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PE titans in ‘smoking gun’ e-mails

By
Josh Kosman
Published Oct. 11, 2012, 4:00 a.m. ET

Perhaps now we should call them “A Group of Barbarians at the Gate.”

Pages of e-mails sent by the country’s most powerful private-equity titans allegedly showing a pattern of collusion and fraud in $270 billion of takeovers from 2004 to 2008, were unsealed yesterday by a Massachusetts court.

On their face, they do not paint a pretty picture.

In one e-mail, Blackstone Group President Tony James, after winning the $17.5 billion 2006 auction for Freescale Semiconductor, said to colleagues: “[KKR’s] Henry Kravis just called to say congratulations and that they were standing down because he had told me before they would not jump a signed deal of ours.”

In a second e-mail, to KKR’s George Roberts, James wrote: “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.”

The e-mails follow Blackstone’s purchase of Freescale where KKR stayed on the sidelines.

Blackstone, as part of the alleged collusion, passed on competing against rival KKR later that year in KKR’s $32 billion buyout of hospital chain HCA.

Many of the buyouts of public companies during that era were for business in which only private-equity firms were interested in bidding.

The “smoking gun” e-mails had been kept under seal until Judge Edward Harrington was asked to make them public.

The case is reaching a critical juncture, with the judge next month hearing arguments for summary judgment on the conspiracy involving 19 LBOs and a separate case involving the HCA buyout.

If Harrington rules against summary judgment, he will likely decide in December whether to award the plaintiffs class action status against defendants Apollo Global Management, Bain Capital, Blackstone, Carlyle, Goldman Sachs, JPMorgan, KKR, Providence Equity, Silver Lake Partners, TPG Capital and Thomas H. Lee Partners, sources said.

Meanwhile, the Department of Justice has also recently shown interest in investigating boom-era private-equity collusion cases, a source with direct knowledge of the situation said.