Lawsuits

The antitrust lawsuit against all the big private equity firms, accusing them of colluding with each other to drive down prices on LBOs in the 2003-2007 boom, was always a bit of a puzzler. On the one hand, there were lots of emails between private equity firms that they’d probably like back, to the effect of “hey thanks for not bidding on my last deal, hope you enjoy my not bidding on your next deal!” On the other hand, the lawsuit was sort of a mess, full of hazy accusations, unsupported conspiracy claims, and the sort of unfalsifiable tin-hattery that sees occasional fierce bidding wars between private equity firms as just a cunning cover-up of their conspiracy not to bid against each other.

I blog for a living, such as it is, so sometimes I would complain about that confusion, but Edward F. Harrington is a federal judge for a living so he gets to just fix it:

Plaintiffs persistent hesitance to narrow their claim to something cognizable and supported by the evidence has made this matter unnecessarily complex and nearly warranted its dismissal. Nevertheless, the Court shall allow the Plaintiffs to proceed solely on this more narrowly defined overarching conspiracy because the Plaintiffs included allegations that Defendants did not “jump” each other’s proprietary deals in the Fifth Amended Complaint and argued in response to the present motions that the evidence supported these allegations. Furthermore, the Court concludes that a more limited overarching conspiracy to refrain from “jumping” each other’s proprietary deals constitutes “a continuing agreement, understanding, and conspiracy in restraint of trade to allocate the market for and artificially fix, maintain, or stabilize prices of securities in club LBOs” ….

And so he ruled today on a summary judgment motion, getting rid of most of the crackpottery but letting the plaintiffs go forward on the claim that the private equity firms had an agreement not to jump each others’ deals after they’d already been signed. Read more »

One day Herbalife will either be put out of business by consumer-protection regulators or it won’t. If it is then Bill Ackman will make a lot of money and Carl Icahn will lose a lot of money, and if it isn’t Ackman will lose a lot of money and Icahn will make a lot of money, and in the meantime everyone will shout that everybody else should be investigated.

That’s proceeding apace. Ackman yesterday:

In a statement late Tuesday, Pershing Square Capital Management’s Ackman said that he was pleased that the NCL was requesting an FTC investigation and believes it will show that the company is a pyramid scheme.

Herbalife today:

We regret that the National Consumers League has permitted itself to be the mechanism by which Pershing Square continues its attack on Herbalife. If anything, it is Pershing Square that should be investigated by appropriate authorities. Its actions are motivated by a reckless $1 billion bet against the company based on knowingly false statements about Herbalife.

Carl Icahn, whose Herbalife position keeps growing, has also been known to make some investigate-Ackman noises.

Now Herbalife may or may not be a pyramid scheme but I’ve always thought that demands to investigate short sellers are unfair and one-sided. People who say mean things about stocks they’re short are always accused of manipulation. People who say nice things about stocks they’re long – which happens all the time – are rarely accused of market manipulation.1

But not never! I assume Daniel Ravicher is a little nuts but still, I like his style: Read more »

  • 12 Mar 2013 at 5:23 PM

Hank Greenberg’s Balls Going Out With A Bang

Maurice “Hank” Greenberg, the former American International Group chief executive, has more than doubled the size of his class-action lawsuit against the United States over the insurer’s bailout to roughly $55.5 billion from $25 billion. In an amended complaint filed late Monday in the U.S. Court of Federal Claims, Greenberg’s Starr International Co said it is now seeking damages over Maiden Lane III LLC, a vehicle designed to rid banks of toxic debt underlying transactions with AIG. The claims are in addition to claims that Starr previously asserted over the government’s taking of a 79.9 percent stake in AIG in September 2008, which was eventually swapped for 562.9 million common shares. In the amended complaint, Starr said it is seeking to recover, on behalf of shareholders and the company, $23 billion over the government’s 79.9 percent stake, plus as much as $32.5 billion of collateral it said was given away through Maiden Lane III. It is also seeking unspecified damages related to AIG’s 1-for-20 reverse stock split in June 2009. [Reuters]

  • 01 Mar 2013 at 5:04 PM

AIG Is Even More Not Owned By The Government

AIG is in the news today for two very small numbers in connection with much larger numbers. First: AIG is no longer bailed out! I know, you thought that happened like six months ago, and then again three months ago, but today AIG got rid of the last little bits of government ownership, really this time:

American International Group, Inc. (NYSE: AIG) announced today that it completed the repurchase of warrants issued to the United States Department of the Treasury (U.S. Treasury) in 2008 and 2009. … AIG and the U.S. Treasury agreed upon a repurchase price of approximately $25 million for the warrants. The U.S. Treasury does not have any residual interest in AIG after AIG’s repurchase of these warrants.

“With AIG repurchasing all outstanding warrants issued to the U.S. Treasury, we are turning the final page on America’s assistance to AIG,” said Robert H. Benmosche, AIG President and Chief Executive Officer. “We appreciate the opportunities this support allowed and are proud to have returned to America every cent plus a profit of $22.7 billion.”

Back in December, I speculated baselessly about why AIG didn’t just buy back these warrants in connection with Treasury’s final sale of stock back in December, since they were just rounding error on the $7.6bn offering. I figured waiting would let the government get a better deal, and it seems to have: I ballparked a value of $18,000,000.393 for those warrants in December, so Treasury made an extra $7mm by waiting three months.1 One possible explanation is that AIG and Treasury enjoyed the dynamic of announcing “AIG HAS PAID OFF ITS BAILOUT” every three months, so they milked it for all it was worth. I’m sure someone from Treasury left a pen or something at AIG’s offices, and its return will be announced with great fanfare in a few months.

But this is a distraction from more amazing, less pleasant AIG news: Read more »

Mike Tyson has sued SFX Financial Advisory Management Enterprises, saying that one of its advisors embezzled more than $300,000 from him and cost him millions of dollars in potential future earnings. The lawsuit claims that although SFX has returned some of the money, it is still well short of returning what it embezzled. Tyson is seeking more than $5 million in damages, claiming breach of fiduciary duty, negligent hiring, unjust enrichment and other charges. “Defendants did not secure, protect, safeguard and appropriately apply the Tysons’ finances for their intended purposes,” the former boxer’s lawsuit states, “but instead misappropriated said funds for the benefit and enrichment of SFX/Live Nation.” SFX Financial Advisory Management Enterprises is owned by Live Nation. Live Nation Entertainment Inc. told the Associated Press that it had not yet been served with the lawsuit and thus could not comment on it. [LA Times]

David Einhorn Sees A Lot Of His Nana In Apple

“It is kind of like my grandma Roz. She wanted to hoard money. She would not leave me a message on my answering machine because she did not want to be charged for a phone call. It is really hard to convince somebody with that mindset to change what they’re doing. We have come up with what we think is a win-win situation for Apple where Apple gets to keep its war chest, they get to keep the money, they get to have it for bad times, for growth, for acquisitions.”[Bloomberg TV, earlier]

According to the police, they found Brian Mulligan high on bath salts after “several” calls had been placed about a man in the area “trying to break into cars” that fit Mulligan’s description. He supposedly told them he was “tired,” which they say is why they drove him to a motel to get some shuteye. When he (allegedly) emerged hours later and started running through traffic despite officers’ orders to get out of the street, later assuming a “fight stance,” they decided it was necessary to deal with him in an aggressive manner. Didn’t want to, felt they owed it to him. According to Mulligan, it was more like this: Read more »