Stephen Schwarzman -- the subject of my Napoleon-Watch feature -- had a mixed 2007. He got the public markets to buy Blackstone Group's (NYSE: BX) busted IPO -- it trades 27% below its $30 IPO price. And he reaped some really bad publicity.

I appeared on CNBC back in June and discussed some of the negatives of the Blackstone IPO. I thought it presented complex tax issues and no legal recourse. I said: "You're getting a massive tax headache and massive losses due to high compensation. I would not want to own this stock; I'd be running for the hills."

But Schwarzman did well on the IPO and his net worth was recently estimated at $7.8 billion. Nevertheless, along with the money came some less than flattering publicity:

• At 5' 6" he is a "little man" who wants to "inflict pain" on and "kill off" his rivals;
• He noticed that one of the servants at his 11,000-square-foot Palm Beach mansion wore squeaky rubber soled shoes; and
• He ate $400 worth of stone crabs there during his 15 minute lunches.

Still, he's got plenty of money to soothe any hurt feelings. I'd say he's a true money winner.

Be sure to check out more Money Winners of 2007.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

This post is part of our Money Face-Offs feature. Let us know who you think comes out ahead in this head-to-head match-up, and check out our other Money Face-Off posts.

Stephen A. Schwarzman, co-founder of the Blackstone Group vs. Henry Kravis, co-founder of KKR. A showdown so delicious, it's already been immortalized on Page Six -- Schwarzman calls Kravis a "one-trick pony," Kravis calls Schwarzman "the poster boy for greed." Who is more arrogant? More eccentric? Richer? Only the planners of their lavish parties can tell ...

The two have been in a high-stakes tennis match of sorts for years in every financially-oriented aspect of their lives, starting with the companies they target, continuing through their more personal acquisitions and not even ending in their contributions to charity.

Nope. In the world of private equity, KKR had always been the hugest, the most storied, the most secret and powerful. KKR was responsible for the 1988 leveraged buyout of RJR Nabisco, inspiration for thousands of MBAs, as well as a book and a movie. Not many financial deals have inspired so much as a little sonnet, but this, this was the stuff of legend.

Part of that legend? Kravis' formidable ego.

Blackstone Group LP (NYSE: BX) Chief Executive Stephen Schwarzman, who became a billionaire thanks to the firm's recent initial public offering, won't be able to stop the U.S. Congress from making his firms pay higher taxes particularly as the presidential election looms.

Legislation proposed by Sens. Max Baucus (D-MT) and Charles Grassley (R-IA) would TRIPLE the amount of taxes that the New York-based company would pay annually. The company is arguing that the Baucus-Grassley bill raising taxes on private equity and hedge funds would deprive the government of revenue because it would discourage companies from going public.

Blackstone won't win too many friends on Capitol Hill with that argument since hedge funds already get a huge break from the IRS because they pay taxes at the 15% rate of partnerships instead of the 35% corporate tax rate. To many people and quite a few economists this just doesn't seem fair.

Politically speaking this also is a losing issue for Blackstone. Americans believe in the Horatio Alger myth that by hard work and luck anyone can become rich. The public, though, has little sympathy for people who climb their way to the top by cutting corners or getting breaks that they don't seem to deserve.

The Democrats in Congress are well attuned to this reality. For them, there is no better industry to target than hedge funds and private equity firms. To most Americans, the industry is mysterious and scary. What possible downside could they have in targeting the likes of Blackstone.

Ok, if you bought shares of The Blackstone Group LP (NYSE: BX) for $38, you probably don't like the firm's leader, Stephen Schwarzman. Or, if you pay ordinary tax rates, you probably have some distaste for the man. Oh, what if you got a pink slip from a company that The Blackstone Group purchased?

I think it's a good bet that Schwarzman's popularity rating is dicey.

Yet, in the deal world, he should be in the Hall of Fame. In fact, in this Sunday's NY Times, Andrew Ross Sorkin has a piece that defends the controversial financier.

According to Sorkin, he thinks it was inevitable that we would learn about the shadowy world of private equity. So why not now?

What's more, Sorkin says that Schwarzman is not the only dealmaker who likes to spend money on luxury and parties. For example, he points to TPG's David Bonderman, who hired the Rolling Stones for his birthday bash.

Of course, Schwarzman was smart enough to realize that there was a big opportunity to take lots of money off the table – and, as a result, make it more difficult for his competitors to do the same.

More importantly, Schwarzman has assembled a top-notch team and racked up stellar returns.

Basically, he is no different from any other top financier, which is probably why he has lots and lots of detractors.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

As I posted last month, Blackstone Group's CEO Stephen Schwarzman gave an interview to the Wall Street Journal with a compelling theme -- Schwarzman is the Napoleon of private equity. Napoleon-watch tracks his moves on the business battleground.

The New York Times reports that Blackstone Group LP (NYSE: BX) is making things tough for itself and its peers in the eyes of Congress. That's because Blackstone used a loophole to avoid paying tax on $3.7 billion -- most of which was raised in its IPO last month.

Although they will initially pay $553 million in taxes, Blackstone's partners will get that back, and $200 million more, from the government over the long term. In a nutshell, the partners used the writeoff of goodwill -- the difference between the book value and market value of an asset -- to shield their gain from tax.

The details are rather complex but fiendishly clever:

• the Blackstone partners paid a 15% capital gains rate on the shares of Blackstone's management company they sold last month in the IPO
• Blackstone then arranged to get deductions for itself for the $3.7 billion worth of goodwill at a 35% rate. They taxed low and deducted high.
• The deductions must be spread out over 15 years. And the original Blackstone partners are getting just 85% of the tax savings, leaving the other 15% to outside investors. The deductions on the $3.7 billion to the partners are $1.1 billion over 15 years.
• If these tax savings were paid as a lump sum this year, the partners would get $751 million, which is $198 million more than the taxes the partners will pay on the $3.7 billion of goodwill.

These guys didn't get to be billionaires for nothing. Meanwhile my proposal for putting half their pay in escrow for 10 years to cover the costs of bad deals is gaining tiny amounts of support.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Blackstone.

Hilton (NYSE: HLT) volatility and volume elevated prior to Blackstone paying $26 billion. HLT announced Blackstone Group (NYSE: BX) will acquire all the outstanding common stock of HLT for $47.50 per share. HLT closed at $36.05. I reported near the close of trading on 7/3/07 "option volume & volatility Elevated as HLT rallies 6%." HLT total volume of 32,490 contracts and HLT July option implied volatility of 39 was aggressive, above its 26-week average of 31 according to Track Data, suggesting larger risk.

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

The elite of private equity travel in private jets, right? Of course. But, this may not be the best vehicle for dealmakers.

In fact, if you look at the Blackstone Group prospectus, you will notice that the CEO, Stephen Schwarzman, and senior chairman, Peter Peterson, co-own a helicopter. Here's the disclosure:

"Mr. Schwarzman owns an airplane and Messrs. Schwarzman and Peterson jointly own a helicopter that we use for business purposes in the course of our operations. Messrs. Schwarzman and Peterson paid for the purchase of these aircraft themselves and bear all operating, personnel and maintenance costs associated with their operation. The hourly payments we made to Mr. Schwarzman and Mr. Peterson for such use were based on current market rates for chartering private aircraft. We paid $1,544,320, $1,037,925 and $1,032,170 to Mr. Schwarzman in 2006, 2005 and 2004, respectively, for the use of his airplane and we paid $158,500, $306,210 and $198,905 to Mr. Schwarzman and Mr. Peterson in 2006, 2005 and 2004, respectively, for the use of their jointly-owned helicopter."

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Another one bites the dust. Morgan Stanley (NYSE: MS) lost its chief investment strategist, Henry McVey, today. He had held the job since early 2004. The company said he would be moving to another firm, but its name was not mentioned.

It is probably a safe bet that his new home will be in private equity or at a hedge fund. And as those sectors grow, the need for the kind of advice that Mr. McVey and his department put out is dwindling. According to Bloomberg, "fund companies cut spending on Wall Street research to $4.9 billion in 2006 from $5.4 billion in 2004 and will reduce it to $4 billion in four years."

The news comes on the same day that is was disclosed that Blackstone CEO Stephen Schwarzman and his co-founder will get $2.33 billion when the company completes its IPO. They will also retain a 28% interest in the firm. Studies of hedge fund compensation have turned up a number of managers who made several hundred million dollars.

Mr. McVey is not likely to make what Mr. Schwarzman does, but, if he can only get a little piece of that pie, it is easy to see why he is changing jobs.

Douglas A. McIntyre is a partner at 24/7 Wall St.

While business editors seem obsessed with reports that Blackstone Group may take public its management company, it's a distraction from what I think is a far more important story -- the economic impact of tighter mortgage markets and slumping home prices.

Last Friday the Blackstone IPO story caused me some personal annoyance. I was on my way to a CNBC studio to comment on subprime investment opportunities when I got a cell phone call from the producer. She announced that my segment was being canceled and replaced with David Faber talking about the Blackstone IPO.

Eight rich guys get richer, yawn! The real story was that Faber needed to promote his scoop on the deal -- which might be partially inaccurate. Faber reported that Goldman Sachs Group (NYSE:GS) was working on a Blackstone prospectus but there's a rumor that Goldman denies involvement.

I think the announcement reflects four parallel trends:

CNBC's deal reporter David Faber who got the scoop on the TXU Corp. (NYSE: TXU) buyout has another big one. Apparently, the big-time private equity firm, The Blackstone Group, is planning to file for an IPO within the next couple weeks.

Funny enough, Blackstone's CEO, Stephen Schwarzman, has indicated -- on many indications -- that an IPO was not in the cards. Why deal with all the hassles? Well, I guess Schwarzman could not ignore the huge $10.4 billion IPO of Fortress Investment Group (NYSE: FIG).

Faber thinks a Blackstone offering could fetch a valuation at least twice that. It's stunning considering that it was in 1985 that Schwarzman, who owns about 40% of Blackstone, invested $200,000 to start the company. How about that for an ROI?

I think it's a good bet that other premier private equity firms are preparing for IPOs. Yes, things are going to get very interesting – very soon.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

In light of the success of the Fortress Investment Group LLC (FIG) IPO, the buzz is swirling on what private equity firm will be next to go public.

How about Blackstone?

Well, probably not. This is according to a report in Reuters.

Blackstone's chief, Stephen Schwarzman, was on a panel at the Super Return conference in Germany (this is pretty big event in the private equity world).

He pointed to some flubs, such as the IPOs from KKR and Apollo. In fact, he called the public markets "overrated."

Yes, Schwarzman is not shy.

But, there may be a couple other reasons why he does not want to go public. First of all, it is likely to be a distraction. The IPO process is time-consuming. There are also ongoing public disclosures.

In fact, a big advantage for private equity firms is speed. This was likely a factor for why Blackstone won the bidding for Equity Office Properties (NYSE: EOP).

Besides, if Blackstone did go public, Schwarzman would have to disclose his compensation. And, in light of the backlash on this topic, it's probably best he keep things private.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Over the years, commercial real estate has made a variety of people multi-billionaires. Actually, in the buyout of Equity Office Properties (NYSE:EOP), we are seeing some of these all-stars compete on a grand scale. This is detailed in a great story in Bloomberg.com. Ok, let's take a look at the roster:

• Sam Zell: He is the cofounder and CEO of EOP. He got his start, back in the 1970s, as a skillful investor in distressed properties. His nickname became the "Gravedancer." Forbes has his net worth pegged at $4.5 billion.
• Stephen Schwarzman: He is the CEO and cofounder the Blackstone Group. True, a big part of his wealth has come from private equity. However, Blackstone is one of the world's largest real estate investors. His networth is about $2.5 billion.
• Steven Roth: He is the cofounder and CEO of Vornado Realty Trust (NYSE:VNO). His networth is about $1.1 billion. Yes, in terms of net worth, Roth is lagging. However, he now has the high bid for EOP – at about $37.6 billion. Moreover, he is being joined by Barry Sternlicht, who built Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT).
  

True, if Blackstone loses the deal, it will get a $200 million break-up fee. But, this is chump change. Actually, it looks like Blackstone wants to make a counter bid. Funny enough, if Blackstone wins, it's a good bet that the firm will sell of some of its properties to Roth.

All in all, this shows that mega real estate moguls still see potential in commercial real estate -- that is except Zell, who wants to cash out. And, of course, he's the richest of the whole group. And about to get even richer.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Back in 1985, Peter Peterson and Stephen Schwarzman pooled together $400,000 and started a private equity firm: The Blackstone Group. Now one of the biggest in the world and has been a player in a variety of mega deals in 2006.In the Financial Times, there's an interview with Schwarzman (who is the current CEO).

First of all, he's not a fan of Sarbanes-Oxley, the law Congress passed in order to deal with the blow-ups like Enron and WorldCom. This law has made it difficult for companies to go public. This is important to private equity firms, as they often need a way to get liquidity for their buyouts – which often means selling the company into the public markets.

Next, Blackstone has been active in real estate plays. His analysis is fairly straightforward: 1) the economy is expanding, creating demand for commercial real estate and 2) there has been little supply because of replacement costs (commodities such as steel, cement and so on) and regulations. As a result, rents are increasing – making it much easier to get a buyout done.

Schwarzman even talks about the apparent lack of bidding on private equity deals (at least for the big ones). Yes, the conspiracy theory is that there is collusion. But, of course, Schwarzman begs to differ. His reasoning: in the buyout process, the private equity firms get the same information. And, since they use typical valuation approaches, it should be no surprise that valuations are similar.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.