Apollo private equity
advisers to pay $52.7 million to settle U.S. SEC case
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[August 24, 2016]
By Suzanne Barlyn
(Reuters) - Four private equity funds
affiliated with Apollo Global Management LLC struck a deal with U.S.
regulators on Tuesday to pay $52.7 million to settle charges they
misled fund investors about fees and a loan agreement.
The Securities and Exchange Commission said Apollo, which settled
without admitting or denying the government's allegations, was also
charged with failing to supervise a senior partner who charged
personal expenses to the funds.
"Apollo seeks to act appropriately and in the best interest of the
funds it manages at all times," an Apollo spokesman said in a
statement. Apollo had enhanced its disclosure and compliance related
to the matters at issue "long before the SEC inquiry began," the
Between at least 2011 and 2015, the SEC said that Apollo advisers
did not adequately disclose benefits they received by speeding up
the payment of fees paid to them by companies in the funds'
portfolios when those companies were sold or became the subject of
an initial public offering (IPO).
Those fees, which the Apollo advisers received in lump sum amounts,
reduced the value of those companies prior to their sale or IPO.
That, in turn, reduced the amounts available for distribution to
fund investors, the SEC said.
One of the Apollo advisers also misled investors by failing to
disclose certain details about interest payments made on a $19
million loan to defer taxes on interest due to the adviser's general
partner and five Apollo funds, the SEC said. The conduct occurred
between 2008 and 2013.
Apollo also failed to supervise a former senior partner who between
2010 and 2013, charged personal items and services to the Apollo
funds and its companies, the SEC said.
The SEC did not disclose the partner's name. Apollo spokesmen also
declined to do so.
The partner made up details to conceal his conduct, the SEC said.
His assistant reported him to Apollo's expense manager after
[to top of second column]
Leon Black, Chairman and CEO Apollo Global Management, LLC, takes
part in Private Equity: Rebalancing Risk session during the 2014
Milken Institute Global Conference in Beverly Hills, California
April 29, 2014. REUTERS/Kevork Djansezian
Apollo verbally reprimanded the partner after he admitted to charging personal
expenses and reimbursed Apollo. Apollo verbally reprimanded the partner again
when more personal expenses resurfaced in 2012, but did not impose further
discipline or supervision, the SEC said.
Later that year, Apollo conducted a firm-wide review of expenses and, in 2013, a
forensic review of the partner's expenses which revealed even more problems.
Apollo and the partner, who reimbursed the firm yet again, entered a separation
agreement in 2014.
(Reporting by Suzanne Barlyn, additional reporting by Sarah N. Lynch; editing by
Bill Trott, G Crosse)
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