Blackstone crumbles as Schwarzman's eyes legacy

Last month, Stephen Schwarzman's Blackstone fund announced that its fourth-quarter earnings for 2007 had plunged a precipitous 89%. What was particularly galling was that this occurred in the same year that the fund released its IPO, for which it received top dollar. Of course, by the time this was announced, Schwarzman had already collected a $5.1 billion paycheck for 2007.

There has been some talk about how Blackstone's declining profits had led to a comparable decline in Schwarzman's fortunes. However, given his considerable 2007 salary, it doesn't seem like he's hurting all that much. In fact, he recently donated $100 million to the New York Public Library; while this is a very impressive gift, it comes with an equally impressive price: the main library building at 42nd Street and Fifth Avenue will now be named the Stephen Schwarzman Building. In return for his munificence, Schwarzman's name will be carved in five separate places on the white marble edifice: thrice on the front of the building and twice on the 42nd Street side. While this will, no doubt, be far more attractive than a graffiti "tag," one cannot escape the feeling that the concept is the same.

One Blackstone investor has recently sued the fund, claiming that, in its IPO documents, it failed to disclose key information about the unimpressive performance of some of its companies. Had this information been made available to investors, they presumably would have had lower expectations for Blackstone and would have paid considerably less for shares in it. In addition to being unethical, the suit avers that this is a violation of federal securities laws.