Private equity firms may have to reveal more in collusion case

Fri Sep 14, 2012 5:48pm EDT

* Shareholders accused firms of collusion in deal making

* Bain, Blackstone, KKR, Goldman affiliate, others sued

* Private equity firms seek to keep details confidential

* NY Times sought to make entire complaint public

By Jonathan Stempel and Greg Roumeliotis

Sept 14 (Reuters) - A federal judge on Friday gave major private equity firms one more chance to keep secret some potentially embarrassing allegations made in a lawsuit accusing them of colluding to drive down prices on companies they sought to buy.

Bain Capital Partners LLC, Blackstone Group LP, Goldman Sachs Group Inc's private equity arm, KKR & Co and other firms have been seeking to block a motion by The New York Times that the entire complaint be made public.

Shareholders in more than two dozen companies bought by the firms between 2003 and 2007 claimed to have lost billions of dollars because of a conspiracy to deflate prices of takeovers, such as a $32.1 billion leveraged buyout in 2006 of hospital company HCA by Bain, KKR and others.

On Monday, the firms released a heavily blacked-out version of the 217-page complaint in a filing in Boston federal court, which nonetheless included illustrations of alleged collusion.

This included alleged agreements that some firms with "strong interest" in HCA decided quickly not to bid and that some firms would "stand down" even after preparing to outbid Bain and KKR by $1.6 billion.

In Friday's order, U.S. District Judge Edward Harrington said the private equity firms did not explain how details they redacted would cause "specific and severe harm" if released and that they had not overcome the "presumption of public access."

Nevertheless, he said the firms should file a second redacted complaint and justify the need to keep some details secret.

Harrington said he would rule later on whether to make public the entire complaint or the second redacted version.

Lawyers for the private equity firms declined to comment or did not immediately respond to requests for comment.

Abbe Serphos, a New York Times Co spokeswoman, said the company is pleased the court "recognized the importance of public access to judicial documents and properly placed on defendants the burden of justifying any sealing." She said the company will pursue the unsealing of the entire complaint.

Christopher Burke, a lawyer for the plaintiff shareholders, said: "It is very clear that, if the firms are going to redact something, they will need very specific reasons."

In court papers, lawyers for the private equity firms have said releasing the full complaint would expose such "critical" details as who the firms' investors are and how the firms negotiate for and value companies.

They said this could hurt the firms' ability to attract investors and to buy and run companies.

Mitt Romney, the Republican presidential candidate and a Bain founder, left that firm in 1999, before the transactions in question. He is not named in the current redacted complaint. Lawyers for the private equity firms said his possible interest in Bain funds did not justify releasing the full complaint.

The case is Dahl et al v. Bain Capital Partners LLC et al, U.S. District Court, District of Massachusetts, No. 07-12388.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.