Headline of the Day

KKR Founders Sued for Allegedly Getting Giant Payday for No Work

—Wall Street Journal

I am shocked that such a headline has appeared in the mainstream media.

I am even more shocked that it was in the WSJ, the biggest cheerleader for Wall Street parasites for getting giant paydays for no work in the United States:

When Henry Kravis and George Roberts handed off the day-to-day management of private-equity firm KKR to their successors in 2021, the two billionaires netted shares now worth more than $650 million.

A new lawsuit is accusing the company of paying Kravis and Roberts but getting nothing in return. Their windfalls came from a complicated financial structure that has netted billions of dollars for other company founders and dealmakers in similar transactions.

………

The shareholder suit filed by a Steamfitters union local pension fund is one of a string of legal actions that are steadily gaining momentum in Delaware courts that could force many private-equity executives to hand back the payouts. Already, a healthcare company has agreed to pay $71 million to settle a similar lawsuit and judges have issued decisions in other cases that have largely been favorable to plaintiffs.

The KKR suit takes aim at a payment allegedly tied to a tax receivable agreement, or TRA. TRAs are typically combined with specific corporate structures to create and share potentially valuable tax assets between the company and their early investors.

………

“This case is about two Wall Street titans who wanted to enrich themselves and their fellow private unitholders because their peers had done so,” the complaint, filed in the Delaware Court of Chancery and made public Tuesday, alleges. 

The union pension fund’s suit names Kravis and Roberts as defendants alongside current KKR co-Chief Executives Scott Nuttall and Joseph Bae, other board members and the company itself. The suit is similar to other litigation undertaken against rivals Apollo Global Management and Carlyle Group, as well as website host GoDaddy. 

The cases are at various stages progressing through the Chancery courts, though judges have issued several decisions favoring plaintiffs in other cases. 

………

TRAs are deals between companies and early investors that help companies save on their corporate income taxes. The savings are generated when early, pre-IPO investors sell their stakes on the public markets.

I believe that this article constitutes a declaration against interest.

If the Department of Justice and the the New York Attorney General were to actually enforce anti-fraud laws, we'd see a parade of executives being frog-marched out of their offices in handcuffs.