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Legal Challenges Over 'Money-for-Nothing' Payments Gain Momentum

Posted on September 25th, 2023 at 11:37 AM
Legal Challenges Over 'Money-for-Nothing' Payments Gain Momentum

From the desk of Jim Eccleston at ÍøÆØ³Ô¹Ï 

Apollo Global Management and Carlyle Group, two prominent private equity firms, now face investor lawsuits regarding payments made to insiders without apparent justification.  The Wall Street Journal reports that suits of this kind may gain more significance nationwide.

The lawsuit against Apollo alleges that the firm paid $570 million to its founders, Leon Black and Josh Harris, along with its current CEO, Marc Rowan, and others during a restructuring. Carlyle also paid $344 million in cash to insiders in a similar fashion. However, the lawsuits claim that Apollo and Carlyle compensated those insiders without generating any benefits in the restructuring, essentially providing them with "money for nothing" as reported by the Journal.

A recent ruling involving GoDaddy, a prominent domain registrar, may strengthen the position of investors in lawsuits against powerful private equity firms. After GoDaddy went public and experienced significant losses with low tax obligations, its board approved an $850 million payout to its founder and private equity partners. In a groundbreaking decision, the judge ruled in favor of shareholders who sued the company over the buyout, setting an important precedent.

 

ÍøÆØ³Ô¹Ï LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law

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