Analysis: Collusion lawsuit in U.S. against buyout firms is no easy case

Sat Oct 13, 2012 12:45pm EDT
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By Michael Erman and Tom Hals

(Reuters) - Shareholder lawyers may have embarrassed just about every top executive in the U.S. private equity industry with allegations of a wide conspiracy to rig deal prices during last decade's buyout boom, but proving their case will be a different matter.

Legal experts say much of the alleged collusion outlined in the antitrust lawsuit may have been nothing more than firms working together in perfectly acceptable ways to spread the risk of taking on a big investment. The practice, they say, allowed the investment firms to pursue the largest deals and offer premiums to shareholders.

A lack of action by the U.S. Department of Justice in a parallel antitrust investigation could also suggest there are few grounds to go after the industry. That probe dates to 2006, according to the lawsuit and regulatory filings from some private equity firms.

"If these allegations are true, and if the DOJ has been investigating since 2006, one wonders then why didn't the DOJ do anything?" said Maurice Stucke, a former Justice Department antitrust prosecutor who is now a professor at the University of Tennessee College of Law.

The Justice Department declined to comment.

The Boston federal judge overseeing the case released a mostly unredacted version of the complaint this week. The defendants had objected, arguing that competitive information about deals should remain blacked out from public view.

One exchange appears particularly revealing. According to the lawsuit, Blackstone Group LP President Tony James wrote in an email to KKR & Co co-founder George Roberts: "We would much rather work with you guys than against you. Together we can be unstoppable but in opposition we can cost each other a lot of money."

Roberts, the lawsuit said, replied later that day: "Agreed."   Continued...

The exterior of the U.S. Department of Justice headquarters building in Washington, July 14, 2009. REUTERS/Jonathan Ernst