall at which customers can choose from among hundreds of purveyors of pay-per-minute phone sex.

Another service, Keen, is a dial-a-psychic site that links the spiritually needy with assorted pay-per-minute clairvoyants, pet psychics, astrologers and people claiming a pipeline to "voices from beyond."

Ingenio supplies the online forum through which independent practitioners of these exotic skills seek customers, as well as the technology to facilitate calls.

The company also gets a 20 percent cut of all calls made through NiteFlirt and Keen, which typically cost between 99 cents and $4.99 a minute (although some calls can run considerably more).

Microsoft declined to comment on its relationship with Ingenio.

EBay spokesman Hani Durzy said the San Jose company's roughly $2 million stake in Ingenio resulted from an earlier promotional agreement that's since expired.

He said eBay wasn't aware of Ingenio's phone-sex business. In light of this, Durzy said, "we are evaluating this investment."

Ingenio says Microsoft and eBay each own less than 2 percent of the company. Both are passive investors, meaning that they have no say over Ingenio's day-to-day operations.

Not so with Carlyle, which owns about 4 percent of Ingenio.

A Carlyle Group managing director, Robert Grady, sits on Ingenio's board of directors and is knowledgeable about most aspects of the company's operations, including the phone-sex and dial-a-psychic services.

"He's a great board member," said Marc Barach, Ingenio's chief marketing officer. "He provides us guidance on a frequent basis."

Grady couldn't be reached for comment.

But Chris Ullman, a Carlyle spokesman, said Grady was named to the board after Ingenio's 2003 purchase of a firm in which Carlyle owned a significant stake, a dot-com called InfoRocket.

He said Carlyle wasn't aware of Ingenio's phone-sex or psychic-hotline operations when the acquisition was announced but acknowledged that no effort has been made since that time to sell off the Ingenio holding.

"Our goal is to preserve our investors' capital," Ullman said. "Through this merger, we have succeeded in that."

The Carlyle Group is chaired by Louis Gerstner, former chief executive officer of IBM. The firm holds substantial stakes in a variety of industries, including telecom, tech and defense.

Carlyle's senior advisers include Richard Darman, who served as budget director under the first President Bush; Arthur Levitt, former chairman of the Securities and Exchange Commission; and Thomas "Mack" McLarty, chief of staff under former President Bill Clinton.

Until shortly after the 2001 attack on the World Trade Center in New York, the Carlyle Group also counted family members of Osama bin Laden among its well-heeled investors.

Whatever else, phone sex and Ingenio's other offerings have been highly lucrative for all concerned. The privately held company posted about $67 million in revenue last year.

The bulk of these sales, said Barach, the chief marketing officer, come from the "advice" services of the NiteFlirt, Keen and Ingenio sites.

At NiteFlirt, for example, a listing for Greedy Gabriella says this "spoiled little princess" enjoys "many different fetishes." She charges $2.69 a minute to discuss them.

Accompanying customer ratings give Greedy Gabriella five stars. One of the few comments printable here praises Gabriella for her "very nice attitude."

Generally speaking, spiritual fulfillment is costlier to obtain via Ingenio than sexual pleasure. At Keen, a psychic calling herself Lady Campbell of San Francisco charges $17.20 a minute for her insights.

For a more economical $1.99 a minute, a woman named Regina says she can communicate with "pets that are living and pets that have passed on to the 'other side.' " She does this, she says, with the help of angels and spirit guides.

Ingenio's Barach sought to distance himself from these aspects of his company's business.

"We create marketplaces," he said. "The consumers purchase in real time whatever they want from the seller."

In any case, he said Ingenio is more excited about the potential for what it calls pay-per-call technology, which evolved from the phone-sex and dial-a- psychic operations. The company believes this is the next big thing in online advertising.

The way it works is this: Ingenio takes on businesses as advertising clients. It arranges for a toll-free phone number to come up any time a Web user searches for something related to a client's product or service.

When that number is dialed, Ingenio routes the call to its client's office, taking an average $7 referral fee in the process.

AOL recently agreed to offer Ingenio's pay-per-call service on its search engine. Barach said Ingenio hopes to eventually cut similar deals with the likes of Google and Yahoo.

Ingenio has only a few thousand pay-per-call advertising clients. But Barach said the company sees a potential marketplace of as many as 13 million businesses. "It's a very, very large market," he said.

And that may be so. In the meantime, however, Ingenio will continue relying for profit on the services of Greedy Gabriella and Regina.

And for investors like the Carlyle Group, that's apparently just fine.

San Francisco Chronicle business columnist David Lazarus' column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU's "Mornings on 2."
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This article appeared on page C - 1 of the San Francisco Chronicle


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