Bain Capital, Private Equity Firms Accused of Price Fixing in Lawsuit - Printable Version
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Bain Capital, Private Equity Firms Accused of Price Fixing in Lawsuit - jaxx - 09-13-2012 04:45 PM
Bain Capital, Private Equity Firms Accused of Price Fixing in Lawsuit
By Christopher Matthews | @crobmatthews | September 13, 2012
<..> Unfortunately for the private equity industry — which traditionally prizes secrecy — Romney’s candidacy has gotten the U.S. press core digging for any juicy bits of news on private equity it can scrounge up. And it may have unearthed a live one: According to heavily-redacted court documents unearthed by The New York Times yesterday, former shareholders of the giant hospital-management firm HCA have formally accused Bain Capital and several other private equity firms of price fixing.
According to the Times report, the documents allege that Bain’s success over the past decade was due in part to agreements with other private equity companies to artificially keep the prices of firms they were bidding on low.
Private equity firms generally use a combination of their own capital and borrowed money to take public companies private. After a period of time, the PE firms aim to sell those companies publically to investors at a higher price. So buying in at artificially low prices directly beefs up profits. Writes The New York Times:
<..> Unfortunately, according to Kosman’s sources, we’ll have to wait until next year for the case to make it to trial, so new details are unlikely to emerge anytime soon. This is certainly good news for the Romney campaign, which would be harmed by any lengthy public airing of allegations against his former firm. It should be stressed that all of the offenses alleged in this suit occured between 2003-2007, at least two years after Romney cut ties with Bain. That being said, if these allegations are true, it would certainly say a lot about the culture of his firm, and the industry itself, just a few years after he departed as one of its most prominent figures.
Romney still profits from Bain Capital, he made sure of that when he retroactively retired.