Fortress Creates Losses But Pays Itself First

Fortress Investment Group (FIG) reported Q4 and year end results using a few tricks from the AIG public relations machine. Pre-tax distributable earnings (DE) were reported at a loss of $162 million for the full year. Then they lay this complicated sentence on investors and report GAAP net loss, excluding principals agreement compensation, of $100 million. GAAP net loss of $322 million. Presumably they paid principals $222 million despite the fact that they are experiencing losses.

In Q4 they report GAAP net loss, excluding principals agreement compensation, of $85 million. GAAP net loss of $140 million. Which means in Q4 they paid out $55 million despite losses. They continue on with an explanation in bold letters that one quarters results is not indicative of another quarter and they conclude that Quarterly dividends are not necessarily representative of the Company's earnings in the current quarter.

They then go on to announce that “The Company's Board of Directors elected not to pay a dividend in the fourth quarter of 2008. Consistent with its decision in the third quarter, the Board elected to retain capital for potential future investment opportunities and for working capital purposes“ Who needs a dividend when you can just take the cash out directly?

At the same time Forbes Magazine reports Chief Executive Wesley Edens plans to participate in this weeks TALF program which will help stabilize financial markets; we pray and hope.

Not quite like AIG, which needs to be propped up, but the mind set is the same. Inside management lines their pockets, pays themselves first and leaves poor results behind for investors.

What a compelling investment proposition.