A little-known lawsuit advancing in federal court has the potential to change the moral and legal balance of power between private equity and the public good. But analysts say it may take the Occupy Movement to bring about needed regulatory reforms.
The secretive industry of private equity, mostly lauded in press in the 1990s and mid-2000s for executing daring buyout deals of ever-increasing proportions, is facing enormous skepticism these days.The fact that the Republican Party has chosen to nominate a co-founder of one of America's largest and most controversial PE firms as its presidential candidate, in the midst of the most severe economic downturn since The Great Depression, is an obvious cause of some of the increased attention. Even so, private equity's record was a story long overdue to be told.
Besides this raft of media attention, including some serious journalistic scoops, there are more serious investigations into the morally and legally dubious activities of companies like Bain Capital that could have reverberating impacts on the industry's future. What's interesting about recent government and shareholder investigations is that in years past, these parties mostly looked the other way, or even cooperated through inaction, allowing PE firms to literally commit crimes, or at least to conduct their business in morally dubious ways, unabashedly preying on the wealth of public companies, less powerful investors and local communities.The lack of moral sanction, and the near absence of law enforcement action, only served to reinforce private equity's greed.
Now, however, one lawsuit has partly pried open the black box of private equity. The case has the potential to not only provide yet unseen data and documents recording some of PE's biggest possible crimes, but also to set the stage for the taming of finance capital's most aggressive and destructive creatures.