Immediately after the January 6 insurrection last year, billionaire Trump adviser Stephen Schwarzman tried to distance himself from the mayhem, declaring that the violence was “appalling and an affront to the democratic values we hold dear as Americans.”  

Yet Schwarzman, CEO of the private equity firm Blackstone, is now wholeheartedly bankrolling the lawmakers who boosted that insurrection — and the resources come from teachers, firefighters, and other government workers whose pension systems enrich the billionaire.

Schwarzman is the single largest donor this year to the Congressional Leadership Fund (CLF), a super PAC closely linked to House Minority Leader Kevin McCarthy (R-Calif.) that is dedicated to winning GOP control of the House. A majority of House Republicans including McCarthy voted to overturn the results of the 2020 presidential election last January, and McCarthy himself was subpoenaed earlier in May by the House committee investigating the January 6 insurrection at the U.S. Capitol, after refusing a request to appear.

Flush with mega-donor cash, CLF has already reserved hundreds of millions dollars worth of TV ads to flip seats currently held by Democrats.

Schwarzman donated $10 million directly to the super PAC in March, according to a recent campaign finance report. Meanwhile, Schwarzman’s massive and growing wealth is built on the back of public pension funds that are supplying much of the capital for his private equity empire.

The Real Insurrection Cash

While much has been made of the corporations whose political action committees donated to the Republicans who voted to overturn the election, the CLF and its Senate counterpart, the Senate Leadership Fund (SLF), constitute a much larger source of campaign cash for these lawmakers and other congressional Republicans.

Super PACs aren’t subject to contribution limits, and these two groups together raised nearly $580 million during the 2020 election season. During that cycle, Schwarzman donated $2.5 million to the CLF, but over the past few months he’s upped the ante. His $10 million donation in the first quarter of 2022 was nearly 10 percent of all of the money raised by the CLF so far this year. Ken Griffin, the founder and CEO of the hedge fund Citadel, donated $7.5 million in March.

Schwarzman separately donated $10 million to the SLF in March.

Schwarzman, who initially defended Trump’s right to question the election results in November 2020, made some conciliatory comments about the attack on the Capitol on January 6.

“The insurrection that followed the President’s remarks today is appalling and an affront to the democratic values we hold dear as Americans,” he said in a statement posted on Blackstone’s website. “I am shocked and horrified by this mob’s attempt to undermine our Constitution.”

At the same time, Schwarzman did not make any commitments to stop funding insurrectionists.

Pension Capital

Blackstone is coming off a year of record earnings and fundraising — one of many private equity firms to see a windfall in 2021, thanks to cheap borrowing costs and more capital flowing to the industry from investors seeking high returns. Schwarzman himself is reaping the profits of that boom; last year alone, he raked in $1.1 billion between his salary and dividends.

Blackstone, already the world’s largest asset manager, now has nearly $1 trillion in assets under management — a milestone it expects to reach by the end of 2022.

Public pension funds have $480 billion invested in private equity, and provide a large portion of the private equity industry’s total capital, including Blackstone’s. After the insurrection, financial watchdog groups wrote to 30 major pension funds invested in Blackstone, and called upon them to review their investments given Schwarzman’s role in bankrolling insurrectionists and relationship to Trump.

“On behalf of the undersigned organizations, we urge you to make a public commitment to decline future investment opportunities with The Blackstone Group and publicly urge the firm and its employees to commit to discontinuing all political spending,” the letter said. “[Schwarzman’s] ongoing refusal to firmly break with former President Donald Trump in spite of Trump’s role inciting the insurrection exposes investors to unacceptable levels of reputational risk. Schwarzman personally donated $3 million to a PAC supporting Trump’s 2020 campaign, money earned from fees and expenses paid for by your pension fund and the working people whose retirement savings you are responsible for investing.”

In New York, state lawmakers introduced a bill demanding the city and state comptrollers review pension funds’ investments in companies whose executives had helped to bankroll the insurrection, including Blackstone. New York pension funds have billions of dollars in Blackstone funds, and the New York City Employees' Retirement System paid the firm more than $7 million in fees last year.

However, pension funds declined to heed these calls, and have continued to invest in the firm.

In a single recent round of fundraising for a new Blackstone fund, Blackstone Real Estate Partners Asia III, major pension funds committed hundreds of millions of dollars. The New York Common Retirement Fund committed $300 million, the Virginia Retirement system committed $200 million, Florida’s state retirement funds committed $100 million, the Illinois Teachers Retirement System committed up to $100 million, the Minnesota State Investment Board committed $100 million, and the New Mexico State Investment Council committed $75 million.

After the insurrection, Illinois State Treasurer Michael Frerichs (D) told the Washington Post, “We’re going to investigate and ask questions of our fund managers… Are their giving patterns destabilizing our government, which would lead to the destabilization of our country? This is not about giving money to Republicans and Democrats — this is about extremists.”

Freirichs’ office did not respond to a request for comment about whether they had proceeded to ask such questions of their fund managers.

Private equity and hedge fund executives like Schwarzman and Griffin, meanwhile, are able to exploit a tax avoidance scheme that Democrats have failed to end, despite Biden railing against it on the campaign trail. The so-called carried interest loophole allows them to pay a lower tax rate on their income than the ordinary rate, which cuts their tax bills by as much as half.

A provision to reform the tax avoidance loophole was initially included in the House’s version of Build Back Better social spending bill, but was ultimately removed from that bill as well as Biden’ own compromise Build Back Better proposal, after major private equity industry lobbying.

While private equity is often billed as a way for investors to beat the market, investments in the space are inherently risky and have not typically been good deals for public pension funds. Ludovic Phalippou, a professor of finance at Oxford University, has found that private equity returns roughly match the S&P 500 index of large stocks, while charging much more in fees.

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