U.S. buyout firm loses bid to shield docs from Austrian fraud investigation
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Private equity firm Lindsay Goldberg is based in Manhattan, thousands of miles away from a criminal fraud investigation in Austria that centers on a former portfolio company called Schur Flexibles.
- Out of sight isn't always out of mind.
The latest: A U.S. federal appeals court last month affirmed a lower court ruling that Lindsay Goldberg must turn over internal documents related to Schur, at the behest of the pissed-off Austrian company that bought most of Schur in 2021 at around a €900 million enterprise value.
- The decision rested on an obscure U.S. statute that allows parties involved in foreign legal proceedings to obtain discovery from U.S. entities.
Why it matters: Lindsay Goldberg is one of midmarket private equity's most venerable firms, founded more than 20 years ago and having raised over $17 billion.
- It's also raising billions for its sixth fund.
Catch up quick: Schur makes flexible packaging for food and pharma.
- Several of its former executives are under advanced criminal investigation — including home raids — by Austrian authorities for alleged embezzlement and inflating EBITDA ahead of majority stake sale to an industrials firm called B&C-Gruppe.
- Lindsay Goldberg is not among those under investigation, but the same cannot be said for one of its European "affiliate partners."
- B&C brought in Deloitte as a new auditor after its purchase, and the accounting firm restated Schur's 2020 financials. Separately, a court declaration from B&C asserts that reports from KPMG and A&M "support allegations that the ... consolidated financial statements for 2018, 2019 and 2020 did not reflect [Schur's] true financial situation."
- B&C already received a record €120 million payout under its warranty & indemnity insurance policy, but that's still less than what it invested in Schur, which it has since turned over to a lender group led by Apollo.
Zoom in: B&C commenced arbitration proceeding in Germany, and likely hopes to find something in Lindsay Goldeberg's internal docs that would prompt the firm to pay up.
- B&C also got U.S. state courts to force three of Lindsay Goldberg's limited partners — large public pension funds in New York, Wisconsin and Louiaiana — to turn over Schur-related documents. A fourth public pension LP, in Texas, won its case.
A spokesperson for Lindsay Goldberg declined comment.
The bottom line: It's still not clear if someone cooked the books at Schur and, if so, who. But we're getting closer to finding out.
