Union takes aim at private equity

NEW YORK (CNNMoney.com) -- Private equity, already in the crosshairs of Congress and threatened by deteriorating debt markets, faces a new challenge: a public awareness campaign by organized labor.

The Service Employees International Union, in conjunction with a local New York political party, announced plans to raise awareness and scrutiny of private equity firms and their deals through public events, leafleting campaigns, Web-networking and Web sites.

Stephen Lerner of the SEIU's Private Equity Project

The announcement was made outside of a private equity conference on Wall Street in New York on Wednesday. The SEIU represents about 1.8 million public and private sector employees in such fields as health care and property maintenance.

"We're shining a light on private equity," said the union's Private Equity Project director Stephen Lerner. "Because what's happening to private equity is central to what's happening to America." Lerner pointed to the soaring profits the industry made last year in an economy "where 50 million people don't have healthcare."

The union claims that there is record income inequality in the United States, while millions of workers lack healthcare coverage and pensions, and that private equity contributes to this through corporate buyouts that don't take workers' considerations into account.

"People are shocked to find out how the industry works and the amounts of money being involved," Lerner said.

But the industry sees another story in private equity.

"We're driven by an overwhelming desire to grow the value of the businesses we acquire," said Robert Stewart, of the Private Equity Council. Stewart notes that between 1991 and 2006 the industry returned $430 billion to investors including public and private pensions funds - which include unions.

"Our responsibility is to be more candid and open and available to talk about who private equity benefits," he said.

A participant in the private equity conference agreed that the industry has a long way to go to make its case to the public and conceded the public's perception toward private equity was "hostile."

Gary Carmell of CWS Capital Partners blamed it on the Blackstone IPO which shed light on the industry and its extraordinary profits.

"It's completely up to the industry to mobilize. The industry has created a lot of wealth for pension funds, and that message needs to get out," said Carmell.

Lerner dismisses the notion of value creation simply by increasing the worth of benefits pensions and mutual funds.

He predicts the campaign "will lead people to say 'There is a lot of money in this country and why don't I have access to it?'"

Lerner said the New York-based SEIU will first focus on Bain Capital, which he says charges higher carried interest than many other firms. Carried interest is the profit from their investments, an area being considered for a tax raise in Congress.

Bain's combined holdings also employ about 660,000 employees, according to the Private Equity Project's research.

The union also plans to hold events around the country in which students will hold hearings to challenge the benefit to them of Sallie Mae's (up $0.06 to $57.56, Charts, Fortune 500) buyout by J.C. Flowers & Co.