Marcus Licinius Crassus and Carried Interest
Posted by Percy Walker at Thursday, August 02. 2007 and is filed under Carried Interest,Private Equity 
Percy is the world's foremost authority on the historic tax treatment of carried interest. This is the first in what may be a series of posts exploring the tax treatment of carried interest throughout history.
Photos: Crassus and Olivier as Crassus
Most of you know Crassus as the Roman general who suppressed the slave revolt led by Spartacus and then crucified 6,000 slaves on crosses lining the Appian Way from Rome to Capua. (He was played by Sir Laurence Olivier in the movie, after all.) You may also know Crassus for his financial and political support of a young Julius Caesar or as a member of the First Triumvirate. But did you also know that he was the most successful private equity fund manager of ancient Rome?
Marcus Licinius Crassus founded the MLC Distressed Opportunities Fund, L.P. in ca. 84 B.C. with an investment strategy not unlike the one Citadel Investment Group recently deployed in acquiring the assets of Sowood Capital. Upon hearing of a fire, Crassus and his management company's 500-strong firefighting team would rush to the scene and offer nearby building owners cash for their property. If the offer was accepted, the fire was extinguished.
This was an effective firefighting and moneymaking strategy practiced by Roman fund managers up until the time Nero came to power and pushed through legislation changing the tax treatment of a fund manager's carry (Latin: transmitto) from the capital gains rate (Latin: caput contradico) to the ordinary income rate (Latin: vulgaris reditus). And what happened next? The Great Fire of Rome and Nero's famous fiddling.
Scholars agree that the fire would have done little damage if it hadn't been for the fiddling with the great Roman tax code.
Photos: Crassus and Olivier as Crassus
Most of you know Crassus as the Roman general who suppressed the slave revolt led by Spartacus and then crucified 6,000 slaves on crosses lining the Appian Way from Rome to Capua. (He was played by Sir Laurence Olivier in the movie, after all.) You may also know Crassus for his financial and political support of a young Julius Caesar or as a member of the First Triumvirate. But did you also know that he was the most successful private equity fund manager of ancient Rome?
Marcus Licinius Crassus founded the MLC Distressed Opportunities Fund, L.P. in ca. 84 B.C. with an investment strategy not unlike the one Citadel Investment Group recently deployed in acquiring the assets of Sowood Capital. Upon hearing of a fire, Crassus and his management company's 500-strong firefighting team would rush to the scene and offer nearby building owners cash for their property. If the offer was accepted, the fire was extinguished.
This was an effective firefighting and moneymaking strategy practiced by Roman fund managers up until the time Nero came to power and pushed through legislation changing the tax treatment of a fund manager's carry (Latin: transmitto) from the capital gains rate (Latin: caput contradico) to the ordinary income rate (Latin: vulgaris reditus). And what happened next? The Great Fire of Rome and Nero's famous fiddling.
Scholars agree that the fire would have done little damage if it hadn't been for the fiddling with the great Roman tax code.
Percy, your analogy here to Marcus Crassus is clever and not too far from the truth it seems. I must admit that I have a soft spot in my heart from MLC, not because he was an a$$, but because he was not afraid to be what he was, even if it was an a$$ -- and he didn't care who knew it! Well, MLC got his in the end by the Partians. I wonder who Citadel's Parthians might end up being?
Tom