Private equity's giant collusion case is over, as Carlyle folds

[Octafish]

Here's something important to know that wasn't on the Sunday talk shows. Wasn't in the Sunday paper, either.

Private equity's giant collusion case is over, as Carlyle folds

The Carlyle Group will pay $115 million to avoid what could have been a very costly trial.

by Dan Primack
Fortune, AUGUST 29, 2014

The Carlyle Group (ACG 0.13%) has agreed to pay $115 million to settle its part in a massive private equity collusion case, Fortune has learned from a source close to the situation. This will bring the entire case to an end nearly seven years after it was first filed, as all of the other original defendants either had been let out of the case by a judge, or had previously agreed to their own settlements.

[font color="green"]In total, the plaintiffs received just under $600 million from seven firms: Carlyle, Bain Capital, The Blackstone Group (BX 0.57%) , Goldman Sachs (GS 0.82%) , Kohlberg Kravis Roberts & Co. (KKR 0.43%) , Silver Lake and TPG Capital.[/font color]

The plaintiffs had argued that Carlyle and its co-defendants had conspired to not bid against each other on eight large “take-private” buyouts that occurred prior to the financial crisis. They had been requesting “class” certification (thus making the case a class action), with a hearing on the matter scheduled for next week. Had the plaintiffs been certified and Carlyle proceeded to trial, it could have been on the hook for a whopping $36 billion.

Carlyle had been holding out largely because its co-founders — David Rubenstein, Dan D’Aniello and William Conway — were said to be personally offended by the notion that they had been involved in an illegal act, and who felt that any settlement would be a tacit admission of wrongdoing. No word yet on why they relented.

SOURCE: http://fortune.com/2014/08/29/private-equitys-giant-collusion-case-is-over-as-carlyle-folds/

Was this news where you are? And, with apologies to Kris Kristofferson and Fred Foster, isn't "collusion" just another word for "conspiracy"?

[hobbit709]

1. $115 million is pocket change to those bastards.

If corporations are people then we should be able to lock them up and strip them of all their assets.

[brewens]

2. Roger that! And I mean right down to their last shitstained pair of underwear! n/t

[Octafish]

3. Carlyle bosses worried, as last to settle, they'd be on the hook for the whole bid-rigging scam.

The Carlyle Group's $36 billion bet

Carlyle refuses to settle its role in private equity’s big collusion case, but it should.

by Dan Primack
Fortune, AUGUST 18, 2014

EXCERPT...

But there are very good reasons for why six other private equity firms already have settled to the tune of nearly half a billion dollars. And, by holding out, Carlyle is increasing its exposure to a level that could become material.

The plaintiffs allege that the defendants conspired to keep prices low on eight take-private transactions, and are requesting $11.97 billion in damages. As the only remaining defendant, Carlyle could be on the hook for all of it. Moreover, damages in antitrust cases like this one are trebled (i.e., tripled). In other words, a worst-case scenario could see Carlyle being forced to pay a whopping $36 billion.

For context, Carlyle only had $37.5 billion in total assets as of June 30. Its market cap is around $10.7 billion.

Were Carlyle to lose in court, most of its penalty — no matter the size — likely would be paid by a combination of insurance and limited partners in its private equity funds. But some also would come off of the firm’s balance sheet. This was immaterial to settling firms like The Blackstone Group BX 0.57% and Kohlberg Kravis Roberts & Co. KKR 0.43% , but that’s because they each paid out just $100 million or so.

So why is Carlyle assuming so much risk?

Sources close to the situation say that the strategy is bring driven by the firm’s founders — David Rubenstein, Dan D’Aniello and Bill Conway — rather than by its legal team. They believe that the allegations are absurd, and that any settlement would be a tacit admission of wrongdoing.

CONTINUED...

http://fortune.com/2014/08/18/the-carlyle-groups-36-billion-bet/

[1StrongBlackMan]

15. I don't know if the fact that this was private litigation ...

changes your calculus on this matter at all.

[littlemissmartypants]

4. Excellent catch, Octafish. Thanks for your post. nt

[Octafish]

6. You are most welcome, littlemissmartypants.

For some reason, the tee vee is full of stuff, but little real news.

Obvious news to the 1-percent, I'd think editors would think Carlyle, Bain, etc. colluding on bids would be of interest to the 99-percent.

[merrily]

5. Carlyle, Bain, Goldman Sachs. Great. But, I have to wonder:

Last edited Wed Feb 28, 2018, 09:11 PM - Edit history (1)

How much does $600 million mean in the collective wallet of Carlyle, Bain Capital, The Blackstone Group (BX 0.57%) , Goldman Sachs (GS 0.82%) , Kohlberg Kravis Roberts & Co. (KKR 0.43%) , Silver Lake and TPG Capital?

Those are some fat wallet cats. Isn't Romney alone raking in about that much every year as a retired founder of only one of those companies?

Let me tell you about the very rich. They are different from you and me.

F. Scott Fitzgerald, The Rich Boy.



If any of us had to pay $600 million, he or she would not be able to comprehend or bear it.

For a group consisting of Carlyle, Bain Capital, The Blackstone Group , Goldman Sachs, Kohlberg Kravis Roberts & Co. , Silver Lake, TPG Capital and their affiliates, it's Tuesday.

Whatever they did wrong to earn this adverse judgment probably made them so much money that, if they had known years ago that it would eventually cost them $115 mil, they would have giggled and proceeded anyway.

[Octafish]

7. Excellent points, merrily: Wrists get slapped, but pockets aren't emptied.

Banksters Pretend that Prosecuting Wall Street Crime Will Blow Up the Economy

Wall Street Criminals Threaten that Economy Will Blow Up If They’re Prosecuted

May 3, 2014 by WashingtonsBlog

The Department of Justice is “considering” initiating criminal charges against 2 banks.

In response, the normal cast of characters is saying – as they have for years – that prosecuting banks will cause a meltdown of the economy.

The U.S. attorney for the Southern District of New York recently mocked the silly claims of gloom and doom:

“Companies, especially financial institutions, will do almost anything to avoid a tough enforcement action and therefore have a natural and powerful incentive to make prosecutors believe that death or dire consequences await,” he said. “I have heard assertions made with great force and passion that if we take any criminal action, the skies will darken; the oceans will rise; nuclear winter will be upon us; and the world as we know it will end.”

As we’ve repeatedly noted, this is wholly untrue.

Indeed, prosecuting the individual Wall Street executives who knowingly committed criminal fraud won’t harm the economy. After all, the main driver of economic growth is a strong rule of law. And numerous Nobel prize winning economists have said that prosecuting Wall Street white collar is necessary for a prosperous economy.

Proof that prosecuting criminal fraud doesn’t hurt the economy comes from Iceland:

[The U.S. and Europe have thwarted white collar fraud investigations ... let alone prosecutions.] On the other hand, Iceland has prosecuted the fraudster bank heads (and here and here) and their former prime minister, and their economy is recovering nicely … because trust is being restored in the financial system.

In response to the sky-is-falling spouting banking apologists, professor of law and economics – and chief S&L prosecutor – William Black explains:

First, no banker is “too big to jail.” They are easily replaceable and removing a fraudulent bank CEO from power is the single most productive act that regulators and prosecutors can accomplish. [The Department of Justice's chief of criminal prosecutions] Breuer and Attorney General Eric Holder were involved in a con when they claimed that their failure to prosecute the senior bank officers leading the frauds was in any way related to “too big to fail.” Hilariously, they even applied the “rationale” for non-prosecution to former bank officers – as if a bank would fail “because” its former officers were prosecuted. It is a testament to the weakness of the reportage that this claim was not treated with ridicule.

Second, valid fraud prosecutions do not “cause” a business to fail. The fraud causes them to fail. They should fail when their “profits” arise from fraud. In particular, they should fail in the case of accounting control fraud because their “profits” are the fictional product of accounting fraud. The markets and the economy are greatly improved when fraudulent enterprises are destroyed. ***

Third, very little is actually “destroyed,” when we place a fraudulent bank in receivership, fire the crooked CEO, and sell the bank to an acquirer of integrity and competence. The new bank will, net, be greatly improved because it has been freed from control by the fraudulent leadership that was “looting” the bank (George Akerlof and Paul Romer, 1993, “Looting: The Economic Underworld of Bankruptcy for Profit”).

Fourth, there is rarely a need to prosecute a bank. In virtually every case in which the bank’s frauds cause serious harm senior officers of the bank will have led the fraud and profited from it. Everyone in law enforcement realizes that any effective deterrence will come from prosecuting those officers and not only removing their fraud proceeds but also imposing fines that will leave the officers bankrupt.

Fifth, the bank’s controlling officers are in an immense conflict of interest when their frauds are detected. They control the bank and its resources. Their first priority is to prevent their own prosecution. Their second priority is to prevent any substantial “claw back” of their compensation. Their third and fourth priorities are to do the same for less senior officers. This isn’t altruism (though it certainly has an aspect of class-based affinity). Fraudulent CEOs realize that it is risky to allow the prosecutors to gain any leverage over more junior officers who may “flip” and testify against the CEO. The fraudulent officers controlling the bank, therefore, will gladly trade seemingly huge fines in exchange for obtaining their top four priorities.

(Finally, the government's policy of not prosecuting Wall Street criminals) produces what Akerlof and Romer warned was the “sure thing” of CEO “looting” through accounting control fraud plus the assurance that the CEO will not be prosecuted, forced to surrender his fraud proceeds, or forced to pay fines that bankrupt him.Unsurprisingly, the result has been unprecedented accounting control fraud by elite banksters.***

None of this explains why they don’t prosecute bankers (much less ex bankers)

CONTINUED w/links to every point made...

http://www.washingtonsblog.com/2014/05/banks.html

[merrily]

11. Thanks, Octafish. Great essay

We even give the job craters job creators tax incentives to take jobs from Americans and ship them overseas. Though, per Burger King, you don't even have to cross the ocean.

And we pretend to believe them when they say that, out of a US population of 350 million, give or take, they just cannot find anyone qualified to fill their jobs. So, we do things like "reform" our immigration laws and don't pass EFCA.

How long? Too long.

Greed.....for want of a better word....whether on Wall Street or in our federal and state capitals, sucks.

[Schema Thing]

10. As a group, they paid 600 million

115 mil was just Carlyle.


But yeah, they all remain outrageously wealthy.

[merrily]

12. Thanks. I'll change the number in my post, but the point of the post will remain the same.

Thanks. I hate spreading disinformation.

[riqster]

8. Nice find. Thanks!

[Laelth]

9. k&r for exposure. n/t

-Laelth

[Demeter]

13. I was hoping that "Fold" meant Going-Out-Of-Business!

Imagine my disappointment....still, it's better than nothing!

[blackspade]

14. the 'legal' system conspired to shield them from actual monetary pain

standard for the US....

[bbgrunt]

16. k and r. thank you Octafish.

[lovemydog]

17. Glad they admitted to collusion

& fraud. Lying thieves.

[warrprayer]

18. kick and recc n/t

[L0oniX]

19. Fuck ...no mugshots ...again.