Reply #32: Extensive NYT article Cerberus/IAP/etc.

[Emit]

~snip~

Through another company it controls, I.A.P. Worldwide Services, Cerberus is poised to become one of the Army’s largest contractors in Iraq. ... All told, Cerberus has a controlling interest in more than 45 companies that employ more than 250,000 people and generate $50 billion in revenue each year, more than the sales of Microsoft, Motorola or PepsiCo. The fund has earned an average annual return of about 22 percent over the last seven years, according to its marketing materials, and Institutional Investor magazine estimated that Mr. Feinberg took home a $75 million paycheck in 2004...

~snip~

Although many backers of Cerberus say Mr. Feinberg, 46, is known for his loyalty to investors and partners, his analytical savvy and his creative takeover strategies, the fund’s tactics in the bare-knuckled and risky arena of distressed-debt investing have given Cerberus its share of bruises. Court documents detail legal brawls in which investors accuse Cerberus of orchestrating secretive deals that transgressed legal and ethical boundaries, accusations the firm denies...

~snip~

Some of those more secretive tactics, however, drew complaints and lawsuits. In 2000, Cerberus invested $42 million in the debt of WSNet Holdings, a small provider of satellite television programming. Over the next two years, according to shareholder lawsuits, Cerberus forced the company into bankruptcy by secretly buying up the bonds of companies WSNet hoped to acquire and forbidding WSNet executives from pursuing deals. Through bankruptcy proceedings, the fund tried to take control of the company, lawsuits contend. The suits also contend that Cerberus installed directors at WSNet who maximized Cerberus’s profits at the expense of other stakeholders. The claims were settled for a relatively small amount in 2005, by which time Cerberus had recouped its initial investment in WSNet, according to the lawsuits.

~snip~

In 2000, when Coram declared bankruptcy, the company’s executives proposed a restructuring plan that would give total ownership to Cerberus and other bondholders. Coram’s equity investors, including the real estate magnate Sam Zell, would have gotten nothing. Mr. Zell and other shareholders then discovered that the company’s chief executive, who helped propose the plan, was secretly receiving nearly $1 million a year from Cerberus, in addition to his Coram salary, according to court documents. A federal bankruptcy judge ruled that a conflict of interest existed.

~snip~

http://www.nytimes.com/2006/12/24/business/yourmoney/24hedge.html?ex=1324616400&en=f6d8424906ae665f&ei=5088&partner=rssnyt&emc=rss