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MONEY MANAGEMENT

Scaramucci scores millions from a buyer with mystery investors

Anthony Scaramucci
Anthony Scaramucci

A few days after Anthony Scaramucci lined up a top job in Donald Trump's White House, he struck a multimillion-dollar deal to exit his investment firm, selling part of his interest to a little-known company, RON Transatlantic EG.

Mr. Scaramucci, the organizer of a popular hedge fund conference, said Friday in an interview that he doesn't know the identity of RON's investors and relied, as is customary, on RON's managers to vet them. A RON spokesman declined to name the investors, and their identities haven't been disclosed to Mr. Scaramucci's SkyBridge Capital, according to a representative of the firm.

Mr. Scaramucci is getting a head-turning price compared with similar transactions, analysts say. RON teamed up with another buyer, a subsidiary of Chinese conglomerate HNA Group Co., to buy most of SkyBridge in a deal that values the asset manager at $180 million or more depending on performance, according to people with knowledge of the matter who asked not to be identified because they weren't authorized to discuss terms. Mr. Scaramucci said the price is fair and that he turned down higher offers.

Securities disclosures and corporate reports identify the man behind at least some of RON's holdings: Danilo Diazgranados Manglano, a 52-year-old Venezuelan-born banker known for close ties to the administration of that country's late president, Hugo Chavez. As of last year, Mr. Diazgranados owned as much as 10% of SkyBridge through a RON investment vehicle formed in the English Channel island of Jersey, one securities filing shows.

Mr. Diazgranados isn't part of the current buyer group and already has shed his stake in SkyBridge, his lawyer, Gregory Craig, said in an interview. He declined to comment further on the transaction.

Ethics disclosures

Richard Painter, who served as an ethics lawyer under former President George W. Bush, said a transaction like the one Mr. Scaramucci is pursuing calls for more public disclosure and a close look by the White House.

“Here, we've got foreign money, and we don't even know who it is,” said Mr. Painter, now a professor at the University of Minnesota.

Mr. Scaramucci has filed all of the ethics disclosures required for his White House role and has agreed to recuse himself from any matter that pertains to his SkyBridge interest, said Elliot Berke, a lawyer for Mr. Scaramucci.

“They bought SkyBridge in spite of, not because of, my affiliation with the administration, because they both recognize that I would personally recuse myself from any and all activities in terms of my relationship with the administration,” Mr. Scaramucci said.

A spokesman for HNA declined to comment.

'The Mooch'

A gregarious Long Island native widely known as “The Mooch,” Mr. Scaramucci was a prominent Trump fundraiser during last year's presidential campaign and a frequent presence at Trump Tower during the transition period.

On Jan. 12, Bloomberg reported that he was given a top White House role as an assistant to Trump. Mr. Scaramucci, who later said his title is director in the office of public liaison, has already started work at the White House, although he doesn't formally join the staff until Feb. 6, according to a person with knowledge of the matter.

As news of his appointment broke, Mr. Scaramucci was wrapping up negotiations for the sale of his approximately 45 percent stake in New York-based SkyBridge, which he founded in 2005. The business manages funds of funds, gathering money from clients and entrusting it to outside hedge funds. On Jan. 17, SkyBridge announced the agreement to sell a majority stake to HNA and RON without disclosing terms. The sale includes all of Mr. Scaramucci's interest.

HNA, based in Haikou City, China, is slated to get a majority stake in the company, according to people with knowledge of the transaction. These people said RON's share is at least 20 percent, and that remaining SkyBridge executives would own the balance. Mr. Scaramucci has already relinquished his role at the company.

'Rich valuation'

The valuation of SkyBridge could climb to as much as $230 million if certain performance targets are met, said the people with knowledge of the matter. The basis for Mr. Scaramucci's payout is fixed at the $180 million valuation, they said. The deal is scheduled to close in about three months, the people said.

The transaction values SkyBridge at 7.2 times normalized Ebitda, or earnings before interest, taxes, depreciation and amortization, Mr. Scaramucci said.

“That's a rich valuation for a fund-of-funds transaction,” said Karl D'Cunha, managing director at CBIZ Valuation Group in Chicago, who said buyers typically pay three to five times earnings.

Six other investment bankers, consultants and managers of similar funds also said the valuation was high for a fund-of-funds manager, particularly one that's seen client withdrawals. SkyBridge's assets have fallen after two years of performance that lagged behind peers. The firm had $13.6 billion under management and advisement in July 2015. As of Nov. 30, 2016, the amount had dropped to $12 billion.

Competitive auction

Mr. Scaramucci said he held a competitive auction and chose a lower bid from HNA and RON because they offered to protect his partners, employees and investors.

Mr. Scaramucci said the company has a uniquely valuable feature: a distribution system that taps 41,000 mostly “mass affluent” clients and gives them access to hedge fund investments that would otherwise be out of reach.

“Every dentist in America can have a $25,000 to $50,000 hedge fund portfolio, run by the best and brightest hedge fund managers in the world — hedge funds that typically have $15 to $25 million minimums,” he said in a Jan. 12 interview in Trump Tower.

Last year, RON said on its website that it was based in Washington, had offices in Madrid, Mexico City and New York and managed more than $8 billion in investments in energy, telecommunications and finance. That information is no longer on the website.

The top executive there, Lorenzo Roccia, was born in New York and grew up in Venezuela before returning to the U.S., according to a 2008 profile in a Venezuelan media outlet. He has helped raise funds for several Democratic presidential campaigns, the profile said. Reginald Love, a personal aide — or “body man” — to former President Barack Obama, is a partner in RON's Washington office, according to his LinkedIn account.

“I've known the principal, Lorenzo Roccia, for 20 years,” Mr. Scaramucci said. “I hold him in the highest regard. He is a man of impeccable character and he has an impeccable reputation.”

Roccia said in a telephone interview that the investors in the SkyBridge deal are family offices and institutions, but he declined to name them.

Diazgranados vehicle

Documents filed in New Jersey last year show that the RON entity that held the SkyBridge stake, known as RON Transatlantic Offshore Ltd., was 85 percent owned by a British Virgin Islands company that was in turn controlled by Mr. Diazgranados. Another Jersey company, RON Transatlantic Brewery Services Ltd., was 82 percent owned by the Diazgranados vehicle. And two other RON companies filed disclosures in Washington identifying their directors as Messrs. Diazgranados and Roccia and Abel Navarro Homet, who lists a Madrid address.

Mr. Diazgranados's son, Francisco, works at SkyBridge as an associate, according to a document filed with the Financial Industry Regulatory Authority.

Mr. Diazgranados was once a prominent broker in Venezuela with a reputation for close ties to the Chavez government and for advising it on financial transactions.

In a confidential 2006 State Department cable, a top U.S. diplomat in Venezuela, Kevin Whitaker, described Mr. Diazgranados as “the intermediary” between the Chavez government and financial institutions for handling “off-the-books activities.” The cable was later made public by WikiLeaks. The State Department declined to comment, as did Mr. Diazgranados's lawyer.

“He presents himself to the private sector as the man with the contacts needed inside the government to make financial deals happen,” said Francisco Faraco, who has worked as a financial analyst in Caracas for decades.

Trash hauling

At one point under Mr. Chavez's reign, Mr. Diazgranados's holdings included $300 million in assets, including a trash-hauling company with government contracts, a diamond mine, two insurance companies and stakes in newspapers, according to the resume of a former employee of Mr. Diazgranados's posted online.

Mr. Chavez, who served as president from 1999 until his death in 2013, was succeeded by his vice president, Nicolas Maduro.

Mr. Diazgranados left the country in 2008 because of the deteriorating security situation there, he told the newspaper El Mundo in 2010. In the interview, El Mundo asked Mr. Diazgranados to answer critics who labeled him a “boliburgues” — a member of a group of insiders who prospered under the Chavez regime by profiting from government connections. He dismissed it as mere guilt by association.

“Every person who has made money in the last 10 years is either Chavista or a thief,” he said. “That is the mentality in Venezuela.”

Mr. Diazgranados wrote in an email Friday that he has hasn't been to Venezuela since 2008.

“I have no business or financial or political or personal relationships with the Maduro government,” he said.