Alternative investment giant The Blackstone Group (BX) this morning reached a settlement with the Securities and Exchange Commission, related to some of the firm’s former private equity fee practices.
Blackstone has agreed to pay a $10 million fine, plus refund nearly $29 million (including interest) to limited partners in its fourth and fifth flagship private equity funds. At issue were so-called accelerated monitoring fees, in which Blackstone effectively charged its portfolio companies for services not actually rendered (without properly disclosing such arrangements to its LPs). Here is how we described the scheme last October:
The SEC also took issue with certain discounts that Blackstone received from law firms from legal work done for the parent company, but which were not also extended to its funds.
Word of the SEC investigation was first disclosed by Blackstone in a May regulatory filing.
“Full transparency of fees and conflicts of interest is critical in the private equity industry and we will continue taking action against advisers that do not adequately disclose their fees and expenses, as Blackstone did here,” Andrew Ceresney, director of the SEC’s enforcement unit said in a press release.
Blackstone spokesman Peter Rose provided the following statement via email:
Back in June, fellow private equity giant Kohlberg Kravis Roberts & Co. (KKR) settled with the SEC over charges that it breached fiduciary duty to investors in its flagship private equity funds between 2006 and 2011.