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Fenway Partners, four executives, to pay $10.2 million for disclosure lapses: SEC
November 3, 2015 / 5:17 PM / 2 years ago

Fenway Partners, four executives, to pay $10.2 million for disclosure lapses: SEC

The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

(Reuters) - New York-based Fenway Partners LLC and four executives will pay a total of more than $10.2 million to settle charges that they failed to tell investors about payments to employees by one of its private equity fund companies, U.S. securities regulators said on Tuesday.

The private equity firm and the executives, including principals Peter Lamm, William Gregory Smart and former principal Timothy Mayhew, were not “fully forthcoming” to a client and investors about the conflict of interest, which involved more than $20 million in payments, the U.S. Securities and Exchange Commission said.

The payments, which had come from assets or companies owned by a private equity fund run by Fenway, were made to a Fenway affiliate and former Fenway employees, the SEC said.

Neither Fenway Partners, nor the executives admitted nor denied the agency’s allegations in reaching a settlement with the agency. The $10.2 million will be returned to wronged investors, the SEC said.

The case is part of the SEC’s ongoing crackdown into what it sees as a widespread industry problem concerning how buyout firms allocate and disclose various kinds of fees. It follows a $39 million SEC sanction against Blackstone Group (BX.N) in October and a $30 million sanction against Kohlberg Kravis Roberts & Co. (KKR.N) in June.

The SEC is making a point that it will hold private equity personnel accountable for not fully and fairly disclosing interests, SEC enforcement director Andrew Ceresney said in a call with reporters on Tuesday.

A lawyer for Fenway Partners, Lamm and Mayhew were not immediately available for comment. A lawyer for Smart declined to comment. The settlement also included Walter Wiacek, the firm’s chief financial officer and compliance head, whose lawyer declined to comment.

Beginning in December, 2011, Fenway and the executives caused some companies owned by a Fenway fund to end their payments to Fenway and enter consulting agreements with a Fenway consulting affiliate.

The affiliate provided services that were similar to those offered by Fenway itself, but Fenway did not offset the $5.7 million in fees that the companies paid to the affiliate against management fees that the fund paid to Fenway, the SEC said.

One of the principals, Mayhew, and two former Fenway Partners employees, received $15 million in incentive compensation from the sale of a company in the fund portfolio, for services that they had almost entirely provided when they were Fenway Partners employees, the SEC said.

Reporting by Suzanne Barlyn; Editing by Alan Crosby

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