Thursday, January 29, 2015

TPG Sues a Former Employee: A Potential Window into Private Equity

TPG Sues a Former Employee: A Potential Window into Private Equity

Lawsuits are one of the best ways of getting a look inside private equity firms.  I expect an emerging dispute between TPG and Adam Levine, former managing director for global affairs, may provide us with some insights into the business affairs of TPG.[1]  Early in January TPG acknowledged Mr. Levine’s departure. In fact, it looked like Mr. Levine had resigned because he said he was leaving TPG to go back into politics.[2]  He had been assistant White House press secretary for President George W. Bush. 

It turns out Mr. Levine’s departure was acrimonious. TPG has sued Mr. Levine in Federal District Court (N.D.-Tex.) for attempting to extort money from TPG and leaking confidential material to the press, including The New York Times.  According to the complaint, Mr. Levine has also refused to return his laptop and mobile phone.  TPG claims that Mr. Levine is upset because he did not receive a promotion and has threatened that “he would take down the company the same way he took down Lewis “Scooter” Libby” unless TPG pays him millions of dollars.  As assistant White House press secretary, Mr. Levine testified about the press leak involving Valerie Plame, a CIA officer.

For his part, Mr. Levine insists that he is a whistleblower.  According to a spokesperson for Mr. Levine, he tried to warn TPG of “serious issues of noncompliance and defrauding its investors of millions of dollars in fees and expenses.”[3]

Back on January 5th The New York Times ran a story citing confidential sources that alleging that one of TPG’s partners was both collecting his compensation from the firm while also being paid by Chobani, one of its portfolio companies.[4]  Fortune countered the Times claim.  They report that the TPG executive hasn’t collected any remuneration from Chobani.  I’m not sure if the Times story is what TPG is referring to when it alleges that Mr. Levine leaked documents.[5]

TPG is an extremely powerful player in private equity and politics.  I suspect their lawsuit is designed to bring Mr. Levine to heel.  With $65 billion in assets under management, TPG can make it extremely expensive for Mr. Levine to defend himself.  As a result, this matter may be settled in the coming days.  However, if Mr. Levine decides to fight, we might learn a few things about private equity that the industry doesn’t want us to know. 

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