"GPs are thieves" - lawsuit underway in US

Everyone said it would happen, and now the lawsuits are underway. A letter has been circulated to 2,800 global limited partners inciting them to "stop the thievery" of the GP community. It claims that LPs should never be threatened with punitive default action as long as that GP is losing money, and points the finger firmly at the small- to mid-market, instead of the oft-criticised large buyout community.

The letter is roughly as follows; edited to fit and to correct some interesting grammar. The rough nature of the wording and tone indicate it has not come from a reputable lawyer, however it does go a way to illustrating the widespread disenchantment with the current situation.

STOP THE THIEVERY FROM LIMITED PARTNERS AT ONCE

When LPs invested with GPs and committed their capital to 10 years-plus, they expected profits. Now almost all GPs lost between 25-50% of LPs ' capital.

... Some of the GPs are applying the most severe conditions in their contracts with the LPs ... For LPs, whether family offices, universities, retirement funds, these monies are accumulated for many years and this capital is crucial to retired people ... The GPs ' losses are threatening to put the LPs in default, confiscate their capital, give their capital to somebody else ... there are many crazy threats from the GPs ' 'irresponsible junior staff ...'.

The purpose of this letter to 2,800 LPs who are subjected to such threats or any harassment from any GP is to write to us immediately. Please let us know the name of the fund and the name of the person at that fund making the threat ...

We are now preparing two Class Action lawsuits against GPs and it is very important to contact us ... LPs together under many agreements can close many funds the same way they did with Cerberus. We are working now on closing down several LBO funds and we need your feedback and cooperation.

We will make absolutely sure these GPs and their sick personnel will be put on our blacklist and for sure will be out of the LBO business sooner than later.

The GPs:

- lost 25-50% of our capital;

- should reduce the fund by the same percentage they have lost;

- should never threaten any LPs of default as long as they've lost money;

- should immeditaetly stop squeezing LPs, and stop forcing them to sell invested capital at discounts to friends and relatives as GPs buy it themselves at a fraction of the cost).

This financial criminality has to stop at once. Many of the big reputable GPs have done a fantastic job, especially TPG, Carlyle, Blackstone, etc. They are accommodating their LPs in every conceivable way and have gone beyond any written agreements to protect and keep their LPs happy, loyal and long-term. It is the smallest renegade cowboy GPs who are destroying their firms ...

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