Blackstone CEO's high profile sparks backlash

By Jonathan Keehner and Christian Plumb

NEW YORK (Reuters) - If private equity firms had aimed to steer clear of political controversy heading into an election year, the message may have been lost on Stephen Schwarzman.

The CEO and co-founder of Blackstone Group BG.UL this week became a lightning rod for criticism over perceptions that he makes too much money and leads an overly lavish lifestyle.

Blackstone revealed his stake in the firm could be worth $7.73 billion after its initial public offering this month and that he will get a one-off payout of up to $677.2 million.

One of his private staff also exposed his penchant for very expensive food: $400 crabs (working out to $40 a leg) and $3,000 for a weekend's food shopping for himself and his wife.

The disclosure of such spending could prove even more costly. By the end of the week, powerful Republican and Democrat politicians were proposing legislation that would impose much higher taxes on private equity firms going public.

Their big concern is that buyout groups are structured in a way that allows them to pay far less in tax, by paying capital gains taxes, than businesses hit with corporate tax rates.

"The public responds to things that are very much in the news and visual," said Columbia University Law School Professor John Coffee. "That Mr. Schwarzman will be worth $8 billion and that he's paying only capital gains taxes has to bother ordinary citizens."

BIRTHDAY GALA  Continued...