The biggest US private-equity giants failed today to get tossed out of court a lawsuit that charges them with conspiring to keep the prices on $270 billion of buyouts fraudulently low.
KKR, Carlyle Group, Bain Capital, a unit of Goldman Sachs and others stand accused of agreeing to stay away from their rival’s buyout in order to avoid a bidding war.
The result, the suit filed by shareholders in the companies purchased, alleges that the price paid by the PE firms was fraudulently low.
The PE firms have tried nearly a dozen times to get the lawsuit dismissed.
Judge Edward Harrington yesterday stymied the latest attempt to have the suit tossed out of Massachusetts District Court by denying the firms’ motion for summary judgment.
Defendants also include Apollo Global Management, Blackstone Group, Providence Equity, Silver Lake Partners, TPG Capital and THL Partners.
The judge did dismiss charges today against JPMorgan.
In the four-year-old case, shareholders claim the collusion affected 17 deals.
If ultimately found guilty, the PE giants could be on the hook for billions, sources told The Post.
The judge, in keeping the suit intact, appeared to be swayed by two “silver bullet” e-mails.
One, referring to the buyout of Freescale Semiconductor, reads, “KKR has agreed not to jump our deal since no one in private equity jumps an announced deal.”
Upon reading the internal e-mail from TPG Capital Managing Director John Marren, Judge Harrington said at a December hearing over whether to issue summary judgment, “That statement is some strong evidence.”
The other he refers to in his decision is a Goldman Sachs executive’s observation, with respect to the same Freescale transaction, that “club etiquette prevailed.”
There was also evidence that PE firms never outbid each other during “go-shop” periods, when listed companies search for rival bids.
The case may proceed, the judge ruled, “solely on an alleged overarching agreement between the defendants to refrain from ‘jumping’ each other’s announced proprietary deals.”
Judge Harrington is also allowing a second suit just covering the buyout of HCA to also proceed.