August 23, 2016

Four private equity fund advisers affiliated with Apollo Global Management will pay $52.7 million to settle charges related to misleading fund investors about fees and a loan agreement and failing to supervise a senior partner who repeatedly charged personal expenses to the funds.  An SEC investigation found that the Apollo advisers failed to adequately disclose the benefits they received (to the detriment of fund investors) by accelerating payment of future monitoring fees owed by the funds’ portfolio companies upon their IPO or sale.  The lump sum payments received by the Apollo advisers essentially reduced the portfolio companies’ value prior to their sale or IPO.  The SEC also found that one of the advisers failed to disclose certain information about interest payments made on a loan between the adviser’s affiliated general partner and five funds.  The purpose of the loan was to defer taxes on the general partner’s carried interest.  The loan agreement obligated the general partner to pay interest to the funds during the course of the loan and the funds’ financial statements disclosed the accruing interest as an asset of the funds.  But the interest was instead ultimately allocated solely to the general partner, making the financial statements misleading.  Finally, according to the SEC’s order, Apollo’s supervisory failures pertain to a then-senior partner at the firm who was twice caught improperly charging personal items to Apollo-advised funds.  SEC

Tagged in: Misrepresentations, Securities Fraud,